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Will Hillary Clinton's Convention Speech Bring Unity?; Are the Obamas That Different from Other American Families?; After New Mexico Jail Break, 5 Inmates are Still on the Run

Aired August 26, 2008 - 10:00   ET

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


SOLEDAD O'BRIEN, CNN ANCHOR: Hey, good morning. Welcome, everybody. You're taking a look at the CNN Grill just a stone's throw at the convention center. The food's pretty good, too, I'm told.
Welcome back. I'm Soledad O'Brien, we continue our coverage of the 2008 Democratic Convention in Denver, Colorado. Sunrise over Mile High City, lots of delegates walking on air, frankly, after Ted Kennedy's remarkable appearance and his speech last night. Warm moments as well from the Obama family, Michelle Obama really moving the crowd. Tonight except more substance. Dana Bash calls it more red meat and higher stakes, too.

Hillary Clinton speaking, right, trying to warn her supporters away from the temptation to swing to John McCain, expected to be a hard hitting speech from her. Let's get a look at some of the highlights from last night and what's ahead from Dana Bash.

Hey, Dana.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Hey there, Soledad.

Well, you're right. Red meat is definitely not what saw last night, but that wasn't the point, according to organizers here in Denver. The point was to have an opener that was more personal. And that is definitely what we saw from Michelle Obama trying to explain who Barack Obama is, the person, the father, the husband, and also the kind of roots that he has, trying to reach out to those voters he needs, those working class voters. And, of course, the moment. The moment that nobody will ever forget of Ted Kennedy coming out, that emotional moment that really, really stirred the crowd and anybody watching at home.

But turning to today and what we are going to see today, I mean, if you want to see drama, a lot of people say that these conventions they're not really dramatic anymore. That is definitely not going to be the case tonight because you are going to see a woman who about a year ago, everybody pretty much would be a shoo-in, she would be the person here and it would be her convention. That is absolutely not her case, and her goal tonight is going to be unity, unity, unity. It is going to be to try to make the case to her supporters in the room, about 40 percent of the delegates in that room, will be her supporters.

She's going to will try to make the case to them that it is time to move of on because she is moving on. And the way we're told that she's going to try to do that Soledad, isn't going to be to say, you know, Barack Obama would be a good commander in chief, Barack Obama's health care plan is wonderful, because she really couldn't do that with a straight face, given the attacks she made day in and day out for over a year on Obama.

So what we're told she's going to do is be much more pointed against John McCain and try to convince many of her supporters who tell pollsters that they're thinking about voting for John McCain that is the wrong thing to do. She is going to make the case, if they supported her, the best thing that they can do is vote for Barack Obama, not John McCain.

O'BRIEN: Dana Bash with the update for us. Dana, thanks.

Now, Dana, we should mention, enjoys a fair amount of access. But as a superdelegate, CNN political contributor Donna Brazile kind of has the run of the place. Here is a little look backstage.

(BEGIN VIDEOTAPE)

DONNA BRAZILE, DEMOCRATIC STRATEGIST: The Clinton-Obama campaign in an effort to unify the party assigned me to be a whip today -

UNIDENTIFIED MALE: I bet they were all grateful to be whipped by Donna.

UNIDENTIFIED MALE: I'm sure they're all very grateful to be whipped by Donna.

BRAZILE: I know. Look at that. Florida's over there. I just went to talk to Florida, talked to Michigan, everybody's happy. And I want to do where people go before they get on the podium. Just going to backstage.

UNIDENTIFIED MALE: Right now, this is the situation.

BRAZILE: The best members of Congress are right here in this room. Well governor, the fundamentals of a good speech is start low, go slow, rise high, strike fire, and then sit your butt down. Mr. Chairman, I just want to say that you've done a terrific and bringing us to this moment.

HOWARD DEAN, DNC CHAIRMAN: All I want to say is that you know, for both us, thing we damn well better win.

(END VIDEOTAPE)

O'BRIEN: He's not kidding. Up next, we're going to talk a little more on the high stakes tonight with Paul Begala, Dana Milbank and Carl Bernstein, right after the short break. Stay with us.

(COMMERCIAL BREAK)

O'BRIEN: It's day two in Denver after a night that was short on meat but long on heart. High stakes tonight though. Hillary Clinton with perhaps the speech of her political life, not in the spirit of Ted Kennedy back in 1980, the speech she was expecting to make, digging deeper now with CNN's political contributor Paul Begala, CNN contributor Dana Milbank of the "Washington Post, Carl Bernstein, CNN political analyst. The guy also literally wrote the book on Hillary Clinton, it's called "A woman in Charge."

Good morning to all of you.

Let's begin with you, Paul. What did you think of last night? Some people said, you know, it was too light on meat, too heavy on emotion. Do you agree with that?

PAUL BEGALA, CNN POLITICAL CONTRIBUTOR: No. In short, a challenger's convention, a change agent, has to do two things. Most importantly, they have to indict the status quo, to build a case for change but also they have to provide reassurance. Last night was for re-assurance. Michelle Obama was remarkable. The best character witness you could ever have. She was just terrific. And those kids, my god, you just wanted to hug them. Senator Kennedy, so emotional, so heroic.

So that wasn't the time or the place for bashing the Republicans, but it means that the stakes are much, much higher for Hillary, for Governor Mark Warner, tonight's keynote speaker and frankly for everybody else. My rule is, unless you're married to the candidate or fighting off cancer heroically, you're job at this convention is to indict the status quo and push McCain, to build the case for change, Obama-Biden.

O'BRIEN: So then, Dana, as we go into today, you expect to see that from the list that Paul just talked about, you expect that they will seriously -- Hillary Clinton included, sit down and say, how do we draw blood here tonight?

DANA MILBANK, CNN POLITICAL CONTRIBUTOR: Well, I think so. They're going to turn off that gauzy piano music that was playing during the documentaries. I think they should spike all the water fountains with Red Bull here. You've got to fire up this crowd. It's OK to, say, have squander the first night with the red meat as long as you come back with it now. And I expect that Hillary Clinton of all people will come to Obama's aid when it comes to this. It's not clear that the official keynoter Mark Warner will do that, but Hillary Clinton may be doing her old rival a big favor tonight.

O'BRIEN: What do you think, Carl, as we mentioned, the guy who wrote a book on her, do you think one she is up to the task and, two, that she'll do it?

CARL BERNSTEIN, JOURNALIST AND AUTHOR: Sure she's up to the task. I think we need to cover this the convention and speculate less about it and watch it happen.

O'BRIEN: What do we talk about?

BERNSTEIN: No, I think it's a problem. I think we got to start watching this convention in a little bit more realtime. It's Barack Obama's convention and he got last night what he wanted. He set things up. There's a great symmetry between Ted Kennedy and between Michelle Obama, defining the candidate. Great emotion, defining what Democrats are.

O'BRIEN: But you and I had talked about, if you want to win come November, you have to talk a lot about the other guy, which is a problem when you really focus on Barack Obama.

BERNSTEIN: Whoa, whoa, whoa. Let them have the convention. We got three more nights. Hillary Clinton, from everything I'm told, is going to get up there tonight and give them hell and at the same time she's going to do what she has to do to sway her supporters. She's got a tricky job up there tonight.

But, look, she is coming out very strong for this candidacy and Barack Obama is getting what he wants from the Clintons. He's moving them off the stage rather uncomfortably but off center stage into a supporting role and we're watching this unfold. I think we've got to go with a little more and do a little bit less of telling these candidates what to do. I'll leave that to Begala and the consultants.

O'BRIEN: I don't tell anybody what to do, but I tell I sure like watching it and weighing in.

BERNSTEIN: Why are you so unhappy with what happened last night except perhaps as analyst?

O'BRIEN: Didn't say I was unhappy. Just asking the questions because I mean, some people did say they thought that --

BERNSTEIN: No, no. I think there's an argument to be made that is tactical, but I think you also have got to look at Barack Obama has called almost everything right through his campaign. He beat the favorite. He wasn't even considered in the race early on. He is very disciplined. Yes, he makes mistakes like all the rest of us, but he has strategy and we're watching it.

O'BRIEN: Dana Milbank, Ted Kennedy I thought was just remarkable last night. I was very surprised because the last hour some of the word we were getting was frankly he was really not going to get there and not be able to pull it off. I thought he looked very strong and his words were terrific. What did you think?

MILBANK: Oh, I certainly did. I mean, he stole the show in essence from what was supposed to be Michelle Obama's night. But nobody in this hall would have minded at all. They sort of kept up the suspense throughout the day, is he here? Will he be able to come out and speak? And he did, and it was very strong. It was certainly a very powerful moment. Questions about whether the voters are going to be focus on Ted Kennedy or the nominee come Thursday though.

O'BRIEN: We'll see about that. I'll give the last question to Paul Begala. When you talk about the time now to go for the red meat, does that mean we lose the Ted Kennedy-Michelle Obama-esque moments of warm and fuzzy for the rest of this convention? We're going to see fist at that cuffs? BEGALA: I certainly hope so. Again, I think Carl makes a good point. As I said, a brick is not a wall. One night is not the entire convention. So I think what Michelle especially and Senator Kennedy even more did was remarkable, historic, important and very useful to Barack Obama. But now the burden shifts everybody else who mounts that podium has a job to do, and that job is to tear down the status quo, to indict the status quo, on the issues, not personal attack but on the issues and build the case for change.

And I think Carl's right. I think Hillary will do it. You know, the way to unite the Clinton and Obama factions is not to simply talk about Clinton and Obama. It's for each faction to start talking about Bush and McCain. An internally divide organization is always united by the identification of an external threat and I think that's what the Democrats need to do tonight.

And I suspect that's what Hillary will do. I'm hearing that's not what Governor Warner is willing to do. And it could be that he's miscast him. He's running in a very red state of Virginia. He's a very bipartisan guy when he was governor. And maybe to put him in a spot where the expectation is that he becomes very partisan may be unfair to Mark Warner.

O'BRIEN: It will be interesting to watch. More drama to watch. Paul Begala and Carl Bernstein and Dana Milbank talking to me this morning. Thank you, gentlemen. I certainly appreciate it. We got more convention coverage coming up in just about 15 minutes and of course, throughout the day.

Reporting from New York, I'm Soledad O'Brien.

Time to send it back to Atlanta and CNN NEWSROOM where they're tracking a major storm. That's coming up right after the short break.

(COMMERCIAL BREAK)

TONY HARRIS, CNN ANCHOR: Well, good morning, everyone. I'm Tony Harris. Heidi Collins is on assignment.

You will stay informed all day in the CNN NEWSROOM. Here's what's on the rundown this hour.

Peak hurricane season approaches and suddenly so does Gustav. Forecasters say the storm could swiftly swell into a major hurricane in the Gulf. Gustav may bring devastating floods and mudslides to the Caribbean islands today Tuesday, August 26th. And you are in the CNN NEWSROOM.

All right. Let's bring the man in on all of this, all things Gustav, Rob Marciano in the severe weather center. Good to see you, doc. We're at Category 1 still, but fast approaching Category 2 status.

ROB MARCIANO, CNN, METEOROLOGIST: Yes -- 90 miles an hour, you can see the satellite. It looks pretty impressive, and it's real close to Haiti. So that's the fist stop. Let's talk about. We have hurricane warnings that are up for Haiti and with winds of 90 miles an hour, or they're going to have a decent storm surge with this. It will probably interact with the coastline here in the next couple of hours and make an official scrape of landfall later on this afternoon. We have water temperatures in the Caribbean that are 85, 86 and change, Fahrenheit. That's real toasty so the National Hurricane Center has put this forecast out which will be updated probably in the next 30 minutes.

So I don't think they're going to change it too much. Computer models are getting in fairly good agreement as to where this thing is going to head. And it's not going to -- if it touches Cuba, then it will maybe get knocked down in intensity a little bit more, but right now it looks like it wants to shoot the gap between Jamaica and Cuba and then turn into a Cat 3 sometime over the weekend, potentially being in the Gulf of Mexico as a Category 3 or higher come Sunday morning. So certainly a grave concern there. And this is we're trying to get rid of Fay, which continues to give the southeast headaches. Just issued a fresh tornado watch out for much of the southeast until 7:00 tonight.

And we have seen a number of tornado warnings pop. The stream of moisture coming in off the Gulf of Mexico, all rotating around what's left over of what was Tropical Storm Fay. Lamar County, this is along highway 75 just south of Atlanta, heading towards the north at about 30 miles an hour. As this radar-indicated tornado warning. And we're watching that carefully for potentially doing some damage. But right now nothing on the ground. North of Atlanta and through the parts of northern Georgia, eastern Tennessee and through the Carolinas, looking at some substantial rainfall here.

So we've got good news on the drought front but not so good news on the just nasty weather front today. And some of this water willing coming in excess of three, four, five inches. And that will cause a little bit of flooding. Speaking of flooding, Florida had its share, although southern Florida wasn't so bad. Let's take a look at Miami, which is certainly always on the lookout for tropical activity.

WPLG, our affiliate out there. Some cues popping up in the late morning hours. And you'll probably see a couple of showers pop up in the afternoon as is typical this time of year. Dry and hot across parts of the northwest. Not so hot but just kind of windy and dry. So fire danger remains high there. We had that fire break out in Boise. So we'll look for winds to continue to aggravate that situation. Hopefully they'll keep things under wraps. We will continue to give you the update on Gustav which will probably be coming out before this hour is done.

HARRIS: Terrific, OK, Rob. Appreciate it. Thank you.

Your wallet, your worries. This hour, new numbers on the health of the economy and as you may have come to expect, some of the news is pretty grim. CNN personal finance editor Gerri Willis is here to break it down for us.

Gerri, great to see you.

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Hey, there, Tony.

HARRIS: Boy, a number of items to get to here. What do you want to start with, consumer confidence maybe?

WILLIS: Let's start there. Yes, we've been getting these numbers into CNN all morning now. Americans' confidence in the economy has gotten a boost in August. Consumer confidence index rose to 56.9, check it out, up from 51.9 in July. And this is the second month in a row, obviously, improved. There had been a slide. The boost here, lower gas prices. As you know, Tony, gas prices have declined in 39 of the last 40 days. And we also have numbers out from S&P, Case-Shiller Home prices.

Let's take a look at those, U.S. home prices fell a record 15.4 percent in the second quarter compared with last year. Now, Case- Shiller maintains 10 cities in 20 city indices those are down respectively 17 percent and 15.9 percent for the quarter. But hey, there may be a silver lining here. I spoke with David Blitzer, who's chairman of the index committee. He says there is a hint of stability in these numbers. The rate of home prices decline slowed in June from the month before. But let's take a look at the worst performing cities here, Vegas down 28.6 percent, Miami down 28.3 percent, Phoenix down 27.9 percent.

Obviously, we're seeing the sun belt cities get hit really hard here. And a third number we had out here today, Tony, new home sales posted an unexpected gain in July. Sales rose 2.4 percent to 515,000 units. But hey, don't get too excited here. Inventories are still pretty high.

HARRIS: That's for sure.

WILLIS: So we're still waiting to see for a true recovery in the housing market, but a little glimmer of hope there in some of the numbers.

HARRIS: Yes, we'll take that. All right. Gerri, great to see you.

WILLIS: My pleasure.

HARRIS: We want to get everyone to the New York Stock Exchange right now for a moment to take a look at the big board. Inside the first hour of the trading day, as you can see, the Dow was down 20, and I think that's off a session low. We were just down 16, 28 points just a moment ago. We are going to be following these numbers, of course, for you throughout the morning.

You know, many Americans are just one major illness away from disaster. The Census Bureau just released a new snapshot of how many people still lack health insurance. Here he is, CNN chief medical correspondent Dr. Sanjay Gupta joins us with that.

Sanjay, great to see you. What have we just learned?

DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: Well, the numbers are still nowhere near good enough, but they're better than they were. So at least we're headed in the right direction. When it comes to children, for example, there used to be 8.7 million uninsured, now 8.1. Take a look at the overall number, 2006, 47 million, in 2007, 45.7 million. Probably what's happening here, Tony, is that the baby boomers, more of them are going under government-run health care, Medicare, for example. So that's probably the changing demographic to some extent. So many Americans still get their health care insurance through their jobs. As you know, as we do here.

HARRIS: That's right.

GUPTA: That's sort of a unique, almost one of those unique qualities about the United States, the way it sort of evolved into the system. The problem is, if you're uninsured, you spend about $30 billion a year in out of pocket costs across the country. That's a lot of money and a lot of jobs are no longer offering insurance they used to. Take a look at what happens if they don't.

(BEGIN VIDEOTAPE)

GUPTA (voice-over): As an optometrist in South Carolina, Jim Matthews was making about $100,000 a year. But he got sick, a serious heart condition forced him to sell his practice.

JIM MATTHEWS, OPTOMETRIST: It was a chronic condition. I had open heart surgery which cured it.

GUPTA: Then doctors found an aneurysm in a major artery. He may need major surgery again.

MATTHEWS: And would you like to try some contacts?

GUPTA: At age 56, Matthews would like to slow down. But no job means no health insurance so that's just not an option.

MATTHEWS: If you have health problems, you're not poor enough for Medicaid, you're not old enough for Medicare and you don't have health insurance through your work, you're really out of luck.

GUPTA: According to the Kaiser Family Foundation, today more than 158 million Americans rely on their jobs for health coverage. But in the past eight years, thousands of companies have stopped offering insurance. Those who still do are asking workers to pay, on average, a whopping 112 percent more. Some health analysts say getting it from your employer is not the answer.

REGINA HERZLINGER, HARVARD UNIVERSITY: We wouldn't want them to buy our cars, our houses, our clothes, but we trust them to buy something that's so important to us which is our health insurance.

GUPTA: But it can be a big gamble, especially for anyone with a pre-existing condition. When Jim Matthews went looking for individual health coverage, it wasn't just expensive, it was nonexistent.

MATTHEWS: They basically laughed at me. They said, you know, you don't have a hope with open heart surgery of having any broker write you a policy in the state of South Carolina. You are uninsurable.

GUPTA: Matthews' leases a small office at a Wal-Mart, making him eligible for a small business policy. Still, he paid $19,000 last year for medical insurance.

MATTHEWS: If my health condition changes, I'm just one step away from not being able to afford it. Suppose I can't work anymore?

GUPTA: So Matthews has to keep working.

MATTHEWS: I have no hope of retiring until I'm 65. I mean, I'm just clawing for the ropes to reach Medicare.

(END VIDEOTAPE)

GUPTA: You know, he went on to tell us that he and his wife for the time being, get this, just keep their fingers crossed, just thankful they have a job for the time being that does offer them some health insurance. But you know, the reason that we tell the story, Tony, is because it's emblematic of millions of others who are in that same boat. This is what they think about most of the time.

HARRIS: Absolutely. All right. The new numbers, they tell us about the uninsured and how many of them are out there. But do the numbers tell us the complete story? Is everyone included in the count, for example?

GUPTA: You know, it's interesting. And if you distill down the study, this is a sampling still. They sample roughly 100,000 households and they sort of extrapolate that to give you the numbers. So it's by no means perfect. The bigger problem I think and I think you're alluding to this is that a lot of people who are underinsured.

HARRIS: Right.

GUPTA: They have insurance but frankly it's not good enough or it's so expensive that it's more than 10 percent of their take-home salary. So, you know, if you think about how much you spend towards health care insurance, they're spending over 10 percent every single month toward that. And it's just becoming an increasing cost.

HARRIS: We can't hear enough about what the candidates for president would do in this area. Maybe we'll hear more from the Democrats this week on this issue.

GUPTA: That's right and then the Republicans after that. We'll have more for you.

HARRIS: Sanjay, appreciate it. Thank you.

GUPTA: Thank you.

HARRIS: An elaborate jail break. Eight inmates make their get- away. This morning, five of them are still missing. The brazen escape happened Sunday in Clovis, New Mexico. These mug shots released yesterday, police say most of the escapees are excused of being involved in violent crimes, one of them a convicted murderer.

Here's what we know about the break. Officials say the prisoners, shimmied their way up plumbing pipes, then cut a hole in the roof using hand-carved tools.

(BEGIN VIDEO CLIP)

SHERIFF MATT MURRAY, CURRY COUNTY, NEW MEXICO: At approximate 9:45, police department officers noticed two people in orange jumpsuits similar to the Curry County Detention Center uniforms, running in the vicinity of the jail. After a short pursuit, one inmate, Victor Apadaca (ph) was located and captured.

(END VIDEO CLIP)

HARRIS: Well, two other escapees were caught in Texas. This morning police are searching for the remaining five.

Hurricane Gustav getting stronger and headed for the Gulf of Mexico. We are keeping a close eye on the storm. But for now the Democratic National Convention, Hillary Clinton tonight's headline speaker. Our special coverage continues.

(COMMERCIAL BREAK)

O'BRIEN: And welcome back, everybody. I'm Soledad O'Brien here with continuing coverage of the 2008 Democratic Convention in Denver, Colorado.

Mark Warner, the former Governor of Virginia, is going to be giving the keynote speech tonight. But, the real fireworks are expected to come from Hillary Clinton. This has been billed as her night. And we are told that she's going to try to use it to bloody up John McCain. Could add another cliche there to the boxing and the fireworks. Senator Clinton also kind of doing a high wire act; juggling political hand grenades all at the same time.

And watching it all facing the peanut gallery is our own Bill Schneider who joins us now with a look back and a look ahead at some of the moments from last night and some of the things to expect tonight.

Bill, let's start with Michelle Obama. I mean, if you counted the number of times the word "values" was used in her speech last night and you got a dollar each time, you'd be a rich person tonight.

The point was, and we knew that going in, to stress, we're just like you, middle America -- people who aren't sure where they want to cast their vote.

Let's listen to a little bit of the speech. Then I'm going to ask you question on the other side, Bill.

(BEGIN VIDEO CLIP)

MICHELLE OBAMA, SEN. BARACK OBAMA'S WIFE: Barack and I were raised with so many of the same values. Like you work hard for what you want in life. That your word is your bond, that you do what you say you're going to do.

(END VIDEO CLIP)

O'BRIEN: So, first, do you think she delivered on what she had to do, which was to make people really understand who her husband is and who she is?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: That's right. She did deliver it very well. Her speech was extremely poised and accomplished and won a lot of admiration. But to the larger audience, she was saying, my life is just like yours, I have the same values. These are normal, middle-class American values. And many Americans are unfamiliar with Barack Obama. He comes from an unusual background. And what she just said was, we have the same values. My life is like yours and so is my husband's.

O'BRIEN: She also had a job to do in explaining to the public who she is, because I guess I wasn't surprised that she's accomplished and poised and good at doing that. But many people really didn't know that much about her.

SCHNEIDER: That's right. They did not know that much.

There was a caricature that some people saw in that controversial cover of the "New Yorker" magazine, the caricature was that her critics -- the Obama critics -- had been trying to portray her as some sort of a black militant or radical. She was anything but that.

She looked like an accomplished professional woman. And you know, I heard delegates on the floor last night turn to each other and turn to me and say, does this woman have a political future? If he gets elected, are we going to begin see more Obamas in office? After all, look at the Clintons.

O'BRIEN: The Senator from Illinois, the second time around, Michelle Obama, maybe. And, of course, the kids.

I mean, I think it's tricky to bring your kids out on a big stage with 20,000 people. I mean, that can really backfire. And their children also, in a way, you know, did a good job.

SCHNEIDER: They did. They looked like they're used to it. I mean, the camera's been on them for a long time. He's tried to keep them out of the camera for a little bit. But you know, that "People Magazine" interview that they did -- or what was it? It was a television interview where he said he regretted having done that because it was a little bit too personal.

But you know, these kids looked very comfortable, very relaxed. They're used to being in the spotlight.

O'BRIEN: I think that was an Access Hollywood thing.

Let's talk about Ted Kennedy who looked so much stronger than I honestly thought he would. I saw him come out and I thought wow, he looks good.

SCHNEIDER: Yes, so did I. He looked very good. And you know, it was a very emotional wrenching moment because a lot of delegates saw that as a farewell to his party.

But he played a very important role in this transition that we saw last night. You know, he engineered, really, was a very important person in the transition from the Clinton era to the Obama era.

O'BRIEN: Let's listen to a little bit of what he had to say in that whole transition. He talks about that torch. Let's play that.

(BEGIN VIDEO CLIP)

SEN. TED KENNEDY (D), MASSACHUSETTS: This November, the torch will be passed again to a new generation of Americans. So with Barack Obama and for you and for me, our country will be committed to his cause. The work begins anew. The hope rises again. And the dream lives on.

(END VIDEO CLIP)

O'BRIEN: For a guy not who's not feeling very well, boy, he can deliver a line, can't he? To watch his family members really, literally sob through it, that was tough.

SCHNEIDER: Yes. I mean, he was very effective. And it was an echo of his famous and well-remembered 1980 concession speech at the Democratic National Convention when he lost the presidential nomination to Jimmy Carter and talking about hope living on, the dream will continue.

But in this campaign, the Kennedys, both he and Caroline Kennedy played a very crucial role. Because early on in January, when the race was very much in the air, they endorsed Barack Obama. They helped to usher him into the Obama era. That was a blessing of the Kennedys, they're Democratic royalty, the Democratic Party establishment.

So, what we're really seeing is the passing from one dynasty, the Clintons, who have really owned the Democratic party for 16 years, since 1992; to the Obamas. And the Kennedys gave it their blessing at a very crucial moment. An electrifying moment in the campaign.

O'BRIEN: More to come, I'm sure.

Bill Schneider for us this morning. Thank you, Bill, as always. Nice to see you.

Coming up next, we're going to break it down just a little bit more with Roland Martin and David Brody. Stay with us.

(COMMERCIAL BREAK)

O'BRIEN: Welcome back, everybody. You're taking a look at inside the Pepsi Center. It's day two of the Democratic National Convention.

A low-key keynote -- it's easy for me to say -- is expected to be in the cards tonight from Mark Warner. But a fiery indictment of John McCain is also expected from any number others, including Senator Hillary Clinton, who also has the job of stopping her supporters from staying home come November, or even voting for John McCain.

Digging deeper now, we're joined by David Brody, he's a CNN contributor and senior political correspondent for the Christian Broadcast Network, also senior political analyst, Roland Martin is with us.

Nice to see you guys. Let's start with --

ROLAND MARTIN, CNN POLITICAL ANALYST: Hey, Soledad.

DAVID BRODY, CNN CONTRIBUTOR: Hey, Soledad.

O'BRIEN: Hey. Hey, let's start with the critics, shall we?

If you didn't like last night, here's what the critics have said. There was not enough of a message that came through. It was too warm and fuzzy and didn't go on the attack enough.

Briefly, do you both agree or disagree with those critics? And then, my question would be, what can change and will it change tonight?

BRODY: Well, I think it's a disagreeable moment at that point. I mean, look, warm and fuzzy is a good thing, Soledad, for the Democratic Party, especially last night.

Anytime -- and you alluded to it in the last segment -- anytime you have children on stage, Michelle Obama talking to daddy on stage, I mean, this is it. This is what they need.

You know, at the end -- there's a great book by Drew Weston, a psychologist, and it's called "The Political Brain." It talks about emotion in the campaign and the fact that you really have to be able to emotionally connect. The voters need to emotionally connect to a candidate.

And indeed that is exactly what was going on on that stage last night. The Democrats need more of that and a little less policy talk because at the end of the day it has to be that emotional connection to drive people to the voting booths.

MARTIN: Soledad, David and I might be Evangelicals, religious atheists, those guys are stuck on stupid.

The message last night wasn't about politics. The message was family, faith, and values. And that's the problem for Democrats for so long. They act like when you talk about values or family, that's not a message. It is a message. They have to appeal to that. They have to say, we understand where you're coming from. And so you have Wednesday -- you have Tuesday night, Wednesday night, and Thursday night to slam McCain. You can slam Bush. Or you have Ted Kennedy give that speech, you have Michelle Obama give that speech. And as David said, when you're seeing that 7 year-old Sasha and Malia, the 10 year-old -- I'm sorry --

O'BRIEN: Who's going to steal your job. You know, both of them are going to steal your job in about 20 years.

MARTIN: I mean, come on. I mean, but these critics -- the problem is McCain is hitting them on character.

BRODY: Yes and here's the other thing. Remember, this is not playing to California and New York. This is not about policy situations at all.

MARTIN: There you go.

BRODY: This is about how this plays in Peoria. OK. The reality is, is that how is it playing in the heartland, exactly? And that's what that was all about.

O'BRIEN: How did Michelle Obama, do you think, play in Peoria? Because I know obviously, as much as it's a message about, here's who my husband is; it's a message about here's who I am, too.

And to you know, -- we were talking to Fay Waddleton earlier and she said, you know, her story is not remarkable. There are plenty of black people from the south side of Chicago, who go off to good schools. And you know, she's just sort of saying, I'm a regular person just like you. It's in a way, kind of sad that she has to reemphasize that, I think.

MARTIN: Well Soledad, you're right. Because the whole setup was, well, we don't really understand their background and we don't identify with that. I mean, give me a break. I mean, come on, I mean, you just nailed it.

If you remove Michelle Obama from that and you slot in a white woman, slot in a Hispanic man, slot in an Asian man, slot in someone who's straight, somebody who's gay, it doesn't matter. It is an American story.

I don't understand why we act as if, if you're an African- American somehow your story is different than someone who lives in the suburbs. It's the same country, the same state, the same city.

So let's get rid of this had notion the Obamas somehow are exotic because they're different. The main difference, let's just go ahead and say it, they're black. Get over that and accept the reality that they are American just as anybody else.

O'BRIEN: Hillary Rodham Clinton, what kind of pressure is on her tonight, do you think?

BRODY: Well, she's under obviously quite a bit of pressure to perform. And you know, it's not so much the words tonight, it's the visuals, it's the smiling, it's the laughter.

Soledad, imagine -- and I was talking about this a little bit about this yesterday -- if she led the crowd in a "yes we can" chant. I mean, is there something she can do beyond words? We've heard the words for now a couple of months and the words have been pretty much on script. That's been fine.

But is there something she can go beyond that? Because let's face it. The mainstream media narrative will be key to going forward because that is what drives a lot of this coverage and she needs a moment tonight and she needs to smile a lot, look genuine. And I think deep down she is very genuine talking to her handlers. Clearly, they believe that yes, there's a rift there to a degree, but she wants a Democrat in the White House in 2008, no doubt about that.

MARTIN: Soledad, you know me. You know I love to dance, OK? Hillary Clinton can't dance tonight.

O'BRIEN: We have video of that.

MARTIN: Well, you know, I will drop it like it's hot. Hillary Clinton cannot dance tonight. She has to say, if you are with me, if you believe in the issues that I believed in, if you believe that we need to change the Supreme Court, a change in our tax policy, a change in the Iraq war, I need you to stand with me to stand with him. It has to be clear. It has to be emphatic. Where the people sitting in these chairs, but more importantly, people at home, they get it.

BRODY: And let me also say, Soledad, we talk about this catharsis moment, you know, that the disgruntled Hillary supporters need to have this moment, so to speak.

But look, I mean, if you're going to have this moment, then in the speech tonight, are we going to hear about some of what went on in those nasty primaries that we saw a while back?

I mean, can she bring it up in a gingerly way without embarrassing Obama, but at the same time letting her supporters know that it's been a tough road? And I think that's important that that is not glossed over. If it's going to be cathartic, then go ahead, we'll start --

O'BRIEN: Well, if she got everything in that you guys are suggesting in that speech, that is a razor's edge to watch there.

David Brody and Roland Martin. Nice to see you guys. Thanks for the insight.

Got more convention coverage coming in 15 minutes and of course, throughout the day. Stay with us. Reporting from New York, I'm Soledad O'Brien. We'll send it back to Atlanta and the CNN NEWSROOM right after this short break.

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HARRIS: And welcome back, everyone, to the CNN NEWSROOM, I'm Tony Harris. Heidi Collins is on assignment.

Severe weather is on our radar. First off, Hurricane Gustav. Caribbean threat now, but could cause some trouble in the Gulf states later. No one wants to hear that. The storm on a fast track right now, just forming as a hurricane today, already nearing Category 2 status.

We are also watching the system that just won't die. Fay, the former tropical storm, pictures here of Geneva, Florida, Lake Harney. And boy, that lake -- live pictures now -- great swollen and flooding homes in the area. Fay carrying its flood threat and tornado potential through the southeast.

Rob Marciano is here, and he is very busy. I guess at the top of the menu here is to get the very latest information on Gustav.

MARCIANO: Yes. We just have the latest advisory that's in from the National Hurricane Center, including a forecast update.

So, let's crank up the satellite and show you that. We still have some pretty decent winds with this thing. It's starting to interact with the island of Hispaniola. So, whether it strengthens to a Cat 2 today, or not, that is still yet to be seen. But the folks who live in the western islands, Port-Au-Prince, towards Haiti -- in Haiti, you're going to be feeling certainly some nasty weather here with the storm surge. You can see the latest flare-up of convection really starting to increase the likelihood of seeing this thing develop even further.

National Hurricane Center -- this isn't the updated track, but the updated track is very, very similar to this, except extend this to about there at 8:00 a.m. on Sunday with similar numbers as far as it being a major hurricane.

So this is the forecast pretty much, give or take a few miles with a Category 1, then 2, then 3 status over the next few days and into the Gulf of Mexico, and obviously folks who live along the Gulf Coast, anywhere in the Gulf Coast, this raises an eyebrow to say the least. And once it gets in the Gulf, we've got water temperatures that are 85, 86, even 87 degrees in spots, which certainly is not going to weaken it. And then once it gets to the Gulf, obviously, you're completely enclosed with land. The only hope really is for it to go into Mexico or maybe take an extreme right-hand turn. Anyway, we're watching that carefully.

Also watching the remnants of Fay which continues to spark thunderstorms that have the potential for seeing tornadoes. We've seen tornado warnings over a good chunk of the morning in spots across Georgia. No reports of them actually touching the ground but certainly we're keeping a wary eye on spots, especially south of Atlanta. And also we're seeing some of the heavier rain north of Atlanta and through parts of eastern Tennessee and in through the Smokies. This is good stuff because we desperately need the rain here and certainly helping what is a nasty, nasty drought, even through the high country of the Carolinas, down through Charlotte. Some of this is creating some, you know, brief downpours which could result in some flash flooding. Three to six inches of rain total expected, Tony. And the good news with Fay is that it finally is getting the rain to where it's desperately need. Try to fill up the reservoirs in spots.

HARRIS: Boy, we certainly need it. All right, Rob. Good to see you, thanks.

Fay no longer a tropical storm and long gone from central Florida, but its effects still making life pretty miserable for residents there. Our Susan Candiotti joins us live from the town of Geneva.

Susan, thanks for the live shot. We used it at the top just moments ago. Lake Harney still swollen and causing problems for the homeowners on the banks of that lake.

SUSAN CANDIOTTI, CNN CORRESPONDENT: That's right. A lot of these people simply cannot cut a break.

This is a combination of the St. Johns River and Lake Harney. One feeds into the other. The river feeds into the lake, the lake feeds up to the river. I guess this sign pretty much says it all. I think we showed it to you earlier in the half hour here -- "Road Under Water" -- I guess so.

This road leads all the way back and eventually the lake is just beyond where you can see the horizon there. But you have about 100 to 150 homes here that are affected. This is largely a rural area. It's beautiful if you can live out here, but right now it is not very pleasant. Some of these homes have indeed been flooded, some of them are close to being flooded. And in fact, you even have incidents where there are reports of alligators that are showing up in people's backyards occasionally because, of course, the line has blended between the lake and the river. Where does one end? So even the alligators are displaced at this time.

We've got 14 inches of water in one person's house. We've got one man who had to move everything up to the second floor. That's happening with a lot of folks here. So authorities are trying to keep a close eye on things, worried about the amount of rain that we'll be getting every afternoon. Flood stage 8.5. We are currently at just under 11 feet -- Tony.

HARRIS: My goodness.

OK, Susan, appreciate it. Thank you.

How about this? Summer storms kicking up winds near hurricane strength in the desert. Gusts approaching 75 miles an hour stirred up a tremendous dust cloud on the horizon in Phoenix. Here it is. This is monsoon season in the southwest. Parts of the region got two inches of rain in just an hour, prompting flash floods. Tropical Storm Julio of Mexico pumped in plenty of moisture. The fast moving storms also flipped some planes, small ones, at Chandler Municipal Airport in suburban Phoenix. Ten were damaged -- look at these pictures -- along with the hangar.

You know, there's been a flurry of activity on Wall Street recently with triple digit moves on the Dow becoming really commonplace. Let's go now to Stephanie Elam at the New York Stock Exchange for details on that and the latest problems in the housing market.

Stephanie, good morning.

STEPHANIE ELAM, CNN CORRESPONDENT: Hi, Tony.

Yes, volatility at this time of year is really not that unusual because volume is typically low. We've got a lot of people who are out and about and not really thinking about work just yet. Yesterday the Dow tumbled 241 points, but today stocks are calm despite a $2 jump in oil prices and some mixed economic news.

Let's go ahead and take a look at the board. The Dow is now back up in positive territory, up 29 points at and 11,415, Nasdaq up 7 points at 2,372.

Now Another reason for all of this volatility is the housing market and a new survey shows problems in that sector are continuing. The Mortgage Asset Research Institute says the number of fraudulent loans issued during the first quarter jumped 42 percent from the year before. The most common fraud cases involve misrepresenting income, debt, your employment and also any other sort of issue related to that.

HARRIS: Whoa, whoa, whoa, wait a minute, Stephanie. Aren't these some of the same problems that got us into this whole mortgage meltdown mess in the first place? I'm just wondering, what's been done about this to stop the fraud?

ELAM: Yes, you know, you can cast your net, but you might not catch everyone. The FBI has arrested 400 mortgage brokers, lenders and appraisers this summer, but not all fraud involves criminal activity. It usually occurs when lenders tweak home buyers' applications in an effort to give them a loan.

So, there are other ways to get in there and be fraudulent I guess, Tony.

HARRIS: Absolutely. I suppose you're right about that.

All right, Stephanie, good to see you. Thank you.

ELAM: Thank you.

A plot against Barack Obama or the ramblings of -- quoting here -- "methed up yahoos." In Denver, federal authorities say three men arrested on drug and firearms charges posed no credible threat to the candidate or the Democratic convention. One was arrested during a traffic stop Sunday, the other two tracked down to Denver area hotels. One allegedly said another made threats against Obama. We should find out more about all of this at a news conference this afternoon. No R&R for John McCain. He is staying in the spotlight during the Democratic National Convention. He is due to speak today at the American Legions National Convention, and that is taking place in Phoenix.

It was wartime some 60 years ago. A sailor named Claude Dawson in the South Pacific wrote to his wife Nadine thousands of miles away. Descriptive letters of war and love. Those letters bundled in a shoebox and just found in the trash at a California thrift store. If it wasn't for one perceptive worker, they might have been gone forever. A local historian now trying to find the couple.

Our tropic watch continues, this time Hurricane Gustav gaining strength as it heads for Haiti. Next up, the Caribbean and then perhaps the Gulf of Mexico. Our storm team is keeping you informed. Those not watching the storm are keeping close tabs on what's happening in Denver. That's where the best political team on television is for special coverage of the Democratic National Convention.

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