Record Floods Ravage Minnesota; Slow Growth, Bank Fears Roil Markets
CAROL COSTELLO, CNN ANCHOR: Good morning, Soledad. Good morning to all of you. Happening right now in the NEWSROOM, here's a headline, $3 gas. Prices are plunging overnight. New outlook this morning that's great news for your wallet. Plus this.</s>MAVIS HARTMAN, MOOSEHEAD LAKE, MINNESOTA RESIDENT: Obviously, you don't buy flood insurance here. You don't do it. So I'm kind of emotional because I don't know what to do.</s>COSTELLO: Police in Duluth, Minnesota, saying it's not safe here. Historic flooding wiping out bridges, roads and lives. One town being described as an island. We'll talk with the mayor of Duluth straight ahead. Sandusky bombshell. An adopted son of the Penn State coach claims he, too, was molested by his father, and he's offering to testify. Will new charges be filed? We're live at the courthouse. Plus --</s>UNIDENTIFIED MALE: Oh, my god. You're so fat. Karen, you're fat.</s>ANDERSON COOPER, ANCHOR, "ANDERSON COOPER 360": Southwest Airlines reached out to us today. They'd like to send you and nine people to Disneyland in California.</s>KAREN KLEIN, BUS MONITOR: You've got to be kidding me.</s>COOPER: The bullies apologized, taunted and teased bus monitor Karen Klein, grateful and humbled today after the jokers fess up and say, we're sorry. This morning Karen is stunned by all the support. It is Friday. Happy Friday, June 22nd. NEWSROOM begins right now. And good morning to you. I'm Carol Costello. We begin this morning with your money. Less than 30 minutes from now, Wall Street tries to rebound from a double whammy. One of its worst days in months. Major American banks that you problem have money and slammed by ratings agency Moody's. Bank of America, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Citigroup. The bad news sent international markets plunging overnight. But there is a silver lining to this report. Futures are up.</s>COSTELLO: Business correspondent Christine Romans joins us live from New York. So is that a silver lining or am I exaggerating things?</s>CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: You're always looking for the bright side, Carol.</s>COSTELLO: I know.</s>ROMANS: Futures are up, and that's something we sometimes see when you have a big down day. The Dow was down 250 points yesterday, and it felt pretty ugly all day long. And so they're up, futures are up a little bit here this morning. That often happens when you've had a big down day. But it's not just the bank issue here. Right? I mean the bank downgrade shows us that there's still a concern about slowing global economy, about credit markets, about the debt problems in Europe. And that's something that banking analysts are concerned about. And there's a lot of talk about a summer slump. A summer slump in the U.S. economy and the global economy. Slow jobs growth is what that will mean. Very low interest rates quite frankly and record-low mortgage rates. That's a result of that summer slump. A weak economy. And falling gas prices. All of these things are what -- kind of this whole macroeconomic grew is giving us right now. There's a lot of things to worry about. Contagion from Europe. We're talking about a U.S. slowdown. We're talking about factories around the world slowing down. We're talking about the banks trying to put a ton of money aside so they can withstand all of this. And we're also talking about the debt ceiling and a fiscal cliff. And congressional inaction on that. Put it all together, and you've got people very concerned about where we are right now in the -- in the cycle, Carol. And it's interesting, too, because Mike Mayo, who's a bank analyst we talked to late yesterday after that downgrade, he was saying on the bank downgrade, in particular, you know, it's not going to affect the way you're doing business with your bank right now but it's going to affect how banks are doing business with each other. And they are what pumps the oxygen into the global system. That's why it's so important. He also said it's probably going to be the worst 10 years for bank lending since the Great Depression. So that affects you, too. You know, the banks are stockpiling their money, trying not to take big risks so they can withstand something terrible happening in the economy. That means you can't really take advantage of those low mortgage rates.</s>COSTELLO: Yes. We've heard that song before.</s>ROMANS: Yes.</s>COSTELLO: Christine Romans, reporting live from New York this morning. Also this morning, a deadly ending to an 11-hour standoff at an Afghanistan hotel. Afghan and NATO troops engage in a fierce gun battle with Taliban militants. They stormed the hotel, taking several dozen civilians hostage. Police say the militants killed 15 civilians and four others before they were killed. Fifty other hostages were rescued by the time the standoff was over. Right now jurors are meeting behind closed doors to decide the fate of Jerry Sandusky. They deliberated late into the night, ending their discussions less than 12 hours ago. They are now reviewing testimony from two witnesses who appeared on the stand. The former Penn State football coach could face even more charges, though, after a bombshell announcement from one of his six adopted children. Matt Sandusky. You're going to see him shortly. He is in a striped t-shirt. You see him on the right. He says he, too, was sexually abused by Jerry Sandusky. National correspondent Susan Candiotti is outside the courthouse. Susan, I want to talk a little bit about Matt Sandusky. He says through his attorney that he was ready to testify. Why didn't he?</s>SUSAN CANDIOTTI, CNN NATIONAL CORRESPONDENT: Well, he didn't testify, Carol, because he -- because his father didn't take the stand. It was a pivotal moment back on Wednesday, you will remember, when we were all waiting to find out whether Jerry Sandusky would take the stand in his own defense. We saw Matt Sandusky come through the witness door that day, and then it was revealed that prosecutors, through sources, had Matt Sandusky on standby in their back pocket to bring out as a surprise rebuttal witness if Matt's father, Jerry, had taken the stand in his own defense. That didn't happen. So Matt didn't testify. But then it was revealed yesterday through that statement that you just mentioned, through Matt Sandusky's lawyers, saying that Matt is now revealing that he was abused by his father. Making that claim now. And what makes it particularly are interesting, Carol, is that before now, up until now, Matt Sandusky has always publicly spoke out in support of his father. Now Matt's name did come up during the trial testimony when alleged victim number four took the stand. And we have an excerpt from that testimony. It goes like this. Alleged victim number four speaking. He says, "Jerry started pumping his hand full of soap like he was going to throw it. He was in the shower. Then he says Matt got out. He went to another shower area." And the prosecutor asked, "And what was the look on Matt's face when he saw the defendant was about to start a soap fight?" And the accuser said, "Nervous." Now there had been testimony throughout that oftentimes preceding alleged sexual assaults in the shower that Jerry Sandusky would soap up his alleged victims, and start rubbing them and that's when the alleged abuse would occur -- Carol?</s>COSTELLO: Of course, he didn't testify. The jury is not considering his testimony. But they have plenty of other -- they have plenty of testimony to consider. I know they are back at work. They just started. We'll get back to you, Susan, to see how they're progressing. Thanks so much. This morning National Guard troops are fanning out across northeastern Minnesota where several cities are reeling from the worst flooding on record. As the governor declared a state of emergency, Coast Guard crews swept in and rescued at least 15 people from homes that were cut off by rushing water. Neighborhoods in and around Duluth have been swamped by up to 10 inches of rain this week, and for many days of anxiety are taking their toll.</s>HARTMAN: When it gets up to this line, we're moving everything out of the house. And we're done. We're moving out. And, you know, obviously, you don't buy flood insurance here. You don't do it. So I'm kind of emotional because I don't know what to do.</s>COSTELLO: Hundreds of people have had to flee their homes and take refuge in Red Cross shelters. Remarkably, there are no known deaths so far. But the damage is staggering. Duluth's mayor says there's at least $50 million in damage just to the city's infrastructure. Mayor Don Ness joins me now by phone. Good morning, Mayor.</s>MAYOR DON NESS, DULUTH, MINNESOTA: Good morning.</s>COSTELLO: How unusual is this kind of flooding for the Duluth area?</s>NESS: Well, it's very unusual. You know, our previous record for a 72-hour period was 6.5 inches. And some of our neighborhoods received nine to 10 inches in less than a 24-hour period. When you couple the fact that, you know, that's just the rain falling on one neighborhood. And Duluth is a beautiful city built upon a hill, a rather steep hill. And so all that rain that was falling further up the hill then started rushing down and into our lower neighborhoods. And the combination of the rain falling on our lower neighborhoods and the water rushing down the hill created a tremendous amount of pressure that overwhelmed our storm water system. And blew out manholes and damaged both our stream beds as well as our street infrastructure.</s>COSTELLO: Let's talk about the infrastructure damage. Because we've seen these incredible pictures of the water taking out an entire bridge. We see highways buckled. How many other scenes like we're seeing now, you know, on CNN's air are there in Duluth?</s>NESS: Well, Duluth has 25 named drought streams running through our city. It's one of the things that people love about our city. It's because we're built on a hill and we have these beautiful ravines. But when you have that much rain falling in such a short amount of time, it simply overwhelms the system. And you had a great -- a large amount of volume coming down at a very rapid pace. And it hit the smaller ravines and just kind of blew the system -- the system up. And so there is a lot of damage, and yet it's localized to these areas where we have the culverts, we have the ravines, we have where the streams went under the road. You know, most of Duluth is in -- is in OK condition, and one of the messages that we want to send is that Duluth is open for business. That the -- as long as you don't go around the barricades, you're going to be safe in our city.</s>COSTELLO: So come on out and fish.</s>COSTELLO: Thank you so much, Mayor Don Ness, talking with us live this morning. Let's find out why all that rain is falling in Minnesota. Alexandra Steele is here to explain. You heard the mayor. This is really strange for this area.</s>ALEXANDER STEELE, AMS METEOROLOGIST: Well, it's probably some of the worst flash flooding they've had in 30 years. But it's so beautiful, isn't it? Duluth. Just look at this beautiful picturesque area. What we've seen is such bad flash flooding. Because it's really kind of a two-day affair, the 19th and the 20th. So a few days ago. Between about seven and 10 inches of rain. And the problem was, Carol, it fell on already saturated ground. So the ground was already wet. And then in comes this seven to 10 inches of rain. So you can see what it looks like there. In terms of the forecast, you know, today we're not going to see any rain for the most part. Really dry in for the next 10 days. It's looking at the forecast, you can see it's really Saturday there's the threat for some scattered showers. And then Sunday morning. But nothing as heavy certainly as they've seen. And you can see how dry the balance of this next five days is. And then even the 10-day outlook is pretty good as well, dry weather.</s>COSTELLO: You're watching another system, too.</s>ALEXANDER: That's right. Something that is heating up is what's happening in the tropics. So here's a look at what we're talking about. We're watching the Gulf of Mexico, really most notably the northern Yucatan Peninsula. And there's the area of interest there. So this is an area of low pressure. You can see it's getting better organized. No question about it. They're delineated in that square. Now what we're going to see especially in the next two days, the National Hurricane Center says the depression probably will develop the next 48 hours or so. And the problem is the terrain of interest is so vast, all the way from the Texas Gulf Coast to the Florida Gulf Coast. Now this is what we call, Carol, there are spaghetti models. And you can see there's a better consensus with this last run of these spaghetti models. You can see now moving it a little bit toward Florida more so. Before, they were more distributed in terms of where they could possibly go. So all eyes for the next 48 hours or so. As this kind of air gets more organized. And take a look. It's all contingent upon the jet stream. That's kind of the driver so the jet stream will push this system maybe to the west, to Texas, or possibly to the east to Florida. So Florida looks like it could get about four inches of rain, but contingent upon this path which we'll know a little more in the next day or two.</s>COSTELLO: OK. We'll keep an eye on the spaghetti model.</s>COSTELLO: Alexandra, thank you. The Miami Heat's NBA title summed up in one word by their hometown paper this morning. "Kings." The banner headline in the "Miami Herald", kind of a play on, King James. Though LeBron is the finals' MVP, the whole team is basketball royalty today. John Zarrella was with fans last night. I bet it was crazy.</s>JOHN ZARRELLA, CNN CORRESPONDENT: I've got to tell you, Carol, it was outrageous last night. When you look at it today, you know, you can see the street Biscayne Boulevard back to normal. A lot of morning work traffic. The arena is quiet. I've got to say, though, I think a lot of those people going to work this morning are going to work with hangovers because nine hours ago, this place was insane.</s>UNIDENTIFIED MALE: Who's number one now? Who's MVP now? The Heat are number one. We're number one, baby.</s>UNIDENTIFIED MALE: I have been a Heat fan since I was born, man. I'm so proud of my dude LeBron. Finally got his ring.</s>UNIDENTIFIED MALE: Wade got a second ring.</s>UNIDENTIFIED MALE: Wade got a second ring. This is the great -- this is the happiest day of my life.</s>UNIDENTIFIED MALE: Heat, they rock. We won the finals.</s>UNIDENTIFIED MALE: You know, I have spent two years fighting across the country with every non-Miamian I know defending my team. They all hate us. And as Franklin Roosevelt said, I welcome their hatred. This is an emotional win for all of Miami, for me. You know, you never forget your first championship. This is our second. It's our first one at home. This is special.</s>ZARRELLA: I love that guy who said that that was the greatest day of his life. It may have been the greatest day of LeBron James' life. You know, Carol, they were handing out these towels last night that have "XVI" on them, 16, which is the number of games they had to win to get the championship. And they did it. They did it.</s>COSTELLO: I know. I know.</s>ZARRELLA: LeBron got his first. And he silenced the critics.</s>COSTELLO: OK. Well --</s>ZARRELLA: And you're not happy, are you?</s>COSTELLO: No. Because I'm from the Cleveland area so I've been one of those critics.</s>ZARRELLA: I know.</s>COSTELLO: And I just want to run this by you, John. The Cavs' owner, the Cleveland Cavaliers owner Dan Gilbert --</s>ZARRELLA: Sure.</s>COSTELLO: He tweeted, congratulations to Miami and OKC for an exciting finals, but he did not mention LeBron, unlike his scathing attack two years ago when LeBron left Cleveland and Gilbert guaranteed his team would win a title before LeBron. I assume LeBron did not mention Dan Gilbert last night?</s>ZARRELLA: Not that I know of. I listened to quite a bit of his press conference, and in fact, at one point, LeBron was asked if he had any message or anything to say to the Cleveland fans. And I may be mistaken, but listening, I recall him saying, you know, that this was about Miami. This was about the victory last night.</s>COSTELLO: Blah, blah.</s>ZARRELLA: And I think he kind of sidestepped that question, yes. Exactly.</s>COSTELLO: Smart man. John, OK, congratulations. I know you're a Heat fan. Thank you, John. There could be a silver lining to all those economic problems in Europe. Average gas prices could hit $3 a gallon or less in just a few months.