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LOU DOBBS TONIGHT

Heroic Fighting in Afghanistan; Senator Schumer: "Don't Blame Bank Crisis on Me"; Ban Lifted on Offshore Drilling; Salmonella Outbreak Still Unknown

Aired July 14, 2008 - 19:00   ET

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


LOU DOBBS, CNN ANCHOR: You got nothing else to offer here, Wolf? Come on! Wolf, thank you very much. We're going to be covering all of the day's news here tonight.
New questions about the conduct of the war in Afghanistan, that after the deadliest day for our troops in years. We'll have a special report, and tonight the federal government bailing out financial institutions at the center of our housing crisis while ignoring working men and women and their families now facing foreclosure.

And tonight President Bush has lifted an executive ban on offshore oil drilling, amid rising anger over skyrocketing gasoline and fuel prices. So why in the world isn't Congress lifting their ban? All of that, all of the day's news and much more with an independent perspective here tonight.

ANNOUNCER: This is LOU DOBBS TONIGHT: News, debate, and opinion for Monday, July 14th. Live from New York, Lou Dobbs.

DOBBS: Good evening, everybody.

New details tonight about one of the deadliest battles of the entire war in Afghanistan. Nine of our troops have been killed, 15 wounded during an enemy attack on one of our remote bases. One military official described heroic fighting as our troops fought back against the insurgents.

Another major issue for the next president will certainly be a rampantly worsening housing crisis. The federal government launching the biggest financial bailout ever of Fannie Mae and Freddie Mac, while ignoring middle class homeowners in this country, some 2.5 million facing foreclosure.

We have extensive coverage of these stories tonight and we begin with Barbara Starr at the Pentagon -- Barbara.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Lou, there are 65,000 U.S. and NATO troops in Afghanistan, that is an all-time high but tonight, that is not enough.

(BEGIN VIDEOTAPE)

STARR (voice-over): It was the deadliest attack on U.S. troops in Afghanistan in three years. U.S. officials say 200 insurgents firing small arms, machine guns, rockets and mortars launched a well- planned assault on a U.S. and Afghan combat outpost in the Kunar province alongside the Pakistan border, killing nine American troops.

MARK LAITY, NATO SPOKESMAN: It is quite common for them to attack our combat outpost, but this was a larger scale attack than normal.

STARR: U.S. officials say insurgents overran an observation platform, outside the base. Most of the U.S. troops were killed there. The fighting described as absolutely brutal. The insurgents are getting bolder. The Associated Press distributed this video of what it says are two women abducted by Taliban gunmen and executed for allegedly being prostitutes.

STARR: Gunshots and screams caught on tape, the incident could not be independently verified by CNN. Senior U.S. military officials say the deteriorating situation is due to the lack of security on the Pakistan border. Militants are crossing into Afghanistan, sometimes at will, from Pakistan's tribal area.

ADMIRAL MICHAEL MULLEN, CHAIRMAN, JOINT CHIEFS OF STAFF: What it really speaks to is that that's a safe haven that's got to be eliminated, for all insurgents, not just al Qaeda.

STARR: U.S. commanders are now asking the Pentagon to send as many as 1,000 more MRAP (ph) armored vehicles to Afghanistan that would double the number there now. They have proven highly effective in Iraq and commanders in Afghanistan want more troops, perhaps as many as 10,000 more.

(END VIDEOTAPE)

STARR: And Lou, U.S. commanders say that Taliban and insurgent fighters, they are now seeing many of them better trained, better equipped, and more able to carry out these sophisticated attacks than ever before, and real questions, Lou, about whether U.S. troops in these remote outposts have enough protection -- Lou.

DOBBS: Barbara, thank you very much. Barbara Starr reporting from the Pentagon.

Well more of our troops have been killed in this one battle in Afghanistan than in all of Iraq, so far this month. Fourteen of our troops killed in Afghanistan so far this month, 472 since the war began. Four of our troops killed in Iraq this month, 4,119 since the war started more than five years ago.

The rising violence in Afghanistan is leading to new calls for more troops to be redeployed from Iraq to Afghanistan. More than 140,000 of our troops are now in Iraq, 32,000 in Afghanistan.

Well, turning now to the economic crisis in this country, the housing crisis is, without question, worsening. Working men and women and their families suffering as never before, but the federal government appears more concerned about the financial institutions at the center of the crisis, rather than the middle class Americans and those who aspire to that middle class, who are facing foreclosure. Treasury Secretary Henry Paulson announced a rescue plan for the mortgage giants Fannie Mae and Freddie Mac which together owned are guaranteed more than $5 trillion of mortgage debt, just about half of the entire housing market. By some estimates, the federal government's rescue plan could cost taxpayers as much as $300 billion, perhaps more.

Secretary Paulson's announcement coming two days after federal regulators took over IndyMac Bank, one of the largest mortgage lenders in the country. The Fed's taking over the bank after depositors withdrew more than $1 billion over a period of 11 days and one of the most powerful members of Congress, Senator Charles Schumer, tonight faces charges that he started that bank run at IndyMac.

Senator Schumer accused of provoking the run on IndyMac that led to the federal government takeover. The senator tonight says don't blame him. Schumer said regulators were as he put it "asleep at the switch." Lisa Sylvester has our report.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): It was reminiscent of a 1930s depression-style run on the bank. Customers lined up outside the California-based IndyMac Bank. The director of the Office of Thrift Supervision blames this run on U.S. Senator Chuck Schumer, saying he pushed the bank over the edge by making public a letter, questioning the bank's soundness. It's a letter the New York Democrat sent on June 26th to the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision.

UNIDENTIFIED MALE: When a member of the United States Senate makes such a public statement, it doesn't take much to frighten the depositors of an institution. It was an unprecedented act on the senator's part and the results sort of speak for itself.

SYLVESTER: The day after the Schumer letter became public, customers began withdrawing their money at a rate of about $100 million a day, according to federal regulators. That added up to more than $1.3 billion in just 11 business days. Until that point, the bank's deposits had been steadily increasing. Although the bank had its share of troubles, efforts were under way to shore up the bank with new investment capital. Senator Schumer held a news conference defending his actions saying it's the Office of Thrift Supervision that's at fault.

SEN. CHUCK SCHUMER (D), NEW YORK: OTS, the regulator, was asleep at the switch, and allowed things to happen, without restraint, and now, they are doing what the Bush administration always does, blame the fire on the person who calls 911.

SYLVESTER: But that hasn't dampened the criticism of Schumer. Economist Wayne Brough says with markets jittery it doesn't take much to send financial entities into a tailspin.

WAYNE BROUGH, ECONOMIST: What people see in the press is really sending a shiver down investors' spines and you know mortgage, mortgagee's spines and you're right, words matter a lot.

SYLVESTER: The estimated cost of the IndyMac Bank collapse to the Federal Deposit Insurance Corporation four to $8 billion.

(END VIDEOTAPE)

SYLVESTER: The former comptroller of currency under the Clinton years, John Hock (ph), had even crisper words. He told the "American Banker" newspaper that the Schumer letter was reckless and grossly irresponsible. Hock questioned why Schumer didn't just raise these concerns with regulators behind closed doors and he called Schumer's conduct incredibly stupid -- Lou.

DOBBS: Lisa, thank you very much. Lisa Sylvester from Washington.

Well hundreds of IndyMac customers today were waiting in line as you saw in Lisa's report, hoping to withdraw as much of their money from the bank as possible. The depositors clearly not convinced that their money is safe despite the federal government takeover of the bank.

Kara Finnstrom now reports from outside IndyMac's headquarters in Pasadena, California -- Kara, good to have you with us. I mean that's quite a scene there.

KARA FINNSTROM, CNN CORRESPONDENT: It is, and Lou as you point out, most people here were fully insured, will get all of their money back, but for some people who were here today it was a long, hot and incredibly disappointing day. Several people came up to us and told us that FDIC officials tell them they could possibly lose hundreds of thousands of dollars, just a nightmare situation for some of these people.

Now what you're looking at behind me right now, police officers came out a short while ago and let the crowd that is still here know that this bank does plan to close within the hour. Some of these people got a little upset because they've been out here for eight or nine hours and they're passing out priority numbers so they won't have to stand in line again all day tomorrow to get answers. Earlier today we got all kinds of reactions from people who did get inside. Here are a couple of those.

(BEGIN VIDEO CLIP)

LINDA GODDARD, INDYMAC CUSTOMER: I had more than 100,000. It was in two people's names so I had enough insurance.

UNIDENTIFIED FEMALE: I think that I'm going to put these checks or cash them and put them under my mattress.

DIANE PIRES, WITHDREW MONEY: (INAUDIBLE) I'm going to get my money and take it out. And then I'm going to put it (INAUDIBLE) and then I'm not going to worry about it.

(END VIDEO CLIP) FINNSTROM: Now the FDIC will do its own investigation into what happened at this bank, including whether there was any negligence. A lot of the folks we spoke with today say they got assurances from the bank that they had structured their savings properly and that it was fully insured, so Lou, they are very anxious to talk with those investigators.

DOBBS: Well absolutely, and Kara, the number of people there, how many people are being turned away do you expect there today? Who will have to come back tomorrow?

FINNSTROM: I'd say about 100 and Lou at one point today you know we had well over 300 people in line here. The problem was we're told there are only five people inside actually handling, you know, the questions. So they would let in between five and 10 at a time, so it was a really slow going throughout the day.

DOBBS: Absolutely, well let's hope that this is all resolved correctly and appropriately. Thank you very much, Kara Finnstrom from Pasadena, California.

That brings us to the subject of our poll tonight. The question is: Do you believe Senator Charles Schumer should be censured for causing a run on IndyMac Bank? Yes or no. Cast your vote at loudobbs.com. We'll have the results here later.

Treasury Secretary Paulson's bailout of Fannie Mae and Freddie Mac marking an abrupt change of course for him and of course the federal government. In testimony to Congress just Thursday, Paulson said Fannie Mae and Freddie Mac are quote, "working through this challenging period", adding "their regulator has made clear they are adequately capitalized." Then yesterday, in a surprise announcement on the steps of the Treasury Department on a Sunday, Paulson announced emergency lines of credit for Fannie Mae and Freddie Mac. Paulson saying the support for the housing market is particularly important, as we work through what he calls the current housing correction.

The Federal Reserve today taking measures to protect home owners from predatory lenders, but for many middle class Americans, particularly those now facing foreclosure, these new rules are simply too late. The measures include a rule to stop lenders from offering a mortgage without proof of a borrower's income. The Federal Reserve will also require lenders now to make certain risky borrowers set aside money to pay for taxes and insurance.

These new rules will also restrict lenders from penalizing risky borrowers who pay off their loans early. Critics of the plan, however, say the Federal Reserve should have taken action to protect borrowers years ago and its failure to do so helped cause the mortgage crisis.

Up next here: President Bush lifting a ban on offshore oil drilling, issuing a challenge to Congress, but will it do anything to help end the ban on offshore drilling?

And Senators Obama and McCain at it again, pandering to the pro- amnesty open borders lobby, we'll have that special report and a great deal more, still ahead. Stay with us.

(COMMERCIAL BREAK)

DOBBS: President Bush today lifted the executive ban against offshore drilling of oil. It's a reversal of the order signed by his father back in 1990. President Bush then called on Congress to lift its own moratorium on offshore drilling. What effect could lifting the ban have on our energy crisis and who is likely to profit? Carrie Lee has our report.

(BEGIN VIDEOTAPE)

CARRIE LEE, CNN CORRESPONDENT (voice-over): American consumers are outraged over high gas prices. They're calling on lawmakers to do something. So, too now is President Bush. He's lifted an executive ban on offshore oil drilling.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Now the ball is squarely in Congress's court. Democratic leaders can show that they have finally heard the frustrations of the American people by matching the action I've taken today, repealing the congressional ban and passing legislation to facilitate responsible offshore exploration.

LEE: That exploration is not likely to start before the November election, if it happens at all. Some say the exploration argument is off the mark.

SEN. JEFF BINGAMAN (D), NEW MEXICO: I think it's very misleading to suggest that the reason the price of gas at the pump is going up is because Congress has refused to act to lift a particular ban. What's pushing up the price is primarily increasing demand, worldwide.

LEE: The U.S. consumes 21 million barrels of oil a day. That's four times as much as we produce. The Minerals Management Service, a unit of the Interior Department, estimates our offshore areas contain a total 85 billion barrels of oil. That's more than 10 years' worth of supply at today's levels. By law, any oil extracted in the U.S. stays in the U.S.

CHRIS OYNES, MINERALS MGMT. SERVICE: The OCS Lands Act requires that that companies have that produce off the outer continental shelf have to have that oil production be used and transported to the United States, rather than shipped somewhere else.

LEE: But whoever leases the land for exploration can be U.S. or foreign-owned.

JOHN KINGSTON, PLATTS GLOBAL ENERGY: More competition is better, it brings in more money for the federal government.

(END VIDEOTAPE)

LEE: So the government is making as much as it can from these leases but Americans are still paying record amounts for gas. Now Congress, and we've talked about this, Lou, has held over 40 hearings so far this year, talking about oil and gas prices. With the election year, nobody wants to look like the bad guy, but nobody's doing anything, either. We haven't had any solutions on the table.

DOBBS: Well it turns out John McCain, what everyone thinks of these candidates and generally, there's a lot here to discuss, but the fact is John McCain called for the lifting of the ban on offshore oil drilling in this country. President Bush has now at least done that by executive order.

Nancy Pelosi, Harry Reid, the Democratic leadership in Congress and Senator Obama, running for the presidency, all of them have pushed back against this idea and squarely against the will of the American people, who want relief from what are just ridiculously high prices. It's fascinating the argument that you know this wouldn't relieve the situation right away.

LEE: Well, right, and Democrats are arguing that oil companies should make the most of the leases they already have. Oil companies of course say we're paying a lot of money for these leases, so of course we're already doing as much as we can.

DOBBS: It looks like we're going to see, I would guess -- I will put forward -- I will hazard a political forecast -- we will see Congress and Senator Obama reverse themselves on this issue very quickly. Thank you very much, Carrie Lee.

Well domestic crude oil production in this country has been falling since its peak set back in 1970 when we were producing about 9.5 million barrels of oil a day. By the way, the United States is the world's third largest oil producer. In 2006, U.S. domestic production was five million barrels a day.

That's about a quarter of the production coming from offshore wells in the Gulf of Mexico. There are now more than 4,000, 4,000 oil platforms in federal waters drilling in water up to a mile and a half deep, almost all are in the central or western part of the Gulf of Mexico.

Anheuser-Busch today agreeing to a $52 billion takeover by Belgium brewer InBev, the deal makes InBev the world's largest brewer, the maker of Budweiser agreeing to the bid after it had rejected InBev's initial offer a month ago. There was widespread opposition in this country to the foreign takeover of one of this country's iconic brands and concern about jobs that could be lost.

InBev for its part says St. Louis will be its North American headquarters. InBev would not say whether layoffs will result from the merger.

Up next: The presidential candidates moving from special interest group to special interest group, is there anything they won't say as they pander for votes with ethnocentric groups? We'll have a report.

And when does satire cross the line? A controversial "New Yorker" magazine cover causing something of an uproar, at least with the Obama campaign, we'll have that story and a great deal more. Stay with us. We're coming right back.

(COMMERCIAL BREAK)

DOBBS: Coming up next, the largest food-borne outbreak in years. The federal government still baffled after 14 weeks of FDA bungling and incompetence. We'll have new details. Just stay with us. We'll be right back.

(COMMERCIAL BREAK)

DOBBS: More now on the worsening salmonella outbreak, the outbreak tonight continuing to spread. The Centers for Disease Control just telling us -- this within the last minute or so -- the CDC is now reporting more than 1,100 cases of salmonella that have spread to 42 states and the District of Columbia. The Food and Drug Administration still cannot identify a single food contaminated with salmonella and as Louise Schiavone now reports, the government's inability to find the source of this outbreak has been devastating for farmers and produce farmers in this country.

(BEGIN VIDEOTAPE)

LOUISE SCHIAVONE, CNN CORRESPONDENT (voice-over): It's almost time to start planning the fall tomato crop in Florida, where counties in the central and southern part of the state are still on the government's not clear list.

REGGIE BROWN, FLORIDA TOMATO COMMITTEE: The damage that's been done to this industry is probably incalculable in that we can't ever probably quantify the concern and the fear that has been placed in the public minds.

SCHIAVONE: This, even though since the outbreak began in April, only two cases of Salmonella Saint Paul have been identified in Florida, and the government has now named different suspects, specialty peppers and cilantro. Losses are estimated in the tens of millions in Florida alone.

BROWN: We, in fact are just literally reeling and almost in shock that this situation has gone on so long.

SCHIAVONE: Meanwhile, investigators have not one item bearing the mark of Salmonella Saint Paul. Unacceptable, one key lawmaker tells CNN.

"We are in the midst of the largest outbreak of food borne illness in recent memory," says Congresswoman Diana DeGette, "and it is outrageous that we still cannot determine the source of the contamination. Meanwhile, for nearly 14 weeks the FDA continues to sift through boxes of paper records while more consumers get sick."

Diagnosis is impeded by the fact that there's little product trace back. A new Government Accountability Office report notes that in the European Union trace back starts at the growers and ends at the restaurant table.

LISA SHAMES, GOVERNMENT ACCOUNTABILITY OFFICE: We found that restaurants labeled exactly where their food came from, in effect almost like a country of origin or geography of origin, so they really do take it very seriously.

SCHIAVONE: As the day began the FDA spent hours briefing several industry players after which John McClung (ph) of the Texas Produce Association told LOU DOBBS TONIGHT quote, "at this point, everyone is just fishing."

(END VIDEOTAPE)

SCHIAVONE: And Lou, these numbers just in from the CDC, their latest count, 1,148 sick, 1,148 Lou, at least 220 hospitalized, the outbreak now affecting 42 states, Washington, D.C., and Canada. Lou.

DOBBS: Louise, and the ratio that the CDC and the FDA expect, those are reported cases, more than 1,100, it's what 30 to 40 cases for each one that is reported.

SCHIAVONE: That's right, 30 to 40 cases for each one that's reported and as it gets over 1,100 you know Lou my math is bad, but we're looking at potentially 40,000 or more cases.

DOBBS: Extraordinary and the FDA simply is giving no statement as to where it is, what it thinks the problem is, what they're going to do?

SCHIAVONE: Lou, so remarkable, I sent a detailed message to the Food and Drug Administration today, with several specific questions, including do you have anything with a trace of Salmonella Saint Paul? Do you have a product that you are confident in? What are you going to do about these people who are affected either as victims or people in industry? They just don't have any answers.

DOBBS: They don't have any answers, and yet this country, right now, as we listen to the -- and my heart goes out to all of the folks who are producers in this, the tomato farmers and the producers, the distributors, the Growers Associations, but these are the same people who complained under this administration, in particular complained about regulation and now they're the ones paying in a very -- I mean they're being devastated because we don't have an effective regulation of their industry, and they know that today.

SCHIAVONE: That's exactly right, Lou. And the truth is that everybody bears some responsibility when it comes to product safety. These producers know and a lot of them, for instance, this month, Florida tomato growers did start their trace back system. In California, they're going to be doing the same thing, but these growers, these producers know that consumers will not be satisfied unless they can tell exactly where these products come from.

DOBBS: Well we're not going to be satisfied on this broadcast I will guarantee you until we have country of origin labeling in place, until we have trace backs in place, because we are going to let the audience of this broadcast understand every legislator and every lobbyist who is fighting all of this accountability, this system of accountability, which is endangering American consumers and their lives. I mean, this is absolutely an absurdity to be putting up with this and as you reported, the European Union already has all of that in place to protect their consumers.

SCHIAVONE: It's devastating, Lou, especially for the people who have been sickened by this.

DOBBS: Absolutely. Well thank you very much. Louise Schiavone, as always, thanks for a great job of reporting.

Up next, Mexican drug cartels invading this country, Mexico's democracy could well be at risk. Tonight we examine the rising national security threat from Mexico's now out of control drug wars.

And a rare show of unity between the Obama and McCain campaigns, they don't like a controversial cover of the "New Yorker" magazine. We'll have that story and more, we're coming right back.

(COMMERCIAL BREAK)

DOBBS: Senator Obama tonight, in fact, just a few moments from now, will be addressing the NAACP's annual convention in Cincinnati. Senator Obama's speech we're told will focus on personal responsibility coming just days after Reverend Jesse Jackson's controversial remarks. Reverend Jackson complaining that Senator Obama has been talking down to black people and threatening to castrate or at least expressing the desire to castrate Senator Obama.

While both Senators Obama and McCain are trying to continue their effort to pander to ethnocentric special interest groups, they're trying to win over Hispanic voters. Sunday, Senator Obama talked before one of the country's largest open borders amnesty groups, the National Council of La Raza. Today, Senator McCain addressed the same group. Casey Wian has our report on full court pandering.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): At the annual convention of the National Council of La Raza in San Diego, John McCain and Barack Obama were dogged by protesters, angry they would address a group whose name means "the race."

UNIDENTIFIED MALE: Obama supports a racist organization.

WIAN: Sunday, Obama used La Raza's own translation of its name, the people.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: That's how we'll make the system work for everyone, for everyone, by living up to the ideals of this organization, the ideals reflected in your name. La Raza, the people.

WIAN: But dictionaries are clear, La Raza in Spanish translates to "the race." People is "la gente." La Raza's president Janet Murguia told the "San Diego Union Tribute" the group has considered changing its name, adding "we take a lot of heat for our name but historically I think it's something that our community feels wedded to." Murguia denies accusations that La Raza is anti-American. JANET MURGIUA, PRESIDENT, LA RAZA: Some of these ridiculous assertions about our organization, that we're willing to give the southwest back to Mexico and that we're for open borders. Those are a flat out lies, not true.

WIAN: McCain speaking to La Raza Monday attacked opponents of the failed bill he cosponsored with Senator Ted Kennedy that offered a path to legalization for some illegal aliens.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: I know many of you were disappointed and hurt by those who used the debate on immigration last year not to respectfully debate the issue as most did, but to denigrate the contributions of Hispanics to our great country. I denounce those insults then and I denounce them today.

WIAN: Yet Sunday night a McCain adviser reaffirmed the senator's commitment to border security first, the identical position taken by opponents of the McCain-Kennedy bill.

(END VIDEOTAPE)

WIAN: We contacted the McCain campaign to find out who he was accusing of denigrating the contributions of Hispanics. We received no response, Lou.

DOBBS: Yes, that was sort of an interesting pass, wasn't it? For example, I'm absolutely one of the most passionate opponents of illegal immigration, but I've also made it very clear I'm also one of those who respects most the illegal aliens, I've described them on numerous occasions as the only rational actor in this crisis.

It is the illegal employers and of course this government that fails to enforce border security and port security and our immigration laws. This was, I mean, this is pandering at its worst, using generalizations and throwing it out there for consumption.

WIAN: Yes, both of these candidates seem to be trying not to offend the Latino audiences they've been aggressively seeking. So in the process, they're stretching the truth and making all of these accusations. Senator Obama today again repeated his claim that ICE raids, Immigration and Customs Enforcement raids at workplaces are terrorizing communities.

Senator McCain was asked if he would stop those raids once he became president, if he becomes president. He ducked the question. It's amazing, Lou, they're just not trying to offend anyone and raising a lot of questions at the same time.

DOBBS: Well they may not have been trying to offend the members of La Raza, by the way. Again, I want to help Senator Obama out here tonight because he wanted to know, we should all be sure our children speak Spanish.

Well Senator Obama, I'm pleased to report to you that my poor children do speak Spanish but I do want to help out the senator when he's asking us to make certain that our children do speak Spanish, by the way, that was their choice, not Senator Obama's our mine -- when this does happen, you know, it seems to me Senator Obama should not be distorting the language, that he does not speak, that is, Spanish. And referred to the people as "la gente" rather than "la raza."

Whoever told him of that was misinforming the senator and the senator seems more than willing to be misinformed on some issues such as this. It's truly remarkable. Thank you very much, Casey.

As the pandering goes on, wouldn't it be nice if we had two men running for president who would actually speak to the American people and say the same thing in front of every audience, precisely the same thing, instead of pander as these two have before Hispanic and in this case, Hispanic groups? Good grief, Senator Obama is going to be talking to the NAACP tonight. I'm sure he'll have another speech there as well. It's a shame. Casey, thank you very much, Casey Wian.

The Obama and McCain campaigns are condemning tonight a "New Yorker" magazine cover that hit newsstands today. The cover shows Senator Barack Obama wearing a turban, Michelle Obama with an afro, carrying a machine gun, depicted in the Oval Office with the American flag burning in the fireplace. A picture of Osama bin Laden, presumably it's Osama bin Laden up there on the wall above the fireplace. The Obama and McCain campaign say that cover is tasteless and offensive. The editor of "The New Yorker" David Remnick says the cover is satire, lampooning the politics of fear.

(BEGIN VIDEO CLIP)

DAVID REMNICK, EDITOR, THE NEW YORKER: We've had many, many images in the past poking fun at many political situations. The Bush administration has been the butt of I don't know how many covers that we've published in the last seven years.

(END VIDEO CLIP)

DOBBS: You know, I feel sorry for Remnick. I mean, he's saying they're defending a freedom of expression, artistic expression and political satire, which by the way "The New Yorker" has some considerable history of providing. And I might say, the article published is about as sweet a bouquet and sweet kiss as a liberal and highly literate magazine could offer the Obamas.

People don't seem to be focusing on that. Here's a list of some of the satirical covers published by "The New Yorker" magazine over recent years. Let's take a look. In January of last year, "The New Yorker" depicts President Bush as Nero. How offended is Senator McCain with that? My goodness, Senator McCain, get on that. Senator Obama, get all over that.

In December back in 2005, well Bush and Cheney, oh my goodness, they're the odd couple. Now that's offensive, that's offensive and I think somebody should apologize and someone should be a victim. Well two someones in this case.

And in October 2004, a "New Yorker" cover entitled "Diversionary Tactics" showing oh no, both President Bush and Senator Kerry draped in military uniforms. Goodness, again, offensive, offensive, I tell you.

And in July of 1999, "The New Yorker" showed Senator Hillary Clinton with a map and an "I Love New York" pin. She wasn't senator then of course in Central Park as she began her campaign for the Senate. Again, I just think there's no end to the outrage. In November 1992, a cover showed the Clintons surprising the first President Bush and Mrs. Bush.

The Obama cover, the latest in what is obviously a long history of political satire both within "The New Yorker" and upon its cover.

Well Senator McCain today earned the title of Mr. Free Trade. The senator telling La Raza - that means by the way, the race, if I wasn't clear, that his recent trip to Latin America reinforced his position on free trade, saying our Latin-American relationships are crucial and that "is the reason why I'm an unapologetic supporter of NAFTA."

Now last December, McCain said "I'm the biggest free marketer and free trader you'll ever see." There's no word about what he has to say about the abuse of the free market by the federal bailout of Fannie Mae and Freddie Mac today and Bear Stearns. Nor whether when he was speaking to La Raza he was talking about his support for NAFTA from the perspective of Mexico or from the perspective of American citizens.

Up next, we'll examine the country's financial crisis with an independent perspective. Three of the best minds on our worsening crisis join me. And the author of an important new book on the Mexican drug cartels and their threat to our national security join me. Stay with me, we're coming right back.

(COMMERCIAL BREAK)

DOBBS: As we reported earlier in this broadcast, the country's housing crisis is deepening but the federal government is bailing out some financial institutions while middle class Americans struggle to keep their homes.

Joining me now for more on this crisis from an independently- minded perspective from Rochester, New York, Pulitzer-Prize winning journalist David Cay Johnston. David is author of "Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense." And at our Washington D.C. bureau, professor Peter Morici of the Robert H. Smith School of Business at the University of Maryland. And in Philadelphia, Professor Jeremy Siegel, of the Wharton School of Business at the University of Pennsylvania.

First, I want to just say thanks to all of you for being here with us. I want to start, if I may, Peter Morici, professor, if you will, we're watching history being made. And the cable news networks were all but silent on the issue, most of the newspapers not in my opinion giving much voice or coverage to what is an amazing bailout by the Federal Reserve and the Treasury Reserve.

PETER MORICI, PROFESSOR, UNIVERSITY OF MARYLAND: Well, absolutely. These two institutions, Fannie Mae and Freddie Mac account for $5 trillion worth of mortgages. That's almost half of the mortgages in the United States, one-sixth of our national wealth. We've never had institutions this large propped up so dramatically. Now, it needed to be done. Without them, the economy would fail. But why can't this administration find a little mercy for ordinary working Americans who are upside down on their mortgages? Why is Henry Paulson telling them to all to tough it out?

DOBBS: Well, that's a good question. Professor Siegel, why is he telling them to toughing it out? Why is the Treasury secretary in point of fact dissembling at I'll put as generous an interpretation on it, as a man in charge of the economic team, last week, talking about these institutions in their current form and obviously they're not going to be in their current form when this is unwound.

JEREMY SIEGEL, PROFESSOR, UNIVERSITY OF PENNSYLVANIA: You know, Lou, we economists have been warning about Fannie Mae and Freddie Mac for many years. They had inadequate capital. They had unfair advantages in the capital market because of the implicit guarantees. But the truth of the matter was, unfortunate as it is, we had to keep these institutions going.

The little bit of activity we're getting in the housing market is a lot of it is coming from Fannie Mae, Freddie Mac mortgages. It would have shut down the whole mortgage industry and thrown housing into a far greater panic than it is now. We have to make sure that those Americans and by the way, Fannie Mae and Freddie Mac were mostly what we call conforming loan, which are the low loans often made of first home buyer. They aren't the jumbo loans, they aren't the big multimillion-dollar loans. This was the bread and butter. This was one of the few sectors that actually was doing a little bit better and we can't, we can't shut that down, otherwise it would be a financial disaster, economic disaster.

DOBBS: David, your thoughts?

DAVID CAY JOHNSTON, AUTHOR: Well this is a very good example of what happens when you handcuff the regulators. The problems that both professors have identified have been around for a long time as well as the housing bubble. I read a story about the housing bubble more than four years ago. Barron's did a very good piece four years ago about the problems with Fannie Mae and Freddie Mac.

Where were the regulators doing their job? And it's not like it's a radical new idea. We have hundreds of years of history telling us that if you turn the predators loose in the financial markets, you'll have trouble.

DOBBS: Well what we have is an interesting situation in which the OTS, the Office of Thrift Supervision which just took over IndyMac said point blank, Senator Charles Schumer of New York is responsible for the run on that bank, and its ultimate takeover by the office of thrift supervision. Here's what Senator Schumer said in response.

(BEGIN VIDEO CLIP) SCHUMER: OTS, the regulator, was asleep at the switch and allowed things to happen without restraint. And now, they are doing what the Bush administration always does, blame the fire on the person who calls 911.

(END VIDEO CLIP)

DOBBS: Thank god we had Senator Schumer to call 911. Who is at the other end of the 911? Can somebody tell me that, David? I'd like to know because when Senator Schumer calls 911, who does he think is going to respond?

JOHNSTON: Well, Senator Schumer loves cameras the way that most Americans love their spouses. And he was right out front there, promoting the letter that he'd already written and sent to the regulators. But fundamentally, this is the problem.

You know, we're told all the time there's too many regulations and they're too costly and we're now seeing the cost of not having prudent regulation.

DOBBS: Well, prudent regulation, Professor Morici, let me ask you this. I mean we're looking at something which the FDA has demonstrated itself to be absolutely led by a failing of competence. And the growers who all did not regulation now are wishing like the dickens they had had it so that there would be some accountability and country of origin labeling and tracebacks so that we could have some accountability.

We're also looking at, as David Cay Johnson just said, a failure to regulate but we've also got an out of control - I mean, the idea that a U.S. senator did what Chuck Schumer did is outrageous, isn't it?

MORICI: Absolutely. Chuck Schumer was quite correct to write a letter to the regulators, drawing attention to the fact that Fannie Mae and Freddie Mac had inadequate capital, the most basic principles of regulation were not applied to these institutions. However in making that letter public was one of the most provocative things a U.S. senator could do. Frankly, it was wholly irresponsible. Unfortunately the people of New York will not call him to task.

DOBBS: Well, part of the reason the people in New York may not be calling him to task is it's very hard to get in line because one part of his support group, if you will, and constituency of course is Wall Street and the very financial institutions that should be regulated here. You wonder where his calls were for that regulation earlier on.

MORICI: Well, absolutely. He raises a ton of money for the Democratic senators on Wall Street. "The New York Times" are so happy to haul Alfons Stamato (ph) across the coals when it says the wrong thing, but Senator Schumer isn't going to get nearly that level of scrutiny. So between Wall Street and the "Times," he gets a pass.

DOBBS: Professor Siegel, right now give us your honest, your best assessment. How much trouble are our markets in, our housing industry in? How much trouble is this economy in and give us your sense of what homeowners and workers in this country can expect.

SIEGEL: Well let me say it's not just the regulators that have been responsible. Congress, OFHO which is the federal housing office has been telling Congress they had to reform Freddie Mac and Fannie Mae. But you know, the contributions that came from them to Congress, they're also responsible.

DOBBS: Professor, that's precisely why we held up here. Chuck Schumer in front of everybody, so that everybody understood what was happening here. The OTS, singling out a sitting U.S. senator for what they say they did, that is start this run is unprecedented.

SIEGEL: It's unprecedented. Let me tell you that the federal reserve stands behind all of the bank deposits, FDIC has, stands behind all of the bank deposits. No one need to worry about the bank deposits. The stock of the bank is another problem. All of these bad loans are coming home to roost, stockholders have, you know, been taking huge losses.

DOBBS: Give us your best -- we got about 30 seconds, professor. Give us your assessment of the condition we're in and what we can expect.

SIEGEL: The condition is serious, and serious measures have to be taken. We have some more downward pressure on this economy. If oil keeps on going up, I don't know how we're going to avoid a recession no matter what the data says and things are very anxious right now to say the least.

DOBBS: Professor Siegel, thank you very much. Professor Morici, thank you very much. And David Cay Johnston, thank you, appreciate you all being with us, gentleman.

Up next, the author of an important new book on the Mexican drug cartels and their threat to this country's national security. We'll be right back, stay with us.

(COMMERCIAL BREAK)

DOBBS: Up at the top of the hour, "THE ELECTION CENTER" with Campbell Brown. Campbell, what are you working on?

CAMPBELL BROWN, CNN ANCHOR: Thanks, Lou. Well in just a few minutes, Barack Obama has a major. We're going to be there live. Obama is expected to tell the NAACP's national convention that he thinks the country has a responsibility deficit extending from Washington to Wall Street to the way that we raise our children. We'll have that speech for you live right here on "THE ELECTION CENTER." Also we'll talk about the controversy involving the cover of "The New Yorker" magazine and John McCain challenging Obama on immigration reform. All of that at the top of the hour, Lou.

DOBBS: Thanks, Campbell, look forward to it. And now a note about our friend and former White House press secretary Tony Snow. He died Saturday at the age of 53 after a long, courageous battle with colon cancer. Tony was as brave professionally I want to tell you as he was brave fighting his cancer. He never backed down when we invited him on this broadcast to join us to debate the issues. Tony joined us happily and with great vigor and intellectual courage always.

He talked with me about the issues such as illegal immigration and the president's political problems, always in a spirited way, always as a true gentleman. Truly remarkable, I have to say. He was an absolute example for this administration, for Washington, D.C., and for the country. Tony leaves a wife Jill Walker and three of his children, Kendall, Robbie and Kristi. And I want you to know, we will miss him, his class, his capacity, his character.

(COMMERCIAL BREAK)

DOBBS: The bloody drug wars in Mexico have left more than 4,000 people dead over the past year and a half. The violence is worsening and spreading to this side of the border. Fred Burton, a former State Department counterterrorism official, author of a very important new book "Ghost: Confessions of a Counterterrorism Agent" joins us tonight. And it's good to have you with us, Fred.

FRED BURTON, AUTHOR: Thank you.

DOBBS: You know, as we report here on what is happening there, I find that, you know, your statements, sir, are just absolutely riveting. Saying that Mexico is one of the primary reasons why terrorism is on the rise and why violence is on the rise in this country. What do you mean by that?

BURTON: What most people don't understand, Lou, is the symbiotic relationship between the narco cartels and the criminal gangs inside the streets of America, meaning that the Gulf cartel, for example can reach out and conduct assassinations on U.S. soil. They control the distribution of narcotics in all of the major cities across America. So the street violence inside the United States is directly attributable to the cartel violence inside of Mexico.

DOBBS: You're also a member of the Texas border security council. And in this -- and, again, it is "Ghost: Confessions of a Counterterrorism Agent," is the book, you write this. "Until we secure our border with Mexico, the threat to the United States will remain. The impact to our national security is much more of a concern than the insurgents in Iraq."

Now that is going to -- that is provocative, even inflammatory analysis in some quarters. How do you expect government to react, this administration to react?

BURTON: Well I don't expect this administration to react. But I think that great things are being done. For example, Governor Perry in Texas has taken the lead on trying to coordinate law enforcement actions and patrols. We need a comprehensive national security strategy to address the border issue, Lou. And until that's done, we're going to continue to have these insurgent kind of activities inside of Mexico and we're going to continue to have the spillover violence inside the United States.

DOBBS: Now, as you look at this, I mean, why is it, do you believe that people in this country, is there some reason it is -- so hidden that there is no connection to border security, port security and the war on drugs? Forget the war on terror, illegal immigration, all of that, and the war on drugs.

BURTON: Well, let's be frank. It has taken a back seat since we had the war on terror. But my point is that you have narco terrorist activity coming into the United States. And if you can get a thousand pounds of cocaine in the United States, how much weapons of mass destruction could you get in or a toxin or a spore?

DOBBS: Or how many contaminated tomatoes or unidentified vegetables that bear salmonella for crying out loud. Fred Burton, we thank you for being here, come back soon. The book is "Ghost", I recommend it highly, "Confessions of a counterterrorism agent." The book is "Ghost."

Our poll tonight, the results, 65 percent of you say Senator Charles Schumer should be censured for causing a run on IndyMac bank. Time now for some of your thoughts. Hernandez in Georgia said, "Lou, the candidates can waste time pandering if they want. It still won't win them our votes, note the last name, Hernandez. Independent now and always. Thank you. And hoping there will be someone, anyone, we can stand to vote for in November."

You've got a lot of company, believe me. Martha in Florida said "You reported that the Congress has 35 scheduled work days until the November elections. What if we only paid them for days worked? I only get paid for days worked."

I think that's a terrific idea. Even better perhaps, what do you think of this? Maybe just pay them for results.

Send us your thoughts at LouDobbs.com and please join me on the radio Monday through Friday for the "Lou Dobbs Show." Tomorrow's guests include John McIntyre, co-founder of Real Clear Politics. We'll be talking about a race between Senator Obama and Senator McCain that is now a statistical dead heat.

Go to LouDobbsRadio.com to find your local listing for the "Lou Dobbs Show." Thank you for being with us tonight. Join us here tomorrow. Thanks for watching, good night from New York.

"THE ELECTION CENTER" with Campbell Brown begins right now -- Campbell?

BROWN: Thanks, Lou.

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