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Freddie Mac Reports Staggering Losses This Morning; Iraq Raking in More Money Than it Can Spend; Sudden Deluge Soaked Parts of Western Massachusetts; Iraqi Families in Refugee Camps Too Afraid to go Home

Aired August 6, 2008 - 09:00   ET

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


TONY HARRIS, CNN ANCHOR: And good morning, everyone. You are in the CNN NEWSROOM. I'm Tony Harris.
HEIDI COLLINS, CNN ANCHOR: Hi, everybody. I'm Heidi Collins.

See events come into the NEWSROOM live on Wednesday, August 6th.

Here's what's on the rundown.

Side by side and live this hour, Barack Obama in Indiana with Hoosier senator, Evan Bayh. Chatter about a VP pick rising today.

HARRIS: Is in the missing British girl Madeleine McCann? Police accused of ignoring a potentially critical security tape.

COLLINS: More and more women are donating. It's a sour economy, the reason? Eggs for sale in the NEWSROOM.

HARRIS: Energized over the nation's energy crisis. The presidential candidates fired up and taking aim at each other.

Barack Obama holds a town hall meeting in Indiana this hour. He will focus on energy and the economy. Obama blames Republican policies for the country's current energy problems.

John McCain is promoting his plans to increase offshore drilling and build more nuclear power plants. He toured a nuclear plant outside Detroit yesterday on the campaign trail. Today, McCain visits Marshall University in Huntington, West Virginia. From there he heads to campaign stops in Ohio.

COLLINS: Barack Obama's town hall meeting this hour generating buzz about the vice presidential spot. Obama will be introduced by a potential running mate, Indiana senator Evan Bayh.

CNN political correspondent Candy Crowley is live from Indiana now this morning.

So, Candy, any chance we're actually going to see an announcement of an Obama/Bayh ticket?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: I think nil, not today.

COLLINS: Yes. CROWLEY: That's for sure. I don't think they're going to let this be a secret. I think we're going to know, at least ahead of time, that he's about to announce his VP candidate. But listen, they are abuzz here in Indiana about Evan Bayh. The Bayh name is huge here in Indiana. Not just Evan Bayh, who was a governor and is now a senator, but his dad, Birch Bayh, was long-time senator from here.

So it is a Democratic name in a very Republican state.

I talked to Senator Bayh this morning, sort of pressed him on the issue, is he being vetted, does he believe he will be picked. And you won't be surprised, Heidi, that he had very little to say.

(BEGIN VIDEO CLIP)

SEN. EVAN BAYH (D), INDIANA: Well, I think that's a little premature. Right now it's an Obama ticket and Barack is here in our state today to discuss an issue that's on the top of Hoosiers' minds and Americans' minds, and that's what do we do to get the price of gasoline down, both in the short run, and most importantly, Candy, in the long run, free our country of this dependency on imported oil, because our continued addiction to that oil is hurting us economically, financially, and it's a big national security and an environmental issue.

So he's focused on the things the president ought to be doing. And he'll make his decision about that other thing in due course.

(END VIDEO CLIP)

CROWLEY: So about that "other thing," there, obviously, are more names on the list than Senator Bayh. For instance, Virginia governor Tim Kaine is today at an event with Michelle Obama. He's on that list.

Certainly in Delaware they are buzzing about Senator Joe Biden. Any number of people on this list. Right now I can tell you that the people who are involved in this process may be talking but they're not saying much. This is always a pretty tightly-held secret.

Certainly the Obama campaign has been very good at keeping the process itself pretty tightly held. So it's one of those things that maybe one or two days ahead of time we'll know, but right now just a lot of names in the hopper -- Heidi.

COLLINS: Yes. All right, Candy. Well, we've also been hearing an awful lot, of course, I'm sure you have noticed as well, from both Obama and McCain about energy issues. Is that likely to change any time soon?

CROWLEY: No, because, I mean, it's a very hot issue. I think the last time CNN had a poll on this, 75 percent of those responding said that gas prices had affected the way they were living. We are coming up on fall and winter. We're already seeing our electrical prices going up. There's home heating fuel certainly in the northeast. This is an issue that really has hit the economy very hard. You know whenever you see two candidates talking about the same thing over an over again, they understand it has resonance among voters.

COLLINS: Yes, absolutely. And, Candy, we do hear that crowd warming up behind you there. We will certainly be bringing some of Senator Obama's comments live to our viewers when they happen.

Candy Crowley, thank you.

HARRIS: The energy crisis. Problems and potential solutions will be a focus throughout the day here on CNN from hybrid cars to alternative energy to offshore oil drilling. We will examine what the politicians are proposing and whether their plans might work.

Nasty attack ads by both presidential candidates. This hour, a reality check. Love these. First under the microscope, Obama's ad.

CNN's Josh Levs puts the claims to the test.

JOSH LEVS, CNN CENTER CORRESPONDENT: Yes.

HARRIS: Love these reality checks.

Sort it out for us, Josh.

LEVS: All right, so here's the deal.

HARRIS: Yes.

LEVS: So we know now we're going to be hearing from Barack Obama this hour, right?

Well, I want you all to go into this with this reality check in mind because you're going to keep hearing a lot of the same claims. So what we're going to do right now is take a look at Barack Obama's latest ad attacking John McCain on issues of energy, and compare his charges to the reality.

(BEGIN VIDEOTAPE)

LEVS (voice over): The ad launches directly into attack mode.

(BEGIN VIDEO CLIP, CAMPAIGN COMMERCIAL)

UNIDENTIFIED MALE: Every time you fill your tank the oil companies fill their pockets. Now big oil's filling John McCain's campaign with $2 million in contributions.

(END VIDEO CLIP)

LEVS: Is that true? The Obama campaign puts its sourcing here. The Center for Responsive Politics tracks contributions by people in the oil industry. Through June McCain had $1.3 million. The Obama ad also cites a "Washington Post" article. That article mentioned oil money McCain gets from Republican National Committee fund-raising. The Center for Responsive Politics says it won't know exactly how much McCain has received until those figures are reported. The total could reach $2 million or it could be less.

Obama's ad does not mention he has received nearly $400,000 from people in the oil industry, or how much more he may have received through Democratic National Committee fund-raising.

Back to the ad.

(BEGIN VIDEO CLIP, CAMPAIGN COMMERCIAL)

UNIDENTIFIED MALE: Because instead of taxing their windfall profit to help drivers, McCain wants to give them another $4 billion in tax breaks.

After one president in the pocket of big oil, we can't afford another.

(END VIDEO CLIP)

LEVS: Politifact.com pointed out last month that the tax reduction McCain wants would apply to all corporations, singling out oil companies suggests he's targeted them for tax breaks.

(END VIDEOTAPE)

LEVS: And that is some thing to keep in mind. Also we encourage you to check out Politifact.com, also CNN.com. Anytime you hear any of these charges on either side, obviously, go to CNN.com. And keep watching us. We're going to reality check these all day long.

HARRIS: Now you're back in a couple of minutes.

LEVS: Yes.

HARRIS: What are you going to have for us then?

LEVS: Well, what we're going to do then is the flip side of this. We're going to look at John McCain's latest ad attacking Barack Obama on energy issues and how those charges compare to Obama.

HARRIS: Way to go. OK, Josh, appreciate it. Thank you, sir.

LEVS: Thank you.

COLLINS: Your money, it's "ISSUE #1" here at CNN. And today, big story is hitting your wallet. More shock waves in the mortgage crisis.

Finance giant Freddie Mac has reported staggering quarterly losses, four times, in fact, what analysts expected. Remember your tax money has already been promised as Freddie's safety net.

More on this story at the bottom of the hour.

And oil prices mostly steady at a three-month low. Next hour the government releases its inventory report on both oil and gas.

And speaking of gas, prices slide yet again. The national average today about a penny less than yesterday.

HARRIS: The search for little Madeleine McCann. Did Portuguese police ignore potential leads? Newly released files reveal secrets.

ITN's Robert Moore has that story.

(BEGIN VIDEOTAPE)

ROBERT MOORE, ITN REPORTER (voice over): More intriguing images have emerged from the Madeleine police files, like these security camera pictures of two different young girls at petrol stations on the Algarve.

No one is saying this is Madeleine with an abductor. Indeed, Portuguese police hint it could be discounted. But those close to the McCanns say it's inexplicable. This second image was never shown to Gerry and Kate.

Similarly the file contains (INAUDIBLE) images of two men seen in the area and reported to have been acting suspiciously around the McCanns' apartment. And yet these pictures, strikingly similar, have never been made public.

And there is a witness statement from a Dutch woman who claims she saw a young girl in a shop in Amsterdam saying she was called Maddie and asking the question, do you know where my mommy is?

CLARENCE MITCHELL, MCCANN FAMILY SPOKESMAN: This is exactly the sort of report, sort of information, that we hoped was within the file. What we don't know is what the police did. Did they really follow this up? Did they rule that child out? Were the Dutch authorities told?

None of that came back to Gerry and Kate or their lawyers.

MOORE: The more you examine the police files, the more apparent it is there is plenty of material in here that might help private investigators now. And that's certainly will give the McCanns some encouragement, even as their anger builds about the competence of the original detective work.

Also in the files that poignant picture of the bed in which Madeleine was sleeping immediately before she vanished.

The Portuguese police were hoping the release of the documents and photos which showed the rigor of their investigation. Many people may now be drawing the opposite conclusion. I'm wondering if a crucial but overlooked clue may yet lie within the files.

Robert Moore, News at 10.

(END VIDEOTAPE) HARRIS: Now in that report you just heard from Clarence Mitchell, a McCann family spokesman. Coming up at 11:00 a.m. Eastern Time we speak to him live about these new angles on the case and where the investigation is today.

COLLINS: From a record high to a three-month low. What's behind oil's slippery slide? "ISSUE #1" with the CNN money team.

(COMMERCIAL BREAK)

ANNOUNCER: Live breaking news, unfolding developments, see for yourself in the CNN NEWSROOM.

HARRIS: The Olympic torch is in Beijing, and so are the protesters. This morning four pro-Tibet demonstrators were hauled away by police, but not before a couple of them managed to scale electric poles unfurling "Free Tibet" banners. And see that there?

This was all going on in the shadow of Beijing's national stadium. A Tibetan activist group says the four protesters are American and British.

Olympic opening ceremonies are now just two days away, although the first events actually kicked off this morning.

COLLINS: President Bush making his way to the Olympics. He's in Thailand right now visiting with the prime minister. While in Bangkok President Bush plans a major address on China's human rights record.

Our Dan Rivers, live from the Thai capital now.

So, Dan, what is the president expected to say about this issue in China?

DAN RIVERS, CNN CORRESPONDENT: Well, Heidi, we've got a copy of his speech that he'll deliver here Thursday. And it's pretty blunt words on China. He -- I mean he goes through a whole bunch of different issues about -- in this region but when he gets to China -- first of all, he stresses the cooperation between the two countries.

But then he goes on to say the United States believes the people of China deserve the fundamental liberty that is the natural right of all human beings. He goes on to say the -- so America stands firm in opposition to China's detention of political dissidents, human rights advocates, and religious activists.

And he'll say, change in China will arrive on its own terms and in keeping with the history -- with its own history and tradition, yet change will arrive.

So pretty blunt stuff talking about the concerns over human rights and the fact that things need to change or will change according to the president.

That speech delivered here Thursday in Bangkok. He will also talk about Burma, as well, another hot topic in this region. COLLINS: Yes. And speaking of that, Dan, we know that the First Lady Laura Bush has a visit planned to the border with Myanmar.

Can you tell us anything more about that?

RIVERS: Yes. While President Bush is delivering that speech the First Lady will be traveling up to the border to a huge refugee camp, one of nine enormous refugee camps, full of Burmese refugees, 39,000 of them in this one camp.

She'll tour around, see the fairly harsh conditions that these people are living in with no running water or electricity. Many of them (INAUDIBLE) some of their own accounts about what they've endured, the difficult conditions that they have now, and meet some refugees who are due to be sent to live in the United States, as part of an ongoing program there.

COLLINS: All right. Very good. Sure do appreciate the report.

Dan Rivers from the Thai capital this morning -- thank you, Dan.

HARRIS: Let's check in now with Jacqui Jeras in the Severe Weather Center.

Jacqui, just curious. How is the air in China? We've talked a lot about it.

JACQUI JERAS, CNN METEOROLOGIST: Yes.

HARRIS: And a question for you, when does smog and fine particulate matter become mist?

JERAS: Yes, good question.

HARRIS: Yes.

JERAS: Apparently that's what they're calling that little yellow haze you see over there...

HARRIS: That's right.

JERAS: ... in Beijing. They're saying that it's mist and not to worry about it.

COLLINS: Sure. Sure, it is.

HARRIS: Yes.

JERAS: But, of course, we know that it has to do with smog and the air quality and it's actually even getting bad in that area, even by China's standards. The air's starting to clean out a little bit though in Hong Kong, but not necessarily for a good reason.

(WEATHER REPORT)

COLLINS: Sounds good. Jacqui, thank you.

HARRIS: Thanks, Jacqui.

News just in to CNN. We've learned that a federal prosecutor has actually arrived at a U.S. courthouse, at the Justice Department actually begins the process of unsealing documents in the investigation of the anthrax mailings that killed five people, a seven-year investigation.

The documents are not expected to be made available to the public until later this morning, perhaps midday.

We're anticipating an FBI news conference at some point today. And at that time we expect the FBI to tell us that army scientist Bruce Ivins was behind the attacks and that he worked alone seven years ago.

That coming after FBI director Robert Mueller briefed victims and their families -- victims and family members of the attacks, which, again, killed five people and sickened 15 more.

So we'll continue to follow this story and bring you additional information as we get it here in the NEWSROOM.

Wall Street open for business just minutes from now. The Dow coming off a huge gain of more than 300 points yesterday. Why? Maybe because oil keeps dropping.

Ali Velshi is "Minding Your Business." He is back.

Ali, it's great to see you. Hmm, I see we have a couple of things to talk about. Good morning, Ali.

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Things are always changing.

HARRIS: That's right.

VELSHI: Yes. I was on vacation, took a little opportunity to grow a little facial hair because really that's the only opportunity to grow any hair that I have.

But, yes. As I was away, what an interesting thing. I've been away a couple of weeks. Got to take this out of my ear for a second, Tony, while we adjust it because I'm hearing myself back.

HARRIS: OK.

VELSHI: While I was away the price of oil has dropped fairly substantially. The price of gasoline has dropped. In fact, we're down to $3.86 a gallon as a national average. About 10 or 11 states above the $4 mark now.

It's been going down because the price of oil has been going down. Yesterday we saw the price of oil settling just over $118. A little bit higher than that right now. But take a look at what's gone on over the last few months with oil and gasoline, or oil versus the market.

HARRIS: OK.

VELSHI: Yesterday we had a very strong day on the Dow. Up over 300 points, 330 points, which is one of the strongest days in a few months. Now as you can see, oil is the red line, the Dow is the green line. And it's kind of a mirror image of each other. So as oil has gone down, people who are investing think that their investments are going to do better. And that's what we're sort of seeing.

Why is oil going down? That's the question that remains to be answered. And even still, Tony, we're still at about $120. So it's a lot more than it was, more than double what it was a year ago. It's no great shakes but it's down a lot from where we thought it was going.

HARRIS: Terrific. All right, so we'll talk about that, but, you know, of pressing concern for everyone watching right now is this -- what do you call that? It's not a goatee. Is it a circle beard? Is it a Van -- what is that actually?

VELSHI: Well, it's a Van Dyke.

HARRIS: Is it Van Dyke?

VELSHI: The mustache part is separate from the down part. I'm doing some research into figuring out whether it is a goatee.

HARRIS: Yes. So what happened? Did you go to Alaska up there in ANWR and rough it a bit, and decide to bring a little bit of that back home with you?

VELSHI: Yes. Like I say, it's the only joy that some of us get. You know what I'm saying?

HARRIS: Yes.

VELSHI: But you know as I...

HARRIS: And did you have to run that by the 6th floor?

VELSHI: As I try and fix it on a daily basis, it'll just -- I'll get it crooked one day and then it will all have to come off.

HARRIS: What do you think, Heidi?

COLLINS: I think it looks very well, plus, I think you look hot, Ali.

HARRIS: Hot?

VELSHI: Thank you...

COLLINS: I got to say. You look darn hot. HARRIS: Hey, yes.

VELSHI: We haven't yet heard from the powers that be. But you know what happens...

HARRIS: But you got to run that thing by the 6th floor, you know that, Ali.

VELSHI: Let me tell you -- well, let me tell you. I'm prepared. No matter what they say, I've got a little shaving cream and aftershave ready to go. So if the answer is no, it comes off.

COLLINS: Wimp. Wimp.

HARRIS: Hey, let me know if it holds up. I might take a little vacation here.

VELSHI: Very nice.

HARRIS: All right. Good to see you, doctor. Boy, it's been a while.

COLLINS: Bye, Ali.

A story to tell you about today. The number of egg donors is up. Is the down economy perhaps behind it? Dr. Sanjay Gupta stops in.

(COMMERCIAL BREAK)

COLLINS: An odd twist on the economic slump. Maybe. Many fertility clinics are reporting an increase in the number of women wanting to donate eggs.

CNN chief medical correspondent Dr. Sanjay Gupta is here now with us with a bit of perspective.

All right, so, Sanjay, donating eggs can get women sometimes up to something like $10,000 when they donate.

Is this really because of the economy and how would we know?

DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: I think probably a small factor is the economy. We've talked to several clinics about this. They say there's more marketing about this, there's more awareness about egg donation than ever before.

Also the time of year. A lot of women are college students. They -- their tuition bills starting to come up, their book bills. This is a way to generate some cash.

But I think what you're alluding to, as well, is this is not an easy process. It is not as simple as showing up at a clinic and saying I want to donate my eggs. Oftentimes, there's 40 days of screening, including genetic tests, blood tests, hormonal tests. You got to take medications to stimulate egg production. You have to have minor surgery to actually get the eggs. It's a process. About 90 percent of women who say that they want to do this will be eliminated from doing it...

COLLINS: Yes.

GUPTA: ... for one reason or another.

COLLINS: Yes. That genetic testing is huge.

I'd like to think that women are doing this because they really want to help people but, you know, that's another topic all together.

What are the risks, though, when we're talking about -- because you already mentioned it's not easy to do.

GUPTA: It's not easy. It's the process itself, I think, is a little overbearing for a lot of women but there are short-term risks and longer-term risks. It -- you could donate probably up to six times in your lifetime. And if you do that you're probably not going risk the chance of becoming infertile, which is the biggest concern, I think.

But there is a thing known as ovarian over stimulation syndrome, where your ovaries just make too many eggs, and you start to develop -- fluid sometimes can accumulate in the abdomen. You can also get bloating, weight gain, abdominal pain, swelling.

And again, the ideal donor is someone between the ages of 21 and 33. So these are young women who may suffer some of these pretty significant side effects.

COLLINS: Anyone who definitely should not go in and try to donate their eggs?

GUPTA: Well, you know, again, about 90 percent are going to be eliminated for various reasons. But if, you know -- from an infectious disease standpoint there are some people who probably aren't going to be good donors. And they're pretty strict about this.

If you've had, for example, body piercings or tattoos in the last year, you're considered higher risk. Multiple sexual partners with the same reason. Body mass index over 30 will exclude you, as well, as well as being a smoker so...

COLLINS: Yes.

GUPTA: ... there's some women who probably just shouldn't do this.

COLLINS: Yes. It's pretty strict, that's for sure.

All right, CNN's chief medical correspondent Dr. Sanjay Gupta, thank you.

GUPTA: Thanks, Heidi. HARRIS: Iraq banking big bucks from high oil prices, while you shell out hard cash to rebuild that country. New numbers this morning.

(COMMERCIAL BREAK)

ANNOUNCER: Live in the CNN NEWSROOM, Tony Harris and Heidi Collins.

COLLINS: Good morning once again, everybody. I'm Heidi Collins.

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

Want to get you to the New York Stock Exchange right now. The big bell, we are just moments away, and as we get the business day started, the bulls in full flight yesterday.

Let's pause and reflect for just a moment. The bulls kick in, yes, and take in, yes, up 331 points yesterday. The rally extended to the NASDAQ and the S&P.

The question today, as the bell tolls, does the rally continue this morning? That may depend on the second quarter earnings from Freddie Mac.

Oh! By the way, numbers are in. And what are we looking at here? Sort of staggering quarterly losses, four times what analysts expected. What kind of an impact is that going to have on U.S. stocks today? We'll check the numbers with Susan Lisovicz throughout the morning here in the NEWSROOM.

COLLINS: Freddie Mac reports staggering losses this morning, and you may pay the price. CNN's senior correspondent Allan Chernoff takes a look at what the mortgage giant's problems mean to you.

And that's what everybody wants to know, Allan. How does this affect me?

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Well, Heidi, our tax dollars may go to work. It is certainly a possibility now. Freddie Mac, as you said, reporting a big loss during the second quarter. And I'm saying our tax dollars may go to work, because, remember, the Federal Reserve has said that it would lend money to Freddie Mac.

Also, Congress recently approved the bill that would authorize the Treasury to buy securities from Freddie Mac. Now, have a look at the second quarter loss, $821 million. That is far worse than analysts had been anticipating. And Have a look at some of the other damage here. Provisions for future losses, $2.5 billion. The drop in the value of mortgage securities that Freddie Mac is holding, they've written it down by $1 billion over it there.

Keep in mind, Freddie Mac was created by Congress, as was Fannie Mae. What the company does, it is a government-sponsored enterprise. What it does is it guarantees, and it also buys mortgages from banks, gives them the money so banks can make new loans. And Freddie Mac, in spite of the financial turmoil here, is continuing to do that, so it is giving a help -- it is giving a big hand to the mortgage industry, to the housing industry, even in these very turbulent times.

Now, the company is trying to conserve cash. It says that it will cut its dividend, its quarterly dividends down to 5 cents a share. That should save about $500 million a year. The company also says it wants to raise capital. It wants to sell some securities. And there's always that possibility, still, that it may need to turn to either the Federal Reserve or the Treasury to get some more money in.

However, the company's capital is above what regulators are requiring. So it is continuing to operate, even in these really tough times.

COLLINS: All right. Well, we will be watching all of it. Thanks so much. CNN's Allan Chernoff from New York this morning.

HARRIS: Well, energy and the economy dominating the debate on the campaign trail. John McCain is promoting his plans to increase offshore drilling and build more nuclear power plants. He toured a nuclear plant outside of Detroit yesterday. Today, McCain visits Marshall University in Huntington, West Virginia. From there he heads to campaign stops in Ohio.

Barack Obama town hall meeting set to start any time now in Elkhart, Indiana. And we will of course take you there live. Obama will be focusing on energy and the economy, and he will appear with Indiana Senator Evan Bayh. And that is certain to generate more buzz about the vice presidential spot.

COLLINS: The politics of energy. Earlier this hour, we looked at Barack Obama's latest ad slamming John McCain on energy. Now, we turn the tables. McCain has an ad attacking Obama over the very same issue. So, is it accurate? Here's CNN's Josh Levs. Has been charged with boiling it all down for us.

JOSH LEVS, CNN CORRESPONDENT: Boiling it all down, I know.

COLLINS: (INAUDIBLE).

LEVS: Busy morning in the NEWSROOM.

COLLINS: Yes, absolutely.

LEVS: Talking about energy, right?

COLLINS: We're on it.

LEVS: We are all over it. That's right. So, just minutes ago, we looked at the other side. Now, it is time to take a look at what McCain has been saying about Obama and how his charges compared to the reality.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: He's the biggest celebrity in the world.

LEVS (voice-over): While everyone was focusing on this part of the McCain campaign's ad, this got less attention.

UNIDENTIFIED FEMALE: Barack Obama says no to offshore drilling? And says he'll raise taxes on electricity?

LEVS: Would Obama raise taxes on electricity? The McCain camp points to a February interview with the San Antonio Express News discussing funding education. Obama was asked if he'd consider taxing emerging energy forms such as wind energy.

His answer -- "That's clean energy, and we want to drive down the cost of that. What we ought to do is tax dirty energy like coal and to a lesser extent natural gas. But I think that the real way to fund education is for local communities to step up and say this is important to us."

Coal and natural gas combine generate most U.S. electricity. Obama has not proposed specific new taxes on them. FactCheck.org calls his one comment a feeble peg on which to hang the McCain campaigns claims.

(END VIDEOTAPE)

LEVS: And we encourage you to check out factcheck.org, of course. But most importantly, CNN.com. Any time you hear one of these charges, go compare it to the reality. Obviously campaign ads, Heidi, as we all know, are never a source of the unbiased truth.

COLLINS: Yes. Well, you know, the big story I really think is more about Paris Hilton. I mean, she came out, we heard what she had to say, and it's very intriguing. Borderline brilliant.

LEVS: You know, combining the best of both plans. Why not? Yes, we actually encourage you to check that out. It's a little bit scary when Paris Hilton is the figure in America calling for everyone to come together and fix our energy prices.

COLLINS: Yes. And paint the White House pink.

LEVS: Well, yes. I skip over to that part. (INAUDIBLE).

COLLINS: Josh, we'll talk with you again later. Thank you.

HARRIS: A higher oil prices and Iraq is raking in more money than it can spend. U.S. auditors say Iraq's government could end the year with a budget surplus of as much as -- are you ready? $80 billion. But American taxpayers continue to pay for Iraqi reconstruction projects. That has Senate Armed Services Chairman Carl Levin steaming. The Democrat calls it inexcusable and he wants Iraq to reimburse the United States.

A matter of life or death. Iraqi families living in squalor in a refugee camps too afraid to go home.

Our Arwa Damon reports from north of Baghdad.

(BEGIN VIDEOTAPE)

ARWA DAMON, CNN INTERNATIONAL CORRESPONDENT (on camera): We're at a camp for displaced people that's just outside of the capital, Baghdad. The families have been living here anywhere between five to two years now. All of them said that they fled violence or sectarian violence.

Nawal's (ph) story is that her 18-year-old son left home one day. They lived in Diyala. And he was just standing outside when a vehicle came up with a bunch of people that were dressed in Iraqi Security Forces uniforms, they grabbed him and she has not heard from him since. They don't know if he's dead or alive. But that was enough for them to decide to pick up and move here. And this is the photograph of her son.

This is Hayas (ph), one of his younger sisters. She's telling us about how her brother used to play with her and tickle her when she was lying on her back. And she says of course that she misses him.

These families here actually considered lucky in the sense that they do have a running water source. A lot of the other similar camps that you go to in and around the capital actually don't even have this. Nawal (ph) really isn't sure just how clean the water is. And she says that the kids are always getting sick but there isn't any money for medicine.

In fact, to make ends meet, the men just try to pick up odd jobs. So when they actually do find work, they make between $8 to $10 a day. And, for example, in one man's case, that's to feed four people. And (SPEAKING FOREIGN LANGUAGE). He has to feed nine people. And they say that quite simply the money very often just isn't enough.

Buying this type of food is actually a luxury here. Ali was able to make about $10 this morning collecting garbage in a Baghdad neighborhood. And with that, he's able to buy enough food to feed his family for a day. He's got three daughters and his wife, as well as a couple of elderly members in the family.

The U.N.'s estimate just for Iraqis that are internally displaced is over 2 million. And from what we're seeing, the majority of them aren't going home. All the families here say that they still live with that sense of fear and apprehension that is so strong. They prefer to live here like this than risk their lives.

(END VIDEOTAPE)

HARRIS: And Arwa Damon joining us now live from Baghdad.

Arwa, good to see you. How is the government addressing this issue, this kind of -- well, these conditions?

DAMON: Well, Tony, look, the government, the Ministry of Migration and Displaced People says that it does have a plan in place and that it is encouraging people to return to their homes offering them financial incentives. The problem is that people are still too afraid to go home. And in many cases, even if fear isn't the inhibiting factor, you've also got the reality that sometimes their homes have been completely destroyed in the fighting. Other times, there are other families that are actually living in their original homes.

And the government actually doesn't really have a plan in place to get aid out to those that are living in the camps. And this is just one of the many examples of the issues in Iraq. So many of the problems that this government faces are so critical that you don't have the luxury of time. They need to be addressed immediately. And yet this government is consistently being criticized for just being too slow to move.

It is unable even to pass the simplest legislation such as the electoral law that is being debated for months now. Never mind address the ever critical and growing issue of internally displaced Iraqis.

HARRIS: How are the people actually holding up right now? I'm talking about attitudes. How are they coping?

DAMON: You know, Tony, Iraqis are so admirably resilient, as desperate as their lives were in the camps. And there is really the sense of true -- they're very lethargic actually. They're just kind of trying to struggle through to get by day by day.

But at the same time when they saw us they were incredibly friendly and open. Really all of their anger is geared towards the government. And for us being there, it was pretty overwhelming to a certain degree. We were being dragged in all different directions. Everybody had the story that they wanted to share. The kids telling us that they want to go back to school. They want to finish their educations.

There was one 12-year-old boy named Ali (ph) who told us a very tragic story of how his father was killed in a roadside bomb. That's when his family decided to flee his neighborhood and move to that camp. And he's forced to go out and try to help make ends meet, make money, and his only play thing are these pet pigeons that he has. That he's trained to fly away and then come back into their camp.

HARRIS: Oh, well, OK, Arwa Damon for us from Baghdad. Arwa, thank you.

COLLINS: It happened in a flash. You can't blame this muddy flood on Tropical Storm Edouard either

(COMMERCIAL BREAK)

COLLINS: A sudden deluge soaked parts of western Massachusetts causing flash flooding on several streets. Up to five inches of rain fell in a really short amount of time. More than 1,000 people in Holyoke and East Hampton lost power. The rain was so heavy it even caused some sewage lines to back up. Yuck! Not so good. But this was not because of that guy that we knew as Edouard. JACQUI JERAS, CNN METEOROLOGIST: Correct.

COLLINS: Was it, Jacqui?

(WEATHER REPORT)

HARRIS: We told you about this story yesterday. A man dials 911 when his sandwich is subpar.

(BEGIN VIDEO CLIP)

CALLER: I've got a situation over here with a Subway sandwich shop.

(END VIDEO CLIP)

HARRIS: He gets his order to go straight to jail.

(COMMERCIAL BREAK)

COLLINS: What the candidates are saying in their own words on the campaign trail. It is part of our continuing effort to help you make an informed choice in the election. Here now John McCain talking about energy independence.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), PRESUMPTIVE PRESIDENTIAL NOMINEE: Solving our national energy crisis requires, as I've mentioned, an all of the above approach, and that will require aggressive development of alternative energies like wind, solar, and biofuels. It also requires expanding traditional sources of energy such as offshore drilling.

And I noticed that there's confusing now information from Senator Obama as to whether he actually supports offshore drilling or not. The fact is we have to drill here, and we have to drill now, and we have to drill immediately. And it has to be done as quickly as possible. And I believe that it's vital that we move forward with that, regardless of what we do on other energy issues.

Senator Obama has said that expanding our nuclear power plants, quote, "doesn't make sense for America," unquote. He also says no to nuclear storage and no to reprocessing. I could not disagree more. My experience with nuclear power goes back many years to being stationed on board the "USS Enterprise," the first nuclear powered aircraft carrier.

I knew it was safe then and I know it is safe now. And I propose a plan to build 45 new nuclear plants before the year 2030, and that would provide 700,000 jobs for American workers. That means new jobs. And if we really want to enable technologies of tomorrow like plug-in electric cars, we need electricity to plug into.

Now, we all know that nuclear power isn't enough and drilling isn't enough, and we need to do all this and more, and it's time that the Congress came back to Washington and went about the people's business. They just went on a five-week vacation without even in the slightest way addressing this nation's energy needs.

People are paying $4 a gallon for gas, are sick and tired of a Congress that won't act in their behalf. So, I'm urging Senator Obama to urge the Democratic leaders of Congress to call Congress back into session, come back from their vacation and act upon our energy challenges.

When I'm president of the United States, I'll call them back into session, and I'll keep calling them back until they act in behalf of the interests of the American people in this compelling national security issue. And it's time we got serious about energy independence. Our nation is sending $700 billion a year to countries that don't like us very much. And some of that money ends up in the hands of terrorist organizations.

We're going to achieve energy independence and we're going to get it done and we're going to use every available resource at our disposal. That means the Lexington Project which I have been talking about now for a long, long period of time. I hope that the Congress of the United States will come back into session, address offshore drilling which is absolutely vital, address nuclear power, and all of the other approaches that are vitally necessary to achieve energy independence.

(END VIDEO CLIP)

COLLINS: Senator John McCain in his own words.

HARRIS: Barack Obama offering his ideas for solving the energy crisis. Here is some of what he is saying on the campaign trail.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESUMPTIVE PRESIDENTIAL NOMINEE: First, commit ourselves to getting 1 million plug-in hybrid cars on the road getting 150 miles per gallon. We're going to do that within six years. And we're going to make sure those cars aren't built in Japan, aren't built in China or Korea but are built right here in the United States of America.

(APPLAUSE)

OBAMA: We'll do that by investing in research and development, providing billions of dollars in loans and tax credits for the auto companies so they can retool their factories to build these cars and by giving consumers a $7,000 tax credit to buy them. That's how we'll make sure American workers and American companies thrive in a 21st century economy. That's number one.

Number two, we'll double the amount of energy that comes from renewable sources by the end of my first term. That means investing in clean technology research and development that's occurring in facilities all across the country. It means investing in tax incentives to encourage the production of renewables like wind power and solar power and the next generation of biofuels. That means finding safer ways to use nuclear power and storing that waste safely and to use our coal more effectively so that it's not polluting our atmosphere but it's America's most abundant energy source.

It means working to modernize our national electricity grid so it can accommodate these new power sources without being overrun by blackouts. Now, the payoff for these investments can be enormous. Ohio, over the last eight years, has lost more than 236,000 jobs. That's a lot of jobs. But I also know that Ohio has the second highest potential of all the 50 states in creating new wind energy manufacturing jobs. And investing in wind power --

(APPLAUSE)

Investing in wind power could increase workers' wages in Ohio by more than 3.5 billion through the year 2020. With the right investments, this state could save $24 billion a year that you spend in imported energy, and instead it could power 2 million homes using wind power.

Now, that's something that we should do because we can put people to work right here in Ohio. In those old shuttered factories that used to make steel, now they can make wind turbines, or they can make solar panels, or they can make cellulosic ethanol and we can put people back to work all across Ohio.

(APPLAUSE)

Finally, I want to call on businesses, government, and the American people to meet the goal of reducing our demand for electricity 15 percent by the end of the next decade. This is by far the fastest, easiest, and cheapest way to reduce our energy consumption. That's going to save us 130 billion on our energy bills.

(END VIDEO CLIP)

HARRIS: And more from the candidates next hour including this town hall meeting being held by Illinois Senator Barack Obama in Elkhart, Indiana. On the stage with him at some point this morning and perhaps introducing him will be Indiana Senator Evan Bayh, a Hillary Clinton supporter during the primaries. Evan Bayh, a name you hear often as a possible VP choice for Barack Obama. That town hall meeting next hour right here in the NEWSROOM.

COLLINS: The 40 million dollar card caper. Do they have your number? It may be the biggest credit card theft ever.

(COMMERCIAL BREAK)

COLLINS: Quickly, we want to get this breaking news out to you, just as immediately as we get it in to the NEWSROOM here. We have learned that Guantanamo Bay jury has actually reached a verdict in the very first U.S. war crimes trial since World War II.

We are talking about Osama bin Laden's driver, Salim Hamdan. We're going to have more information on exactly what that verdict is of course as soon as it becomes available to us.

Also, we want to let you know that our senior Pentagon correspondent Jamie McIntyre is there at Guantanamo Bay Naval Base. He will be reporting to us very shortly on the details of this case. You see the picture there of Salim Hamdan. Once again, just a reminder, we are learning the verdict is in in that trial. We will get to it very shortly right off the top here in the CNN NEWSROOM.

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