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Federal Government Investigates Failed Bank; More U.S. Troops Heading to Afghanistan?; Bush Administration Takes Page from Obama's Playbook

Aired July 16, 2008 - 18:00   ET

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


WOLF BLITZER, CNN ANCHOR: And, to our viewers, you're in THE SITUATION ROOM.
Happening now, the bank taken over by the federal government is now being investigated by the federal government -- all of this leaving lots of nervous IndyMac customers even more worried about their money.

John McCain breaks the ice with the nation's oldest civil rights group. But, as he courts African-American voters, there is new evidence of how tough it might be to get their votes this year.

And some people are wondering if the Bush administration is facing foreign policy cues -- taking some foreign policy cues, that is, from Barack Obama's campaign? We explain. And the best political team will weigh in.

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

Many people say IndyMac is certainly guilty of financial mismanagement. But now the federal government wants to know if it's also guilty of fraud.

We want to welcome our viewers in the United States and around the world. The California bank that just days ago created one of the most stunning losses in American banking history is now being investigated by the FBI.

Let's go straight to our justice correspondent, Kelli Arena. She's working the story for us. And she has the latest.

What do we know, Kelli?

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Wolf, for months, the FBI said it's been investigating mortgage fraud. And if it weren't looking into IndyMac, that would be an even bigger story.

(BEGIN VIDEOTAPE)

ARENA (voice-over): IndyMac was taken over by regulators last week. And now we learn it's being investigated for possible fraud. Sources with knowledge of the investigation tell CNN the FBI is looking into whether any crimes were committed when IndyMac made home loans to risky borrowers.

The FBI would not comment. But one source says the investigation is focused on the company, and not individuals at this time.

JOSH HOCHBERG, FORMER JUSTICE DEPARTMENT PROSECUTOR: I would suspect that they're looking at bad appraisals, bad underwriting, which would mean false statements on loan applications.

ARENA: And now that the bank has been taken over by regulators, experts say it will be easier for the feds to get their hands on what they need to conduct their probe.

HOCHBERG: There's been so many issues associated with the mortgage failures and the subsequent losses, that the question is whether the FBI has enough resources working these cases.

ARENA: The bureau says it's made investigating mortgage fraud a priority and assigned nearly 200 agents. In all, it's investigation 21 companies. Officials won't offer any details, but CNN has previously confirmed that the nation's largest mortgage lender, Countrywide Financial, is part of that probe.

ROBERT MUELLER, FBI DIRECTOR: Our mortgage fraud case load has doubled in the past three years to more than 1,400 pending investigations. We have engaged each of our 56 field offices to focus on this criminal priority.

(END VIDEOTAPE)

ARENA: Wolf, it's not clear how long the feds have had their eye on IndyMac, but these investigations do take a lot of time.

BLITZER: I know you will watch every step of the way, Kelli -- Kelli Arena reporting.

It's a tale of two wars over at the Pentagon today. There are new and urgent concerns about Afghanistan. But the top brass is reporting significant improvements in Iraq.

Let's go to our senior Pentagon Jamie McIntyre. He's working this story for us.

Troops in Iraq, are they likely to be heading toward Afghanistan?

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Well, it sure seems that way, Wolf. Admiral Mike Mullen, the chairman of the Joint Chiefs just back from Iraq and Afghanistan, said he was very impressed with progress in Iraq and that he's going to be prepared, he believes, to recommend further troop drawdowns in Iraq come fall.

Now, technically, he doesn't make that recommendation. But, as the senior adviser to the president and defense secretary, his recommendation will carry a lot of weight when General Petraeus makes his recommendation -- Wolf.

BLITZER: If they don't get the troops from Iraq to move over to Afghanistan, where do they get the troops, because we know there's a huge shortage out there? MCINTYRE: Well, the problem is, the Pentagon did an about-face today. After saying for months they didn't have any troops to send to Afghanistan, now they say they are going to try and find them. The question is, where are they?

If you don't send replacement troops to Iraq, you could send them to Afghanistan. But they're not going to be ready to go for months. And U.S. commanders on the ground in Afghanistan say they need additional forces right away.

BLITZER: This all volunteer-force is under enormous stress right now, given the wars that are under way. Jamie is at the Pentagon.

In the presidential race today, John McCain gives an enthusiastic speech in front of a less-than-enthusiastic audience of African- Americans, meeting with the nation's oldest civil rights group.

He's trying to win over black voters. But, by several indicators, he's looking at a rather uphill battle.

CNN's Dana Bash is working the story for us in Cincinnati -- Dana.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Wolf, we're told several prominent black Republicans met with John McCain last week and urged him not to give up fighting for the black vote. He came in part because of that and in part to beef up his brand as a Republican not afraid to reach out.

(BEGIN VIDEOTAPE)

BASH (voice-over): If your audience is the NAACP and your opponent would be the first black president, you start here.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Don't tell him I said this, but he's an impressive fellow in many ways.

BASH: That was John McCain's biggest applause line, an icebreaker about Barack Obama, who got a thunderous reception two days earlier. McCain was greeted with mostly polite clapping. One person so indifferent, he read the paper.

McCain came armed with new education initiatives.

MCCAIN: The worst problems of our public school system are often found in black communities.

BASH: He pushed merit pay for teachers and hit Obama for opposing school vouchers.

MCCAIN: All that went well over the teachers union, but where does it leave families and their children who are stuck in failing schools?

BASH: The reaction, dead silence. McCain's chances at winning black votes are incredibly steep. A fresh New York Times poll shows 89 percent of black voters support Obama. Just two percent say they'll vote for McCain.

MCCAIN: Whether or not I win your support, I need your goodwill and your counsel.

BASH: But McCain came looking mostly for just that, goodwill, to show he's a different kind of Republican. After George Bush was elected, he did not attend the NAACP conference for six years. McCain came, and even opened it up for questions...

MCCAIN: I know that you have a couple of things on your mind.

BASH: ... knowing he would get some tough ones, like from this teacher in an Obama T-shirt who says teachers can't afford food.

UNIDENTIFIED FEMALE: What are you going to do, Senator? We can't continue this way.

MCCAIN: I want to reward good teachers.

BASH: If nothing else here, kudos for coming.

GRETCHEN WOODS, DES MOINES, IOWA: After hearing him today, I may listen to him again.

(END VIDEOTAPE)

BASH: Democrats were quit to send out a list of black forums John McCain skipped this campaign season. But most NAACP members we talked to after McCain's speech said, they're not planning on voting for him, but they respect him for coming and especially taking questions, something Obama did not do -- Wolf.

BLITZER: Dana Bash is working the story in Cincinnati.

Meanwhile, Barack Obama must confront his own political challenges regarding race issues. There is a brand-new "New York Times"/CBS News poll showing that despite Obama's being the first African-American prime to lead his party in a race for the White House, Americans are sharply divided on racial issues.

Among other things, the poll found that 55 percent of whites think race relations are generally good, while only 29 percent of blacks feel that way.

Let's bring in our senior political correspondent, Candy Crowley. She is looking at the numbers with all of us.

Senator Obama has also said he wants to transcend these historic racial issues.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Right.

You know, I was talking to Dr. Ron Walters, who I think you know, who is an expert on African-Americans in politics and how it all fits.

And I said, so, what sticks out to you about this poll? And he said that, as historic a campaign as this is, it doesn't really change the course of history up to now. These are deep-seated divisions and world views that have accumulated over 200 years of history in the U.S.

And he said it's going to take a lot more than an African- American being the nominee of the Democratic Party or, for that matter, being the president of a country, should he get that far. He said they're just too deeply ingrained and that whites and blacks really do look at the state of race and the state of progress in very different ways, and continue to despite this historic...

(CROSSTALK)

BLITZER: Barack Obama getting an extraordinary number of African-American votes in the primaries and presumably in the general election.

John McCain has an uphill struggle in trying to get those votes. But what he does -- and correct me if I'm wrong -- by reaching out to the African-American community, he reassures a lot of white voters out there that he's with them when it comes to race relations.

CROWLEY: Well, absolutely.

Also, remember, he's campaigning as a different kind of Republican. I'm going to reach out to everybody. And I can work with everybody. And you notice that, in that speech today, he said, even if you don't vote for me, if I become president, I want to work with you.

So, that fits into the whole, I'm not the kind Republican that you have seen before. And I'm also going to reach out across the aisle and to all groups.

BLITZER: That's his message. Candy, thank you.

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

JACK CAFFERTY, CNN ANCHOR: Well, the Democrats think that it might be time for another round of rebates for taxpayers in order to help millions of Americans deal with rising energy prices, unemployment, declining home prices, and tight credit.

House Speaker Nancy Pelosi says they're working on another stimulus package, hopes it will be a bipartisan effort again. Democrats say a package this time might be more than just rebate checks, probably include spending for things like roads, infrastructure, additional unemployment benefits, help for low-income families to heat their home, and aide for states that are struggling with deficits.

The former secretary of the treasury Larry Summers calls our current economic situation serious. He says the government is -- quote -- "in much more danger of responding inefficiently than in responding excessively" -- unquote.

But the Republicans say, not so fast. President Bush says we ought to let that first stimulus package run its course. Federal Reserve Chairman Ben Bernanke agrees. Republicans say the best way to boost the economy is to pass legislation limiting home foreclosures and increased production of domestic oil. They would likely push for more tax cuts for business if they agree on another stimulus package.

The initial $168 billion package included rebates to more than 100 million households, checks up to 600 bucks for individuals, $1,200 for couples. Economists say that some stores did see more business as a result of those checks, but it hasn't meant more hiring by companies or more lending by banks. And some say the only way to solve our financial crisis at this point is by injecting the banks with a lot of money.

The question now is this: Is another economic stimulus package the answer to our shaky economy?

Go to CNN.com/caffertyfile. You can post a comment on my blog -- Wolf.

BLITZER: We will speak about it tomorrow, Jack, with the speaker of the house, Nancy Pelosi. She's going to be here in THE SITUATION ROOM.

And, by the way, if you have a question for the speaker, this is what you can do. Send us your question at CNNireport.com/situationroom. We will try to get some of your video questions to the speaker tomorrow.

Serious allegations from a pilot union. It involves fuel levels, discipline, and your safety. Are the airlines cutting too many corners?

And they didn't spill a drop of blood. But did Colombian troops commit a war crime when they freed 15 hostages from a brutal rebel group? There is a new controversy breaking today.

And the federal government is helping out Fannie Mae and Freddie Mac. But their CEOs are raking it in, making more than $10 million in salary each year. Is it too much?

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

(COMMERCIAL BREAK)

BLITZER: They didn't fire a shot or spill a drop of blood, but it seems Colombia's military, they actually have broken the rules of war in freeing those 15 hostages from a brutal rebel group.

Let's go to Carol. She's working the story for us.

So, what is the story here, Carol?

CAROL COSTELLO, CNN CORRESPONDENT: Well, you know, Wolf, the Colombian rescue of three Americans and Ingrid Betancourt was absolutely spectacular. But it turns out it was flawed.

Tonight, the Colombian president admits at least one rescuer used the symbol of the Red Cross as part of a disguise. And it turns out, that is a serious breach.

(BEGIN VIDEOTAPE)

COSTELLO (voice-over): The Colombian rescue operation was widely hailed as ingenious. But now Colombian President Alvaro Uribe admits there was a slip-up.

One of the rescuers was wearing an International Red Cross symbol on a bib, part of the elaborate effort to dupe the kidnappers. That slip-up is serious. It violates the Geneva Convention and could be classified as a war crime, according to an international legal expert consulted by CNN.

Mark Ellis says, "The fear that any misuse of the symbol would weaken the neutrality and would weaken the Red Cross and he says potentially put Red Cross workers at risk.

Immediately after the rescue, Uribe acknowledged that intelligence officers had posed as bogus aid workers and journalists. But he denied at a news conference that a Red Cross symbol was used to dupe FARC terrorists. He even questioned Ingrid Betancourt on the issue.

ALVARO URIBE, COLOMBIAN PRESIDENT (through translator): Did you see if there were any emblems?

INGRID BETANCOURT, FORMER COLOMBIAN PRESIDENTIAL CANDIDATE (through translator): Of course, Mr. President. We have become after all these years in the guerrilla, we have become experts in identifying who is before us. That's why I said it was very strange to me. I said, well, what is this? A helicopter? A white helicopter? Red Cross? No. France? No. There was no flag. There was nothing. There was no sign anywhere.

COSTELLO: But CNN saw other unpublished video and photos of the operation. And they showed what appear to be the Red Cross logo. The International Committee of the Red Cross has taken note of the Colombian government's administration, saying, "The ICRC, as neutral and impartial, must have the confidence of all the sides in the conflict in order to carry out its humanitarian work."

(END VIDEOTAPE)

COSTELLO: And the Red Cross also said, as guardian of international humanitarian law, the ICRC reminds us that the use of the Red Cross emblem is specifically regulated by the Geneva Conventions and its additional protocols. As for where this goes from here, Wolf, we will just have to wait see.

BLITZER: You're right. A lot of people, I assume, did not know that. But we will see what happens next. Carol is working the story. The Federal Reserve chairman, Ben Bernanke, right here in Washington today assuring Congress that the mortgage giants Freddie Mac and Fannie Mae are -- quote -- "in no danger of failing." Those are his words.

Still, the Fed and the Treasury Department are showing them at least some potential financial lifelines, as the mortgage meltdown across the country spreads. And that's focusing attention directly on the men in charge of these two mortgage giants and their huge salaries.

Let's go back to Brian Todd. He's got the story for us.

Both of the CEOs very, very well compensated, Brian.

BRIAN TODD, CNN CORRESPONDENT: They are, Wolf, but this is an unusual situation. These are privately run companies. But it's their connections to the federal government and their involvement in one of America's most troubled mortgage industries that have eyebrows raised about these salaries.

(BEGIN VIDEOTAPE)

TODD (voice-over): A mortgage meltdown, stock prices for two of the nation's giant lenders plummet, amid fears about the historic downturn in the housing market. Still, the CEOs of Fannie Mae and Freddie Mac are bringing in huge salaries.

Daniel Mudd of Fannie Mae, more than $12 million in salary, bonuses and long-term incentives last year. Freddie Mac's Richard Syron got $10.5 million last year.

REP. BARNEY FRANK (D), MASSACHUSETTS: It's not appropriate for people to be making tens of millions of dollars if they are reliant on a potential help from the taxpayers.

TODD: The two companies were created by Congress to help provide mortgage funding, with the understanding that the government, the taxpayers, would back them up financially if they got in trouble.

That hasn't happened yet. But Democratic Congressman Barney Frank wants to regulate how much the top executives of Fannie and Freddie make.

FRANK: We're not asking anybody to take an oath of poverty, but I believe that paying at a level of a couple of million dollars a year, $3 million a year, that's going to get you the talent you need.

TODD: But both companies are privately run, trade on the open market. They tell CNN their executive stock awards dropped last year because the firm's stock prices went down. A Freddie Mac official said that company's board believe Richard Syron's salary is justified, because he led them to a greater share of the mortgage market.

One analyst says, even with quasi government involvement in Fannie and Freddie, maybe we shouldn't be so outraged at those salaries.

MAURNA DESMOND, FORBES.COM: Fundamentally, companies need to offer compensation for talent. Combined, the two firms shoulder $5.2 trillion in outstanding government debt. That's about half of the outstanding U.S. mortgage market. And they're as important, if not more important, than any Wall Street firm.

(END VIDEOTAPE)

TODD: And Maurna Desmond points out the Fannie and Freddie execs make much less than the CEOs of many Wall Street firms. Still, given the foreclosure prices, Congress will push more to have more oversight of these lenders.

Under Barney Frank's bill, if Fannie Mae and Freddie Mac tap into an expanded line of credit from the federal government that is now being proposed, meaning more potential taxpayer money, their executives and shareholders could not be paid dividends if the stocks rise -- Wolf.

BLITZER: Brian, thanks very much for that information.

Brian Todd working for us

Barack Obama's campaign is all about change. But that change may be happening even before the election.

Big news on Iraq and Iran have some wondering whether the Bush administration is actually taking some cues from Senator Obama. We're looking closer at the story.

And poking fun at the candidates. How far is too far? You will see the new Web video that is racing across the Internet.

And a pod of dolphins trapped in a New Jersey river for weeks finally makes a move.

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

(COMMERCIAL BREAK)

(NEWS BREAK)

BLITZER: So, what do President Bush and Senator Barack Obama have in common? If you take a closer look at what the Bush administration did recently, you may be wondering if it's borrowing some foreign policy cues from the Senator Obama's campaign.

And it's a question that stumped John McCain. Now one group is using his answer against him.

And it's supposed to be a high honor, a very happy honor to meet the president of the United States. But one little girl just cries and runs away. We will show you the video right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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

Happening now, talking to Iran, bringing troops home from Iraq. Is the Bush administration right now taking a page from Senator Obama's playbook and what does it mean for the campaign?

Also, Planned Parenthood turns John McCain's own words against him. Will the new ad cost him votes from women?

And JibJabbing the candidates, a new animated video mocking Barack Obama and John McCain, among others.

All this, plus the best political team on television.

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

But, first, a developing story we're tracking right now.

Pilots from U.S. airways are complaining they're being pressured to save fuel, possibly jeopardizing safety.

Let's get details. CNN's Deborah Feyerick is working the story for us.

Deb, what do we know?

DEBORAH FEYERICK, CNN CORRESPONDENT: Well, Wolf, take a look at page five of the "USA Today." A full-page ad by the U.S. Airline Pilots Association, it accuses U.S. Airways management of pressuring captains to reduce fuel levels in order to save money. Eight pilots filed complaints with the FAA, as did the union. They accused the airline of trying to infringe on the captain's authority by making them fly with less fuel than they're comfortable with.

Prior to filing the complaints, the eight pilots, all senior captains who normally fly international flights, were called in by U.S. Airways to do fuel conservation training. But the union says the pilots were carrying only 10 to 15 minutes worth of extra fuel. They call the training intimidation and harassment.

U.S. Airways says the eight pilots were way above average in terms of amount of fuel they had when the plane landed. A spokesman for the airline says, if you carry too much fuel, you burn too much fuel and that, with the high price, it's a balance between having enough to travel safely, but also fly efficiently.

Today, the Department of Transportation's chief, Mary Peters, said that the fuel levels are always up to the pilots.

(BEGIN VIDEO CLIP)

MARY PETERS, TRANSPORTATION SECRETARY: The pilot is the last authority that determines how much fuel that plane takes. And pilots have that discretion and are routinely given that discretion. So if a pilot doesn't feel that a plane has enough fuel in it for the trip that he or she is about to make, then they -- they have the discretion of not flying that flight.

(END VIDEO CLIP)

FEYERICK: Now, the captains are fearful that their jobs are now in jeopardy because of this training. But US Airways says the training is not punishment. The jobs are safe. US Airways says it's going to pay $2 billion more in fuel costs than it did last year. The FAA is looking into the allegations -- Wolf.

BLITZER: At least some of that money is going to trickle down to customers buying airline tickets.

All right. Good work, Deb. Thanks very much.

When it comes to Iraq and Iran, is the Bush administration right now taking a page from Senator Barack Obama's playbook?

Let's discuss that and more with our senior political analyst, Gloria Borger; Jack Cafferty and Stephen Hayes, the senior writer for "The Weekly Standard" here in Washington.

All of a sudden, in the past 24 hours, Jack, we learned that for the first time, the Bush administration will send the number three official at the State Department to meet with Iran's chief nuclear negotiator in Switzerland this weekend, even though the Iranians have not stopped enriching uranium, which had been, at least now, the condition for such a direct level of exchange. As you know, Senator Obama's been calling for this kind of dialogue for some time.

What do you make of it?

CAFFERTY: Well, I was going to say Senator Obama has been calling for this dialogue for some time. He's been saying for months that you don't just negotiate with your friends. And the timing of this probably couldn't be a whole lot worse for John McCain, because John McCain has been in Obama's face over this idea that you would go and meet with Iranian officials about their nuclear program.

Now the Bush administration is saying well, that's not a bad idea, let's send somebody over there and see if we can do a little let's make a deal.

BLITZER: They did it with North Korea.

Steve, why not talk directly to the Iranians?

STEPHEN HAYES, SENIOR WRITER AT "THE WEEKLY STANDARD": Well, I think, for one thing, because the Iranians are killing American soldiers in Iraq and have been for years. For another, Condoleezza Rice and President Bush and others in the Bush administration have said repeatedly we will not engage directly with Iran until they stop enriching uranium.

And it's been -- it's been sort of the red line for the Bush administration...

BLITZER: So how do you explain the change?

HAYES: Well, you just explain it by a complete capitulation. I mean it's a disastrous complete capitulation. You know, I interviewed Condi Rice...

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: But isn't it the recognition of the reality, though, that there may be some divisions over in Iran that we could exploit and possibly get them to stop making this kind of uranium?

HAYES: You know, there may be. That may be the Bush administration's line at this point. But you can't have a red line and then simply drop it. They've done this with North Korea. They've done it repeatedly with Iran. And when I interviewed Condoleezza Rice back in May, I asked her specifically about this and said, you know, is this something you envision backing off?

And she said, look, we're not going to negotiate with Iran until they stop enriching uranium. She was very clear about it. So this is just a (INAUDIBLE)...

BORGER: Well, but the administration...

CAFFERTY: Any idea, Steve, why...

BORGER: The administration...

CAFFERTY: Any idea why they would decide to do this now?

HAYES: Well, I think she...

BORGER: Because...

HAYES: ...she's been pushing for this behind-the-scenes for a long time, for many, many months.

BORGER: And there may be an opening. And they are saying this is a one time deal and they're going there to tell the Iranians what they think and to listen. But, obviously, they think there's an opening, just as they did with North Korea. And maybe they're thinking about their legacy (INAUDIBLE).

BLITZER: All right, Jack, how does this play out politically...

HAYES: Yes, that's right.

BLITZER: ...because as I said earlier, Senator Obama has been calling for a direct dialogue for some time.

CAFFERTY: Well, of course. And, you know, when you engage in diplomacy and it doesn't work and you don't achieve the results that you set out to achieve, then you consider other options. But you don't just go around and bomb everybody and go to war with everybody and engage in military conflict with everybody who is doing something that you don't happen to approve of.

You know, let's see what we can do.

BLITZER: The only thing I can imagine...

CAFFERTY: If you can't...

(CROSSTALK)

CAFFERTY: If you can't do anything, there's always the other option.

BLITZER: Either it's -- either it's, as Steve says, it's just a unilateral capitulation or, Steve, does the possibility exist maybe there's something out there?

Maybe the Iranians, at least the so-called relatively decent or good Iranians who are involved in these negotiations, did offer some sort of signal that, you know, talk to us and you might get something. Maybe there's something out there we don't know.

HAYES: Well, that's always a possibility and it's good that you raised that. I guess I don't have much confidence in that because I've seen the Bush administration do this on North Korea. I mean, you know, they said we will not negotiate directly with North Korea and then they did secretly in Berlin...

BORGER: Right.

BLITZER: Right.

HAYES: ...in the middle of the night and once again capitulated, capitulated, capitulated.

CAFFERTY: Is this...

BORGER: And by the way...

CAFFERTY: Could this just be some phony attempt at a legacy, the whole announcement with North Korea?

HAYES: Yes.

BORGER: Well, it is...

CAFFERTY: And not a...

BORGER: It is part of that. But, also, the announcement on Iraq, that now there's going to be some -- some withdrawals in Iraq. Well, that plays into Obama's hands, as well, because everybody's talking about how we need more boots on the ground in Afghanistan. And the American public believes you can't win the war on terror without more boots on the ground in Afghanistan. And that is what the Bush administration is talking about now. And, by the way, that's what Obama is talking about. And now John McCain is talking about it, too.

BLITZER: They're talking about moving some of those troops maybe from Iraq to Afghanistan. Again, this is a point that Senator Obama has been making for some time.

BORGER: Right.

BLITZER: All right guys, stand by. We're going to continue this conversation and also talk about a question that caught John McCain caught off guard involving Viagra and birth control. Now, one advocacy group is using a brand new attack ad against him.

Could it cost Senator McCain some support among women?

Plus, on a very, very different note, jib jabbing Senators McCain and Obama.

Is it OK to mock the candidates?

Stay with us.

(COMMERCIAL BREAK)

BLITZER: Planned Parenthood is seizing on a stumble by John McCain when he was asked about insurance coverage for birth control and Viagra.

Let's talk about that with once again, our senior political analyst, Gloria Borger, Jack Cafferty and Stephen Hayes of "The Weekly Standard".

Here's the ad that Planned Parenthood is now running, guys.

(BEGIN VIDEO CLIP, PLANNED PARENTHOOD AD)

UNIDENTIFIED FEMALE: Ever use birth control?

Then you'll want to hear this.

QUESTION: It's unfair. Health insurance companies cover Viagra, but not birth control.

Do you have an opinion on that?

MCCAIN: I don't know enough about it to give you an informed answer.

UNIDENTIFIED FEMALE: Planned Parenthood Action Fund is responsible for the content of this ad.

(END VIDEO CLIP)

BLITZER: All right, so, Gloria, let me start with you.

What do you think? Is this going to be an effective ad, because Planned Parenthood is running it in several of these so-called swing states?

BORGER: I think what was clearly on John McCain's mind is that he didn't want to talk about Viagra and that's why you saw him in such agony during this. But, you know, McCain is trying to get those women voters that say that they're alienated from Obama, they were supporting Hillary Clinton. And, you know, this is not the way for him to get young women voters. He may have a lot of the Viagra voters, but he needs those young women if he's going to try and win the election (INAUDIBLE).

BLITZER: Steve, what do you think?

HAYES: Well, you know, you could see McCain just struggling to come up with any kind of an answer.

(LAUGHTER)

HAYES: I think he was probably thinking, jeez, on the one hand, I really need women voters. I don't want to say anything that will offend them. On the other hand, I'm essentially a conservative. I might make the point that maybe the federal government shouldn't be in the business of funding, you know, things for erectile dysfunction or birth control.

BORGER: Or -- right.

BLITZER: Jack?

CAFFERTY: Well, you know, the answer is Viagra is used to treat a medical condition, erectile dysfunction. Birth control is a lifestyle choice. And that's why insurance companies don't reimburse for it unless pregnancy represents a danger for the woman. And then there's a gray area where you can do a negotiation.

But this is not going to help John McCain. It brings to mind his opposition to freedom of choice. He's a pro-life guy. You take a look at the Justices on the Supreme Court, you put McCain in office, you replay this ad from Planned Parenthood, you can figure out what kind of justices are going to be appointed if he's the next president.

BORGER: And, by the way, this whole thing was started by one of McCain's surrogates, Carly Fiorina, who pointed out this imbalance between insurance companies paying for Viagra and not paying for birth control. So I'm sure John McCain was kind of scratching his head.

BLITZER: All right. Let's have a -- let's have a laugh. Let's change to a little lighter subject right now.

BORGER: Oh, that was fun.

BLITZER: The latest little except from that...

CAFFERTY: Well, that was pretty fun.

BORGER: Yes, that was funny.

BLITZER: ...from that jib jab -- that jib jab animation.

(BEGIN VIDEO CLIP) UNIDENTIFIED MALE: Gather conservatives, lend me a hand unless you want this to grow (INAUDIBLE) in command. I spent years in a rat hole in North Vietnam (INAUDIBLE). So forget my skin cancer and swollen lymph glands, oh, it's time for something (INAUDIBLE). Gosh, I'm so tired of divisive exchange, and I've got one or two things to say about change. Like the change we must change to the change we hold dear. I really like change, have I made myself clear? So we'll talk about change until you're deaf in the ear, oh, the times (INAUDIBLE).

(END VIDEO CLIP)

BLITZER: All right, Steve, let me start with you.

A nice little animation, huh?

HAYES: I like it. Look, you know, there -- you could read, you could get too serious about the animation with Barack Obama on a unicorn and these things. You know, he -- being too good to be true, being something people only dream about. But it's a -- no, it's funny. Those guys have been good for years.

BORGER: I'm glad we're laughing, Wolf. Honestly, we had it -- we had "The New Yorker" cartoon that became so controversial. I mean it's good to finally laugh a little bit in this campaign (INAUDIBLE)...

BLITZER: This is a real laugh out loud one, isn't it, Jack?

CAFFERTY: You know, the best -- the best part of it, I think -- I watched the whole thing in my office today -- is the stuff about Hillary Clinton. If you go on your computer at home and play the whole thing, the stuff about Hillary Clinton is crying real tears funny.

BLITZER: I think we need a little bit more humor.

What do you think, Steven?

HAYES: Yes, I'm with you. I mean it's interesting, you know, I haven't spent much time with Barack Obama one-on-one or in small groups, but John McCain is actually pretty funny. He tells the same jokes every time he's out on the stump. And it's gotten to the point where I was standing next to one of his senior advisers the other day and he was mouthing the punch line of the jokes as McCain was actually telling them...

BORGER: Oh my gosh.

HAYES: ...which is pretty bad.

CAFFERTY: (INAUDIBLE) do number seven.

BORGER: And, by the way...

CAFFERTY: And everybody laughs, right?

HAYES: Right.

BORGER: He's been telling them for 10 years...

BLITZER: He needs some new...

BORGER: ...not just on this campaign.

BLITZER: He needs some new comedy writers. It shouldn't be too hard. He's the presidential -- you know, presumptive nominee.

Get some new writers out there, right?

See you in a little while, Jack.

BORGER: Yes. Hard.

BLITZER: Steve and Gloria, thank you.

Beachgoers out of luck as piles of garbage wash ashore, hundreds of pounds of it.

But where did it come from?

And a young ball player cracks under the pressure of meeting the president.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We'll see about Emily in a bit here. Let's go to...

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: Carol Costello is working some other stories incoming into THE SITUATION ROOM right now.

What do we know -- Carol?

COSTELLO: Wolf, the U.N.'s highest court is stepping in today on behalf of five Mexicans sentenced to death in Texas. The World Court voted to review the cases and persuade Texas courts to stop the executions. The World Court says the Mexicans have been denied the right to seek help from consular officials. The Bush administration also tried to intervene, but was unsuccessful in convincing Texas courts to change their ruing.

Looking to beat the heat on the beaches of Lake Michigan?

You just might be out of luck. Hundreds of pounds of garbage have washed up along 10 miles of shoreline. The mess includes prescription drug bottles and even needles. The Coast Guard says it's not sure where the garbage came from, but says some items carry Wisconsin names and addresses. Some beaches, as you might expect, are closed. Trash is being hauled away by the truck load.

If President Bush were running for re-election, here's some video his opponent might want to use. This after the annual tea ball game at the White House. The president will greet little Emily -- she's 10 years old -- so that she can have a photo taken with the president. There she is. You can see she's kind of shy, Wolf. And she's going up to meet the president of the United States.

Now, I would be excited. He is the president of the United States. But, Emily, not so much. Look at her. She's running. She's running. And she keeps on running, Wolf -- running and -- we don't know if she ever stopped. Look at her. I don't know, maybe she's a Democrat. I don't know. But if you see a little girl named Emily somewhere in Washington, D.C. she's looking for her parents now.

BLITZER: She got a little nervous. You know, it's a big deal to meet the president of the United States. You know, I'd be a little nervous myself.

COSTELLO: She'll pay for doing that the rest of her life. There will be videotapes her family will have that and she will see when she's 45.

BLITZER: A sweet, adorable little girl.

COSTELLO: Yes.

BLITZER: Carol, thank you.

Let's check in with Lou to see what's coming up at the top of the hour. He's working on some big stories.

Give us a little preview -- Lou.

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Wolf, thank you.

We're reporting tonight on the outrage over the World Court's efforts to interfere in our judicial system. The World Court has ordered the U.S. government to delay the execution of five Mexican citizens on death row in Texas -- one of them convicted of a brutal rape and murder of two young teenaged girls, also set to be executed on the 5th of August.

And stunning evidence tonight that illegal aliens and other non- citizens could be playing a decisive role in our presidential election. We'll be telling you about it. And it's not what you think. It turns out they're actually voting.

And the federal government remains clueless a to the causes of one of the biggest salmonella outbreaks in history. With that, we have an E. Coli outbreak. Two lawmakers with a plan to fix our broken food safety system join me.

And we'll tell you what Independent voters need and want to know right now about the education policies of both Obama and McCain.

Join us for that at the top of the hour, all the day's news and more with an Independent perspective -- Wolf, back to you.

BLITZER: We'll see you then, Lou.

Thank you.

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

CAFFERTY: The question this hour is: Is another stimulus package the answer to our shaky economy?

The Democrats in Congress are thinking about perhaps trying to do another one.

Al in Dallas writes: "Sure. And they should start planning for a third and a fourth. As the song goes, there's a hole in daddy's arm where all the money goes. We're stimulus junkies out here, Jack. We need some more stimulation. Come on."

Darryl in Davis, California: "Listen to Bernanke on this. Let's give it a little more time. A good comprehensive energy solution, including more drilling, access to shale oil, would go a lot further. Just look at what's happened over the last couple of days to oil prices at the mere suggestion the U.S. would increase domestic production, along with some conservation."

D.J. writes: "Contrary to the way many of our representatives think, the American people are not stupid. Stop trying to buy us off. Do something for once that will really help the country."

Jerry writes: "We don't need more money, we need less spending, less credit, more discipline on the part of the consumer. Why do we have to buy everything we see? No to the stimulus package."

Jonathan in Connecticut writes: "Sure, what the hell? I'd sooner see it going to individuals than to bail out corporations. Let's try trickle down economics in the other direction and see if that works."

Sergio says: "Why is it that borrowing money from China, buying Chinese made goods with that money and then sticking our children with the bill is called economic stimulus?"

And Beverly in Virginia writes: "Jack, actually, I think this stimulus package thing would really work. We've got to spend the money because God knows we're too afraid to put it in any of the banks now. So please tell the government to make my check out to cash."

If you didn't see your e-mail here, you can go to CNN.com/caffertyfile.

Some pretty good stuff came in today. If there's nothing on TV you like tonight, you might enjoy reading the e-mails -- Wolf.

BLITZER: People love to read those e-mails.

Jack, see you tomorrow. Thank you.

CAFFERTY: Yes. BLITZER: In our Political Ticker today, what's a little political controversy and heartbreak between friends?

Patti Solis Doyle tells the Associated Press what's it like to work on Barack Obama's team after being fired from Hillary Clinton's team during the primary. Solis Doyle tells the A.P. she and Clinton remain friends, that there were no hard feelings when she decided to work for Obama and that she could easily work for Clinton again if she were picked as the vice presidential running mate.

And who says Democrats and Republicans don't get along?

The "Boston Globe" reports Republican Senator Orin Hatch of Utah has written a moving song for Democratic Senator Ted Kennedy. He's undergoing treatment for brain cancer. The song reportedly is called "Headed Home." It's about Senator Kennedy's recent return to the Senate. Democrats could play it at their summer convention. Senator Hatch tells "The Globe" that Kennedy is like a brother to him.

If you'd like to talk, by the way, to the House speak, Nancy Pelosi, what would you ask her?

Here's your chance. Submit your video questions for my interview with Speaker Pelosi tomorrow. Just go to iReport.com/situationroom and make sure to tune in for my one-on-one interview with the speaker of the House tomorrow here in THE SITUATION ROOM.

Remember, for the latest political news at any time, you can always check out CNNPolitics.com. It's the number one political news blog on the Web.

They've been nabbed by the police and now they've been busted by the fashion police, as well. You won't believe what some people are wearing in their mug shots. Jeanne Moos finds it Moost Unusual.

And a political edition of today's Hot Shots coming up as well.

We'll be right back.

(COMMERCIAL BREAK)

BLITZER: Here are some of the Hot Shots coming in from our friends at the Associated Press -- pictures likely to be in your newspapers tomorrow.

Here in Washington, the White House press secretary, Dana Perino, fields questions from reporters about the decision to send a U.S. envoy to meet with Iran's top nuclear official this weekend.

On Capitol Hill, Representative Barney Frank grills the Federal Reserve chairman, Ben Bernanke, during a hearing on the economy.

In Cincinnati, Republican presidential candidate, Senator John McCain, holds on to his microphone as he listens to an audience question at the NAACP convention. And in Indiana, Democratic presidential candidate Barack Obama with Senator Evan Bayh and former Senator Sam Nunn. They all participated in a discussion on nuclear proliferation.

Some of this hour's Hot Shots -- pictures worth a thousand words.

Not many suspects can predict the time they will get arrested, but some should probably dress for the occasion.

And just what is the appropriate attire for an arrest?

CNN's Jeanne Moos shows us what it isn't in her Moost Unusual way.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): People who get busted like to hide their faces with their hair, with their hoods, with their shirts.

UNIDENTIFIED MALE: Slime!

MOOS: But you can't hide from a mug shot. And when this Michigan man was photographed in a "world's greatest dad" T-shirt after allegedly arranging underage sex, that got us thinking about perps suited to a tee. For instance, the mug shot of the guy wearing "Trouble Finds Me" or "Out on Bail."

ANDREW GOLDBERG, THE SMOKING GUN: Not anymore.

MOOS (on camera): "Out on bail."

GOLDBERG: That's what it could say on the back -- "Not Anymore."

MOOS (voice-over): The folks at The Smoking Gun Web site specialize in legal documents and mug shots. Imagine getting arrested in an "If we Get Caught, It's All Your Fault" tee or "It Wasn't Me."

And who needs a written confession when you're wearing one -- "I make stuff up."

"Trust me, I'm a Liar." "Nobody's perfect" goes perfectly with a face that shrugs. "Every great idea I have gets me in trouble." And the mother of all mug shot understatements, "I May not be Mr. Right."

Andrew Goldberg is a mug shot connoisseur sifting through...

GOLDBERG: Hundreds a day and thousands a week.

MOOS: Out of those thousands, one like "I'm a Virgin, But This is an Old T-shirt" sticks out.

Or the opposite...

UNIDENTIFIED FEMALE: "Support Your Local Hooker."

MOOS: But some T-shirts are prophetic.

UNIDENTIFIED FEMALE: "I'm not an Alcoholic, I'm a Drunk. Alcoholics go to Meetings."

GOLDBERG: And she got arrested for drunk driving, so...

MOOS (on camera): Did she really?

GOLDBERG: Yes.

MOOS: "Things not to say to a police officer."

GOLDBERG: Right.

MOOS: Now, how -- what are the chances of getting arrested with that on?

GOLDBERG: And the first thing is "oink, oink."

MOOS (voice-over): Some of the T-shirts merit getting busted by the fashion police. "Overly Caucasian, Do Not Place on Dance Floor." "Motorcycles Helping Ugly People Have Sex Since 1903." "Warning: I have PMS and a Handgun."

Arrested people seem to like to insult others with their T- shirts.

GOLDBERG: He says, "you're a freaking idiot," but he's the one who's locked up. "Ninety-eight Percent Naughty, two Percent Angel."

MOOS: A party has arrived, all right -- "trust me, I do this all the time." I live in my own little world, but it's OK. They know me here."

(on camera): "Stupidity is not a crime."

GOLDBERG: It's not a crime, right. And, obviously, that's not what he got arrested for is stupidity.

MOOS (voice-over): Nope. It was aggravated assault with a folding knife.

Who needs to dress for success when you can dress for arrest?

Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

BLITZER: Jeanne Moos reporting for us.

Please check out our new SITUATION ROOM screen saver and stay up to date on the latest political news. You can download it at CNN.com/situationroom. We think you'll enjoy it.

That's if for us.

I'm Wolf Blitzer in THE SITUATION ROOM.

Up next, "LOU DOBBS TONIGHT" -- Lou.