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Massive Earthquake Strikes Peru; Should Federal Government Keep Chinese Products Out of the Country?

Aired August 16, 2007 - 17:00   ET

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


MILES O'BRIEN, HOST: Thank you, Jack.
You're in THE SITUATION ROOM.

Happening now, victims laying in the streets, others buried under rubble after a massive earthquake strikes Peru. An elite U.S. rescue team with specially trained search dogs is ready to help.

Tainted toys and toxic toothpaste -- should the federal government keep products from China out of your home?

And a new cold war -- the U.S. and Canada rush to lay claim to arctic oil and mineral riches after Russia plants its flag under the North Pole.

Wolf Blitzer is off today.

I'm Miles O'Brien.

You're in THE SITUATION ROOM.

We begin with a fast-moving storm that just got stronger and threatens to become a very powerful storm. Warnings are already up in the Caribbean for Hurricane Dean and Dean may be eying other targets.

CNN meteorologist Chad Myers at the CNN Weather Center -- you are our severe weather expert, Chad.

What's your best guess on where Dean is headed?

CHAD MYERS, CNN METEOROLOGIST: Hopefully somewhere where people aren't living, because this is going to be a major storm. And there are so few places now where you can call a coast where there's no one there. I mean obviously everybody is building up the coast now, so more people are affected.

But I'm going to think probably into the Yucatan Peninsula, then into the Gulf of Mexico as a really big storm.

It's already enormous. I mean let me -- let me get you to the next satellite picture and show you. Here are the islands. There's the Virgin Islands all the way to Grenada and, well, Venezuela. This thing is as large as the Caribbean is tall. It's going to run over Martinique and Dominica. You guys there, you need to batten down the hatches. If you're an American tourist in there, find out where all the locals get to go, because this is going to be a category two, 105 mile an hour storm over Martinique and Dominica.

And then it moves into the Caribbean and into Jamaica. By Sunday afternoon, a category four, 135 mile per hour storm very close to Jamaica.

Now, there's a little bit of a chance it could be left or right of this. And then by Monday, a category four storm.

Erin wasn't even a category anything and look what happened. Here are some pictures out of San Antonio just coming in now from our affiliate there. And we're just seeing flooding everywhere.

This is kens, kens-5 TV. A traffic watch here. All of this water just backed up into these cities. There's over nine inches of rainfall in the past four hours in the southwest side of San Antonio.

This same thing happened in Houston about four hours ago. That water is finally running off -- Miles.

O'BRIEN: All right, Chad Myers.

That's a reminder that even if it's not a full-fledged hurricane, you have to beware, don't you?

MYERS: It's called fresh water flooding. And I know that that doesn't make sense unless you hear about it, but it's not the saltwater flood that comes in with the storm surge. It's the rain that happens and then the ground can't hold it.

O'BRIEN: Chad Myers, thank you very much.

MYERS: OK.

O'BRIEN: At least 450 people are reported dead in Southern Peru, where a massive eight magnitude earthquake struck last night. More than 1,500 have been injured. Some towns have been reduced to rubble.

Reporter Tim Ewart has our story.

(BEGIN VIDEO TAPE)

TIM EWART, ITV NEWS CORRESPONDENT (voice-over): These eerie nighttime images were the first pictures from the town of Ica, where the earthquake claimed the most lives. People stumbled through the streets as buildings lay in ruins around them. Many of those killed here were celebrating mass when a church collapsed.

There was pandemonium in local hospitals as doctors struggled to cope with nearly 1,000 injured people. And along the coast, there was panic, as the earthquake triggered fears of a tsunami and fishermen frantically hauled their boats ashore to safety.

An aftershock in the capital, Lima, brought down the roof of a shopping center, sending people rushing into the street.

As the night wore on and the aftershocks continued, those who could not or would not return to their homes huddled under blankets in the streets.

This woman said, "We're all on the streets. All the houses have fallen down. We have nowhere to sleep."

And this Ica now, the Senor de Luren Church, where worshipers lost their lives, is in ruins -- a monument to a few moments of terror that had such catastrophic effect.

All around is devastation caused by an earthquake that scientists say was one of the largest that can be expected anywhere in the world in an average year. Its epicenter was 90 miles off the coast, but there were four major aftershocks.

As people in ruined communities like this confront the task of rebuilding their lives, there are warnings that the toll of dead and injured will continue to rise.

Tim Ewart, ITV News.

(END VIDEO TAPE)

O'BRIEN: Peru was the scene of one of the deadliest earthquakes of the past 50 years. Back in 1970, a massive quake struck the region of Chimbote. The 7.9 magnitude quake killed 70,000 people.

The next deadliest was in Northern Pakistan in 2005. I remember that one. Eighty thousand people perished. That was a 7.6 magnitude quake.

'76 now -- 255,000 people died when an earthquake measuring 7.5 hit Tangshan, China.

The deadliest earthquake, though, of the past half century -- you remember this one. It devastated Southeast Asia, December of 2004. A massive 9.1 magnitude quake. Of course, it triggered that tsunami that swept across the entire region. More than 283,000 people were killed. Fourteen thousand are still considered missing. A million people were displaced by that single earthquake.

They're drilling a fourth hole, still trying to find six miners trapped in Utah's Crandall Canyon mine. The company has more video of what they've already found and last night's sounds detected through the third hole.

CNN's Brian Todd is at his post at the mountain, trying to sort out the ups and downs of this story -- Brian.

BRIAN TODD, CNN CORRESPONDENT: Well, Miles, we're told that morale is high among the rescuers, but the problem is that every time there's some encouraging news, it's accompanied by another setback.

(BEGIN VIDEO TAPE)

TODD (voice-over): Water virtually sprang from the ceiling -- wire mesh, poles -- new pictures of what officials say is an undisturbed cavity more than a thousand feet from the surface. RICHARD STICKLER, MINE SAFETY AND HEALTH ADMINISTRATION: There's 16, 15, 16 percent, almost 17 percent oxygen in there. Almost a normal atmosphere.

TODD: Rescuers first thought the six trapped miners could have retreated to this chamber if they survived the devastating collapse.

What do these pictures say?

STICKLER: This video shows that they're not at that location.

TODD: But officials say the camera can only capture a distance of 30 to 40 feet all around, and the cavity could be much bigger. With still no sign of the miners, they're pursuing another lead -- a fourth hole at a location pinpointed by the detection of noise or vibrations. They caution the noise picked up by devices on the ground called geophones could have been anything -- an animal, thunder, a shift in the rock. And it could have been at any depth.

STRICKLAND: We can't tell you that it was in the mine. We don't know if it was in between the mine and the rock strata or in the surface (ph). But we thought that it was significant enough that we could not discount it.

TODD: The drilling can only give indications of where the miners are or possibly get food or air to them.

What will get these miners out, owner Robert Murray told me, is the digging in the main tunnel. And that's been set back again by seismic activity.

BOB MURRAY, PRESIDENT AND CEO, MURRAY ENERGY CORPORATION: We've gone 826 feet. As it -- we should go two to three times what we are, but we don't know whether the mountain will let us or not. That mountain is alive.

(END VIDEO TAPE)

TODD: Eight hundred and twenty-six feet in -- that's not even halfway to where they believe these miners are. Those recent mountain bumps were so powerful, we're told, that one of them kicked up rubble that was so devastating it covered one of those giant machines that they use to dig through. They had to make sure the machine was operable, then they kept going -- Miles.

O'BRIEN: Brian Todd in Huntington, Utah.

Thank you very much.

Let's go right to New York.

Jack Cafferty with The Cafferty File -- hello, Jack.

JACK CAFFERTY, THE CAFFERTY FILE: An estimated 12 million illegal aliens take giveaways like free health care and education from the American taxpayer. But our own senior citizens are picking up and moving south of the border to nursing homes in Mexico, where they can better afford care.

What's wrong with this picture?

"USA Today" has a terrific front page story today. Mexico's proximity, cheaper costs compared to U.S. assisted living facilities and warm weather are driving many of our elderly south. And with millions of baby boomers getting closer to retirement age and health care costs soaring here at home, Mexican nursing home managers expect to see more Americans heading their way in the years to come.

Now, some residents say the quality of care varies in this industry, that is just picking up steam there in Mexico, and experts warn that lax government regulation can and probably will pose dangers at some of these nursing homes, just like years ago here in the United States a lack of adequate government regulation led to some horrible, horrible stories about nursing home abuse and neglect.

So here's the question -- what does it say about the United States that seniors -- our seniors, are going to Mexico, where they can find affordable nursing home care?

E-mail your thoughts to caffertyfile@CNN.com or go to cnn.com/caffertyfile.

It's a disgrace -- Miles.

O'BRIEN: It sounds like a scene you might have seen in "Sicko, " the Michael Moore movie.

CAFFERTY: I haven't seen any of Michael Moore's movies, but, perhaps you're right.

O'BRIEN: All right, Jack Cafferty.

Thank you very much.

Up ahead in the program, a U.S. rescue team with specially trained search dogs is ready to rush to Peru, where an earthquake reduces towns to ruins.

Stay in Iraq or pull the troops out -- the Bush administration prepares to make its case to Congress on the war in Iraq. Why it may be a make or break moment.

And a new cold war, as the U.S., Russia and Canada race for riches buried underneath the North Pole.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

O'BRIEN: In Florida, a jury today found Jose Padilla guilty of terrorism charges. The man once accused of being the so-called dirty bomber is guilty of plotting to kill, kidnap and maim people in an overseas jihad.

CNN national correspondent Susan Candiotti live from Miami -- Susan, tell us what the jury had to say.

SUSAN CANDIOTTI, CNN CORRESPONDENT: Hi, Miles.

Well, guilty on all counts. And the verdict came very quickly, only after a day-and-a-half of deliberations. This jury evidently convinced by the government's circumstantial case against Padilla and two other defendants that they planned to carry out and conspired to carry out a violent jihad overseas.

Also, evidence that included coded conversations and Padilla's fingerprints on an Al Qaeda application for a training camp.

The defense said, "Well, his prints might have been on the form, but that doesn't prove he actually filled it out."

In any case, Padilla showed no reaction in court. He simply turned and talked to his lawyers. His mother, not surprisingly, said her son is not guilty.

There will be appeals. The government, the Justice Department is calling this a significant victory. Sentencing will take place on December the 5th. But this case, as you indicated, has really morphed. It went from Jose Padilla being charged, accused by the Bush administration of being a dirty bomber, planning to carry out attacks against Americans using radioactive truck bombs.

In the end, the government got accusations against him and a case filed and guilty verdicts on a totally different case, where he could face up to life in prison.

But was he really the dirty bomber?

Miles, we may never know.

O'BRIEN: Susan Candiotti.

It would be nice to know, wouldn't it?

Thank you very much, Susan, from Miami.

Stay the course or pull the plug in Iraq?

The Bush administration will soon have to make its case in a report to Congress. Much anticipated. But there's already bickering over how the message should be delivered.

Our White House correspondent, Suzanne Malveaux, joining us live from Crawford, Texas -- Suzanne, bring us inside this debate.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Miles, it really is all about credibility. You have the White House and Congress, both of them are really trying to make the case that is most palatable to the American people, most credible to the American people. And that is why you see the White House putting out Tony Snow today and you see this debate emerging.

(BEGIN VIDEO TAPE)

MALVEAUX (voice-over): The White House says now is a time of choosing.

TONY SNOW, WHITE HOUSE PRESS SECRETARY: We've got to choose whether to stay or leave Iraq. The decision will influence the entire world. And it's going to stamp future generations of Americans for good or ill. They will recall this either as America's finest hour or its final hour as a nation of consequence.

MALVEAUX: Waiting for the president's own mid-September Iraq progress report and Congress's return from summer recess, the White House put its chief spokesman forward -- not at a briefing to reporters, but in a speech to a friendly crowd.

Press Secretary Tony Snow launched a defiant message aimed at both sides of the aisle.

SNOW: Democrats and Republicans on Capitol Hill soon are going to have to make a choice.

Will they permit troops in Iraq to continue pursuing their missions or will they try under various guises and disguises to walk away regardless?

MALVEAUX: Anticipating wary Republicans will join the Democrats in challenging the president's war strategy, the White House is laying the groundwork for framing September's make or break debate. The White House was quick to deny reports that it was trying to limit the publicity of the administration's war assessment.

GORDON JOHNDROE, NSC SPOKESMAN: General Petraeus and Ambassador Crocker will testify to the Congress in both open, as well as closed sessions, prior to the September 15th report. That has always been our intention.

MALVEAUX: But Democrats are skeptical. House Democratic Caucus Chairman Rahm Emanuel said the war in Iraq has seen too many reports and rosy assessments that put spin first and facts second.

(END VIDEO TAPE)

And, also, Miles, today the White House tried to downplay the fact that it is not going to be General Petraeus or Ambassador Crocker that are actually going to write up this Iraq progress report. Rather, that is going to come from the staff of the White House and the National Security Council. But Johndroe brought out this point. He said, well, that's what happened last time, that interim report in July, and that was fairly critical -- Miles.

O'BRIEN: Suzanne, the White House has an expectation problem on this one, doesn't it?

MALVEAUX: Well, the expectations are very high. People want to see some real progress here. And the problem is, is that you've got Republicans who have already kind of given a warning here to the White House, as well as Democrats, who say they're fed up, they've run out of time here. They want to see something definitive and they want to see something substantial here in September. Otherwise, they are not going to keep supporting and continuing the support of keeping American troops inside of Iraq.

O'BRIEN: Suzanne Malveaux in Crawford, Texas.

Thank you very much.

Up ahead on the program, the housing market crumbles, the stock market tumbles.

What if the easy money party is over?

Say it ain't so.

Jenna Bush gets engaged. Politics shouldn't make for any awkward moments at the family dinner table, though. Her fiance has campaigned for the president and worked at the White House.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

O'BRIEN: Welcome back.

Carol Costello watching stories in THE NEWSROOM -- Carol.

CAROL COSTELLO, CNN CORRESPONDENT: Hi, Miles.

Hello to all of you.

Hezbollah has rolled out its second video game. Special Force II debuted today at a special exhibit south of Beirut. The 3-D game reportedly simulates the Islamic militant group's operations against Israel and last summer's month long war. One Hezbollah lawmaker calls the video game educational and a new tool of resistance. It can be played in Arabic, Farsi and English.

Search and recovery crews have found more human remains in the wreckage of the collapsed I-35W Bridge in Minneapolis. They were found in two of the four vehicles pulled from the bottom of the Mississippi River since last night. The medical examiner's office is working to identify the remains so that it can notify families.

Since the August 1st collapse, nine bodies have been identified. Four people are still missing.

And news impacting small business -- companies rethink disaster plans two years after Hurricanes Katrina and Rita. The new contingencies include having phones that don't require electricity, having cell phones with numbers in a different area code to circumvent local service overloads, keeping a generator and backing up company data with a service well out of the local area.

Could a White House wedding be in the offing? President and Mrs. Bush announcing today their daughter Jenna is engaged. Her fiance is University of Virginia business student, Henry Hager. Hager has worked as a White House aide, as well as on President Bush's re-election campaign. He popped the question yesterday. No date has been set. So congrats to them.

Back to you -- Miles.

O'BRIEN: All right.

I'll be looking for my invitation.

How about you?

All right, Carol Costello, thank you very much.

Standing by, American rescue teams say they're ready to head to Peru to help with earthquake search and rescue. We'll update you on the devastation they'll find when they arrive.

And Democratic presidential candidate Chris Dodd is proposing cutting off one of America's top trading partners.

Is he going too far?

He'll join us right here in THE SITUATION ROOM.

Stay with us.

(COMMERCIAL BREAK)

O'BRIEN: "Made in China" has fast become a term that makes many Americans afraid -- whether it's the pet food, the toothpaste or now the toys. There is a long list of imports from China that are hazardous to our health.

Presidential candidates are pouncing on the safety issue. Some say they're politicizing it a little bit.

Democratic Senator Christopher Dodd is calling for imports of Chinese toys and food to be suspended.

Senator Dodd joins us now from, where else, Iowa.

Good to have you with us, Senator.

SEN. CHRIS DODD (D), CONNECTICUT: Good to be with you, Miles.

O'BRIEN: We're talking about in excess of $20 billion per year in toys.

What do you say to the kids in the audience who will be upset they're going to lose their Batman over this?

DODD: Well, let's start with their parents. And I think parents want to have some assurance that when they buy toys or food or toothpaste, that they're buying safe products. And we know they're not safe. We've had nine million toys that were apparently contaminated with lead paint. We have cat food coming in that's already caused the deaths of some animals. Toothpaste, as you pointed out.

If this were a domestic company doing this, you'd suspend sales of those immediately here.

Under the World Trade Organization, the authority exists within the power of the presidency to suspend imports. The Chinese have done it to us. Japan has done it to us. South Korea has done it to us, where they were concerned about the quality of meats coming from the United States to their countries.

Why would you wait even another minute before doing this?

Why would I even call for it?

It seems to me the president should use his leadership to do this immediately here...

O'BRIEN: Well, but wait a minute.

But don't you think that could really kick up a big trade war?

And China is an essential trading partner for us.

DODD: Well, they're essential, but I'm not talking about banning every import. We're talking about banning products that have raised health questions to the consuming public. And parents (INAUDIBLE) go out and buy a toy...

O'BRIEN: All right. So let me clarify.

DODD: ...they might have some assurance it's safe.

O'BRIEN: So you're not saying there should be an across-the-board ban on toy shipments, just the ones that are suspect?

DODD: Just the ones that are suspect, we're talking about here, the ones we've had real problems with them. This is very, you know, it's being done to us all the time. This is what these laws exist for here, to provide some protection here.

A parent going out to buy toys for their children doesn't want to have to worry whether or not they're going to get sick or worse as a result of making those acquisitions here. That's pretty simple and basic. Why -- I'm surprised that I even have to be the one calling for it here.

Other countries have done it, we ought to do it here, clearly.

O'BRIEN: Let's talk -- I mean, you want to be president. You're going to have to deal with China in the Oval Office.

Is this a way to deal with such a huge trading partner?

They have -- I think there's about a trillion dollars in debt of ours that they hold. They have a lot of leverage over us.

DODD: Well, look, I'm a great believer in fair trade here. And obviously very important to have that here. But this isn't exactly an assumption of a level playing field here. If you're going to have products coming in that damage -- potentially damage your country, then you have a right to respond to it.

I pointed out to you that other countries have done that here. That's why you have these rules and these organizations set up in a way that allow you to respond to it here.

That's what I'm calling for here. It's what the president ought to be doing.

I don't consider that any great threat here. If you can't respond to this situation, if you've got products coming in that could do great health damage to your children, what do you need to know before you'd want to suspend that?

What's the problem?

O'BRIEN: All right, did you see what the Chinese government official in Washington said here yesterday?

DODD: No, (INAUDIBLE).

O'BRIEN: I'll share it with our viewers.

He said this: "I would like to say the question of food safety and quality is a question for all countries in the world. It is not just a question for individual countries."

And he specifically pointed out some U.S. food exports to China that were allegedly tainted.

What do you say to that?

It goes both ways, doesn't if?

DODD: Well, as I said, they've already done this to us. And it was over quality. There were some bones, apparently, in the meat products here. It wasn't about whether or not it was poisonous or could do great damage. They didn't like the quality of it.

Now, again, they had the right under the World Trade Organization rules to do that.

As I've pointed out, Japan has done it to us. South Korea has done it to us and China has done it to us. So the idea we wouldn't respond here, when we've been told that nine million toys have lead paint in them, toothpaste and other products coming in are dangerous because they're -- the materials used in the production of them could jeopardize the health of our children, I don't understand what the problem is here.

Why wouldn't you suspend that? O'BRIEN: All right, what about those who say it's a political tactic?

What do you say to them?

DODD: Well, look, I mean, this is about leadership in the country. It's about understanding where we have to go in order to have a fair and free trading practices here. And this is a good example of utilizing the rules here to push back.

You know, we allow China to sell an awful lot of goods on our shelves. It's not exactly a level playing field when it comes to access to their markets. They manipulate their currency.

We talk about being competitors here, but competitors assume that the rules are going to be the same for both countries. They're not quite the same. And this is one example of it.

O'BRIEN: Senator Christopher Dodd joining us from Iowa.

Thank you very much for your time.

DODD: Thank you, Miles.

O'BRIEN: Back now to coastal Peru and the devastating and deadly earthquake there. Hundreds dead, many hundreds more hurt.

CNN's Carol Costello joining us now.

Carol, tell us how the U.S. is helping out.

CAROL COSTELLO, CNN CORRESPONDENT: Well, Miles, the U.S. ambassador in Peru is working closely with authorities to see how the United States can help. We have special expertise in search and rescue, and are eager to go there to help.

(BEGIN VIDEOTAPE)

COSTELLO (voice over): A massive quake, a magnitude 8.0. Thousands of people are wandering the streets bewildered and scared, their homes destroyed.

One American visiting Peru said the quake sounded like a plane flying too low over his hotel. Then the building started moving.

FERNANDO CALDERON, WITNESS: Suddenly, we start hearing glass breaking, things falling out of the buildings, and that's when everybody started screaming and praying. Children crying. It was just awful.

COSTELLO: And then people panicked, running outside to find safety, but it wasn't over. American Dave Brumbaugh says the quake seemed to last forever.

DAVE BRUMBAUGH, WITNESS: The ground was shaking so hard that I almost had to go to my knees to avoid falling. It was as if waves were going through the ground and moving you up and down, and it was actually absolutely terrifying.

COSTELLO: And so deadly. Many were killed by falling debris. The U.N. says at least 450 are dead, at least 1,500 hurt.

Bodies line the streets of Pisco. Peru's hospitals and morgues are overrun.

As for survivors, there may be hundreds buried between tons of rubble. American aid workers are already in Peru working with the American ambassador and Peruvian officials to determine how we can help.

Standing by stateside, Virginia Task Force One. The men and women here are itching to go.

DEWEY PERKS, FAIRFAX COUNTY URBAN SEARCH AND RESCUE: Every person in emergency response, whether it's police, EMS, or fire, has the inherent need to help, and so we always want to go wherever it is.

COSTELLO: His 70-member team is experienced and well-equipped with six rescue dogs, high-tech listening devices and special drilling equipment. His team has been to quakes in Armenia, Iran, and Turkey, where in 1999 the team from Virginia saved five people buried beneath the rubble.

(END VIDEOTAPE)

COSTELLO: Now, that Virginia team can be ready to go at a moment's notice. They have people on the team who speak the language. And once that team is assembled, they can get on a plane and, Miles, they can be there in 10 hours.

O'BRIEN: So do they know when they might deploy?

COSTELLO: Well, they're thinking maybe they will get some sort of decision by tomorrow noon, but we're keeping in touch with them to see if, indeed, they get to go.

O'BRIEN: All right. Well, stay in touch with them. I'd be very interested to see how it goes for them and how well they do down there.

Carol Costello, thank you very much.

Images and videos of the massive earthquake in Peru are popping up on YouTube and, of course, through CNN's I-Report.

Our Internet reporter, Abbi Tatton, is here with that.

And Abbi, what are we seeing?

ABBI TATTON, CNN INTERNET REPORTER: Miles, the shaking that we just heard described was actually captured on a cell phone in Lima. Take a look at this video uploaded on to YouTube by Daniel Mercado- Salina (ph), who talked to us today.

He said, bear in mind, this is 90 miles away from the epicenter. But look at the shaking here.

He's going to zoom in right here on this computer monitor, which you can see is almost coming off its stand. He'll then move the camera away. Again, the camera on his cell phone. Look how much the water is moving.

This video goes on for a minute long and the shaking continues throughout. He says that there was damage, lots of broken windows, equipment damage as well.

And we're seeing some of that damage coming in through pictures of an I-Report. This is from Mariana Morales who's at the University of Lima, showing the damage to her building. She says they've been experiencing aftershocks. Around Lima, at least, things are looking better -- Miles.

O'BRIEN: Boy, that's a dramatic scene, that crack right there. You've got to wonder how safe it would be where she was taking that picture.

TATTON: Absolutely. And we've been talking to her, and she was saying this is one of the older buildings and they've been pretty worried.

O'BRIEN: Abbi Tatton, watch the Internet for us. Thank you.

One person can make a difference, and that person is you. Impact your world by logging on to CNN.com/impact to learn how you can become a part of the solution for those affected by the Peruvian earthquake. We have a list of agencies mobilizing to provide assistance to quake victims.

Impact your world -- CNN.com/impact.

You know, every time there's an earthquake anywhere in the world, we naturally think of our own fault lines here in the U.S. What happens when -- not if, when -- the big one hits in Los Angeles? It's no the a pretty picture.

Let's bring back Brian Todd, doing some double duty for us.

Brian, tell us about this latest report that came out. You were telling us about it a little while ago. Let's talk about it again.

BRIAN TODD, CNN CORRESPONDENT: Well, Miles, these are some very dire predictions from government seismologists, who say that this one area of California is long overdue for a massive earthquake.

(BEGIN VIDEOTAPE)

TODD (voice over): A catastrophic new outlook for California. A top scientist forecasting a massive earthquake along the San Andreas Fault that would be devastating to people and property near Los Angeles.

LUCY JONES, SEISMOLOGIST, U.S. GEOLOGICAL SURVEY: We are reasonably certain that we are going to have substantial damage to our buildings. It's got to be in the range of hundreds of billions of dollars. And there will then be a significant loss of life, probably in the thousands.

TODD: Lucy Jones from the U.S. Geological Survey warns that region is 150 years overdue for the big one. A likely scenario, she says, the epicenter in the Coachella Valley. The quake moves northwest toward L.A., with a possible magnitude of about 7.9.

Compare that to the 1989 earthquake in San Francisco collapsing part of the Bay Bridge and killing 63, or the Northridge quake near Los Angeles in 1994, when 57 people were killed. Both measured about 7.0 or lower.

Jones says it's not just the size that will be more devastating, but the amount of time the earth actually shakes.

JONES: Northridge, 6.7, had a duration of seven seconds. And this earthquake is going to be two to three minutes.

TODD: Roads, railways, and pipelines, she says, will be gone. The massive damage, experts say, is partially due to urban sprawl creeping east of Los Angeles right along the danger zone. Within the next 20 to 50 years when this quake is forecast...

JONES: The communities that are within 10 miles of the San Andreas Fault are going to be doubling in the same time period.

TODD: This is all under one scenario, where the earthquake reverberates northwest toward Los Angeles. But Jones and her team says there's another possibility that it moves southeast. Then, Los Angeles would not bear the brunt, but the Mexican city of Mexicali, population about two million, would.

(END VIDEOTAPE)

TODD: Another scenario for Los Angeles that has seismologists worried are the buildings there. Some of them have been retrofitted. Others built after 1990 are in pretty good shape, but, Miles, there are many, many buildings in Los Angeles that have concrete frames that are very vulnerable to collapse in earthquakes. And they say that those buildings have not been required to be retrofitted.

O'BRIEN: Brian Todd, in Huntington, Utah.

Thank you very much.

Market worries. Is the party over on Wall Street? If it is, it could have a powerful effect on your pocketbook.

Also, it's a new Cold War, a really cold war between the U.S. and Russia, and it's heating up. We'll tell you what's at stake.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK) O'BRIEN: New signs today about just how bad the nation's credit crunch has gotten. Housing starts fell to the lowest level in more than a decade and the stock market took a panic-driven tumble today. The Dow fell more than 300 points before finally racing back to close down only 15 points. The Nasdaq was down almost eight points, the S&P 500 finished higher by four points.

(BEGIN VIDEOTAPE)

O'BRIEN: Joining us now with this week's edition of "What If..." Frank Sesno.

Hello, Frank.

FRANK SESNO, CNN SPECIAL CORRESPONDENT: Hello, Miles.

This week, a look at mortgages, markets and maybe meltdown. You know, you've been tracking this throughout the program and it's really getting kind of ugly out there. But for a lot of people it's getting real.

Take a look at what's happening across the country.

Foreclosure rates in the first six months of this year, up 55 percent. The pain is pretty well spread across the country. Top five States coast to coast, Nevada, Colorado, California, Michigan and Florida. By one estimate, Miles, next year there could be a million foreclosures, a million people losing their homes. That would be more than double from last year.

So, what if this credit crunch turns into crunch time? It's starting to.

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SESNO (voice over): Low-interest loans, no money down, soaring home prices, corporate buyouts, super-easy money -- those were the days. But with the mortgage market and Wall Street in turmoil, what if the party's really over?

Wal-Mart and Home Depot, the two biggest retailers in America, think it is. They predict slower times, lower earnings.

Mortgage companies have the worst hangover. Countrywide, the nation's largest, reports delinquencies way up in July, has seen its stock plummet, and just had to borrow over $11 billion to fund its loans.

What if you want to buy or borrow against a house? Well, the days of ridiculously low teaser rates and jumbo mortgages, without even having to document what you earn, or borrowing on the dreamy idea that housing prices only go up, that's over.

Here is what a lot of experts think lies ahead: stock markets stay volatile, probably drop more; more people have trouble paying their loans; foreclosures go up; home prices soften; and construction slows.

From Las Vegas to Miami, the condo market has been letting off a lot of steam. In Washington, D.C., alone, 20,000 planned condos have been shelved in the past year. And when construction slumps, there are fewer jobs, less spending. So expect more of this kind of thing from the campaign trail.

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE: Income inequality in America is the worst that it's been since the Great Depression.

SESNO: What if the dust doesn't settle soon? Some high rollers on Wall Street now privately predict the Fed will lower interest rates maybe several times in the next six to eight months.

It's going to be a rocky ride.

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SESNO: Miles, this gets even tougher because of the debt we're carrying. We're a debtor nation. Check this out.

Just credit card debt alone, a recent study show that $6,000 to $7,000 is what people are carrying on they're credit cards. The typical cardholder, 61 percent say they carry debt over month to month. Bottom line for the family, about $1,500 a year.

So, all of this becomes really tough for average folks to absorb.

O'BRIEN: You have to ask the question -- the "R" word -- are we approaching a recession?

SESNO: Well, you know, it's really interesting. Just today, the Treasury secretary appears in an article on the front page of "The Wall Street Journal," and here's how he put it. He says he thinks that the markets are strong enough to absorb the losses without a recession. But the fact that it's even being mentioned, that people are starting to talk about this, shows just how deep the worry really is.

O'BRIEN: You can talk your way into a recession.

SESNO: Yes, and you can talk your way out.

You know, the markets do work. Markets do work. They'll shake this out, but there's going to be a lot of pain along the way, and a lot of people who apparently are going to lose their houses and have a lot of very sleepless nights.

O'BRIEN: All right. Frank Sesno, thanks very much.

SESNO: Miles, thanks.

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O'BRIEN: Up ahead on the program, it's cold and basically uninhabitable, so why does everyone want it? The international ice grab in the Arctic when we come back.

Also, decision time. As we speak, will NASA send out a spacewalker to repair some broken shuttle tiles?

You're in THE SITUATION ROOM.

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O'BRIEN: Well, I guess you could call it a new Cold War. A dispute heats up over who owns the North Pole.

CNN Pentagon correspondent Barbara Starr joining us now.

Barbara, why now? Why the North Pole?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, you know, think of the North Pole, Miles. A lot of people are saying, is regime change coming now to the North Pole? It's being called the tizzy at the top of the world.

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STARR (voice over): This is what started it: a mini sub planted a Russian flag under the ice at the North Pole, directly challenging Canada's claim it's in charge of the Arctic region. Canadian Prime Minister Stephen Harper then flew to the Arctic Circle to put Moscow on notice.

STEPHEN HARPER, CANADA PRIME MINISTER: Canada's new government understands the first principle of Arctic sovereignty -- use it or lose it.

STARR: The U.S. is also skeptical of Russia's newfound claims in the Arctic.

TOM CASEY, DEPUTY SPOKESMAN, STATE DEPT.: I'm not sure whether they've, you know, put a metal flag, a rubber flag, or a bed sheet on the ocean floor. Either way, it doesn't have any legal standing or effect on this claim.

STARR: All three countries and others want the oil and natural resources under the pole, especially if global warming makes the Arctic more accessible.

For its part, Canada is taking new steps across the fabled Northwest Passage to protect its claim. A navy deep water port will be opened at the eastern entrance to the passage. A new army training center will be built at Resolute Bay. And the red-uniformed rangers, Canada's long-standing eyes and ears in the north, will get 900 new troops and much-needed equipment.

The dispute may only grow. Denmark is mapping the region to see if it can extend a claim, and the U.S. Coast Guard also has sent science experts to the area for its own mapping effort.

(END VIDEOTAPE) STARR: You know, Miles, so it's all about oil, gas, and rights of sovereignty and passage in this remote area of the world. But it is getting serious.

Canada has started a new series of exercises up there, and Russia has started flying its long-range bombers on training missions over the arctic, and sovereignty and passage in this remote area of the world. But it is getting serious. Canada has started a new series of exercises up there, and Russia has started flying its long-range bombers on training missions over the Arctic, and all of that is making the Pentagon keep a very sharp eye on this matter -- Miles.

O'BRIEN: Barbara Starr at the Pentagon.

You just never know where countries will face off, I guess.

NASA is in the midst of the final stages of decision-making on whether or not to go out and try to repair that damaged series of tiles at the ab section of the belly of the space shuttle Endeavour. There you see it, about three and a half inches long, pretty much right down to the skin of the space shuttle. There's just a felt liner there.

They've done a series of tests with computers, as well as in a blast furnace, and every test so far has indicated that the temperatures that Endeavour will experience as it returns at that damaged spot are OK, are below the thresholds. The final decision will come very shortly though.

We may see on Saturday astronauts, in an unprecedented fashion, going out, putting in some goo to sort of patch up that hole. We'll let you know and we'll keep you posted.

Meanwhile, Barbara Morgan, the first teacher in space, teacher- turned-astronaut, had yet another session today with students. This time at a Challenger Learning Center in Alexandria, Virginia. Those Challenger learning centers founded by the families of the Challenger crew. Of course, one of the Challenger crew, the first teacher in space, Christa McAuliffe.

And they had some good questions for Barbara.

Listen.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: How and where do you sleep on the space station? And do you ever sleep space walk?

BARBARA MORGAN, ASTRONAUT: OK. And Alex (ph), crawling into our sleeping bag, you can really sleep in any position here -- right side up, upside down, it doesn't matter. But the main thing is you want to keep from floating around so that you don't hit your head into anything and either hurt yourself or hurt the equipment.

So we have these sleeping bags, it's just kind of like a sleeping bag liner, and it has clips on it and you can clip it anywhere you want.

(END VIDEO CLIP)

O'BRIEN: Barbara says she's been sleeping very well in space. Closes her eyes and doesn't even wake up at all until the alarm rings.

Up ahead, America's seniors head south of the border to get affordable nursing home care. Jack Cafferty wonders what you think about that and what you think that says about our country.

Your e-mail is ahead.

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O'BRIEN: Check out these pictures just coming into us now. This comes from San Antonio, where today -- and these are live pictures from San Antonio -- where today Erin is a four letter word.

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O'BRIEN: Let's go to Jack Cafferty now with "The Cafferty File".

Hello, Jack.

JACK CAFFERTY, CNN ANCHOR: The question this hour is: What does it say about the United States that some of our seniors are being forced to go to Mexico in order to find affordable nursing home care?

Patrick writes from Houston, Texas, "It means our government doesn't care about our children, our soldiers, our sick or our elderly. Is this the model of democracy we want the world to admire? No wonder we're viewed as selfish pigs by others and many Americans as well. Sadly, I don't see it getting any better anytime soon."

Cersy (ph), Farmington, New Mexico, "It says that the land of milk and honey is no longer affordable for the average American. Of course, no politician in Washington really cares despite what they say. They've got it made financially and they will always be able to afford the best medical care."

Judy in Raleigh, North Carolina, "The U.S. has completely betrayed its people, especially the elderly, when it comes to health care. The Congress and the president have sold out to the drug companies, the insurance industry. Profit rules and compassion has gone out the window. It's a national disgrace."

Brenda in Danielson, Connecticut, "I think our seniors deserve better care in their golden years and more money to live on. It's a shame many seniors must decide between medicine and food on a monthly basis. For them to be forced to pay for health care on their limited income is absurd."

"Big raises for seniors. No benefits for illegal aliens."

Ben in Ft. Lauderdale, Florida, writes, "We spend so much time arguing the differences between Obama and Hillary while the candidates miss the real issues -- taking care of our country and its people. We need to stop having in-party fighting over who said what and debate real issues like health care. Hurry up, before my grandfather has to learn to speak Spanish."

Clyde writes from Ontario, "It's all part of the plan. Unproductive seniors are disposable."

Debbie in Siloam Springs, Arkansas, "This is a disgrace. Our seniors, who defended and built this country, are having to leave their home in order to get health care. Maybe if we weren't spending so much on illegal aliens we could take care of our own citizens."

And Buster in Poughkeepsie, New York, "Hola, Jacko. Would you rather spend the twilight of your life bundled up in some old folks home in Buffalo sniffing hot cider during a blizzard and playing bingo with a bunch of blue-haired seniors or be an expatriate kicking it in Cancun, coiffing cold cervezas and playing croquet with the cute senoritas? God bless America, but adios, amigo."

If you didn't see your e-mail here, you can go to cnn.com/caffertyfile, where we post more of them online, along with video clips of "The Cafferty File" -- Miles.

O'BRIEN: Cancun and cervezas, not bad, actually.

CAFFERTY: No, it sounds like a reasonable place to spend your twilight years, but that begs the issue that we're talking about. I just did it because it's kind of clever, and that's that, you know, senior citizens in increasing number are going south of the border to Mexico to seek out nursing home care because it's about 25 percent of the cost of the same care here in the United States. And elderly people on fixed incomes, many of them alone and unable to care for themselves anymore, are forced into nursing homes or some sort of assisted care facility, but they simply can't afford to pay the freight here.

O'BRIEN: Well...

CAFFERTY: Now, when you contrast that with the fact that we give free health care and free education and free other things to anywhere from 12 to 20 million illegal aliens, it's nauseating.

O'BRIEN: We owe them so much more, don't we?

CAFFERTY: Yes.

O'BRIEN: And if everything goes well, we will be them one day. So we've got to think about that.

Jack Cafferty, always a pleasure.

We're here every weekday afternoon from 4:00 to 6:00 Eastern. We're back at 7:00 p.m. Eastern.

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