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Obama Discusses His Pastor; Will Florida Redo Its Primary?; Trouble in Tibet; Major Bank Runs Short on Cash

Aired March 14, 2008 - 17:00   ET


WOLF BLITZER, CNN ANCHOR: And to our viewers, you're in THE SITUATION ROOM.
Happening now, President Bush says the economy is going through a tough time, but opposes a massive federal bailout for homeowners. Meantime, your tax dollars will go to bail out one of Wall Street's biggest investment banks. We're watching this story.

Florida's mail-in do-over may be a dead letter. Michigan still hasn't come up with a deal for a re-vote. Will the candidates themselves have to come up with solutions for the states with no delegates?

And Barack Obama's pet projects -- the candidate comes clean able special funding requests. Will that help, will that hurt his campaign?

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

We're going to have more now on the news first that's just been coming in. Barack Obama -- he's defending his controversial spiritual adviser, to a certain degree. He's distancing himself majorly from what Jeremiah Wright has said. We just reported on his latest statement coming out, clearly making it clear -- making it abundantly clear that he's repudiating and rejecting these statements from his own pastor.

Let's get some more specific details for Brian Todd, who's watching this story for us.

Brian, we just reported some of the highlights of what Barack Obama, in his latest statement, which was very forceful, what he is saying. But give us some more.

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, we're going to set it up for some viewers. Barack Obama clearly sensing that his political opponents here are trying to gain some traction -- some political traction by this story. He's sensing that. He's trying to dial back some more from Reverend Jeremiah Wright, his long-time pastor.

Let's set it up first by playing you some of the remarks that Reverend Wright has said recently at the Trinity United Church of Christ recently that started this controversy off.


REVEREND JEREMIAH A. WRIGHT, TRINITY UNITED CHURCH OF CHRIST: Barack knows what it means to be a black man living in a country and a culture that is controlled by rich white people. Hillary can never know that. Hillary isn't never been called a (EXPLETIVE DELETED).


TODD: Now, as that video has made the rounds of YouTube and elsewhere on the Internet, it really has created a political firestorm. First, Barack Obama came out and said he profoundly disagreed with some of the comments that Reverend Wright had made. Then he kind of equated him to an old uncle that you don't always listen to, that you don't agree with. Today, he comes much more forcefully against those comments.

Barack Obama issuing a statement saying: "I categorically denounce any statement that disparages our great country or serves to divide us from our allies. I also believe that words that degrade individuals have no place in our public dialogue."

He goes on to say: "In sum, I reject outright the statements by Reverend Wright that are at issue. I believe that Americans will judge me not on the basis of what someone else said, but on the basis of who I am and what I believe in, on my values, judgment and experience to be president of the United States."

This was a man who Barack Obama has called his spiritual adviser, long-time pastor at Trinity United Church of Christ in Chicago, Wolf.

He married Barack Obama and his wife. It's got be an awkward situation for Mr. Obama to do this, but he's going to try to gain some political traction back on this story.

BLITZER: A very, very strong statement from Barack Obama. He went on to say, Brian, at the end: "I believe that Americans will judge me not on the basis of what someone else said, but on the basis of who I am and what I believe in, on my values, judgment and experience to be president of the United States."

All right, Brian. Thanks very much. We'll stay on top of this story together with you.

On the campaign trail, Michigan may be a bit closer to a primary do-over, undoing the damage caused when it defied the national Democratic Party by holding an early vote. Congresswoman Carolyn Kilpatrick says it's not a done deal yet, though.

Meanwhile, what many see as the best hope for a re-do in Florida is looking less and less likely.

Let's go to our man down in Miami, John Zarrella. He's watching the story for us.

It seems every day there are twists and turns in this story. What's the latest in the Sunshine State -- John?

JOHN ZARRELLA, CNN CORRESPONDENT: Well, a little bit gloomy if you're a proponent of a re-do in Florida here, Wolf, today. It is not likely to happen. With every passing hour, less and less likely that there will be a re-do in Florida.

So what happens now? Well, it may all be up to the candidates.


ZARRELLA (voice-over): Hillary Clinton, Barack Obama -- let's make a deal. It now appears unlikely that Florida Democrats will see a ballot in the mailbox. The mail-in vote proposal floated by the state party is already barely breathing -- deemed too difficult to validate voters' signatures and open to fraud. State Democratic leaders say with the plan now lost before it got in the mail, there is little hope for a re-vote.

MITCH CEASAR, BROWARD COUNTY FLORIDA DEMOCRATIC PARTY: I think there's no question that as the clock ticks by, we have to come up with some solution that does not involve a re-vote, because there's simply money issues, integrities of ballot issues, time issues. It's going to have to be a solution of all the parties in the room at the same time.

ZARRELLA: Of the three re-vote possibilities -- a full primary, a caucus and a mail-in vote -- mail-in was considered the most doable. What happens now in Florida? State Representative Dan Gelber believes the future of the Florida delegates have now been turned over to Clinton and Obama.

DAN GELBER (D), FLORIDA STATE SENATE: There's going to have to be some meeting of the minds between the candidates and their surrogates, who most of whom are elected officials here in Florida. So that's going to happen because this is a pressure cooker. People here want something done.

ZARRELLA: But maybe not right away. One state official believes both sides may be willing to cross their fingers and wait, hoping a nominee emerges by May. "We'll look back on this as much ado," about nothing says super-delegate and Obama supporter, Allan Katz.

ALLAN KATZ, FLORIDA OBAMA SUPERDELEGATE: I think when all the smoke clears, we'll have a delegate seated from Florida, we'll have delegation seated from Michigan. Neither state is going to have an impact on the outcome of this race.

ZARRELLA: The vote by mail would have cost $10 million to $12 million. While it isn't officially dead, no one is performing CPR, either.


ZARRELLA: So the problem right now in the State of Florida is that everybody is waiting for another shoe to drop and waiting for someone to take the lead, Wolf. And it appears that now the ball is really going to end up in the court of the candidates because the state is no longer going to be able to -- the state Democratic Party, that is -- is out of options -- Wolf.

BLITZER: They need some leadership, John. They keep passing the buck. First -- they say the candidates now. Before that, they said the state legislature. They said the party in the state, the DNC and Howard Dean. Somebody is going to have to take charge of this down in Florida, John.

ZARRELLA: That's exactly right, Wolf. And the problem now is, again, they're looking at the candidates to take charge on this. And there the problem is that, as we saw in the piece, the candidates may be saying well, let's just wait. We're not going to do anything right now. We'll see how this shakes out.

But that's very dangerous. People have told me that's a very dangerous philosophy. If they wait too long, there could be real problems come November no matter who the candidate is, no matter who is the nominee of the Democratic Party.

BLITZER: None of this is helping Florida's reputation, when it comes to elections to begin with.


BLITZER: All right, John. Thanks very much. John Zarrella in Miami.

Let's go back to Jack. He's got "The Cafferty File" in New York -- Jack.

JACK CAFFERTY, CNN ANCHOR: Wolf, as a wise man once said -- somebody I know pretty well, actually -- it's getting ugly out there. The Democratic primary race, which began as a rational discussion of the issues, has now degenerated into a nasty personal battle between Hillary Clinton and Barack Obama.

These kinds of fights leave scar tissue that can be tough to get rid of. And if the Democrats can't figure out how to patch things up in time for November, George Bush can just drop the White House keys in John McCain's mailbox. One Democratic pollster describes how the Democrats might "take what is a golden year and turn it into dust."

So far, no sign of a cease-fire. Yesterday, the Clinton campaign suggested that Pennsylvania will show that Hillary is ready to win and that Obama really cannot win the general election. Obama's campaign said those comments were divorced from reality and ignore both the polls and the delegate math.

Much of the week was consumed with a bitter fight over race, thanks to Geraldine Ferraro's comments, which ultimately ended with her stepping down from Hillary Clinton's campaign Finance Committee. Clinton's camp points out that Obama's people have called her a monster and "the most secretive politician in America".

Well, one side is going to lose and they're not going to be happy. What if Clinton's supporters don't turn out for Obama in November or vice versa, if it goes the other way?

Here's the question: How can the Democrats heal the wounds of a truly ugly primary battle before the general election? Go to You can post a comment on my blog -- Wolf.

BLITZER: All right, Jack, thank you for that.

Violence raging in Tibet right now, as protesters battle Chinese authorities. What should the U.S. be doing about it, if anything?

I'll ask the actor and human rights activist, Richard Gere. He's standing by live. He'll be here in THE SITUATION ROOM.

Also, nasty viruses preloaded in your brand new digital gadgets. You won't believe what they can do to your computer. This is information you need to know.

And cocktails and chitchat at Hillary Clinton's house. Super hospitality for superdelegates. Will it pay off at convention time?

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


BLITZER: Police use gunfire and tear gas against protesters today in Tibet's capital of Lhasa. Human rights groups say the demonstrations against Chinese rule are the most violent in decades. Vehicles and shops have been set ablaze. And according to one source, up to a third of the city may be on fire, with power lines cut.

The protests, led by Buddhist monks, began Monday to mark the 49th anniversary of Tibet's failed uprising against China. That revolt led to the exile of the Tibetan spiritual leader, the Dalai Lama.

China is blaming the violence on followers of the Dalai Lama, while the spiritual leader himself is calling on Chinese authorities to stop using force.

Let's discuss this with the actor and the human rights activist, Richard Gere. He's been very, very involved over the years in this story. He's joining us now live from New York.

Richard, thanks very much for coming in.


BLITZER: All right, what do you hear? What is the latest information that you're getting, because I know you've been deeply involved in this cause for a long time.

GERE: Well, we're getting very little facts that are coming out. The best that we can tell is that there, in fact, was a demonstration. It was the 49th anniversary of the uprising against the Chinese, who invaded Tibet in 1949 and 1950.

There was a protest last fall -- which I think was the last time I spoke to you -- after His Holiness, the Dalai Lama received the Congressional Gold Medal. And there were monks from, I believe, Drepung Monastery in Lhasa, who celebrated that medal being won by the Dalai Lama. They were arrested -- are still under arrest now. And there was a recent protest on their behalf in Lhasa.

BLITZER: The Chinese government, as you know, they're accusing these protesters and the Dalai Lama, for that matter, of provoking this incident, trying to cause this kind of situation to unfold. I wonder if you want to respond to their accusations.

GERE: Well, that's clearly foolish and embarrassing for them. We have a situation where the Tibetans have been brutally repressed now for 50 years -- 55 years, close to six decades.

Now, when you repress a people to the degree that the Tibetans have been brutalized, they will explode. All people will explode. Now Tibetans are incredibly loving and forgiving people. The Dalai Lama has been -- has been uniform in keeping the Tibetan movement nonviolent. He is the winner of the Nobel Peace Prize...

BLITZER: So you reject this...

GERE: ...he universally...

BLITZER: ...because the timing, coming only a few months before the summer Olympic Games in Beijing Games, this -- these are not the kinds of pictures that the Chinese regime, the Chinese government clearly wants the world...

GERE: No. And I'll tell you, Wolf...

BLITZER: see right now.

GERE: Wolf...

BLITZER: It can't set the stage for them well right now. You obviously understand what -- the point that people are making.

GERE: Sure. Yes. I mean I've been making my calls about this and the best information I'm getting is this was totally spontaneous. This was not organized. Now, there will be organized demonstrations around the Olympics. No question about that. But this was an outpouring of emotion which was spontaneous.

And the fact that it wasn't just among the monks and nuns, who traditionally -- especially the nuns -- have been the ones who have protested in simple non-violent marches and expressions of freedom. But this has gone into the lay community, as well, and that's extremely rare. People have traditionally been brutalized by the Chinese. And this is taking an extraordinary chance for them -- not unlike in Burma, that we saw a few months ago.

BLITZER: What --

GERE: And, in fact, the Chinese are behavioring very similarly to that very brutal military crackdown on civilians.

BLITZER: And we remember the amazing pictures that were coming out of Burma.

What should the U.S. government being doing about this, this latest up -- this latest series of demonstrations and a very strong response from the Chinese government? What should the U.S. be doing?

GERE: Well, the U.S. response should not be measured. It should be unequivocal. This cannot happen. The U.S. government has been very good, in every opportunity, bringing up Tibet and as a forceful friend of the Tibetan people and the Dalai Lama.

But this is clearly a time that, if China wishes to be the world power, the respected world power that it appears that it wants to be and it's on the edge of becoming, it can't behave this way. Inclusive societies become great societies. Brutalizing your own people is not a way to greatness.

BLITZER: Do you see any differences between the various presidential candidates, because you've studied this issue closely, on this human rights issue?

GERE: Certainly, the Democrats, you know, are uniform and have said so to me. Obama has said it to me very clearly that he understands the motivation of the Tibetan people and they have a right to live -- to the pursuit of happiness, the pursuit of religion. And these are the things that have been taken away from them by the Chinese.

BLITZER: And Hillary Clinton or John McCain? Have you had any conversations with them about this?

GERE: John McCain, I also had a talk. I haven't had specifically with Hillary Clinton. But John and I did speak about it. And he's very much a human rights person, as well, and very much a supporter of the Dalai Lama.

BLITZER: So this is not necessarily an issue where there's going to be a lot of political dissent?

GERE: I don't think so. The whole Tibetan thing has been across the aisle and almost from the beginning. I mean these kind of -- the honoring of the Dalai Lama has been universal in U.S. government -- presidents, both sides of Congress, the unanimous approval of proclamations about Tibetan freedom -- not separation, but freedom -- have been universal and consistent. And I have no problem with the U.S. government.

But this is a time to be very clear with the Chinese. If you want to be a world power, you must behave in a certain way. And this is not appropriate.

BLITZER: And let's hope things quiet down over there.

GERE: I hope so, too. We all hope so.

BLITZER: We appreciate your coming in, Richard Gere.

GERE: Thank you.

BLITZER: Thanks very much.

Let's continue this dialogue down the road.

GERE: Thanks.

BLITZER: By the way, I want to just congratulate you. They dropped the charges on a totally...

GERE: I knew you were going to get that in...

BLITZER: ...on a totally...

GERE: I knew you were going to do it.

BLITZER: ...unrelated matter...

GERE: No, no, no...


GERE:, no, no, no. You don't get that one.


BLITZER: You want to express your happiness over that kissing incident with the movie star in India?

GERE: No. I'll tell you when I'll express my happiness is when the Chinese leave the Tibetans alone. The brutality here is an unbelievable degree. And the reality is -- this is a sad reality.

The Tibetans have to be in a violent situation for people to notice -- an incredibly peaceful, nonviolent people. How do they find a way to get in the news? How do they find a way to capture the world attention? It's sad that it has to come to this.

BLITZER: All right, Richard, good luck.

GERE: Thank you.

BLITZER: Good luck to all the people in Tibet. And let's hope this thing works its way out in a very productive, positive way.

GERE: I think everyone has to cool down now.

BLITZER: All right.

GERE: Take a deep breath. Everyone cool down.

BLITZER: Good advice.

GERE: Thank you.

BLITZER: Richard, thanks. Hillary Clinton's new strategy in trying to win the White House -- it has something to do about opening up her home to super- delegates. We're watching this story.

Plus, the race for the White House through the eyes of Iraqi soldiers. Many of them are following this campaign in the United States very closely. You're going to find out which candidate at least some of them like. Kyra Phillips is there in Iraq.

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


BLITZER: Barack Obama is coming clean about his pet projects, the special funding requests he's made as a United States senator.

Let's bring in Brian Todd. He's watching the story for us.

Brian, what's going on? Will this help or will this hurt his campaign?

TODD: The jury is still a little bit out on this, Wolf. And a lot of people are looking at what he's disclosed and starting to make that judgment.

Now, you know, recently, pork projects have become everyone's favorite boogie man in politics. John McCain started railing on them years ago. Hillary Clinton and Barack Obama are now joining him. But for at least one of them, there are some political land mines.


TODD (voice-over): Each major candidate trying to capture momentum by squaring off against the old staple of machine politics -- earmarks, those funding requests made by lawmakers, often for their home districts, sometimes tacked onto unrelated spending bills. Barack Obama said recently he's all for transparency on the projects.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: And I've been consistently in favor of more disclosure around earmarks.

TODD: And responding to a challenge from John McCain, Obama backs it up, releasing his list of earmarks during his three years in the Senate -- nearly three quarters of a billion dollar's worth.

ROGER SIMON, POLITICO: He didn't say I'm only going do release those things that make me look good. He released some things that don't make him look so good.

TODD: Like a 2006 request for a million dollars for the University of Chicago Hospital. Obama's wife Michelle was a vice president there at the time. The Obama campaign says Michelle Obama had nothing to do with that request, which was turned down by Congress. And, in fact, Barack Obama also asked for money for several other Illinois hospitals, as well as dozens of other projects for public works. Another request that raised eyebrows -- $8 million for updated ammunition for the Bradley fighting vehicle. That project was overseen by military contractor General Dynamics. On that company's board of directors James Crown, a major Obama fundraiser who's on the candidate's Finance Committee. The Obama campaign and an official at General Dynamics tell us Crown had nothing to do with that earmark.

Analysts say these disclosures likely won't cost Obama many votes.

CHRIS CILIZZA, "THE WASHINGTON POST": This is in keeping with Senator Obama's pledge that he's going to do things differently. He's going to reform Washington. It's going to make an open book. And I think a lot of it, though, is designed to draw a contrast with Senator Clinton.


TODD: Now so far, Hillary Clinton has resisted pressure from Obama and McCain to release all of her past earmarks in the Senate, but she has announced the earmarks that she won. And her campaign tells us that it will start to release her requests this year.

John McCain, as everyone knows, has always refused to ask for spending projects for his home state -- Wolf.

BLITZER: So he doesn't have any of those specific earmarks, as they're called --


BLITZER: The pork barrel spending.

TODD: Right.

BLITZER: What about a timetable for Hillary Clinton? Is there any more specific information when she might release this information?

TODD: We went back and forth with them on this today. They say they're going to release that information as they make the requests. And they've already told us today that they're going to release -- that they have released some information about $22 million in requests for military construction projects for the next fiscal year. So they are trying to come clean with some of this.

BLITZER: All right. Brian Todd, thanks very much for watching this story.

Wooing the superdelegates. -- Hillary Clinton taking what some consider a different approach to getting their crucial support for the Democratic nomination. We're going to show you what's she's doing.

Also, what if there was a scandal and guess what -- and nobody cared? Why the country is so caught up in the private lives of politicians. Frank Sesno watching this story for us.

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


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

Happening now, the head of the Environmental Protection Agency says he is the one who made the decision on new smog standards, not President Bush. Internal documents show the president intervened in a dispute over the standards between the EPA and the White House.

Also, what's widely seen as a referendum on the Iranian president, Mahmoud Ahmadinejad, voting has concluded in the country's parliamentary election. Official results expected next week.

And a man believed to have been exposed to the deadly poison ricin in a Las Vegas hotel room has emerged from a month-long coma. The FBI now says he's talking to investigators, but remains in critical condition.

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

Hillary Clinton and Barack Obama are pulling out all the stops in an effort to try to win support from the Democratic superdelegates who will almost certainly wind up deciding the party's presidential nominee.

Let's go to Carol Costello. She's looking at the story for us.

And you're looking specifically, Carol, at some new efforts to woo those superdelegates that Senator Clinton is engaged in.

CAROL COSTELLO, CNN CORRESPONDENT: Yes. New efforts that include a little wine, a little cheese, and a charming informative talk with the Washington power broker. It sounds so Washington. What sets it apart is this was Hillary Clinton's home. And she was doing the talking.


COSTELLO: A new weapon in the battle for superdelegates, the cocktail party. While Hillary Clinton and Barack Obama played nice on the senate floor, Clinton staff was preparing her Washington home for a party. Among the invited, uncommitted superdelegates.

REP. JASON ALTMIRE (D), PENNSYLVANIA: She gave a very short speech and then stood in the front and said anything is fair game. Ask any questions that you want.

COSTELLO: It was an important party for Clinton. She's counting on the superdelegates to vote her to victory at the Democratic National Convention. Right now she's in the superdelegate lead. Of the 795 superdelegates up for grabs, she has 237 to Obama's 207. Three hundred and fifty-one superdelegates are uncommitted.

Of late, though, Clinton has suffered deflections. Georgia representative John Lewis switched to Obama a new weeks ago. In the last three weeks, Obama has gained the support of 31 superdelegates. Hence the Clinton cocktail party.

California Congresswoman Susan Davis was also there. For Davis, choosing the between the two will be especially tough. In California's February primary, there was just a 1 percent difference between the two candidates. Davis' concern now is the tone of the Democratic contest. And she shared that with Clinton.

REP. SUSAN DAVIS (D), CALIFORNIA: Every campaign is going to have negativity. I think the question really we can look at is whether it's been of such a nature that it's truly divided the party and frankly bloodied either one of the candidates.

COSTELLO: Congressman Altmire of Pennsylvania will wait to see how his state votes in April but he asked Clinton why he should vote her way if Obama still leads in the popular vote and in pledged delegates.

ALTMIRE: If Senator Obama is ahead on all counts, then certainly it would be difficult for me to make a decision to go the other way.

COSTELLO: Clinton's response, she feels superdelegates exist for a reason and that is to exercise independent.


COSTELLO: Now Wolf, both lawmakers told me they found the party informative, helpful. As for whether it swayed their opinion one way or the other, they wouldn't tell me. Back to you, Wolf.

BLITZER: All right, Carol, thank you for that.

Let's discuss this and more of the Democratic race for the white house with two guests. Lisa Caputo is a former press secretary to Hillary Clinton when she was the first lady. She's a strong supporter of Hillary Clinton's campaign. And Congressman Jan Schakowsky, she's backing Barack Obama.

Thanks to both of you for coming in.

Congresswoman let me ask you first, anything wrong with Hillary Clinton trying to woo these superdelegates by inviting them to her home and discussing the issues?

REP. JAN SCHAKOWSKY (D), ILLINOIS: I don't think so at all. Of course the superdelegates, I believe if they sway the election toward her or toward any candidate I think it really jeopardizes our ability to win in November. Really it's the elected delegates, the voice of the people. And of course, as you know, right now, Barack Obama is 161 delegates ahead actually.

BLITZER: So why even bother to have the rule about superdelegates if they should be irrelevant?

SCHAKOWSKY: Well, I think they're not irrelevant in the sense that they create - they help to create momentum and show support in their states. But I think that the, you know, as Hillary said it and her campaign said at the beginning that it's really a race for the elected delegates.

BLITZER: But you're not saying, Congresswoman, to change the rules right now. You're not calling for a change in the rules. The rules are the person that gets the most delegates, pledged and super, that's the person that gets the nominee. You're not calling for a change of the rules.

SCHAKOWSKY: Certainly not. I mean Barack Obama has always played by the rules. I think that's why we're concerned about the Clinton campaign wanting to change the rules relative to Florida and Michigan. Oh, no. We're absolutely playing by the rules. We understand them, and we're with them.

BLITZER: All right.

You trying to change the rules? Your Clinton campaign, Lisa, in Florida and Michigan right now be having a do over? Is that what you're trying to do?

LISA CAPUTO, FORMER CLINTON PRESS SECRETARY: You know, Wolf, it's the Clinton campaign who said from the get go let's seat the delegates that both Florida and Michigan have spoken and let's seat the delegates.

BLITZER: But those elections, Lisa, with all do respect, nobody campaigned there in Michigan. Nobody's name except for Hillary Clinton and Dennis Kucinich. They were the only names on the ballots. Those elections were not really appropriate.

CAPUTO: All I'm saying, Wolf, is that the Clinton campaign, far from it, is trying to change the rules, taking your point, which I agree with. The question is what's the best way to proceed? How do we have a redo for both of the key states? There's no question these are key states.

The Clinton campaign I think said from the get go on the redo question is let's have a redo. Let's have a primary. Now we've had backs and forths on whether there should be a write-in in Florida. You see a proposal out today where the delegates would essentially count as half a vote. I think that they are questions around that. I know that the Obama campaign had concerns about fraud for a write-in.

Then you have Michigan, Senator Levin and others from Michigan really pushing forward to having a primary in Michigan in June. So I think the fair thing to do is to have the people of Florida and Michigan heard. The question is what's the right way to go.

BLITZER: It's not necessarily, Congresswoman, brain surgery to have another election by where both of these candidates' names are on the ballot and the Democrats decide who should get the vote.

SCHAKOWSKY: Well, Barack Obama isn't rejecting. There's a number of options. You know what's really important, Wolf, though, is that at the end of the day, not just the people in Michigan and Florida, but around the country believe that this has been run fairly. There's been so many people that feel in the past presidential elections have been won by manipulating rules, by miscounting votes, so certainly the Obama campaign believes that the delegates should be seated. But we want to see something that's really fair. And I think that's what the American people feel, too.

So we've rejected mail ballots because Clinton and Obama supporters in the Florida delegation in the house say that that isn't going to work.

BLITZER: All right. Let me get your quick reaction to a lengthy statement that Barack Obama just put out rejecting the views of his pastor, Jeremiah Wright.

Among other things Obama saying let me say at the outset that I vehemently disagree and strongly condemn the statements that have been the subject of this controversy. I categorically denounce any statement that disparages our country or serves to divide us from our allies.

I believe that words that degrade individuals have no place in the public dialogue, whether it's on the campaign stump or the pulpit and some I reject out right. The statements of Reverend Wright that are at issue.

BLITZER: Is the issue over with Wright now, Lisa?

CAPUTO: I would hope so, Wolf. I know that Reverend Wright was a mentor to Senator Obama in his early years. I think that Senator Obama made his position very clear in the last debate that he rejects the teachings of Louis Farrakhan and the statements Farrakhan where he didn't go as far on Reverend Wright.

In fact, Reverend Wright's church was behind Farrakhan getting an award. I think he's completely set the record straight now. I would hope we can all move on from this and talk about the issues.

BLITZER: What do you thing, Congresswoman?

SCHAKOWSKY: Well in fact, the part that is so hurtful about this is that the remarks of Reverend Wright, none of which Barack Obama heard either in public or in private, at church or in private conversations, are completely at odds with the tone of his campaign and the person that he is.

His whole goal has been to unite the country, to step over those divides of race and ethnicity in our country. That's what's been attractive about his campaign. Anything that would disparage our country is totally contradictory to where Barack Obama is coming from as a person.

So I would say that we hope we can all put this behind us. There's been things said in this campaign, in the heat of the campaign, that go beyond the boundaries, and we have to put those behind us.

BLITZER: Congresswoman Jan Schakowsky, Lisa Caputo, thanks to both of you for coming in. Good discussion.

This important program note for our viewers; later tonight on "ANDERSON COOPER 360," his special guest will be Barack Obama. Anderson will have a one-on-one interview with the Democratic presidential candidate.

They'll discuss the Reverend Jeremiah Wright and other issues. "ANDERSON COOPER 360", 10 p.m. Eastern tonight, you're going to want to see the interview Anderson has with Barack Obama. That's coming up, plus all the day's other important news.

News that sent a chill through Wall Street today and calling to mind the great depression. We're going to show you what's happening at one of the country's largest investment banks.

Lots of news happening right here in THE SITUATION ROOM.


BLITZER: Tough economic times, President Bush himself now concedes the U.S. is sailing through some very stormy financial waters. With oil and gas at record high prices, home foreclosures surging amid a credit crisis and wild swings in the stock market, two- thirds of Americans now believe we are already in a recession.

One development in particular sent a real chill through those financial markets today, a run on one of the country's largest investment banks. It took some extraordinary measures to try to avert a full-fledged crisis.

Let's go our senior correspondent, Allan Chernoff. He's watching the story in New York.

What happened, Allan?

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Wolf, what happened is that a major investment firm, Bear Stearns, admitted today it nearly collapsed and the bottom line is that our tax-payer dollars are now standing behind the rescue of a company that made huge bets on risky loans.


CHERNOFF: The nation's central bank, the Federal Reserve, is backing a loan to prevent the collapse of investment bank Bear Stearns and to stabilize the financial markets. In a tense conference call this afternoon, Bear Stearn's CEO Alan Schwartz confessed rumors of possible bankruptcy Thursday caused the equivalent of a run on Bear Stearn's by its trading partners.

ALAN SCHWARTZ, CEO, BEAR STERNS: A lot of people wanted to get cash out. We were meeting those needs in every case, but they accelerated yesterday, especially late in the day.

CHERNOFF: Schwartz admitted if the run continued, Bear Stearns would have been drained of cash. So it turned to banking giant JP Morgan Chase for a bailout of an undisclosed amount, short-term funding to keep Bear Stearns in business. The Federal Reserve is backing the loan to prevent a collapse of confidence that could threaten the survival of other financial firms as well.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This morning, the Federal Reserve was supported the Treasury Department, took additional actions to mitigate disruptions to our financial markets.

CHERNOFF: Disruptions that could be severe. Much of it triggered by the sub prime mortgage crisis. Bear Stearns was the first major investment bank to reveal it had lost hundreds of millions of dollars investing in mortgages granted to people with poor credit. Other major investors have lost billions more.

That has made lenders cautious, hesitant to provide money that businesses need to keep growing. The Federal Reserve in stepping is trying to prevent the credit crunch from turning into a credit freeze that could trigger a deep recession.

STEVEN RAYMORE, FORDHAM UNIVERSITY: It's pretty scary. They're afraid the market will freeze up, that lending will worsen more than it has been worsening.


CHERNOFF: Bear Stearns stock lost 47 percent of its value today. The Federal Reserve is trying to rescue not only Bear Stearns. It's trying to keep the money flowing that allows American business to borrow and grow and that is ultimately what is at stake here -- Wolf.

BLITZER: Allan, thank you very much. Really disturbing news up on Wall Street today.

Power, politics, and sex. The outgoing New York Governor Eliot Spitzer is just the latest ethics crusader to get caught up in a scandal. Why do we have so many here in the United States, those scandals? That's what we're talking about. What if we didn't? That story coming up.

And Jack Cafferty is asking how can the Democrats heal the wounds of an ugly primary battle before the general election?

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


BLITZER: The Justice Department went public today on the Eliot Spitzer case. The attorney general Michael Mukasey saying flatly there is no case now against the outgoing New York governor. But one official says don't take that to mean charges will never be filed against Spitzer.

In the meantime, the irony of yet another anti-corruption campaigner being caught up in a scandal is not lost on CNN's special correspondent, Frank Sesno -- Frank. FRANK SESNO, CNN SPECIAL CORRESPONDENT: Wolf, it's been all about sex, lies and politics with the Eliot Spitzer story this week. It's hardly the first time though power and passion have collided.

Take a look at this. It reminds us that everybody from Thomas Jefferson to Warren Harding, his alleged girlfriend may have had their child out of wedlock while he was president. F.D.R., John Kennedy, and Bill Clinton have been down this road before.

Wolf, I can't tell you the number of people this week, incredulous people really, who asked if this sort of thing goes with the power of territory.


SESNO: What if we didn't have people like this, crusaders of decency who turn out to be so indecent?

FMR. GOV. ELIOT SPITZER (D), NEW YORK: I am deeply sorry that I did not live up to what was expected of me.

SESNO: What if the Clintons and the Kennedys, the Giulianis and the Vitters, the Kilpatricks and the Spitzers could control their egos and their arrogance, their power, and their sex drives? And what if the wives, it's always the wives, isn't it, what if they didn't standby in that painful made for TV spousal perp walk? It's become a staple of politics and 24/7 news. These guys would have to walk the plank alone.

What if we took a page from other country's playbooks where they seem to be more laid back about these kind of things? France knew about the mistresses. Sarkozy's girlfriend caused a ruckus but didn't destroy him. Argentina watched a playboy president lock a wife out of their official residence. We wouldn't have headlines like these.

What if America said your private life is well private? Not going to happen. The public won't let it. The media couldn't stand it, and the politicians won't allow it because so often they're so moralistic.

SPITZER: Some public officials may not want to face stricter ethics rules.

SESNO: When they say and legislate one thing and do another they become towering sometimes tragic hypocrites. Power is the ultimate aphrodisiac Henry Kissinger once said. It can tempt people to violate the public trust. Maybe even the law, as Eliot Spitzer surely knows. He's under investigation.

What if this just didn't happen? It always will because no one has repealed the laws of human nature.


SESNO: So where does the public come down on all of this? It's hard to tell. We had a poll a year ago that was very interesting. Pew asked whether people would be less likely to a support a candidate if they'd known they had an extramarital affair.

Take a look at this. Among Democrats, about 25 percent said less likely. Among Independents, 39 percent said they would be less likely to support them. Among Republicans, 62 percent said they'd be less likely. So some real political divides here.

But I think where people would agree is when it's patently illegal or just grotesquely immoral, that's where you draw the line. It gives us some sense maybe as to how people are thinking. What we have no clue about, however, is what Eliot Spitzer was thinking -- Wolf.

BLITZER: Frank Sesno, thank you for that.

Let's get back to Jack. He's got "The Cafferty File" -- Jack.

CAFFERTY: We might find out some of what he was thinking when that girl he was with starts testifying to keep herself out of trouble. I understand she's willing to do that in exchange for some immunity. We might learn a whole lot more about client number nine.

The question this hour is: How can the Democrats heal the wounds of an ugly primary battle before the general election?

Bob in Richmond, Virginia says: "I think things can be turned around with two actions. One, Barack's and Hillary's camps need to stop going after each other and focus on McCain. There is plenty there to attack. Two, Hillary's camp needs to stop suggesting every conceivable way to bend the rules to their advantage. Most people see this for what it is and will not be able to support her if she somehow gets the nomination through illegitimate means."

Kelly in Atlanta: "Any hope that was left for healing was dashed when Hillary said John McCain will be a better commander in chief than Obama. If Obama loses the nomination, I don't think the majority of his supporters will ever go back to politics let alone vote for Hillary."

Pat writes: "They can't heal the wounds by November. I'm a Hillary supporter. I will not vote for Obama, even if he gets the nomination. She is by far the better candidate. His mantra of change will never translate into becoming a viable president."

Mike in Arizona: "There's only one way the wounds will heal and that's if the media agrees to stop scraping the scab off. Do you think that is likely to happen?"

Don't hold your breath, Mike.

Ted in Oregon writes: "Hillary's the single most divisive element of the current Democratic Party Crumbling Syndrome (DPCS). She needs to begin working on taking over the Senate Majority Leader spot and realize that Obama/Edwards, Obama/Dodd, Obama/ Richardson teams along with her heading the Senate could reunite that party as never before. She says she's a fighter. What better place to get things done than the leader of the Senate working with the president?"

And Jen in Pennsylvania: "The longer this goes on, the less likely it is. Instead of digging up dirt against the opposition, the Democrats are slinging it at each other. If you ask those in the blogosphere, it's already over. Or as I have seen it put, Humpty Dumpty will never be put back together again" -- Wolf.

BLITZER: Thanks, Jack. See you a in a few moments.

Hillary Clinton and healthcare for kids. How much credit does she deserve for a popular children's insurance program? We're doing a fact check.

Plus, Barack Obama condemning a sermon by his pastor. We'll talk about that and more.

Lou Dobbs standing by live right here in THE SITUATION ROOM.


BLITZER: Lou Dobbs is here in THE SITUATION ROOM. He's got a show coming up in one hour but I want to pick his brain right now.

This story involving the Reverend Jeremiah Wright, his pastor, Barack Obama's pastor for 20 years, it's caused some stir over the last couple of days or so. Obama has just issued a lengthy statement rejecting these controversial comments. Is it over with this story now?

LOU DOBBS, HOST, "LOU DOBSS TONIGHT": Not by a long shot.


DOBBS: The reason is that it's taken this long for Senator Obama to respond. First and foremost a great deal is going to be made of this. There's no question about it. And some of the questions by Jeremiah Wright.

There's no question that Senator Obama should not be held responsible for what Revered Wright has written and said previously. But their close relationship for suddenly Senator Obama to be throwing him under the bus at this point, this is becoming a national past time, throwing others with whom you've been associated with under the bus. At some point we need to hear from Senator Obama specifically what he thinks about the issues, about this country's --

BLITZER: Well, he says here in this statement, he says I vehemently disagree and strongly condemn the statements that have been the subject of this controversy. Then he goes on point by point by point.

DOBBS: But he doesn't go point by point over the statements made by Reverend Wright about the fact that there is effectively charging the United States with being a consciously a killer.

BLITZER: It is a categorically denounce any statement that disparages our great country or serves to divide us from our allies. I also believe that the words that the great individual is no place in our public dialogue.

DOBBS: Right and I quite believe that he believes that but now it's critically important that he speaks specifically to the issues that Reverend Jeremiah Wright addressed. It is not enough to simply say now after a 20 year association that he categorically denies. That's too - that's a little too facile, a little too convenient and there's needs to be greater specificity.

BLITZER: He's going to have that chance later tonight. He's going to be a guest on "ANDERSON COOPER 360." Anderson will be speaking with him and presumably asking him all those questions that you just raised.

DOBBS: Well, I would certainly hope so.

BLITZER: Lou, thanks very much. See you back here in one hour, "LOU DOBBS TONIGHT" coming up at 7:00 p.m. Eastern.