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Regulators Raid Wachovia Headquarters; Democrats Hiding Homeless For Denver Convention?

Aired July 17, 2008 - 15:00   ET

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

KYRA PHILLIPS, CNN ANCHOR: We begin with a developing story this hour.
Securities regulators from several states have raided the Wachovia Securities headquarters in Saint Louis, going after documents and records on the company's sales practices. Authorities in Missouri say that the move is part of a broad investigation into auction rate securities.

Missouri's secretary of state says that hundreds of investors have complained about not being able to get their money. The company says it's cooperating with discussions with regulators. Wachovia Securities is part of the Charlotte, North Carolina-based Wachovia Corporation.

Our Susan Lisovicz is watching what's happening on Wall Street as well.

Susan, how is Wachovia's stock doing right now? It was doing pretty well last hour.

SUSAN LISOVICZ, CNN CORRESPONDENT: Very well, Kyra.

Investors were not only unfazed by the news of a special investigation at Wachovia. They're buying shares big time. Right now, shares of Wachovia, ticker symbol WB, up 12 percent, and has been climbing steadily with the rest of the market.

(BUSINESS REPORT)

PHILLIPS: All right, Susan Lisovicz, we will keep tracking it. Thanks.

DON LEMON, CNN ANCHOR: Oil is a burning issue on Capitol Hill today, with Democrats in both the House and the Senate trying to find ways to relieve America's pain at the pump.

In the House, Democrats want to force energy companies to use existing oil leases before acquiring now ones. In the Senate, Majority Leader Harry Reid is pushing a crackdown to energy speculators. Neither measure has the support of Republicans.

More trouble in the housing market. Building starts for single- family homes dropped more than 5 percent last month to their lowest level since 1991. Construction of multifamily units surged by more than 40 percent. But most of that was due to a change in the building code in New York City, triggering a wave of development.

You have heard the term, it could be worse? Well, that rings especially true for J.P. Morgan Chase. The banking giant posted a quarterly earnings drop of more than $2 billion, but still beast analyst expectations. The plunge was due in part to the recent acquisition of Bear Stearns.

PHILLIPS: And this just into CNN: Bill Clinton apparently says he's ready to campaign for Barack Obama. The former president says he hasn't personally been asked, but he's eager and he's willing to pitch in.

Now, during the primary season, when Obama was battling Hillary Clinton for the Democratic nomination, the two men a number of times had a pretty strained relationship. Now Bill Clinton throwing his hat in the ring to support Barack Obama.

LEMON: Well, the goal is answers here. Pentagon investigators are in Afghanistan today learning all they can about a weekend ambush that killed nine U.S. troops. The big questions, what, if anything, did coalition forces know about the attack in advance? And if they didn't know enough, why not? About 200 Taliban fighters stormed a remote outpost on Sunday near the border with Pakistan. It was a deadliest single attack on U.S. forces there since 2005.

The United States and Iran officially not on speaking terms since the Carter administration. But we may soon see evidence that the diplomatic ice is melting. Not so far unconfirmed by the Bush administration, but a British newspaper cites a source saying that Washington will within weeks announce the opening of a diplomatic offense -- office, I should say, in Tehran, not an embassy, but an interests office. That's quite a change from today's diplomatic presence in Tehran, which is actually zero.

PHILLIPS: In North Carolina, police have new warrants to search the family home and cars of a missing jogger who turned up dead. The body of 32-year-old Nancy Cooper was found at a construction site Monday. She was reported missing two days earlier. Police won't say how she died. Cooper's twin sister talked to reporters today.

(BEGIN VIDEO CLIP)

KHRISTA LISTER, SISTER OF NANCY COOPER: It's really hard to look in the mirror. When I walk in and I see myself walking, and I will do a double-take. Oh, Nancy. So, it's -- I'm not really coping yet, I don't think. It's adrenaline.

(END VIDEO CLIP)

PHILLIPS: Police also have warrants for DNA evidence from Nancy Cooper's husband. They say he's cooperating and they haven't named a person of interest yet.

LEMON: Well, standing room only at a memorial for Army Lieutenant Holly Wimunc. More than 200 people showed up in North Carolina last night to pay their respects. Wimunc is the third female soldier at Fort Bragg to be killed in seven months. Her husband, Marine Corporal John Wimunc, is charged with her murder.

PHILLIPS: Two small children are dead after an apartment building stairwell and a balcony collapsed on them while they were playing. It happened last night in Houston. A third child suffered a broken leg. Crews worked late into the night to recover the two bodies and shore up walls.

The Associated Press reports that neighbors had complained about cracks in the concrete staircases that led to patios. Neighbors also tell "The Houston Chronicle" the staircases were supposed to be locked, but never were. The city's building department and child protection agency are now investigating.

LEMON: The FAA is investigating the crash of a small plane in central Oregon. Officials say the twin-engine Cessna crashed at Sunriver Airport and burst into flames. A witness says the plane hit the runway and lost control. The plane was registered to ProSoft Technology of Bakersfield, California. The company's CEO was killed. He was the only person on board.

PHILLIPS: President Bush is due in California for a look at what wildfires have done to the Shasta-Trinity National Forest. He will join Governor Arnold Schwarzenegger on a flyover. More than 2,000 fires have burned nearly 1,400 square miles of California since mid- June. And dozens of fires are still burning. The president will end the day with a private fund-raising dinner in Napa.

(WEATHER UPDATE)

LEMON: With a raid on Wachovia Securities headquarters today in Saint Louis, should you be worried? We will check in with our personal finance editor, Gerri Willis.

And a 5-year-old Texas boy isn't allowed to go to school. We will tell you what his hair has got to do with it.

(COMMERCIAL BREAK)

PHILLIPS: Democrats due to descend on Denver next month for their national convention probably won't see many homeless people. We're going to tell you how the city is making sure the homeless will be off the streets?

(COMMERCIAL BREAK)

PHILLIPS: Republican presidential candidate John McCain took his town hall meetings to Missouri today. A short time ago, McCain spoke to voters in Kansas City -- part of his focus, soaring energy prices and their impact on the American way of life.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Now, let me also point out, on national security, we are transferring somewhere around $700 billion of American money to countries that don't like us very much. Some of that money ends up in the hands of terrorist organizations. We cannot afford that from a national security standpoint. We have to reduce our -- and eliminate our dependency of foreign oil.

(APPLAUSE)

(END VIDEO CLIP)

PHILLIPS: Democratic candidate Barack Obama is taking the day off.

LEMON: All right, we have been telling you about Bill Clinton making a speech earlier today in New York, saying he is ready to campaign for Barack Obama. And, as you know, there had been some question about whether he would do it and some people say some contention. But we want you to hear what Bill Clinton had to say for himself.

(BEGIN VIDEO CLIP)

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: We had a good talk. And he said he wanted me to campaign with him. And I said I was eager to do so.

And, you know, he's busier than I am on politics, anyway. So, I just told him that, whenever he wanted to do it, I was ready. And, so, it's basically on their timetable. He's got a lot of things to do between now and the convention, of which this is simply one. So, I will do whatever I'm asked to do whenever I can do it.

(END VIDEO CLIP)

LEMON: All right, and the former president made that announcement there. He was taking questions about that after he made an announcement about joining forces with drug companies to try make malaria medicine more available to people around the world.

Also, one note which is important to point out here. He also commented on the recent comments made by the Reverend Jesse Jackson on FOX and said that Mr. Jackson did the right thing by apologizing for his comments. That was the former President Bill Clinton -- Kyra.

PHILLIPS: All eyes will be on Denver next month, when Democrats flood the city for their national convention. For those few days, the Colorado capital plans to get its homeless off the streets, or at least out of sight. Critics are already howling.

Details now from reporter Jim Hooley of CNN affiliate KMGH.

(BEGIN VIDEOTAPE)

JIM HOOLEY, KMGH REPORTER (voice-over): The plan will give the homeless things like free movie tickets, passes to museums, the Denver Zoo, and other attractions during the week of the convention.

UNIDENTIFIED MALE: It's better than them doing like a police sweep. What good is that going to do but clog the jail that's already clogged?

HOOLEY: The DNC Homeless Advisory Committee, along the Colorado Coalition of the Homeless, and the Denver Police have been putting the plan together over the past four months.

(on camera): It's estimated that some 3,800 homeless people live in Denver during the summertime. And organizers deny that this is a plan to sweep them off the streets.

GRETA WALKER, DENVER RESCUE MISSION: Absolutely not. There are no plans to relocate the homeless, to keep them out of the downtown area. If anything, we're trying to educate the homeless population on what is available.

HOOLEY: Organizers say they want to educate the homeless about the footprint of the DNC, the area around the Pepsi Center, and help them avoid unknowingly getting caught up in some of the activities and MSNBC of the protests surrounding the convention.

UNIDENTIFIED MALE: It depends on how they doing it. If they're coming in here and just running and taking people to jail, I think that is B.S. If they're going to offer places for them to stay and give them things to do, cool.

HOOLEY: Shelters in the city will also be open extended hours during the daytime and have additional cots on hand at night to encourage the homeless to stay out of the parks and often the streets.

In Denver, Jim Hooley, 7 News.

(END VIDEOTAPE)

LEMON: Al Gore to America: Clean up your act. A far-reaching challenge on the nation's energy future.

PHILLIPS: And sticking your hand where it doesn't belong, down the gullet of a 10-foot shark. We're going to tell you why one man is being called a hero for doing it.

(COMMERCIAL BREAK)

LEMON: All right, with energy prices spiraling, Al Gore says renewable energy now makes sense economically, not just environmentally.

Speaking today in Washington, the former vice president challenged the nation to convert to 100 percent clean electricity and do it in 10 years.

(BEGIN VIDEO CLIP)

AL GORE, FORMER VICE PRESIDENT OF THE UNITED STATES: To those who say the costs are still too high, I ask them to consider whether the costs of oil and coal will ever stop increasing if we keep relying on quickly depleting energy sources to feed a rapidly growing demand all around the world. When demand for oil and coal increases, their price goes up. When demand for solar cells increases, the price often comes down. That's the difference.

(APPLAUSE)

(END VIDEO CLIP)

LEMON: And as right if on cue, Texas today gave an initial OK to the nation's biggest wind power project. The plan would deliver power to major cities from wind farms in gusty West Texas.

(BUSINESS REPORT)

LEMON: All right, Kyra, so, you have heard this. You have seen the operation shows where you go, scalpel stat. And then they say, clamp stat, right?

(LAUGHTER)

PHILLIPS: Actually, I haven't watched any of those. Well, let me think.

LEMON: You know about that.

(CROSSTALK)

PHILLIPS: You see them in the movies. That's true. That's right.

LEMON: How about PVC pipe, stat?

(LAUGHTER)

PHILLIPS: How about nails? That's sometimes...

LEMON: Well, check this out. An Australian veterinarian is being hailed for a rather brave operation on a nurse shark, which are on the endangered species list, by the way.

Somewhere, this nearly 10-foot-long female got a gaffing hook stuck in its gullet. The vet armed with a PVC pipe stuck his hand down the shark's throat to remove the steel hook. The operation took all of 45 minutes and of course a lot of gumption and nerves of steel.

PHILLIPS: Well, with a raid on Wachovia Securities headquarters today in Saint Louis, should you be worried? We are going to check in with our personal finance editor, Gerri Willis, in just a sec.

(BEGIN VIDEOTAPE)

JESSICA HARDY, 2008 OLYMPIC SWIMMER: Obviously, my goal is to do the best that I can, medal in anything and everything that I can.

ROB MARCIANO, CNN CORRESPONDENT (voice-over): Swimmer Jessica Hardy is heading to the 2008 Summer Olympics. She says her swimsuit, the LZR Racer by Speedo, helps get her there and shatter a world record along the way.

HARDY: I have continued to do best times all year, so it's definitely helping me out.

MARCIANO: Elite swimmer Mary Descenza is wearing a high-tech suit by TYR.

MARY DESCENZA, ELITE SWIMMER: The material is actually faster than your skin, I think.

MARCIANO: Many top swimmers say their own skin just is not enough to compete. These suits made up of lightweight fabrics are specially woven to compress muscles and repel water. For example, the TYR's suit's tracer technology literally compresses muscles. So, Descenza, who normally wears a size 34 suit, will zip into a size 26.

JEREMY TONGISH, TYR SPORT: The body doesn't have to produce as much oxygen to the extremities. So, the athlete essentially is not as tired at the end of the race.

MARCIANO: Speedo boasts of a polyurethane panel that holds in the swimmer and decreases drag.

CRAIG BROMMERS, SPEEDO: Allowing them to maintain a streamlined position for the length of the race.

HARDY: It is a little bit (INAUDIBLE)

MARCIANO: Both swimmers are sponsored by their respective swimsuit manufacturers and don't think this second skin gives them an unfair advantage.

HARDY: Because the suit is available to anyone who wants it at the elite level.

MARCIANO: Already, plans are under way for the next-generation suits to give swimmers that split-second edge over the competition.

Rob Marciano, CNN.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

LEMON: All right, there's breaking news to tell you about, that salmonella outbreak that sickened thousands of people. New word now coming from the FDA.

Elizabeth Cohen, our medical correspondent, joining us now with this breaking development.

ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: Right.

We have been telling you for weeks don't eat these kinds of tomatoes. They could have this terrible Salmonella Saint Paul that has made more than 1,000 sick, sent 224 people to the hospital.

Well, the FDA, I was just on a call with them, they said that you can eat tomatoes again. You don't need to worry what kind you're eating. They believe that there is no Salmonella Saint Paul in any tomatoes that are currently on the market.

However, they do have a warning still about raw jalapeno and serrano peppers. They say that elderly people, infants anyone with immune system problems should stay away from raw jalapenos and raw serrano peppers. Those are still suspect at this point.

LEMON: That's all I was eating after tomatoes, seriously, not kidding.

But are people still getting sick? That's the question.

COHEN: They are. The FDA says that they are still getting reports, 20 to 30 reports of sick people every single day.

Now, they do think that the epidemic is waning. That's the word that they use. They said they think that it's plateaued and that now the numbers are going down. But they say they still are getting reports of people getting sick every day.

LEMON: All right, we have heard about these outbreaks and the FDA. And I'm just being honest with you. And I'm sure a lot of people out there, viewers, are thinking the same thing. We hear these things about the FDA. They said, it's not this, it's not that. We didn't have these precautions.

How do you know for sure that it's -- you go back to eating these tomatoes, how do we know? What can you eat, you know?

COHEN: You know what? The way that the food market is these days, you can never be 100 percent sure.

Food is shipped between different countries. It's touched by many different people before it comes to your plate. The days of picking something in grandma's garden and putting it on your plate, those days are pretty much gone for everyone. So, you can never be 100 percent sure.

But they say that they have gone to all the places where they thought these infected tomatoes might have come from. They have tested tomatoes on the market and they say they don't believe that it's out there anymore.

LEMON: I think that's a fair question, though.

(CROSSTALK)

COHEN: Absolutely. Sure.

And there a lot of people who are very critical of the way that they have handled this and other outbreaks.

LEMON: All right. Thank you, Elizabeth Cohen, with our breaking news about the salmonella outbreak -- Kyra.

PHILLIPS: 3:29 Eastern time right now, here are some of the other stories we're working on in the CNN NEWSROOM. Federal regulators showed up at Wachovia Securities today seeking documents linked to the sale of auction rate securities. Now, in recent months, the market for those securities has dried up, preventing investors from accessing their money. Some say that they should have been warned before they even invested.

Well, former President Bill Clinton, he is touting an agreement that will make it easier for people who need a malaria-fighting drug to get it. Clinton's foundation has signed an agreement with several suppliers aimed at reducing price fluctuations.

And the Pentagon trying to determine whether an intelligence failure contributed to the death of nine U.S. soldiers in Afghanistan's Kunar Province on Sunday. Sources tell CNN the troops did not know about a buildup of insurgents.

Now, should investors be worried about today's raid on the Wachovia Securities headquarters in St. Louis? Joining me now, CNN's personal finance editor, Gerri Willis.

Let's talk about first of all, what the heck are auction rate securities?

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Well, that is a great question, right? I think it's confusing to everybody out there. You know money market funds. You may have money markets funds...

(CROSSTALK)

PHILLIPS: Which are supposed to be secure.

WILLIS: Yes, they are. And they don't return that much. But you believe that your money is always going to be there and you're not going to have to worry about it. Well, auction rate securities was something like that but they were bought by colleges, universities, municipalities. They were sold, very popular over the last few years because they provided a little better return than, say, money market funds.

The problem is the credit crunch came about and it gummed up the system. A lot of investments couldn't change hands. You couldn't sell these things, you couldn't find a buyer. You couldn't find a seller. The market wasn't working.

And so these folks who owned this stuff got very, very concerned and they started calling regulators, saying, hey, we were never warned that these securities were so dangerous. We were told they were really, really safe.

PHILLIPS: So it was a risky investment. Nothing fraudulent happened? Or do we not know yet?

WILLIS: We are looking into this. You know, there have been a lot of stories in the trades about they auction rate securities. What were they? Were they mishandled? And you notice the investigators are looking for marketing materials. That's what they're searching for.

They want to know do the folks who sold these things, did they really warn people that there are going to be a downside here. So I think that's what they're looking into right now. It's not just Wachovia who is in the crosshairs here. I think at risk in this, $40 million for Wachovia, which is a $1.2 trillion bank, OK?

It's a small amount of what Wachovia does. And Wachovia is not the only bank who does these. There are many. And many are being investigated. So this is part of a broader investigation going on right now.

PHILLIPS: Do we know if the investors are going to get to their money or not?

WILLIS: That's a great question. You know, there are lots of questions out there about not just stocks, not just bonds, but the market as a whole, how it's holding up. We've seen a sell-off in a lot of the bank stocks. It's not surprising that some of these securities are having problems, especially when you consider that they got caught in this credit crunch. And these folks couldn't -- they couldn't get their money out.

That doesn't go over very well with investors.

PHILLIPS: Gerri Willis, thanks for putting it into perspective for us. Still not very good news. All right. Thanks, Gerri.

WILLIS: My pleasure.

PHILLIPS: Well, for more on the money versus safety debate sparked by some U.S. Airways pilots who say the carrier is questioning their judgment when it comes to whether pilots are trying not to be wasteful in light of record fuel prices. Earlier I had a chance to talk to the spokesperson for both sides -- or actually two individuals that are on each side of this debate.

(BEGIN VIDEOTAPE)

JAMES RAY, SPOKESMAN, U.S. AIRLINE PILOTS ASSN.: U.S. Airways and Captain Skinner can speak on this momentarily. They've implemented a new training program. And it's all in the interest of conserving fuel. And they've taken action and called in eight of our very senior captains to undergo this training. They have told us this is non-jeopardy training.

However, it is intimidating in the fact that if the pilot is in the simulator, the training involves not only some ground school classroom sessions, but also manipulating the controls of the simulator. If the FAA shows up and observes this training -- which they do periodically, it's the FAA's jobs to police the industry.

And on a daily basis the FAA does ride in simulators. So if the FAA showed up and the pilot was manipulating the controls, then we're putting him in harm's way unnecessarily. They've got this training program. We've asked the president of the company, we appealed to him last week and we said if the training program is that good, and I'm sure that it is, then why limit this training to only a select few? Why not put all 5,200 pilots through that training?

PHILLIPS: All right. Bob Skinner, you're also a captain. I want you to respond to this. Is this happening? Do you see other pilots being intimidated to do this and this training, to be intimidating?

ROBERT SKINNER, U.S. AIRWAYS: Absolutely not. First of all, U.S. Airways have never denied a line pilot the ability to add fuel. We ask them to do that wisely, jointly with our dispatchers.

These pilots that have been asked to come in for an interactive demonstration in the full flight simulator have been asked to do so, so we can gather information as to why they're adding fuel at a rate much higher prior to dispatch than our other pilots.

U.S. Airways as a whole, their pilot group adds fuel less than 2 percent of our flights on top of fuel that's way in excess of the FAR minimums. The FAR minimums for flight are 45 minutes. Our wide body aircraft are carrying over 100 minutes when they arrive at destination. We ask these...

PHILLIPS: So, Captain Skinner, let me ask you, why are they adding fuel? When you're say that you're finding that they're adding fuel, why -- what's the response when you ask them why they're doing that?

SKINNER: That's exactly what we're trying to find out here. And that's why we asked them to come in for an interactive demonstration. And I say, that demonstration, they are not required to fly the aircraft. They will not touch the flight controls. The FAA will not be present. We just ask them to come in and share information with us.

There is no classroom. There's a little bit of briefing room time where we -- where we present how we build dispatch releases, how we -- how we dispatch our aircraft. We go into the fuel -- into the full flight simulator and we talk about fuel initiatives.

PHILLIPS: OK. Well, Captain Ray, is this true? Are these pilots adding a little -- are they being too cautious and adding more fuel than they should be adding?

RAY: No. These eight captains are very senior international wide body captains. They probably, on average, have at least 30 years experience with our airline.

And, you know, the company says that they are -- they're grossly -- they're adding to the amount of fuel at a much higher rate than the average pilot. However, I'd like to mention that these flights are eight- to 10-hour flights across the Atlantic Ocean. And you know, one of the pilots... PHILLIPS: Well, let me ask you this. If they're senior pilots, why would they feel intimidated? They've been around the company for a number of years. They have proof of performance. They know what they're doing. Why would they feel intimidated?

RAY: Because, what you have to understand is that any time a pilot goes through training and, if the FAA does show up -- and I know Captain Skinner said that they won't be there, but they have the right to be there, and I would suspect that they will be there. There's a lot of attention being drawn to this training right now. And I'm sure the FAA would like to know what it's all about.

So yesterday, the first -- first training sessions took place. And the captain, in fact, did manipulate the controls, if that's my understanding. And with the FAA present, then that captain is putting his license on the line. It could possibly be in jeopardy.

Any time a pilot goes through training and manipulates the controls of the simulator with the FAA present, his or her license is always on the line.

PHILLIPS: Now, is it possible that these captains could lose their jobs? They're older pilots. They're senior. You can get other pilots to come in at a less cost. They could be fearful of their jobs because of all of the layoffs. Would you and your company think about letting older pilots go?

SKINNER: Absolutely not. This is not a disciplinary issue. This is not counseling. This is a fact-finding mission.

In fact, no pilot has been asked to manipulate the controls. If they've manipulated the controls at the end of the session, it's because they ask for landings for currency. There is no requirement for them to do this. This is -- this is not curricula that's in our training curricula. This is a fact-finding mission.

We have over 5,000 pilots. We've asked eight to come in and share information with us.

(END VIDEOTAPE)

PHILLIPS: And we asked the FAA to join our discussion but we were turned down. However, a spokesman did tell us: "This is an issue between the airline and the union. The FAA is monitoring the situation in case there are any safety issues that have to be addressed.

LEMON: The American Red Cross says it's taking new steps to ensure the safety of its blood, the blood it processes. That follows a New York Times report accusing the organization of repeated safety lapses. The newspaper says the Red Cross has been cited by the Food and Drug Administration for lapses in screening donors for exposure to disease, including failure to test for syphilis. The organization has been fined $21 million since 2003. The Red Cross is responsible for 45 percent of the blood supply in the United States. Well, money is on the way for former users of the now-withdrawn painkiller Vioxx. The drug-maker Merck will start cutting checks in August as parts of a nearly $5 billion settlement designed to settle about 50,000 lawsuits alleging harmful Vioxx side effects. Merck pulled Vioxx from the shelves back in 2004.

PHILLIPS: Oh, the long lines, the baggage checks, take off your shoes. But you're a lucky traveler if your name is not on the terror watch list. A CNN correspondent is on it and he's still not sure why. I'm about to talk to him.

(COMMERCIAL BREAK)

LEMON: OK. So we brought you this yesterday. You might remember, it was a very interesting story. CNN investigative reporter -- I should say, correspondent Drew Griffin met a man with a little extra aggravation in his life, ever since his name turned up on the U.S. government's terror watch list, watch this.

(BEGIN VIDEO CLIP)

DREW GRIFFIN, CNN SPECIAL INVESTIGATION UNIT CORRESPONDENT (voice-over): Washington Attorney Jim Robinson is a former assistant attorney general. He's a former U.S. attorney from Michigan. He holds a high level government security clearance, and he's a former law school dean, a husband, a granddad, and American. And he gets delayed if not stopped every time he gets on a plane.

Why? Because Robinson is also one of the estimated 1 million names now on the terror watch list.

JIM ROBINSON, ATTORNEY: So it seems, for years now, despite my best efforts to get off.

(END VIDEO CLIP)

LEMON: All right. And you know what? There is more to the story. That reporter, CNN's Drew Griffin learned that his name is also among those estimated 1 million names on that watch list. Well, it got his attention of course, but it also got the attention of a member of the House Homeland Security Committee, Sheila Jackson Lee.

Listen to what she told us today, and the homeland security secretary.

(BEGIN VIDEO CLIP)

REP. SHEILA JACKSON LEE (D-TX), HOMELAND SECURITY CMTE.: We understand that a new member is on the watch list, Drew Griffin of CNN. And my question is, why would Drew Griffin's name come on the watch list post his investigation of TSA? What a curious and interesting and troubling phenomenon. What is the basis of this sudden recognition that Drew Griffin is a terrorist? Are we targeting people because of their critique or criticism?

MICHAEL CHERTOFF, HOMELAND SECURITY SECRETARY: As far as the watch list is concerned, we do have circumstances where we have name mismatches.

LEE: The individual in question, this particularly, and I know that Mr. Lewis has, Mr. Griffin has sent materials to document the fact that he believes that he is not a terrorist. And he documents that he's not a terrorist. And I use him as an example, because what I'm concerned about is the precipitousness of him getting on the watch list, May of 2008, around the time that he was investigating one of our agencies in DHS.

And so I'm going to ask officially for an investigation of that. I don't know if the chairman -- I wasn't here, whether the chairman asked for John Lewis, but I'm asking for an official investigation.

CHERTOFF: The database you're talking about is really maintained by the Department of Justice. It's not my understanding that the reporter was put on. He may share the name with someone who was put on. And if he has a complaint about it, he ought to be refer it over to the IG.

(END VIDEO CLIP)

LEMON: Look what you've done, special investigations correspondent Drew Griffin, fresh from Capitol Hill. Did you have any idea that it was going to have this response, Drew? Because you're sitting here, and I'm like, you caused an uproar.

GRIFFIN: No, and it's a little bit uncomfortable. I mean, the story is really not about me. It's about all the people like me who are, hopefully, mistakenly on this list and get hassled all the time at the airport and how hard it is, Don, to get off even after the sending in the information and try to get off, no response.

LEMON: But it's good that you're the squeaky wheel in this. And that's what I'm asking, because now other people who may be mistakenly on that list, they may finally get some help here.

GRIFFIN: Perhaps. And the TSA told us yesterday that some of this may be cleared up next yesterday when the TSA, as they say, assumes responsibility for matching the terrorist list to the actual passenger lists. They say some of this mistaken identity, that's what it is, should be cleared up.

LEMON: OK. I'll just chuckle to myself. But what are you doing? Are you doing anything else on this that we should know about? Are you reporting any of this for later shows? And what else are you digging into when it comes to this issue?

GRIFFIN: Well, we continue to look at TSA, which we have for over a year now, all aspects of aviation security as it relates to terrorism and the Federal Air Marshal Service, how many federal air marshals are on board.

That's -- in fact, Sheila Jackson Lee held hearings on that as well. So we will continue to dig in that. We will be on the late shows today, 8:00, 10:00, Anderson Cooper, Campbell Brown talking about this. But again, it's really -- I mean, we've gotten e-mails from people who have an 8-year-old boy on the watch list. It's a big problem

LEMON: You answered my next question. I was going to say, quickly, what has the response been like? But I would imagine people...

(CROSSTALK)

LEMON: Yes. Drew Griffin, thank you very much for that -- Kyra.

PHILLIPS: Well, a 5-year-old Texas boy isn't allowed to go to school. We're going to tell you what his hair has got to do with it.

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PHILLIPS: Well, he's only 5, but a kid in southeast Texas has run afoul of the school's dress code. Round one went to the rule book. But the child's parents say they're not through fighting.

The story now from Elizabeth Scarborough of CNN affiliate KPRC.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: And there's a turtle in there too.

ELIZABETH SCARBOROUGH, KPRC REPORTER (voice-over): Five-year-old Addie Arocha (ph) has never cut his hair. And when you ask him why, he has a simple response.

UNIDENTIFIED MALE: Because it tells me how long I've been here.

SCARBOROUGH: His mother puts his hair in braids every morning. But now his two braids are the center of a controversy. The Needville School Board held a public hearing on whether to allow little Adriel (ph) to keep his hair long despite their dress code rules that specify boys cannot have hair below the collar.

Addie's father says his hair is part of their Native American heritage, their beliefs.

UNIDENTIFIED MALE: It's our life experiences, it's our wisdom, it's our faith, our ancestry.

SCARBOROUGH: But members of the community spoke out to uphold the rules.

UNIDENTIFIED FEMALE: Yes, it's a small town, some people might think we're backwards, some people might think we're hicks. I don't agree with that.

UNIDENTIFIED FEMALE: And I'm just afraid that if the school district decides to give in and accept -- to change the rules for these parents, that other problems are going to come in the future.

SCARBOROUGH: The superintendent said he had already denied any changes, but on different grounds.

UNIDENTIFIED MALE: He's not an enrolled student, has not suffered harm, has not been denied an education.

SCARBOROUGH: Ultimately the board decided their rules would not change. The family says they're moving into this house and the district in a few weeks. And the district will have to deal with Addie's hair eventually.

UNIDENTIFIED FEMALE: I really wasn't surprised. I knew that they would say no. The whole not living in the district yet was a little bit of a surprise, but it just seems like another hoop that we're going to have to jump through.

(END VIDEOTAPE)

PHILLIPS: Well, that story from Elizabeth Scarborough of CNN affiliate KPRC. We'll follow up and find out what happens.

Well, a little bump in the road on the way to work this morning in South Pasadena, California. A sinkhole that appeared overnight got bigger, and bigger, and bigger until it forced the closure of northbound lanes on the Pasadena Freeway. Crews are hoping to fix it by the evening rush hour.

LEMON: We get a fix, closing bell, wrap-up of all the action on Wall Street straight ahead.

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PHILLIPS: Wolf Blitzer, what have you got shaking at the top of the "SIT. ROOM"?

WOLF BLITZER, CNN ANCHOR: We have got a lot going on, Kyra, right here in "THE SITUATION ROOM," including my exclusive interview with Nancy Pelosi. What's the speaker of the house says about the war in Iraq, why Congress hasn't been able to deliver on lower gas prices. You're also going to want to hear what she has to say about President Bush, the exclusive interview coming up.

And Bill Clinton, he's back in the spotlight today. He's talking about Barack Obama, and his role in the Democratic presidential campaign. You'll hear precisely what the former president is saying.

And a big change in U.S. policy toward Iran, amid reports the U.S. may be ready to set up a diplomatic mission there. First time since the late '70s. What the White House might be planning. All that and a lot more coming up right here in "THE SITUATION ROOM."

Back to you, Kyra.

PHILLIPS: All right. We'll be watching.

LEMON: Getting close to the top of the hour. We're going to check with our Chad Myers to see what's happening with the weather around the country. Chad, what do you know? What are you working on over -- oh, wait a minute, that's not Chad.

RAINN WILSON, ACTOR: No, I'm filling in for Chad today. Hi, it's Rainn Wilson.

LEMON: It's the guy from "The Office."

WILSON: Yes, that's me. I've always wanted to give the weather on CNN. And so I'm going to give you the rundown, OK?

LEMON: OK. Go ahead.

WILSON: There's a big storm, but don't worry, it's out on the ocean and there's no one fishing there right now.

LEMON: Wait, do you know anything about the weather?

WILSON: Yes, I do. Hold on. Hail storms, these are very bad hail storms in South America, OK? Let's move, move people, with the graphics. OK. We've got a little bit of a slight -- there's a gale off of the coast of Florida and it's moving all the sail fish inland, so get your rod and reels out.

LEMON: Let's tell people why you're really here. You've got a new movie coming out.

WILSON: Wait, that's Bermuda again. Yes, I've got a movie, "The Rocker," I was just doing a interview at cnn.com and I got my fantasy come true, I get to do the weather. There are buttons on here.

LEMON: So your wish came true. It comes out on August 20th and you're a former, what, heavy metal drummer, right, who gets a second chance at fame.

WILSON: Yes. The movie "The Rocker," yes.

LEMON: August 20th. And we have to say though, because this is very appropriate and timely, you were just nominated for an Emmy today for Best Actor in a comedy role, right?

WILSON: Supporting actor in a comedy role, yes, the best actor, Steve Carell, that's his territory. But very, very excited. And that was a good day today. I got to do the weather, I got nominated for an Emmy, and I'm here in the CNN NEWSROOM.

LEMON: You are.

WILSON: Oh, look at that!

LEMON: There it is, with Don Lemon and Kyra Phillips. Hey, you have hit the big time, buddy.

WILSON: I have indeed.

LEMON: Congratulations on that Emmy nomination, we wish you the best, OK, Rainn, you're a good sport.

WILSON: Thanks for having me.

LEMON: All right. You're a good sport -- Kyra.

PHILLIPS: Is that Rainn without his shirt on?

LEMON: I think it is.

PHILLIPS: Wow, Rainn, I never thought you'd be so sexy.

LEMON: Rainn doing the rain forecast.

PHILLIPS: The whole NEWSROOM back here is feeling a little ill. All right. Here are some other primetime Emmy nominations that were just announced. Ah, Rainn is a sexy guy, come on. For the first time, two programs from basic cable made the list. The legal thriller "Damages" on FX, and "Mad Men" on AMC. The nominees for best drama series, "Boston Legal," great show, by the way, "Damages," "Dexter," "House," "Lost," and "Mad Men."

And then in the best comedy category, "Curb Your Enthusiasm," love that one, "Entourage," oh yes, "The Office," there you go, Rainn's show, "30 Rock," and "Two and a Half Men." HBO's historical drama "John Adams" had the most nominations at 23.

LEMON: There you go. Thank you, Rainn. Thank you, Kyra. That was pretty funny. He was a pretty good sport about it, right?

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PHILLIPS: We're going to go to Wolf now in "THE SITUATION ROOM."

LEMON: Have a good evening.

BLITZER: Thanks very much, guys.