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The Situation Room

Oil Seal Holds on New Well Cap; U.S. Addiction to Foreign Oil

Aired July 16, 2010 - 17:00   ET

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

WOLF BLITZER, CNN ANCHOR: Thank you, Don. Happening now, the oil seal appears to be holding as BP tests this new well cap for a second day. We're monitoring the situation minute by minute and what happens when the oil starts flowing again. Stand by.

New denials that BP played a role in the release of a convicted terrorist, but some U.S. lawmakers are not buying it. This hour, CNN's Richard Quest presses Libya's oil minister about the Lockerbie bomber and whether a deal was can cut to free him.

And Apple reveals its response to an embarrassing problem with its newest iPhones. Three weeks after they went on sale, will customers who race to buy these new gadgets be satisfied?

I'm Wolf Blitzer. You're in "The Situation Room."

BP says it is encouraged by what's happening in the Gulf of Mexico right now. For more than 24 hours, a new well cap has been containing the oil that spewed into the water for almost three months.

The critical integrity test as it's called and the cap is still under way right now. The worst may, repeat, may be over. But as we've seen in this disaster sometimes things can go wrong at any moment.

Let's check in with CNN's David Mattingly joining us now from New Orleans. David, you just got off a phone conference with Thad Allen, the National Incident commander. He updated us on what's going on right now. Give us the very latest.

DAVID MATTINGLY, CNN NATIONAL CORRESPONDENT: Well, still some questions here, Wolf, but so far so good. They've got a PSI rating of up to 6,700 pounds per square inch. He says it's rising at a rate that's consistent with the well that is in good shape.

But this time, at this time, the pressure is sort of an in between phase that raises some questions. They're wondering if there might be a lower pressure in this well than they anticipated because possibly it might be depleted. It also raises the question, are we leaking somewhere?

So what they're doing, they're going to proceed now with another six-hour period of testing where they're going to let the pressure continue to come up, but they're going to watch it even more closely. They're bringing more resources into the area.

They'll do sonar testing. They're going to do acoustic testing. They're going to do seismic testing and they're going to be watching the sea floor to see if there is any sort of petroleum product coming up there from the sea floor.

And they're also going to be looking for methane. So, again, looking very closely as they take another cautious step forward to do this for another six hours and to see where it takes them - Wolf.

BLITZER: And he said it was, as you point out, 6,700 the PSI level right now. They'd like it eventually, correct me if I'm wrong, to be above 7,500. This is still in the ambiguous phase right now. Is that right?

MATTINGLY: Yes, 8,000 is generally considered a home run where they know that this is a pressure that this well is telling them the well is in great shape and there's no damage and it's not going to leak.

But right now, they're in that in between phase. It's 6,700 plus. It's going up, he said, at a rate of 2 to 10 pounds per hour, which is okay. It's consistent with the well that's in good shape, but they don't have the solid numbers right now saying, yes. This is great. It's so far so good. Let's proceed cautiously.

BLITZER: All right. Good analysis. We're going to stay on top of this, David. Thank you.

President Obama says he expects to return to the Gulf Coast in the next several weeks. He spoke to reporters earlier today about the long awaited progress in stopping the oil leak.

(BEGIN VIDEOTAPE)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: The new cap is good news. Either we will be able to use it to stop the flow or we will be able to use it to capture almost all of the oil until the relief well is done.

We're not going to know for certain, which approach makes sense until additional data is in. And all the American people should rest assured that all of these decisions will be based on the science and what's best for the people of the Gulf, all right? I'll take just one or two questions. Go ahead.

UNIDENTIFIED FEMALE: Did you feel the earthquake, Mr. President?

OBAMA: I didn't.

UNIDENTIFIED MALE: Sir, do you think this means that basically we're turning the corner, at least, in the Gulf? Tell the American people what you anticipate in the next few weeks ahead because they are still very anxious about this.

OBAMA: Well, I think it's important that we don't get ahead of ourselves here. You know, one of the problems with having this camera down there is that when the oil stops gushing, everybody feels like we're done and we're not.

The new cap is containing the oil right now, but scientists are doing a number of tests. What they want to make sure of is that by putting this cap on, the oil isn't seeping out elsewhere in ways that could be even more catastrophic and that involves measuring pressures while this cap is on.

The data is not all still in and it has to be interpreted by the scientists. But here's the good news that I think everybody needs to understand. Even if it turns out that we can't maintain this cap and completely shut off the flow of oil, what the new cap allows us to do is to essentially attach many more containment mechanisms.

So that we're able to take more oil up to the surface, put it on ships, it won't be spilling into the Gulf. The final solution to this whole problem is going to be the relief wells and getting that completed. But there's no doubt that we have made progress as a consequence of this new cap fitting on.

And that even if it turns out that we can't keep the containment cap on to completely stop the oil, it's going to allow us to capture much more oil and we'll see less oil flowing into the Gulf.

Now, in the meantime, obviously, we've still got a big job to do. There's still a lot of oil out there and that's why we've got more skimmers out there, there's better coordination on the ground and along the shore lines. There's still going to be an enormous cleanup job to do.

And still going to be the whole set of issues surrounding making sure people are compensated properly that the $20 billion, fund is set up and is acting expeditiously. So we've got an enormous amount of work to do and people down in the Gulf particularly businesses are still suffering as a consequence of this disaster.

But we are making steady progress and I think the American people should take some heart in the fact that we're making progress on this front, all right?

UNIDENTIFIED MALE: Target, what does ahead of target mean, Sir?

UNIDENTIFIED MALE: Mr. President, when does BP begin paying fines according to the amount of oil spilled? OBAMA: Well, we are obviously going to be taking measures about how much oil is spilled and those are calculations that are going to be continually refined. Bp is going to be paying for the damage that it has caused.

And that's going to involve not only paying for the environmental disaster and cleanup but also compensating people who have been affected. It's going to be a component of the calculations that are made. Go ahead.

UNIDENTIFIED MALE: What do you want to say to the people there? When do you expect to go down next? OBAMA: Well, I would expect sometime in the next several weeks, I'll be back down. What we're trying to do right now is make sure that the technical folks on the ground are making the best possible decisions to shut this well down as quickly as possible, that we're standing up the fund so people are compensated quickly.

I'm staying in touch each and every day monitoring the progress and getting briefed by the scientists. The key here right now is for us to make decisions based on science, based on what's best for the people of the Gulf. Not based on PR, not based on politics.

(END VIDEOTAPE)

BLITZER: The president and his family, by the way, left Washington later for a brief weekend getaway in Maine. They're visiting Mount Desert Island, home of the Acadia National Park.

It's the president's third getaway for a brief time since the oil disaster began in April. Democrats and Republicans as usual are sparring over whether it's a need break or inappropriate.

You heard the president promise that BP will be held responsible for damages. The company announced that its payments to Gulf Coast residents and businesses reached $201 million today.

Bp also faces fines for the spill, fines that will be determined by how much oil has actually been released over these past three months. Experts should be able to get a more accurate measure of that with the new containment cap now in place.

Our congressional correspondent, Brianna Keilar is taking a closer look at this part of the story. Briana, what are you finding out?

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Big call right now, Wolf, from Democrats who are pushing for an exact number of how much oil has been spilling into the Gulf over the 87 days that the oil was flowing so far.

Right now, it's just an estimate, a range of 35,000 to 60,000 barrels per day and under federal law there is a standard fine of $1,100 per barrel of oil spilled, civil damages, that could go up to $4,300 per barrel if it's proven that BP or other companies were grossly negligent here.

So let's break this down. If the flow rate estimate, if is off or if it's short by 5,000 barrels per day we are talking these high end fines, the U.S. could miss out collecting almost $1.9 billion in fines. Off by 10,000 barrels? Obviously that doubles to about $3.7 billion and so on.

Off by 20,000 barrels, almost $7.5 billion in fines that the federal government could miss out on. Massachusetts Democrat Ed Markey is one of the top Democrats on the powerful House Energy and Commerce Committee is spearheading the push for this exact flow rate number.

(BEGIN VIDEO CLIP)

REPRESENTATIVE ED MARKEY, (D) MASSACHUSETTS: My fear is that BP will then deny the magnitude of the spill, force the U.S. government to take them to court, and that the U.S. government will have insufficient evidence to prove that the spill wasn't 5,000 barrels or 20,000 barrels.

But perhaps 40,000 or 60,000 barrels per day and since the fine is tied to how many barrels per day BP will be arguing there is no conclusive evidence and that would short change the American taxpayer and the people in the Gulf of Mexico.

(END VIDEO CLIP)

KEILAR: Now, Markey told me that after this well integrity test, once there are enough oil collection ships in place to collect all of the oil that could come out of the well, it should be allowed to flow freely so that an exact number of barrels can be calculated from what all of the ships are collecting -- Wolf.

BLITZER: And bottom line in all of this, the civil penalties, they're going to be paying a lot of money.

KEILAR: Yes, no matter what they are going to be paying a lot of money, certainly a lot more money if gross negligence is proven. But, you know, when you look at that large range of the flow estimate, here is why they want an exact number. Here's why Markey says he wants an exact number.

When you look at the high end penalties, it could be on the low side, $9.5 billion but on the high side, it could be almost $19 billion and Democrats like Markey, Wolf, say they want an exact number so there is no question. There's no confusion.

BLITZER: This is beyond the $20 billion they've already put in an escrow accountant and the 3 billion or 4 billion they say they've already spent with the cleanup and everything else.

KEILAR: That's right. That $20 billion and what they've spent is for claims and for cleanup. This would be for civil damages for fines.

BLITZER: Good explanation, Brianna. Thanks very much.

The Gulf oil spill hit America close to home. Will that set back efforts to reduce U.S. dependence on foreign oil? We're taking a closer look at one plan to kick the overseas oil habit within 20 years.

We're also learning more about the Iranian scientist who reportedly shared nuclear secrets with the United States for a hefty price.

And Apple CEO Steve Jobs faces reporters and admits his company and the new iPhones aren't perfect. We're taking you inside his rare news conference.

(COMMERCIAL BREAK)

BLITZER: Jack Cafferty is here with the "Cafferty File."

JACK CAFFERTY, CNN CONTRIBUTOR: Wolf, there are currently five Republicans generally viewed as the most likely contenders for the 2012 presidential nomination.

Bobby Jindal, the governor of Louisiana, Mitt Romney, former governor of Massachusetts, who actually finished his term of office and went on to be a hugely successful businessman as well. Mike Huckabee, a former governor of Arkansas who also actually finished his term of office. You see where this is going and Newt Gingrich, the former speaker of the House of Representatives.

But the most popular of all the Republicans seen vying for the nomination in 2012 is Sarah Palin and it's not even close. Palin, who describes herself as a female grizzly bear has a whopping 76 percent approval or favorable rating among Republicans according to a brand new Gallup poll, 76 percent. Huckabee gets 65 percent. Gingrich gets 64 percent. Romney, 54 percent and Bobby Jindal trails the pack at 45 percent.

Sarah Palin quit her job as governor of Alaska midway through her first term so she could run out and capitalize on her failed bid to be John McCain's vice president. She is the darling of the GOP. If anything could overcome the increasingly sour view of the Obama presidency it might be this.

Why the Democrats should be positively euphoric. You see, the problem with Sarah Palin is that while Republicans adore her, the rest of the country not so much. According to Gallup, Palin has a 44 percent favorable rating among all Americans, but 47 percent unfavorable rating and numbers like that simply don't bode well for a general election where everybody gets to play.

Here is the question. Should the Democrats pop out the champagne if Sarah Palin is the most popular Republican contender for 2012? Go to cnn.com/cafferty file. Post a comment on my blog.

BLITZER: Jack, I'm going to throw out another name for you and get your immediate reaction. We haven't discussed this, but there's a lot of buzz here in Washington about the former very popular governor of Florida, Jeb Bush.

CAFFERTY: Yes, I've heard of him. He's related to some of those other Bush's, is he not?

BLITZER: Yes, he is. Yes.

CAFFERTY: You know, I don't -- that's a tough call. I mean, I don't know if it's too soon after "W." Has he indicated he's got an interest in running?

BLITZER: No, he has indicated not. But there is sort of a movement behind the scenes growing. He speaks Spanish. He's popular. He did a good job down in Florida. There is a little movement that maybe he's more quote, "electable" than some of the other people you mentioned in your list.

CAFFERTY: I think Republicans are going to have to do a little looking because I'm not sure any of the people on the list I just mentioned are the answer to their prayers with the possible exception of Mitt Romney.

He might be able to get the job depending on -- it's all about the economy. If the economy is still suffering, Romney becomes a little more attractive guy I think based on his business background. That's a long way off.

BLITZER: We're going to talk about Jeb Bush later in our strategy session.

CAFFERTY: All right.

BLITZER: We'll see what our strategists have to say. All right, Jack. Thank you.

We may be watching the beginning of the end of the Gulf oil spill right now, now that the flow of crude has been sealed off at least temporarily. Some members of Congress, though, saying there is still a long-term crisis to deal with, a huge crisis involving America's addiction to foreign oil. Let's bring in CNN's Lisa Sylvester. She's looking at the story for us - Lisa.

LISA SYLVESTER, CNN CORRESPONDENT: Well, Wolf, let's look at the numbers. The United States imports well over 1 million barrels of crude oil per day and on the list of the top five countries the U.S. is most oil dependent on, Saudi Arabia, Nigeria and Venezuela, which some senators say make the U.S. vulnerable to economic and security risks.

(BEGIN VIDEOTAPE)

SYLVESTER (voice-over): Senator Jeff Merkley of Oregon wants to end what he calls the U.S. addiction to foreign oil. Call it a lofty goal, but he believes U.S. families, companies, and consumers can cut oil consumption by 8 million barrels per day ending entirely U.S. dependence on imported oil by the year 2030.

SENATOR JEFF MERKLEY, (D) OREGON: We're spending a billion dollars a day overseas. That means a lot of money that goes out of our economy doesn't create jobs here. It also means we are continually looking for ways to make sure we preserve access to that oil and that is a national security issue.

So rather than just continuing to complain about this being a problem, let's have a national plan to end our dependence on foreign oil. That's what this plan is.

SYLVESTER: Yes, it's a problem that's been around since the gas lines of the 1970s. So what would be different? Merkley and his Democratic cosponsors want a National Council on Energy Security created to oversee new incentives to changing the behavior and consumer choices of Americans.

Shifting to hybrids, setting up battery recharging stops for electrical vehicles, finding more efficient ways to move freight, getting families to leave the car at home and take public transportation and replacing gasoline with natural gas.

But the Conservative Heritage Foundation says the problem with the idea is that it requires all Americans to chip in.

DAVID KREUTZER, HERITAGE FOUNDATION: If people change their mindset, we wouldn't have to have these regulations but they'll make it too expensive to buy the cars we like.

SYLVESTER: The Merkley bill focuses on demand more than supply. The Oregon senator adamantly opposes expanding offshore drilling especially in the wake of the BP Gulf disaster, but conservative critics say if you want to tackle oil dependency, you have to look at the supply side.

KREUTZER: If you're really worried about oil dependency what you want to do is let markets work. Open up those places where we can drill safely.

(END VIDEOTAPE)

SYLVESTER: Now Democrats and Republicans mostly are in agreement that oil dependency is a problem. But changing Americans' demand for gas is not going to be easy. The number one factor is the price of gasoline.

The price of gas shoots up, well, then people will cut back. But a Harvard study this year found that to cut vehicle emissions 14 percent below 2005 levels may require gas prices of more than $7 a gallon - Wolf.

BLITZER: Wow, all right, Lisa. Thanks very much. Lisa Sylvester will be back.

New questions right now being raised about the release of the Lockerbie bomber. Was there a link to BP and Libya's oil interests? Our own Richard Quest is getting some answers trying to at least from Libya's oil minister. Stand by.

And there are new developments in the case of the alleged barefoot bandit. We'll have the details, coming up.

(COMMERCIAL BREAK)

BLITZER: Back to Lisa, she is monitoring some of the other top stories in "The Situation Room" right now. What else is going on, Lisa?

SLYVESTER: Hi, Wolf. The federal government is charging 94 people with Medicare fraud. The defendants are accused of conspiring to submit more than $280 million in false claims to the Medicare program, which is designed to help the elderly.

Arrests are taking place in Miami, Brooklyn, Baton Rouge, Detroit, and Houston and more are expected.

A federal judge in Miami has ordered the so-called barefoot bandit to face charges in Washington State. Colton Harris-Moore was arrested Sunday in the Bahamas in connection with a string of home and airport break-ins as well as vehicle thefts.

He goes to Washington State first because he was arrested on their warrant. Harris-Moore got his nickname for allegedly committing the crimes in his bare feet.

And California governor, Arnold Schwarzenegger, will temporarily deploy National Guard troops to the state's border with Mexico. His office says the move is a response to President Obama's efforts to secure the border.

In May, Mr. Obama proposed deploying a total of 1,200 National Guard personnel along the southeast border of the U.S. The mission is scheduled to end in June of next year.

And actor George Clooney was in an Italian court today testifying against three men accused of using his name to promote a fashion line without his permission. Although no cameras were allowed inside the courtroom, a CNN affiliate said Clooney spoke about a half hour or so even cracking the occasional joke from time to time. Clooney is suing the men for more than $3 million. He's a good looking fellow. He's got a lot of fans, but he's nothing on you, Wolf.

BLITZER: He's a good actor, a good person. All right, thanks very much.

New denials today that an oil-related deal was cut to win the release of the Lockerbie bomber. Cnn's Richard Quest tries to get some answers from Libya's oil minister.

There is also a new push to change Pentagon rules about women in combat to make sure female troops get the training they need in the war zone.

And is Jeb Bush the Republicans' best hope for winning the White House in 2012? Mary Matalin and (Rohen Mark), they're both standing by.

(COMMERCIAL BREAK)

BLITZER: You're in "The Situation Room." Happening now, it's been more than 24 hours since we've seen oil gushing from a ruptured well in the Gulf of Mexico. We're monitoring BP's critical integrity tests now under way. Standing by for another update.

And the governor of West Virginia names the successor to the longest serving member of Congress. The attorney and political confidante Hart Goodwin will temporarily fill the seat left by the late Senator Robert Byrd.

I'm Wolf Blitzer. You're in "The Situation Room."

Britain's ambassador to the United States is now calling the decision to free the Lockerbie bomber a mistake. U.S. officials are renewing questions about the release of Abdul Megrahi and whether there was any link to BP and Libya's oil interests.

The Scottish government freed Al Megrahi last year on grounds he had terminal cancer and was expected to die soon, but he is still very much alive. Scottish officials and BP deny there was any oil related deal to send him back to Libya. Libya's oil minister also denies any deal in a new conversation with CNN's Richard Quest.

(BEGIN VIDEO CLIP)

RICHARD QUEST, CNN CORRESPONDENT: People find it hard to believe that there isn't a connection. Mr. Megrahi gets released. Six weeks later the deal is ratified.

SHOKRI GHANEM, CHAIRMAN, NATIONAL OIL CORPORATION OF LIBYA: I'm sorry to say no. I'm sorry. We signed that agreement in 2007. And we started negotiation on this agreement maybe since 2004. That agreement was signed in 2007. Megrahi was not released until 2009. It was a long time. But you see people are saying things which are not true.

QUEST: So just to clarify, are you - or do you deny that you spoke to BP about any form of connection?

GHANEM: I will tell you something. I was leading the negotiation with BP. I was the person who was negotiating the technical and the whole agreement. I never spoke (inaudible) any political, nor did I accept any political interference. I was discussing this agreement for almost two years.

(END VIDEO CLIP)

BLITZER: Let's speak to Richard right now, joining us from London. Sometimes in these kinds of deals, shall we say, Richard, some things don't have to be formally said. Is that what's going on right here?

QUEST: I just don't know. You're talking about the tacit understanding. We certainly know that BP put pressure on the UK government and said it was worried that the lack of a prisoner transfer treaty was hampering its commercial interests.

We know that the British government at the time did take commercial interests into concern, and we know that the time scale is all rather suspicious in that sense. But getting anybody to actually say, Wolf, you know, that there was a deal done or, nod-nod, wink- wink, say no more, that of course is much more difficult.

BLITZER: Is there going to be a strain on US./UK relations? The new prime minister David Cameron is coming to the White House next week. What's your assessment? QUEST: No. I think - look, the old government basically said it was up to the Scottish. The new government has said, we wouldn't have done it. We think it was a mistake. So Cameron comes to Washington with clean hands on the al Megrahi decision.

Where I think there may be a little trickness is what Secretary of State Clinton has said tonight. She has called on the British government to make representations to the US Congress when congress and the senate have their hearings in the next few weeks.

Now, that would be a very interesting question, if a sovereign government is hauled up in any shape or form ,or is required to explain its decision to a foreign body. I suspect some compromise will be reached. Perhaps the ambassador, perhaps some other compromise that allows both sides to say they got something from it without losing face.

BLITZER: We'll see how that works out. Richard, thanks very much.

Here in Washington meanwhile the partisan sparring over jobs and the economy getting more and more intense by the day, as we get closer to the mid-term elections in November. The top house Republican is one of the most vocal critics of the president's policies and their effect on businesses. John Boehner today called for a ban on all new federal regulations, after meeting with business lobbyists who complained about uncertain economic conditions.

(BEGIN VIDEO CLIP)

JOHN BOEHNER, (R), HOUSE MINORITY LEADER: The American people are continuing to ask the question, where are the jobs? And all they're getting out of Washington Democrats is more stimulus spending and more unsustainable federal debt. A moratorium on new federal regulations is a great idea, sends a wonderful signal to the private sector going to have some breathing room.

(END VIDEO CLIP)

BLITZER: All right. Let's bring in our Senior Political Analyst Gloria Borger. Are the Republicans, Gloria, making some headway in defining the Democrats as the party of big spending greater federal regulation?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Yes they are, absolutely. Particularly on the spending side. More than half the American public doesn't like the way Barack Obama is dealing with the deficit. But the interesting thing is regulation. Because as you know, Wolf, financial regulation is a very, very popular bill.

But there is a question that needs to be answered out there which is, whether the public's mistrust of government has grown so large that they believe that the government can't possibly do the financial regulation that they actually want. So they don't trust the government to regulate Wall Street. And that could be a real problem for the Democrats going forward. BLITZER: How do they come back, the Democrats, and control this narrative?

BORGER: Well, you know, it's very difficult for them right now to control the narrative. Because they have to speak to those independent voters that are out there. They have to say to independent voters, look. Here's what we did. We're taking the country forward. But what would Republicans do? All they're doing is voting no. And that's why you hear the president talking about Joe Barton who said that, you know, he'd apologized to BP for the $20 billion escrow account. So it is a very difficult job, at the moment.

BLITZER: Does the public trust the Republicans more than the Democrats?

BORGER: Well, you know, this is, this is their opening. Right now in the short term voters are making it clear they want a change and they'd like to see that change towards the Republican Party in the short term. So that's the mid-term elections there.

But take a look at this. When asked in this week's "Washington Post" poll about who will make the right decisions for the country, the Democrats 32 percent, the Republicans 26 percent. So what that tells us, Wolf, is that the public really wants to take a look at the Republicans. But in the long term, when we talk about the presidential election, they want to hear some more ideas from them and not just votes of no against Barack Obama.

BLITZER: In '94 when the Republicans took control of the House.

BORGER: Right.

BLITZER: Newt Gingrich had his contract with America.

BORGER: Right.

BLITZER: He had ideas. And what you're saying, they're not putting necessarily the same kind of package of ideas --

BORGER: Right. They say they're working on it and taking ideas from the American public. They don't need those to win in the mid terms, but they will need them in the presidential.

BLITZER: Gloria, thank you.

BORGER: Sure.

BLITZER: A bitter, bitter dispute between the NAACP and the Tea Party movement getting a little bit uglier by the day. There's the top Tea Party spokesman, fighting allegations of racism, or fueling them with mocking new comments.

A new report suggests a mysterious Iranian scientist has in fact been on the US payroll for years, long before he left Iran.

Plus, is there a glitch in that critical test of the new oil well cap in the Gulf? Officials right now they're keeping a very close watch on pressure readings. We're keeping a close eye on those underwater cameras. Stick around. We're waiting for an update.

(COMMERCIAL BREAK)

BLITZER: The bitter conflict between the NAACP and the Tea Party movement heating up on Wednesday after the civil rights organization accused the movement of racism, or at least elements in the movement of racism. The national spokesman for the Tea Party Express, Mark Williams appeared here in "The Situation Room" and fired right back.

(BEGIN VIDEO CLIP)

MARK WILLIAMS, NATIONAL SPOKESMAN, TEA PARTY EXPRESS: Well, a real mouthful coming from a guy with a - from an organization with the words "colored people" in its title. The Tea Party --

BLITZER: Let me interrupt for a second. What does that have to do -- one thing with the other thing?

WILLIAMS: That's a pretty racist phrase. I was taught as a small child to not use those terms.

Williams then posted a parody letter on his blog appearing to

(END VIDEO CLIP)

BLITZER: Williams then posted a parody letter on his blog appearing to mock the group's accusations against elements in the Tea Party movement. The letter, which is supposed to be from an NAACP president, talking about Ben Jealous, to former president Abraham Lincoln.

And it says this, and I'm quoting from the parody: We colored people have taken a vote and decided that we don't cotton to that whole emancipation thing. Freedom means having to work for real, think for ourselves, and take consequences along with the rewards. That is just far too much to ask of us colored people and we demand that it stop.

A representative from the NAACP calls the posting, and I'm quoting now, a feeble attempt at satire, and offensive. Let's talk a little bit more about this in our strategy session.

Joining us now are two CNN political contributors, Roland Martin and Mary Matalin. Guys, thanks very much for coming in. Well, let me get your reaction. Because later in the day, Williams removed that parody, Roland, from his blog post.

And he said he is actually trying to get into a serious conversation with Ben Jealous, to work out these matters in a much more civilized, respectful way, which is something I'm sure you encourage.

ROLAND MARTIN, CNN POLITICAL ANALYST: Well, first of all, last night on "AC 360," I actually challenged mark Williams to actually have a conversation with the NAACP, because he claimed they advocate for civil rights. In fact I have a post on CNN.com talking about that.

Bottom line is Mark Williams got lots of heat from his own folks today, Colby Dillard, who is the co-founder of the Tea Party right there in Hampton Roads, Virginia, blasted him this morning when I interviewed him on the "Tom Joiner Morning Show," saying he should not be speaking at any of their rallies. He should not represent any of the Tea Party people, because that letter that he wrote was simply childish.

BLITZER: What about all this, Mary? How is this affecting Republicans at large?

MARY MATALIN, CNN POLITICAL ANALYST: It isn't. I don't know Republican has any responses. There's nothing to say. I don't know this man. I don't know any Republican who does or any Republican who thinks like he does. He is a crackpot.

I mean, there are racists in this country, but this is not a racist country. He's in no position to influence anybody, unlike the Reverend Wright for instance. And frankly I find this conversation stomach churning. Roland and I have had many thoughtful conversations about race in this country. I'm glad Roland's involved in this and for my part I'm going to pray that we can move on to a conversation about a lot of real issues that are out there hurting people today.

BLITZER: All right. Let's move on and talk about something that is intriguing at least to me and some other folks that I've been speaking with. Jeb Bush, Mary. Let me pick your brain.

You worked for another President Bush at one point. The former Governor of Florida. Very popular guy, you hear a lot of names. Is it possible that he could come out of whatever he's doing right now and run for the Republican presidential nomination?

MATALIN: It's absolutely possible. We "chatterati" make up these rules that, you know, this one can't run, that one can't run. "W" wasn't his daddy, and Jeb is not his brother, and 2012 is a long way away.

I guarantee all Republicans are focused on 2010. I see Steve Wynn came out this week for Haley Barbour. And lots of people are moving around for Mitch Daniels. A lot of us are focused on 2012, but the activists are focused on 2010. But if Jeb wanted to get in -- he said he doesn't want to -- but he is an intellectual powerhouse with a record to prove his principles work in policy.

BLITZER: He was a very popular governor in Florida.

MARTIN: Absolutely.

BLITZER: Which is a key battleground state, Roland, as you know.

MARTIN: He was hugely popular there, but also. Look, let's just be honest. It's not like the Bush name is still so well received in many parts of this country. And so he would not only be running for the Republican nomination, he would have to run away from his brother.

And so that's a very difficult thing to put a brother in the position of having to either denounce or explain or justify the actions of his brother. And, again, I just, after eight years, after four years, eight years as vice president with George H.W. Bush, then of course him being president, and eight years of George W. Bush I'm just still not sold that the country -- he might do well in the Republican primaries, a few of them. I just don't know if the country is ready for another Bush in the White House.

BLITZER: One of the things I've heard, Mary, is that his wife is a Latina woman, he speaks, he speaks Spanish fluently. That's a growing bloc out there. And he could be an attractive candidate in a general election.

MATALIN: The country is ready and receptive for ideas and principles that work. He is a leader on education reform, on balancing budgets, on fiscal conservativism in his state. He has a big record. And the notion, these anachronistic rules, that whatever your name is you don't stand as an individual are, really are not going to play in 2012. I can't think of anybody with a better record or a deeper thinker than Jeb Bush.

MARTIN: Well, Wolf, we also saw in 2008 where Senator Hillary Clinton, I mean she had to grapple with the legacy and the policies of her husband, President Bill Clinton. So we can't deny the reality that that may play a role in a primary or even in the general election.

BLITZER: Well, we're not that far away from the presidential contest because remember after the --

MARTIN: Don't remind us! No!

BLITZER: After the November election, you know, it's only about a year until the Iowa caucuses. So things move quickly.

MARTIN: Don't remind us, wolf.

BLITZER: I don't know about you but I'm getting excited just thinking about all, all the politics.

MARTIN: Wolf, I will wait for Labor Day. I won't rush to the 2012 election.

BLITZER All right. Good, guys. Thanks for coming in. Roland Martin and Mary Matalin. They'll be busy as we all will be, getting ready for the mid terms first, and then we'll worry about the presidential contest.

BP is closely monitoring that critical well integrity test under way right now in the Gulf Of Mexico. Are they getting the results everyone is hoping and praying for? We'll have the latest. And do women belong on the front lines of combat? CNN'S Chris Lawrence has the details of a brand new controversy.

(COMMERCIAL)

BLITZER: A new tragedy today northern Iraq not from the war, but from fire. CNN's Arwa Damon reports on the deadly hotel blaze.

(BEGIN VIDEOTAPE)

ARWA DAMON, CNN CORRESPONDENT: Authorities are now saying that of the at least 28 people that died in that hotel fire, 14 of them were foreign nationals from ten different countries.

The casualties included women and children as well. Many bodies were burnt beyond recognition. The vast majority of the casualties happened due to smoke inhalation. People quite simply could not escape the flames.

The hotel did not have any sort of emergency stairwell. There was no fire escape and the windows were too thick to break. Three men did manage to jump out of the fifth floor. Two of them did not survive the fall. The third was critically injured.

And it may seem strange that we're talking about foreign nationals being in Iraq, but this took place in Iraq's autonomous Kurdish north, an area that has been nicknamed by many, the "Other Iraq." That is because business is booming and tourists are flocking to the area.

In fact, it is a very popular destination for Iraqis, especially in the summer. They travel north to escape the scorching heat, and also, the area is considered to be relatively safe. Now, this is believed to have been an accident, but the incident is still under investigation. And the region's prime minister has ordered a full review of all fire safety measures in public areas.

Arwa Damon, CNN, Baghdad.

(END VIDEOTAPE)

BLITZER: As US Troops battle on the front lines in the wars of Iraq and Afghanistan, a key member of the House Armed Services Committee is now taking the military to task for its controversial policy on women and combat. Let's go to our Pentagon correspondent t Chris Lawrence. He's working the story for us. What are you finding out, Chris?

CHRIS LAWRENCE, CNN CORRESPONDENT: Wolf, right now the army is reviewing who can go into what military specialties. And one California congressman saysthe priMary thing that needs to change is who gets these combat positions.

(BEGIN VIDEOTAPE)

LAWRENCE: A California congresswoman says that if women were allowed into the infantry and other combat jobs, it would open up more promotions, and better prepare them for the attacks and ambushes they are already facing in the war zones.

LORETTA SANCHEZ, (D), CALIFORNIA: They don't get enough of that training, they don't get enough of that time..

LAWRENCE: But the army says that all soldiers who deploy to Iraq or Afghanistan get some combat-specific training, such as convoy live fire exercises, reaction to ambush, weapons training, combat lifesaver training, and other skills.

LAWRENCE (on camera) and when I was in Afghanistan, I spoke to some women who were part of female engagement teams, they walk foot patrols outside the wire, and to get additional training.

We do this one drill where we have all of our gear on, like a full combat load, and we do a whole bunch of push-ups and then sprint, then try and shoot, you know, so that we understand what it's like to shoot under pressure.

LAWRENCE: Sanchez says in the civilian world, there are reasons that some human resources supervisors don't become CEO's, but sales executives do. They are directly involved in what that business does.

SANCHEZ: With respect to our military? It's to fight wars. It is combat.

LAWRENCE: Sanchez recently met with a young male officer she nominated for West Point eight years ago. He's about to become a major.

SANCHEZ: How has he gotten promoted so quickly? He has done three or four tours already in Iraq. And he said to me, congresswoman, it is where the battle is, it is where you get promoted, it is where you get to move up. Where are the bulk of the four-star generals coming out of? Where do the Petraeus's come from. The McChrystals? These types of people. Of course they come out of the battle.

LAWRENCE: Women make up percent of the military but only percent of the generals and admirals. And army general Ann Dunwoody is the first and only four-star.

On the other hand, the first female Navy officer starts submarine school this fall. And the army says that more than 90 percent of the service jobs are open to women. Quote - They're service is steeped in tradition, and continues today in greater numbers and with greater positive influence than any time in our nation's history.

(END VIDEOTAPE)

LAWRENCE (on camera): And again, right now be army is in the process of reviewing exactly who is eligible for specific MOS's. That review going to be done by the end of the year. So this is a story we want to keep our eye on. Wolf?

BLITZER: Chris Lawrence at the Pentagon. Thank you. Jack Cafferty is asking, should Democrats break out the champagne if Sarah Palin is the most popular Republican contender for 2012? Jack will be back in a moment with your e-mail.

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BLITZER: Back to Jack for the Cafferty File. Jack?

CAFFERTY: The question this hour is about one of my very favorite topics, should the democrats pop out the champagne if Sarah Palin is the most popular Republican contender for 2012?

Of the five Republicans most frequently mentioned as possibly heading up the ticket, she's the most popular by far of all of them. Bob writes, if you still believe that the majority American voters have even a lick of sense, then you have to believe that Sarah Palin, a gifted natural TV celebrity, who quit on the people of Alaska to chase fame and money, lots of money in the lower 48, could never be elected.

As presidential material, she makes George W. Bush look like a Rhodes scholar. The woman knows nothing and hasn't the decency to do anything about her ignorance. And the Democrats prayer each night is, bring her on.

Mary in Connecticut writes, I finally have to admit I just don't get it. Who are these people?. I would pop out the champagne if Sarah Palin were nominated, because it would definitely be a gift for the Democrats. But I would have to have two bottles, one cork for each ear whenever she made a speech. Koran writes, pop out the champagne, not. How about pop out the thinking caps She is going to be a force to be reckoned with. It won't be Obama this time for me, so I surely hope someone shows some promise.

Ed writes, I'd imagine Democrats would be dancing in the aisles of the convention if Palin is the Republican nominee. Of course at some point during the primaries she would have to actually articulate her plan, wouldn't she?

Maryann writes, no they should not celebrate too soon. Never underestimate the stupidity of the American voter. And Dee writes this, if the magic 8-ball known as the Republican party fronts that gun-toting word-mangling half-wit half-term third runner-up beauty pageant contestant, aka Big Mama Grizzly as the grand idea of presidential material and potential leader of the free world, then we will know that Armageddon has indeed arrived.

If you want to read more on this, we always get a lot of mail about Miss Sarah, you can go to my blog, CNN.com/Caffertyfile. Pretty funny stuff some of them. BLITZER: Yeah. I'm going to read some of them later. Jack, thank you. Don't go too far away. Reading the details this hour about the testing is going on in the Gulf of Mexico standby, we'll update you. And the US goes after the assets of the alleged planner of the failed Christmas bomb attack. Some critics are asking, what took so long?