Return to Transcripts main page

The Situation Room

Obama's Tough Talk; Political Impact of Mortgage Crisis? America's Financial Meltdown and the Presidential Race. A Conversation with Cindy McCain

Aired July 14, 2008 - 18:00   ET

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

WOLF BLITZER, CNN ANCHOR: And, to our viewers, you're in THE SITUATION ROOM.
Happening now: Many of you fear what could happen to your home and the money in your bank accounts now that there is some breathtaking government efforts to try to shore up two mortgage giants, and now that we're seeing what could be the most expensive bank failure in this country ever.

Barack Obama's campaign promises a tough speech about personal responsibility in front of a large African-American audience. Some are wondering if blacks will feel he's talking down to them, as the Reverend Jesse Jackson claims.

And would Republican Governor Arnold Schwarzenegger ever serve in a Barack Obama administration? The governor has a surprising answer -- all that and the best political team on television on television.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

We want to welcome our viewers in the United States and around the world.

They have been lining up around the block, worried customers trying to pull their money out of a failed bank, the IndyMac bank in California. Here is the question. Is your money at risk?

CNN's Ali Velshi is standing by with more on that.

But let's go out to Pasadena.

CNN's Kara Finnstrom is standing by to tell us about what has been happening, huge lines, people desperately trying to get their cash. What is the latest, Kara?

KARA FINNSTROM, CNN CORRESPONDENT: Well, Wolf, most customers at this bank were fully insured and they will get all of their money back, according to FDIC. But for some, this has been a long, hot and incredibly disappointing day.

We want to give you a look at the crowds that are out here at this hour. Some of these people have been out here for eight hours now. And they're still waiting for answers.

(BEGIN VIDEOTAPE) FINNSTROM (voice-over): The line started building before sunrise. Customers coming to 33 branches of what was less than one week ago their bank. Now customers like Nasim Ahmed facing what could only be described as a nightmare, asking FDIC officials: What happened to my money? Ahmed and his family drove from San Francisco overnight.

Ahmed had his personal savings and numerous accounts for his business, a clinical research company, at IndyMac. When the doors opened, he was number four in line. Ahmed asked question after question. Two-and-a-half-hours later, he came out.

NASIM AHMED, INDYMAC DEPOSITOR: I'm surprised, shocked.

FINNSTROM: Ahmed was told only the first $100,000 in each of his accounts is fully insured. Beyond that amount:

N. AHMED: You will get 50 cents on a dollar. So, that's pretty miserable.

FINNSTROM: Ahmed said he was misled by IndyMac officials, who had assured him he had structured his savings in different accounts that would be safe. He may take a huge hit.

N. AHMED: This is going to hurt me, but I will try to recover, stand again, and try to do business as usual. But, from now, I will be better, more cautious.

FINNSTROM: Ahmed says he plans to fight for more of his money. But, for now, he and his family are heading straight back to San Francisco.

SHAMEEMA AHMED, INDYMAC DEPOSITOR: I had never dreamed of this one. I don't know.

FINNSTROM: He says they can't afford to miss another day of work.

(END VIDEOTAPE)

FINNSTROM: And, Wolf, what you see going on just over my shoulder right now is, a police officer just came out to let these crowds know that this bank still, you know, plans to close in two hours here, and that means that not everyone here will get inside and get their answers today.

So, a lot of folks anxiously waiting and hoping they will get in before this bank closes -- back to you.

BLITZER: Those are very, very worrisome pictures.

Kara, thank you.

Ali Velshi is working this story for us as well.

People are wondering, Ali, is this the type of the iceberg? What's going on? ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Yes. Wolf, I mean, you have got to look at those pictures, and you have got to say, what a thing, to be able to go to your bank and not know, have the doors closed or come in and not have all your money available.

There is a very easy way to make sure this doesn't happen to you. First of all, the Federal Deposit Insurance Corporation, which has taken over IndyMac, has 90 banks on its problem list. That means 90 banks that it could have to step in for. It is not telling us what those 90 banks are, because they don't want a run on the money, which is what caused this bank ultimately to fail.

But the bottom line is, you are insured until the first $100,000 in one account at a bank. If you want to make sure this doesn't happen to you, even if you don't know the financial state of your bank, divide your money up. If you got more than $100,000, put it in another bank. There are ways to have more than $100,000 in one bank and not have it at risk, but you need to check with the FDIC, FDIC.gov, to do that.

Wolf, for all the problems that could happen with banks, there is a way to protect your own money. And that's what you have to do. If you had a mortgage with the bank, it makes no difference. You have to keep on making your payments. There are banks on this watch list. There have been times in the last 10 years where there have been three time as many banks on the problem list. I wouldn't worry about that. I don't think we're looking at a failure of banks across the country.

But, please, to everybody out there, go to FDIC.gov and call your bank. Make sure you are insured with your deposits. There is an easy way to make sure you don't lose money if there's a bank failure. Your deposits are insured, you handled them the right way.

BLITZER: And if they're under $100,000.

VELSHI: That's correct.

BLITZER: Ali, thanks very much. We will stay on top of this story. More coming up.

But another story we're following right now, John McCain sending a message to Latinos to be very concerned about a potential Barack Obama presidency. That's his message. Today, McCain spoke before a large group of Hispanics. He spoke about immigration reform and his support for reform bill that almost killed his presidential bid.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: My campaign was written off as a lost cause. I did so not just because I believed it was the right thing to do for Hispanic Americans. It was the right thing to do for all Americans. That's why I did it. Senator Obama declined to cast some of those tough votes. He voted for and even sponsored amendments that were intended to kill the legislation, amendments that Senator Kennedy and I voted against.

(END VIDEO CLIP)

BLITZER: Now, let's bring in Dana Bash. She's covering the McCain campaign for us.

So, why is the senator doing this, saying this right now?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, Wolf, this is the third Hispanic conference that actually both candidates have attended in the last few weeks.

And, at all of them, Barack Obama really actually went after Senator McCain on this whole issue of abandoning what he calls his courageous attempts at immigration reform, because of the fact that Republican primary voters were so opposed to it.

So, what McCain is trying to do here is trying to turn that into a part of his central theme against Barack Obama. And that is that McCain says, I walk the walk when it comes to this, but he talks -- he just talks the talk and that's it.

And on immigration, what McCain is basically saying is, wait a minute, I was the one taking those tough votes that were politically suicidal. In fact, that's the term that he used. And Obama was voting for several measures that everyone, including his supporter Ted Kennedy, knew would actually kill that delicate immigration compromise.

So, Wolf, it is part of the narrative that McCain is trying to drive here, that Obama says that he's for a new kind of politics, but when it comes down to it, he votes on the politics of the moment, not doing what's hard.

BLITZER: It seems to those of us who have been watching McCain closely when he was with Ted Kennedy on this comprehensive immigration reform, he was taking a huge political gamble, especially among the Republicans. But then after it collapsed, he made a turn and started focusing in on strengthening the borders, wasn't talking about comprehensive reform. But now he seems to be coming back.

BASH: It really has been fascinating to watch, Wolf. You're absolutely right.

It is just a fact that John McCain came back from the political dead during the primaries because he went up to New Hampshire and he said over and over and over again: I get it. I hear you. We talked to the Republican voters and said, I understand you don't -- you're not ready for comprehensive immigration reform. He said: I will secure the border first.

The reality is, since then, McCain obviously locked up the nomination. And, since then, he's really softened his tone. He uses the term comprehensive immigration reform a lot more often. In fact, McCain recently called comprehensive immigration reform his top priority.

He hopes obviously that that is going to go a long way to reaching out to Latino voters, the voters that he went after today. But, Wolf, it is not the kind of thing that we heard from him in the Republican primaries at all.

BLITZER: And to the critics, comprehensive immigration reform is nothing less than some would say amnesty. Others say a pathway to citizenship for millions of illegal immigrants.

BASH: It's one of those buzz terms, buzzwords that has a lot of people, especially on the right, saying, wait a minute, this is why we didn't support John McCain before.

BLITZER: He supported it, though, for a long time, the comprehensive immigration reform.

Dana, thank you.

Let's go back to Jack. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: It's hard to keep track of their positions on all of this stuff, isn't it?

President Bush thinking about speeding up the withdrawal of U.S. troops from Iraq beginning as early as September. Reports say no decision made yet, but anywhere from one to three of the 15 combat brigades now in Iraq could be withdrawn by the time Mr. Bush leaves office in January. That would leave between 120,000 and 130,000 troops in Iraq, down from a peak of 170,000 last year.

One reason for an accelerated withdrawal is because more U.S. troops are needed in Afghanistan, where the Taliban has been making a comeback. Yesterday, nine U.S. troops died in an insurgent attack there, the deadliest for U.S. troops in three years. In the last two months, more American and allied troops have died in Afghanistan than in Iraq.

The White House says, although the president hopes to bring more troops home, he will wait to hear what General David Petraeus says in the briefing in September. If President Bush decides to announce troop reductions, it could impact the presidential race.

John McCain could say that the surge, which he was in favor of, worked, and therefore the troops can now be withdrawn. On other hand, Barack Obama has been against the Iraq war from the outset and has said he would immediately look at getting our troops out of Iraq if he's the next president.

Obama said the war in Afghanistan has suffered because of the administration's misguided policies in Iraq. He says he would be in favor of deploying up to 10,000 additional troops to Afghanistan.

So, here's the question: Would faster troop withdrawal from Iraq help John McCain or Barack Obama? Go to CNN.com/caffertyfile. Post a comment on my blog -- Wolf.

BLITZER: Jack, see you in a few moments. Two hundred thousand dollars and up, a lobbyist caught on tape promising access to the vice president and other top Bush administration figures. Could he deliver? And a magazine famous for its cartoon covers seems to depict the Obamas as terrorists. Did "The New Yorker" magazine cross a line?

And Cindy McCain has a need for speed. But John McCain didn't always know about it.

(BEGIN VIDEO CLIP)

CINDY MCCAIN, WIFE OF SENATOR JOHN MCCAIN: I didn't tell my husband, though. I went and got my license and then told him and took him for a flight. So, it was a lot of fun.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: A newspaper sting leads to stunning videotape, a lobbyist allegedly offering access to Vice President Cheney, Secretary of State Condoleezza Rice, and other top Bush administration officials, for a price, a steep price.

Let's go live to our White House correspondent, Ed Henry. He's working the story for us.

All right, a lot of confusion on this story. Tell us what's going on.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Well, the lobbyist, Stephen Payne is basically suggesting to CNN it was all a big misunderstanding. The problem is, it's on tape.

(BEGIN VIDEOTAPE)

HENRY (voice-over): Promises of access to the president's top aides in exchange for contributions to the George W. Bush Library and some cold, hard cash on the side for the man brokering the deal, the whole discussion caught on tape.

(BEGIN VIDEO CLIP)

STEPHEN PAYNE, LOBBYIST: A couple of hundred thousand, I think that would probably get the attention of people raising the money.

(END VIDEO CLIP)

HENRY: That's Texas lobbyist and Bush fund-raiser Stephen Payne, unwitting star of this shocking video, secretly recorded by "The Times of London."

Here, he tried to get a donation from a man whom he thought was representing the exiled former president of Kurdistan.

(BEGIN VIDEO CLIP) PAYNE: Two-hundred, 250, something like that, that's going to be a show of we're interested. We're your friends. We're still friends.

(END VIDEO CLIP)

HENRY: Payne, who raised $200,000 for the president's reelection, is seen promising meetings with top officials, including Vice President Cheney, in exchange, big money for the future Bush Library.

(BEGIN VIDEO CLIP)

PAYNE: Cheney's possible, definitely the national security adviser, definitely Dr. Rice, or I think a meeting with Dr. Rice or the...

(END VIDEO CLIP)

HENRY: The White House distanced itself from Payne's actions and suggested he's not an insider.

DANA PERINO, WHITE HOUSE PRESS SECRETARY: There is categorically no link between any official business and the Bush Library. Steve Payne was never an employee of the White House. But we do use hundreds of volunteers a year as you know for helping us do advance work.

HENRY: The White House admits Payne helped with logistics on some foreign trips. And Homeland security secretary Michael Chertoff did appoint Payne to an advisory committee.

In a long written statement to CNN, Payne, president of Worldwide Strategic Partners in Houston, called "The Times of London" story gotcha journalism. Payne acknowledged mentioning that they might be able to make donations to think tanks, foundations and/or President Bush's library.

But Payne stressed that in subsequent e-mails, which he gave to CNN, he made clear there could be no quid pro quo. In one of those e- mails, Payne wrote he would accept the $250,000 and pass it directly to the library, but noted he could not promise specific government action, because that would be bribery.

(END VIDEOTAPE)

HENRY: Now, the key question, did Stephen Payne get meetings here at the White House for his clients? Dana Perino said she was not sure.

So, I asked whether the White House would clear this up by releasing records of the visitor logs here to see how often Stephen Payne has been here. She said she would check with White House lawyers.

But I think the bottom line is, it is highly unlikely they will ever turn those over, Wolf. BLITZER: We're not holding our breath? Is that what you're saying, Ed?

HENRY: I don't think so.

BLITZER: OK. Ed is working the story for us. Thank you.

In a little while from now, Barack Obama is expected to deliver a major tough message before a large African-American audience. What he says will be closely watched after the Reverend Jesse Jackson's recent rather controversial comments to put it mildly that Barack Obama talks down to blacks.

CNN's Jessica Yellin is in Cincinnati waiting the speech for us.

What do we know? What is he expected to say, Jessica?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Wolf, we got an early glimpse at the remarks Barack Obama is intending to deliver, and he will talk about what they call at the campaign the responsibility deficit.

To quote from part of the speech, Obama says we have to demand more responsibility from Washington, more from Wall Street, but, yes, also more from ourselves, he says. He's been criticized for making that point. But he's not backing down from it.

(BEGIN VIDEOTAPE)

YELLIN (voice-over): Reverend Jesse Jackson says Barack Obama has been talking down to the black community. But when a reporter asked Obama if he's been lecturing African-Americans, the candidate said:

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: No.

YELLIN: Obama insists he agrees with Jackson that racism and poverty make it difficult for many Americans to improve their lives.

OBAMA: I absolutely believe that we have structural inequalities in this country that have to be dealt with, which is why I have proposed making sure that health care is successful for every American, making sure that we're investing in things like early childhood education to close the achievement gap.

HENRY: But he thinks tough love is in order, too. Obama will have a chance to address all these issues in his speech before the NAACP tonight. That speech is getting heightened attention coming as it does after Jackson criticized Obama.

The audience here in Cincinnati is expected to give the senator a warm reception.

DONNA BRAZILE, CNN POLITICAL ANALYST: I think the NAACP would like to hear Senator Obama talk about personal responsibility, but also, as president, how he would put some of their issues on the national agenda as well.

(END VIDEOTAPE)

YELLIN: And, Wolf, in the speech, Barack Obama acknowledges that he stands on the shoulders of other great civil rights leaders, as he puts it. He acknowledges Martin Luther King's contribution, Julian Bond of the NAACP. At least in the prepared remarks, he does not name Reverend Jesse Jackson -- Wolf.

BLITZER: All right, thanks very much. Thank you for that, Jessica Yellin, reporting.

Iran's president makes plans for a trip to the United States. We're going to tell you what's on his agenda.

Also, would California's Republican governor, Arnold Schwarzenegger, serve in a possible Barack Obama administration? You may be surprised by his answer.

And what's the worst thing that could befall a beauty queen? Jeanne Moos has a "Moost Unusual" report.

(COMMERCIAL BREAK)

BLITZER: Amid skyrocketing gas prices, President Bush takes a major step to try to help lower them. He's lifted an executive order banning offshore drilling. He and many others say that could yield billions of barrels of oil. But critics are skeptical, and they say oil companies are allowed to explore on millions of acres of land already, but they don't.

We have been looking at areas where drilling is not allowed. In those places, experts say, there could be almost 18 billion barrels of oil. But there has been limited exploration since the 1970s.

(NEWS BREAK)

BLITZER: Barack Obama claims to be a change agent. Would he go so far as to put a Republican in his Cabinet should he win? Arnold Schwarzenegger answers if he would actually serve if he were asked.

Also, the political impact of the credit crisis, some say it could present a wide opportunity for Barack Obama.

And the flap, a huge flap, right now over a magazine cover. It draws on virtually every negative mischaracterization about Barack Obama and Michelle Obama. So, how does "The New Yorker"'s editor explain it?

(BEGIN VIDEO CLIP)

DAVID REMNICK, EDITOR, "THE NEW YORKER": In a way, this is Colbert in print.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now: the single-most controversial magazine cover of this campaign season, "The New Yorker" magazine depicting Barack and Michelle Obama as terrorists. Is it satire or is it just tasteless?

Also, banks going under, foreclosures skyrocketing, fuel prices soaring -- how the country's financial meltdown is impacting the race for the White House.

And Arnold Schwarzenegger saying he would consider a role in a Barack Obama administration -- all of this, plus the best political team on television.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

The cover of the latest "New Yorker" magazine is sparking huge controversy. The magazine's editor, David Remnick, says it is pure satire. But critics say there is nothing funny about it at all.

Let's go to Carol Costello. She's working the story for us.

Carol, tell our viewers what this is all about.

CAROL COSTELLO, CNN CORRESPONDENT: Well, it is about a caricature of the Obamas as gun-toting terrorists. And it's on the cover of "The New Yorker" magazine, a publication known for being provocative.

(BEGIN VIDEOTAPE)

COSTELLO (voice-over): Offensive or clever? Take a look at "The New Yorker" cover. There are the Obamas in the Oval Office. He's in a turban. She's in full black militant mode, AK-47, ammo, afro. An American flag is burning behind them right below Osama bin Laden's portrait. Oh, the Obamas are doing the dap.

"The New Yorker" says it is a satire not about the Obamas, but about all the outrageous rumors swirling around them, the politics of fear.

But Obama and even his opponent are not amused.

MCCAIN: Frankly, I understand if Senator Obama and his supporters would find it offensive.

COSTELLO: Some of Obama's supporters are even calling for a boycott of "The New Yorker."

BERNARD PARKS SR., LOS ANGELES CITY COUNCIL MEMBER: Millions of people will see this in an atmosphere of the airport, on newsstands. They will never read the article. And this is what is what is so harmful about having this in this depiction.

COSTELLO: And maybe he's right. When we showed people "The New Yorker" cover, they just didn't get it.

UNIDENTIFIED FEMALE: He reminds me of Islam, and she reminds me of a terrorist killer.

UNIDENTIFIED MALE: I mean, it's not a scary issue. But, you know, backgrounds are what they are.

UNIDENTIFIED MALE: But it isn't funny, because I see a flag burning in the fireplace and a picture of -- on the wall. I'm not sure who that is.

COSTELLO: But there is another side to this. "The New Yorker" is meant to appeal to a more sophisticated audience -- the kind that watches Comedy Central's Stephen Colbert.

REMNICK: This is Colbert in print. The intention of this cover, in no uncertain terms, is to talk about the politics of fear and the lies that have been told about Barack Obama and Michelle Obama, as well.

COSTELLO: And it's not like "The New Yorker" has never satirized before. Last year, Iran's president was drawn sitting on the loo, his foot touching a foot next door, a la Senator Larry Craig.

(END VIDEOTAPE)

COSTELLO: And, you know, oddly enough, Wolf, most people we spoke to today were more upset at the depiction of the American flag burning in the fireplace than about Obama or his wife being depicted in less than a flattering way.

BLITZER: All right, Carol.

Thanks for the background.

Let's talk about this right now, this "New Yorker" magazine cover, with our senior political analyst, Gloria Borger; our own Jack Cafferty; and Stephen Hayes, senior writer for "The Weekly Standard."

I know this was one of your questions, Jack, earlier today. You got a ton of reaction.

What do you think?

Did they -- was it legitimate satire or did they cross a line?

CAFFERTY: Well, it's fairly typical "New Yorker" stuff, if you buy and read the magazine. That's kind of what they do.

On the other hand, if you're going make your decision on who to vote for the next president of the United States based on something you see on the newsstand magazine cover, then your citizenship should be revoked and you should be thrown out of the country immediately.

(LAUGHTER)

BLITZER: What do you think, Gloria?

GLORIA BORGER, SENIOR POLITICAL ANALYST: Look, I think this is pretty standard "New Yorker" magazine fare. I must say, I got the magazine last night and looked at it and I thought, it's kind of an inside joke, though. It might have been OK as a cartoon inside the magazine. But if you're the Obamas, this is exactly the kind of stuff you've been campaigning against -- all of these rumors, this innuendo about you. I mean Michelle Obama looks like Angela Davis in this.

And I think that I could understand their frustration with it. Sure, the less of this the better, because it's an elite inside joke and a lot of people, as Carol showed in her piece, just don't get it.

BLITZER: I think that's a good point, Steve. A lot of people are going to see this cartoon and they're not necessarily familiar with the history of "The New Yorker" magazine.

STEPHEN HAYES, SENIOR WRITER AT "THE WEEKLY STANDARD": Right. But as Jack says, I mean, if they then go and vote for John McCain because they see this on the newsstand, I mean, really that's a probably a bigger problem than the one we're talking about.

I don't think this is that big a deal. I mean if you look at the -- if you look back at cartoons that we've seen depicting the Bush administration and its conduct in the war on terror, you often see, you know, Dick Cheney with fangs and, you know, blood dripping from their hands and things like this. That's just what cartoons do.

I'm not sure I would have published it. But at the end of the day, it's meant to be provocative, it's meant to sort of start the kind of conversations that we're having right now.

CAFFERTY: But those Cheney ones are...

BORGER: I mean, you know...

CAFFERTY: Those Cheney ones are true, aren't they?

(LAUGHTER)

HAYES: Well, exactly. There you go.

BORGER: Yes, right.

You know the hard thing...

HAYES: That's the point that people would make.

BORGER: The hard thing is the writer part of me is saying this, that there are a couple of really interesting pieces in "The New Yorker" this week about Barack Obama, one of which, by Ryan Lizza, talks about how Obama is really a politician, talks about his Chicago roots that turned him into the kind of politician he is. And those stories are not getting the publicity that they deserve and we're talking about the cover. BLITZER: Because, actually, the article, if you read "The New Yorker," as I do, Jack, the articles that they've written about Barack Obama over the past year or two have -- almost all of them have been rather flattering and including the current article in the current issue with this controversial cover.

CAFFERTY: Well, "The New Yorker" is historically a liberal publication and Barack Obama would be right in their wheel house, in terms of a politician they could find it in their hearts to support. You know, they're in the business to sell magazines.

BLITZER: Well...

CAFFERTY: How do you sell magazines?

You put something provocative on the cover. That's why we see Britney Spears as often as we do...

BLITZER: Could...

CAFFERTY: ...not because anybody has any use for Britney Spears, but she sells magazines.

BLITZER: So here's the question Steve, and then we'll take a break.

"The New Yorker" gets away with putting this on the cover.

Could "The Weekly Standard" gotten away with this on the cover?

HAYES: No, I don't think we could have, because people know that the "New Yorker" editorially, is likely to make arguments that are supportive of Barack Obama, at the end of the day.

Being a conservative magazine, I think we would have been criticized far beyond what "The New Yorker" has been, although picking up on Jack's point, I'm not sure next week we might not use Britney Spears and Barack Obama to help sell some magazines.

BORGER: Or maybe...

CAFFERTY: Maybe with Dick Cheney.

(LAUGHTER)

BORGER: Maybe you'll put "The New Yorker" cover on the cover of your magazine.

BLITZER: Stand by, guys. We've got much more to talk about, including this important programming note for our viewers in the United States and around the world. Barack Obama himself will be a special guest tomorrow night on "LARRY KING LIVE." Tomorrow night, 9:00 p.m. Eastern. You're going to want to see Larry's interview with Senator Obama.

So what about Arnold Schwarzenegger in a Barack Obama cabinet -- what California's Republican governor is saying about possibly working for a Democrat.

And Cindy McCain speaking out about a possible move to Washington if her husband is elected and why she's still in Arizona.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Banks going under, foreclosures skyrocketing, fuel prices soaring -- how is the country's financial meltdown impacting the race for the White House?

Let's get back to our panel.

And, Steve, let me start with you right now. You have a piece in "The Weekly Standard" talking about the lack of enthusiasm right now for John McCain among his conservative base -- a much lower level of enthusiasm than Senator Obama certainly is getting from the liberal base out there. This economic mess could only exacerbate that problem for Senator McCain, I assume.

HAYES: Yes, I think you're exactly right. You know, one of the things I think Senator McCain is going to face here coming up is an environment -- and looking at the top of your show today, you see people in line talking about getting paid 50 cents on the dollar for their life savings. These are pretty compelling stories. And this could turn into, pretty quickly, another I feel your pain election, in which case, I think Barack Obama has sort of the likeability and the ability to connect with people in such a way that I think people will think of him as really identifying with their problems in a way that John McCain -- he doesn't communicate that.

BLITZER: It is...

HAYES: He's much better on national security issues.

BLITZER: It is pretty shocking, Jack, to see these long lines of people waiting in a bank in California, trying to get their money out.

Who would have thought, in this day and age, this kind of stuff could happen?

CAFFERTY: Well, you know, those pictures, as Steve suggested, are a little scary. But I think we're crying wolf a little bit here.

If you have less than $100,000 in a bank account, the money is safe, whether the bank goes out of business or not. And all of those people...

BLITZER: If the bank is FDIC insured.

CAFFERTY: Wait a second. All of those people in those lines outside that California bank who have less than $100,000 in their accounts and all of the chartered licensed banks in this country who are FDIC insured, they'll get their money. If you have more than $100,000, you're going get some portion of the money.

The crisis on Wall Street, as it relates to the forward-looking earnings of places like Merrill Lynch and Lehman and Freddie Mac and Fannie Mae -- the declining stock prices don't threaten the average American, unless you own stock in those companies. And it's related more to the resolution of the housing and the credit crisis.

So showing lines of people outside banks conjures up memories of the Great Depression. And it's just not realistic. That's not where we're at at all.

HAYES: Yes, but, Wolf...

CAFFERTY: Banks fail.

BORGER: But you also...

HAYES: Wolf, if I can...

BORGER: It also...

HAYES: (INAUDIBLE).

BORGER: Go ahead.

HAYES: If I could just jump in real quickly, I mean perception, in this case, is reality. I mean this is what people are seeing.

CAFFERTY: Exactly.

HAYES: This is what people are reading about.

BORGER: Right.

CAFFERTY: Exactly.

HAYES: I think the concern, if you're talking about the political campaign, the concern for John McCain, you know, who's somebody who said the economy is not my strong suit, is that Barack Obama is going to be able to talk about this in a way, coming from the left side of the political spectrum, in which he can say hey, look, I'm willing to fight this for you.

BORGER: Well, this is...

HAYES: I'm on your side.

BORGER: This is the Democratic issue set.

HAYES: Exactly.

BORGER: You know, if you had to choose an issue set to run on, it would be -- it would be the economy, it would be health care. It wouldn't be national security, which is where John McCain feels safer.

But this is going to be an election about security -- all kinds of security -- how secure you feel in your financial situation, how secure you feel for your children and their future, and how secure you feel for your life, you know.

BLITZER: Jack...

BORGER: And I think Obama benefits on one of those and McCain benefits on another.

BLITZER: What does it say that Arnold Schwarzenegger yesterday suggested, you know what, he might be open to serving in a Barack Obama administration?

CAFFERTY: The Republican governor in California. Between him and Phil Gramm, the financial problem pales in comparison to the political problems being presented to John McCain by his Republican friends.

BORGER: You know, he didn't rule out, by the way, serving with John McCain, either. It's just that he was asked about Obama. I think Schwarzenegger might be available to whomever wanted him, particularly on the issue of the environment, which he really cares about. And that's what he was saying.

BLITZER: All right, Steve, button it up.

HAYES: Well, I think the bigger problem for McCain is that Schwarzenegger was on largely because he's viewed as a McCain Republican.

(LAUGHTER)

HAYES: You don't want a McCain Republican saying work for Barack Obama.

BLITZER: We've got to leave it there, guys. Steve Hayes, thanks very much. Gloria, thanks to you. Jack, don't go away. We've got "The Cafferty File" coming up.

A videotaped execution underscoring a new reign of terror by the Taliban, putting two women to death.

Also, Russian warships returning to waters they haven't patrolled since the demise of the Soviet Union.

And would faster troop withdrawals from Iraq help John McCain or Barack Obama?

That's Jack's question.

He's standing by with your e-mail.

(COMMERCIAL BREAK)

BLITZER: Lou Dobbs is getting ready for his show, that begins right at the top of the hour.

He's standing by with a preview. What are you working on -- Lou?

LOU DOBBS, CNN ANCHOR: Wolf, thank you.

Tonight, we're reporting on charges of hypocrisy by the federal government as it bails out financial institutions at the center of our housing crisis and ignores homeowners who are facing foreclosures, some two-and-a-half million of them. I'll be joined by three of the best minds on the worsening economic crisis.

And President Bush's apparently had a belly full of Congress on crude oil exploration issues. President Bush today lifted his executive ban on offshore oil drilling. He wants Congress to do the same. End the partisan blather and get to work for the people.

And the raging drug wars in Mexico threatening our national security and the future of Mexico's democracy. I'll be talking with Fred Burton, author of a very important new book on the violence of the drug cartels -- a book I believe everyone should be reading.

Join us for that and a great deal more, all of the day's news with an Independent perspective, at the top of the hour here on CNN -- Wolf, back to you.

BLITZER: See you then, Lou.

Thank you.

Let's check back with Carol Costello.

She's monitoring some other important stories incoming into THE SITUATION ROOM right now -- what's going on, Carol?

COSTELLO: Well, Wolf, before I go on with this story, I want to warn you, we have very chilling video to show you. It's coming in from the Associated Press.

According to the accompanying report, this footage shows two women abducted by Taliban gunmen -- and you heard them executed for allegedly being prostitutes. Local Afghan officials reportedly say the Taliban accused them of running a prostitution ring that served U.S. soldiers in the area -- allegations those officials say are completely false. The incident could not be independently verified by CNN.

In other news, a new search is underway for missing billionaire and adventurer Steve Fossett. Highly trained athletes and expert mountaineers are combing a remote area along the California/Nevada border. That's where Fossett's small plane is believed to have crashed last September. He was declared legally dead back in February after multiple searches failed to turn up his remains.

Russia's Navy is going on Arctic patrol again for the first time since the end of the Soviet Union. It's deploying a submarine destroyer and a missile cruiser starting on Thursday. A naval spokesman says it's not an aggressive move, just national security. But Russia is aggressively pursuing natural resources in the Arctic, staking a claim on oil and gas reserves.

And federal airline safety officials say a new runway light system is being installed in 20 of the nation's busiest airports. The lights are embedded in concrete and act like traffic signals, letting pilots know when runways are clear. The FAA says they cut collision hazards at Dallas/Fort Worth Airport by 70 percent during a test period.

And will Jesse Ventura return to politics with a run for the U.S. Senate?

We're going to find out very soon. The former Minnesota governor has made up his mind and will announce his decision tonight, exclusively on "LARRY KING LIVE." That's at 9:00 Eastern, 6:00 Pacific, only on CNN -- back to you, Wolf.

BLITZER: We'll be watching that show.

COSTELLO: We will.

BLITZER: Thank you, Carol, for that.

Let's go back to Jack Cafferty once again.

He's got "The Cafferty File" -- Jack.

CAFFERTY: Has Ventura still got that long curly, greasy looking hair that hangs down over his collar?

BLITZER: Yes, he's sort of bald. But he had a little goatee. I think he's lost it.

CAFFERTY: Yes. I mean, if he's going to run for the Senate, he's got to get a haircut.

BLITZER: Yes.

CAFFERTY: I mean it's priority one.

The Bush administration says it's considering faster troop withdrawals from Iraq. We wondered in the political race that's going on whether that would tend to benefit John McCain or Barack Obama.

Lynda in North Carolina says: "Pulling a large amount of troops out of Iraq before November would help McCain for sure. Right now, a lot of people, including me, are voting for Obama purely because he's against the war. If I see that the war has an end in sight, even with McCain, I'll look at other issues and McCain might just have a chance to get my vote."

Pablo in Texas writes: "Damned if I know or care, for that matter. As long as it helps the troops, I'm for it."

Kent in Illinois: "Pulling the troops out of a war that has no set mission helps Obama. Obama has said time and again the troops need to be in Afghanistan. Well guess what? Now we're going to send the troops to Afghanistan."

Marty in Idaho writes: "It will help America and both candidates ought to be satisfied with that."

Michael in Virginia: "It would probably benefit Obama, since he opposed the war from the beginning. The Iraqi government wants the U.S. out of Iraq and we should comply."

Tim writes: "John McCain clearly should benefit from the improved situation in Iraq. The surge worked. It has given the Iraqi people hope, kept the terrorists off guard and provided a path to victory for the United States and its military."

Lisa says: "The heck with Obama and McCain, let's worry about it helping the American military, not the election. Bring our soldiers home."

And Andy writes: "War? What war? It's the economy, stupid."

If you didn't see your e-mail here, you can go to my blog, CNN.com/caffertyfile, and look for yours there among hundreds of others -- Wolf.

BLITZER: Thanks, Jack.

We'll see you back here tomorrow.

Good work.

Virtually all eyes watch her as the wife of a presidential candidate, yet she's also among the most private of the political wives out there. But Cindy McCain is opening up to CNN.

Our own Brianna Keilar caught up with her yesterday at an Indy car race in Lebanon, Tennessee. That's near Nashville. And she asked Mrs. McCain if she'd be ready to embrace the spotlight should her husband become president.

(BEGIN VIDEOTAPE)

CINDY MCCAIN: Obviously, if my husband were elected, I would be proud to move with him to Washington and to the White House. You know, we made a choice years ago to stay in Arizona -- or for me to stay out West with our kids and raise our children in the most normal fashion that we could. And we didn't feel like Washington, D.C. was a healthy environment for young kids, particularly doing what we were doing.

So we made the right choice. And it wasn't because I didn't like Washington so much, but I cared more about my children and wanted the best for them so.

BRIANNA KEILAR, CNN CORRESPONDENT: You're very complex, multifaceted. You're a private pilot.

Why did you start doing this? C. MCCAIN: Oh, gosh. My husband was running for the Senate in Arizona. And in Arizona, the only way to get around the state is by small private plane. And I was scared to death to fly. And so I decided I would take ground school and learn a little bit about it so that I could then maybe not be so frightened. And I wound up loving it and buying a plane and, you know, it just -- it was something that just caught my interest and my passion.

And so -- and I didn't tell my husband, though. I went and got my license and then told him and took him for a flight. So it was a lot of fun.

KEILAR: You mentioned your son was with you today a few times today. And on Friday, you did something you normally don't do -- you mentioned your son coming home.

Why talk now about that?

C. MCCAIN: Oh, it was just a moment for me. You know, I'm happy to have him home, obviously. I'm a mother. When I look at a group of women and know so many of them have their children -- they either are serving or about to go overseas and serve, I know how it feels. And it was a group of women and I -- we, you know, we were -- a lot of them I talked to coming in. I kind of knew how they felt. And it was more about just, I guess, relating to a group of women, more so than anything -- a group of mothers.

KEILAR: So the last question...

C. MCCAIN: ...a group of mothers more than anything.

KEILAR: A group of mothers.

C. MCCAIN: Yes.

KEILAR: Like yourself. You're a very proactive mother.

(END VIDEOTAPE)

BLITZER: Cindy McCain speaking with our own Brianna Keilar.

Thank you, Brianna, for that.

Miss USA falling down on the job. Jeanne Moos standing by with a "Moost Unusual" story.

And a car powered by the sun -- we're going to show you what it looks like, among today's Hot Shots, right after this.

(COMMERCIAL BREAK)

BLITZER: Here's a look at some of the Hot Shots coming in from our friends over at the Associated Press. These are the pictures likely to be in your hometown newspapers tomorrow.

In Texas, the University of Minnesota solar car team prepares for a race that will lead them all the way to Canada.

In France, soldiers from the fire brigade march in the Bastille Day parade.

In Sweden, Crown Princess Victoria walks and talks to guests at her 31st birthday celebration.

And in Germany, check it out -- reporters get up close and personal with a newborn rare white lion cub.

That's cute, isn't it?

Some of this hour's Hot Shots -- pictures often worth a thousand words.

For the second year in a row, Miss USA took a tumble at the Miss Universe pageant. Now, she's destined for what a lot of people are calling YouTube infamy.

Our Jeanne Moos has this "Moost Unusual" look.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): Who cares if a beauty queen can twirl?

What the public falls for is a fall. Or as Perez Hilton's Web site put it, "Miss USA eats it" -- and we eat it up.

The fall zoomed to number one most popular video. It was replayed...

UNIDENTIFIED MALE: Let's just keep this rolling on a little bit of a loop here.

MOOS: Six times in 40 seconds on CNN. The "Today Show" played it nine times over a phone interview with Miss USA, in which she had this advice for a future contestant who might fall in her footsteps.

(BEGIN VIDEO CLIP)

CRYSTLE STEWART, MISS USA: I would tell her to put grips on the bottom of her shoes and wear a short dress, not a long dress.

(END VIDEO CLIP)

MOOS: If only last year's Miss USA had passed on that advice after she fell. At least they both made expert recoveries -- Miss USA '08 clapping and Miss USA '07 cocking an eyebrow.

(BEGIN VIDEO CLIP)

RACHEL SMITH, FORMER MISS. USA: I'm tired of talking about it.

UNIDENTIFIED MALE: Yes.

SMITH: Who has not tripped?

UNIDENTIFIED MALE: Yes.

SMITH: I just happened to do it in front of a billion people. Oops.

(END VIDEO CLIP)

MOOS: Rachel Smith had a costume defender on YouTube falling all over her.

(VIDEO CLIP)

MOOS: YouTube is a magnet for videos of people falling. This one was billed as probably the funniest fall ever caught on TV. In this one, a guy who preceded the models managed to stomp a hole in the runway. Seconds later, a model fell in. But holes aren't usually the culprit -- it's when high heels get caught in a hem. Ask Beyonce.

Of course, Kelsey Grammer wasn't wearing heels when he fell.

(BEGIN VIDEO CLIP)

KELSEY GRAMMER: ...a U.N. interpreter. Oh, good lord. Oh, damn.

(END VIDEO CLIP)

MOOS: Sometimes it's not the beauties themselves who fall, but what they wear. From a sash...

(VIDEO CLIP)

MOOS: ...to a skirt.

UNIDENTIFIED MALE: And gave a new meaning to media exposure.

MOOS: When Carmen Electra went sprawling and a would-be rescuer in heels rushed to her aid, even Carmen cracked a smile.

(on camera): Now, there is someone else who has a right to be almost as upset about the latest beauty contestant fall as Miss USA herself.

(voice-over): That would be the Miss Universe winner -- Miss Venezuela, who ended up second banana in many a headline.

(on camera): The moral of the story -- a fall isn't necessarily the downfall of a beauty queen.

(voice-over): There are worse things that can befall you.

UNIDENTIFIED FEMALE: I personally believe that U.S. Americans are...

MOOS: Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

BLITZER: Who could forget that answer she gave?

This important programming note for our viewers. On Thursday, I'll be interviewing Nancy Pelosi, the Speaker of the House of Representatives. You can submit some video questions. Here's what you do. You go to iReport.com/situationroom. We're going to try to pose some of your video questions to the speaker of the House on Thursday.

And check out our new THE SITUATION ROOM screen saver. You can stay up to date with the little political news. Download it at CNN.com/situationroom.

Let's go to Lou in New York -- Lou.