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Government plan to bolster mortgage giants get investors pumped; FDIC Takes Over IndyMac; Genocide Charges Against Sudan's President; Guilty Charges for Terrorists Who Plotted to Bomb Transatlantic; Indian "Untouchables" Clean Up Waste

Aired July 14, 2008 - 10:00   ET

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

TONY HARRIS, CNN ANCHOR: Rolling on a bit of a loop here. Crystle Stewart trip on her evening gown. I'm just surprised this doesn't happen more often because the ladies wearing these heels and you need to raise the hem on the dresses just a little bit. The slip coming right after judges just selected her as one of the top ten contenders.
RANDI KAYE, CNN ANCHOR: Don't they practice this stuff?

HARRIS: You would think.

KAYE: You walk the stage and it's something that you know what to do.

HARRIS: It's a radiant smile, though. Isn't?

You may recall that last year Miss U.S.A. Rachel Smith also tumbled during the evening gown competition.

KAYE: Oh, you wiggle like that.

HARRIS: You may want to put some ice on that before it bruises. That's a pretty moment there on YouTube, for all of you YouTubers.

KAYE: Well, good morning, everybody. I'm Randi Kaye, in for Heidi Collins.

HARRIS: And I'm Tony Harris. Stay informed all day here in the CNN NEWSROOM. Here's what's on the rundown. The government got their back. Mortgage giants Fannie Mae and Freddie Mac to get a boost and investors go along for the ride.

KAYE: Guerrilla in the mix. Company wants to turn farmlands into a refinery. Critics say show me the money and the plan.

HARRIS: And they're called the untouchables, what a story this is. The Indian women who cleaned up human waste. How one walked with models. It is Monday, July 14th. You are in the CNN NEWSROOM.

KAYE: Your wallet, your worries, the week starts with dramatic and unsettling news on the economy. Reopening this morning under federal control, Indymac Bank. On Friday, it became the second largest institution to fail in U.S. history. The biggest collapse since Continental Illinois went under in 1984. Indymac specialize in mortgages that required little if any proof that the home buyer was well qualified. The mortgage crisis is also looming over two lending giants, and the government wants you to know that they are ready to step in. At risk, Fannie Mae and Freddie Mac. They are responsible for about half of all mortgages in the U.S.. So how are investors reacting? Wall Street opened in the last hour. A quick look at the big board shows not too bad. Up 32 points there on the Dow. So the efforts to calm investors may have worked.

HARRIS: We are off session highs, though. Maybe a touch concerning there but we will check with Ali. Fannie, Freddie, and the mortgage crisis. What does this tangled mess mean and what's being done to protect you? Here to explain is CNN's senior business correspondent Ali Velshi and Gerri Willis is here as well to help us understand what's being to protect your bank safe.

But Ali, let's start with you. Really, what's being done to protect us here and sort out some of this for us, please.

VELSHI: I got to tell you, you just mentioned session highs - the Fannie and Freddie and all the other banks are actually a little bit lower right now, which was not the expectation. We started this market with triple-digit gains. Here's the bottom line, Fannie Mae and Freddie Mac are government sponsored enterprises but they're basically public companies. They trade on the stock market like everyone else. And they're the middleman in this whole larger than life mortgage situation that we've grown to understand.

Bottom line is, you go to your bank, the bank gives you money. The bank then only has a certain amount of money so how do they keep on doing business? Well, Fannie and Freddie buy mortgages from those banks. That frees up the banks to issue more mortgages because they now have the money for the mortgages they've just sold to Fannie and Freddie. Fannie and Freddie then resell those loans, they bundle them and package them as something called mortgage-backed securities. They sell those to investment houses and big investors and everybody theoretically makes money up the chain until someone stops paying their mortgages. And that's where Fannie and Freddie got caught. What they are supposed to do is they are supposed to keep the cycle of money going and that's how you have lots of money for mortgages.

If they were to stop doing what they do, there would just be a whole lot less money for mortgages. So the Treasury Secretary stepped in yesterday and said that the President has asked him to take steps are necessary to keep these two banks liquid. And the two steps that they have said that they will do is the Federal Reserve will allow Freddie and Fannie to continue to borrow money from the Federal Reserve to stay in business and they want Congress to authorize the Treasury Department to actually go on the open market and buy stocks in those companies. Because the stock have been plummeting and there was some fear that they would go out of business that way.

So the government has stepped in and say, we're going to keep Fannie and Freddie running so that the mortgage business keeps running and there's still money to make loans. That's pretty much what it mean. It's a complicated issue but that's what the government is doing.

HARRIS: We like to think of markets working and sorting out the winners and losers here. Bottom line this for me. Are Freddie and Fannie too big to fail?

VELSHI: Well, they are too big to let fail.

HARRIS: Yes.

VELSHI: Let's put it that way. Even though the big can fall. But they are too big to let fail. And that's what the government is saying, that we need to keep them open. So, you're right. We like markets to deal with these but it's one of those instances where the government is saying that we actually need the market to deal with this but we're going to prop it up.

HARRIS: I appreciate it. Thanks, Ali.

KAYE: Run on the bank. Over the past few days, we saw the second largest failure of a financial institution in American history. Is your bank safe? Are your savings protected? Here with some tips, CNN personal finance editor Gerri Willis. Good morning, Gerri.

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Hey, good morning, Randi. Good to see you.

KAYE: Good to see you. So, the question this morning is - now, we have this fifth bank to fail so far this year. Lot's of folks waking up this morning. What do I do with my money? Do I leave it in the bank? Do I take it out of the bank? How do you know if your bank account is safe? That's what they are all asking.

WILLIS: Well, chances are, it is safe. But here are the details. There's one thing that will save your money if your bank goes under and that is the FDIC insurance. You may want to look for that FDIC logo at your local branch or in their advertising materials. And if you don't see it, ask the bank or better yet go to the FDIC's web site, at FDIC.gov, click on bank find. That's where you'll find for certain if you have that coverage? Randi.

KAYE: And how much are you actually covered for? What are the limits of the protection. Because we heard there's $100,000 number but is that per account or per person or per bank?

WILLIS: Well, the devil's in the details here. As an individual, your deposits are insured up to 100,000 bucks at an FDIC insured back. This includes savings, checking, certificates of deposit, money market accounts, joint accounts can be insured up to $200,000. And you should know, Randi, not covered here money invested in stocks, bonds, mutual funds, life insurance policies. You should also know that big limits for retirement assets, I.R.A.s, these are insured up to $250,000 and just because these retirement accounts are considered separate from individual bank accounts.

Now, let's say that you don't have your money at a bank, you have it at a credit union. Guess what, the same protections exists. They're insured under the National Credit Union Administration, another government agency. Also, you should know that the proportion of uninsured accounts, those that exceed the limits that I just described, it's doubled since 1992. A lot of folks have more money than they realize is safe and a source told me this morning that if you have more money than the 100,000 and $250,000 limits in these banks, it's like driving around without a seat belt on. You want to make sure that you are under these limits.

Now, the good news for Indymac folks is that if they are over those limits, the FDIC is saying that they will pay uninsured depositors half of their uninsured deposit if they have more than $100,000 in an Indymac account. But you can count on that going forward. So you want to make sure that you are under those limits.

KAYE: So, the bottom line is if you have multiple accounts in the same name at the same bank, you better think about moving those around if they are more than $100,000?

WILLIS: That's right. That's exactly right. And of course, the good news here is that the FDIC insures deposits of thousands of banks. When a bank fails, what they do is, they have a healthier institution come in and buy that bank. In the meantime, the checks still clear, you can still use your ATM card. But there's one thing, on thing, you may not be aware of. If you're investing, in, say, C.D.s, under the terms of the new bank, the terms of your investments could change. If you were being paid and A.P.R. of three percent, they may change that. So you have the option to withdraw those funds if the rules have changed on you and if you took out a loan from a bank, say an auto loan or a mortgage loan, those interest rates have to remain the same, which is of course good news.

And we'll be discussing more of this today in a special edition of "ISSUE #1" today at noon. Join us, we'll be talking about all of these issues, how to keep yourself safe. What you can do to make sure that your money is going to be there when you need it. Randi.

KAYE: "Issue number one" that is more special than it typically is.

WILLIS: It's always special.

KAYE: I know. It's even more special.

All right. Gerri Willis, thank you for those tips.

WILLIS: Thank you.

HARRIS: All right, just in to CNN, and we have been able to confirm this. The White House announcing that President Bush will announce in a Rose Garden news conference, maybe just a statement, maybe a press conference where he will take some questions at 1:30 p.m. Eastern time, that the president will lift the executive ban on offshore drilling. An executive ban put in place by his father, actually, when he was president. That will happen at 1:30 Eastern time in a Rose Garden news conference. This then has to move to Congress in order to pave the way for offshore drilling, Congress would have to lift its ban as well. So that statement coming from the White House that President Bush will announce this afternoon that he will lift the executive order banning offshore oil drilling.

Let's talk about the FDIC for a moment here. Those letters could mean everything if your bank goes under. The government program ensures private savings accounts up to a limit.

(BEGIN VIDEO CLIP)

JOHN BOVENZI, COO, FDIC: We understand the uncertainty and the concern that people have and the message I want to get across is that if you have insured accounts, you have nothing to worry about.

(END VIDEO CLIP)

HARRIS: And here's what will happen in the case of Indymac. The federal government will cover every penny of accounts up to $100,000 or less. If your account has more than $100,000, half of that extra amount will be available immediately. More of your money will become available as the banks assets are sold.

KAYE: All right. So let's break it down for you. What are Fannie Mae and Freddie Mac? Both were created by Congress and are owned by shareholders. Their mission increase home ownership and rental housing. But as losses added up, investors backed away. Shares in those companies have plunged as much as 90 percent just since last August. Now, we're asking for your i-reports. Are you worried about your financial future? Do you have a story you would like to share? Send it to iReport.com.

HARRIS: New details this morning about a bold and surge I attack on an outpost in eastern Afghanistan. Nine American soldiers were attacked. It is the deadliest attack on U.S. troops in Afghanistan in three years. Our Barbara Starr is here with more details. Barbara, good morning.

BARBARA STARR, CNN CORRESPONDENT: Good morning, Tony. The security situation in Afghanistan is deteriorating. Two major fire fights over the weekend. The one you're speaking about on Kunar province. That's on the eastern outer edge along the Pakistan border, nine U.S. troops killed. It is believed that those fatalities, most of them occurred when a group of insurgents did overrun a U.S. military observation point. A very small observation site outside of the combat outpost. There were about 200 insurgents involved in the attack.

We are told that now not necessarily as a result of the weekend's violence, but U.S. commanders in Afghanistan, we now can confirm, are asking the Pentagon to send hundreds of those MRAP armored vehicles that have been so successful in protecting U.S. troops in Iraq, to send hundreds of them to Afghanistan.

They need more protection. They need more troops in that country. The situation there is very concerning to commanders. The police, the central police is that Pakistan is simply not controlling the border next door and hundreds of militants have been flooding into the region, causing some of these latest round of combat. Tony.

HARRIS: Just amazing. All right. Barbara Starr at the Pentagon for us. Barbara, thank you.

KAYE: Building a new oil refinery. A plan for South Dakota that's missing a few important details.

(COMMERCIAL BREAK)

KAYE: Wild weather nationwide. Storms submerged and Arizona highway. Rain triggers California mudslides and hurricane spin-off leads to deadly east coast rip currents.

(COMMERCIAL BREAK)

HARRIS: You know, locals call it the gorilla project. The first new oil refinery to be built in the United States more than 30 years now but claims about it are leading to a lot of questions. CNN's Special Investigations Unit correspondent Drew Griffin has the story.

(BEGIN VIDEOTAPE)

DREW GRIFFIN, CNN CORRESPONDENT: It was a mystery just across the dirt road, somebody was interested in a large area of crop land. Dale and Carol Harkness never imagined that this farmland would become the center of their own energy crisis.

DALE HARKNESS, FARMER: Last summer they finally let the community know what they had intentions of doing with this land.

GRIFFIN: This is the intention, a $10 billion oil refinery. 400,000 barrels a day of Canadian oil would arrive by a yet to be built pipeline and then converted into gasoline, diesel, and jet fuel. The company behind the mysterious project says it would be the first of its kind clean refinery. We'll get to the mysterious part in a minute.

But Dale Harkness laughs at the idea of a clean oil refinery. In the rush for new energy production, he fears that his farmland, creek water and fresh bright skies are all about to be ruined.

Why not sell this farm stead. I know you love it, but golly, can't you get a million or two for it and cruise on down to Florida?

HARKNESS: How many people have been handed a pocket full of money that are happy? Not near as many as people that have earned it and are proud of it. I feel like I've earned this. I want my children or grandchildren to be able to enjoy it. And if not them, someone else.

GRIFFIN: The Harknesses' biggest problem though is not fighting an oil refinery, it's fighting their own neighbors. Many have already agreed to sell. And just last month, the oil refinery question was placed on the Union County ballot. Voters near proposed refinery said no but county wide, voters overwhelmingly said yes. 58 percent of voters in Union County, South Dakota want an oil refinery right here. The mayor of the closest town says jobs, tax money, and a desire for energy independence all played a role.

Do you think the Elk Point, Union County, South Dakota is the place to start?

MAYOR ISABEL TROBAUGH, ELK POINT, SOUTH DAKOTA: Well, it's as good as any and it will be good for Elk Point because if we don't grow, a small city dies.

GRIFFIN: So is the first U.S. oil refinery in 30 years really about to be built? If you ask the folks around Elk Point, that's where this story gets a little mysterious. It was a huge secret with a weird name. They dubbed it the gorilla project because of these very weird concrete sculptures of gorillas near the property.

But now after it was announced that the gorilla project is actually an oil refinery, many people still don't know much about it.

And that even includes the mayor, who wasn't told the plan until one day before everyone else. Why the secrecy?

TROBAUGHT: They say that's the way big business does their - when they do their thing, they don't want anybody to know that they are coming in. So they keep it secret.

GRIFFIN: Who are they? The company that would build the $10 billion refinery is called Hyperion Energy. They have a new office at Elk Point's Main Street where we went to find out more about them. And we're politely told by the receptionist we'd have to find our answers by somewhere else.

The actual Hyperion folks, they just come every couple of weeks?

UNIDENTIFIED FEMALE: Yes. They are not here otherwise.

(END VIDEOTAPE)

HARRIS: So who is behind this mysterious company? Drew finds out.

(COMMERCIAL BREAK)

KAYE: One South Dakota community clearing the way for a new oil refinery, almost. But who's behind it and where is the money coming from? CNN's special investigations unit correspondent, Drew Griffin, continues his report.

(BEGIN VIDEOTAPE)

GRIFFIN: Hyperion Energy, the company behind what could be the first new oil refinery to be built in the U.S. in 30 years, has a fancy 15th floor air conditioned office in, where else, Dallas, Texas. But that is not where Hyperion, chose to answer our questions. For answers we were told to meet the oil refinery's project executive in a Dallas City Park a few miles away where in 94-degree heat we met Hyperion's Preston Phillips who explained to us that Hyperion doesn't have a lot of experience building oil refineries, doesn't have the $10 billion in financing it will take to build the refinery yet but says now is the time to start the project.

PRESTON PHILLIPS, HYPERION ENERGY: We need more refineries in the United States.

GRIFFIN: Is it really going to happen? They're not sure Hyperion is the company that can make this happen.

PHILLIPS: Well, we obviously wouldn't be spending the resources and time we have if we didn't think we could.

GRIFFIN: What we found out about Hyperion is mostly it has been involved in real estate dealings with oil and gas leases. It's CEO is this man, Albert Huddleston. We learned he is involved in a federal lawsuit accusing him of wasting money from his wife's trust account. She is the grand daughter of famed oil man H.L. Hunt.

According to the suit filed by one of the former trustees. Since his marriage to Mary, Albert has pursued a variety of businesses, always unsuccessfully. Huddleston has counter sued, denying the charges and accusing the former trustee with extortion. As for Huddleston, we were told that he was traveling, not available for comment. And then we were sent this video tape. Apparently taped just last week. It's Albert Huddleston talking about global politics, world war, oil in Canada

HUDDLESTON: Three million barrels a day.

GRIFFIN: Remember this is basically a home video, a statement where we couldn't ask any questions. The only time he came close to answering our big question which was, does Hyperion have the money or the expertise to pull this off, he said this -

HUDDLESTON: I am not going to go to these strategic partners and financial partners and other people until we have a permit. And if we don't get the permit, then perhaps people are right. I just don't believe that is the case.

GRIFFIN: Back in South Dakota, reporters for "The () City Journal" have apparently had the same trouble we've had finding out about Hyperion. Mitch Pugh is the editor.

UNIDENTIFIED MALE: Where do they get the money?

GRIFFIN: Huddleston did tell at least one person that he has the money, Elk Point Mayor Isabel Troubaugh. But she wouldn't share the details.

TROBAUGH: What he told me was private, it's his own personal funding and that's not public.

GRIFFIN: So the United States' first new oil refinery in 30 years is perhaps underway. Voters said yes. The land has been leased and the company says if all goes as planned, a clean oil refinery will be producing gasoline right here in just six years. Just remember, there's a little matter of $10 billion yet to be found and a neighbor with growing political backing from environmentalist, clean or not, there won't be a refinery here.

HARKNESS: I'll keep fighting it. They will never build here. 150 years from now, somebody will be enjoying that land and this land.

GRIFFIN: Drew Griffin, CNN, Elk Point, South Dakota.

(END VIDEOTAPE)

HARRIS: And breaking news. President Bush is set to lift a ban on offshore drilling. We will get the latest from Elaine Quijano at the White House.

Also protecting your money. The FDIC as a last resort. How does it work?

(COMMERCIAL BREAK)

HARRIS: Welcome back everyone to the CNN NEWSROOM. I'm Tony Harris.

KAYE: I'm Randi Kaye, in for Heidi.

HARRIS: We learned just a short time ago that President Bush is said to lift the executive branches ban on offshore drilling. Our Elaine Quijano was at the White House for us. And Elaine, I understand the president is set to issue that statement this afternoon.

ELAINE QUIJANO, CNN CORRESPONDENT: That's right. In the Rose Garden at 1:30 p.m. Eastern time, Tony. The White House press secretary Dana Perino just making that announcement about the President's statement. A short time ago in the off camera gaggle with reporters. Now, this is a move certainly that will get a lot of attention but the question is will this really have an immediate impact on offshore oil drilling. The answer to that even the White House acknowledging is no. Why is that? Because lawmakers have their own legislative ban on offshore oil drilling that must be lifted as well in order for anything to move forward.

Now, fast forward to today, you've got President Bush essentially trying to put the pressure on Congress, lawmakers there who have so far not been willing the White House to work with the executive branch on this issue. So the president acting today, essentially turning one key as the Press Secretary Dana Perino put it, And waiting for Congress to turn the other legislative key in order to make something happen. What does this all men for the person paying through the nose at the pump, remains to be seen. Don't expect any kind of immediate fixes.

Again, Perino saying that this is a problem. The high energy prices have been a problem for a long time and they're going to take a long time to get out of. But again, this move today, President Bush making the announcement at 1:30 Eastern time in the Rose Garden. He'll be lifting the executive ban on off shore drilling -- Tony.

HARRIS: And if I'm correct here Elaine, it puts John McCain in line with the president on this issue?

QUIJANO: That's exactly right.

And you know, what President Bush has said and what you'll likely hear again is that the United States, as he sees it, is in a transitional period. Which means that in order to get off the oil addiction, there needs to be more oil pumped into the system here so that people can eventually figure out how to make these alternate sources of energy work and technology can catch up, et cetera.

So, that's likely what you're going to hear from the president. But a lot of this certainly will be talked about as well on the campaign trail. President Bush, of course, has seven months left in the office as you know.

HARRIS: You can bet. All right Elaine Quijano at the White House for us. Elaine, thank you.

(BUSINESS HEADLINES)

HARRIS: So you, me and every other taxpayer may soon have more of our tax money involved with Fannie Mae and Freddie Mac.

CNNmoney.com's Poppy Harlow has been talking to a key lawmaker and has the latest from New York. Poppy, I hope it was someone on the Senate Banking Committee.

POPPY HARLOW, CNNMONEY.COM: It was the chair, Tony. It was Senator Chris Dodd.

Really informative discussion with him this morning. And whether you agree with it or not, one thing seems certain. More of our taxpayer dollars will are going to be used to prop up Freddie Mac and Fannie Mae. I spoke to Connecticut Senator Chris Dodd, this morning. He is the democratic chairman of the Senate Banking Committee. He says, the moves are necessary.

(BEGIN VIDEO CLIP)

SEN. CHRIS DODD (D), SENATE BANKING CMTE. CHMN.: In my view, we now need to stabilize this as quickly as we can and Fannie and Freddie but for them, 30-year fixed-rate mortgages would never exist. And they've been the sources of liquidity over the last couple of years which is bearing a tremendous amount of the burden for them on this problem.

(END VIDEO CLIP)

HARLOW: Now, these two companies have used their connection to the government to get cheap loans and it has passed on the cheap loans to homeowners. Dodd says, the two companies are still on strong footing but at the same time, he says that they have not been well regulated.

(BEGIN VIDEO CLIP) DODD: This didn't need to have happen. Again, the failure to have regulators doing their job four and five, six years ago, when they should have been doing it. And this administration has to bear that indictment by history. This did not have to happen.

(END VIDEO CLIP)

HARLOW: Keep in mind, if it weren't for Fannie and Freddie, the mortgage market might have ground to a halt. A scary thought there.

But still, the government is moving into some new territory right now. If it buys shares of the two companies, the two publicly-traded companies, taxpayers will have a stake in their future. And with the company is now able to tap funds from the Federal Reserve and get even more money from the treasury, the risk to the average taxpayer is much higher now. But it does seem that lawmakers view the potential collapse of the U.S. housing market to be a far worse outcome than that, tony.

You can see my full interview with Senator Dodd on our web site, CNNmoney.com. He really has some good perspective there and some helpful comments -- Tony.

HARRIS: Let's get some voices and let's get some solutions going here.

Poppy Harlow. Poppy, good to see you. Thank you.

HARLOW: You, too.

KAYE: Federal government to the rescue, bailing out bank customers. IndyMac is the latest example.

CNN's Deborah Feyerick explains how it works and what's ahead of IndyMac.

(BEGIN VIDEOTAPE)

DEBORAH FEYERICK, CNN CORRESPONDENT (voice-over): Many IndyMac customers searching for answers this weekend, heard this recording, alerting them someone new was in charge of their money.

ANNOUNCER: As conservateur, the FDIC will operate the IndyMac federal bank to maximize the value of the institution while maintaining banking services in communities served by the bank.

FEYERICK: The FDIC was put in charge Friday, after regulators announced IndyMac could not meet the demands of it's depositors, calling the mortgage lender's condition unsafe and unsound.

BEVERLY GOODMAN, SR. EDITOR, "SMARTMONEY" MAGAZINE: The best news is for the individuals that have money at these banks. When the FDIC steps in, their money has been secure. It's much worse news for the economy in general.

FEYERICK: The Federal Deposit Insurance Corporation was created in 1933, in response to the great depression, when thousands of banks failed. In order to limit the effects on the economy, banks pay insurance premiums to the FDIC, so a portion of your money is always protected.

Beverly Goodman is with "SmartMoney" magazine.

GOODMAN: The FDIC is insurance. It's the government's guarantee that you will not lose your money.

FEYERICK: Experts say the FDIC will run the bank as is. Customers will have access to much of their money. And those with loans will still have to pay on time.

DAVID BARR, FDIC SPOKESMAN: This is very manageable. It's an excellent example of how the FDIC operates. That when a bank gets in trouble, how we come in to protect the depositors.

FEYERICK: Meantime, the FDIC will look for a buyer.

CHRIS ISIDORE, SR. WRITER, CNNMONEY.COM: FDIC is hoping to sell the bank pretty much as an intact unit to a larger bank, sometime in the next three months. That's going to be a somewhat more difficult sale now that it's gone through the failure.

FEYERICK: 90 banks are on an FDIC risk list. But the agency is confident it's fund is large enough to cover any additional bank failures. If not, a spokesman says the FDIC could always raise premiums.

Deborah Feyerick, CNN, New York.

(END VIDEOTAPE)

KAYE: Here are some facts to put this into perspective for you. IndyMac is the fifth bank to fail so far, this year. Compare that to three last year and none in the two years prior to that. In 2002, 11 banks failed. Those 11 failures pale in comparison to the savings and loan debockle of the late 1980s.

In 1988, near the end of the S&L crisis, 190 banks failed, at a cost of about $98 billion. The whole crisis cost taxpayers around $132 billion IndyMac is the second largest failure in terms of assets. In 1984, Chicago's Continental Illinois National Bank and Trust failed with assets of $40 billion. IndyMac had $32 billion.

HARRIS: Wild, wild weather nationwide, including wildfires out west. Check out this new video from Washington. We will talk about fires, mudslides, rip tides and hurricanes. Oh, my.

(COMMERCIAL BREAK)

KAYE: Getting ready for the storm. Bertha has weakened to a tropical storm as it moves in toward Bermuda. But it is still kicking up a pretty deadly surf as far away as New Jersey. Forecasters say, it's expected to hit Bermuda today. High winds and 3 to 5 inches of rain are expected. People who live there are taping up their windows and tying down those boats.

HARRIS: How about this? Rain from violent thunderstorms helping firefighting efforts in California just a bit. But it has also triggered mudslides. A mud slide in an area devastated by wildfires last year, damaged about 50 homes. It also shut down a main road in the town of Independence on the eastern side of the Sierra Nevada. Firefighters couldn't get to a blaze in Lake Isabella. Meantime, in Paradise, most of the people who evacuated their homes because the wildfires have returned. But, about 300 homes are still threatened. An evacuation order in nearby Concow has also been lifted. But officials say nearly 300 fires are still burning around the state.

KAYE: A major highway back open this morning in Phoenix, after massive rains forced a shutdown. Take a look at this. Quite a traffic jam there. Hundreds of cars at a standstill. Some drivers were stranded. A storm rolled into Arizona yesterday, dumping up to 2 inches of rain, in an hour. Both directions of US-60 near Interstate 10 were closed for hours.

(WEATHER REPORT)

HARRIS: You know, it's difficult to imagine. African-American residents in Ohio, denied public water -- public water -- for almost 50 years. Now about 70 residents of the small community of Coal Run, in eastern central Ohio, have been nearly awarded $11 million. A federal court jury found they were denied water due to racial discrimination.

(BEGIN VIDEO CLIP)

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

(END VIDEO CLIP)

HARRIS: OK. City and county officials in Zanesville plan to appeal the verdict. Here to talk about it is Avery Friedman, the civil rights attorney, law professor.

Avery, my good friend, good to see you.

(CROSSTALK)

HARRIS: I can't believe this. So, the water lines were put in, in this area, what, in 1956. And that this particular community was just excluded? The water lines just weren't put in to this community, correct?

AVERY FRIEDMAN, CIVIL RIGHTS ATTY. AND LAW PROFESSOR: yes.

HARRIS: OK. So what kind of laws were broken here? Clearly this was and is illegal, correct?

Well, it's illegal. You'd be amazed how many communities have situations like this. HARRIS: Oh, come on!

FRIEDMAN: They're all over America. But, the folks at Coal Run, near Zanesville, decided to do something about it. And to answer your question, they used American fair housing laws and public accommodation laws to stand up and fight back. And what they got was a five alarm federal verdict, late on Thursday.

HARRIS: Well, how was this allowed to go on for so long? Again, we're talking about 1956. The water lines were finally put into this community what, in 2003?

FRIEDMAN: Yes.

HARRIS: I'm wondering, was there no other challenge against this system until this successful challenge?

FRIEDMAN: You know, the truth is Tony, that if you're poor and you're fighting to survive, the likelihood of fighting a multimillion dollar battle, which is what this was. The $11 million roughly, is only the start of what's coming up here. So, the battle itself, in hiring lawyers and experts and Tony, getting people like this to stand up and support there roughly 70 people, is a battle in and of itself.

HARRIS: Avery, tell me this kind of thing isn't happening in other places across the country. This is an anomaly, it's not happening anywhere else.

FRIEDMAN: Love to do it. But, it ain't the case.

The fact is, these officials are probably thunderstruck that they got hit with $11 million and there are scores of communities all over America.

The good news though -- I think this is important -- is that, for the first time in American (INAUDIBLE) history, a community of group, a neighborhood stood up and fought back. And it's setting precedence for other communities that suffer.

HARRIS: Well, I'm looking at a note here. It says the Zanesville mayor will appeal this case. That's being planned right now.

I'm wondering, on what basis do you launch an appeal on this? What, on the merits on the case, on the amount of the award? What's the basis, do you think?

FRIEDMAN: You know, I've seen cases like this for 35 years, Tony. And usually the officials will say, well you know, I'm not a bigot.

Well, nobody is accusing you of bigotry. But, when you separate services out, based on the race of the residents, you've got a problem. And it was an $11 million problem here.

HARRIS: And this was clear as -- well, as the nose on my face. This was a decision based on race. This was racial discrimination.

FRIEDMAN: Not even a close call, Tony. It was a unanimous verdict. And that unanimous verdict is likely to stand if the appeal is based on the facts. The chances of a reversal are less than small.

HARRIS: Avery, good to see you. Can't believe it. Can't believe it.

Avery Friedman for us from Cleveland, this morning. Good to see you, my friend.

FRIEDMAN: Good to see you, Tony.

KAYE: Escape from fate. An untouchable woman trades life in a sewer, for a walk down a runway.

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KAYE: Eight men charged with plotting to blow up Transatlantic flights. This morning, the British Press Association is reporting that three of those men have pleaded guilty to conspiring to cause explosions. Their trial is wrapping up in London. The British Press Association says the man admitted to causing a public nuisance by making threatening videos. Two other men also pleaded guilty this morning, to that charge. A jury still has to decide if the men are guilty of conspiring to kill thousands by smuggling homemade bombs onto passenger planes. The alleged plot was uncovered by police nearly two years ago.

HARRIS: Seeking an arrest warrant for the president of Sudan. An international prosecutor unveiling genocide charges against the president Omar al-Bashir, just a couple hours ago. Al-Bashir, seen here, is accused of ordering murder and rape in Darfur. He faces three -- five counts of genocide, two counts of crimes against humanity and two counts of war. It could take the three-judge panel months to go through all of the evidence in this case, before issuing any rulings.

On Sudan's state TV, the president's National Congress Party warned of more violence and bloodshed if an arrest warrant is issued. The United Nations estimates 300,000 people have died in Darfur mission. More have been displaced -- millions more have been displaced because of the fighting.

KAYE: Angelina's new arrivals. Or should we say Brangelinas? Next in the NEWSROOM.

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KAYE: Well, all right. We know that you have been waiting to hear this one. At least I know Tony has. Yes, those movie star twins are finally here. The proud parents, Angelina Jolie and Brad Pitt. They have named the boy, Knox Leon and the girl Vivienne Marcheline. The babies were delivered by C-section at a French hospital. We're hearing mom, dad and babies are doing just fine. And if you're keeping track, which many are, the Jolie-Pitts are now a family of eight.

HARRIS: Wow. You want to talk about a story here, of triumph over extreme hardship. We're going to introduce you to a woman doomed by birth to wander the sewers. An Indian woman escapes her fate to wander the world of fashion.

Sara Sidner takes us on that remarkable journey.

(BEGIN VIDEOTAPE)

SARA SIDNER, CNN CORRESPONDENT (voice-over): This is the life of what Indian society calls an untouchable woman. By birth right, it is her job to manually clean away the feces and urine left behind in the toilets of her upper cast neighbors. And then carry it away, on her head.

MANJU ATWAL, VILLAGER (through translator): For the past 20 years, my life hasn't been a life, she says. Like insects, the world opposes us, so this is hardly a life.

SIDNER (on camera): We have just arrived at one of the homes where Manju, who's 37 years-old, is going to go ahead and clean out the toilet. The smell is indescribable. This whole lane is covered with urine and feces. We're stepping in it, as is she. She doesn't wear anything. She has no gloves, she has no boots. She's wearing a basic flip-flops here.

(voice-over): These women begin this dirty work as early as age 7. Usha Chaumar did and then spent 21 years of her life as doing it. She says, she was often treated like the excrimant she cleaned up every morning.

(on camera): So, it would be unusual for someone to do this, just to touch you?

USHA CHAUMAR, VILLAGER (through translator): No touching, she says. Even if I was ashamed, I didn't have any other work but this. Since I was a child I've been doing this. I would have died doing this.

SIDNER: Instead, five years ago, she quit and lived to do something unimaginable in this rajisani town. She ended up in New York City, on a runway, no less. Modeling side by side with a professional. The U.N. invited Usha and others like her, to bring awareness to the world's sanitation problem.

Dr. Bindeshwar Pathak made it all possible. He runs Sulabh International, a multi-million dollar charity to change lives by literally changing toilets. His toilets don't require the dirty work.

DR. BINDESHWAR PATHAK, SULABH INTERNATIONAL FOUNDER: I saw the conditions and I though they were living like pigs. So, why not to give some alternative jobs to them.

SIDNER: His education centers give women training to do other jobs. Usha is one of the most dedicated pupils. For her hard work, she was crowned princess of sanitation workers at the U.N. It is a title that takes some getting used to. Especially after being treating like dirt for most of her life.

Sara Sidner, CNN, Rajasthan, India.

(END VIDEOTAPE)

HARRIS: And good morning, again, everyone. You're informed with CNN. I'm Tony Harris.

KAYE: I'm Randi Kaye. Heidi Collins has the day off.

Developments keep coming into the CNN NEWSROOM, on this Monday, July 14th. Here's what's on the rundown.

Opening rally based on reinforcement. Government plan to bolster mortgage giants get investors pumped. But for how long?

HARRIS: How the sweet ride ended. Signs were there before the housing boom went bust.

KAYE: And hope runs out. A missing Army nurse's remains are found.