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Charter Bus Crash; Detroit Mayor's Troubles; FBI Probes Raid on Mayor's Home; Hunt for Missing Girl; Russia Invades Georgia

Aired August 08, 2008 - 10:00   ET


HEIDI COLLINS, CNN ANCHOR: Good morning once again, everybody. I'm Heidi Collins.
TONY HARRIS, CNN ANCHOR: And I'm Tony Harris. Stay informed all day in the CNN NEWSROOM.

Here's what's on the rundown.

Breaking news. Russian tanks roll across the border into Georgia. The former Soviet Republic says it also under an aerial attack.

COLLINS: U.S. combat troops out of Iraq by the end of 2010? Iraqi politicians say the deal is close.

HARRIS: The search for a Florida toddler, Caylee Anthony. Police analyzed evidence seized from her mother's closet today, Friday, August 8th.

You're in the CNN NEWSROOM.

And we are following breaking news out of the former Soviet Republic of Georgia. Georgia's president says his country is under attack by Russia. President Mikheil Saakashvili says Russian aircraft are dropping bombs and Russian tanks are moving in. Saakashvili says his force has responded today, shooting down two Russian aircraft. Violence follows clashes this week between Georgian troops and separatists forces in Georgia's breakaway region of South Ossetia.

Georgia's president gave CNN an exclusive interview just a few hours ago. Here's what he had to say about the Russian offensive.


PRES. MIKHEIL SAAKASHVILI, GEORGIA: These troops that are in Georgia now, they didn't come unexpectedly. Those troops were amassed - the border have been amassed at the border for the last three or four months, they were claiming they were staging exercises there. And as soon as a suitable pre-text was found yesterday, they moved in. But, you know, it was meant to be this way as we found out all the way through, and they didn't hide that very much. You know, they've been preparing, they've been looking at the world opinion how they would react to this preparation and in the end they just moved in. It's unheard of, unparalleled. It's absolutely outrageous.

(END VIDEO CLIP) HARRIS: Now what U.S. officials are saying about all this, live to Pentagon correspondent Barbara Starr. And for us, at the Pentagon watching this very closely.

Barbara, good morning.


This is an area many Americans may not have a lot of familiarity with, but here at the Pentagon and for the Bush administration, a very serious matter. The Republic of Georgia is a close ally of the U.S., and the U.S. cares a lot about what's going on there. There are about 130 U.S. military and civilian D.O.D. Defense Department personnel in Georgia right now. They are all accounted for, but the U.S. watching very carefully as this situation continues to develop for two major reasons.

Of course, first the instability and the violence. But Georgia is a major contributor of troops to the war in Iraq. The U.S. military has a training program in Georgia. That's why the Americans are there, to help prepare the Georgian troops to go to Iraq. In fact, just a couple of weeks ago there were up to 1,000 American troops in that republic. And of course, the U.S. wants to ensure they are safe.

They work on training the Georgian troops, not just for Iraq, of course, but Georgia is getting ready to become a member of NATO, and according to top officials we've spoken with, it's that NATO membership, that possibility, that has the Russians deeply upset and may be one of the reasons the Russians have taken some of this action to counter the U.S. effort to get Georgia into NATO, to show the world that Georgia is not a stable country perhaps, subject to violence, and that they shouldn't become members of NATO. That's what the U.S. thinks part of the Russian motivation may be right now. So all efforts being made to calm the situation down and to get this violence ratcheted back -- Tony.

HARRIS: OK. Barbara Starr at the Pentagon for us. Barbara, appreciate it. Thank you.

So many questions to ask on this developing story. We will put most of them, as many as we can to our Matthew Chance. He is coming up live from Moscow in just a couple of minutes.

COLLINS: Tragedy in Texas. A bus loaded with 55 church members careens over a highway overpass, and into a ravine. It happened overnight about 60 miles north of Dallas. Police say at least 13 people are dead. Investigators say a flat tire might have set it all in motion.


LT. STEVE AYERS, SHERMAN, TEXAS POLICE: It appears right now that it did not roll as it moved over the guardrail after the blowout. It landed on its side. That's what appears right now. Like I say, it's going to take some time for them to reconstruct the accident. That's going to take some time. But I think that will probably reveal some more information to us also, and I can't give the exact time now, but they're working on it as we speak.


COLLINS: The passengers were part of a church group traveling from Houston to a fair in Carthage, Missouri.

We want to talk a little bit more about this with Lieutenant Bob Fair. He's on the phone with us with the Sherman, Texas, Police Department.

Lieutenant, can you tell us a little bit more about what the gentleman -- what he was saying regarding the investigation and what is taking place right now?

VOICE OF LT. BOB FAIR, SHERMAN, TEXAS POLICE: What's taking place right now is the cleanup. Of course, all of the victims and the deceased have been removed from the scene. In fact, right now they have the bus loaded on a transport trailer and they are moving the bus to a secure location. Federal authorities are coming in to assist the police department with inspections of the bus and the history, of course, of the records of the company and the driver, and so forth, all that goes through with all these investigations all the time.

COLLINS: Boy, it's just such a horrible story. Have you ever seen anything like this before in the time that you have been with the police department?

FAIR: Well, yes, if you remember in 2004 we had a 10-person fatality where the transport crossed the highway and killed ten people at that time.

COLLINS: I do remember. You worked on that as well.

FAIR: Yes, I did. Yes I did.

COLLINS: It must be difficult for you also. Do you ever have any contact with the families of these victims?

FAIR: I haven't at this time. In the last accident I did, but in this one there were other people that were tasked with that assignment.

COLLINS: Yes. Well, that is a tough assignment as well. I just wonder when we're talking about the investigation and what will take place now, I looked at those pictures of the bus, I certainly don't want to speculate, but it looks like a fairly new vehicle. I imagine they'll look at the maintenance record certainly and how the tires were cared for?

FAIR: Oh, yes. They'll be checking all the records of the bus, all the history of it, all the log records of it. They'll be checking into everything and finding out exactly all the details and the history of the bus, the company, the driver, and we'll be going over everything very finely.

COLLINS: Sure, given your experience, lieutenant, any idea how long that will all take?

FAIR: Well, this investigation is going to take - if not days, weeks to make sure it's completed and make sure it's done very thoroughly.

COLLINS: All right. We will continue to follow that story, of course. Once again out of Texas this morning a terrible tragedy there, 13 people dead. We certainly do appreciate your time. Lieutenant Bob Fair from the Sherman, Texas, police department.

HARRIS: A troop withdrawal deal. Iraqi officials say it is close at hand. U.S. combat forces leaving Iraq by the end of 2010. Live now to CNN's Arwa Damon in Baghdad.

And Arwa, if you would, lay out this proposed, this tentative timeline for us, please.

ARWA DAMON, CNN CORRESPONDENT: Well, Tony, according to the Iraqi lawmakers that we spoke to, which do include Iraq's deputy foreign minister, who is also the head of Iraq's negotiating team, U.S. troops would be off the streets of Iraqi cities in less than a year, by June 30, 2009. They would then have all U.S. combat forces out of Iraq by 2010 with all remaining troops gone by 2011. Iraqis are saying that they are just days away from signing this deal.


MOHAMMED AL-HAJ MAHMOUD, IRAQI DEPUTY FOREIGN MINISTER: Well, according to our position, we would like to have a complete jurisdiction on the Iraqi territories except on the American soldiers during the military operations, but outside of that we would like to have Iraqi control.


DAMON: That according to Iraq's top negotiator is the only sticking point, that remains. However, U.S. officials that we have spoken area saying that even that timeline has not yet been defined. And both the Iraqis and the Americans are in agreement that any sort of timeline would still continue to be conditions based. No one really wants to set something so firmly that should the security situation deteriorate they can't send U.S. troops back in. And the U.S. official are telling us there has been much progress that's been made, but they're cautioning really that this deal is still very much in the making.

There are other issues of contractor immunity, detention authority that still needs to be ironed out, even though Iraqis are publicly telling us that agreements have been made on those fronts as well. Privately, however, we're hearing from Iraqi lawmakers that this timeline just might not be realistic.

Iraq still needs the U.S. It needs it for logistics, it needs it to control its airspace, it needs it for combat air support. When we look at the situation here, Iraqi officials are telling us that Iraq really isn't at a stage where it can protect itself. And that that's going to change in the next three years, highly unlikely, Tony.

HARRIS: Wow, with this announcement, your reporting days have gotten considerably busier. Arwa Damon for us in Baghdad.

Arwa, appreciate it. Good to see you. Thank you.

COLLINS: Deadly flash floods in New Hampshire. A seven-year-old girl died after her family's car flipped over in a flooded campground. The car was swept downstream. The father was able to get out and rescuers saved the mother, and another child.


UNIDENTIFIED FEMALE: He was screaming, help, get help, my family, my car. The car is under water, you know. There's people in the car. And help. I mean he was frantic, screaming, waving his arms up and down. Just a mess.


COLLINS: The seven-year-old girl's body was recovered after the water's receded. The floods were triggered by major storms that hit the state on Thursday. Reynolds Wolf joining us now from the severe weather center to talk more about these storms in the northeast.

Boy, what an awful story.

REYNOLDS WOLF, CNN METEOROLOGIST: Guys this is why we say over and over again, don't ever drive a car through flooded roadways. You just can't do it. I mean, if water is up to 18 inches, it can pick up some of the heaviest vehicles and move them downstream. And more people die in flooding than any other weather phenomena. Just a nightmare situation and still the rain will continue today. You know, just over the last 24 hours, we've had these records. They were showing up Goodland, Kansas, Hartford, Connecticut, Tupelo, Mississippi, even into Harrison, Arkansas and Denver, Colorado. Heavy rain.

Right now we've got a chance of seeing some more flooding in parts of the northeast, namely into New York state, back into Vermont, New Hampshire, even into Maine, as the scattered showers will continue especially later on today. And every place you see that happens to be shaded with a dark or light green is where you have the watches and warnings in effect.

Over the next 30 seconds we're going to show you a few other places, namely both in Colorado and into Utah where we have the threat of flooding for today. And not only the heavy rainfall possibility but also dealing with potential fires in parts of Washington state, Oregon even into Idaho. We got the red flag warnings in effect. And as we head right back down to the Sierra Nevada, we are seeing again another potential for fires, see from Reno back to Carson City, right down to parts of, actually not far from Yosemite, believe it or not. So, again, the dry conditions are going to persist out to the west, and that is something to watch very careful. So, fire, rain, we got both sides to cover today and possibly through the weekend. Let's send it back to you guys at the desk.

COLLINS: All right. Reynolds, thank you. We'll check back later on.

WOLF: You bet.

HARRIS: Russian tanks on the move, fighting erupts in the former Soviet Republic of Georgia. Georgia's president says his country is under attack.


COLLINS: Once called the forbidden city, today Beijing is a city of smiles and snapshots. We're going beyond the Olympics and behind the scenes.


COLLINS: We'll quickly get you updated in the situation that we've been covering all morning long regarding Russia and Georgia. What happened is a Russian military aircraft dropped two bombs on Georgian territory, known as South Ossetia.

We want to go ahead and go to Matthew Chance now to learn a little bit more about what Russia is saying on this military confrontation -- Matthew.

MATTHEW CHANCE, CNN CORRESPONDENT: Well, Russia is confirming that it's carrying out any attacks inside Georgia or inside the territory of South Ossetia. It is saying that it's sending reinforcements into Ossetia, South Ossetia, from Russia in order to back up the thousands of Russian peacekeepers that are already on the ground as a result of an international agreement and the ethnic fighting that took place in South Ossetia in the 1990s.

Russian state television has been broadcasting images of Russian tanks and armored vehicles pouring across the Russian frontier into Georgia, into South Ossetia. The Georgian President Mikheil Saakashvili has appeared on CNN saying that his country is under attack by Russia. And there have been claims by the Georgian officials that up to four Russian war planes have been shot down by Georgian forces. And so a lot of claims and counterclaims kind of taking place at the moment in this very volatile situation.

COLLINS: So, Matthew, let me clarify. Are you saying that Russian officials are denying that these bombs were actually dropped? Or they are not confirming or denying?

CHANCE: They're refusing to comment on what they call accusations coming from Georgia, a government in which they say they have no confidence. And so they're kind of avoiding addressing these accusations, you know, directly. They are saying that they're providing humanitarian support, though, for the many refugees who they say are flooding out of South Ossetia to north towards Russia. The Russian President Dmitry Medvedev has issued an executive order calling for funding to provide whatever humanitarian assistance is necessary to cater for these refugees.

COLLINS: All right. We know you're following these developments very, very closely.

CNN's Matthew Chance, we sure do appreciate it. Live from Moscow this morning.

We'll take a moment to give you a few more facts about Georgia. It was part of the Soviet Union until 1991. South Ossetia declared it's independence from Georgia back in the early 1990s but South Ossetia's independence is not internationally recognized.

HARRIS: Well, the summer games under way in Beijing, China. But beyond the games and behinds the scenes, the mystery and magic of what had once been known as the forbidden city. CNN's Larry Smith is our tour guide.

And we're going to rate you on this, Larry. Good to see you, sir.

LARRY SMITH, CNN CORRESPONDENT: Good to see you. Good evening from here in Beijing.

Right now the opening ceremony continues in the Birds' Nest. More than 90,000 spectators watching a fantastic spectacle. As usually is for the Olympic opening ceremony. In fact, kicking off the evening was a series of 29 fireworks that started at Tiananmen Square and went in a footstep pattern all the way up to the National Stadium, the Birds' Nest, the 29 symbolizing the 29th Olympiad.

Now, as you mentioned, you know, you can't come to Beijing and not at least attempt to get a taste of this city's rich history. And so we set out to do just that.


SMITH (voice-over): Right now we're at the media center, 6,000 media members live here. We'll live here throughout the games. And later for the Paralympics in September when they come along. Right now, this is our home away from home. And it's been good to us so far.

So, let's go out, see the city, show you what we do behind the scenes to get ready for the games and then we'll let the games begin.

When we got through the check point. So now here we are in Tiananmen Square. It's like a big festival, everyone here just taking pictures. Everyone's been very friendly. Everyone saying ni hao, which is hello.

With some of the things that happened this year, you kind of heard there have been anti-American sentiment. Certainly haven't felt that at all today. Not all. Why do you want a picture with us? It's very human. I don't feel very fresh. It's very warm. You're welcome.

UNIDENTIFIED MALE: They think you're an athlete.

SMITH: Boy, are they mistaken.

UNIDENTIFIED MALE: That's why they want pictures with you.

SMITH: I thought they watch CNN.

UNIDENTIFIED MALE: They don't care about CNN. They think you're an athlete.

SMITH: Oh, really. OK. Let's get going. The picture is actually the picture of Chairman Mao. It's world famous. It's actually overlooking the whole square right here. It's repainted very often. So they just take it down, repaint it, put it back up again.

Now, here at the Forbidden City right through that gate is the Forbidden City. We're about to walk in there. But first one thing I never of thought I'd ever see in the Forbidden City, a basketball court complete with Astroturf for the court. Well, we are finally here. Imagine this is your house and the first three gates we just went through are your garden. This is the house, the emperor's home here in the Forbidden City. There is a massive structure, impressive and has stood the test of time over centuries.


SMITH: Back here live now again here in Beijing as the opening ceremony continues. Still waiting for the United States to make its walk out as the athletes are now beginning their procession into the stadium. Tony.

HARRIS: Well, that was terrific. That was a good look. They thought you were an athlete. Forget about CNN. Hey, what sport do you play? That was good stuff. All right, Larry, great to see you, man.

SMITH: They're so unusual. Right. All right. OK.

HARRIS: Thanks, man. And you can follow all of the Olympic action at in a special section called fan zone. This unique site -- let's show folks -- brings CNN's global resources right to your computer. Just go to zone.

COLLINS: His door kicked in, his dignity bruised. The FBI now investigating a raid at a Maryland mayor's home.


HARRIS: A man is in custody in Florida, not sure you've heard this story yet, accused of an assassination threat against Barack Obama. Authorities say Raymond Hunter Geisel made the threat while at a bail bondsman training seminar. They say they found a gun, ammunition and other weapons in Geisel's vehicle and hotel room. Secret service agents say Geisel said he suffers from post traumatic stress disorder and once checked himself into a psychiatric institution for treatment.

COLLINS: Bill Clinton's role at the Democratic Convention is now set. He will give a speech when the Democrats meet in Denver later this month. Senior political analyst Bill Schneider live now from Washington.

So, Bill, there was a little uncertainty over whether the former president would actually appear, right.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: There was some uncertainty, but we just found out last night that he is going to appear and he is going to speak at the Democratic convention. There's been a little bit of tension between particularly Bill Clinton and the Obama campaign over what role he would play, over how full throated an endorsement he would give to Obama.

He seemed to be unable or unwilling to say that he thought Obama was fully qualified to be president when he was interviewed by ABC News. So he is being given this major speaking role on Wednesday night, the third night of the convention, presumably his wife will speak on Tuesday night. So it will be a separate occasion. And there both he and his wife are expected to be good soldiers and give full support for the ticket, at least that's what the Obama campaign is hoping for, is counting on.

COLLINS: Hey, Bill, I just want to get this out there. We are hearing that on the other side of the fence, if you will, vice president Dick Cheney will actually be speaking now at the RNC, which of course, will be in Minnesota. I just wanted to get that out while we are talking to you. And it's just coming in to us here.


COLLINS: And so is this a big deal that Bill Clinton will actually be doing a speech?

SCHNEIDER: Well, it is because he has a considerable following within the Democratic Party and the country. He was the last elected Democratic president, two terms, and you know, most Democrats respect him, believe his presidency was on the whole a great success. But there is a passing of torch here. Barack Obama is taking over the Democratic Party.

Remember, Bill Clinton has dominated the Democratic Party for 16 years, ever since 1992. His vice president Al Gore didn't win in 2000. John Kerry didn't win in 2004. Throughout the last 16 years, the Democratic Party has been the Clinton party. So it's kind of a mixed feeling for the Clintons and for their supporters because it means that they're really giving up control of the party to Barack Obama and to his political movement. And if Obama wins, it will become the Barack Obama party.

COLLINS: All right. CNN's Bill Schneider from Washington this morning. We sure do appreciate it, Bill.


HARRIS: Roads turn to rivers, treacherous driving conditions just before rush hour across Las Vegas. Look at these pictures.


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

COLLINS: Hi there, everybody. I'm Heidi Collins.

I want to get you up to speed on one of the stories we've been following all day long.

You are looking now at some new video coming into us from one of our affiliates there in Texas. This is the bus. Boy, look at the damage. There's the blown tire that we're talking about and we have been talking about this morning that may have contributed to the death of 13 people on that bus. Self critical injuries as well for the rest of the 55 people who were originally on that bus. This was a Vietnamese church group that was traveling from Houston to a fair in Carthage, Missouri.

The latest information that we want to get out to you right now is that the National Transportation Safety Board will be sending a team known as a go team to investigate this bus crash.

Once again, we've been hearing from authorities there that they did find a blown tire on the bridge and are looking into the possibility that that tire, as well as one that we just showed you a ago on the actual bus still may have contributed to this horrible accident.

Also learned from one of the authorities there in a press conference just a little while ago that it appears at least at this point that the driver had fallen asleep.

We are, of course, going to wait for more of that investigation to take place. Very early on. Of course, we'll stay on top of the story for you.

HARRIS: The mayor of Detroit in court right after now after spending the night in jail. Mayor Kwame Kilpatrick is appealing a court order that landed him in jail. A live picture of the court hearing. Kilpatrick is accused of violating the terms of his bond that he took a business trip to Canada. Kilpatrick was free on bond facing felony charges of perjury, obstruction of justice and misconduct of office. The charges stem from romantic text messages with his former chief of staff.

Two dogs shot to death, a family terrorized. Now the FBI is opening a civil rights investigation into the raid open the home of Berwyn Heights, Maryland, mayor Cheye Calvo. Police say it was part of an investigation into a ring that was shipping packages of drugs to the homes of unsuspecting people.

Now earlier this morning, the mayor told CNN's "AMERICAN MORNING" he thought the raid was a home invasion.


MAYOR CHEYE CALVO, BERWYN HEIGHTS, MARYLAND: The reality is this happens all the time in this country and this is Prince George's County. To most people that it happens don't have the community support and the platform to speak out. I appreciate you paying attention to our condition, but I hope you'll give the same attention to those people who may not have the same platform and voice that we have.


HARRIS: Calvo's wife is still traumatized by the death of her dogs.


TRINITY TOMSIC, WIFE OF BERWYN HEIGHTS MAYOR: A little girl came to our house after this happened, the next day. I didn't know who she was. She didn't know us. But she saw us walking the dogs every day, and waving at her. And she came in, she gave me a big hug and she said to me, she said, if the police shot your dogs dead and did this to you, how can I trust them? And I don't want people to feel like that. I just want them to be proud of our police and proud to live in Prince George's County.


HARRIS: Oh, man. The Prince George's County Police Department, for its part, expressed sympathy but no apology. It described the raid as part of a continuing investigation into drug trafficking.

COLLINS: An awful lot of news we are following today.

Quickly want to get back to a story that we mentioned just a moment ago about the bus crash that happened in Texas. I was reading some lines here, and I want to make sure that I correct that one of the authorities on the scene there, in particular, had said at least at this point it does not appear that the driver had fallen asleep. This is the accident that we told you about where the 13 people have died. Again, the investigation, very early on, the NTSB is now there and they are investigating this terrible tragedy.

Now to this story, some new evidence but no answers in the hunt for little Caylee Anthony. Family members hope she will be found by her third birthday, which is tomorrow. She's been missing for more than a month now. Investigators can't seem to get a straight story from her mother. Police crime labs right now poring over new evidence collected at the family's home near Orlando.

Our Randi Kaye reports.


RANDI KAYE, CNN CORRESPONDENT: The home on Hope Springs Drive was swarmed by cameras, the curious and crime scene investigators who for a second straight day left carrying evidence they hope may lead them to this missing toddler. The lead detective in the hunt for Caylee Anthony also paid another visit. He said he was asked to by Cindy, Caylee's grandmother.

SGT. JOHN ALLEN, ORANGE COUNTY, FLA. SHERIFF'S DEPT.: There were things that would be important to us. She asked us to come out, meet with her and pick that stuff up and talk to her.

KAYE: What they picked up was evidence obtained with this search warrant. The items belonged to Caylee's mother, Casey, and were taken from a closet in her bedroom, three pairs of pants, six shirts in various sizes and two skirts. Police hope the evidence from the house will provide some clues. They are already testing DNA from a stain in Casey's car. Local media say the family has also turned over Casey's cell phone records. Investigators are looking for any contact she may have had with the baby-sitter she claims she left Caylee with on June 9th.

Casey had been jailed on charges of child neglect and filing a false police report since mid-July. Until recently, her family suspected she was lying.

This is what her mother said in a 911 call on July 15th.


CINDY ANTHONY, GRANDMOTHER OF MISSING TODDLER: I told you my daughter was missing for a month. I just found her today. But I can't find my granddaughter. She just admitted to me that she's been trying to find her herself. There's something wrong. I found my daughter's car today and it smells like there's been a dead body in the damn car.


KAYE: Casey initially said she did not know where her daughter was. Now she says she knows Caylee is alive and could be in harm's way.

In a case full of surprising developments, one reporter in Florida tells CNN Casey may even have posed as her daughter's baby- sitter. One day after Caylee was last seen alive, her mom reportedly used the baby-sitter's name to look at an apartment, the same apartment where she told police the baby-sitter lived. That apartment, police say, had been vacant for six months.

Police have evidence. They have more than 1,000 tips. But are they getting any closer to solving the mystery of Caylee Anthony's disappearance?

Randi Kaye, CNN, Atlanta.


HARRIS: Boy, getting home was a real gamble in Las Vegas. Here's why. Take a look. Heavy rain stirs a flash flood. Look at this. Heidi, you know this area pretty well there. That's a mess.

COLLINS: Stop it. No, I only know the strip. Wow, look at that, though.

HARRIS: Streets turned into rivers, huh? And this all happening just before rush hour so you can imagine the intense storms also led to at least hour-long delays at the airports. Then the ripple effect and dominos collapse and collide.


HARRIS: Trying to get quick new information here on Detroit's mayor Kwame Kilpatrick. The news is that he has been released from jail. He has to wear a tether. There's a fine as well. But the court proceeding we brought you just moments ago that has apparently wrapped. Bond reinstated. But he has to wear this electronic tether. You know he's set to stand trial for obstruction of justice charges, that trial set to move forward. Yes, $50,000 is the new bond for Detroit's mayor. That case resolved, Kwame Kilpatrick out of jail, still awaiting trial on the criminal charges.

COLLINS: What they're saying, unfiltered moments with the candidates. Barack Obama in a moment. John McCain speaking live, next hour.


HARRIS: Nice rebound on Wall Street despite another huge loss for a mortgage giant. Let's get more on the story from Susan Lisovicz, on the floor of the New York stock exchange.

We must be talking about Fannie Mae at this point, Susan.

SUSAN LISOVICZ, CNN CORRESPONDENT: I think Yogi Berra would say deja vu, all over again. Yes, that's right. Fannie Mae losing $2.3 billion in the last quarter. That's about four times worse than the consensus on Wall Street. What's the culprit? Of course, it's a big increase in provisions for default. Credit losses for the last quarter amounted to $1.3 billion, up 400 percent from a year ago.

Also losses to reflect the declining value of those mortgage- backed securities, something we also heard a lot about. CEO of Fannie says this worst housing prices in 70 years. He warns of billions or more losses yet to come and setting aside $4 billion for future losses. Of course, we just heard two days ago from Fannie's brother, Freddie Mac, and results also worse than expected. Its executive says we're only halfway through the housing crisis.

HARRIS: Oh, boy. You know Susan, I know that all of us as taxpayers are on the hook for a credit line if these companies continue to struggle, but I am curious to know what Fannie is doing to shore up its balance sheet. What is it doing to help itself? LISOVICZ: Right, just like Freddie, it's slashing its dividend from 35 cents to 5 cents. It also says it wants to cut its operating costs by 10 percent by the end of next year. It's pulling out of something called Alt-A loans. These loans incredibly enough don't ask for a compensation, your record of compensation. They're often called liar loans. Of course, you know how much trouble that amounted to.

HARRIS: That's right.

LISOVICZ: Also, it's opening offices in California and Florida to closely monitor sales of foreclosed properties. Obviously those are two state was a very high number of those.

Fannie shares, well they are getting whacked today. They're down 8.5 percent. You know what, Tony? Year to date, Fannie shares are down nearly 80 percent. It's just been a terrible, terrible time. But if you look at the big board, nice rebound.

HARRIS: That's pretty impressive.

LISOVICZ: Yes. Dow is up 187 points, NASDAQ up 35. And oil is down three bucks because of the big rally in the dollar. It's at a five-month high against the euro. Europe is still not cheap, mind you.

HARRIS: Absolutely. But we like the idea of stirring up the dollar and its impact on the price of oil. We'll take that.

Susan, good to see you. See you next hour.

LISOVICZ: See you in the next hour.

HARRIS: A closer look now at what the presidential candidates are saying. It is part of our effort to help you make an informed decision on Election Day. Here is Senator John McCain in Lima, Ohio, yesterday challenging Barack Obama on the economy and energy.


SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: I spoke up against the administration and Congress and Senator Obama, when they gave us an energy bill with more than giveaways to big oil and really no solution to our energy problems. I want to take a minute here on this issue because I think Senator Obama might be a little bit confused.

Yesterday, he accused me of having President Bush's policies on energy. That's odd because he voted for the president's energy bill and I voted against it. I voted against that $2.8 billion in corporate welfare to big oil companies and they're already making record profits as you know. Senator Obama voted for that bill and its big oil giveaways.

I know he hasn't been in the Senate that long, but even in the real world voting for something means you support it and voting against something means you oppose it. Unfortunately, on issues big and small, what Senator Obama says and what he does are two different things. Senator Obama says he's going to change Washington, but his plan is to raise your taxes and spend more of your money. It's not my idea of a solution of what troubles Washington. In fact, it sounds a lot like the problem.

In the few years he's been in the Senate, he has requested nearly a billion dollars in earmarked pork barrel spending. That's a million dollars almost for every of day that spent in office. We need to end this out of control spending in Washington, and when I'm president we will stop it. And I'm proud to stand before you to tell you that I have never asked for nor received a single earmarked pork barrel project for my state. I'm proud of it.

I will veto -- I will veto -- I will veto every pork barrel bill that comes across my desk. I will make them famous, and you will know their names, my friends. You will know their names. We will stop this corruption. We'll stop this corruption in Washington, and it is corruption.

Former members of Congress now are residing in federal prison because of this system. You know, I often steal a lot of lines from Ronald Reagan. Ronald Reagan used to say Congress spent money like a drunken sailor only I never knew a sailor drunk or sober with the imagination of Congress. That's a pretty good line. It gets a good laugh.

I use it so often -- I'm not making this up -- I received an e- mail from a guy that said, as a former drunken sailor, I resent being compared to members of Congress. You know, you can't blame him. You can't blame him.


HARRIS: And we will hear from Barack Obama -- actually, Senator McCain live next hour.

COLLINS: Now we hear from Senator Barack Obama. He talks to reporters on his campaign plane about his approach to solving the energy crisis.


SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: Our main focus has to be on creating energy efficiencies, on developing alternative power like solar and wind and biodiesel. I've made a major commitment to investing in these alternative energies as well as developing the next generation -- excuse me -- of fuel-efficient cars.

Our economy I think is going to depend on how successfully we deal with this huge structural issue, and as I said before, I'm pleased that there were some serious negotiations taking place in the Senate among the so-called gang of ten. I think it provides a framework for continued conversations.

I am not persuaded that offshore drilling is going to provide the kind of significant relief or long-term strategy that we need, but I think there is room for negotiations around a domestic production strategy as long as it's part of a larger comprehensive strategy to deal with our real energy challenges.

The fact that John McCain and Paris Hilton are engaged in a spat I don't think is of prominent concern for the American people. I think they want some real solutions to their problems, not chattering between those two. And in terms of the tire gauge issue, I think that was and is an illuminating issue. You've got, number one, John McCain pretending that that was some centerpiece of my policy as opposed to a response to a town hall meeting, so he had a misleading ad which can everybody knows was misleading. Then it turns out that John McCain himself said, actually, inflating your tires was a smart thing to do, as did President Bush, as did the AAA, as did NASCAR.

So I thought it was a good example of the fact that the other side is not serious about real energy savings that can push down the price of gas. They're interested in scoring political points. And as long as we're speaking truthfully about what we need to do to meet our challenges, I'll let you guys worry about the politics of it.


COLLINS: Barack Obama in his own words.

HARRIS: Russian tanks on the move, fighting erupts in the former Soviet Republic of Georgia. Georgia's president says his country is under attack.


COLLINS: The fighting in the Republic of Georgia has caught many Americans off guard but this conflict has actually been running hot and cold for many, many years.

Veronica De La Cruz is in New York now to help explain the situation there.

Hi, Veronica.

VERONICA DE LA CRUZ, CNN CORRESPONDENT: Good morning to you, Heidi. actually has an excellent explainer on what led up to today's military action by Russia. The epicenter, Heidi, of the conflict is a region within the Republic of Georgia called South Ossetia. Historically Heidi, this identifies more strongly to the north. For years, it's been trying to insert its independence from Georgia. Recent tensions heated up in November 2006 when they declared independence from Georgia in a referendum and Russian peacekeepers have been keeping the two sides apart. But shooting erupted several days ago between Georgian troops and opposing forces in South Ossetia. Each side blames the other for firing fist.

As you know, we've been watching the video and pictures all morning. The situation has escalating to where Russia is sending in tanks and warplanes. There is a lot online. You can find a lot on

COLLINS: Very good. We appreciate it, Veronica De La Cruz.

HARRIS: Too young to get a tattoo but not too young to give one. Word on street is she does a mean Sponge Bob. Not bad with a skull and crossbones either.

New York stock exchange, nice Friday rally. The Dow up 200 points, not sure where the NASDAQ is. A good day so far on Wall Street.


HARRIS: You know, I hear tattoos are all the rage these days, but would you trust your skin to a 9-year-old? Lilly Hibbs is her name. She's been around body art all her life. Mom does piercings and dad does ink.


LILLY HIBBS, TATTOO ARTIST: One person saw me tattooing so many times when they were going to a different place they just stopped in saying they wanted a tattoo by me.

STEPHEN HIBBS, FATHER: Most parents would say, I can't believe your kid wants to be a tattoo artist where I say, I could only be lucky if my kid turns out to be a tattoo artist.


HARRIS: OK. Lilly's work has been featured on YouTube. One customer even drove to Dallas from North Carolina for one of Lilly's tats after seeing her work online.

Good morning again, everyone. You're informed with CNN.

I'm Tony Harris.

COLLINS: Hi, everybody. I'm Heidi Collins.

Developments keep coming into the CNN NEWSROOM on this Friday, August 8th.