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"The Mother Of All Battles"; Iran Preparing To Strike U.S. Warships?; Economy Takes another Hit; Nonprofit Organization Offers Free Plastic Surgery; Olympics Opening Ceremony; Home on Brink of Falling 200 Feet

Aired July 27, 2012 - 17:00   ET

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

CANDY CROWLEY, CNN ANCHOR: You're in the SITUATION ROOM. Happening now, reports of a horrific massacre in Syria's largest city. CNN is inside Syria as rebels brace for what could be the ultimate showdown against the country's embattled president.

Plus, new signs Iran may be stepping up its military capabilities to take on U.S. warships in the Persian Gulf. Just how concerned should Americans be?

And a home on the brink of falling hundreds of feet over a cliff. Ahead, the amazing video of its yard literally disappearing before our eyes.

Welcome to our viewers in the United States and around the world. Wolf Blitzer is on assignment. I'm Candy Crowley. And you're in the SITUATION ROOM.

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CROWLEY: It's being called the mother of all battles. Rebels and government forces are converging on Syria's largest and most important city for potential showdown that could ultimately determine the fate of embattled president, Bashar al-Assad. We're getting reports of a horrific massacre in one part of Aleppo as other parts are purportedly being bombarded by mortars, tanks and helicopter gunships.

The death toll across the country at least 100 people just today. Many of them believed to be from that one blistering attack. CNN's Ivan Watson is in Northern Syria.

(BEGIN VIDEOTAPE)

IVAN WATSON, CNN INTERNATIONAL CORRESPONDENT: We're here on the outskirts of Aleppo on the main highway running in. And the signs of war are everywhere. I mean, look at the shopping mall that's been damaged. It had a car of four, an international brand here. And it's pot marked with bullets and the windows have been shattered. Lots of the neighborhoods around here completely deserted with the exception of rebel fighters.

Now, the rebels we've talked to, the bulk of their fighting brigade, are inside that city right now hunkered down and awaiting a siege, a Syrian government onslaught. The rebel commanders we've talked to say they've set up field clinics, medical clinics inside the city as well as informal ambulance services so that they can treat their wounded.

They're anticipating a major assault from Syrian security forces, airplanes, tanks, artillery as well. One rebel commander we talked to from Aleppo, he was an Aleppo native, a stern man, when I asked him about what was going to happen there, he said it's probably going to end up looking like Homs. Of course, he's referring to that other Syrian city, which endured weeks if not months of Syrian government bombardment, and so, entire neighborhoods destroyed.

And then, I was stunned to see this very stern man who rarely smiles, stand up, pick, up a Kleenex, and sit down and quietly weep as if the realization that this city, that his hometown, would be destroyed had suddenly set in.

Ivan Watson, CNN on the outskirts of Aleppo.

(END VIDEOTAPE)

CROWLEY: Ivan joins us now. Ivan, tell me what's happening where you are.

WATSON: Well, we've been traveling around Northern Syria around the city of Aleppo. You hear the periodic sounds of gunfire and heavy artillery exploding. Skirmishes between Syrian government forces that are holed up for the most part in checkpoints and army bases. And the rebels do seem control the surrounding countryside. We drove for hours today, Candy.

And, of course, we were evading these government checkpoints. But you see no presence of the Syrian government for hours driving around the Syrian countryside. And that gives you a sense of how much the government has lost control over its own territory and how much popular support there really is for the uprising -- Candy.

CROWLEY: Ivan, can you give us the importance of Aleppo? Give us some sense of why this has come down to this battle, it seems.

WATSON: It's the commercial capital of the country, the industrial hub of the country. And it's widely believed that if the government loses control of Aleppo, it can't continue even pretending to be a government anymore. It can't really pretend to run the country anymore. The rebels made a surge into Damascus last week that seems to have been beaten back. The government has not succeeded in beating back the rebels from Aleppo as easily.

I'm not sure exactly why that is whether there's, perhaps, more popular support in Aleppo, whether the government security forces are weaker there, or perhaps, whether the rebels have just been able to prepare better for this battle and hunker down more, sending in more forces and weaponry as well.

One commander I did talk to, I asked him, do you have enough ammunition to withstand a government siege? And he very quickly answered and said, no. And that may be one of the critical weaknesses of what the rebels are trying to do there right now.

CROWLEY: Ivan Watson out of Syria tonight. We know you'll be careful. Thanks, Ivan.

Alarming signs that Iran may again be flexing its military muscle in the face of the United States. "The Washington Post" reports today the country is gaining new capabilities to strike at U.S. warships in the Persian Gulf. It cites officials who say the new systems are boosting Iran's confidence that could quickly damage or destroy U.S. ships if hostilities erupt.

CNN Pentagon correspondent, Barbara Starr, is working that story which we'll get to in a second. But first, Barbara, you're getting some new information just now on U.S. strategy concerning Syria.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Indeed, Candy. I've just spoken to a senior U.S. official who confirms to us that the U.S. as well as some of the allies, but the U.S., has stepped up its contacts with the opposition forces in recent weeks. And this U.S. official says also the U.S. is playing what he calls more of an advisory role with the opposition.

This may begin to point the way towards how the opposition is making at least some of the gains that it appears to be making. The official says more vetting of opposition forces, more advising them how to achieve their goals more quickly. By all accounts, the at least over U.S. effort still falls short of arming the opposition.

No arms coming from the United States government, at least of course, not officially, nut certainly stepping up contacts with them. The key question on the table, Candy, though is, what happens if Assad falls to the Syrian military, the Syrian government structure, will it hold? Does the U.S. want it to hold? You remember all about Iraq when the army collapsed.

CROWLEY: And Barbara, if I could just take advantage of your expertise here and turn back to Iran. It sounds from those reports out of "The Washington Post" that the U.S. navy may be a sitting duck or at least Iran has an interest in making it seem so.

STARR: Well, indeed. You know, that "Washington Post" story really laid out the potential vulnerabilities of the U.S. navy to attack by Iran in the gulf, but how vulnerable is the navy? Let's have a bit of a reality check here on both sides of it.

You know, the navy sends aircraft carriers into the Persian Gulf all the time. Huge, huge ships. But they are not defenseless by any means. I wanted to run people through some of the things that these carriers have on board. Sea sparrow, anti-aircraft, and anti-missile capability to be able to counter any Iranian missiles coming at them.

The Phalanx, that's a radar guided gun that can shoot at any small Iranian boats coming at them. Another missile system called the Rolling Airframe. It can attack anti-ship cruise missiles. In other words, if the Iranian shoot cruise missiles, add an aircraft carrier. And secondly, of course, the navy also has cruisers, destroyers, equipped with radars (ph) that can see 360 degrees around them.

Submarines, small ships, minesweepers, there's a lot of navy capability. There's a lot of concern about the Iranians, however. They are working on advance systems. Make no mistake, Candy.

CROWLEY: Barbara Starr, thanks for the reality check. Appreciate it from the Pentagon tonight.

Turning to the battle for the White House and the next stop on Mitt Romney's world tour, Israel. The trip may help win support from Jewish voters for Mitt Romney, but Christians as well. CNN's Tom Foreman joins us now with more.

TOM FOREMAN, CNN CORRESPONDENT: Yes, candy, this is really interesting. This is, in chess (ph), a popular game in Israel. This is one of those moves that both would attack the president's base and buildup Mitt Romney's if it turns out right.

(BEGIN VIDEOTAPE)

FOREMAN (voice-over): Mitt Romney's trip to Israel this weekend is unmistakably aimed at a traditional Democratic voting block. As a group, Jewish-Americans are very politically active in fund raising, campaigning, and voting.

RANDALL BALMER, DARTMOUTH COLLEGE/AUTHOR "GOD IN THE WHITE HOUSE": I think Mitt Romney's going to Israel certainly to court the Jewish vote.

FOREMAN: However, Randall Balmer, a professor at Dartmouth and author of "God in the White House" says Romney may have an even bigger prize in mind.

BALMER: I think more important, the constituency he wants to impress is the evangelicals, people who have an unequivocal support for Israel. And this is the constituency that was quite suspicious of him in the course of the primaries. And in many ways, he hasn't fully won them over.

FOREMAN: Countless Christian evangelicals are, indeed, staunch supporters of Israel citing a biblical kinship with the Jewish nation. Their interest in the well-being of Israel has been a motivating force in recent years for many Republican contenders to visit the holy land and speak out for Israeli rights.

RICK PERRY, (R) FORMER PRESIDENTIAL CANDIDATE: Israel is our friend.

SARAH PALIN, (R) FORMER ALASKA GOVERNOR: The American and Israeli connection will grow and strengthen.

FOREMAN: Once more, the group Christians United for Israel with more than a million members whose leadership is politically conservative says President Obama has further strained America's sometimes tense relationship with Israel.

DAVID BROG, EXECUTIVE DIRECTOR, CHRISTIANS UNITED FOR ISRAEL: My name is David Brog --

FOREMAN: David Brog is that group's executive director.

BROG: American Christians, Americans in general, are going to want to see Governor Romney treat Israel and treat Prime Minister Netanyahu with the respect and an appreciation that many of us feel has not been present, has been lacking in the current administration.

FOREMAN: Some evangelicals believe there must be a mass convergence of the world's Jews in the holy land before Christ can come again. Therefore, protecting Israel's stability is key. Many other Christians and Jews see that as a radical interpretation of scripture and it is soundly dismissed by Brog.

BROG: This is simply one of those urban myths.

(END VIDEOTAPE)

FOREMAN (on-camera): Still, all of this adds up to, as we said at the start, a dual attack in many ways. A way for Mitt Romney to go after the Jewish support for President Obama and to reach out to those evangelicals out there who there may be a million or more in that one group but have influence in many, many churches out there and can help get them past the things that have hung them up on Mitt Romney.

The fact that he's a Mormon, the fact that maybe he hasn't spoken out quite as strong as it like on some issues. This may be a bit of a trump card because those groups have been looking for a really strong voice of support for Israel, and they may find it in Mitt Romney depending on how he acts --

CROWLEY: Might bring him into their comfort zone.

FOREMAN: It could certainly do just that, Candy.

CROWLEY: Thank you so much, Tom Foreman. Good to see you.

Wolf Blitzer is traveling to Israel for an extensive interview with Mitt Romney, and you can see it all right here in the SITUATION ROOM Monday.

A 14-year-old girl bullied all her life for her appearance undergoes free plastic surgery. And our own Dr. Sanjay Gupta is there for the transformation. You're going to see it just ahead.

Plus, if Republicans believe voters should trust Mitt Romney over President Obama on the economy, then why isn't he doing better in the polls? I'll ask the former Republican presidential candidate, Newt Gingrich.

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CROWLEY: Mitt Romney's going to Israel tomorrow undoubtedly hoping for better headlines than his trip to the Olympics produced. And we already know that team Obama is watching. Our CNN chief political analyst, Gloria Borger, is here. Gloria, London is nice and the Olympics are there, but in terms of sheer politics, Israel's more important.

GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: I think it's more important, And I think the Romney campaign wants a better trip than they had in London, wouldn't you say? Because that didn't exactly --

CROWLEY: The bar's not high.

(LAUGHTER)

BORGER: The bar's not high. That didn't go exactly the way they planned. So, going to Israel is really part of the process that presidential candidates go through when they have to prove their foreign policy credentials. Barack Obama went through this when he did his tour in July of 2008, actually. And foreign policy, Mitt Romney is really behind President Obama in all the polls.

It's a way going to Israel in particular is a way to contrast with President Obama who has not been to Israel since he took the oaths of office. And Mitt Romney's also clearly interested in pointing out that he's a better friend to Israel, that he would be tougher on Syria.

That he would be tougher on Iran. And I believe he'll probably get a better reception in Israel than he had in London.

CROWLEY: So, you know, this is always kind of -- this is a little tricky for candidates -- as Mitt Romney said, they didn't want him over there criticizing the president, yet he has to sort of show differences here, did an interview with an Israeli newspaper. How did he couch those differences?

BORGER: Very carefully. Very carefully. An interview with (INAUDIBLE). And he sort of backed into his criticism of President Obama, because he would not -- he said, you know, I'm abroad and I don't want to criticize the president while I'm abroad. But here's what he said.

I'll read it to you. "I am afraid that any discussion of settlements" -- this is a question of Israeli settlements stopping -- "would lead me into waters showing a distance between me and the president. That will not appropriate for me to do while on foreign soil."

CROWLEY: But suffice to say, there are differences.

BORGER: Suffice to say. So, obviously, this question of Israeli settlements, a free sound settlement (ph) has been a big point of contention with the president and American Jews, in particular. So, that was a way of backing into the criticism.

But, when he did an interview on American soil with an Israeli newspaper, he was quite critical of the president, but he did it in this country and not abroad.

CROWLEY: Time and place. That's all about --

BORGER: Exactly. CROWLEY: I've been fascinated by how much attention Team Obama seems to be paying to this trip.

BORGER: A lot of attention. First of all, the London part of it, they're absolutely gleeful about it and tweeting up a storm about it. But, in terms of the Israel trip, you know, there's a question of counterprogramming. How do you counterprogram it so you will not be surprised to know that the president had an oval office bill signing today?

And it was the U.S./Israel enhanced security cooperation act. This is something that was passed by the Congress last week, but he signed it today. And it's a non-controversial measure which essentially restates the United States' commitment to supplying arms to Israel. Also, the president promised another $70 million for something called iron dome.

And that's a program to bolster Israeli security against aggressors. So, there you have it. Not a coincidence.

(CROSSTALK)

CROWLEY: -- Jessica Yellin earlier, good to be president during election years.

BORGER: It is. That bully pulpit comes in handy.

CROWLEY: It does. Thanks so much, Gloria Borger, appreciate it.

Nearly a half million Fords are being recalled. We'll tell you what model and the scary reason why in just a minute.

Also, a new medical study will give you ammunition for trying to argue your way off the late shift. You're in the SITUATION ROOM.

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CROWLEY: We're continuing to get images into the SITUATION ROOM from the London Olympics opening ceremonies. What you are seeing here as we were told earlier by a reporter is London sort of walking through the history of Britain. For some time, you're seeing there as night has fallen, past 10 o'clock, we believe this is probably a reference to World War II.

So, London telling the history of the British. We are expecting to also find out who is lighting the Olympic torch before we get off the air. You don't have to wait until later tonight. We'll have it for you as soon as it happens.

Mary Snow is monitoring some of the other top stories in the SITUATION ROOM right now. Mary, another car company is dealing with vehicles accelerating on their own.

MARY SNOW, CNN CORRESPONDENT: Yes, Candy. That company is Ford. It's recalling 485,000 Escape Crossover SUVs around the world because of a problem that could cause the vehicle to speed up on its own. The company says the cruise control cable can get stuck even if the driver isn't using cruise control. The recall is for 2001 through 2004 V-6 models with cruise control.

Working the second or third shift can be tough enough. But now a study of two million workers shows those on the night shift are more at risk for heart attack or stroke than day workers. The research in the British Medical Journal finds that shift workers should be screened for risk factors as they are more prone to have poor sleep and nutrition.

And Lupe Ontiveros, one of Hollywood's most recognized Latina actresses has died at the age of 69. Her publicist say Ontiveros died of liver cancer. Along with roles in "Selena" and "As Good As It Gets," the actress once said she made a career in TV and film playing the maid appearing as more than 150 times. In so many roles, Candy, it's really a loss.

CROWLEY: Yes. That is a familiar face. Thanks so much, Mary Snow.

SNOW: Sure.

CROWLEY: The Obama administration's just released a surprisingly upbeat report about the economy. Coming up, what do they see that others do not? We'll ask former House speaker, Newt Gingrich, and former labor secretary, Robert Reich.

And later, a girl who was bullied because of how she looked. See what she looks like now and who helped her.

(COMMERCIAL BREAK)

CROWLEY: Another blow for the economy today. The Commerce Department reports a significant slowdown in growth due, in part, to weak consumer spending.

It's giving Republicans a new line of attack on the campaign trail.

Joining us to talk about it, former Republican presidential candidate and former House speaker, Newt Gingrich. He is the author of the book, "No Taxation By Misrepresentation."

Also joining us, former Clinton Labor secretary, Robert Reich. He is a professor at the University of California in Berkeley and the author of the book, "Beyond Outrage."

Gentlemen, thank you both.

Secretary Reich, first to you. We're just going to put up a chart that -- that shows GDP, gross domestic product, from the first quarter of last year to now. And it is a -- a roller coaster. It went from .1 to 2.5, back down to 1.3, up to 4.1, down to 2.

What is going on here?

ROBERT REICH, FORMER LABOR SECRETARY: Well, Candy, it is a roller coaster. You know, in a way, things are not nearly as bad as they could be if we didn't have Europe and the European debt crisis to worry about, if China's growth were not slowing.

But this is dad -- this is bad. I mean there -- there's no way of dressing it up. There are some silver linings here. Housing prices seem to have rebounded somewhat.

But there is a big drag on the economy and one of the biggest drags on the economy -- and I'd love Newt Gingrich to comment about this -- is government spending, which is way, way down, particularly at the state and local levels.

CROWLEY: See I don't even have to ask the questions.

Go ahead, Mr. Speaker.

(LAUGHTER)

FORMER SPEAKER NEWT GINGRICH, R-GA, FORMER PRESIDENTIAL CANDIDATE: Well, as usual, Secretary Reich has launched straight into the differences, I guess.

Look, I think that the attitude the president communicated when he said you didn't build that tells you a lot about what's going on.

And the fact is, there is some potentially great news out there. Now, if you look at what's happening with energy in places like North Dakota, Western Pennsylvania, Eastern Ohio, there's a very exciting possibility that America could be basically independent, that North America, as a continent, could literally produce all of its own energy, bringing down the costs for manufacturing, etc.

All of this is being slowed down by the Obama administration. And I do agree with Secretary Reich, when you add in, I think, the very real dangers in Europe, where there's a very big possibility that we're going to see further economic decay in the next two or three months -- there's a report out today that Greece, for example, may run out of money by August 20th.

The most -- the most sobering thing I've seen this week is a report on the -- this will sound kind of strange, but the amount of waste that is shipped by railroads is one of the highest correlations of what happens to the general economy.

When the amount of waste being shipped goes up, the economy is booming. When the amount of waste goes down, the economy is shifting...

CROWLEY: But...

GINGRICH: -- toward a recession.

Right now, the amount of waste is going down...

CROWLEY: Yes.

GINGRICH: -- and that really bodes badly for Obama for the next three months. CROWLEY: Secretary Reich, I know that you started the conversation saying about the cutbacks in government and -- and that kind of thing, that may, I think is your belief, be leading to some of the problem with the GDP.

But Republicans are now making the argument on the tax side. And they're saying, listen, when President Obama agreed to extend the Bush tax cuts in 2010, he said the economy was too weak to not have them.

It was -- 2.4 percent was GDP. Now it's less than that.

Can't you now also argue that the economy is too weak to start cutting taxes for -- I mean start raising taxes for anyone?

REICH: Well, Candy, I think that the -- what the president has said is absolutely right. What we need is a continuation of the middle class tax cut. Everybody's should have a Bush tax cut, a continuation of the tax cut...

CROWLEY: But in 2010...

REICH: -- on the first $250,000...

CROWLEY: -- he let all of the tax...

REICH: -- on the -- but -- but on the first 100 -- $250,000 of their income.

There's absolutely no reason, given that huge budget deficit in the out years, to provide a -- an additional tax cut on incomes over $250,000. I mean even rich people are going to get a Bush tax cut on the first $250,000 of their income.

This is not a -- a kind of class warfare. All the president is saying is, hey, guys, you there who are wealthier than everybody else, you have some responsibility vis-a-vis that budget deficit in the future. And going back to the Clinton tax rate for your income over $250,000 is not so awful.

I mean as I remember it -- and I may be biased, because I was a member of the Clinton administration -- the economy was pretty good under those Clinton tax returns.

CROWLEY: Mr. Speaker, if...

GINGRICH: Well, but...

CROWLEY: -- if I could -- let me just shift you slightly and...

GINGRICH: All right.

CROWLEY: -- and ask you, that Speaker Boehner has said, listen, this election coming up is not really about Romney, it's a referendum on President Obama and how the economy is faring.

But when you look at the polls, these two men remain statistically tied, even though consumer confidence is completely lousy.

Sometimes President Obama is slightly ahead. He leads on who can best handle the -- Romney leads on who can best handle the economy.

But when you ask about who's protecting the middle class, it's always President Obama.

How does Mitt Romney get out of the template that he is for the rich and the president is for the middle class?

Is there any way to do that?

GINGRICH: Well, I think, first of all, that pushing as hard as he can on jobs and on the economy, emphasizing the importance of small business, you know, the number one thing the middle class needs is jobs. And the fact is, if you don't have jobs, you're not going to have a middle class.

And I think that the jobs issue, which is probably also -- as Robert will remember from his former boss' first campaign in 1992, when Carville had that sign, "it's the economy, stupid," I think jobs are the center of this campaign.

But I also think where -- where I disagree with Secretary Reich, as a practical matter, the Europeans are trying socialist austerity. That's where you punish people in the private sector to prop up government.

I think we do have deficits that are too big. My answer would be to cut government spending, not to raise taxes. And people have to decide at a fundamental level, do you think this is a country in which we are under-taxed or a country in which we're overspent, because you get very different answers to what kind of a budget you want based on how you answer that question.

CROWLEY: Speaker Gingrich, Secretary Reich, I know both of you have many more points to make.

I hope you will come back and join us another day.

Thank you very much.

GINGRICH: Thank you.

REICH: Thanks, Candy.

CROWLEY: Starting this morning after -- starting the morning after the Colorado theater shootings, the alleged gunman's university insisted nobody had a clue about his behavior. Coming in our new 6:00 p.m. Eastern hour why that claim now is being questioned and later a family whose backyard is going downhill in a hurry. Will their home be next? And how did they get in the situation in the first place?

(COMMERCIAL BREAK)

CROWLEY: Growing up a victim of bullying can be traumatic for any child, especially if it's brought on by physical attributes that can't be changed. One nonprofit organization is trying to change that offering free plastic surgery to some of these victims. CNN chief medical correspondent Dr. Sanjay Gupta spent time with one patient and was there for her transformation.

(BEGIN VIDEOTAPE)

DR. SANJAY GUPTA, CNN SR. MEDICAL CORRESPONDENT (voice-over): It's a parent's nightmare.

UNIDENTIFIED FEMALE: I used to be very talkative when I was a little kid and now I'm just shy and I'd rather not talk to anyone. I'm anti- social now.

GUPTA: Children viciously bullied for their physical appearance. For 14-year-old Nadia Ilse, the bullying started in first grade.

NADIA ILSE, 14-YEAR-OLD PATIENT: There was this girl, she came up to me and says you have the biggest ears I've ever seen. I'm like, well -- just -- I was speechless because I didn't think about it until she said that.

GUPTA: She's heard Dumbo, elephant ears and much, much worse. Seven years of torment, so withdrawn, still so hard to talk about.

(on camera): What is the -- do you remember the worst sort of taunting or teasing or, you know, whatever -- do you remember a day where that happened?

N. ILSE: It happened a lot -- well, it happened so many times that it kind of all blends together that I kind of don't remember.

GUPTA (voice-over): Nadia was just 10 years old when she asked her mom if she could have surgery to pin her ears back, also known as a nodoplasty (ph). She wanted them to stick out less. All in an effort to stop the bullying.

(on camera): It's been sort of a dark place for you for some time it sounds like.

N. ILSE: Yes, it's been very depressing.

GUPTA (voice-over): Her mom desperate to help turned to the Internet and stumbled across the Little Baby Face Foundation. The nonprofit organization offers free plastic surgery for children like Nadia who are bullied because of their physical appearance and can't afford an operation.

(on camera): There may be people, Nadia, who say look you know you don't need to do this. This is just who you are. It's the way you were born. You know people should love people for who they are. What do you say to those folks?

N. ILSE: I say that they're right, but it'll never stop. It'll just keep going, get worse and worse. GUPTA (voice-over): The foundation flew Nadia and her mother from Georgia to New York City for an all-expense paid trip to this hospital.

UNIDENTIFIED MALE: This will be our target ear, so we'll match it up -- it'll match the other ear, which is not as lateralized as this ear.

GUPTA: In her application, Nadia had asked to have her ears pinned back, but Dr. Thomas Romo (ph) with the Little Baby Face Foundation recommended she change more than just her ears.

UNIDENTIFIED MALE: I love thin chins. But I don't want them as pointy as that chin. We talked about that, didn't we? We looked at some pictures of some different people.

N. ILSE: (INAUDIBLE)

UNIDENTIFIED MALE: Yes and their chins come off just a little more square. So that's exactly what we're going to do too.

GUPTA: And there was more.

DR. THOMAS ROMO, III, MANHATTAN EYE, EAR & THROAT HOSPITAL: When I looked up inside her, the whole septum is actually going off this way. As the septum goes, so goes the nose.

GUPTA (on camera): She never talked about the nose or the chin before, right --

ROMO: She did not because she didn't recognize that.

GUPTA (voice-over): Dr. Romo says with her ears pinned back, her nose and asymmetrical chin would be more pronounced. He said all three surgeries combined are necessary to balance out Nadia's features.

(on camera): So any last thoughts as we're going into the OR here?

N. ILSE: Nervous, excited.

GUPTA: So in some ways this has been seven years in the making for Nadia. She just went under, but she tells me she's been dreaming about this day for some time and now it's all happening for her.

So what Dr. Romo is doing is an otoplasty (ph), a reduction rhinoplasty (ph) reducing the size of the nose and a mentoplasty (ph) here on the chin. I think what might surprise a lot of people is about 42 percent of otoplasties (ph) on the ears are done on people under the age of 18.

(voice-over): This four-hour operation would normally come with a price tag of about $40,000. For Nadia, it's free.

(on camera): Here in the operating room when you see what's happening here behind me, it gives you a good idea of just how significant bullying can be. Kids become depressed. They can become anxious. In Nadia's case she told me it changed her entire personality. (voice-over): But surgery alone won't wipe away the pain from years of all that bullying. Nadia's mom hopes counseling will be the final step in the healing process. Seventy-two hours post-op Nadia is still swollen, but cautiously optimistic as Dr. Romo removes the bandages and she sees her new self for the first time.

N. ILSE: I look beautiful. Really. Exactly what I wanted. I love it.

(END VIDEOTAPE)

CROWLEY: Sanjay Gupta is joining us now. Sanjay I'm not really even sure how to react to this because she's clearly so happy with how she looks and that's great. I think people watching this will look at it and say, wait a second. Wait a second. That's pretty aggressive. Now, this man is doing this for free. So we can't, you know, suggest that there's anything other than ultraistic (ph) motive here, but boy that seemed like a lot for a little girl that just wanted her ears fixed.

GUPTA: Yes, you know, and it's a wildly controversial topic, as you might guess, Candy. I've had a lot of conversations about this. We've talked to several child psychologists while investigating this piece and I will tell you none of the child psychologists said I absolutely would not do this. The answer always seemed to be, well, there are certain situations where something like this may be warranted. Look there, Candy, the before and after.

CROWLEY: Yes.

GUPTA: You know you saw her in the piece about 72 hours after her operation. This is just a couple of days ago now. A significant change. I asked her the same question, Candy. I asked her you know any regrets? That seemed like a lot to go through. She said absolutely not. And I will tell you just from a dad's standpoint when I first met her she was you know very withdrawn, quiet, you could see a little bit how hard it was to talk to her and she was very outgoing. Now her personality changed just as she predicted that it would, so that's you know her particular story.

CROWLEY: Yes. Thanks, Sanjay Gupta. What a great story. You all be sure to tune in for Sanjay's special "Taking it to Extremes: Surgery for Bullied Kids". It airs tomorrow afternoon at 4:30 Eastern and again Sunday morning at 7:30 Eastern right here on CNN.

Michelle Obama is leading the U.S. delegation to the Olympic opening ceremonies. Her day included a visit with the queen as well as an unusually personal pep talk for the U.S. Olympic Team.

Also ahead, a man's threat as he's getting fired gets him arrested too. Find out what he's accused of saying.

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CROWLEY: Opening ceremonies are underway for the London Olympics. More than 100 heads of state and international dignitaries are on hand. Here you are seeing some of the pictures. Obviously nighttime there, very colorful. These are huge pageants, really. We are now just watching them unfold with these stills as London officially opens the Olympic ceremony. This means of course that the past few days have been something of a marathon for Queen Elizabeth. Here is our CNN royal correspondent Max Foster.

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MAX FOSTER, CNN ROYAL CORRESPONDENT: Candy presidents and prime ministers from around the world arrived here at Buckingham Palace for this final leg of the build up to the London 2012 Olympics. The presence of Brazil were joined by Jack Roger (ph) of the IOC and (INAUDIBLE) United Nations. Representing the United States, of course, was Michelle Obama arriving here, and going inside to join a reception where she and heads of state and royalty from around the world enjoyed canapes (ph) and drinks. Royalty included of course the Duke and Duchess of Cambridge, and Prince Harry, who in many ways have represented these games in terms of royalty as least. And the queen gave her last speech before officially opening the Olympic Games.

QUEEN ELIZABETH: My great grandfather opened the 1908 Games at White City (ph). My father opened the 1948 Games at Wimbley (ph) Stadium. And later this evening I will take pleasure in declaring open the 2012 London Olympic Games at Stratford in the east of London.

FOSTER: Rarely have so many of the world's most powerful people been in one place and there's complete lockdown around here at Buckingham Palace, understandably so. But there is a positive mood really now going into the Olympics it's about going for gold and the heads of states are fully behind their teams and everyone in London is fully behind London -- Candy.

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CROWLEY: As you heard, first lady Michelle Obama is leading the U.S. delegation to the Olympics Opening Ceremony. In addition to the queen, her day also included meet and greets with assorted British royals and an emotional pep talk to the U.S. Olympic Team.

(BEGIN VIDEO CLIP)

MICHELLE OBAMA, FIRST LADY: Some of my fondest memories growing up and even as an adult for that matter involved watching the Olympics on TV. I know each of you probably were in that position. I remember cheering on Mary Lou and Nadia and Carl Lewis (ph) and so many others. I was just in awe of those athletes. And my family, I remember we would sit together for hours watching these men and women perform fetes of endurance, speed and grace that would have us cheering at the top of our lungs. My brother and I we would dream about how maybe one day if we worked hard enough, we might be able to achieve something just as great for ourselves.

And the Olympics was particularly powerful for my family for another reason, as some of you may know, my father contracted MS in the prime of his life. In a matter of several years, he went from a man who was once a thriving competitor, he was a boxer, a swimmer throughout high school, and then he was stripped of all of his hopes, so he thought as an athlete. My father wasn't able to walk without the assistance of crutches, but he retained his love of sports, truly, and the Olympics was a special time for him to watch amazing athletes of all abilities compete on the world stage.

(END VIDEO CLIP)

CROWLEY: The first lady also led about 1,000 students and children of U.S. military personnel in some "let's move" exercises.

Coming in our new 6:00 p.m. Eastern hour, there are new questions about a university's claim that nobody had a clue about what's wrong with the graduate student who is now accused in the Aurora, Colorado theater shootings. But next, a house you'll be glad isn't yours, but why did the current owners move in there in the first place?

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CROWLEY: You have to take a look at this video. It is near Seattle. A home on the verge of falling hundreds of feet over a cliff as the front yard quickly disappears, breaking off in huge chunks. Our Lisa Sylvester has the details.

LISA SYLVESTER, CNN CORRESPONDENT: Candy, the homeowners told us they think they might lose their little green house by the end of the day today, but at the rate they are going they could soon lose much more, the garage, the workshop, even the House, and they are powerless to stop it.

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SYLVESTER (voice-over): Hour by hour, more of the Ballinger's (ph) yard is eroding away.

UNIDENTIFIED FEMALE: Oh look at this one. Oh holy --

SYLVESTER: Bit by bit, their beautiful property at the top of a cliff is breaking off and plunging down a 200-foot ravine to the beach below. Just over a week ago, Roy and Rosalie Ballinger (ph) noticed the first chunks breaking off.

ROSALIE BALLINGER, HOMEOWNER: Oh, I said Roy, the tree is gone! And it took part of the fence with it and everything went downhill from there.

SYLVESTER: The culprit is apparently an underground water source that just appeared without warning.

ROY BALLINGER, HOMEOWNER: And all of a sudden one day, just out of God's wonderment (ph) there was this geyser (ph) coming out the side and it s probably squirting 25 or 30 feet in the air.

SYLVESTER: So far it has cost them 50 feet of land, a 500-year-old tree and some (INAUDIBLE).

ROSALIE BALLINGER: We planted all those.

SYLVESTER: But every day it is getting closer to their buildings. Their property used to look like this. Now the cliff edge has come right up to their out buildings, including the greenhouse and Roy's shop.

ROY BALLINGER: I don't think it is going to get to the house. But it sure as hell is going to take over my shop, and that's my pride and joy.

SYLVESTER: They cleared out the shop Thursday, but there is nothing they can do about the underground propane tank that used to be 12 feet from the edge. Now it is 12 inches, fire officials say.

MIKE COTTON, ASSISTANT FIRE CHIEF: It could explode. A valve could bust off or the tank just slides down the hill, innocently. Don't know.

SYLVESTER: So far, the erosion has been moving at a steady pace.

ROY BALLINGER: I don't know of any way to stop it. I think you know it was God that started it and God will have to stop it.

SYLVESTER: No one knows whether the house they have lived in together for 12 years will be next.

ROSALIE BALLINGER: We cry and we laugh and that's all we can do. It's devastating, absolutely devastating.

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SYLVESTER: So far the Ballingers are still living in the house. They say today had started out pretty quiet, but then again, that's what they thought yesterday until evening came and they had another slide -- Candy.