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Obama Talks Economy In Iowa; Romney Hits Obama On The Economy; Russian Warships To Syria; 24 Hours of Hell in Cambodia; Nearing The Death Of Cash; Holder Speaks On Texas Voter I.D. Law; Flash Flood Capital Of The U.S.; Versace's Return To The Ritz; Cable Channels Could Go Dark

Aired July 10, 2012 - 14:00   ET

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

BROOKE BALDWIN, CNN ANCHOR: Hi, everybody. I'm Brooke Baldwin. Happy Tuesday to you. A lot to get to, but I want to begin with some news just into us here at CNN. There's a report of smoke inside the control tower at Newark Liberty Airport in New Jersey. The FAA is issuing a ground stop here. Ground stop on all air traffic. We are told the tower has been evacuated because smoke was reported in the elevator shaft. That's what we know. And as of right this moment, air traffic controllers, they're managing their air traffic at an alternate site. We're keeping a close eye as far as what's happening at Newark Airport. Any updates we promise we'll pass them along to you.

Also happening right now, President Barack Obama, here he is speaking live to a crowd. He is in Cedar Rapids, Iowa. He is pushing an issue that affects the paychecks of each and every American. He wants to extend the Bush era tax cuts, but only to households earning less than $250,000. Brianna Keilar is following this with us from the White House.

And we've talked about this. I mean there really is, Brianna, zero chance, zero chance the Republicans in the House, that they're going to approve this partial extension. So what is his strategy? What's the president's strategy here?

BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: Yes, that's right. And also possibly zero chance that this would get past the Democratically controlled Senate. What he's really trying to do here, Brooke, is stake out a position in an election year. This is all about politics. So, President Obama has been talking now for months that he's the one fighting for the middle class. And this plays very much into that because he's talking about extending the Bush era tax cuts, but only for American families that are making up to $250,000. And he's trying to portray Mitt Romney and congressional Republicans as protecting the wealthy.

On the flipside, as you know, Republicans and Mitt Romney are saying that President Obama would be hurting small businesses without extending all of the tax cut for all Americans, no matter what they earn. But this is really a battle for the message here as President Obama talks a lot about fairness and that he's fighting for the middle class.

BALDWIN: So, as it's a battle for the message, let's just remind everyone, you know, he is -- the president's just only pushing for this one-year extension. So even if -- and this is a big if, right -- if he gets it, we're going to be right back here, "Groundhog Day" again, arguing about these extended cuts again next year, will we not?

KEILAR: Well, yes. And House Republicans who are expecting to have a vote later this month on an across the board extension, also looking for a one-year extension. Now the idea here is that that would buy some time for comprehensive tax reform so that you wouldn't be dealing with things piecemeal, like with the Bush era tax cuts or with loopholes for certain industries or for other tax cuts that have to be resolved. But, obviously, comprehensive tax reform is a very heavy lift and they're going to have to deal, certainly, with the Bush era tax cuts before they can tackle that. So this is a fight that we'll be hearing about for some time.

BALDWIN: And, you know, as far as the fight goes, we know where a lot of Republicans stands. But we just want to point out some Democrats as well here. Virginia Democratic Senate Candidate Tim Kaine, he released a statement saying the cutoff should actually be twice as high as the president's proposal. The president wants $250,000. Kaine wants $500,000. Does the president, Brianna, even have his own party behind him on this one?

KEILAR: No, he doesn't. If passed as prologue, this is something that he would have trouble getting past Democrats. Now, you do have some key Democrats, like Senator Chuck Schumer, who has promoted in the past setting the threshold at $1 million. But now saying that, you know, this is important to look at what the president is doing and really indicating that he would go along with what the president is talking about.

But you've got a lot of other more sort of middle of the road moderate Democrats, especially in the Senate, where Democrats, as you know, do not have the 60 votes they'd need to pass something. But even a lot of moderate Democrats who are facing tough re-election battles, it would be really difficult for them to sign on to this because they're really afraid of looking as if they're doing anything to hurt small businesses. And that's certainly how their opponents would really, I guess, portray them, as really hurting job growth at a time when that's really what Americans want.

Brooke.

BALDWIN: Brianna Keilar at the White House. The president speaking in Iowa right now.

Let's talk about Mitt Romney now, because he is slamming President Obama and the president's plan to extend these Bush tax cuts. In fact, he just wrapped up a town hall meeting in Grand Junction, Colorado, just a short time ago. And like a lot of his fellow Republicans, Romney framed the tax expiration as a tax hike. And not just, he says, for the wealthiest Americans. Take a listen.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: For job creators and small businesses, he announced a massive tax increase. So at the very time the American people are seeing fewer jobs created than we need, the president announces he's going to make it harder for jobs to be created. I just don't think this president understands how our economy works. Liberals have an entirely different view about what makes America the economic powerhouse it is.

(END VIDEO CLIP)

BALDWIN: CNN political editor Paul Steinhauser.

Paul, you heard the boos. You know, as we were just talking to Brianna, Democrats say this is just an expiration of temporary tax cuts. Romney and Republicans are calling it a tax increase, tax hike. And to her point about messaging, isn't this just a matter of who wins the message?

PAUL STEINHAUSER, CNN POLITICAL EDITOR: Yes, it's a lot about messaging. And with less than four months to go now until the election, it's a lot about campaigning, no doubt about it, Brooke. And you heard Mitt Romney in that sound you just played say jobs how many times? That's what the Republicans, that's what Mitt Romney's trying to frame this about. This, they say, would be a tax increase on the wealthiest Americans. Those who own small businesses. It's all about jobs, jobs, jobs. That's how they're trying to frame it because jobs, of course, and the economy, the top concern to American voters right now and been that way for years.

Well, what do Americans think about all this, Brooke? Take a look at this. Our most recent poll in this issue was last October and a majority of Americans said they were OK with those making $250,000 a year or more, they were OK with their taxes increasing or the cuts expiring, however you want to say it.

One thing, though, Brooke, when we broke down that poll, there is a partisan divide here and Republicans are pretty uniform on this and they are against that move. And that's why you're seeing Mitt Romney and congressional Republicans very much opposed to the president, Brooke.

BALDWIN: Got another poll we're going to talk about here in just a moment. But you mentioned jobs. Part of this whole jobs discussion lately has been this word that both camps now are throwing out, that being outsourcing. Romney hitting back at President Obama over one of their latest battlegrounds being outsourcing. Take a listen to this.

(BEGIN VIDEO CLIP)

ROMNEY: Is interesting that when it comes to outsourcing, that this president has been outsourcing a good deal of American jobs himself, by putting money into energy companies, solar and wind energy companies, that end up making their products outside the United States. If there's an outsourcer in chief, it's the president of the United States, not the guy who's running to replace him.

(END VIDEO CLIP) BALDWIN: So, here we go, Paul. I mean we heard outsourcing, outsourcing from, you know, camp Obama when it came to Bain Capital. Now we're hearing it from, you know, commander and outsourcing chief from Mitt Romney talking about the federal stimulus money.

STEINHAUSER: Again, I guess this goes right back to jobs. Both sides claim the other side are sending jobs overseas. You know, the Obama campaign and an independent super PAC that's supporting the president have both went up with ads in a lot of these key battleground states, Brooke, over the last couple of weeks, you know, just claiming that Mitt Romney, when he was head of Bain Capital, a lot of the companies they invested in did ship jobs overseas. Now you're seeing Romney and Republicans trying to turn the argument back on the president saying his policies over the last three and a half years have sent jobs overseas.

While Romney said what he just said, that sound you played in Colorado today, the chairman of the Republican National Committee was in Iowa, where the president is, also going after the same tactic here, saying that the president's policies are shipping jobs overseas. You know, fact-checkers have said there are holes in both these arguments, Brooke.

BALDWIN: They have, indeed. But, still, does that matter? It's pretty interesting. Talk to me about these poll numbers that came out today. Despite all this sort of verbal battling back and forth, people are still very split.

STEINHAUSER: Very split. Let's take a look at these numbers from ABC/"Washington Post." A national survey. Brooke, can you get any tighter than that? Forty-seven percent for the --

BALDWIN: No.

STEINHAUSER: Yes. And you know what's interesting, we've been in a general election contest basically since early April when Rick Santorum dropped out and Romney became the, you know, presumptive GOP nominee. Those numbers have stayed pretty consistent in most national polls. Most polls have either dead even or the president with a slight advantage. A lot of ads have been up there. It doesn't seem to have changed, you know, the barometer that much, Brooke. A little less than four months to go.

BALDWIN: Yes, that needle -- that needle is not moving very much, is it, Paul Steinhauser. Paul, thank you so much. We'll be watch the exciting next couple of months before the big elections.

And we have a lot for you in the next two hours. Watch this.

A source tells CNN that Russian military ships are approaching a port in Syria. But this comes as we're getting a hint that Russia may be slowly backing away from the Assad regime.

I'm Brooke Baldwin. The news is now.

One of the world's biggest banks under fire for bad behavior. But new questions surface about what the New York Fed knew and when.

And get ready for the death of cash. Why tech giants are hoping the green soon becomes an American pastime.

(COMMERCIAL BREAK)

BALDWIN: There is a lot going on right now. "Rapid Fire." Let's go.

Beginning with House Republicans. They are making another attempt to kill President Obama's health care reform law. In fact, they're set to vote tomorrow to appeal it. The measure has no chance of passing in the Senate, but it does gives Republicans yet another chance to demonstrate their opposition to Obamacare. This is the first vote on the health care law since the U.S. Supreme Court upheld it last month.

And the Justice Department is offering up to $1 million for information leading to the arrest of four men allegedly responsible for the killing that set off that Fast and Furious controversy. The U.S. attorney's office says the men, who are Mexican citizens, killed Border Patrol Agent Brian Terry. Guns tracked in Operation Fast and Furious were found at the scene of Terry's killing.

(BEGIN VIDEO CLIP)

LAURA DUFFY, U.S. ATTORNEY, SOUTHERN DISTRICT OF CALIFORNIA: The indictment alleges that upon entering the United States, these defendants armed themselves, they armed themselves with firearms and they did so with the intention that they would use those firearms to rob marijuana loads from individuals as they were smuggling them into the United States.

(END VIDEO CLIP)

BALDWIN: In addition here, a U.S. attorney says a fifth man, allegedly involved in the killing, is in custody.

And what a picture here. I just wanted to share this with you. Look -- just look at this. Do you see something here on the right side of your screen? This is a picture out of the United Arab Emirates. Do you see the little legs on the right? That's a baby stuffed into a handbag. Yep. An Egyptian couple has been arrested, attempting to smuggle the five-month-old through security at the UAE Airport. The baby was discovered because of this. You're looking at it. An x-ray machine. The couple flew into the country, didn't have a visa for the child, so they apparently hoped to sneak the little baby past security in the hand luggage. Come on, now. The parents remain in the UAE to be questioned. The baby is in good condition.

A new day, a new mystery out of North Korea. An unidentified woman joined leader Kim Jong-un Sunday at a ceremony honoring his late grandfather, the country's founder. A lot of questions. Is she his wife? His sister? His girlfriend? No one knows. She also showed up at that pageant we told you about just yesterday. Remember the pageant featuring the Disney characters? There she is. Her high-profile appearances, they are quite unusual, but so far no official world on who in the world she might be. Hurricane Emilia is getting stronger and larger. There she is churning in the Pacific. Top winds at 140 miles per hour. This is a category four storm, churning just about 700 miles off Baja, California. And while the storm isn't a threat to land, you want to keep the Dramamine close if you are on a cruise ship.

Talk about a leap of faith here. Watch this as a teenager jumps 35 feet. Thirty-five feet from a chair lift during a lightning storm. Watch. We spotlighted it for you. Thirty-five feet down because of the lightning. This is a Jersey Shore -- Melanie Rossomando says she felt like she was caught in a metal death trap.

(BEGIN VIDEO CLIP)

MELANIE ROSSOMANDO, SKYRIDE JUMPER: Or I'd break a leg maybe.

HERLIDE JOSEPH, SKYRIDER: I was like, OK, I'll only jump if you jump, too. And she was like, OK. And then she jumped. And I was like, oh, wait, I wasn't ready.

(END VIDEO CLIP)

BALDWIN: Well, they're laughing about it now and they're high-fiving, so they're OK. They're bruised but OK. The operator of the lift says they were already evacuating people from the ride when the girls jumped.

A soggy but very regal reception for the Olympic torch in London. Queen Elizabeth and her husband, Prince Philip, Duke of Edinburgh, welcomed the torch at Windsor Castle this morning. After getting out of the rain and curtsying to the queen, the 74-year-old torch bearer said, it's English weather, isn't it? Ah, those summers in the U.K. The Olympic opening ceremonies are set for July 27th.

Russian warships heading to Syria right now. We're going to explore why.

(COMMERCIAL BREAK)

BALDWIN: (INAUDIBLE) reminding me because I just want to let all of you know that ground stop has been lifted. We talked at the top of the show about Newark Airport. There were reports of smoke in the air traffic control tower there. Reportedly some smoke in the elevator shaft. And the air traffic controllers had to move off to an alternate site. Still no word if you are heading there or heading out of there, hopefully -- no word on delays and still the cause of that smoke, we do not know. But the ground stop has been lifted at Newark Airport at this hour.

We want to talk now about Syria. And I just want to tick off a couple items real quickly here. First, you have the Syria opposition. They're now reporting 37 deaths in the fighting today. This video, this was shot today. As you know, the fighting pits the Syrian armed forces and various allies against the armed rebels. And as you also know, the Syrian government's been accused of indiscriminate shelling that has claimed the lives of thousands of civilians. That is point one. Point two, international envoy Kofi Annan, he raised some eyebrows today. Why? Because he went to Tehran and said Iran could play a, quote/unquote, "positive role" in ending the fighting in Syria. So that puts him as loggerheads with Washington, which has essentially said that Iran -- Iran should butt out because it's only causing problems through its support of the Syrian government.

But here's what really got our attention, though, today. Russian warships, they are headed toward a Syrian port today. How many warships? Well, that part's murky. At least two Russian ships chugged out of the Black Sea, are expected to exit the Dardanelles Strait today. From the Dardanelles Straits, it's a hop, skip and a jump to Syria's Mediterranean Port of Tartus, where the Russians have a huge naval base of massive strategic importance to the Russians. Tartus.

Mohammed Jamjoom is our guy on the story. He's in Abu Dhabi for us today.

And, Mohammed, we know the Russians have been accused of resupplying several times Syria's armed forces, thus allowing them to take the fight to the rebels. Do we know why the Russian warships here are headed to Syria this time?

MOHAMMED JAMJOOM, CNN CORRESPONDENT: Well, Brooke, a U.S. officials tells us that these two military transport ships have actually been watched for quite some time for the last several weeks by U.S. intelligence as they were docked at the Black Sea port of Sevastapul (ph). The U.S. official also told us that the ships would be transiting through the Dardanelles Strait, as you mentioned, on their way to their ultimate destination of Tartus. Tartus, as you said, is a Syrian -- is a Russian base. They have a Russian base in that port of Tartus. It's of very strategic importance for the Russians.

But there is a bit of murkiness around all this activity from the Russians, because today you also had reports -- in fact a report on the Russian news agency Interfax, that a flotilla of four ships was taking another route, also going to Syria today, ultimate destination being Tartus, that it had nothing to do with the Syrian conflict, that simply these ships were there to supply that port of theirs in Tartus. But it's coming at a time when there are so many questions about what Russia plans to do with regards to Syria and if they're still supporting the Syrian regime as much as they have in the past.

Brooke.

BALDWIN: So I have another question for you, but on the murky factor. Why doesn't Russia just come forward with all this mounting pressure globally and say, hey, here's what we're doing and why.

JAMJOOM: Well, Brooke, you know, there have been signs in the last few days that perhaps Russian support of the al Assad regime may be starting to crumble just a bit. Yesterday you had a report in the state media in Russia in which a Russian official said that there would be no new arms shipments to Syria. Now that's very significant because Syria and Russia --

BALDWIN: That's huge.

JAMJOOM: Syria is a major buyer of arms from Russia. That's huge. That's a very big deal. It's not yet known if this will encompass preexisting contracts. Arms deals where weapons are still being shipped. But they're say that until this crisis is over, and because of the instability, they're not going to ship any new weapons at this time. That's one thing.

Then another thing, there seemed to be a bombshell dropped yesterday. There was an interview that CNN's Christiane Amanpour did with Dmitri Simes. Now, he is the Russian-born president of the Center for National Interest, a Washington think tank. And he was asked if Russia was starting to -- if their stance towards Syria was starting to crumble. He said that they recently had a top level Russian delegation, hosted by the Center for National Interest. He said it included senior Russian officials that were there in an official capacity. At a private dinner there was a question asked and the answer was very clear. Here's what he had to say.

(BEGIN VIDEO CLIP)

DMITRI SIMES, PRESIDENT, CENTER FOR THE NATIONAL INTEREST: Very clear. Russia will not welcome such an intervention. Russia will not approve such an intervention. It would not resist such an intervention. And this intervention would not become a major issue in the U.S./Russian relationship.

(END VIDEO CLIP)

JAMJOOM: And in addition to that, also yesterday another significant thing happened. The Russian foreign minister, Sergei Lavrov, met with members of the Syrian opposition in Moscow. You take all these signs together, the international community wondering, is Russia's stance towards Syria starting to change even just a little bit?

Brooke.

BALDWIN: Yes, it's tremendous if their support of the Assad regime is wavering whatsoever. Mohammed Jamjoom, we'll be watching right along with you. Mohammed, thank you.

A mystery illness killing children. Our Dr. Sanjay Gupta is in Cambodia's ER.

(COMMERCIAL BREAK)

BALDWIN: It is this mystery illness that almost always ends in death. And doctors in Cambodia, they're scrambling now just to find out what is killing these children. At least 50 kids so far. It is the speed of this virus that really worries these doctors, described as 24 hours of hell and then death. Our Dr. Sanjay Gupta is in the capital Phnom Penh, with this latest on this mystery killer.

Sanjay.

(BEGIN VIDEOTAPE) UNIDENTIFIED MALE: We are, by no means, at the conclusion of our investigation.

DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT (voice-over): An investigation into the mystery of what's killing some of Cambodia's children at a frightening pace.

UNIDENTIFIED MALE: The majority of these cases, they're mostly under the age of three, were seriously ill and many of them had died within 24 hours of admission.

GUPTA (on camera): I mean that's -- that's pretty frightening, I think, for people to hear, twenty --

UNIDENTIFIED MALE: Absolutely.

GUPTA: And there's a lot of diseases in this part of the world, many parts of the world. But to kill that quickly.

GUPTA (voice-over): The backdrop is important here. Kantha Bopha Hospital treats thousands of children suffering from Dengue fever, Malaria and Tuberculosis every week. And, remember, this is a part of the world where bird flu and SARS originated. Still, right away, Dr. Beat Richner knew this was different.

DR. BEAT RICHNER, HEAD, KANTHA BOPHA HOSPITAL: It's a new picture for us. We've never seen this in Cambodia before.

GUPTA: He is the head of the hospital and he allowed us into the ICU, where the patients are treated.

GUPTA (on camera): Give you an idea of how busy this is. Even as we were talking, Dr. Richner got called away to go see another child (INAUDIBLE). That's who we're going to see right now.

GUPTA (voice-over): Dr. Richner says 66 children came to this hospital with the mystery illness. For 64 of them, it was 24 hours of hell before they died. You heard right. All but two died.

GUPTA (on camera): In many of these children, it started off rather mild. A mild fever. But then things progress quickly from there. For example, in Rafinam's (ph) case, who's two years old, we don't know what's causing his encephalitis, but this is typically what happens. The fontanel over here starts to budge and the eyes, as you can see over here, become disconjugate as well. From there it just becomes merciless. It goes from the head and the brain to the lungs.

RICHNER: You see these lungs, 8:42 and five hours later you see the lungs.

GUPTA (voice-over): In the last few hours of life, this unknown illness completely destroyed the child's lungs. And there was no way to stop it.

GUPTA (on camera): You've never seen anything like this before?

RICHNER: No. This is the first time at the end of (INAUDIBLE). And this make us worried.

GUPTA (voice-over): Something called Enterovirus 71, typically associated with hand, foot and mouth disease, was found in more than a dozen patients. But that's only adding to the mystery.

GUPTA (on camera): But would the Enterovirus leads to this?

RICHNER: But we have -- never, never, never, never.

GUPTA: So it has to be something else?

RICHNER: I think so, but we cannot prove. But we must look for it (ph).

GUPTA (voice-over): And that's where the investigation goes next. Cambodian health officials and the WHO say they're now looking into whether expired medication, the wrong medication, or inappropriate medication, such as steroids, could be to blame.

GUPTA (on camera): And steroids can also make a relatively harmless infection suddenly much more severe.

UNIDENTIFIED MALE: Yes, that is -- that is definitely a possibility.

(END VIDEOTAPE)

GUPTA: Brooke, as you can see there from both the doctors in the hospital, as well as to doctors at the World Health Organization, they still have more work to do. They're trying to figure out what made this particular virus so problematic. The prevailing theory seems to be that maybe there was a medication that was given either inappropriately or the wrong medication or a bad batch and they're trying to figure out what that medication is. So the laboratory tests may provide some answers, but they really want to go out there, find out where these kids lived, what medications they may have taken, and if there's anything that these kids share in common. That's where the medical investigation goes next.

And, Brooke, as we get more details, we'll certainly bring them to you. Back to you.

BALDWIN: I know you will. Sanjay, thank you so much.

Millions of merchants, billions of transactions, trillions of dollars in commerce. Cash is quickly becoming an endangered species. Or is it? How companies want to make cash a thing of the past.

(COMMERCIAL BREAK)

BALDWIN: OK. Do you see this? This is my wallet. I'll do this because I like to share. Do I have any cash? No. I have 25 euro from a recent trip to London or France, wherever I was. That's about it.

And the deal is, if tech trends keep you on track, you're looking at a dying breed in my hand, the death of the wallet, the death of cash.

Google has been working having your smartphone carry your credit cards, your transit cards and more. A project the company called "Google Wallet" in its video. Here it is.

So, now a new CNN Money article talks about how technology is getting to the point, you don't even have to take out your phone. That option comes from the start-up pay with Square.

The company has gained traction. I'm sure you've heard about this amongst small businesses for a device that turns smartphones into these credit card readers as seen in an online ad. Take a look.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Patient's home doing a "House Call" and I pull out my phone with my Square app. Patients are actually blown away by how he's easy it is to use. Cash and checks --

(END VIDEO CLIP)

BALDWIN: So how close are we, really realistically here to the death of cash? Let me bring in Jill Schlesinger. She is the editor-at- large at cbsmoneywatch.com.

Jill, first, just, you know, I mean, I'm kind of old school. I don't have cash but my credit card is bent. How does this work?

JILL SCHLESINGER, EDITOR-AT-LARGE, CBSMONEYWATCH.COM: Well, you know, it's kind of a cool thing. You saw that little square on the top of your phone being able to swipe the card. It's really neat.

It's really just a different way to use your credit card. And it help the smaller merchants not have to go through this whole lengthy process of getting a credit card account set up from the merchant site.

Now I also want to say, don't throw away your wallet just yet. This is not ubiquitously. You know, really, there are a couple of big issues I see with this.

The first is that, not a lot of merchants use it and not a lot of systems providers can use the same kind of system. Until they're all on a unified system it's hard to see how this takes off pretty quickly.

BALDWIN: Let me jump in because that's precisely one of my questions, right? In this money article, the CNN Money article, I want to quote here, then there's the chicken and egg problem.

This is what they call it. Merchants don't want to upgrade pricey point of sale terminal so that they can work wirelessly with smartphones unless e-wallets become main stream.

And e-wallets won't be main stream until consumers can use them just about everywhere. So which does come first and how do you get main stream shoppers, Jill, to ditch the wallets ultimately for, you know, what we're talking about?

SCHLESINGER: Well, I think, obviously, if consumers find it to be convenient to do this, they will use it. So, I think there are a couple of things that have to happen.

Number one, we mentioned Square. Square is just a different way to use a credit card. There's another technology that literally kind of skips over the credit card step, where you're swiping, and that's the one that really seems to be a little bit more intriguing.

The problem is, Apple has not gotten on board. And I would say that the consumer will get on board when Apple gets on board with this.

When you can use your iPhone to wirelessly transact something in a store, I think that's going to be the big sticking point. And I know that sounds crazy because people are going to say, you're an Apple fan girl.

It's not really that. It's just that so many people use those devices. That's going to be a huge, big hurdle to get over.

BALDWIN: So you're saying beyond -- and I was just magically handed a Square. Thank you, Kyle. That goes into my iPhone. So, this is an Apple product. But you're saying it needs to be something all Apple and that to get us on board?

SCHLESINGER: It has to be hard wired into your phone because all of a sudden now I have an extra thing I have to swipe. What's the great convenience of swiping my phone versus swiping at a merchant, right? I mean, you have to think about this reasonably.

BALDWIN: But here's the other thing, because here's what I'm thinking. I don't have the best track record with my iPhones. You don't know this about me, but you can lose an iPhone or four.

And when you lose these iPhones, in the time it takes to you realize your iPhone is gone, someone could have, you know, taken your iPhone or taken something, if you upload this app with your credit card information.

You know, by the time, I realize I get my phone back, if I'm lucky, somebody's already taken my credit card information.

SCHLESINGER: Well, I guess the answer to that is, there's two points of security, right? You could lose your wallet. I've left a wallet in a cab although it was the fastest 100-yard dash I ever ran. It was awesome.

BALDWIN: Good for you.

SCHLESINGER: I did get it back. But that said, I think a bigger security issue is, consumers are going to have to be convinced that these are secure transactions.

Remember how long it took for people to get on board with online banking. People were freaked out about this. So I think the other piece of this is that technologically we're going to have to be convinced that these are safe transactions and you're absolutely right.

You have to remember that, you know, if you're a ding bat and leave your card somewhere or your phone somewhere, you're going to pay a price. But, look, this is really an intriguing idea.

It does start to really make you think that our world is shrinking into that one device. There's a great amount of convenience and freedom in it. It's a little scary so much is in there.

BALDWIN: It is. It's amazing, though. Jill Schlesinger, thank you so, so much. We appreciate it.

SCHLESINGER: Great to be with you.

BALDWIN: Texas state attorneys, they are defending their new law requiring voters to show personal identification before casting a ballot.

Today is day two here of this federal trial in Washington over the law and the Department of Justice, they blocked it over concerns it might be keeping minorities, it might be keeping the disabled from voting.

Attorney General Eric Holder defended going after the law in the NAACP national convention just this afternoon.

(BEGIN VIDEO CLIP)

ERIC HOLDER, ATTORNEY GENERAL: According to some recent studies nationally, only 8 percent of white voting age citizens, while 25 percent of African-American voting age citizens, lack a government- issued photo I.D.

In our efforts to protect voting rights, and to prevent voting fraud, we'll be vigilant and we will be strong. But let me be clear, let me be very clear. We will not allow political pretext to disenfranchise American citizens of their most precious right.

(END VIDEO CLIP)

BALDWIN: Let's bring in Joe Johns here. Joe, it mentioned a lot, but you know, other states, they have already -- they have these voter I.D. laws. Why the focus on Texas specifically?

JOE JOHNS, CNN CRIME AND JUSTICE CORRESPONDENT: Well, Texas, for one thing, is a big state. I actually sat in just yesterday on that three-judge panel that was listening to testimony on this.

One of the takeaways I think from yesterday's testimony was about absentee voters. Anecdotally it sounds like there are bigger problems with voter fraud involving absentee ballots versus in-person voting.

But in this example, the Texas example, the voter I.D. there, that law is all about in-person voting. So, it wouldn't seem to be getting at the problem if there is one.

A lot of people, of course, Brooke, say there isn't that big a problem with voter fraud. On the other side of the coin, even if just a few people get through, well, that's certainly offensive to a lot of Americans.

This question of minority voters, very interesting the kind of reaction there, that the attorney general got from the NAACP, Eric Holder, obviously, has a lot of fans.

And his appearance in the lone star state really just a day after this three-judge panel got started in Washington's pretty interesting stuff.

BALDWIN: When should we have a ruling, Joe?

JOHNS: Well, that's a good question. Certainly doesn't look like they're going to rule from the bench. They're moving very thoughtfully on this.

But it's quite obvious to everybody involved that the Justice Department is taking this issue on and the state of Texas wants a ruling in time for the November elections because that's when the law's supposed to be in effect.

BALDWIN: OK, Joe Johns, thank you.

A slow-moving storm, dumping 10 inches of rain in just a matter of hours, leaving some folks stranded.

(COMMERCIAL BREAK)

BALDWIN: Talk about these folks taking a pounding here. The rain would not stop in the Austin area today leading to extreme flash flooding in Webberville, Texas.

Streets, sign posts, more disappeared under 10 inches, let me say that again, 10 inch of rain that hit the area in just a matter of hours. There's a reason the region is called the flash flood capital of the U.S.

Chad Myers has more on this. I mean, how rare is that, that kind of, what, 10 inches in how many hours?

CHAD MYERS, AMS METEOROLOGIST: In three hours. But it was only for like a three-square mile area. It just rained. The storm would just not move. It wouldn't leave the area and just poured right down.

Obviously, it has to go somewhere. It's flash flood capital of the world because some of the roads here don't have bridges. They go down and that's where the water would run. That would be a dry creek.

But the roads go down into those creeks and then back up the other side. And they don't have time to build a bridge. Don't build a bridge, because 99.10 percent of the time it's dry.

But drive into that when it's moving that fast across the road. Yes, that was a mess this morning. Rain has finally stopped now. But it's the flash flood capital of the world because these storms in the hill country especially will hit something, like a hill.

Go up the hill and then not stop. It will rain for hours and hours in the exact same spot and all of a sudden it all washes away. The ground is so dry, it's so hot.

BALDWIN: I was going to say, we talk about Texas, about the drought, the rivers are so slow. And now it's --

MYERS: When you get the dirt on land to literally be a pueblo block of dry clay. Remember how the pueblo made their houses. They would make bricks out of this clay. So when the clay is dry like that, it's like trying to rain on a brick. The rain just can't go in.

BALDWIN: So now what? Rain's done --

MYERS: Rain stopped.

BALDWIN: For the time being?

MYERS: Right, until 4:00 tonight and then it starts again tonight, like it did yesterday. We'll be here.

BALDWIN: OK, Chad, thank you.

Glitz, glamour and gowns from the runway to the Ritz. It is what Versace is known for and CNN has the exclusive Backstage Pass.

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BALDWIN: Versace, it's a name you recognize for the gorgeous gowns worn on the red carpet. In this CNN Special Fashion Backstage Pass, we sit down for her highs, lows, success of her brand and her brother's murder.

(BEGIN VIDEOTAPE)

ALINA CHO, CNN CORRESPONDENT (voice-over): It's nearly show time at Paris' Ritz Hotel. Why are they here? This is an event.

(on camera): How does it feel when you wear Versace?

JESSICA ALBA, ACTRESS: You feel very sexy, very glamorous.

CHO (voice-over): They've come out for a fashion show. What will go down in history as Donatella's return to the Ritz.

(on camera): You never came back.

DONATELLA VERSACE, DESIGNER: It was too painful for me.

CHO (voice-over): Painful because it was here at the Ritz in July 1997 that her brother who started the Versace collection. Nine months later, he was gunned down on the steps of his Miami mansion by Andrew Cunanan.

VERSACE: After the show, two days after, I said, we'll see you and never saw him again.

CHO: The two were as close as could be, she his muse, he the creative force. The man who popularized the notion of dressing celebrities for the red carpet, the first to pay high salaries to models, creating the supermodel. When Gionni was killed, Donatella took over so the brand Versace would live on.

VERSACE: I need to find my own voice. Can you walk for me?

CHO: There are highs and lows. J. Lo in this Versace gown brought a lot of attention, but the company lost money. Donatella struggled with drug addiction. Versace lost its way. Then Lady Gaga came along.

Gaga opened Versace to a whole new generation, young buyers who don't remember Gionni Versace. That gave Donatella the courage to do a collection for H&M, and ultimately gave her the strength to return to the Ritz.

VERSACE: I'm not afraid anymore. I'm not afraid anymore.

CHO: And the clothes, reminiscent of her brother's designs, and yet all her own.

(on camera): No one knows a woman's body like Donatella Versace.

STEFANO TONCHI, EDITOR-IN-CHIEF, W MAGAZINE: I look at Donatella really as like a hero in a certain way.

CHO (voice-over): In 2011, Versace became profitable again.

(on camera): Emotionally how do you feel?

VERSACE: It's -- you know, it's difficult, but I'm very happy. I think Gionnni would be very happy.

(END VIDEOTAPE)

CHO: He most certainly would. You know, the Ritz Hotel, Brooke, will close for renovations at the end of July. Donatella assures me when the hotel reopens in 27 months, Versace will be back to stage and couture runway show again.

Just like Donatella as always, it will be glitzy, glamorous and star-studded, I'm sure. As you know, this was a very painful assignment for me to do.

BALDWIN: I'm sure it was very, very difficult. Lots of arm-twisting involved. Someone had to do it. I tell you, those gowns, I can't imagine seeing them in person. CHO: They would look great on you, Brooke Baldwin.

BALDWIN: I'd take one. Alina Cho, thank you so much. Just let everyone know you can watch Alina's special this Saturday afternoon. Don't miss it, 2:30 Eastern Time "Fashion: Backstage Pass".

It is enough to make Spongebob scream. Millions of you could be cut off from Jon Stewart tonight? Satellite TV and network moguls are battling out over big bucks. We're going to break that down for you next.

Also, minutes from now members of Congress are going to hear how your tax dollars went to a hospital in Afghanistan where patients were mistreated and abused. This is CNN exclusive report.

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BALDWIN: This is a showdown between media giants, but the real losers could be American TV viewers. You have satellite carrier DirecTV in this huge contract dispute now with Viacom.

If they can't work things out by midnight tonight, DirecTV viewers could lose access to some of the most familiar networks on TV.

Let's go to Brian Stelter. He is a media reporter for "The New York Times" and a friend of ours. So Brian Stelter, let's begin with the question that matters most to people watching.

Which channels -- what are we talking about if DirecTV viewers lose at midnight, which channels might that be?

BRIAN STELTER, "NEW YORK TIMES": It's actually more than a dozen of them. You probably haven't heard of ones like Paladia or Nick Jr. because I grew up watching it.

But it's a bunch of those old channels that are, you know, pretty infrequently watched and then a bunch of big ones, Nickelodeon, MTV, VH1, Comedy Central, home of the daily show with Jon Stewart.

You know, Nickelodeon is the single biggest channel in American cable households, other than the broadcast networks, Nickelodeon is the biggest one.

And it could go away in DirecTV homes at the end of the day today if these negotiations remain at an impasse the way they are right now.

BALDWIN: So say it isn't so. I know a lot of people think no "Daily Show," no Spongebob. Some of them are major channels. How many people are we talking? We're talking millions potentially affected, yes?

STELTER: You know, these fights happen from time to time. This one is a big deal because DirecTV has about 20 million homes. So about one in five American homes that even have television subscriptions have DirecTV. Probably one in five viewers who are watching us right now probably have DirecTV. They'll be seeing advertisements warning them these channels could go away. These fights do happen from time to time, but rarely do they affect so many homes.

BALDWIN: Right now, obviously, this is an impasse between DirecTV and Viacom. I read your article. Explain the crux of the issue. As you explain -- explain what bundling means.

STELTER: This idea of bundling goes way back in cable history. You know, for decades. When companies like Viacom or the parent of CNN, Time Warner, goes out and sells channels to distributors like DirecTV or Comcast or Time Warner Cable, they like to put them all together in a bundle.

It's better for them to sell all those channels together. So for instance, Viacom will sell MTV and VH1 and a bunch of smaller channels together in one package and they say it gives DirecTV a better price for all those channels because their interest is getting all those channels on your cable dial.

Basically, that's why you and I have 300, 400 channels at home. Now DirecTV is saying, wait a minute. We don't want to raise prices. Why don't we buy some channels, not all of them? That seems to be the impasse.

BALDWIN: Do the network ratings with Viacom, does that play a factor in all this? Who has the upper hand in talks?

STELTER: Well, DirecTV is saying, Nickelodeon isn't doing very well, ratings are down, but it's still a popular channel. By the way, people like to have choices. They like to have Nick Jr., Nick tunes and all of those channels as well in Nickelodeon.

So it's about choice and convenience versus price. On the other hand, cable bills are going up. Satellite bills are going up. DirecTV and companies like it want to try to hold the price down as much as they can by being tough, by going out in public, having these fights. The customers are stuck in the middle.

BALDWIN: All right, Stelter, prediction time. What's going to happen at midnight?

STELTER: Usually these blackouts don't happen. Usually when they do they only last for a couple days. But once in a while, it's gets really ugly.

Right now on Dish Network, a competitor of DirecTV, AMC, IFC and we have been off the air for nearly two weeks. I don't think that's going to happen in this case, but I do think it's possible that we'll see Nickelodeon disappear at least for a little while tonight.

BALDWIN: All right, Brian Stelter, "New York Times," Good to see you, friend. Thank you.

STELTER: Thanks. BALDWIN: All right, let's roll on. Top of the hour, welcome back. I'm Brooke Baldwin.