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The Situation Room

Wall Street Plummets; Interview With Transportation Secretary Ray LaHood

Aired August 04, 2011 - 18:00   ET

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

WOLF BLITZER, CNN ANCHOR: We want to welcome our viewers in the United States and around the world. Breaking news, political headlines and Jeanne Moos all straight ahead. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

ANNOUNCER: This is CNN breaking news.

BLITZER: It was Wall Street's worse day since the 2008 financial meltdown. In a stunning freefall, the Dow dropped more than 500 points. All the major indices are now down for the year. One analyst says the market is in total fear, a direct quote, as investors worry about a global slowdown and a possible double-dip recession right here in the United States.

Adding to all the jitter, the federal government jobs report is due out early tomorrow morning.

Let's go straight to CNN's Erin Burnett. She is in New York. She is working the story for you.

Erin, why did this happen? What's the best analysis up in New York?

ERIN BURNETT, CNN CORRESPONDENT: Well, it's interesting.

Talking to investors today, they said actually, Wolf, it's linked a bit to the debt ceiling impasse. And investors had been so focused on that that they had to failed to focus on the fact that we had manufacturing orders slipping into recessionary territory, we had weaker-than-expected economic growth numbers and you had a lot of companies starting to come out and warn that things were not that great.

The market though was so focused on the debt that they didn't actually look at all of those numbers. So they're saying a bit of today was catchup when we are looking at the weakness in the economy.

And I would say, Wolf, thanks, fear is the right word. Panic not the right word. It was pretty calm. But the sell-off puts us back to levels in terms of how cheap the market is that we haven't seen since the market bottomed. Cheap does not necessarily mean it's a good buy. We could have further down to go. But it is not panicked out there.

BLITZER: Because as much as there is fear about the uncertainty let's say here in the United States, here in Washington, there is a lot of fear gripping Wall Street about what is happening in Italy, Spain, in Europe in the spillover effect here the United States.

BURNETT: That's right. This is a global problem, Wolf, right now. And in terms of countries that have spent more money than they have in tax dollars, America is one of many. You have Greece, you have Portugal, you have Italy, you have Spain, you have Germany. It is a worldwide problem and so there is really nowhere to turn.

One thing that's ironic, Wolf, in all of this with all of these economic fears and all of this worry about debt in America, do you want to know the one place where money went today? It didn't go anywhere but in U.S. treasuries, so people wanted to lend money to the U.S. government.

If you look at a chart, we are at the cheapest level for borrowing that we have been at since Dwight Eisenhower was president back in 1953. So if you have a good credit record, there is probably no better time to borrow money than right now. The problem obviously is a lot of people don't and a lot of people have jobs. And the economy is in a bad spot.

BLITZER: So I guess a big question is what can the federal government do about this situation, if anything, right now?

BURNETT: All right, so there is a few options. Wolf, one is the Federal Reserve could embark on what is called QE3. It is weird acronym. It means quantitative easing. And they had to because interest rates are already essentially at zero. So they can't cut interest rates any further, slightly, but pretty much they can't do that. They will meet again next week.

What they can do is try to go in there and use money to buy up other assets to try to bring prices up again. And in particular they have been doing that by buying treasuries. They have already tried it twice. That's why this would be QE3. But I have to tell you, Wolf, they don't to do it unless they have to do it. They will not even start to talk about it likely until the end of August. And something important has changed.

They would now have to get congressional approval to do it. And as we all know, getting Congress to approve anything right now is almost impossible. So a lot of investors think that even if you thought that would be helpful, and there's a lot of skepticism about whether it would be, they probably won't do that. We are in a tough spot. Congress perhaps could come through and do some sort of a payroll tax holiday if they're really worried about the economy. But again, that would require Democrats and Republicans working together. It just may be something where there is more pain and more time.

BLITZER: Any good news at all coming out of this market as far as you can tell?

BURNETT: I know. I feel like I have been pretty negative, Wolf.

I would say that what we called the valuation is one good thing. Because of this sharp sell-off, when you look at how companies are valued, we are back at the cheapest levels by some measures since early in the financial crisis, other measures since the 1980s.

So that again just because something is cheaper on sale doesn't mean it's smart to buy it. But it does mean we have come down quite a ways. And that may mean that even if we go sideways, we don't have further significantly further down to go, but a little too early to say that.

BLITZER: Because I checked. Back on April 29, the Dow Jones was at 12810. It now ended today 11383, almost, what, a 1,500-point drop since April 29. And when you add up the amount of equity that has been lost, well over $1 trillion in people's investments have simply gone away. That's pretty depressing when you think about it.

BURNETT: It is pretty depressing.

And you know what, Wolf? If you look at it since the market bottom right in the spring of 2009, we are 43 percent above where we were on that unlucky 666 day. That was when the S&P 500 hit 666. So we are well above the bottom.

But the one number that I think kind of hits to what you are saying that still says so much is that real estate prices in America are still 33 percent off the highs that we saw in 2005. And until you fix real estate, which, as we all know, is the most important asset in most of our lives, it's hard to see everything else come back quickly.

BLITZER: Erin Burnett, thanks very much. See you back here probably tomorrow, I suspect, when the jobless numbers come out for July, and not necessarily going to be all that great. Thank you.

With the economy faltering, America's new defense secretary, Leon Panetta, is drawing a line in the sand today. He's making his views crystal clear about the across the board defense cuts that could be triggered under the recent debt ceiling agreement.

(BEGIN VIDEO CLIP)

LEON PANETTA, U.S. SECRETARY OF DEFENSE: It is an outcome that would be unacceptable to me as secretary of defense, to the president and I believe to our nation's leaders.

(END VIDEO CLIP)

BLITZER: Let's bring in our Pentagon correspondent, Barbara Starr.

Barbara, to me that sounds a little bit like a threat. What does Leon Panetta plan to do about it?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, Wolf, he walked into his first Pentagon press conference knowing the market was tanking, knowing that this would be the question front and center on the table.

So, we asked, OK, if it's unacceptable to have more budget cuts in defense, what would you do about it? Would you actually think about quitting? Here's what he had to say and here is the strategy Leon Panetta has.

(BEGIN VIDEO CLIP)

PANETTA: I didn't come into this job to -- to quit. I came into this job to fight.

You cannot deal with the size deficits that this country is confronting by simply cutting the discretionary side of the budget. Now, that represents less than a third of the overall federal budget. You've got to, as the president has made clear, if you're going to deal with those size deficits, you've got to look at the mandatory side of the budget, which is two-thirds of the federal budget, and you also have to look at revenues as part of that answer.

(END VIDEO CLIP)

STARR: Revenues as part of the answer. You are seeing the defense secretary just days into the job lay out his lobbying strategy in Congress.

That is revenues. That means he wants to see tax hikes before there is even any consideration of additional deep cuts in military spending. Wolf, I think it's quite extraordinary to see a defense secretary even though he's a former OMB director, Office of Management and Budget, former chairman of the House Budget Committee, from his perch here at the Pentagon, extraordinary to see him wade right into this tax debate on Capitol Hill -- Wolf.

BLITZER: Covered Leon Panetta for a long time, going back way, way back when he was a member of Congress. It's good to see him at news conferences now, because when he was CIA director, he didn't exactly have a lot of news conferences over in the CIA. Thanks very much, Barbara, for that.

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

JACK CAFFERTY, CNN ANCHOR: Another subject entirely, free cell phones for the poor, yet another example of where our government is getting involved.

"The Pittsburgh Tribune Review" reports on programs that provide free cell phones and 250 monthly minutes to people receiving government support like Medicaid or food stamps.

These programs, which exist in most states, are paid for by the federal Universal Service Fund. Federal law requires that all of the telecom providers contribute to this fund.

An industry spokeswoman told the newspaper in Pittsburgh that all cell phone carriers charge consumers a fee to recover the cost of their contribution to the fund.

Translation: People who pay cell phone bills are also paying for the people who get free cell phones.

There are millions of participants nationwide in these programs. Customers only need to provide proof of income in order to qualify.

Supporters say the program is about peace of mind, that it's one less bill for someone to pay so they can afford to pay their rent or day care.

Critics say free cell phone service is no right, that you don't need a cell phone to live.

One expert at the Heritage Foundation calls the free cell phone programs particularly wasteful and unnecessary, adding that our society cannot afford to give free everything to everybody.

Other experts suggest programs like these could help the overall economy since having a phone can help people look for a job, especially since there are no public pay phones on every street corner, like there used to be, back when Wolf was young, and before cell phones became so prominent.

So here's the question: Should the government decide whether poor people get free cell phones?

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

Remember when there were pay phones everywhere, Wolf?

BLITZER: Yes. I barely see those pay phones nowadays.

(CROSSTALK)

CAFFERTY: Yes, they don't exist anymore.

BLITZER: Yes. All right, Jack, thank you.

Congressional gridlock and a partial shutdown of the FAA that put thousands of people out of work. Now a major new development. We will talk about it with the transportation secretary, Ray LaHood.

And a massive, mysterious gift to outside supporters of Mitt Romney's presidential campaign. We are digging deeper to a million- dollar donation by a company that suddenly vanished.

And the California governor, Jerry Brown, sees an ominous sign for the United States. He talks about it one on one with our own Candy Crowley.

(COMMERCIAL BREAK)

BLITZER: He's a veteran of multiple battles between the executive branch and the legislature in his own state. And the California governor, Jerry Brown, is deeply troubled by what he is seeing in Washington right now.

Our chief political correspondent, Candy Crowley, sat down with the governor just a little while ago. She is joining us now live from San Francisco.

So, what was the headline? What did he have to say, Candy?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Well, lots to say, as you know.

I'm sure you have interviewed him before. This is a man who doesn't need much tempting to tell you exactly what is on his mind.

We started out, as you mentioned, talking a little bit about what the whole debt ceiling debate looked like from California as he watched Washington. And there is one word, I think, that I would use to describe Jerry Brown when he is talking about Washington, and that deeply worried.

(BEGIN VIDEO CLIP)

GOV. JERRY BROWN (D), CALIFORNIA: The Washington of today is suffering and experiencing a governability crisis. America can't govern when you have two parties so diametrically opposed. We are a very powerful if not the most powerful country in the world, and if the country cannot make decisions about how it spends money or how it deals with basic problems, but squabbles with the scapegoating, finger pointing and blaming, I think that is an ominous sign going forward.

(END VIDEO CLIP)

CROWLEY: In the interview, Wolf, I ask Governor Brown for a little advice on how President Obama should run his reelection race. We talked about that.

We also talked about the California budget. As you know, he just went through a bruising battle of his own where Republicans here flat out refused to allow even voters to vote on whether they would allow to continue a tax increase that had been put into place by Governor Schwarzenegger. I asked Governor Brown, who had to come together on a budget without any revenue increases, whether he could live with the budget because it cuts things like help for the mentally ill, help for the elderly and the poor, and he said thing, I will tell you one thing I'm not going to do is I am not going to bust our budget, I'm not going to allow us to continue with these budget deficits. So he has made some very, very tough cuts here in California.

I have to tell you, just standing out here, people recognizing CNN, we've had a few choice words for Governor Brown. Somebody just now said, you know, ask him about my student loans. So they have gone through very much in California what they have gone through in Washington. Governor Brown making no apologies, but saying that he is going to insist that the idea of revenue increases goes on the ballot in 2012 because he thinks without revenue increases there will be draconian cuts here in California in order to balance the budget, which he's determined to do, Wolf.

BLITZER: And when you use the phrase "revenue increases," Candy, in effect what you are saying is tax increases on people in California.

CROWLEY: Absolutely. Yes, yes. And he would like to continue the ones that they have.

BLITZER: Candy Crowley will have a lot more of the interview and a lot more Sunday morning, 9: 00 a. m. Eastern on "STATE OF THE UNION."

Candy, thank you. Thanks very, very much.

BLITZER: Government snipers said to be leaving the streets of one city littered with bodies. We're following some very disturbing new developments happening right now in Syria.

Plus, details of what scientists are seeing on Mars that raises the possibility -- the possibility -- of life on the red planet.

(COMMERCIAL BREAK)

(NEWS BREAK)

BLITZER: Thousands and thousands of workers idled, millions in tax revenues uncollected. But now there's a break in the standoff over funding the Federal Aviation Administration.

The transportation secretary, Ray LaHood, he's standing by live right here in THE SITUATION ROOM.

Plus, a mysterious million-dollar contribution to a pro-Romney political group, it came from a company that existed only briefly. We're on the money trail.

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

(COMMERCIAL BREAK)

BLITZER: Finally, there's a deal to break the political deadlock over the funding of the Federal Aviation Administration here in the United States.

The feud forced a partial shutdown of the agency, idling 4,000 federal employees and tens of thousands of workers. The bipartisan compromise will put them back to work, fortunately.

The transportation secretary, Ray LaHood, is here live in THE SITUATION ROOM. We will talk with him in a moment.

But let's get some background first from our chief political analyst, Gloria Borger. She broke the story for all of us here at CNN a few hours ago.

Gloria, how is this deal going to work?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, I think the secretary of transportation will be able to tell you, but essentially, Wolf, this is a patch.

There are very long-simmering differences between Republicans and Democrats over the issue of collective bargaining, which is why the larger FAA spending bill has never been able to get through both houses of Congress since 2007.

So, what happened was, the House passed a temporary version, but, in it, there was a problem. And it cut off $16 million worth of funding for some rural airports and the Senate balked at that. To make a long story short, the man you are going to interview next came in and said, look, I actually have the authority as the secretary to issue waivers for those rural airports.

And while he didn't promise that he will do a blanket waiver for all of these airports, that he would do it on a case-by-case basis, that was enough to get the House and Senate to finally agree on what I think is really a temporary patch until September 16.

BLITZER: There was a lot of political pressure, as you know, Gloria, to get this done.

BORGER: Yes.

BLITZER: Yes, they were intricate details, complex issues involved, but the American public was understandably outraged by what was going on.

BORGER: Sure, outraged. And I think the secretary was outraged as well.

Look, this looked like the House and the Senate not being able to do their jobs; 4,000 people were going to lose their jobs. Tens of thousands of construction employees were going to lose their jobs at a time when the president of the United States and members of Congress want to talk about job creation, because that's a huge problem in this country.

So, it looked absolutely ridiculous. It was maddening. Everybody looked childish and foolish. So, they had to find a way to resolve it pretty quickly or they would all look terrible, Wolf.

BLITZER: Gloria, thanks very much.

Gloria broke the story earlier.

For days, the transportation secretary, Ray LaHood, has been lashing out at lawmakers over the failure to fund the FAA. Ray LaHood is a former Republican member of Congress. He also bemoaned what he called the loss of bipartisanship. Does this deal mean that Washington hasn't lost the ability to get things done?

And the secretary is here in THE SITUATION ROOM.

Mr. Secretary, you must be happy about this.

RAY LAHOOD, U.S. SECRETARY OF TRANSPORTATION: I am thrilled. I really am.

I'm thrilled for these hardworking people right in the middle of the construction season. They're going back to work Monday in what they want to do, earn a good wage, take care of their families and do construction jobs. And our FAA employees are going to back to work, too. I am very, very happy.

BLITZER: Well, walk us through the legislative process, because the House is, for all practical purpose, not in session. The senators have disappeared. They fled Washington.

How do they pass legislation, the president signs it, in effect, and get this done within the next, what, 24 hours?

LAHOOD: Senator Harry Reid deserves a lot of credit, along with the president, even during debt and deficit. He told me, "Take care of our employees. Take are of the construction workers. Figure this out. Get it done."

BLITZER: How do they do it legally in terms of the legislative process?

LAHOOD There's a provision in their adjournment resolution that lets them come in, which the Senate will do tomorrow morning. They will ask for unanimous consent to pass the House bill, and if nobody objects, that will be the bill that passes, and the president will sign it. And over 70,000 people will go back to work, Wolf, and they need these jobs. They really do.

I want to thank Senator Reid, Senator Rockefeller, Senator Kay Bailey Hutchinson, Senator Baucus and the president. This could not have done it. You heard the president yesterday at the cabinet meeting. At the top of the cabinet meeting he said, "Get it done. Figure it out. Get these back -- people back to work."

BLITZER: It's not that complicated.

LAHOOD: It's not that complicated.

BLITZER: But technically -- correct me if I'm wrong -- one Senator who shows up tomorrow, in fact one senator shows up and says, "I'm not part of that unanimous -- that consent," he could hold up -- he or she could hold up the whole thing.

LAHOOD: That's correct. I think Senator Reid has talked to enough senators to know. And again, his leadership played a big part in this, along with the president who's been on the phone also and has played a big part in making sure that this gets done tomorrow morning on the floor of the Senate. That U.C. does get passed, the president signs it; 70-plus thousand people go back to work.

BLITZER: And then they have to approve it in the House of Representatives. When would that -- when would that happen?

LAHOOD: Wolf, that -- the bill that they will U.C., unanimous consent...

BLITZER: Of our Senate.

LAHOOD: ... is a House bill.

BLITZER: So they're not -- the House doesn't have to... LAHOOD: They have to go back.

BLITZER: They don't have to come back down.

LAHOOD: It goes right down to the White House. The president signs it.

BLITZER: And people go back to work right away, which is very important. Now, you blame Congress for this mess. Who is more to blame: the Democrats or the Republicans?

LAHOOD: Congress is more to blame.

BLITZER: I know Congress is to blame, but there are Democrats in Congress and there are Republicans in Congress.

LAHOOD: Look, I'm grateful to Senator Reid for what he's been doing the last few days, calling people to the president for what he's been doing by using the bully pulpit of the White House and our efforts to really persuade Congress this is the right thing to do for hardworking people, people who can little afford to go without a paycheck. And our people have been doing that, our FAA employees, and so have construction workers.

So the blame is done. We have success. We're going to take our success and -- but we need to begin working next week on an FAA bill so that we don't have these kind of problems in the future. And there's a commitment on the part of Senator Reid to get people together and to get a -- to get a bill.

BLITZER: You've been outspoken on all of this, as understandably so. You're the secretary of transportation. But Congressman Steven LaTourette of Ohio, he criticized you, and I'll play a little clip here of what he said. I'll give you a chance to respond.

LAHOOD: Sure.

(BEGIN VIDEO CLIP)

REP. STEVEN LATOURETTE (R), OHIO: Ray LaHood is a friend of mine and throughout this entire process last week, I called him more than I called my wife. And we talk on a regular basis about where it was and what we were doing, and he was very helpful. So -- so to then sort of turn on a dime when the Democratic Party here in Washington has decided that hostage takers is the new drain in the swamp is -- it's offensive to me.

(END VIDEO CLIP)

BLITZER: You want to respond?

LAHOOD: What I would say is I was sticking up for hardworking people. I was sticking up for more than 70,000 construction workers who were laid off. I was sticking up for 4,000 FAA people who were furloughed. While members of Congress were headed out the door on their vacation, still getting their paychecks, we had over 70,000 Americans who were trying to figure out how they were going to get their house payment, their car payment. Those are the people that the president and I and others were looking out for. Those were the people that we were speaking up for. And I think people heard our argument.

BLITZER: Some have suggested that 70,000 figure is inflated. It was really maybe a third or maybe even a half of that, but there were other outside vendors who were affected by the loss of construction.

LAHOOD: For sure there were up to 38 -- 3,700 FAA workers. There are thousands...

BLITZER: Construction.

LAHOOD: Yes, of construction workers, and there were other people who were involved in these construction projects.

BLITZER: Who tangentially would lose their jobs.

LAHOOD: Exactly.

BLITZER: But there were no construction workers there who could hire them to do certain things or buy products.

LAHOOD: You know what? We tried to do -- what the president tried to do is say you make good speeches about jobs. We care about jobs. This is not the way to treat people.

BLITZER: You're a former member of the House from Illinois. You understand why Congress's job approval number, according to our most recent poll, is 14 percent. Only 14 percent of the American people think Congress is doing a good job.

LAHOOD: Well, look it: the FAA problem is symptomatic of the fact that people don't think Congress can solve any problems, that they can't really get their act together. They can't compromise. And there are -- you know, Wolf, there are a group of people in Washington that don't like the word "compromise." They won't use it. It's not in their lexicon; it's not a part of their vocabulary.

And as a result we've ended up with a -- with a mess at FAA and a very difficult time getting debt and deficit. And...

BLITZER: So what's the most important lesson all of us should learn from this fiasco? We call it a fiasco, because it really was. So that we don't repeat it down the road.

LAHOOD: I think when reasonable people realize that hardworking Americans were out of jobs, particularly construction workers right in the middle of their season, this is their season. This is their bread and butter season. And our people were out of work. I think reasonable people said what's wrong with Congress? Come together.

BLITZER: Taxpayers, we're going to lose $1 billion if they would have continued this until September 7.

LAHOOD: I think what resonated was what the president said yesterday at the top of the cabinet meeting: get back here, get it done. Take care of it for citizens. This is not the way to treat American workers. It is not the way to treat our friends and neighbors around America.

BLITZER: Secretary LaHood, thanks for coming. I'm happy because this has been resolved. I want to get some reaction now. Stand by for a moment. I think you'll be interested. Mary Snow has been getting reaction to this deal that puts these FAA workers back on the job. These construction workers back on the job. What are you see seeing on the streets there, Mary?

MARY SNOW, CNN CORRESPONDENT: Wolf, relief would be an understatement. Along with the 4,000 furloughed workers, there have been 40 FAA inspectors working for free, and one of them is Evelyn Martinez. She's the lead inspector in the Northeast. She's a mother of two and the sole breadwinner in her family. And while we were talking with her at JFK Airport, news broke that an agreement had been reached. Take a listen.

(BEGIN VIDEOTAPE)

EVELYN MARTINEZ, FAA INSPECTOR: It's the right thing. It's the right thing.

SNOW: You're so emotional about this. Tell me why.

MARTINEZ: Well, it's just I think most of us didn't expect it to get to this. And working for the federal government you just expect more.

SNOW: And your tears?

MARTINEZ: Well, I -- they're out of relief if it's true, that this has been resolved. It's just out of relief.

SNOW: How does this change everything going forward?

MARTINEZ: I'm not as naive about it. You know? I think I'm educated in government. I have a masters in public administration. It's not like I don't understand how government works. But what we are experiencing is outside of any text book.

(END VIDEOTAPE)

SNOW: Martinez used the word "heartbroken," she says when she found out about what was going on back in late July. Now she says going forward, one thing that she does expect from the government is better contingency plans -- Wolf.

BLITZER: It's an emotional moment, Evelyn Martinez. Let me get quick reaction, Mary, from the secretary of transportation. You see that's just one person. Multiply that by tens of thousands. LAHOOD: Well, look it, Wolf. I am very touched by that scene, and I'm very touched by the federal employee. Obviously, she's a hardworking person and there are thousands of hardworking federal employees and construction workers.

All of the work that the president and I did, this makes it worthwhile to see this interview. The tears of joy that she knows that she has the satisfaction of working and getting a paycheck. It makes it all worth it for what the president and I and others have done to get these people back to work. And I -- my heart is full of joy for her and all the other workers.

BLITZER: Multiply that by thousands. You know, when people make fun of federal employees, I think -- I'll think of her.

LAHOOD: Absolutely.

BLITZER: Because they do important work...

LAHOOD: They do.

BLITZER: ... on behalf of all of us.

LAHOOD: They do. Thank you, Wolf.

BLITZER: Thanks for coming in.

LAHOOD: Thank you very much.

BLITZER: A massive and mysterious gift to help Mitt Romney's presidential effort.

(BEGIN VIDEO CLIP)

FRED WERTHEIMER, DEMOCRACY 21: It looks like a shell corporation created so some folks could make a million-dollar contribution to this pro-Romney PAC without anyone knowing who they are.

(END VIDEO CLIP)

BLITZER: And the company behind it vanished virtually overnight. Where did it go? Who was behind it? Stand by.

(COMMERCIAL BREAK)

BLITZER: Guilty verdicts have been handed down for the polygamist sect leader, Warren Jeffs, convicted of two counts of sexual assault on a child. Our national correspondent, Gary Tuchman, has been in San Angelo, Texas, watching this trial unfold.

Tell us a little bit about the flavor, Gary, of how this went down.

GARY TUCHMAN, CNN CORRESPONDENT: Wolf, a weird flavor. The weirdest trial I've ever covered in my career. This jury was out for three hours and 45 minutes before delivering two guilty verdicts of aggravated sexual assault and sexual assault. The aggravated because that victim is only 12 years old. The one without aggravation, because that victim was a little bit older, 15 years old.

But either way, Warren Jeffs found guilty of two charges. The sentencing hearing is now beginning. That's expected to take two or three days. The jury actually participates in that. And they'll decide if he serves just a few years in jail or up to life in jail. It's a very wide range.

But it's a very unusual trial, because Warren Jeffs represented himself. He was a bizarre lawyer, to say the least. I'll give you an example. In the closing arguments, each side had 30 minutes. The prosecution used 22 minutes. It was then Warren Jeffs' turn, Wolf. And he stood up and just stared at the judge, and he stared at the judge and didn't say anything. And he didn't say a word. And there were 200 people in the courtroom and 12 jurors. And we all just were totally silent.

Five minutes went by, 10 minutes went by. The judge didn't want to interrupt, because it's his 30 minutes. Twenty minutes went by, 24 minutes went by, and after 24 minutes he turned this way and looked at each one of the jurors one by one. He stared them down. And then he turned back, and he said four words. This is all he said in his closing arguments: "I am at peace."

And then he sat down. And I will tell you, if this man wanted to be found not guilty, that wasn't a good thing to do, because he absolutely creeped out this jury. And they were very intimidated, and they'd already been weirded out. I'm using all these colloquial words. But this is the way to put it. They'd already been weirded out because of his halting delivery during when he represented himself.

What his followers say is that God is talking to him. And when God talk to him, Warren Jeffs just stops talking It will be in the middle of a sentence, and he stops talking.

So a very unusual trial. At one time he threatened the judge. He told the judge that she would be killed. He was talking in God's voice, though; he said this is what God told him. Either way, he is now found guilty, and he will be sentenced shortly.

BLITZER: And you say, Gary, he could be sentenced to a few years or to life in prison. How is that going to -- who's going to make that decision?

TUCHMAN: Well, that's absolutely right. The first count carried the possibility of to 5 years to 99 years or life. The second count, 2 years to 20 years. So the jury is now -- they're hearing more stories about Warren Jeffs, stuff that couldn't be admitted in this trial. This is just about two victims. And then the jury makes the decision what the sentence will be. That will come no earlier than tomorrow. It could come as late as Monday.

BLITZER: Gary Tuchman, thanks very much for your good reporting, as usual. Appreciate it. We're on the money trail here in THE SITUATION ROOM. We're tracing a mysterious $1 million contribution to a pro-Mitt Romney political group. Stand by.

And a panic-stricken horse meets a panic-stricken tourist in New York's Central Park. Only Jeannie Moos will be able to show us what happened next.

(COMMERCIAL BREAK)

BLITZER: A mysterious million-dollar donation to a pro-Mitt Romney political group from a country that exists -- from a company, I should say, that existed only briefly and apparently only on paper. Lisa Sylvester has been digging into this story for us.

What are you finding out, Lisa?

LISA SYLVESTER, CNN CORRESPONDENT: Well, Wolf, to begin with, it is a pretty thin paper trail. That is because this company only existed for about four months. But it sure had a lot of money to give away to one political action committee with deep ties to presidential candidate Mitt Romney.

(BEGIN VIDEOTAPE)

SYLVESTER (voice-over): Records obtained by CNN show a $1 million contribution by a company called W Spann LLC on April 28, 2011, to Restore Our Future. This super PAC was started by a group of Mitt Romney insiders, including Romney's chief financial officer during his 2008 White House bid.

Unlike regular PACs, super PACs can raise an unlimited sum of money from corporations and individuals. But W Spann LLC is largely a mystery company. Records filed with the Delaware secretary of state's office show the LLC was incorporated on March 15 of this year, but the company dissolved on July 12, less than four months in existence. In between, W Spann LLC made that million-dollar contribution.

Fred Wertheimer is with the nonpartisan group Democracy 21 that promotes transparency in elections. He says that's highly unusual.

WERTHEIMER: It looks like a shell corporation created so some folks could make a million-dollar contribution to this pro-Romney PAC without anyone knowing who they are.

SYLVESTER: The person who signed the certificate of incorporation was Boston associate layer Cameron Casey, according to the Delaware secretary of state's office. We tried her corporate offices at Ropes and Gray and were given a statement saying, quote, "The firm does not discuss confidential client matters."

Adding to the mystery, federal election disclosure records list W Spann's offices at 590 Madison Avenue, New York, but the building manager told CNN they have not had any tenants by that name this year.

Maybe a coincidence, but what is housed in the New York offices for Bain Capital. That's the private equity investment firm that Mitt Romney used to run. The campaign's legal center is asking the Justice Department and the Federal Election Commission to investigate to see if laws were broken.

PAUL RYAN, CAMPAIGN LEGAL CENTER: It's slightly illegal to give money to a third party and have that third party pass the money on to a committee and claim that the money belongs to that third party.

(END VIDEOTAPE)

SYLVESTER: Now, Restore Our Future says it has fully complied with all Federal Election Commission regulations. And we also contacted Bain Capital which gave us this statement, quote, "Bain Capital has many employees who actively participate in civic affairs, and they individually support candidates from both parties. The firm takes no position on any candidate, and the entity in question is not affiliated with Bain Capital or any of our employees" -- Wolf.

BLITZER: What else does the super PAC say about all this?

SYLVESTER: You know, these groups like Democracy 21 are saying if they can't tell where this money came from and they have no idea who's behind this $1 million in funding that they should give it back. So, I asked the super PAC, Restore Our Future, do they have any plans to give this money back? And they said not at this time, Wolf.

BLITZER: One million dollars is a lot of money. All right. Thanks very much, good reporting. If you get any update, let us know.

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

JACK CAFFERTY, CNN ANCHOR: I like that answer, not at this time. Not at any time, probably.

The question this hour: "Should the government decide whether poor people get free cell phones?"

Reno writes from Texas, "Sure, let's give them a car, too, and how about some nice furniture? I'll just write another tax check. Wait, I'm a little short. Would you mind raising my debt ceiling for me? Never mind, I'll just print some money and cover it myself."

Gary writes, "Federal government has no business getting involved in the distribution of cell phones to anyone. States and local governments should administer all programs, not the federal government. We need to downsize the federal government. If I had my way, tattoos and 20-inch rims would also be banned by people receiving government assistance."

Ab writes, "The federal government should give free limited cell phone service to poor people, especially the elderly poor, for emergency and safety purposes."

Jordan writes on Facebook, "Is this a joke? Cell phones aren't a necessity to survive. If you can't afford one, you don't need one." Jack in Pennsylvania: "Great, another hand-out the working class has to pay for to help people who won't look to better themselves so they can pay for their own goodies."

Ralph writes, "No. Give them a job instead."

Terry writes from Indiana, "I'm a poor people. And I sure as hell don't want the government giving me a free cell phone. We know anything the government gives you has got strings attached. The first time I get a call from Obama telling me how, because of what he's done for the country, I should re-elect him, I'll send the cell phone to the deepest part of the lake off my rear dock."

And Mary in Philadelphia writes, "Recent evidence suggests the federal government is incapable of deciding anything at all."

If you want to read more on this, you can go to my blog, CNN.com/CaffertyFile, or through our post on THE SITUATION ROOM's Facebook page. I didn't know we were posted there but apparently we are.

BLITZER: It's great. We got a blog, we got a Web site. We've got the whole nine yards.

CAFFERTY: We're everywhere.

BLITZER: It's a whole new world, Jack.

CAFFERTY: There you go.

BLITZER: Thank you.

Our Jack Cafferty with "The Cafferty File."

This important note for our North American viewers, "JOHN KING USA" coming up at the top of the hour. He'll talk with U.S. ambassador to the United Nations Susan Rice about Syria's brutal and deadly crackdown on anti-government protests.

But up next, right here in THE SITUATION ROOM, Jeanne Moos and an unforgettable carriage ride from hell.

(BEGIN VIDEO CLIP)

THERESA SHAVER, NEW YORK CITY TOURIST: Oh, my gosh, oh, my gosh! Oh, God!

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: All right. Here's a look at this hour's "Hot Shots."

Let's go to Afghanistan. Firefighters and police stand at a scene of fuel tankers that caught fire in Kabul.

In South Korea, teenagers tested their strength in a wind- resistance exercise at a naval base.

In France, a man empties a bucket of grapes at a vineyard.

And in India, look at this, a devout Hindu woman pours milk over a cobra as part of a religious ritual.

"Hot Shots," pictures coming in from around the world.

An unforgettable ride in a horse-drawn carriage and not in a good way. Here's CNN's Jeanne Moos.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): Nothing like a nice serene ride in a horse carriage through Central Park. Right?

SHAVER: Oh, my gosh. Oh, my gosh. Oh, my gosh!

MOOS: When the horse pulling Theresa Shaver (ph), her husband and son got spooked by a pedi-cab like this one, Theresa got even more spooked than the horse.

SHAVER: Oh, my gosh. Oh, God, get off! Get off! Get off! Run! Run, Eddie run!

IAN MCKEEVER, SPOKESMAN, HORSE AND CARRIAGE ASSOCIATION: His back feet hit the curb. The horse trips and goes down.

MOOS: The horse, Smoky, got up, then fell again. Theresa thought the carriage might hit her teenage son.

SHAVER: Run! Oh, my God! Oh! Oh.

MOOS: As she saw the horse lying there, she got more upset, even when they got him up.

SHAVER: Oh! Oh!

MOOS: Her husband tried to calm her down.

UNIDENTIFIED MALE: Walk away.

SHAVER: The horse!

MOOS: Soon Theresa realized the carriage had left with her bag in it. When she found the carriage 20 minutes later, he was back in line where the horses wait for riders.

SHAVER: That horse dropped to the ground twice, and you guys have him back on to work again? Do you know how traumatic that was for me? And I got the whole thing on video just so you guys know.

MOOS: A spokesman for the driver says what he knows is that Theresa overreacted.

MCKEEVER: She went nuts, so she did, and people were looking at her.

SHAVER: And you put him back to work after he drops to the ground twice? You put him back in that (EXPLETIVE DELETED) line? Are you kidding me?

MOOS (on camera): They're saying you overreacted, you acted crazy.

SHAVER: I may have, you know, I mean, I love animals, and it is a traumatic experience to see an animal that size fall to the ground.

MOOS (voice-over): After Theresa confronted the driver, the ASPCA confirmed the horse was taken back to its stable.

MCKEEVER: All I can say the horse is absolutely fine, thanks be to God.

MOOS (on camera): Every time something like this happens, it reignites that long-running controversy...

(voice-over) ... animal rights supporters versus the carriage drivers.

UNIDENTIFIED MALE: He's my buddy.

MOOS: The drivers say the horses are well treated and a wonderful tourist attraction. Animal rights folks say the horses are overworked and live in confined conditions.

(on camera) There is one guy who could shed more light on this all, but he's not talking.

(voice-over) Neither Smoky the horse nor his driver had much to say. Where's Mr. Ed when you need him?

UNIDENTIFIED MALE: Go right to the source and ask the horse.

ALAN YOUNG, VOICE OF MR. ED: Hey, Wilbur, get a load of this story.

MOOS: Theresa's story sure has people talking, if not horses.

SHAVER: And I have it on video, you son of a (EXPLETIVE DELETED).

MOOS: Jeanne Moos, CNN...

SHAVER: Oh, my gosh!

MOOS: ... New York.

SHAVER: Oh, my gosh!

(END VIDEOTAPE)

BLITZER: That's it for me. Thanks very much for watching. I'm Wolf Blitzer in THE SITUATION ROOM.

For our international viewers, "WORLD REPORT" is next. In North America, "JOHN KING USA" starts right now.