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THE SITUATION ROOM

Obama Goes Global; Major Mortgage Firms in Crisis; Germany & Obama-'Gate'

Aired July 11, 2008 - 16:00   ET

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


WOLF BLITZER, CNN ANCHOR: Happening now, Barack Obama one-on-one and going global. A brand-new CNN interview with the Democratic presidential candidate, it's just coming into THE SITUATION ROOM.
Plus, Citizen McCain. Renewed questions about whether the Republican actually needs a constitutional requirement to be president.

And how a powerful and wealthy congressman is renting apartments on the cheap. Is Democratic Congressman Charlie Rangel actually abusing New York's rent control system? Rangel is now speaking out.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Well, we begin with Barack Obama. He's gearing up for his first overseas trip as the presumptive Democratic presidential nominee. And today he's facing some serious questions about international hotspots and his foreign policy vision. Obama took a break from campaigning in Ohio to sit down with CNN's Fareed Zakaria. Up for discussion, among other things, the hunt for Osama bin Laden.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: If he was captured alive, then we would make a decision to bring the full weight of not only U.S. justice, but world justice down on him. And I think that -- and I've said this before -- that I am not a cheerleader for the death penalty. I think it has to be reserved for only the most heinous crimes, but I certainly think plotting and engineering the death of 3,000 Americans justifies such an approach.

Now, the -- I think this is a big hypothetical, though. Let's catch him first, and the fact that we have failed to seriously go after al Qaeda over the last five years because of the distraction of Iraq, I think we are now seeing the consequences of that in Afghanistan.

(END VIDEO CLIP)

BLITZER: Now look at Senator Obama on Afghanistan and the problems there for the president, Hamid Karzai.

(BEGIN VIDEO CLIP)

OBAMA: I think the Karzai government has not gotten out of the bunker and helped to organize Afghanistan and government, the judiciary, police forces, in ways that would give people confidence. So there are a lot of problems there.

But a big chunk of the issue is that we allowed the Taliban and al Qaeda to regenerate itself when we had them on the ropes. That was a big mistake and it's one I'm going to correct when I'm president.

(END VIDEO CLIP)

BLITZER: And joining us now, the host of "FAREED ZAKARIA GPS," Fareed Zakaria, who has just conducted this interview with Barack Obama.

Fareed, thanks very much for joining us.

FAREED ZAKARIA, "FAREED ZAKARIA GPS": My pleasure, Wolf.

BLITZER: Let's get your analysis right now, what we just heard. Because as far as John McCain is concerned, we're hearing a very different stance from Barack Obama as far as Russia and its involvement in the G-8 alignment.

ZAKARIA: I think they're two very different visions of how to deal with the world, Wolf. I think on the one hand, you have McCain, who is suggesting, in a sense, a new division, a new Cold War, if you will, between the democracies and the autocracies.

What Obama said to me was, look, you can't solve the world's problems that way, we have got to deal with the issues of global warming, issues of nuclear proliferation. On nuclear proliferation, on loose nukes, you need the Russians. On any economic issue, you need the Chinese. So it's a vision of drawing in the world's major powers, whether or not they're democracies, which is a kind of more ideological view, you know, which is sort of democracy versus the rest.

BLITZER: So basically the major difference between Barack Obama and John McCain is, McCain wants to expel Russia from the G-8 and Barack Obama says keep them in, keep them in this tent, because the U.S. needs them.

ZAKARIA: Exactly. Draw these guys into the tent so we can solve some of the world's common problems together.

BLITZER: Now, let's talk a little bit about Afghanistan, because there's been a dramatic increase in violence there. Some U.S. officials are blaming the Pakistanis for allowing Taliban and al Qaeda fighters to go in from the tribal areas of Pakistan into Afghanistan. But you and the Democratic presidential candidate focused in on Hamid Karzai, the leader of Afghanistan.

What's his bottom line?

ZAKARIA: I think Senator Obama was repeating a standing segment (ph) for a long time, which is that things in Afghanistan are not going well. That they are deteriorating, and that's where U.S. forces and diplomatic and all kinds of energy needs to be placed. So in that sense, I think he was being quite consistent. I thought he went a little bit further in directly criticizing Karzai for not really trying to reestablish control of the country. But I think that overall, it was a fairly consistent message that we're spending too much time on Iraq, not enough on Afghanistan, and the real problem is Afghanistan, which is deteriorating.

BLITZER: Fareed Zakaria.

The full interview will air Sunday, 1:00 p.m., on "FAREED ZAKARIA GPS."

Fareed, thanks very much for joining us.

ZAKARIA: My pleasure.

BLITZER: And later we're going to be speaking with the foreign minister of Pakistan. He's now here in Washington. We'll have his first interview since arriving here. He's part of the new government in Pakistan, and we'll talk about the hunt for Osama bin Laden and what's going on along the border between Pakistan and Afghanistan.

That interview coming up later.

But let's move on to another huge story we're following right now. That would be Wall Street.

It's reeling after stock prices fell into anxiety-producing territory once again. The Dow closed down more than 120 points. At one point it sank below 11,000. That would be for the first time in two years.

Shares in the huge mortgage companies Fannie Mae and Freddie Mac have plunged in value in recent days, and there's growing fear that one or both of those companies could collapse and would wreak havoc on the U.S. economy.

Let's go to CNN's Allan Chernoff. He's in New York watching this story for us.

Is there a real possibility that these two mortgage companies, Fannie Mae or Freddie Mac, could actually go bust?

ALLAN CHERNOFF, CNN SR. CORRESPONDENT: Well, Wolf, that's been the big worry on Wall Street, but the federal government is going to try to make sure that does not happen. These two companies are more than just the most important players in mortgage financing. They are essential to the American housing market.

Now, the odds are pretty good that our mortgages and the mortgages of so many of our viewers actually originated with funding from either Fannie Mae or Freddie Mac. Fannie and Freddie are offspring of Uncle Sam, created by the government.

For most of their lives, they've behaved sort of like wealthy relatives, making money available for Americans to borrow. But with the housing market tumbling, Fannie and Freddie have been falling on hard times, and there is speculation Uncle Sam may have to adopt them by bailing them out.

(BEGIN VIDEOTAPE)

CHERNOFF (voice over): As more homes tumble into foreclosure, Fannie Mae and Freddie Mac are suffering billions of dollars in losses. That's because they own about half of all the mortgages in the country. Investors, worried losses will mount, have been dumping stock of the mortgage giants.

JAREY SEIBERG, STANFORD GROUP: Well, there's widespread fear that Fannie Mae and Freddie Mac are not going to have enough capital to cover their losses.

CHERNOFF: Funding from Fannie Mae and Freddie Mac has dramatically expanded homeownership in our country. Banks sell mortgages to Fannie Mae and Freddie Mac; Fannie and Freddie pay banks for those mortgages, and banks use that money to make more home loans. If Fannie and Freddie stumble, the funding cycle is at risk.

SEN. CHRISTOPHER DODD (D), CONNECTICUT: There is sort of a panic going on today, and that's not what ought to be. The facts don't warrant that reaction.

CHERNOFF: But there's enough fear that, according to "The New York Times," the Bush administration has discussed taking over either Fannie or Freddie, or both of them.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Secretary Paulson came by this morning to brief me on the financial markets. Freddie Mac and Fannie Mae are very important institutions. We spent a fair amount of time discussing these institutions. He assured me that he and Ben Bernanke are -- will be working this issue very hard.

CHERNOFF: In fact, Reuters reports the Federal Reserve is offering to loan money to Fannie Mae and Freddie Mac. And Treasury Secretary Paulson is trying to rebuild confidence, saying, "Our primary focus is supporting Fannie Mae and Freddie Mac in their current form. We are maintaining a dialogue with regulators and with the companies."

(END VIDEOTAPE)

CHERNOFF: Freddie Mac, in a statement, says it has plenty of money to keep supporting the nation's housing market. Still, Freddie and Fannie are under pressure to raise more money from investors to ensure their stability. If they can't, the federal government indeed may have to step in. And if Uncle Sam has to adopt both Fannie and Freddie, you know who's going to be paying the bill -- American taxpayers -- Wolf.

BLITZER: Who would have thought? That's really startling, startling information with enormous ramifications.

Allan, thanks for that report.

Let's go right to Jack Cafferty. He's got "The Cafferty File." You know, it's one thing, Jack, for Bear Stearns to be bailed out, in effect, by U.S. taxpayers, but you know a lot about Fannie Mae and Freddie Mac. These are venerable institutions. And if they're going down -- and that's a big "if" -- but if they're going down, you know how bad it is out there.

JACK CAFFERTY, CNN ANCHOR: Well, the frightening part of the story is that the mortgage obligations that are represented by Freddie Mac and Fannie Mae are in the trillions, trillions of dollars. I mean, if they go...

Jesse Jackson got away a few years ago with calling New York "Hymietown." That was a reference to New York's Jewish population.

This time around, he might not be so fortunate. Jackson's saying that he wanted to castrate Barack Obama for "talking down to black people." It may mark the end of Jesse Jackson's relevance to anything.

His comments, which were caught on an open mike in a TV studio, were in response to Obama's speeches about the responsibilities of absentee black fathers. Jackson apologized, said he meant there are other important issues to address in the black community like unemployment, the number of blacks in prison. But it turns out Jackson's vulgar comments -- and they were vulgar -- could actually wind up helping Barack Obama with white voters, for example, who wonders if he shares their values -- remember the Reverend Jeremiah Wright? -- and with blacks who see Jesse Jackson as a figure of the past.

Barack Obama is proving to Jesse Jackson and the rest of us that it's not necessary to play the black and white races off against each other in this country. Something Jesse Jackson has done his whole life.

Charles Hurt of "The New York Post" this morning wrote that Jackson knew exactly what he was doing when he made these vulgar comments. Hurt suggests the real reason Jackson's unhappy is that, "Obama has shown that unifying and uplifting campaigns succeed in American politics, where the divisive failed campaigns waged by Jesse Jackson become history's footnotes."

And finally, consider this: Obama's telling a black church that a father's responsibility doesn't just end at conception may have hit too close to home for Jesse Jackson. After all, it was only a few years ago that the Reverend Jesse Jackson acknowledged an extramarital affair that produced a baby that was born out of wedlock.

So here's the question: Has Jesse Jackson become irrelevant?

Go to cnn.com/caffertyfile, and you can post a comment on my blog -- Wolf.

BLITZER: Get ready for a lot of comments, Jack.

CAFFERTY: Already getting them. Hundreds of them pouring in. BLITZER: I'm sure you are. All right. Stand by.

Powerful Congressman Charlie Rangel says he's not apologizing to anyone. The House Ways and Means Committee chairman under the microscope right now for the way he's using New York's rent control assistance to his advantage.

Plus, John McCain thought he had put the controversy to rest, but the question is being raised once again. Is a natural-born citizen someone who is not necessarily born in the United States? And is that a requirement, a qualification for being president?

And concerns that Barack Obama might cause something of an international incident in Germany. What the Germans are now saying.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The German government said today it expects to find a "good solution" to a flap that could be called "Obama-gate." At issue, Barack Obama's request to speak at Berlin's historic Brandenburg Gate during an upcoming trip to Germany.

Our White House Correspondent Ed Henry is following this story for us.

Ed, lots of symbolism for American politicians, and for Germans, for that matter, at the Brandenburg Gate.

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: That's right, Wolf.

As you know, both John Kennedy and Ronald Reagan gave major speeches in Berlin. But Angela Merkel, the German chancellor, is now saying she doesn't want Senator Obama to use the Brandenburg Gate as an actual backdrop. And there are now charges that the U.S. pressured Merkel to say that, though I can tell you the White House is trying to shoot that allegation down.

(BEGIN VIDEOTAPE)

HENRY (voice over): Barack Obama will soon embark on a global tour to beef up his foreign policy credentials, with stops in big European capitals like Berlin, London and Paris, where people are giddy about his presidential campaign.

UNIDENTIFIED MALE: I think Obama is seen a bit in the line of the continuation of Kennedy, you know? A very dynamic, charismatic person.

HENRY: During his own trip to Germany in 1963, John F. Kennedy famously said, "Ich bin ein Berliner" at a town hall near the Brandenburg Gate. Obama is now considering a speech at the gate itself, but German Chancellor Angela Merkel, a key ally of President Bush, is trying to squash it. A Merkel spokesman said it's inappropriate to use the gate as a campaign backdrop. RONALD REAGAN (R), FMR. PRESIDENT OF THE UNITED STATES: If you seek liberalization, come here to this gate.

HENRY: It was the site of Ronald Reagan's most famous anti- communism speech in 1987, when he prodded Soviet leader Mikhail Gorbachev to open up the gate and...

REAGAN: Mr. Gorbachev, tear down this wall.

HENRY: On Thursday, a German newspaper reported a U.S. official approached Merkel's staff at the G-8 summit in Japan to express concerns about Obama's planned speech. But a White House official told CNN, "The U.S. delegation did not raise this issue" with Merkel. And a Merkel aide suggested it was pure fiction to suggest the chancellor was pressured by the president.

The Obama campaign is trying to be diplomatic. A spokesman saying the candidate "... has considered several sites for a possible speech, and he will choose one that makes most sense for him and his German hosts."

As for the message Obama will bring to Europe and then the Middle East?

OBAMA: After the end of the Cold War, we found ourselves as this mighty superpower, and yet, although our military power is unmatched, world security today can't be solved just by one country, because they span the globe.

(END VIDEOTAPE)

HENRY: Now, in addition to Europe, we know that Senator Obama will also be going to Israel. It's widely expected as well that he'll be going to Iraq. Those are very important stops, obviously, for him to try and show he's ready to be commander in chief -- Wolf.

BLITZER: We'll watch that trip obviously very closely.

Ed Henry at the White House for us.

There's new information coming in about those two U.S. soldiers missing in Iraq. They vanished more than a year ago. We're going to have an update for you on what we know.

Plus, it could be the key to some major swing states, how John McCain's new ad could help him in places like Florida.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: It's a question John McCain certainly hoped was dead, but that's apparently still alive, at least for now. Some question if he actually qualifies under the U.S. Constitution to be president of the United States. At issue, McCain's birth in the Panama Canal zone back in 1936. It was then a U.S. territory, but outside the continental United States. The Constitution says only a natural-born citizen can be president.

McCain was born to a family serving in the U.S. military in the canal zone. But now a law professor from McCain's own state says his birth disqualifies him from actually becoming president. He says it involves a 1937 law that granted citizenship to those born in the canal zone, but didn't necessarily make them naturally born.

Let's get some analysis from our senior legal analyst, Jeff Toobin, who's watching this story for us.

Is the argument technically right that this law professor is putting forward?

JEFFREY TOOBIN, CNN SR. LEGAL ANALYST: Well, I think it's plausible, but ultimately I think it is not going to stop John McCain from being president, because the idea that Gabriel Chin, the professor at the University of Arizona Law School, said is that this 1937 law said everyone born before this is now a citizen. McCain was born in '36. The -- so by implication, when he was born in '36, Chin's argument goes, he was not a natural-born citizen.

BLITZER: But, you know, so there are some legal grounds. I guess lawyers can debate this. If it doesn't affect McCain, who does it affect?

TOOBIN: Well, I really don't think it affects anybody, because it seems to me that the weight of authority is that this law simply ratified the understanding that had been in place previously. And there's an even bigger problem with this issue getting in McCain's way.

There is almost no way that anyone could bring a lawsuit where a court would say, John McCain, you're not going to be president. No one, perhaps only Barack Obama, would have standing, would have the right to bring such a lawsuit, because they just simply don't have the right to go into court on this.

No one has the right to go to court. You have to be injured by the violation. And a mere citizen is not going to be able to bring this case.

And Obama has said he's not going to raise this issue. So I think it's basically in the realm of an interesting debate, but no court will ever hear this challenge.

BLITZER: What do the founding fathers mean when they inserted "naturally born" as a qualification to be president?

TOOBIN: Well, what they -- what they wanted was not someone who had been born in England. They wanted someone born within, at that point, the 13 colonies. And usually it's a pretty straightforward issue of whether someone was born in this country or not. Arnold Schwarzenegger, born in Austria, not eligible. Jennifer Granholm, the governor of Michigan, born in Canada, not eligible.

What makes McCain's situation so interesting is that he was born in the canal zone, which was under American control, with military parents. That's a situation that I think most people feel we should be sympathetic to.

His parents were serving their country. They shouldn't be penalized by having their offspring not being eligible for the presidency. And I think that's the view that most scholars hold, notwithstanding this very interesting article.

BLITZER: And that's certainly the view of most of the politicians in the Congress hold, because they certainly don't see this as a disqualification, Democrats and Republicans, for John McCain.

TOOBIN: Two hundred seventy electoral votes, that's what McCain needs to be president. Everything else will take care of itself.

BLITZER: Good point, Jeff. Thank you.

The powerful Congressman Charlie Rangel is angry today. He's speaking out about published reports that he might be getting a deal on his apartments in New York City. You're going to hear what he has to say about it.

And John McCain's straight talk may be too straight for some. Why some Republicans worry about part of the candidate's message.

And both political parties want your input in their conventions. How to make your opinions really matter, that's coming up, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now, a book publisher promises that an upcoming book will reveal things about the Bush administration never heard before. It's entitled, "The Dark Side," and it talks about a secret report alleging that after 9/11, some of the highest officials in the government did things to put them at risk of being charged with war crimes.

Also, they are solemn occasions, funerals for soldiers killed at war. But is the Pentagon trying to stop you from seeing them? And was one Arlington National Cemetery official fired for trying to show more of them?

And a CNN exclusive. They were trained to fight extremists in Iraq, now they're fighting extreme wildfires in California. Iraq war vets on dangerous duty on a new front line.

I'm Wolf Blitzer. You're in THE SITUATION ROOM. He's the powerful chairman of the House Ways and Means Committee, a static figure in national Democratic and New York City politics. But a newspaper report is exposing a rent deal Congressman Charlie Rangel enjoys, a deal that's raising some questions, causing some concern.

CNN's Mary Snow is working this story for us.

Mary, Congressman Rangel, who is obviously a blunt guy, he's not very happy with these accusations.

MARY SNOW, CNN CORRESPONDENT: He's not, Wolf.

And a very defiant Congressman Charles Rangel is firing back at questions about apartments he's renting in Harlem and whether he's getting them at a bargain price.

(BEGIN VIDEOTAPE)

SNOW (voice-over): New York Democratic Congressman Charles Rangel facing reporters outside his Harlem home after a front-page story in "The New York Times" raised questions about the fact he has four rent-stabilized apartments in the building.

REP. CHARLES RANGEL (D-NY), HOUSE WAYS AND MEANS COMMITTEE CHAIRMAN: And I'm not apologizing to anyone for that.

SNOW: The powerful New York Democrat who chairs the House, Ways and Means Committee lashed out at "The New York Times" story, poking holes in one inconsistency, that he lived in a penthouse, when there is none.

But it didn't quell questions about having four units at a time when the number of rent-stabilized apartments in New York are dwindling, as landlords push to charge higher rates. Rangel says he uses one of those units as an office and not a residence. He says he will need to check whether there's an issue with that unit, but says:

RANGEL: And I have done nothing illegal, and I have not negotiated a separate contract with the landlord.

SNOW: The topic is so heated that Harlem resident Lance Smith disrupted Rangel's press conference at one point.

LANCE SMITH, RESIDENT OF HARLEM: Does it constitute you receiving a gift, a special privilege from the landlord that the landlord has not afforded to any other tenant?

SNOW: Rangel says he's not accepted any gifts, adding he wouldn't recognize the landlord if he saw him.

The company that owns the building, Olnick Organization, declined comment, beyond a spokeswoman saying, "This is a private matter for the Olnick Organization and Mr. Rangel to evaluate."

We asked Rangel about the fact that an owner of that real estate company contributed $2,000 to Rangel's campaign in 2004.

RANGEL: This year, I have raised $5 million. So, I would not be able to find that $2,000 check.

SNOW: One watchdog group says, while Rangel may not have done anything illegal, it could pose problems for him.

UNIDENTIFIED FEMALE: There's both an appearance problem, but there's a bottom-line problem here that he may have gotten a sweetheart deal.

(END VIDEOTAPE)

SNOW: Now, Congressman Rangel was asked what he would do if there is an issue with him using one of those apartments as an office. And he did say today that he would go to another place and get a different office if there is an issue with it -- Wolf.

BLITZER: Mary Snow will stay on top of this story for us.

Mary, thank you.

John McCain, meanwhile, is out on the campaign trail in Wisconsin today, wrapping up a week that was supposed to represent a new beginning for his campaign under brand-new management.

Let's turn to CNN's Dana Bash. She's covering the McCain campaign for us.

This relaunch, if you will, as some are calling it, Dana, of the campaign, not exactly gone the way that some would have liked.

BASH: Well, it's interesting, Wolf. This week really started with a palpable new determination coming from the McCain campaign.

Advisers you talk to really were trying to keep a laser beam-like focus on their message, that McCain's economic plans will create jobs. But, as one Republican strategist that I talked to put it to me, he said, McCain is still ending the week scarred with some self-inflicted wounds.

(BEGIN VIDEOTAPE)

BASH (voice-over): In many ways, this town hall with Wisconsin women was the kind of makeover John McCain's aides retooling his campaign were going for.

MCCAIN: I have a proven record. I have a proven record of reaching across the aisle. Now, sometimes...

(APPLAUSE)

BASH: McCain was connecting with swing voters. He was loose, but maybe a bit too loose.

MCCAIN: I will do anything in my power to get those offshore exploited -- explored, discovered, and...

(LAUGHTER)

MCCAIN: Explored and exploited..

BASH: A Freudian slip of sorts from the self-described environmentalist now calling for drilling offshore, evidence that McCain's week of events to relaunch his campaign had some misfires.

Case in point:

PHIL GRAMM, MCCAIN CHIEF ECONOMIC ADVISER: We have sort of become a nation of whiners.

BASH: Having to rebuke his good friend and economic adviser for declaring the country is in a mental recession.

MCCAIN: Phil Gramm does not speak for me. I believe that the person here in Michigan that just lost his job isn't suffering from a mental recession.

BASH: Some awkward moments got less national attention, but may be just as politically perilous, like going to the battleground of Michigan, where many voters believe free trade sent their jobs overseas, and saying this.

MCCAIN: I believe that free trade is important.

BASH: Too much straight talk for these voters, who told him so.

UNIDENTIFIED MALE: So, what we need to do is control some of these trade issues that we have got going on. And we want fair trade.

BASH: Some Republicans tell CNN, they worry McCain's free trade message is alienating blue-collar voters he's trying to pull from Barack Obama.

Experts agree.

BERNIE PORN, MICHIGAN POLLSTER: He may think that he's telling the truth about the issue, but this is one of those issues where I can assure him that the voters can't handle that truth.

(END VIDEOTAPE)

BASH: Now, McCain did talk hour after hour, day after day this week about his prescriptions for the ailing economy and how he believes Barack Obama will raise your taxes.

What's unknown, Wolf, is whether voters really heard it.

BLITZER: A lot of those blue-collar voters hate NAFTA and some of these other free trade agreements. So, he is going to have some explaining to do.

All right, Dana, thanks very much. Shakespeare wasn't known for mysteries, but he's been involved in one for a decade. And now it's been solved. We will tell you.

Plus, what Barack Obama can do to improve his chances in Michigan. Stand by for our "Strategy Session."

And Obama may put his campaign for NASCAR voters in high gear -- lots of news happening today right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Carol Costello is monitoring some other important stories incoming to THE SITUATION ROOM right now.

Carol, what is going on?

CAROL COSTELLO, CNN CORRESPONDENT: Well, Wolf, a homecoming for some soldiers from Iraq, but an extremely sad one. Two soldiers missing for more than a year have been found.

The military has identified their remains. One soldier was 19 years old, the other 25. They're both from Waterford, Michigan. They were kidnapped in an ambush last year in an area called the Triangle of Death. Another American soldier also kidnapped was found dead days after the attack.

Rising exports helped slim down the nation's trade gap to under $60 billion. That's the best showing since March. In the meantime, many of you are saying goodbye to your favorite luxury brands and yes to stores like Family Dollar and Wal-Mart. More Americans are trading down from pricey goods to generic items. Some of that is seen in a report showing Americans boost its sales at Wal-Mart almost 6 percent in June.

In Ohio, 67 residents of a rural mostly African-American community are awarded between $15,000 and $300,000 each. Why, you ask? Because a jury found that local authorities denied the black residents public water service for almost 50 years. One resident talked about the pain of not having water service.

(BEGIN VIDEO CLIP)

CINDY HAIRSTON, RESIDENT OF OHIO: It was emotionally straining. It hurt to know that our neighborhood would go without public water.

(BEGIN VIDEO CLIP)

COSTELLO: Others describe having to dig wells, haul water in containers, even collect rainwater to drink, cook and bathe. Local officials say they will appeal. And others representing the defendants called the verdict disappointing.

A Shakespearian tragedy with a happy ending -- a 400-year-old first ever edition of Shakespeare's plays has been recovered a decade after it was stolen in England. Three weeks ago, a man brought the book to a library here in Washington and asked to have it verified as genuine.

Suspect staff held on to a book and a suspect was later arrested. The First Folio, as it's known, is worth a cool $30 million. But it is priceless to Shakespeare scholars -- back to you, Wolf.

BLITZER: Thirty million dollars, that's a lot of money for that little book.

COSTELLO: Well, I had questions about that man. Did he have it for 10 years and then thought it was safe to -- it's weird.

BLITZER: If you have got something that valuable, and you're maybe not dealing with the right motives, you would think you would have a better way to authenticate it.

COSTELLO: Someone was arrested, but we don't know if it's that man.

BLITZER: Yes, we will see. All right, you will update us, Carol. Thank you.

COSTELLO: Yes.

BLITZER: John McCain is out with a brand-new campaign ad. He's urging Americans to remember that Hispanic immigrants are God's children. McCain is clearly sending a message to a crucial group of voters.

Let's turn to our senior political analyst, Bill Schneider.

These candidates are really eager, Bill, to go after that Latino or Hispanic vote.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: They certainly are, for four reasons, Florida, Colorado, New Mexico, and Nevada.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Why are the candidates paying so much attention to Latinos this year?

OBAMA: This election could well be decided by Latino voters. Every four years, some of the closest contests take place in Florida and Colorado and Nevada and New Mexico. Those are all states with Latino populations.

SCHNEIDER: Both candidates know that. That's why both candidates will have addressed three Latino political organizations in three weeks, including the National Council of La Raza this weekend. John McCain has just released a new ad aimed at Hispanic voters. Where is it running? Colorado, Nevada, New Mexico.

(BEGIN VIDEO CLIP, MCCAIN CAMPAIGN AD)

MCCAIN: You go to Iraq or Afghanistan today, you're going to see a whole lot of people who are of Hispanic background. You're even going to meet some of the few thousand that are still green card holders who are not even citizens of this country, who love this country so much, that they're willing to risk their lives in its service.

(END VIDEO CLIP)

SCHNEIDER: Flattery or pandering? We asked someone who knows the Latino community.

JUAN CARLOS LOPEZ, CNN EN ESPANOL CORRESPONDENT: They know that politicians pander, so it's a fairly sophisticated community. Politically, they're pretty aware of what's happening. And they know that politicians will promise anything and everything to get their vote.

SCHNEIDER: Both candidates support comprehensive immigration reform, but will that issue determine how Latinos vote? Mr. Lopez doesn't think so.

LOPEZ: Immigration will be the issue to get them -- get their foot in the door and get them to listen. Will they vote only on immigration? Probably not. They will vote on other issues, as other American voters will, the economy, the war, health, education.

(END VIDEOTAPE)

SCHNEIDER: Latinos are not one-issue voters. Once they feel reassured that the candidates are not against them, they vote the same issues as everybody else, because they, too, are paying over $4 for a gallon of gas -- Wolf.

BLITZER: And that's a lot of money. And it's getting closer in some parts of the country to $5 a gallon, if you can believe it.

All right, thanks very much, Bill, for that.

With the Republican National Convention less than two months away, the GOP is working hard to shape its party platform and asking voters online for their assistance.

Our Internet reporter, Abbi Tatton, is working the story for us.

BLITZER: So, how are they sending this, Abbi.

ABBI TATTON, CNN INTERNET REPORTER: Wolf, this is the election where we have already seen a snowman ask a question of a presidential candidate in those CNN/YouTube debates.

Well, now we might see similar characters participating and contributing to the Republican Party 2008 platform. This is a new Web site from the Republican National Committee inviting people to submit their policy ideas for the platform ahead of the convention this summer, that they will be considered by the platform committee.

And the topics that people are weighing in on right now include energy policy and national security. Over 600 people have weighed in and suggested their ideas so far. There's also a place where you can submit your YouTube videos.

One of the first to be uploaded to the Web site today, a speech by Ronald Reagan. And then, since then, it seems like a lot of the videos have been either by Ron Paul supporters, and then, in just the last couple of hours, it's been people advocating the benefits of hemp.

But these RNC officials say it it's policy-oriented, it's going to be posted here, and they want to hear about it. We heard earlier this week from the Obama campaign and the Democratic National Committee that they're going to be touring the country and holding events in every state to hear ideas for their platform as well.

BLITZER: Get ready for those ideas. They will be pouring in.

All right, Abbi is watching the story.

In our "Strategy Session": One tossup state might be a lot tougher than either candidate realized. We have some new poll numbers. We will talk about it. And we will get the take on what Barack Obama and John McCain should be doing to try to win Michigan.

Plus, an American college student accused of murder in Italy -- there are new details coming into THE SITUATION ROOM on a crime in one of the most popular sites for American students studying abroad.

(COMMERCIAL BREAK)

BLITZER: Senator John McCain has a message for Latinos: I want your vote.

In our "Strategy Session," joining us right now, our political contributor Donna Brazile -- she's a Democratic strategist -- and Republican strategist Kevin Madden. He's a former spokesman for Mitt Romney.

Guys, thanks very much for coming in.

He's aggressively right now, John McCain -- we just saw Bill Schneider's report -- going after voters in some of those key battleground states. So, he's got a record.

DONNA BRAZILE, CNN POLITICAL ANALYST: He has got a record, but what record, Wolf? Is it his record in 2003, where he said he would give a limited number of Hispanics amnesty, or is it 2006, when he called the Republican approach to enforcement only ill-advised and ineffective, or is it 2008, when he said, no, he would not have voted for his own bill?

Look, John McCain has been through a circular firing squad on this issue. He took a bold position on the past, but now he's changed and he's trying to appeal to 43 million Hispanic voters.

BLITZER: He doesn't support comprehensive immigration reform right now, as outlined in McCain/Kennedy. He says you have got to deal right now with the borders first. KEVIN MADDEN, FORMER ROMNEY CAMPAIGN NATIONAL PRESS SECRETARY: Right.

I think the only thing that's changed is that John McCain is talking differently about this. But he's been for comprehensive reform. He still is for comprehensive reform. And I think it's going to be a priority in his administration.

(CROSSTALK)

BLITZER: But comprehensive reform, doesn't that mean you do everything simultaneously?

MADDEN: Well, look, I think a lot of voters, the conservative voters that didn't like his position before, have found comfort in the fact that -- how we would go about it sequentially.

He wants to secure the borders first, then move towards a comprehensive plan. I think a lot of people would agree with that. They want to know that they stop the influx of lawbreakers before we go about a comprehensive approach.

And I think that there are -- there is a lot of goodwill with John McCain with Latino voters, because he's always stood up and done the right thing. He's done the hard thing. I think where he can go after -- and I think where the McCain campaign is going to go after Barack Obama on this is that Barack Obama seems to be politicizing this issue.

He seems to be only be demagoguing it. When the hard votes had to come to get comprehensive reform, Barack Obama voted against or voted for amendments that would kill the bill. So, John McCain is doing the hard thing. Barack Obama is just demagoguing.

BLITZER: Go ahead, Donna.

BRAZILE: Well, there's no question that Mel Martinez would tell you that Barack Obama was there on the scene helping John McCain, Ted Kennedy, Dick Durbin, and many others.

The problem for McCain is that he's trying to appeal to Hispanics, because he needs their votes in the states that Bill Schneider outlined. But it's not just immigration reform. Hispanics are concerned about the economy. They're concerned about health care, the mortgage crisis.

So, if McCain cannot convince them that he has the right ideas and the right solutions on those issues, it won't matter about immigration reform.

MADDEN: I would agree with that. And I think that he's going to go after them on economic issues. Donna is right there. He's also going to go after them on social issues and draw the contrasts there.

And Hispanic voters hate taxes just as much as every other voter, and Barack Obama is for higher taxes and bigger government. BLITZER: How big of a problem does McCain have when he goes to a state like Michigan, which has lost a lot of manufacturing jobs? And so many of those workers, the blue-collar workers there, really hate NAFTA, hate these free trade agreements because they blame those free trade agreements on their losing their jobs, the jobs being exported around the world.

And he goes there and he says, you know what, America needs free trade.

MADDEN: Well, look, I think John McCain's going to make the argument to the Michigan voters by proxy of Jennifer Granholm's unpopularity in the state.

Michigan voters know what happens when you draw up a wall around your economy and when you tax it, that jobs go elsewhere. And that's going to be the important contrast there with a lot of the voters in Michigan, that he can go out there and say that he has got a vision for growing this economy, using an energy sector to help replace some of the auto jobs that are leaving, and that he can grow jobs and grow the economy there, whereas Barack Obama's remedy would drive jobs even further away from Michigan.

BRAZILE: Well, he needs to go to Flint, Michigan, and he will find out that this is not a mental recession. People are losing their homes. They have lost their jobs. And they want relief. They don't want a president who says that this is psychological drama.

(CROSSTALK)

BLITZER: He didn't say that. His adviser, Phil Gramm, said that, and he disassociated himself from those remarks.

(CROSSTALK)

BRAZILE: Well, he did the right thing, because I think there are a lot of people out there hurting, and it's not in their mind. It's in their wallets and at their kitchen table.

BLITZER: That kind of tough talk, or blunt talk, if you will, by Phil Gramm, as a surrogate, not only a surrogate, but a close friend of John McCain, how much does that hurt him?

MADDEN: Well, I think this goes to -- Donna and I have been working on the campaigns. We always tell surrogates, go out there and be an advocate. Do not be an analyst.

And I think this is exactly what happens when surrogates go out and they serve as analysts. But I think that John McCain was smart. He went out there and said, Phil Gramm does not speak for me. I speak for me. Here is my plan for moving the Michigan economy forward. Here's my plan for creating jobs.

That's what he did. And he had to it...

(CROSSTALK) BRAZILE: Well, you know Phil Gramm is a big Wall Street exec. And he knows the pain on Wall Street, but not the pain on Main Street. He needs people who understand the problem of everyday Americans. They will help John McCain sell his message.

BLITZER: Donna, Kevin, guys, thanks.

Barack Obama's keeping silent about his potential vice presidential choices. But we know at least one candidate who's in the running, and it's not necessarily Hillary Clinton -- that story coming up.

Solemn burials at Arlington National Cemetery kept under tight wraps. The woman who says she was fired for trying to change policy.

And NASCAR is usually a Republican domain, but Obama might be getting into the racing scene in a big way. You are going to find out how.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Here's a look at some of the "Hot Shots" coming in from our friends at the Associated Press, pictures likely to be in your newspapers tomorrow.

In New York, traders at the Mercantile Exchange press on, as oil prices hit a record $147 a barrel.

In Afghanistan, a U.S. Marine and an Afghan border police officer shake hands after a joint patrol.

In China, workers clean the national stadium in preparation for the opening of the Olympic Games.

And, in Germany, check it out. A baby gorilla watches an adult chimp through a window at the zoo. That's it -- some of this hour's "Hot Shots," pictures often worth 1,000 words.

On our political radar today: A former top adviser to Hillary Clinton says he does not think she's being formally considered as Barack Obama's running mate. Howard Wolfson says, as far as he knows, Clinton has not been asked to participate in a formal vetting process.

But Senator and former presidential candidate Chris Dodd apparently has been approached by the Obama camp. The Associated Press reports Dodd has been asked to provide information to the Obama search team -- Dodd among my guests Sunday on "LATE EDITION."

Remember, for the latest political news any time, check out CNN.com/SITUATIONROOM. That's also where you can download our new political screen saver. Check out what else is going on in politics.

Let's check out Jack Cafferty right now, because he's got "The Cafferty File." CAFFERTY: And if you do everything the instructions on that Web site say, we will send you a cookie.

The question this hour is: Has Jesse Jackson become irrelevant? Boy, did we get some mail.

Mark says: "I believe one of the big reasons Barack Obama has had success, unlike Jesse Jackson or Al Sharpton, is because Obama does not have the hatred that these two so often demonstrate. Much like Reverend Wright, these guys are old-school, and don't reflect the opinions of most, who think that more change can be achieved without the hate."

Michaela writes: "You're in the news business. You and your colleagues make Jesse Jackson relevant by sticking a camera in front of his face every time he makes a ridiculous or poetic utterance and by seeking comment and opinion from him on all matters large and small. That you would even ask the question is alarming."

Alise writes: "Jesse is not irrelevant. If it were not for Jesse Jackson and the civil right soldiers, there would be no Barack Obama. What Jesse Jackson is, is out-of-touch with technology, and he got busted for making that comment. He should have been more careful. That is it. What happened is, he got caught saying out loud what some African-Americans may feel."

Tom in Fort Lauderdale writes: "Jesse lost his stripes after the birth of his last child outside his marriage. He ought to be selling tennis shoes at the mall."

Sandra in Texas says: "Yes, to an extent. Jesse Jackson faces the same situation as Bill Clinton. The torch has been passed to a new generation of Americans" -- Jack Kennedy, I think. "The problem with Jesse and Bill is, they did not pass the torch. Obama took it from them."

Mac in Fort Lauderdale writes: "I don't ever recall him being actually relevant, just in your face about anything that he could dream up to bitch about. What a loser."

And Renee in Illinois writes: "He is nothing more than a has-been and, thankfully, never will be again. It's time the media stopped giving him attention, and move on. There's nothing left at the end of that rainbow."

If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile. Look for yours there among hundreds of others.

Those were some of the kinder ones.

(LAUGHTER)

BLITZER: I can only imagine, Jack. Thank you.

(LAUGHTER)

BLITZER: And, to our viewers. You're in THE SITUATION ROOM.

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