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The Situation Room
Failed Bank Now Being Probed; McCain's Uphill Battle; Challenges of Race in Presidential Race
Aired July 16, 2008 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, CNN ANCHOR: Happening now, John McCain breaks the ice with the nation's oldest civil rights group, but gets somewhat of a lukewarm reception. As he courts African-Americans, there's a new indicator of just how tough it might be for him to win them over.
Barack Obama moves in on what some people consider McCain's political turf. It's to counter what some see as Obama's political weakness.
And amid breathtaking steps to prevent two mortgage giants from failing, some people are short of breath at what the CEOs were paid at their companies -- as their companies neared financial disaster.
I'm Wolf Blitzer. You're in THE SITUATION ROOM.
ANNOUNCER: This is CNN breaking news.
BLITZER: But let's begin with some breaking news first. Breaking news involving your money.
The government is investigating right now that California bank that just days ago was taken over by the federal government. This adds to the company's huge financial problems, and to the huge sense of nervousness for customers worried about their money at IndyMac banks. You remember those long lines that we saw only this week.
Let's go straight to our justice correspondent, Kelli Arena. She's working the story for us.
What's the latest, Kelli?
KELLI ARENA, CNN JUSTICE CORRESPONDENT: Wolf, CNN has confirmed that the FBI is investigating IndyMac Bank Corp. A source with knowledge of that investigation tells me that the feds are looking into whether the bank engaged in fraud when it made home loans to risky borrowers.
As you've said, the bank was just taken over by federal regulators last week. It was the second biggest bank failure in U.S. history.
Now, the FBI refuses to comment, Wolf, but a source tells me that the probe is primarily focused on the company and not individuals at this time.
BLITZER: Do we have any idea, Kelli, how many companies are right now being investigated by the FBI? Because god knows there's a lot of nervous investors out there, a lot of nervous bank depositors.
ARENA: There sure are, Wolf. Well, the bureau says that it's investigating 21 corporations for possible mortgage fraud. It's got more than 180 agents on the job. The FBI is not offering any details about those investigations, but as you know, we've previously reported that the nation's largest mortgage lender, Countrywide Financial, is part of that probe -- Wolf.
BLITZER: I know you're working this story and will have more.
Kelli Arena watching it for us.
What a day it's been already. The worst inflation numbers in nearly three decades. We're going to have much more on the economic story coming up.
Let's turn to politics right now.
John McCain confronts a huge political problem head-on. Today he gave an enthusiastic speech in front of a less than enthusiastic audience of African-Americans, meeting with the nation's oldest civil rights group. He's trying to win them over and he's trying to win over other African-Americans as well. But by several indicators, he's looking at a rather steep uphill battle.
Let's go to Cincinnati. CNN's Dana Bash is covering the McCain campaign for us. She's watching this story.
So how did he do before the NAACP convention today, Dana?
DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, he did basically what he had to do, and actually something that we're told he was urged to do by several prominent black Republicans who met with John McCain last week and urged him not to give up on the black vote. He came in part because of that, and in part to beef up his brand as someone willing to reach out.
(BEGIN VIDEOTAPE)
BASH (voice over): If your audience is the NAACP and your opponent would be the first black president, you start here.
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Don't tell him I said this, but he's an impressive fellow in many ways.
BASH: That was John McCain's biggest applause line, an icebreaker about Barack Obama, who got a thunderous reception two days earlier. McCain was greeted with mostly polite clapping. One person so indifferent, he read the paper.
McCain came armed with new education initiatives.
MCCAIN: The worst problems of our public school system are often found in black communities.
BASH: He pushed merit pay for teachers and hit Obama for opposing school vouchers.
MCCAIN: All that went well over the teachers union, but where does it leave families and their children who are stuck in failing schools?
BASH: The reaction, dead silence.
McCain's chances at winning black votes are incredibly steep. A fresh "New York Times" poll shows 89 percent of black voters support Obama. Just two percent say they'll vote for McCain.
MCCAIN: Whether or not I win your support, I need your goodwill and your counsel.
BASH: But McCain came looking mostly for just that, goodwill, to show he's a different kind of Republican. After George Bush was elected, he did not attend the NAACP conference for six years. McCain came, and even opened it up for questions...
MCCAIN: I know that you have a couple of things on your mind.
BASH: ... knowing he would get some tough ones, like from this teacher in an Obama T-shirt who says teachers can't afford food.
UNIDENTIFIED FEMALE: What are you going to do, Senator? We can't continue this way.
MCCAIN: I want to reward good teachers.
BASH: If nothing else here, kudos for coming.
GRETCHEN WOODS, DES MOINES, IOWA: After hearing him today, I may listen to him again.
(END VIDEOTAPE)
BASH: Now, Democrats were quick to send out a list of black forums this campaign season that John McCain has skipped. But many NAACP members that we spoke to after this speech said they don't plan to vote for Senator McCain, but they do respect him for coming, and especially for taking questions. That's something, Wolf, that Obama did not do.
BLITZER: Dana is in Cincinnati watching this story.
We'll get back to you.
Meanwhile, Senator Obama must confront his own political challenges when it comes to the issue of race. There's a fresh "New York Times"/CBS News poll showing that, despite Obama being the first African-American trying to lead his party in a White House race, Americans are sharply divided on racial issues. Among other things, the poll found that 55 percent of whites think race relations are generally good, while only 29 percent of blacks feel that way.
So how might all of that impact the election? Let's bring in our Senior Political Correspondent Candy Crowley. She's watching this story for us.
He's long hoped, as we all know, to transcend these kinds of racial issues.
CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Absolutely. And I think what this poll shows is in the main, because as we all know, the support and non-support of white or blacks can shift back and forth between now and November.
But what it shows us is that, while this may be a historic moment, while it may be a first for the United States, it is not a moment that's going to change race relations. I mean, what they basically found was that since 2000, black attitudes toward the state of race relations has not changed. And Barack Obama, in fact, does not change that, his expected nomination.
Also interesting I thought in the poll was that about 50 percent of the blacks polled said that they thought things would stay the same in terms of race relations. Only...
BLITZER: Even if Barack Obama becomes president.
CROWLEY: Yes. Only -- sorry, only 50 percent thought even if he became president that things would be better. The other half didn't think so. So, there's not a lot of expectation that the larger picture will change, but that this is obviously a step forward.
BLITZER: Although, if it does happen, if he is elected, that would be such a symbolic and dramatic move. It could affect attitudes.
CROWLEY: Absolutely. Except for, again, neither whites or blacks overwhelmingly saw any big change in race relations. It's just going to take a lot more time and a lot more "for instances" than the first African-American nominee.
BLITZER: Good point. Candy, thank you.
Let's check in with Jack once again. He's got "The Cafferty File" -- Jack.
JACK CAFFERTY, CNN ANCHOR: One of the jobs of American presidents, whether they realize it or not, is to make us laugh once in a while. You need look no farther than George W. Bush. But if you want to look farther, there's a gold mine of yucks out there --- Bill Clinton with the blue dress and cigars; Al Gore with his robotic seriousness; Ronald Reagan sleeping through cabinet meetings; Dan Quayle trying to spell "potato." President Bush's dad meeting a grocery store scanner for the first time was priceless, as was President Carter's tale of being attacked in a rowboat by a rabbit.
What about Barack Obama? The writers for the late-night TV shows admit they're having a tough time coming up with jokes about the presidential frontrunner. Letterman and Leno lampoon McCain on a regular basis, but not Barack Obama. Maureen Dowd wonders aloud in her column in "The New York Times" this morning, "Why not?" When "The New Yorker" magazine cover came out a couple of days ago, people didn't laugh even though it was a cartoon. They got mad. Dowd suggests, with the rather dark mood of the country these days, that it wouldn't hurt Barack Obama to lighten up a little bit. Because if he does, then the rest of us would feel freer to have a giggle at his expense, and that would be good for everybody.
So here's the question: Is Barack Obama in danger of taking himself too seriously?
Go to CNN.com/cafferty file, you can post a comment on my blog -- Wolf.
BLITZER: See you in a few moments, Jack. Thank you.
There are serious fears that two mortgage giants are flirting dangerously close to failure. But the CEOs of Fannie Mae and Freddie Mac are being paid rather handsomely. We're looking at exactly what they're being paid for right now.
The Bush administration changes its tune about Iran. Something will happen this weekend that has the Bush administration flat-out rejecting any notion it's giving in to Iran. We'll explain.
And with Mitt Romney helping John McCain, he could wind up helping himself.
(BEGIN VIDEO CLIP)
MITT ROMNEY (R), FMR. PRESIDENTIAL CANDIDATE: The campaigning I did for myself resulted in a loss. And I don't want to hurt him, I want to help him.
(END VIDEO CLIP)
(COMMERCIAL BREAK)
BLITZER: Right now the Bush administration is making a dramatic break in a tough stance regarding direct contact with Iran. For the first time, a top U.S. official will sit down with Iran's top nuclear negotiator. And the Bush administration says it will be the last time as well.
Our White House correspondent, Elaine Quijano, has more -- Elaine.
ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Wolf, the White House insists it is not giving in to Iran despite President Bush signing off on a decision to send Under Secretary of State William Burns to a meeting in Switzerland this weekend with Iran's top nuclear negotiator and the foreign policy chief of the European Union. The Bush administration had said it would not engage in direct nuclear talks unless Iran suspended its uranium enrichment program. Officials argue the meeting will not be a negotiation, that Burns will be there to reiterate the U.S.' position and to listen to what the Iranians have to say about a package of economic incentives that the Europeans delivered weeks ago.
(BEGIN VIDEO CLIP)
DANA PERINO, WHITE HOUSE PRESS SECRETARY: I think it shows the seriousness from which we've been trying to tell all of you for many months, which is that we want to solve this issue diplomatically. We seek to do so.
We are going to continue to work with our international partners in unison, which is what we are going to do on Saturday. But the fundamental underlying principle is that there will not be any negotiations unless Iran suspends its enrichment of uranium.
(END VIDEO CLIP)
QUIJANO: The U.S. insists there will be no separate meeting between Burns and the Iranian envoy.
Meantime, presumptive Democratic presidential nominee Senator Barack Obama says this is welcome news that the Bush administration, in his words, has shifted course -- Wolf.
BLITZER: Watching the story, Elaine is at the White House.
In another story we're watching, the answer is no. President Bush asserts executive privilege to a House panel looking into the CIA leak case. He wants to prevent the attorney general, Michael Mukasey, from having to comply with a subpoena to hand over some documents.
The administration says it's to protect the separation of powers. But the House panel chairman says it's unfounded and he warns Mukasey could be held in contempt.
(NEWSBREAK)
(COMMERCIAL BREAK)
BLITZER: By political standards, it's among the most closely guarded secrets, John McCain's list of people he's considering for vice president. There's wild speculation out there about who might be on that list. But one name is getting a lot more buzz than some of the others.
Let's go to Tom Foreman. He's working this story.
And we're specifically speaking about Mitt Romney, Tom.
TOM FOREMAN, CNN CORRESPONDENT: Yes, Mitt Romney. He's really rising up here. He and John McCain have gone from being political foes to friends. The question is, will they go much further than that?
(BEGIN VIDEOTAPE)
ROMNEY: Senator McCain said that the economy is not his strong suit. It is my strong suit, I can tell you that.
FOREMAN: That was then, and this is now.
ROMNEY: You can take Hillary Clinton and Barack Obama's experience and multiply it by 10, you still haven't caught up with Senator McCain when it comes to experience on the economy.
FOREMAN: Back in the heat of the primaries, former Massachusetts governor Mitt Romney was one of Senator John McCain's fiercest rivals.
ROMNEY: You know, he was against the Bush tax cuts. Now he's for making them permanent. He was for McCain/Kennedy, now he's for a new program for immigration. He's changed his view on issue after issue.
FOREMAN: But after Romney dropped his bid for the White House back in February, he backed McCain. He's held fund-raisers for him and has become one of McCain's biggest surrogates.
ROMNEY: You're finding in our party that people are rallying strongly around Senator McCain.
FOREMAN: In fact, this week McCain joked about all of Romney's help.
MCCAIN: I am appreciative every time I see Mitt on television on my behalf. He does a better job for me than he did for himself, as a matter of fact.
FOREMAN: Romney's also considered to be a potential running mate, a job he seems to be interested in. But McCain remains coy.
MCCAIN: Millions of Republicans voted for him, and so obviously I think he would be a consideration for a lot of different roles in a Republican administration.
(END VIDEOTAPE)
FOREMAN: Well, there are a lot of positives with Mitt Romney, including the fact that he's already been thoroughly vetted because of his own campaign run. He's got family ties to Michigan, which is an important battleground state. And it never hurts in a campaign, he's a good looking guy.
Wolf, we'll have a complete rundown on all the veep choices on both sides of the aisle on "AC 360" tonight.
BLITZER: We'll be watching. Thank you, Tom.
(BEGIN VIDEOTAPE)
BLITZER: And joining us now, the former governor of Massachusetts, Mitt Romney, himself a former Republican presidential candidate. Now a strong supporter of John McCain.
Governor, thanks very much for coming in. ROMNEY: Thanks, Wolf. Good to be with you.
BLITZER: All right. Let's talk about issue #1, the economy, right now.
Obama keeps saying if you like President Bush's economic policies, vote for John McCain, because you're going to get a whole lot more of the same. With the exception of McCain being much tougher on pet projects, pork barrel spending, is there any real difference between McCain and Bush on the economy?
ROMNEY: Well, the answer is, of course. But, of course the greatest differences between McCain and Barack Obama.
But with regards to Bush, first of all, he will cut spending, not just on pork barrel projects, but discretionary accounts will be cut back. He'll also cut back on entitlement excesses. And then he's going to go after our energy policy in a very aggressive way by making sure that we, one, have a cap and trade program, but also, he's going to develop nuclear power, wind power, solar power, additional drilling in this country offshore. It's an entirely different approach to energy, getting us energy independent.
And with regards to trade, he does believe in trade around the world, but trade that's fair, that protects American jobs.
BLITZER: But so does President Bush.
ROMNEY: But the big difference between John McCain and Barack Obama is with Barack Obama. That's where the big difference lies, where Barack Obama wants to raise taxes, John McCain wants to lower them. John McCain, unlike either the president or Barack Obama, has said let's lower taxes on middle-income Americans, $2,700 a year savings by getting rid of the AMT, as well as doubling the personal exemptions.
BLITZER: But Barack Obama says you're only going to be paying more taxes if you make more than $250,000 a year. If you're middle class income taxpayer, you're going to have a cut in taxes. He says McCain will have a bonanza for rich people, he will have a savings for the middle class.
ROMNEY: You know, sweet talk is awful nice, but it doesn't compare with straight talk. And in the case of John McCain, he said, look, the tax changes he's going to put in place are changes to reduce taxes for middle-income Americans. And Barack Obama's been all over with regards to taxes.
But I do understand that he voted this year twice to increase taxes on people making $32,000 a year and above. So he's not a guy who's going to shy away from more government spending and more government taxing. So they come from different places with regards to taxes.
From energy, they're miles apart. Where Barack Obama says we can't drill offshore, John McCain says we can and should. And John McCain also wants to fast-track nuclear power plants. So there's a big difference.
BLITZER: It seems that the Bush administration over the past 24 hours has now come around to a certain degree and is ready to start a direct dialogue with Iran. They're sending the under secretary of state to Switzerland for these talks over the weekend. And the Obama campaign welcomed this, saying it looks like the Bush administration is moving closer to Senator Obama's position on this.
Is this OK with you?
(LAUGHTER)
ROMNEY: You know, the Obama folks have to work awful hard to find a way to get their candidate to seem like he's prescient when it comes to foreign policy issues. Look, Barack Obama was asked whether he personally, as president of the United States in his first year, would, without condition, meet with Ahmadinejad of Iran. And he said yes. And that's absolutely nuts.
Of course we talk with people around the world. Our government has always been willing to talk and exchange ideas. Sometimes at the very bottom level, sometimes at diplomatic levels.
BLITZER: Well, the Bush administration wasn't willing to talk with Iran on nuclear-related issues until they stopped enriching uranium, but all of a sudden, over the past day, they made a change on that.
ROMNEY: You know, I don't know what changes the Bush administration has made. Of course you're going to be somewhat flexible in the decisions you make with regards to talking with people. We talk to folks.
The Bush administration has always been willing to let Iran know exactly where we stand. And that's, I think, the critical element here. And the crazy thing is to say you're going to have the president meet with Ahmadinejad.
BLITZER: Well, let me say -- as you this: If you're the vice president of the United States, and they say go ahead and meet with the Iranian leadership, are you ready to do that?
ROMNEY: Well, first I'm going to reject the hypothesis that I'm the vice president of the United States. But I can tell you that whoever is the vice president of the United States is going to take their signals from whoever the president is, and he'll follow the president -- or she'll follow the president's guide. Whether or not he agrees with it, when you're the vice president, you do what you're told.
BLITZER: Fair point.
Let's talk about another sensitive issue that's come up over the past few days, the issue of gay adoption. John McCain told "The New York Times" he opposes adoption by homosexual couples, although the campaign later said they wanted to clarify it, saying this should really be an issue left up to the states.
What do you think about this whole issue?
ROMNEY: You know, I know just exactly how Senator McCain feels on this. And I think most Americans feel the same way, which is that we recognize that the ideal setting for raising a child is where there's a mom and a dad. And a great majority of states recognize that as well.
But typically states have said, look, we're going to encourage adoptions where there's a mom and a dad, but we're not going to make it illegal for other circumstances for adoption to occur as well. And we're going to let the courts decide what's in the best interests of the child. And so you don't make illegal necessarily or have a national policy that says you can't have gay adoption. You let the states decide what's in the best interest of the child, and that's, as I understand it, about where Senator McCain is on this issue.
BLITZER: And is that OK for you on that? If the states -- whatever state said, you know what, it's fine for gay couples to adopt kids, that would be OK with you?
ROMNEY: I didn't oppose that here in Massachusetts. My view was the best setting for a child to be raised is where there's a mom and a dad, but I did not say let's put in place a law that would prevent a court from deciding that a child, instead of being in an orphanage, should be with a same-sex couple or with a single mom or a single dad. You leave that up to the court and let them make the decision.
BLITZER: A lot of people are suggesting you're the front-runner right now for John McCain's running mate. Have you already started being vetted? In other words, have you been asked questions, are you submitting documents, IRS returns? Has that process already started?
ROMNEY: Well, first of all, with regards to the -- all the people who think I might be on some kind of a short list, the only one that really counts in that regard is John McCain. And I don't think he's told anybody what his thinking is.
And with regards to a vetting process, you know, anything of that nature I'm going to direct to the McCain campaign. I don't want to, you know, engage in any speculation with regards to the VP sweepstakes. And my own view is, I expect to support the administration and the McCain team. I don't expect to be part of it.
BLITZER: So we'll leave that vague and we'll see what happens. But, you know, he did say just the other day he thought you were a much better surrogate for him than you actually were for yourself. He was sort of joking, but you heard him say that?
ROMNEY: Yes, I heard about that. I thought it was pretty good. And by the way, he hit the nail on the head.
After all, the campaigning I did for myself resulted in a loss. And I don't want to hurt him, I want to help him.
BLITZER: And he's probably very grateful to you for your help.
Governor, thanks very much for coming in.
ROMNEY: Thanks, Wolf. Good to be with you.
(END VIDEOTAPE)
BLITZER: And to our viewers, you're in THE SITUATION ROOM.
Happening now, a dramatic prisoner swap as Hezbollah guerrillas deliver the bodies of two Israeli soldiers and Israel frees a militant accused of a gruesome attack.
Intense pressure to recruit U.S. troops could have resulted in a number of criminals who were causing new problems within the military ranks. Military figures show an increase in what are called conduct waivers.
A dozen years after the TWA 800 disaster, the FAA announcing new rules to prevent midair fuel tank explosions. Planes with center wing tanks will be retrofitted.
I'm Wolf Blitzer. You're in THE SITUATION ROOM.
(COMMERCIAL BREAK)
BLITZER: Barack Obama's campaign is apparently weighing its political vulnerabilities. And that is becoming clear when you take a closer look at where he's been speaking recently and what he's been saying.
Let's turn to our senior political analyst, Bill Schneider. He's working the story.
Bill, where is Barack Obama most vulnerable?
WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: On national security issues.
Obama's trying to counter that weakness. McCain is trying to highlight it.
(BEGIN VIDEOTAPE)
SCHNEIDER (voice-over): On Tuesday, Barack Obama gave his big speech about Iraq and Afghanistan. John McCain's response? Obama doesn't know anything.
MCCAIN: Why not take your first trip ever to Afghanistan before you come out with a speech on what we need to do? I mean, it's remarkable. I have never seen anything like it.
SCHNEIDER: McCain has extensive military experience. Eleven flag-level officers signed a letter endorsing him.
(BEGIN AUDIO CLIP) GENERAL P.X. KELLEY (RET.), U.S. MARINE CORPS: He's experienced. He's well-liked and he knows what he's talking about.
(END AUDIO CLIP)
SCHNEIDER: Nearly three-quarters of Americans feel McCain would be a good commander in chief. Obama has no military experience. Voters are not sure whether he would be a good commander in chief.
As a result, McCain has the advantage on national security issues, like terrorism and handling a national crisis. Obama opposed the troop surge in Iraq, but now acknowledges that violence has declined.
MCCAIN: Senator Obama refuses to acknowledge that he was wrong.
SCHNEIDER: Obama claims he was right, not because the surge didn't work, but because it was a dangerous distraction.
SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: This war distracts us from every threat that we face and so many opportunities we could seize.
SCHNEIDER: On Wednesday, he held a summit with national security experts aimed at drawing attention to those threats.
OBAMA: Instead of adjusting to the stateless threats of the 21st century, we invaded and occupied a state that has no collaborative relationship with al Qaeda.
SCHNEIDER: Right now, Obama and McCain are rated about the same on Iraq, Iran and international affairs, which means he has neutralized McCain's advantage or foreign policy. And he's trying to do the same thing on national security.
(END VIDEOTAPE)
SCHNEIDER: Obama will shortly be headed for the Middle East, and intends to show how much he knows about the threats the U.S. faces. McCain is hoping the trip will demonstrate how little he knows -- Wolf.
BLITZER: All right, we will be covering that trip obviously wall-to-wall -- Bill Schneider reporting.
Coming up: Fannie Mae and Freddie Mac, the two huge mortgage giants, they could be in trouble. So, here's a question. Why are their CEOs still taking home huge salaries, in fact, more than $10 million each? Is it too much? That story coming up.
Plus, a comment John McCain made is turning into a new political ad from one major political group, and it's being aired in several swing states.
Plus, it looks too amazing to be true, but we checked it out -- the story of a photographer, some surfers, and a high-jumping shark. (COMMERCIAL BREAK)
BLITZER: The Federal Reserve chairman, Ben Bernanke, is assuring Congress that the mortgage giants Freddie Mac and Fannie Mae are -- quote -- "in no danger of failing."
Still, the Fed and the Treasury Department are thinking of throwing them some financial lifelines, as the mortgage meltdown across the country spreads. And that's focusing closer attention on the men in charge and their sizable salaries.
Let's turn to CNN's Brian Todd. He's working the story for us.
When we say sizable salaries, these leaders of Fannie Mae and Freddie Mac are very well compensated.
BRIAN TODD, CNN CORRESPONDENT: They certainly are, Wolf. But this is an unusual situation. These are privately run companies. But it's their connections to the federal government and their involvement in one of America's most troubled industries that have eyebrows raised about these salaries.
(BEGIN VIDEOTAPE)
TODD (voice-over): A mortgage meltdown, stock prices for two of the nation's giant lenders plummet, amid fears about the historic downturn in the housing market. Still, the CEOs of Fannie Mae and Freddie Mac are bringing in huge salaries.
Daniel Mudd of Fannie Mae, more than $12 million in salary, bonuses and long-term incentives last year. Freddie Mac's Richard Syron got $10.5 million last year.
REP. BARNEY FRANK (D), MASSACHUSETTS: It's not appropriate for people to be making tens of millions of dollars if they are reliant on a potential help from the taxpayers.
TODD: The two companies were created by Congress to help provide mortgage funding, with the understanding that the government, the taxpayers, would back them up financially if they got in trouble.
That hasn't happened yet. But Democratic Congressman Barney Frank wants to regulate how much the top executives of Fannie and Freddie make.
FRANK: We're not asking anybody to take an oath of poverty, but I believe that paying at a level of a couple of million dollars a year, $3 million a year, that's going to get you the talent you need.
TODD: But both companies are privately run, trade on the open market. They tell CNN their executive stock awards dropped last year because the firm's stock prices went down. A Freddie Mac official said that company's board believe Richard Syron's salary is justified, because he led them to a greater share of the mortgage market.
One analyst says, even with quasi government involvement in Fannie and Freddie, maybe we shouldn't be so outraged at those salaries.
MAURNA DESMOND, FORBES.COM: Fundamentally, companies need to offer compensation for talent. Combined, the two firms shoulder $5.2 trillion in outstanding government debt. That's about half of the outstanding U.S. mortgage market. And they're as important, if not more important, than any Wall Street firm.
(END VIDEOTAPE)
TODD: And Maurna Desmond points out, the Fannie and Freddie execs make much less than CEOs of those Wall Street firms.
Still, given the foreclosure crisis, Congress will push to have more oversight of these lenders. Under Frank's bill, if Freddie Mac and Fannie Mae tap into the expanded line of credit from the federal government that is being proposed right now, meaning taxpayer money, their executives and shareholders could not be paid dividends if those stocks go back up, Wolf.
BLITZER: Does Congressman Barney Frank also want the government to determine who should be hired as the CEOs of these -- these mortgage giants?
TODD: He says he doesn't want to go that far. He doesn't want to politicize the process that much. But he says they want to have the control to tell these people to stop shady lending practices, to make them raise more capital, even have the power to put them into receivership if they don't perform.
BLITZER: Thanks very much, Brian, working the story.
Coming up in our "Strategy Session," it was a question that seemed to have stumped John McCain.
(BEGIN VIDEO CLIP)
QUESTION: I guess her statement was that it was unfair that health insurance companies cover Viagra, but not birth control. Do you have an opinion on that?
(END VIDEO CLIP)
BLITZER: And now an advocacy group is using his answer against him. Why can't Senator McCain put this issue behind him?
And former Senator Sam Nunn and current Senator Evan Bayh, they were both on the campaign trail with Senator Obama today. Could one of them be his running mate?
Paul Begala and Dick Armey, they're standing by live -- right here in THE SITUATION ROOM.
(COMMERCIAL BREAK)
BLITZER: There's been a decision involving the sensitive issue of gay marriage in California. Let's go to Carol Costello. She's working this story for us.
What are we learning, Carol?
CAROL COSTELLO, CNN CORRESPONDENT: Well, we're just getting word, Wolf, that the California Supreme Court has refused to hear a case on the gay marriage initiative. That means the initiative will go on the ballot in November. It will go to the voters.
And if voters pass that initiative, they will vote to amend the Constitution, banning gay marriage in California. As you know, the courts in California just upheld the right for gays to marry there. So, of course, it will be very interesting come November. It will be interesting to see if this will play a part of the presidential politics as well -- back to you, Wolf.
BLITZER: Well, it certainly looks like it's going to be on the ballot.
Thanks very much for that, Carol.
Let's get to our "Strategy Session" right now.
Joining us, our Democratic strategist Paul Begala and our Republican strategist Dick Armey, the former House majority leader. I'm going to ask both of them to stick around for just a moment, because, first, I want to get to the Internet buzz that's out there about a new anti-McCain ad that's just out from Planned Parenthood.
Our Internet reporter, Abbi Tatton, is working this story for us.
Give us the background and the details, Abbi.
ABBI TATTON, CNN INTERNET REPORTER: Wolf, it was an uncomfortable moment for Senator John McCain on the campaign trail last week, asked about insurance plans that cover Viagra, but not birth control. And now Planned Parenthood wants women voters to see it.
(BEGIN VIDEO CLIP)
NARRATOR: Ever use birth control? Then you will want to hear this.
UNIDENTIFIED FEMALE: ... unfair that health insurance companies cover Viagra, but not birth control. Do you have an opinion on that?
MCCAIN: I don't know enough about it to give you an informed answer.
(END VIDEO CLIP)
TATTON: That ad is from the political arm of Planned Parenthood. They say it's been running in six battleground states. And they're going right after women voters on this. It's going to be airing during "Oprah" in select markets and also on shows like Lifetime's "Army Wives" -- Wolf.
BLITZER: All right, Abbi, thank you.
Let's go right to Congressman Armey and ask him, what do you think? Is this an issue he can put behind him?
DICK ARMEY, FORMER REPUBLICAN HOUSE MAJORITY LEADER: Well, I don't know.
It's too bad he didn't realize the correct answer was that it's not the government's business to issue mandates about a private insurance company. Unlike my opponent, I do not believe in government mandates on health insurance.
I think he was taken by surprise. The question was such an inane and inappropriate question, it would have caught about anybody from surprise.
BLITZER: Why is it inappropriate, if some insurance companies will reimburse for Viagra, but they won't reimburse for birth control?
ARMEY: In the private insurance market, you get the coverage you pay for, and you should be free to stipulate the coverage you want.
And my guess is that, at John McCain's age, he's too old for birth control and too young for Viagra. He's not given any thought to either one.
BLITZER: Well, I don't know about his personal predilections, but go ahead.
PAUL BEGALA, CNN POLITICAL ANALYST: I don't want to know. I'm a Democrat, though. We make love, not war. But my Republican friends can't do either, actually, if you look at the status of things in -- around the world.
This is enormously problematic. This is a man, Senator McCain, who recently said he didn't know anything about the economy. Now, apparently, he doesn't know anything about procreation either. I mean, what does he know?
It's a wonderful ad for Planned Parenthood. The left, and particularly the feminist movement, have often been criticized for lacking a sense of humor. Well, this is hilarious, if unintentionally so, from Senator McCain. It's the fairest attack you can wage. It's putting someone's own words, or in this case eight seconds of deadly silence, about an issue that every family who deals with family planning, for goodness' sakes. And the notion he doesn't know about that is really problematic for McCain.
BLITZER: Is it going to hurt him?
ARMEY: I don't think it will hurt him because of the constituency that will be entertained by this ad is probably a constituency who wouldn't vote at all. On the other hand, it might in fact help him. There's a big constituency that's had a little bit of doubt from the Christian right about whether or not he's their guy. And they might like him.
But, you know, it falls within the intellectual framework of asking a person what kind of underwear they wear. Quite frankly, the point still remains, it's not the federal government's business to mandate health insurance coverage. And, in a free market, you can buy the coverage you want.
BEGALA: It's not a private matter. It's a public policy issue.
You believe that it's not the government's business. I believe it is. But this is why we have debates and elections. And that is why politicians ought to know enough about the real lives of real people to have a position on something like this.
I tell you, you know, this is something that affects people's lives. And McCain is completely out of touch.
(CROSSTALK)
BLITZER: Let's move on, Paul, and Congressman Armey, and talk about what we call the veepstakes, because Senator Obama was out campaigning today, and he brought along two potential running mates, the former Senator Sam Nunn and the current Senator Evan Bayh.
Listen to what they say.
(BEGIN VIDEO CLIP)
SAM NUNN (D), FORMER U.S. SENATOR: I have never aspired to that office. It's always nice to have your name mentioned. It's an honor. But I have no expectations of being offered any office.
SEN. EVAN BAYH (D), INDIANA: I think any questions about the vice presidential thing are understandable. It's good for my ego. But I should probably let the -- Senator Obama and his campaign address those kind of questions.
(END VIDEO CLIP)
BLITZER: All right, what do you think about those two guys?
BEGALA: Two very different things.
I think, if Senator Obama were to pick Evan Bayh, it would be almost universal acclamation. He's a very well-liked and respected person in the Democratic Party and across the country.
Of course, he's from Indiana, which is traditionally a red state. But he's probably the most popular politician of either party in that red state.
BLITZER: Former governor of the state.
BEGALA: Former governor and a very popular senator, on the Intelligence Committee, knows national security.
BLITZER: Former supporter of Hillary Clinton, too.
BEGALA: Yes, which would be good for all the Hillary people.
Now, Nunn a very different thing. Senator Nunn was one of the leaders in the movement to keep gays and lesbians from serving honorably in the military in the early '90s, when President Clinton first took office. A lot of gay rights activists who have I talked have said, and the phrase that one of them used with me was that this would be a permanent distraction, a fatal distraction, if Senator Obama were to pick Senator Nunn for...
(CROSSTALK)
BLITZER: But even your former boss, Bill Clinton, he supported that compromise, don't ask/don't tell.
BEGALA: The compromise -- the compromise back then. But Nunn didn't want any gays or lesbians to serve in the military at all. And he was at the most conservative edge of that.
He was with Jesse Helms, not with Bill Clinton.
(CROSSTALK)
BEGALA: It would be a huge problem.
BLITZER: He does bring a lot of national security gravitas, though, to a potential ticket.
ARMEY: Well, I have to say, I like I appreciate and both of these gentlemen. I think they're both extremely competent, able and good people.
I happen to have also a very warm place in my heart for Senator Nunn for the work that he and I were able to do together. My own view is that Bayh would be a better choice for him. Senator Nunn's been out of office for a long time. I don't think he would be as attractive to Senator Obama's own base as Bayh. And Bayh would be an extraordinarily good choice for him.
BLITZER: Is Bayh a better choice than Hillary Clinton?
BEGALA: I don't think anybody is a better choice than Hillary. Of course, you know my bias is -- all our viewers know, I voted for her, and I donated to her campaign.
But Bayh would be an outstanding choice. I think Democrats, from the far left, to the center, to the right, would be happy with Evan Bayh.
BLITZER: All right, we will leave it there. Thanks, guys.
BEGALA: Thanks, Wolf. BLITZER: If you could, by the way, talk to the House speaker, Nancy Pelosi, what would you want to ask her? Here's your chance. You can submit your video questions for my interview with the speaker. Tomorrow, I will be speaking with her. Just go to ireport.com/SITUATIONROOM. Make sure to tune in for my one-on-one interview with the speaker of the House tomorrow, right here in THE SITUATION ROOM.
They're equal opportunity political offenders. Now the people of JibJab are poking even more fun and poking some jabs at the politicians. Wait until you see what they do with Barack Obama, John McCain, Hillary Clinton, and George W. Bush, among others.
And it's reminiscent of the movie "Jaws," a huge shark apparently -- and I stress the word apparently -- jumps out of the water. There are pictures you're probably going to want to see. We have them for you.
And we also have some exclusive access to the FBI. You will go inside the crime-fighting agency and see how it fights as many as 100 threats every day.
(COMMERCIAL BREAK)
BLITZER: Now, here's a look at some of the "Hot Shots" coming in from our friends at the Associated Press.
In Myanmar, a boy eats a lollipop as he stands next to a statue of Buddha.
In Beijing, fireworks light up the night sky during rehearsals of the opening ceremony of the Summer Olympics. The Games begin next month.
The Iraqi, the Iraqi security forces show off their skills during a handover ceremony.
In Virginia, the recovered wreckage of TWA Flight 800 stands reassembled at the National Transportation Safety Board Training Academy -- some of this hour's "Hot Shots," pictures often worth 1,000 words.
In our "Political Ticker" today: something from those fun Greek American brothers, the guy who started the cartoon Web site known as JibJab. Take a peek at their satire as it hits both presidential candidates and even features a cameo appearance by Hillary Clinton.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE (singing): Gather conservatives. Lend me a hand, unless you want this liberal left in command. I spent years in a rat hole in North Vietnam.
Now the Jihad needs containing.
So forget my skin cancer and swollen left gland. Oh, it's time for some for some...
UNIDENTIFIED MALE (singing): Gosh, I'm so tired of divisive exchange. And I got one or two things to say about change, like the change we must change to change we hold dear. I really like change. Have I made myself clear?
UNIDENTIFIED MALE AND FEMALE (singing): Oh, he will talk about change until you're deaf in the ear.
UNIDENTIFIED MALES (singing): Oh, it's time for some campaigning.
(END VIDEO CLIP)
BLITZER: All right, can't top that.
So, let's go right to Jack. He's got "The Cafferty File."
Those guys are funny.
CAFFERTY: We were watching that whole thing in the office this afternoon. It is laugh-out-loud funny. And the stuff about Hillary Clinton is simply hysterical. It's -- it's worth a look.
The question this hour: Is Barack Obama in danger of taking himself too seriously? We got a lot of mail on this.
Carl in Philadelphia says: "I don't think Barack Obama takes himself too seriously. He does take the role of being president seriously, which is refreshing after the last eight years. At least he isn't known for having a vicious temper, like his rival, John McCain, which, in my view, is far more indicative of taking oneself too seriously."
Matthew writes: "This question might actually be the mental recession Phil Gramm was whining about. It's this kind of Dowd tabloidism" -- he's talking about Maureen Dowd -- "much of it without merit, and most without any relevancy toward what it takes to run this country for the benefit of its people, that is the malignancy within the mainstream media. When will the fourth estate finally clear the weeds, so they can see the true landscape?"
Amy writes: "I am not in a laughing mood. I feel the country is exhausted and worn down, ready to give the new guy a chance. After Bush, you can keep the funny crap. This job is no laughing matter. He can tickle my ribs when he gets in the White House, provides a path to affordable insurance for everyone, and gets our children out of Iraq. I don't need jokes. I see a need for change."
Dan writes: "I don't believe this has anything to do with Obama taking himself seriously. My guess would be that, because he is African-American, everybody is afraid to crack a joke about him."
Marie in Canada says: "Clowns have their place in the world, but the White House shouldn't be one of them. The pain -- plain truth of the matter is, if the news media played up McCain's blunders and senior moments to the degree that they play up anything they feel might have an adverse effect on Barack Obama, McCain would be at about 10 percent in the polls."
And S. writes: "Are you saying Obama has to make an ass of himself, so the comedians can make jokes at his expense for us to vote for him? This is the dumbest question you have ever come up with. Besides, if I want a laugh, I just watch your show. I think you are hysterical, without even trying."
If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile. There are hundreds of others posted there -- Wolf.
BLITZER: None of us here in THE SITUATION ROOM takes ourselves all too seriously, Jack. Thank you.
CAFFERTY: Well, we -- we try not...
(CROSSTALK)
BLITZER: That's right.
CAFFERTY: Yes.
BLITZER: And, to our viewers, you're in THE SITUATION ROOM.
