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Judge to Lift Stay on Same-Sex Marriages; Will Blagojevich Walk?; Obama-Clinton Ticket in 2012; President Obama Driving G.M. Profits?; 44's Poll Position

Aired August 12, 2010 - 17:00   ET

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


WOLF BLITZER, CNN ANCHOR: Thanks very much, Rick.

Happening now, breaking news -- same-sex marriages could be legal again in California within a matter of only a few days. The judge who overturned a voter-approved ban on gay marriage is ready to lift the stay. But the legal fight is far from over.

In Illinois, jurors admit they're struggling right now to reach a verdict in the corruption trial of Rod Blagojevich.

Will the impeached governor now walk?

And police say they've captured the suspect in a series of vicious stabbings in three states. He was trying to board a flight to Israel.

Is this a criminal case?

Is there any threat to homeland security?

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

ANNOUNCER: This is CNN breaking news.

BLITZER: Well, we begin with the breaking news. An important ruling today in the legal and political fight over same-sex marriage. The breaking news this hour, a federal judge in California has announced the timetable for lifting a temporary stay in the case that overturned Proposition 8. That's the voter-approved measure banning gay marriage in the state. The decision means gay couples in California could be able to legally marry once again starting next Wednesday. But that might change depending on where the battle goes from here.

CNN's Dan Simon is joining us now from San Francisco, where the ruling came out just a little while ago. Walk us through what's going to happen over the next few days.

DAN SIMON, CNN CORRESPONDENT: Well, it's a very good question. There's still some unknowns here. But bottom line, barring any sort of reversal from an appeals court, same-sex couples here in California can resume getting married next Wednesday, August 18th, at precisely 5:00 p.m.. That is the ruling that came down about an hour and a half ago from Judge Vaughn Walker.

Here at city hall in San Francisco, you had many same-sex couples, Wolf, ready to get marriage certificates today and get married as early as today.

We have a supporter with us -- a very high profile supporter. This is Speaker John Perez. I think it's fair to characterize you as the first openly gay speaker of the House here in California.

REP. JOHN PEREZ (D), LOS ANGELES: That's absolutely fair to characterize me that way.

SIMON: And to ask an obvious question, your reaction to Judge Walker's ruling?

PEREZ: Well, I think this is a great day for LGBT people in California and, quite frankly, nationwide. It's also a good day for anybody who's really concerned about full equality for people in the state of California.

I think Judge Walker's decision today was consistent with the news that he made when he first found Prop 8 to be unconstitutional. I think that it's a very good ruling on the merits. And I think it undermines the ability for it to be overturned at the appeals court on the question of stay.

SIMON: The judge, in his ruling today, saying that August 18th is the day, next Wednesday. That gives the other side some time to go to the Ninth Circuit Court of Appeals to try to get Judge Walker's ruling reversed. They -- they're going to try to do that.

What -- what are your thoughts about that?

PEREZ: Well, first of all, I think this is another example of how fair the judge has been in his process, first, in holding out until today to rule on the issue of a -- a stay and now giving the other parties up until next Wednesday to try to overturn him on stay.

When you look at his decision on the stay itself, there are four main tests involved. And on each of the four tests, I think he was very clear. And I think that it really limits the ability of the Court of Appeals to overturn him on the question of stay.

Obviously, the main question will still go to the Court of Appeals. We think it will likely end up before the U.S. Supreme Court.

But in the meantime, we think the chances of people moving forward and having full marriage equality starting next Wednesday are very good. And that's wonderful news for all of us here in California.

SIMON: California House Speaker John Perez, thank you for your time.

PEREZ: Thank you. SIMON: We want to bring in somebody from the other side here. This is Victor. Victor, tell me your last night one more time.

LUKE OTTERSDAD: Sorry. It's Luke Ottersdad (ph).

SIMON: Excuse me, Luke Ottersdad.

You can see here, Wolf, he hays this sign here, "Stop Judicial Tyranny" -- wearing a sign here, "Yes On 8." Obviously, the majority of people here are pro-same-sex marriage. But you have people like Luke here out at city hall.

Explain to me, Luke, why you're so passionate about this issue.

OTTERSTAD: Well, I'm definitely out here representing the majority of Californians who voted to support Proposition 8. And I'm also here to be their voice, as their vote is trampled on by this judge, ruling their votes as not worth being counted, really.

SIMON: The judge obviously using blunt language in the -- in the original ruling and today, saying, in effect, that there's no reason why this marriage ban on same-sex couples should remain in place. Yet, as you say, 52 percent of California voters backed Prop 8. Explain why -- why Judge Walker is wrong here.

OTTERSTAD: He's basically saying that the majority of Californians are irrational, that we're uneducated, that we don't know what we're talking about.

I'm sorry, but that's -- that's pretty offensive to us for him to say that. He's a homosexual judge, -- openly homosexual. I think he's been very biased in this ruling.

SIMON: All right, thank you very much for your time.

OTTERSTAD: Sure.

SIMON: So, Wolf, there you have it, two very distinct sides. Obviously, a very contentious issue here in California, not going away any time soon. We know that the pro-Prop 8 people will file an emergency appeal, probably this afternoon. And now we're just waiting to see what the appeals court will do. But barring any sort of last minute decision -- decision from them, same-sex couples here in California can marry beginning next Wednesday -- back to you.

BLITZER: All right. Dan Simon, thanks very much.

Let's bring in our senior legal analyst, Jeffrey Toobin, who's been watching this and reading between the lines.

What's likely to happen between now and 5:00 p.m. Pacific time next Wednesday, as far as the Ninth Circuit Court of Appeals is concerned, because they could continue the stay if they want to?

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: They sure could, Wolf. And the most important fact, which we don't know at this point, is which three judges will be on the panel to decide the stay. Because the Ninth Circuit is a court with a lot of liberal judges and a lot of conservative judges. Once we know which three judges are on the panel to decide this stay, we'll have a lot better sense of whether that stay will be extended or not.

BLITZER: Do you have any prediction?

TOOBIN: Well, I think given the fact that the Ninth Circuit tends to be a pretty liberal court, and if you look at the judges who have previously ruled in this case on earlier issues, if they get the case, they tend to be a pretty liberal group. And they seem like the kind of judges who would let the stay end, who would allow gay marriages to proceed next week.

But let's just see which judges we get, then we'll have a lot better idea how the decision is going to go.

BLITZER: All right, guys, stand by. I want you to stand by because there's another important story that we're covering right now with enormous legal and political implications. I want Jeff and everybody else involved to weigh in what's going on in Chicago, as far as the Rod Blagojevich trial is concerned.

The former Illinois governor has kept his game face throughout this corruption trial and two weeks of jury deliberations. Today, he may have some new reason to be optimistic. Jurors told the judge they're deadlocked on two of the 24 counts against him. No word on the verdict they reached on two counts.

The judge told the jury to go back and work a bit harder.

But this raises a lot of questions about how long the trial will last and how it will finally end. Blagojevich pleaded not guilty to all the charges, including allegations he tried to sell or trade the U.S. Senate seat once held by President Obama.

(BEGIN VIDEO CLIP)

ROD BLAGOJEVICH, FORMER ILLINOIS GOVERNOR: I don't believe there's any cloud that hangs over me.

UNIDENTIFIED MALE: Governor...

UNIDENTIFIED FEMALE: Well, getting back to that, can we...

BLAGOJEVICH: I think there's nothing but sunshine hanging over me.

(END VIDEO CLIP)

BLITZER: Blagojevich has a history of being colorful and controversial. He was elected governor of Illinois back in 2002 and reelected four years later. He was arrested on corruption charges in late 2008. He went ahead and appointed Roland Buras to become the -- the new senator from Illinois, replacing Barack Obama once he became president. In early 2009, Blagojevich was impeached by the Illinois House and barred from holding political office in Illinois ever again. He didn't attend his own impeachment trial. But he has been no stranger to the camera since then, including his appearance as a contestant on the "Celebrity Jeopardy" program.

Let's bring back our senior legal analyst, Jeffrey Toobin. Also joining us, Lynn Sweet, the Washington bureau chief for the "Chicago Sun-Times" and columnist for PoliticsDaily.com.

All right, Lynn, let me start with you this time.

Is this likely to go on for days or are we sitting within only a few hours of knowing what this jury is finally going to reach?

LYNN SWEET, "CHICAGO SUN-TIMES": Well, I think -- I don't think -- nothing today -- and I -- I would -- so that's the easy answer. But Wolf and Jeff, this is a very complex case so it still might take more time, because they had not even addressed some of the charges dealing with the selling of the Senate seat.

One of the reasons I think this is hard for anyone to figure out is because the charges have to do with attempted extortion, attempted conspiracy and attempted racketeering and conspiracy to commit those crimes. And that's a lot of analysis you have to do to find out whether or not Rod did commit it or did not.

When you're dealing with attempting to do something and conspiracy, those are just tough charges -- a lot of material to go through.

BLITZER: What if the jury is -- is hung on 22 of the 24 charges, Jeffrey, and only has reached the verdict on two charges. We don't know if they're really the important charges, the less important or even the relatively unimportant charges. What -- what does that mean, if they remain deadlocked on 22 of the 24?

TOOBIN: Well, if they remain deadlocked, those charges will be -- they'll rule a hung jury. There'll be a mistrial and Blagojevich can be tried again. I mean that is a lot better than being convicted. It's also not as good as being acquitted.

So a mistrial is certainly better than a conviction. And the government never wants a mistrial. But keep in mind, if there is a mistrial, if there is a hung jury, Blagojevich will just be tried again.

On the two verdicts -- the verdicts that we have, well, we don't know what they are. If he's acquitted of those two, he can't be retried on those. If he's convicted, he could be sentenced on those.

So, you know, obviously this is good news for Blagojevich and bad news for the government. But it's important to keep it in perspective. A mistrial is only a temporary setback for the government, if that's what happens.

BLITZER: Well, what if he's acquitted on these two charges and the 22 others there's no -- there's no decision?

Is it a slam dunk for the prosecution to go forward?

Let me go to Lynn and say, you know what, we're going to redo this whole thing from the beginning?

SWEET: Well, even if it happens -- and I know we're jumping ahead here -- the prosecution and the defense now both have the ability to analyze what went wrong in the first trial. Remember, the defense never happened. Blagojevich never put any witnesses up. In a redo, already the lawyers -- one of the lawyers of Blagojevich in Chicago had talked about how he regretted, maybe, about not calling Representative Jesse Jackson, Jr. to testify.

So when you get a do-over, you now know the now know the ups and downs. There's -- you know who has what information. You know how the jury reacted or you will know more no matter what happens when people talk to the jury afterwards. And you can maybe just do a better prosecution and at least put on a defense, if there's a mistrial this time around. You could figure out what went wrong.

One quick point. One of the things that Rod Blagojevich is -- is charged with is lying to agents about maintaining that he never had anything to do with who contributed to him and he had a firewall between politics and government. You know, that's the kind of charge where I think people might just have a lot of trouble, because he should have, if he -- if he -- why did he lie?

Everyone knows that it's perfectly legal for a government official to be also involved in his political life. It happens from the president on down to aldermen. So people might also be wrestling with just what does it mean to have lied in this event.

BLITZER: And we should know what this jury is going to decide fairly soon, whether today, tomorrow or the day after, we'll be watching it.

Guys, thanks very much.

New fears about horrific flooding right now in Pakistan. It could swamp the government there and create a new security crisis for the United States, as well.

Does President Obama deserve credit for General Motors' impressive profits?

And later, why should we be concerned about a drifting iceberg four times the sides of Manhattan.

(COMMERCIAL BREAK)

BLITZER: Let's get right to Jack Cafferty for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Wolf, President Obama ought to drop Joe Biden and put Hillary Clinton on the ticket with him if he runs for reelection in 2012. That's an idea that's getting a lot of attention these days, despite the fact that that election is still more than two years away.

It all heated up after a piece on Politico.com this month by former Virginia Governor Douglas Wilder. Wilder says as secretary of State, Mrs. Clinton has been nothing but a team player. Wilder says she's been tough and commanding when necessary, as well as graceful and diplomatic. He then compares her to Joe Biden who, as vice president, has continued to make his famous gaffes. Wilder also points out that Clinton might be able to help the president win key voting blocs, like middle class Independents and working class voters.

Since the Wilder piece, the idea is suddenly popping up all over -- in the pages of "The Wall Street Journal," "Time Magazine," AOL's "Politics Daily" and "The Daily Beast." Some suggest that Hillary Clinton and Joe Biden ought to swap roles as secretary of State and vice president, while others argued that putting Clinton on the ticket will give President Obama the best shot at being reelected.

Of course, then there's the whole notion of President Obama creating another historic ticket. He's the first black president. With Hillary on the ticket and they won, she would become the first female vice president.

As for the White House, they shoot this whole idea down, insisting that Joe Biden will continue to be a, quote, "trusted partner," unquote, for the president. And it could all be a moot point should Mrs. Clinton decide to make another run at the top job herself.

Anyway, here's the question: Should President Obama drop Joe Biden for Hillary Clinton as his running mate in 2012?

Go to CNN.com/caffertyfile and post a comment on my blog.

BLITZER: If he were to do that, Jack, and if they won, it certainly would set the stage in 2016 for Hillary Clinton, as then a sitting vice president, to run for president herself.

CAFFERTY: Assuming that the four years that the two of them held the top two jobs didn't -- the country didn't go down the drain, she'd be a -- probably a shoo-in, slide right in there.

BLITZER: Yes.

CAFFERTY: Of course, she'd be getting, as they say, a little long in the tooth by then.

BLITZER: No. She'd be in her late 60s. Not too bad.

CAFFERTY: That's what I am and I'm a little long in the tooth.

BLITZER: No, you're not. You're a young guy.

(LAUGHTER)

BLITZER: Stand by, Jack.

CAFFERTY: All right.

BLITZER: I want to bring in David Gergen to talk a little bit more about this and some other important issues. Quickly, what do you think about all this talk of Biden and Hillary Clinton perhaps switching jobs or -- or she being the running mate in 2012?

Is -- is all that far-fetched, in your opinion, David?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST, FORMER PRESIDENTIAL ADVISER: Absolutely. It's the idle talk of August, Wolf. You know that. There's -- I don't think there's any chance in the world the White House would throw Joe Biden over the side. You know, they -- the president has come to rely upon him as perhaps his most important substantive adviser in the White House. He looks to him not only in international affairs, but on domestic.

And as far as Hillary is concerned, you know, she can run from secretary of State and use that as a springboard. She doesn't need to be vice president to run for -- for the White House in 2016, if that's her choice.

BLITZER: Let's make the turn to General Motors.

GERGEN: Sure.

BLITZER: Right now, they're posting a $1.3 billion profit. They're making cars. People are working. As you know, the president took a chance in that bailout for G.M. and for Chrysler.

How is this going to play out politically?

GERGEN: This is playing out as a substantial plus for the president and, you know, at a time when the other things are pretty bleak. He did go in with Chrysler and GM. They're -- they both turned around. General Motors is a -- is getting ready to -- the CEO is just stepping down. They're preparing to go -- start offering stock to the public and no longer be government -- be government motors, but back to General Motors. They're doing pretty well.

But, Wolf, again, it's like the results in Colorado. If you're in the White House, you can't be too exuberant, because if you look at jobs, even though they're making a lot of money, they've only added 2,000 jobs since January and two straight quarters of profits. And overall, the job numbers are down a third in the U.S. from what they were before the recession hit. There's only about 100,000 jobs.

And, Wolf, if you go back a half a century, the number of jobs at General Motors in this country is only about a fifth of what it was half a century ago.

So from a -- from a -- a point of view of the workers, this hasn't been a success story so far.

BLITZER: But if G.M. and/or Chrysler would have gone down, none of those workers would have been -- would have been working for an American automobile manufacturer.

GERGEN: Well, that's right. I mean, this is part of that same story. It could be a lot worse. And that's true. And, you know, that's why I think the president deserves a lot of credit -- and his team -- for going in and -- and saving these two companies. This is one that's really worked well. And, you know, I think, it is a success story. But it's tempered by this -- this jobs question.

And, you know, for General Motors, you know, the growing markets tend to be more in Asia. You know, General Motors is selling more cars today in China than it's selling in the U.S. And, of course, that's where their employment numbers are starting to jump up.

BLITZER: They love the Buick Regal in China. It's a huge seller over there.

GERGEN: They do.

BLITZER: All right.

GERGEN: They do. BLITZER: Thanks very much, David, for that.

GERGEN: Thank you.

BLITZER: Could the Iraqi government now be reconsidering plans to withdraw U.S. troops from the country?

New details coming up.

Plus, why polygamist sect leader, Warren Jeffs, is now facing extradition.

What's going on here?

And a disgraced flight attendant -- we're talking about Steven Slater. He is speaking out today. You're going to hear from him in his own words. You're going to find out if he wants to keep doing the same job.

(BEGIN VIDEO CLIP)

STEVEN SLATER, FLIGHT ATTENDANT: It's so encouraging and so special and there's some really great people.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: Lisa Sylvester is monitoring some of the other top stories in THE SITUATION ROOM right now -- Lisa, what's going on?

LISA SYLVESTER, CNN CORRESPONDENT: Hi there, Wolf.

Well, Polygamist sect leader, Warren Jeffs, will be extradited from Utah to Texas to face a felony child sexual assault charge. That charge dates back to 2008. Jeffs had already been sentenced to two consecutive prison terms in Utah for allegedly coercing a 14-year-old girl into marrying her 19-year-old cousin, but the Utah Supreme Court overturned those convictions in July.

The Iraqi government says it is not reconsidering the negotiated deadline for U.S. troop withdrawal. The comments come in response to the Iraqi Army chief of staff, who reportedly said the United States should not completely pull out of country by the end of 20111, as the deadline stipulates that. That deadline was set between the United States and Iraqi governments in 2008.

And President Obama is praising Senate passage of a bill designed to help secure the US/Mexican border. Democratic Senators Chuck Schumer and Ben Cardin returned from August recess today to gave the chamber's unanimous consent for $600 million in emergency border funding. The measure, which was already approved by the House, now goes to the president's desk and he is expected to sign it into law tomorrow.

And no need for these workers to punch a clock. They are making repairs to one of London's most famous landmarks -- yes, Big Ben. They had to be lowered onto ropes and then dangled over 300 feet in the air to inspect all four clock faces on the tower. The three specialists also -- the ones involved also had to wear special ear protection. And I would imagine you would be able to guess why. The bongs from Big Ben would leave some serious ringing in your ears.

So Big Ben getting a little bit of a facelift there -- Wolf.

BLITZER: A little occupational hazard, if you've got that kind of work.

All right. Thanks very much, Lisa.

The president's national security adviser revealing Mr. Obama's biggest fear about Afghanistan. Stand by for more of my exclusive interview with retired U.S. Marine Corps General James Jones. He's here in THE SITUATION ROOM.

And new fuel for Republicans' hopes that this November election will be 1994 all over again.

And new details about the suspect in a series of stabbings and his arrest at the Atlanta airport.

(COMMERCIAL BREAK)

BLITZER: You're in THE SITUATION ROOM.

Happening now, An Israeli Arab citizen now in police custody following a string of deadly multi-state stabbings believed to be racially motivated.

Jeanne Meserve has the latest on the suspect's past and how authorities tracked him down. New information coming into THE SITUATION ROOM. We'll also get more of my exclusive interview with the national security adviser, retired Marine Corps general, James Jones. I'll ask him when President Obama will begin bringing American troops home from Afghanistan for good.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

(BEGIN VIDEO CLIP FROM "THE JAY LENO SHOW," COURTESY NBC)

JAY LENO, HOST: The world champion New Orleans Saints visited the White House earlier this week. Now, they -- you probably saw this. They presented President Obama with a Saints jersey with the number 44 on it in honor of his approval rating.

(END VIDEO CLIP)

BLITZER: Jay Leno was joking, but he almost got the president's approval rating right. Our just released CNN/Opinion Research Corporation poll shows 47 percent of Americans now approve of the way Mr. Obama is doing his job. Fifty-one percent disapprove, matching his all time high disapproval rating back in March of this year.

It's proving to be a long, hot summer for the president and his Democratic Party, with just a few months until the mid-term election -- less than three months, to be precise.

Let's bring in our senior political analyst, Gloria Borger, and our White House correspondent, Dan Lothian -- Dan, how worried is the write -- White House right now?

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, you know, Wolf, one senior aide told me that it doesn't take a poll to let them know that Americans are frustrated. People are out of work. The economy is in the tank. And so they know that. And they're frustrated, as well. One senior aid telling me that they want to see more jobs. They want to see more people back to work.

Having said that, they're also touting sort of their accomplishments, that they've been able to get these stimulus jobs. And while they don't believe that that was the end-all, they believe that the economy would be in a lot worse place right now if they didn't get those stimulus jobs.

BLITZER: Usually first -- in the first term of a presidency in mid-term elections, the party in power loses.

The question is, is this 1994 all over again, though, for the Democrats? Look at those numbers over there. Approval numbers right now for Barack Obama at 47 percent.

GLORIA BORGER, CNN POLITICAL CORRESPONDENT: That's right, 47 percent, which you see compared with the other presidents, not too bad but let's take a little walk down memory lane here. George W. Bush 2006 also had 42 percent. The Democrats won 31 house seats that year. Bill Clinton in '94, that's the year we're seeing a lot of comparisons to. Bill Clinton was at 44 percent. Republicans won 54 house seats that year, and Ronald Reagan in '82, that was his first mid-term, his popularity was down. The Democrats won 26 house seats, so you can see why, as Dan says, the White House is a little bit worried about this. And, you know, also people don't trust government now either. So you compare these numbers with low trust in government, just as it was in 1994, and Barack Obama has asked government to do an awful lot and people don't like it.

BLITZER: Where specifically, Gloria, are Obama and the Democrats losing support?

BORGER: Not surprisingly Wolf they are losing it with independent voters. Take a look at these numbers. You see for Republican candidates, independents prefer Republicans 46 percent to 38 percent for the Democrats. You see how polarized the rest of the electorate is. You know, 97 percent of Republicans like Republicans and 93 percent of Democrats like Democrats. That's not a surprise. The question we have is whether these independent voters are going to be mote motivated to come out and vote or whether they are going to stay at home and you'll only have the motivated Republicans come out and vote.

BLITZER: Because the president had the independents when he won his election in 2008. The Democrats did really well. What are you hearing from your sources at the White House? What they are going to do between now and November 2nd to bring back some of those independents.

LOTHIAN: You know, that's the big question, and I talked to one senior aide who told me nothing changes tomorrow when they get up. They are going to continue fighting for those small business owners. They will continue fighting to create more jobs. Again, they really believe that jobs, jobs, jobs is the way to get people to understand that this administration and what they are doing is working. Right now though things aren't looking so good.

BORGER: And there is something that is a little bit of a silver lining here in our polls, Wolf, which is --

BLITZER: Silver lining for the Democrats.

BORGER: For the Democrats, because this is not great news, is that the public dislikes Democrats and Republicans about equally.

LOTHIAN: That's right.

BORGER: So it's not like they are saying the Republicans are really fabulous. We want them to take control. It's just that they don't like the way things are working out, but it's not as if they see an alternative that they want to actively pursue unless they are Republicans.

LOTHIAN: Having said that, we all know that President Obama won because everyone wanted change.

BORGER: Exactly.

LOTHIAN: And people tend to go after the party that's in power, and so it could be that when people go in there to vote they look at it and say, listen, these are the guys who are in power. It's time to make some changes.

BLITZER: If they want change, the Democrats control the house, the Senate and White House, they might want change.

LOTHIAN: That's right.

BLITZER: All right, guys. Thanks very much.

We're following the breaking news out of California right now. Same-sex marriage now on track to be legal again next week. That unless an appeals court weighs in between now and 5:00 p.m. pacific time next Wednesday. We'll have more in the legal battle ahead.

And is the president's national security adviser willing to give a vote of confidence to the Afghan government? Stand by. More of my exclusive interview with retired General James Jones.

(COMMERCIAL BREAK)

BLITZER: An eye-openings new report about the federal bailout of banks here in the United States and how your tax money was spent. A Congressional watchdog group says all of those billions of dollars did make a difference but not necessarily just here at home. Lisa is back with more on this story what. Are you finding out, Lisa?

LISA SYLVESTER, CNN CORRESPONDENT: Well, Wolf, as the financial markets were collapsing, the U.S. Congress approved a $700 billion bailout of Wall Street, but as it turns out it wasn't just U.S. banks that received billions of U.S. taxpayer dollars. Foreign banks were also on the receiving end.

(BEGIN VIDEOTAPE)

SYLVESTER: AIG was deemed too big to fail. The insurance giant received billions of dollars in a taxpayer-funded bailout but an independent Congressional oversight panel now reveals that a large chunk of that money went straight out of country to foreign banks. In the AIG bailout alone, Germany's Deutsche Bank received $11.8 billion. The French bank, $11.9 billion and the European bank, $4.9 billion.

ELIZABETH WARREN, TARP CONGRESSIONAL OVERSIGHT PANEL: Banks in France and Germany received billions from AIG's rescue, yet the U.S. bore the whole $70 billion risk of the AIG capital injection program alone.

SYLVESTER: The overall Wall Street bailout known as T.A.R.P. cost $700 billion. The treasury department says it was necessary to prevent the economy from falling off a cliff. But rising U.S. deficits have helped fuel public anger over the Wall Street bailout. The Congressional panel report found that while the U.S. pumped money into 700 banks, all the other G-8 countries combined bailed out fewer than 50 banks. The watchdog advocacy group Public Citizen says under current international financial rules the U.S. had to give equal treatment to foreign and domestic banks when doling out $700 billion in bailout funds.

LORI WALLACH, PUBLIC CITIZEN: And the current world trade organization rules, really the United States is pretty much required to take our tax dollars and on the down side bail out things that don't work, but the U.S. taxpayers don't get the profit for those risks on the upside when that globalization finance is profitable for the banks.

SYLVESTER: Treasury department responded to the Congressional panel's findings saying, "The bottom line is that T.A.R.P. played a critical role in restoring stability to the financial system at a much lower cost than many of its critics anticipated, and the bank program in particular is likely to earn a substantial profit for U.S. taxpayers."

(END VIDEOTAPE)

SYLVESTER: The Congressional oversight panel says the U.S. should have done a better job of tracking the T.A.R.P. money that went overseas and had it done so it could have asked some of the other countries to share some of that pain of the $700 billion Wall Street bailout -- Wolf?

BLITZER: Thanks very much, Lisa, for that report.

We're following breaking news here in THE SITUATION ROOM. that's coming up. The issue being gay marriage in California. Our strategy session weighs in on the new ruling today which could legalize same- sex marriage in California within a matter of only a few days.

And it's the worst natural disaster in Pakistan's history. Could it have serious security implications for the United States? The story. That's coming up.

(COMMERCIAL BREAK)

BLITZER: Let's get right to our strategy session and bring in our two CNN political contributors, Democratic strategist Paul Begala and Republican strategist Mary Matalin. I want of you to weigh in on the judge's decision out in California today. I have the ruling right here. The judge saying people -- gay people in California can start getting married next Wednesday as of 5:00 p.m. pacific time unless the ninth circuit court of appeals extends the stay or takes some other action between now and then. Mary, what's -- what's your reaction?

MARY MATALIN, REPUBLICAN STRATEGIST: Well, it's a good day for gay couples who want to commit -- committed gay couples who want to sanctify their relationship with marriage. It's a bad day for the law. The original ruling was internally inconsistent, et cetera, but it's worse for politics, not that it's becoming a big political issue. There's been no poll since the first ruling that shows that issues other than job loss and no recovery and expansion of government are going to predominate, but the bad politics is the basis of this decision was that if you're for traditional marriage for whatever reason, theological or traditional, you are anti-gay and that couldn't be further from the truth, and people who support traditional marriage also support civil unions and they certainly support no discrimination, so it was divisive -- the politics of the decision was very, very divisive and sad for people who have been working towards resolution of this issue.

BLITZER: I suspect you disagree on this, Paul, but how significant is this decision in California, assuming gay marriage resumes in California next Wednesday? How significant politically is it for Democrats, for the president?

PAUL BEGALA, DEMOCRATIC STRATEGIST: Well, I think it's significant for this reason. Gays and lesbians finally will be able to be treated equally under the law in California, at least they are here in D.C. and Iowa and other states. I think what citizens will see, you know what's going to happen? Nothing. Nothing. They are good-hearted people who oppose full equality for gays and lesbians and many of them are close family members and friends of mine but they are wrong and scared. The argument they made in court, which of course the judge rejected out of hand, bus it's just prejudice and not law is that somehow letting other people fall in love and get married will diminish straight people's marriage or weaken the institution of marriage. We've had marriage equality in D.C. now for a while. It's not made me leave my wife for a dude. It's not going to hurt anybody. It's going to let people - Kiki Friedman, my old friend is Texas said it right. I asked him about gay marriage. He said I'm for it. They should be as miserable as we are. I mean, nobody is harmed.

BLITZER: Let me bring Mary back. Is it going to be a political issue between now and November?

MATALIN: To me, you know, that is a very weak argument. It's -- I never agreed with that argument, but it's also a bad argument to say that people who oppose traditional marriage are anti-gay. They are just not, and that's the division of it. But politically for this cycle. I'm not saying for all time, for this cycle there's no poll for this original ruling that suggests any other issue besides the loss of jobs, the ill health of the economy or the growth of government, any other issues are going to be able to be heard this cycle. That is set and that's what this -- all -- everybody is running their campaigns on and that's what the outcome is going to be about.

BLITZER: As someone who Mary loves very much once said, it's the economy, stupid, and it still is. All right, guys. Let's move on to Iran right now. I interviewed the president's national security adviser, Paul, General James Jones, and yesterday here in THE SITUATION ROOM he left open pretty wide that door to a direct meeting potentially between the president of the United States and Ahmadinejad of Iran, if the Iranians cooperate with the nuclear inspections and especially if they were going to go release those three American hikers. Listen to General Jones.

(BEGIN VIDEO CLIP) GEN. JAMES JONES (RET.), NATIONAL SECURITY ADVISER: If in fact we find the accommodation and the convergence of paths here that shows a sincerity, a willingness to be open and transparent and to meet the very reasonable standards that the international community has asked them to meet, then all things are possible.

(END VIDEO CLIP)

BLITZER: One of those things being a meeting. You know, Ahmadinejad is going to be in New York next month at the U.N. general assembly. Paul, should the president meet with him?

BEGALA: If it meets with those preconditions that General Jones just laid out, and I use that word advisedly. In the primary campaigns then Senator Obama was asked would you meet without preconditions with Ahmadinejad and they named some others, and I think it was one of our YouTube debates.

BLITZER: It was a CNN/YouTube debate.

BEGALA: And he said yes, I would. He's walked that back because he's president. He should be willing to negotiate but only if the Iranians are showing some sort of progress, which they are not. JFK had this right. He said America should never fear to negotiate but should never negotiate out of fear. I will point out that this president has moved the toughest sanctions through the united nations, even getting Russia and China who have never been strong on our side against Iran, even getting them to support, back in June, some very tough sanctions again the Iranian regime, and I think it's having some bite.

BLITZER: What do you think, Mary?

MATALIN: He -- Paul is right. He has moved. He has a different position than -- as president than he has had candidate. The preconditions are important, but he's trying to say and people in the meeting said that he is -- that the president understands the gravity and the sobriety of this issue, and he is harder and he's taking a heard line, but he doesn't want to close that door. But still, Ahmadinejad continues every day, to the open hand, to spit in his face. Just yesterday in the horrible case of the stoning of Ashdiani, they tortured her into a confession and they are resurrecting, if not the stoning, an immediate execution, despite the international outcry on this, including Hillary Clinton recently, so they have to show something to get this conversation with these preconditions. They have to do something immediate or otherwise I think the president will keep a harder line than he had -- than he ran on.

BLITZER: All right, guys. Thanks very much. We'll have more on this story coming up in the next hour.

Jack Cafferty is having should President Obama drop Joe Biden for Hillary Clinton as his running mate in 2012? Jack will be back with "the Cafferty file" in just a moment.

And the threat from a chunk of ice that's four times bigger than Manhattan.

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BLITZER: Jack is back with the Cafferty file. Jack?

CAFFERTY, CNN CORRESPONDENT: So, the question this hour looking way down the highway, should President Obama drop Joe Biden for Hillary Clinton as his running mate in 2012?

Dave in Phoenix suggests: "The Democrats ought to drop Obama for Hillary Clinton."

Keith in Tucson writes: "I think it would be great though I didn't like her too much when she was running against him. Once he was the nominee, she did a complete about face and supported him since. The character is amazing and I would welcome such a ticket."

Pat writes: "I hope not. Personally I think that Joe Biden is great. He is a working class guy and possesses a first-class intellect and keen sense of foreign policy and as for the gaffes Michael Kinsley once wrote that a gaffe is when a politician accidentally tells the truth. After all of the pandering and promises of both sides in Washington, we could use a healthy dose of the truth these days."

Stan says: "What a great idea and then Hillary could run for president in 2016 and 2020, then Chelsea Clinton in 2024 and 2028 and then Malia Obama in 2032 and 2036."

Chad in L.A. writes: "Recent history shows that having too ambitious a vice president can be disastrous for the whole world. See Bush/Cheney as reference."

And Sarah writes: "She would make a better candidate than Joe Biden, but is that really what is best for our country? Hillary is one of the best secretaries of state we have seen in a while, and she could keep that job where she is doing somegood."

Eugene in California writes: "I don't think it makes much of a difference. I suppose if Hillary became VP she might have an easier time with the presidential bid in 2016, but she is going to be getting long in the tooth by then."

And Brian says: "I don't care who he picks, he won't be re- elected."

And Ben says: "Not for a minute Jack. No more than I would drop my cat and go pick up a porcupine."

If you want to read more about this, go to my blog at CNN.com CNN.com/CaffertyFile.

BLITZER: Thinking about the porcupine. It's a good idea. Thanks very much.

A suspected serial killer with a foreign passport arrested as he tries to leave the United States. The dramatic details from Washington and from Israel on who he is and how police caught up with him.

Plus, inside of the national ice center where they are tracking a rogue glacier four times the size of Manhattan and you will want to see this.

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BLITZER: Pakistani President Asif Ali Zardari is getting his first look at what is considered to be the worst natural disaster in the country's recent history. Ranging flood waters have killed more than 1,300 people and public health officials now fear a second wave of death caused by waterborne diseases. Almost 1,600 people have been injured. One river is expected to crest today further impeding the lives of millions and millions of folks in Pakistan. The massive flooding which began in the northwest region of the country is now threatening cities as far south as Karachi. Let's bring in our Pentagon correspondent Barbara Starr for more on this story. It is tragic, Barbara.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Wolf, this has become a disaster of epic proportions and it is only going to get worse. The U.S. military is trying to help where it can.

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STARR: At least 15 million Pakistanis, six million of them children, affected by the floods. Here in Washington, Pakistan's ambassador trying to reassure local Pakistanis his government is doing everything it can.

UNIDENTIFIED MALE: So, how prepared can any government be for an event that happens only once in 90 years? No one can.

STARR: Pakistanis wonder if their already weak government can handle the crisis. Sameer Ahmet was in the flooded areas just days ago.

SAMEER AHMET, PAKISTANI FLOOD SURVIVOR: I did not see a lot of presence of the government of Pakistan over there which is disappointing.

STARR: That sentiment is a concern for the U.S. If Pakistan loses the people's confidence, it could mean a new security crisis.

BRUCE RIEDEL, BROOKINGS INSTITUTE: Pakistan has had four military coups in the past, and the failure of the civilian government to respond to this enormous human tragedy is going to increase the risk of yet more military takeovers in Pakistan.

STARR: The U.S. is increasing its assistance, more military helicopters in addition to food and money. The agency for international development is coordinating much of the effort, and is trying to combat the impression in Pakistan that the Taliban is providing more aid than the Pakistanis, themselves. The Taliban claim they are out there helping. Tell me what you know about that part of it.

MARK WARD, ACTING DIR., OFFICE OF FOREIGN DISASTER: They are probably out there helping in some communities. They were probably there before the rain started. They have no more access than we do.

AHMET: We all wanted to escape.

STARR: For Samara, memories of utter devastation.

AHMET: The river had just taken everything, you know, on the route. And people were helpless, and they are still helpless, and everyone wanted to just get out, and they were swimming for their lives.

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STARR: Now, Defense Secretary Robert Gates has authorized 19 additional military helicopters to go to the region, but Wolf, they have not been able to do very much, because the weather is bad, and the rain keeps falling, and the floodwaters are moving south. Food, clean water, shelter, all very much at a premium, and here at the Pentagon, officials are beginning to say that they, themselves, here are just beginning to understand the scope of this disaster -- Wolf.

BLITZER: All right. What a terrible, terrible tragedy. Barbara, thanks very much.

You're in THE SITUATION ROOM.

Happening now, a suspect in a series of stabbing attacks arrested at the last possible moment trying to fly to Israel. We are learning new details of the violent spree and the dramatic capture.