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The Situation Room

Hurricane Dolly Lashes Texas; Obama Talks Iran in Israel; McCain Wants Your Attention

Aired July 23, 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, we're following the breaking news. Dolly eyes the United States and strikes. It's powerful enough to plunge areas into darkness, punish communities with heavy rain, and push residents out of their homes, worried for their lives.
We're going to have extensive coverage of Dolly coming up.

Barack Obama, he's in Israel right now. He's showing his very strong support for Israel. He's also mincing no words as far as Iran is concerned. He's threatening -- threatening action unless Iran stops going for some sort of nuclear capability.

Also, President Bush decides not to stay the course, backing down his threat against a housing bill, while a secret tape comes out showing the president joking about the crisis that's causing so many Americans pain.

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

But, we begin with the breaking news, Hurricane Dolly. The storm has slammed ashore with wind gusts above 100 miles an hour just a short time ago, tearing off roofs, flooding streets, and sending residents near the coastal border of Texas and Mexico scrambling for safety.

We're covering it from all angles. Brian Todd is just off the coast on South Padre Island, which took the brunt of the storm's first wave. We'll check in with him in a moment for the damage.

Susan Roesgen is also watching the story in Brownsville, where anxious residents are keeping an eye on the levees, protecting the city.

And our CNN severe weather expert, Chad Myers, is tracking every aspect of the force and the danger of Dolly from the CNN hurricane headquarters.

But let's go to where Dolly made landfall first. Brian Todd is on the scene for us.

Brian, set the stage. Tell us what you saw, what you felt.

BRIAN TODD, CNN CORRESPONDENT: Wolf, we're right in the center of the bull's eye. The worst part of the storm passed over just a short time ago. This was where Hurricane Dolly came ashore, right here on South Padre Island. We're still getting battered with tropical storm- strength winds. You can see the bluffing all around us.

Our cameraman (INAUDIBLE). He's going to pan out to the ocean a little bit. You can see the storm surge still coming in here right below us. There's flooding, there's flooding in many parts of this island.

I've got a wind gauge here on me, and we just held this out (INAUDIBLE) the winds here are at least about 50 miles an hour, very strong tropical storm strength. We were out in the worst of it today when the wind in excess of 100 miles. We saw sections of roofs coming off apartment buildings and traffic lights coming off their moorings, windows blown out all over the place. A window even blew out here where we're taking shelter.

Still, a big storm surge that we're right in the middle of (INAUDIBLE) going to be the problem here -- Wolf.

BLITZER: All right, Brian. Stand by. We're going to get back to you in a moment.

Brian Todd is on the scene for us.

Also coming up, we're moving to the mainland right now, and one of the biggest risks is the threat of massive flooding. An enormous amount of rain is hitting the area.

Susan Roesgen is in Brownsville, where officials are keeping a close eye on the levee system out there. Not only severe rain, they're expecting a lot of inches of rain, but there's deep concern about flooding.

Tell us what's going on, Susan.

SUSAN ROESGEN, CNN CORRESPONDENT: Well, you're absolutely right, Wolf. It isn't the wind, it's the water that kills half as many people in hurricanes. Half of the people killed in the last 30 years in hurricanes have been killed by rising waters. So that's a concern here.

Now, the levees that they're talking about are right behind me. This is the natural earthen levee that goes for hundreds of miles all along the Rio Grande River, the natural border between the United States and Mexico. The river itself is only about a quarter of a mile away.

The good news is from the head of the emergency management here in this county, is that the levees have not been breached. They've not been breached, and he does not expect the river to overtop them.

But what we have seen today, Wolf, is serious street flooding. More flooding in the streets than they expected. And that's a serious problem, because six inches of water can knock a grown man off of his feet and two feet of water will float a car. So the flooding is the big concern here now.

So far, the levees have held. There is street flooding. Some power lines are down. Some of the phone service has been cut. But no one has been hurt.

And when Dolly finally stops drenching us, the real concern will be not the rising water, but rising prices. The Texas attorney general is now warning people, especially those who own convenience stores and gas stations, not to raise their prices, not to do any price gouging for all the people who are going to need supplies when this thing goes through -- Wolf.

BLITZER: And the Texas governor's already declared disaster areas, even in anticipation of the flooding, the rain, what is about to hit that area.

With the exception of the few intrepid reporters like yourself, Susan, and local authorities, I take it most people are bunkered down in shelters and they're trying to ride this out inside?

ROESGEN: Boy, that's true, Wolf. The smart ones are inside. Of course, we're out here to show you what's happening.

Twenty-one hundred people in this area are in shelters, in a variety of local schools. Mostly as a precaution.

They also, Wolf, let 75 inmates, nonviolent inmates, out of the local Cameron County Jail so that they could go home and take care of their families and their property. Smart ones are inside. And we will be soon, too.

BLITZER: Good. All right, Susan. Thanks. Stand by, though. We're going to be getting back to you.

(WEATHER REPORT)

BLITZER: We have one of our producers who's streaming live pictures from his cell phone right now. Aaron Cooper is on the scene for us.

Aaron, tell us what you're seeing, because we can see your live video coming in via your cell phone.

AARON COOPER, CNN PRODUCER: Yes. Right now, Wolf, you're seeing palm trees certainly blowing in the wind. It's been a very rough day for the palm trees, a number of the buildings.

Behind these palm trees, you can see a power line that's down. It knocked out power to a good section of South Padre Island.

Most of the hotels here -- this is a popular destination resort -- destination for resorts -- most of the hotels have lost power. I've been talking to people here at a Holiday Inn who are basically sitting and waiting out the storm. I did run into two guys that had braved the wind, and rather taking a quite a bit of risk, I would think, when down to the beach just to see how it was. Winds have been very rough here. Lots of pieces of buildings we've seen fly by, down spouts and signage and things like that have certainly come down. And a lot of the people I've talked to are just kind of waiting and seeing what's going to happen.

In fact, some of the people here even came with the intent of seeing the hurricane. I talked to one gentleman from Oklahoma that came down because he had seen tornadoes but he had never seen a hurricane. So he wanted to come down for this, and he brought his kids.

BLITZER: Well, you know what? A hundred-mile-an-hour winds nothing to simply be out doing some tourism, doing some sightseeing. This is a very, very dangerous storm.

I recommend everyone get inside.

Aaron, we're going to come back to you, but we're going to continue to show our viewers your live pictures coming in. You're streaming these pictures via your cell phone, a new technology that we're using.

Brian Todd is also watching this story for us. I want to go back to Brian.

All right, Brian, tell us what you're seeing and feeling right now.

TODD: Well, Wolf, we're feeling some very, very strong wind and rain, still at this tropical storm strength. We were right in the bull's eye of this when it came ashore just a short time ago.

We were, just not long ago, experiencing winds of in excess of 100 miles an hour. It's not much better right now.

You've got a picture of the storm surge here on the beach. It's still very, very strong. A lot of flooding in this area.

We were out in some of the worst of it earlier, got some pictures that we're going to bring to you in THE SITUATION ROOM later of higher sections of roofs just flying off apartment buildings and condominiums. Traffic lights coming off their moorings, windows blown out of stores, all that stuff. You've got -- it's still a major, major storm system here.

Flooding is a big problem. We've got flooded streets all over the place, and they're really warning people to stay inside now. We are not over the worst of it yet.

BLITZER: And Brian, earlier we were speaking to you. You were in your hotel room. And all of a sudden, what, the windows just simply blew out?

TODD: Yes. We were actually in a restaurant where we're transmitting from, an abandoned restaurant. And we were on the second floor of it, where we were doing a lot of our reports from, and, yes, one of the windows just completely blew out, an entire section of the window blew right off. And then the window panes blew out partially.

So we essentially, to minimize the further risk, just knocked out the rest of the windows so we wouldn't have flying glass all over the place.

BLITZER: All right. Be careful over there, Brian. We're going to be getting back to you.

Brian's also got some amazing pictures he and his crew have been shooting all day. We're going to share those with you later here in THE SITUATION ROOM.

Let's check in though right now with Jack Cafferty. He's got "The Cafferty File."

Have you ever covered a hurricane, Jack?

JACK CAFFERTY, CNN ANCHOR: No, sir, I have not.

BLITZER: Yes. It's not fun.

CAFFERTY: I can imagine.

In case you're wondering why our economy is in the toilet, President Bush had an explanation at a closed Republican fund-raiser in Houston last week.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Wall Street got drunk. It's one of the reasons I asked you to turn off your TV cameras.

(LAUGHTER)

BUSH: It got drunk, and now it's got a hangover. The question is, how long will it sober up?

(END VIDEO CLIP)

CAFFERTY: The depth of the intellect at the very top of our nation's government is staggering, isn't it? Quite an assessment coming from a reformed alcoholic.

The president had apparently requested that those attending this event turn off their cameras, but somebody didn't. The comments were recorded. And then they began popping up on Texas news outlets.

The White House grabbed their brooms and immediately began sweeping up after him. They said that Mr. Bush was referring to the fact that, "The markets were using very complex financial instruments that had grown up over the years, and when confronted with the shock of this housing downturn, they did not fully understand what the consequences were going to be."

The problem is, that doesn't sound at all like the president saying Wall Street got drunk.

It's that kind of shallowness that's created an appetite among the American public and overseas for someone like Barack Obama. King Abdullah of Jordan actually cut short his vacation this week so that he could come home from Aspen and meet with Obama. He even personally drove him to the airport in Jordan when it was time to leave.

It must be like somebody who works in a nursery all week long and then finally, on Friday afternoon, they get a chance to have a conversation with an adult.

Here's the question: What do you make of President Bush's assessment that Wall Street got drunk when it comes to the ailing economy?

Go to CNN.com/caffertyfile. Post a comment on my blog -- Wolf.

BLITZER: Jack, thanks very much. We'll get back to you shortly.

Incoming to THE SITUATION ROOM right now, President Bush also reversing course on another significant issue. But what he has decided about a housing bill could be overshadowed by that joke that was secretly caught on tape that Jack was just talking about.

Also, Barack Obama talks about Iran in Israel. Very tough words, much tougher than only a year ago. We'll tell you exactly what Barack Obama had to say today.

And John McCain wants you to pay attention. As Barack Obama's trip slashes headlines, Senator McCain's campaign is going to unusual lengths with unusual claims to stay in the spotlight.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: We're getting new pictures in of Hurricane Dolly. You can see some of these pictures just coming into THE SITUATION ROOM. We're going to have a lot more on this hurricane that slammed ashore only moments ago, 100-mile-an-hour winds. We'll go back there shortly for a complete update.

But there's other important news we're following, including the race for the White House.

Barack Obama wants there to be no doubt at all. He says he staunchly supports Israel. He stands with Israel in the face of threats brought on by Iran and its nuclear program.

Today, Senator Obama took that message directly to the people of Israel, and he also spoke with top government officials. He's trying to ease any concerns that some of them may have about his position toward Iran.

Let's go to Jerusalem. Our senior political correspondent, Candy Crowley, is standing by. She watched this day unfold. Update our viewers, Candy, on how it went.

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Well, it went fine, Wolf. At least it seemed to go fine. No huge mistakes made here that anyone can see.

Barack Obama has wrapped up his final meeting here in Israel with Prime Minister Olmert. Before going into that meeting, Olmert said that they would talk about things of importance to the U.S. and Israel, of course, but he mentioned specifically the subject of Iran, and Iran possibly acquiring nuclear weaponry.

He said that was very important to Israel. And that's the message that Barack Obama got all day long.

(BEGIN VIDEOTAPE)

CROWLEY (voice over): Yet another picture postcard home: Barack Obama in front of the remnants of rockets launched from Gaza into Israel, navigating the landmines of Middle East diplomacy by saying as little as possible.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: America must always stand up for Israel's right to defend itself.

CROWLEY: But it begs the question whether the U.S. would back an Israeli attack on Iran to prevent it from developing a nuclear weapon.

Obama sidesteps.

OBAMA: I will take no options off the table in dealing with this potential Iranian threat.

CROWLEY: A nuclear Iran is a top concern for Israeli officials and political leaders.

BENJAMIN NETANYAHU, LIKUD PARTY CHAIRMAN: The main focal point of our conversation, the need to stop Iran from developing nuclear weapons.

CROWLEY: Like some American Jewish voters, Israelis were uneasy a year when they heard this...

UNIDENTIFIED MALE: Wow be willing to meet separately without preconditions during the first year of your administration in Washington or anywhere else with the leaders of Iran, Syria, Venezuela, Cuba and North Korea in order to bridge the gap that divides our countries?

ANDERSON COOPER, MODERATOR: Senator Obama?

OBAMA: I would.

CROWLEY: There were no caveats to that statement, and Obama has been trying to finesse it ever since. OBAMA: But I think that what I said in response was that I would, at my time and choosing, be willing to meet with any leader if I thought it would promote the national security interests of the United States of America.

CROWLEY: Obama's picturesque news conference was part of a jam- packed day intermingling photo-ops with private meetings which often took on the feel of virtual reality, a kind of almost state meeting: a man who wants to be U.S. president meeting with a string of prime minister wannabes in Israel.

Obama's itinerary also took him past the security checkpoint into the West Bank city of Ramallah for a meeting with an obviously pleased Palestinian President Mahmoud Abbas. Four months ago, when John McCain passed through Israel, there was no visit with Palestinian leaders, a point Obama is happy to make with another picture postcard.

(END VIDEOTAPE)

CROWLEY: More pictures tomorrow, Wolf, only this time from Berlin. That famous speech we have been hearing about for some time, Obama will give it tomorrow in the heart of Berlin. It is open to the public. They're expecting thousands. His subject matter, we're told, is transatlantic relationships -- Wolf.

BLITZER: And some people even expecting hundreds of thousands of people to show up in Berlin for that address.

Candy, thanks very much. Safe trip, safe travels. We'll be checking back with you, obviously.

CROWLEY: Thanks.

BLITZER: Meanwhile, while the world watches Senator Obama, John McCain is determined not be edged out of the spotlight. He's going to some great lengths to try to keep all of our attention. And the campaign is making some unusual claims.

Let's go to Dana Bash. She's working this part of the story for us.

All right. So what is he doing now, Dana?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, it's actually a mix, Wolf. He's really got a lot of biting comments on Obama's policies, both at home and abroad. But there's also a heavy dose of sarcasm.

(BEGIN VIDEOTAPE)

BASH (voice over): Call this counterprogramming.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Northeastern Pennsylvania is going through a tough time today. We know that. We know that Americans are silting around the kitchen table tonight figuring out whether they can keep their home or not. BASH: While Barack Obama is overseas, John McCain is trying to convince voters back home he's working to ease their pain. He even suggested the price of oil is down because of a controversial White House decision he supported: lifting the federal ban on offshore drilling.

MCCAIN: The president of the United States announced that we would be -- a week or so ago -- that we would be lifting the moratorium on offshore drilling. The price of oil dropped $10. We need to drill offshore.

BASH: And he eagerly shared his rival's position.

MCCAIN: Senator Obama doesn't want to drill offshore.

BASH: But talking pocketbook politics is only half of McCain's double-barreled strategy while Obama is abroad.

MCCAIN: Apparently, Senator Obama would rather lose a war in order to win a campaign.

BASH: The other? Trying to keep Obama from bolstering his foreign policy credentials this week by pounding away on his Iraq plans.

MCCAIN: He is in favor of an unconditional withdrawal. An unconditional withdrawal, my friends, without paying attention to the facts on the ground, could lead to our failure.

BASH: Republicans frustrated with Obama's overseas spotlight are trying to be clever in getting their message out. The Republican National Committee will run these radio ads in Berlin while Obama is there...

NARRATOR: When our military needed necessary resources, Barack Obama failed to stand up.

BASH: But not that Berlin. The towns of Berlin in three battleground states: Wisconsin, New Hampshire and Pennsylvania. And the McCain campaign is resorting to sarcasm to get attention, handing out fake French passes, dubbing the McCain media, the "JV Squad, Left Behind to Report in America."

(END VIDEOTAPE)

BASH: Now, another way McCain advisers know they'll get attention is to tease the media on McCain's search for a running mate. Now, the plan was to do that by going to New Orleans to meet with someone on the VP buzz list. That is Louisiana Governor Bobby Jindal. But it didn't happen, Wolf. The trip was canceled because of bad weather.

BLITZER: And what about the governor of Minnesota, Tim Pawlenty? There's a lot of buzz right now about him.

BASH: Well, that's right. McCain actually met privately yesterday with some top Republicans in the state of New Hampshire, and one source who was there told me that at that meeting, out of the blue, McCain told the group that they're really going to like Tim Pawlenty, who, of course, is Minnesota's governor. He has long been considered to be high on McCain's running mate list.

Now, the source said it could have been that McCain was referring to the GOP convention, which is in Pawlenty's home state of Minnesota, but this source who, Wolf, this source has been around politics a long time, he says McCain mentioning Pawlenty like that in that small private gathering really came out of left field and seemed pretty noteworthy.

BLITZER: All right. We'll watch all of this, together with you, the VP stakes, as the say, or veepstakes.

Dana's working the story very, very aggressively.

By the way, I'll be speaking with Senator McCain about all the criticisms over Iraq and other substantive foreign policy and domestic economic issues, issues you care about. The interview with Senator McCain will take place here, Friday, in THE SITUATION ROOM.

And guess what? You can take part in the interview as well. Send us your questions via CNN's iReport. You can submit your questions at ireport.com/situationroom, and we'll try to get some of your questions to Senator McCain on Friday.

Hurricane Dolly brings disaster and danger. We're going to have the latest on the storm that made landfall in Texas and has been slashing areas since it roared ashore.

And unique problems African-Americans face. One of them involves dealing with prejudice while trying to find a job. We have a special report using a hidden camera to show you one man's deep frustration in the job search. It's part of the CNN special series, "Black in America."

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(NEWSBREAK)

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

Happening now, the breaking news we're following.

Rising waters, Hurricane Dolly pounding south Texas with powerful wind and rain. And the storm, as it moves inland, the threat of flooding and tornadoes actually grows.

A hundred and eighty thousand residents of Brownsville, Texas, are taking cover and hoping that levees protecting the city hold. The mayor of Brownsville is standing by to join us live.

Also, a firsthand look at the brunt of the storm. I-Reporters are checking in. Abbi Tatton will check in with a couple of them who decided to try to ride out the storm on their boats.

And the National Hurricane Center will release its latest update on Dolly in a matter of minutes. I will be joined live by the center's director, Bill Read. We will get his take on how dangerous the storm still is.

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

But, first, I want to show you what happened as Hurricane Dolly's eye crashed into Texas and Mexico.

Our CNN meteorologist Reynolds Wolf watched it in South Padre Island, Texas. Take a look at this video.

(BEGIN VIDEOTAPE)

REYNOLDS WOLF, CNN CORRESPONDENT: Earlier today, when we were coming to you, we were dealing with wind mainly out of the north.

Right now, the wind is due west. It is coming in sheets, not in drops. We have been dealing with all kinds of debris, pieces of roofs, trees, piles. You name it, it's all been coming by.

Now, as the storm continues to march westward, we do expect it to lose a bit of its intensity. The winds should die down. But then it's a rainmaker and a true threat for parts of South Texas.

Reporting from South Padre Island, Reynolds Wolf, CNN.

(END VIDEOTAPE)

BLITZER: Reynolds Wolf watching this story.

With Hurricane Dolly dumping torrential rain in South Texas, all eyes are on Brownsville, Texas, right now. And the question is, will the city's levee system hold. We will check in with the mayor for an update. That's coming up.

And President Bush reverses himself on a bill to help homeowners save their homes. So, what caused his change of heart?

Stay with us -- lots more coming up on Dolly right after this.

(COMMERCIAL BREAK)

BLITZER: Our CNN I-Reporters are riding out the storm, Hurricane Dolly.

Let's bring in our Internet reporter, Abbi Tatton. She's getting a close look, a firsthand look, at some of these images we're getting from our I-Reporters.

ABBI TATTON, CNN INTERNET REPORTER: From all around this area, in the eye of the storm, Wolf.

We are going to start off actually in South Padre Island actually on a fishing boat. These are three boats that are on a marina there in South Padre Island. And one of the owners, Stephen Murphy (ph), on a boat, Murphy's Law, has decided to ride out the storm on the boat.

They said that they have been second-guessing this decision ever since. But it's a 65-foot vessel that they have been staying on. They say the winds have been outrageous. Right now, they're safe, but we are going to be checking back in with them in the next hour.

BLITZER: That's pretty risky stuff in 100-mile-an-hour...

TATTON: They have even said not the best decision they have made. But, right now, they're still safe. And we have checking in with them.

BLITZER: Let's hope they remain safe.

TATTON: And we look at some of the conditions that other people are dealing with right now.

We're going to Harlingen, Texas, here, from Jose Sanchez (ph). He says they're right in the middle of it right now. He says the rain has been plowing sideways. He can't really see across the street at this point.

And then 20 miles away, as well, going to Brownsville, Texas, from Todd Worke (ph), who's been sending in pictures all day. He's been showing the preparations that people have been making there and the conditions there on the ground. He says what they're looking for right now at this point is the flooding, the floodwaters just starting to rise up in his apartment building right now.

BLITZER: And let's hope that all these people stay safe. I know we're getting -- and I hate to use the expression flood of I-Report images coming in. And we will share as many of them with our viewers as we can.

Thanks very much, Abbi.

As Dolly slowly moves inland, it's dumping huge, huge volumes -- volumes of rain on many low-lying areas. Officials say the flooding is the biggest threat.

Let's check in right now with the mayor of Brownsville, which is right in the middle of all of this.

Mayor, give us an -- give us an eyewitness account of how bad it is right now.

Mayor, can you hear me?

Unfortunately, I don't think -- I think we may have lost contact with the mayor of Brownsville. We're going to check back. We're going to try to correct that -- get that line.

Mayor, you there, by any chance?

All right. It doesn't look like -- it doesn't look like we have the mayor.

PAT AHUMADA, MAYOR OF BROWNSVILLE, TEXAS: Hello?

BLITZER: Mayor, are you there?

All right, unfortunately, he's not there. We are going to try to correct that and get back to you. We apologize for that.

Gary Tuchman, though, is on the scene for us. And only a little while ago, he sent us this report.

(BEGIN VIDEOTAPE)

GARY TUCHMAN, CNN NATIONAL CORRESPONDENT: South Padre Island, the barrier island, in the southernmost part of Texas is getting ravaged.

This behind me, just a few hours ago, was grass, was land. Now you can see the Gulf of Mexico and the bay have made it like a raging rapid. That billboard was on land. We're standing right now on the causeway.

In front of me is a bridge that links South Padre Island with the mainland. This is a barrier island, 34 miles long. Normally, there are 2,000 people who live here. But in summer weekends, there are up to 200,000 people who are here. Most people have evacuated.

But there are a lot of people still here. We have seen roofs collapse. We have seen signs go down. Firefighters are all over helping people evacuate who decided not to evacuate. But you can see, this is a Category 2 hurricane. And it's incredibly treacherous. And most people are surprised by how strong it is.

This is Gary Tuchman, CNN, South Padre Island, Texas.

(END VIDEOTAPE)

BLITZER: We will check back with Gary as well.

I think we have the mayor of Brownsville, Texas, on the line now, Pat Ahumada.

I hope I'm pronouncing your last name correctly, Mayor.

AHUMADA: You got it right, Wolf.

(CROSSTALK)

BLITZER: But that's the least -- that's the least of your concerns right now.

How many people are we talking about who are in direct threat of Dolly right now in Brownsville and the surrounding areas?

AHUMADA: Oh, man, we have got about, oh, about 600,000 people total -- 800,000 people. (CROSSTALK)

BLITZER: So, that's a huge, huge number. All right. I know you're right on top of the scene right now. Give us the very latest. How are the folks there doing?

AHUMADA: We're doing fine, Wolf.

You know, we have been waiting for this to happen. And everything's going according to plan here. First-responders are ready to respond as soon as this weather clears up a little bit. We're here at command center. I activated it yesterday.

And we're following the state and local plan to -- in case of disaster, as we are having right now. Trees are down. The winds are high. We have rain, six to eight inches. And -- but we're -- we're -- we're prepared. And we have the best team (AUDIO GAP) respond.

BLITZER: A lot of concern, though, about the rain, heavy rain, and the flooding, not necessarily even today, but tomorrow and Friday. Are those levees holding, as far as you know? Will they hold?

AHUMADA: Wolf, I'm glad you asked that question, because a perception has been created that we face an imminent danger, similar to Katrina.

I want you and everybody else listening, that is not the case. That is totally not the case. Somebody put out a news release that the levees would be breached, that the river would crest. That's totally false. The -- the river is not going to crest. And the levees have been reinforced, and they have been brought up to FEMA standards, almost -- all except five miles.

And the levees are not going to be breached. This weather is not up to that standard to where it would be a threat on our levees or our river. It would require a storm surge from the Gulf coming upstream, upriver here, you know, quite a few feet high.

And it would require about 20, 30 inches of rain to get to that level. This is a Category 2. The storm surge is not that big of a deal. And the rains are six to eight inches.

But the perception is, is that the levees could be breached. I had the commissioner of the International Boundary and Water Commission call me earlier this morning. He assured me that's not going to happen, and the levees have been reinforced.

So, please, help me correct that...

BLITZER: All right.

AHUMADA: ... because people think that we're facing a Katrina. And that's not the case.

BLITZER: Well, that's excellent news, and good to know. We are going to be checking back with you, Mayor. Good luck to everyone in Brownsville and the entire area. We will be watching closely.

The mayor of Brownsville, Texas, joining us.

And it's not just Texas taking a beating from Dolly. The storm is also pounding the northeastern corner of Mexico as well. Our man Harris Whitbeck, he's on the scene in that corner of Mexico, along the border with Texas. We will check in with him.

Also coming up, new testimony today in the trial of bin Laden's driver. Was he just a low-level worker, or was he a key link to al Qaeda's leadership?

But, first, President Bush is not staying the course on the new housing bill. The president changes his mind on a veto threat he just made yesterday.

We will explain -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Our producer on the scene at this Hurricane Dolly, Aaron Cooper, is streaming these live pictures via his cell phone.

Aaron, what are we seeing right now? It looks like a tall building there.

COOPER: It is a tall building, Wolf. I believe it's a condo complex.

And inside of the skin of the building, there appears to be about a two-story-tall tear, a big hole in the side of this building, obviously left over from Hurricane Dolly. Above that, there is also a one-story-tall looks like just plain hole that goes into the interior of the building. And you can see some debris dangling out of there.

This is on the main road here, Padre Boulevard, in South Padre Island. And, as you can tell, much of the road is flooded, and there's power poles down all throughout this area. There's quite a bit of cleanup and quite a bit of debris that's still blowing around. The winds have subsided a little bit. But they're still blowing pretty -- pretty strong.

And you have got some of the first locals beginning to venture out and to check on the damage and see what -- what all has happened during this storm. And...

BLITZER: It looks like a downed power line on that road in front of you. Is that what we're seeing?

COOPER: Yes, that's exactly what you're seeing. You're seeing a rather large power pole, with quite a few lines attached to it, laying on its side. I have counted at least four or five of these just in the few blocks here I have so far ventured out from around the hotel where I was taking shelter at.

BLITZER: All right, so, just stay away from those, Aaron.

All right, we will check back with you, Aaron Cooper, our producer on the scene, South Padre Island.

Other news we're following: President Bush today did something he doesn't often do. He reversed himself. It involves a sweeping bill to help homeowners save their homes. And that bill could clear the House of Representatives today, but it also could face some problems in the Senate.

Meanwhile, something the president said recently that was caught on tape is also raising eyebrows.

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

Ed, first of all, tell us why the president decided to reverse himself on this homeowners bill.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Well, Wolf, the bottom line is that White House officials say they realize the American people, homeowners in particular, are hurting right now, and the president decided, this is the best deal he could get.

(BEGIN VIDEOTAPE)

HENRY (voice-over): In a rare move, the president backed down, dropping his veto threat of a $300 billion housing rescue bill.

DANA PERINO, WHITE HOUSE PRESS SECRETARY: We had to make a hard decision, a hard choice.

HENRY: Spokeswoman Dana Perino said the president still opposes $4 billion to local communities that may prompt lenders to foreclose on more families. But, with Congress about to leave town for August, Mr. Bush saw the window closing on provisions he likes, such as reforming mortgage giants Fannie Mae and Freddie Mac.

PERINO: If we were in a prolonged veto fight, we wouldn't have enough time to actually get it done.

HENRY: But the housing bill still could get blocked in the Senate by some of the president's fellow Republicans. Senator Jim DeMint is planning to filibuster the legislation, unless a provision is added banning political contributions by Fannie Mae and Freddie Mac.

SEN. JIM DEMINT (R), SOUTH CAROLINA: The president has decided he wants this bill out more than he wants to stand by his original position that he would veto it.

HENRY: The president's shift came at an awkward moment. Coincidentally, a tape emerged Tuesday of the president briefly joking about the housing crisis at a Republican fund-raiser last week. News cameras were banned from the event in Houston, but someone with a personal camera secretly recorded the president's remarks, now posted on YouTube.

BUSH: And now we have got a housing issue, not in Houston, evidently, not in Dallas, because Laura was over there trying to buy a house today.

(LAUGHTER)

HENRY: White House officials say the tape had absolutely nothing to do with the veto reversal. They say there was a collective shrug at the White House about the video, because the president's comments, such as declaring that Wall Street got drunk and now has a hangover, are similar to what he said publicly during other crises.

PERINO: I don't think the criticism is any different. It's just said with a little bit more candor and more bluntly.

(END VIDEOTAPE)

HENRY: Now, when I asked whether this tape had any effect on this decision about the veto, White House spokesman Tony Fratto told me -- and I want to quote -- "This is about the most laughable connection I can ever imagine a news organization making." He says, congressional leaders basically finally sealed the deal last night. That's what -- that's the timing issue. That's why the president finally decided to reverse himself. They say it had nothing to do with this tape -- Wolf.

BLITZER: Thanks very much, Ed Henry, working this story for us over at the White House.

In our "Strategy Session," a don't-ask/don't-tell hearing on Capitol Hill. And how will the issue of who can -- who can and cannot serve in the U.S. military play out on the campaign trail?

Also, eccentric, that's how one editorial page is describing Senator Barack Obama's strategic vision for the war on terror. Why is "The Washington Post" questioning Obama's position? Paul Begala and John Feehery, they're standing by live -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

STAFF SERGEANT ERIC ALVA (RET.), U.S. MARINE CORPS: That land mine may have put an end to my military career that day, but it didn't put an end to my secret. That would come years later, when I realized that I had fought and nearly died to secure the rights for others that I myself was not free to enjoy.

(END VIDEO CLIP)

BLITZER: That was Staff Sergeant Eric Alva, a former Marine who was the first person to be injured in the war in Iraq. He testified in Congress today about the don't-ask/don't-tell policy that prevents gays from serving openly in the U.S. military.

Let's discuss this and more in our "Strategy Session."

Joining us, the Democratic strategist and CNN contributor Paul Begala, and Republican strategist John Feehery.

A major difference between the two presidential candidates on reversing, eliminating the don't-ask/don't-tell policy.

PAUL BEGALA, CNN POLITICAL ANALYST: Right. And I think it's a big problem for John McCain.

If you do focus groups, the first thing voters raise about John McCain is age. And that's kind of a delicate thing for politicians to attack him on, because, you know, I mean, the guy seems to be...

(CROSSTALK)

BLITZER: His position on this is, during a time of war, you keep the -- you don't make a major change like that and allow gays to serve openly. Barack Obama's position is, it's time to end the ban on gays serving openly in the military.

BEGALA: Right.

And McCain's problem is not that he's -- not only that he's physically old, but his ideas are old. The country has passed him by. Seventy-five percent of Americans support gays and lesbians serving equally in the military. Staff Sergeant Alva lost his right leg in Iraq, broke his left leg, broke his right arm, retained nerve damage in his hands because of those injuries.

McCain called gays and lesbians, like Sergeant Alva, an intolerable risk to national security. That's just old thinking. That's just old, bigoted thinking.

BLITZER: All right, go ahead, John.

JOHN FEEHERY, REPUBLICAN STRATEGIST: Well, you know, the fact of the matter is, is that he reflects where a lot of the veterans are, a lot of the senior staff are.

BLITZER: You're talking about Senator McCain?

FEEHERY: Senator McCain. And he's right on one sense.

You don't really want to change this kind of policy in the middle of a wartime. We're in Afghanistan, in Iraq. Don't change the policy. Let's win these wars, and then we will talk about social policy later. Win the war, social policy later.

BLITZER: Because this is a strategy -- policy, as you well know, the compromise over don't-ask/don't-tell, that President Clinton himself back in 1993, under pressure from the military and General Colin Powell, who was then chairman of the Joint Chiefs, he accepted, even though himself wanted to end the ban on gays serving openly in the military.

BEGALA: Right. So, that was a provisional, transitional position. I think it hasn't worked.

We're still kicking hundreds and hundreds -- actually, 12,500 gays and lesbians have been kicked out of the military since that policy was enacted in 1993, many of them Arabic translators, medics, pilots, intelligence analysts. It's ridiculous. It's hurting our national security.

BLITZER: Is this a strategy, is this an issue that's going to resonate out there, you believe, over the next few months?

FEEHERY: I don't think so.

I think McCain wants to talk about the war. He wants to talk about winning the war. I think Obama wants to be seen as a centrist. He doesn't necessarily want this to be one of his top issues.

I think Paul is right in a certain sense. This doesn't have the same resonance it did in '94. The issues have changed. People's attitudes have changed. But, you know, when you're in the middle of a wartime, don't change your policy.

BLITZER: All right, guys, we will continue this conversation down the road. Thanks very much.

Some stories we're working on here in THE SITUATION ROOM: We will go live to Guantanamo Bay, where our Jamie McIntyre is standing by with the latest testimony regarding Osama bin Laden's former driver.

And we're only moments away from the latest on Hurricane Dolly. We will get a live update from the National Hurricane Center director -- all that and a lot more coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: On our "Political Ticker" today: The journalist Tim Russert provided an avenue for so many of the nation's political discourse. Now a symbol of that in the form of a roadway. Today, President Bush signed into law the Timothy J. Russert highway outside of Buffalo, New York. It runs along a portion of U.S. Route 20-A in Orchard Park. That's a suburb of Buffalo. It's not far away from Russert's hometown, which, of course, was Buffalo.

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

He was really a great guy. I'm glad our hometown of Buffalo now has the Russert Highway.

CAFFERTY: One day, they will have a Wolf Blitzer Highway up there, too, Wolf.

BLITZER: I hope not too soon. I hope not too soon.

CAFFERTY: No, no, no, not for a while.

The question this hour is, what do you make of President Bush's assessment that Wall Street got drunk when it comes to the ailing economy?

Kim in Portland writes: "Unbelievable. The guy is out of his mind. I can't believe this is the leader of our country. Embarrassing and shameful. And there are still people who are going to vote for more of the same with McCain. Never have I wished for winter so badly. November cannot come soon enough. This utter joke, and his evil cabal, need to vacate the White House."

Greg in Dallas writes: "What's next? Baghdad got drunk. Tehran got drunk. Halliburton got drunk. Katrina got drunk. How many days are left?"

Ron writes: "He is right, investor greed, lack of common sense, and a SEC and Congress that changed the investment bank restrictions several years ago. We still have loan companies that target Hispanic- speaking persons, mortgage companies that target people without basic math skills, and Congress with the collective intellect of a peanut."

Sky writes: "That's the alcoholic answer to everything. It's their get-out-of-jail free card. I didn't mean to hurt your feelings. I was drunk. I didn't even see the kid run out in front of me. I was drunk. Sorry about your couch. I was drunk. Sorry about America going down the toilet. We were drunk."

Ryan writes: "I think the statement is being blown out of proportion. I think we all know what the president was trying to say. I see no problem with him using such a metaphor in a room full of adults while he thought he was off the record. Heaven forbid a president show some sort of sense of humor."

Fred in South Carolina: "If Wall Street got drunk, it was the Bush administration who supplied the booze."

And Winston in Michigan writes: "Yeah, but not half as drunk as I got after I watched my 401(k) go straight into the toilet."

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

BLITZER: Jack, thank you.

And, to our viewers, you're in THE SITUATION ROOM.