Return to Transcripts main page


Killer Storm Eyes U.S.; Government Seizes Mortgage Giants; Palin's Ex-Pastor Speaks Out; McCain Leads for First Time; Russian Navy in U.S. Backyard; Pictures of Airstrike Victims

Aired September 8, 2008 - 17:00   ET


WOLF BLITZER, CNN ANCHOR: Happening now, storm warnings still up in the Florida Keys. But the final target may once again be the Gulf Coast. Ike -- that would be Ike -- may now be eying the U.S. We've got the latest forecast. It's just out.
The killer storm has left a trail of death and destruction across the Caribbean. It's killed dozens in Haiti and forced nearly a million people to flee in Cuba.

And speaking in tongues -- faith healing and a belief in the end of times -- a close look at the church where Sarah Palin worshipped. We'll hear from her ex-pastor.

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

But first, a category one killer -- it could get a lot more powerful, almost certainly will. And it could turn on the United States. Hurricane Ike has hammered the Caribbean. The death toll is still rising in Haiti and the storm sent a massive wall of water slamming into Cuba.

Let's go to straight to our weather expert, our meteorologist, Chad Myers. He's at the CNN Hurricane Headquarters right now watching this. I understand we just got a new forecast. What's going on?

CHAD MYERS, CNN METEOROLOGIST: They're turning the storm to the south, which means farther to the left of the old track, which will mean just to the south of maybe Galveston. I'll get to that.

It is every computer model trending this to stay south and not turn it up to the north as much as it did before. But the story now, it's a category one. It became a category one because it rolled over so much land all day long today. It's now finally back into the Caribbean here, but wobbling back and forth.

It is raining through the Keys, but the hurricane watch has been canceled for the Keys, just a tropical storm warning.

Now here we go. It is a one right now. It is forecast to get back into very warm water and be back into a two and then into a three. But the forecast still has it turning or bending left here near Galveston or even farther south.

And, in fact, Wolf, the bottom -- the bottom of this cone is in Mexico. The top is New Orleans. But it could all the way to Northern Mexico. We'll have to see. At least it missed Florida. I mean the east coast of Florida really dodged a big time bullet, because the east coast of Cuba got hit.

BLITZER: Yes. The people of Florida are relieved.

Is it too early, though, to say New Orleans is out of harm's danger?

MYERS: No. It is too early, yes. We cannot say that yet. There are still storms and still tracks that want to take it into at least Western Louisiana. And that's too close to take -- in my opinion, to take New Orleans completely out.

BLITZER: All right. We'll watch with you.

Thanks, Chad, very much.

Stunning pictures of a storm's fury, as Ike sends a massive wall of water into a Cuban coastal city. Hundreds of thousands were evacuated ahead of the hurricane, which has been tearing a path of destruction across the island nation.

Let's go live to Havana.

Our man there is Morgan Neill.

He's watching the situation.

It looks nice and calm behind you, but what's the latest -- Morgan?

MORGAN NEILL, CNN HAVANA BUREAU CHIEF: Well, here in Havana, Wolf, people have been keeping a close eye on this storm, because the trajectory for days had it passing right over the capital here. But earlier today, the storm changed its path, moved a bit to the south. So some relief here in Havana.

Let's go to those images you were talking about, though.

When this storm first made its way ashore in Eastern Cuba late Sunday night, just very dramatic images, as these waves crashed into the shore in Baracoa there in the easternmost extreme of the island, reaching the height of a five story building, in some cases.

We also saw a lot of flooding there in Baracoa. Reports we've seen of some 1,000 homes damaged or destroyed. A lot of people are going to be cleaning up for a long time there in the East.

Now, from there, it churned its way slowly westward, toward the central provinces. Everywhere it's gone, we've seen power lines down, trees knocked out, roofs torn off of homes.

But as you pointed out, Cuba was not taken unawares by this storm. There was a lot of preparation that went into this -- massive evacuations, partly due to the path of the storm itself. Because it essentially has gone nearly half the length of the island, a lot of provinces have been affected. And in every single one of those provinces, we've seen evacuations. Cuban authorities have said as many as a million people evacuated -- Wolf.

BLITZER: All right. Morgan Neill watching this story for us.

Morgan, stay safe over there in Cuba.

And our best to everybody in Cuba who's watching this. Torrential rains from Ike bought more death to Haiti. Floods spawned by the storm have killed at least 73 people there, but the toll is expected to climb. That follows the battering that Haiti took from Gustav and Hanna. At least 167 deaths were reported after those two storms.

Even as the waters recede, areas in the Western Hemisphere's poorest country remain cutoff from aid. A U.S. Navy ship equipped with helicopters and other boats has arrived to deliver food and water.

This is turning out to be a very busy storm season. As you know, three hurricanes have already made U.S. landfall -- Dolly, Gustav and Hanna. During the previous two years, only one hurricane hit the United States, Humberto, back in 2007. We're already on the ninth named storm of this season. Forecasters have predicted up to 16. But they say this season shouldn't be as active as 2005, when the U.S. was devastated by four storms, led, of course, by Hurricane Katrina.

The White House and President Bush himself are strongly defending the decision to take over Fannie Mae and Freddie Mac. The failing mortgage giants together guarantee almost half the nation's home loans -- about $5 trillion worth -- a burden now falling on the federal government. This is an extraordinary development and it's raising lots of questions what this means for all of us.

Let's go to our personal finance editor, Gerri Willis.

She's looking at this story for us -- all right, Gerri, tell our viewers what they need to know.


Federal regulators, as we know, took the unprecedented step over the weekend of taking over the mortgage giants Freddie Mac and Fannie Mae, as you just said, in an effort to right the ailing housing market and ease the credit crunch. It could become one of the most expensive bailouts ever.

Now the move drew positive response from the stock market this morning, with the Dow surging more than 300 points at the open.

Who will the plan hurt and who will it help?

Well, here are the winners and losers. One big winner -- mortgage applicants. The plan to right Freddie and Fannie could ultimately bring down mortgage interest rates from as much as an eighth of a point to three quarters of a point from their current levels, which is 6.39 percent. This is real savings for buyers. A mortgage for a medium priced home would mean that buyers would see a dramatic reduction in their mortgage of $70 each month, if they were able to lock in a mortgage rate of a half a point less. So big savings there.

The plan may help homeowners, especially sellers and banks and savings and loans, if it succeeds in stabilizing the housing and mortgage markets -- Wolf.

BLITZER: There's losers, as well.

What's the bad news out there?

WILLIS: Well, the losers -- Freddie Mac and Fannie Mae shareholders. They've already been devastated. The stocks are down 80 percent this year and fell more this morning, after officials announced dividend cuts for both common and preferred shares of the two companies. And even if you don't own individual shares, your 401(k) may get hit here. Freddie and Fannie were held by big mutual funds and even stock index funds. The biggest losers, of course, as we've been talking about all day, the American taxpayer. They are on the hook for the cost of this new plan. The Treasury could ultimately spend $30 billion to $200 billion to right the mortgage ship, depending on just how long it takes the markets to turn around -- Wolf.

BLITZER: And if they spend $200 billion, that would be the largest bailout -- taxpayer bailout ever -- bigger than the S&L bailout, is that right?

WILLIS: Absolutely right, Wolf. There is a big tab coming. We just have to wait and see how much it's going to be.

BLITZER: All right. Gerri Willis doing some excellent explaining for us.

Thank you.

For the first time since the end of the cold war, Russia warships could soon be in the Caribbean, disturbingly close to U.S. shores, as tensions between the two countries increase.

Is there a return of the cold war underway right now?

And Sarah Palin's former pastor speaking out to CNN about her deeply conservative faith and more.

And Hillary Clinton out on the campaign trail today for Barack Obama -- as his lead in the polls disappears, can she help him pull ahead?

Stay with us.



BLITZER: It's among the country's most conservative Christian denominations and it's the one that shaped the faith of Republican vice presidential nominee, Sarah Palin. Now her former pastor is speaking to CNN in his only television interview and he's revealing details of the Assemblies of God.

Let's go to Anchorage.

CNN has assembled a team of reporters there, including Randi Kaye, who had a chance to speak with the pastor -- Randi, what have you discovered?


He had a lot to say about Sarah Palin and her beliefs. Apparently, her religious views were shaped as a very young girl. She was baptized in Alaska's Beaver Lake and by age 12, she had enrolled in church classes, in bible study classes and church camps, as well.

Her former pastor told me today that she was hungry for religion. Well, now, that religion has some people concerned and it's getting a closer look.


KAYE (voice-over): Sarah Palin calls herself "a bible-believing Christian period." What she does not mention is this. Palin spent most of her life attending a Pentecostal Church, which may have shaped her beliefs, if not her politics.

That's potential quicksand. So the McCain campaign won't talk about it.

Palin's spiritual journey from her teenaged years until 2002 was mainly at the Wasilla Assembly of God -- a Pentecostal denomination where congregants say they speak in tongues.

CAROLINE SPANGLER, WASILLA ASSEMBLY OF GOD MEMBER: When the spirit comes on you, you either -- things that nobody else can understand. Only God understands what is coming out of our mouths.

KAYE: Tim McGraw was pastor at Assembly of God when Palin belonged there.

PASTOR TIM MCGRAW, ASSEMBLY OF GOD: I don't think everybody understands how -- why it is that humans would react the way they do if they get touched by God. And I think that the Pentecostal Church is very familiar with that dynamic.

KAYE: McGraw says he never saw Palin speak in tongues. He says members also practice faith healing and believe in the end times -- a violent upheaval in the world that will bring the second coming of Jesus.

MCGRAW: Sarah didn't -- she wasn't taught to look for one particular sign, one cataclysmic kind of single sign. She just knew that, like every Christian does, that God is sovereign and that he is in control.

KAYE: When Palin delivered this speech at the church in June, it got little notice. But now it's controversial. GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL CANDIDATE: Throughout Alaska -- and we can work together to make sure God's will be done here.

KAYE: Posted on YouTube, it was delivered just two months before she joined the Republican ticket.

PALIN: Pray for our military men and women who are striving to do what is right also for this country, that our leaders -- our national leaders -- are sending them out on a task that is from God. That's what we have to make sure that we're praying for, that there is a plan and that that plan is God's plan.


KAYE: Now late today, just about an hour ago, the McCain campaign released a statement trying to clarify Sarah Palin's comments that you saw in that videotape on Iraq. The campaign says she is praying that the war will be God's plan. She is not asserting that it is God's plan.

The McCain campaign also adds this is an incredibly humble statement, they call it, a statement the McCain campaign stands by, Wolf, 100 percent.

BLITZER: And, Randi, I know you're working on much more for our shows at 8:00 and 10:00 p.m. Later tonight. But tell us some more about these controversial comments from the pastor.

KAYE: Well, we've seen this before -- these controversial comments playing out in the media by church pastors of the candidates. In this case, it is Pastor Ed Kalnins. He's the senior pastor at the Wasilla Assembly of God. And he had made some comments back in 2004, saying that Democrats who voted for John Kerry for president would not have salvation, they would no go to heaven, they would go to hell.

We'll tell you what transpired after those comments.

Also, he made mention of Alaska being used as a shelter for the end of times -- that this is where people would come to be saved.

We'll tell you all of that and we'll also share with you some comments about a guest speaker at Sarah Palin's current church and what he had to say about Israel.

BLITZER: All right. We'll be watching that closely. Randi will have much more later tonight here on CNN.

I don't remember a time when a candidate's pastor -- whether on the Democratic side with Barack Obama, or now with Sarah Palin, on the Republican side -- a pastor has potentially had political impact on what's going on. But maybe you can remind me if that's happened in the past.

Meanwhile, Barack Obama's campaign is hoping the former rival, Hillary Clinton, can take some of the wind out of the GOP's sails right now. She campaigned on Obama's behalf in Florida today.

Here she is in her own words, raw and unfiltered, from earlier today.


SEN. HILLARY RODHAM CLINTON (D), FORMER PRESIDENTIAL CANDIDATE: We know had you to fix this. Democrats have done it before and we can do it again if we get a Democratic president.


CLINTON: So I hope that you'll really think hard about what you can do over the next less than now two months to make a difference in this election. Tell those folks who haven't made up their minds that it's Barack Obama who's proposed a middle class tax cut of $1,000 per family, covering 95 percent of American working people and their families. This will make work pay again.

It's Senator Obama who's called for a $10 billion foreclosure closure prevention fund. And I don't have to tell you how hard-hit Florida has been from the hem mortgage crisis.

And what do Senator McCain and Governor Palin offer for you and your families?

More of the same, not the changes we need. Senator McCain has said the economy is fundamentally sound. He doesn't think 47 million people without health insurance is a crisis. He wants to privatize Social Security.


Hurricane Bertha It's on the record. He has promised tax breaks for the biggest corporations instead of middle class families.

And in 2008, he still thinks it's OK for a woman not to earn equal pay for equal work.


CLINTON: So, as they say in the courtroom, I rest my case.



BLITZER: There's a small but potentially important change in the race between Barack Obama and John McCain. For the first time, the Republican candidate has the lead in our poll of polls -- our average of the major polls, but it's a very narrow one.

Our brand new average of three major surveys has McCain at 47 percent. That's one point ahead of Barack Obama. Seven percent right now unsure.

So how concerned should the Obama campaign be?

Let's talk about that and more with a senior adviser to the campaign, Stephanie Cutter.

She's also Michelle Obama's chief of staff.

Stephanie, thanks for coming in.


BLITZER: You're joining us from Chicago.


BLITZER: There was, in the poll of polls, a 6, 7 percent advantage that Barack Obama had a few weeks ago. Now he's one point behind. How concerned should you be?

CUTTER: Not concerned at all. This is exactly where we thought the race would up. We knew that we would get a bounce in our convention and they would get a bounce in their convention. They had a very effective convention. And that's what we're seeing in the polls right now.

The race is essentially tied, just as it was two or three weeks ago.

But, you know, Wolf, there's one number in the polls that we're not talking about, that I think probably the McCain campaign is extremely concerned about. And that's 63 percent of the American people are concerned that John McCain is going to pursue George Bush's policies. And you know why they're concerned?

Because it's true. Hillary Clinton just said it best. Whether it's, you know, being against equal pay for women, or stopping our outsourcing of jobs going overseas, or giveaways to big corporate interests instead of middle class families, those are the things people are concerned about. And that's what's going to shape this race.

BLITZER: Here's another number that you should be concerned about. We asked, in this CNN/Opinion Research Corporation poll, "Which candidate is more likely to be a strong and decisive leader?" McCain got 56 percent, Obama 37 percent. That should be a source of some worry.

CUTTER: Well, this is coming off a week of the Republican Convention, where they do what they typically do and their speeches are full of political rancor and division. You know, they spent their week tearing Barack Obama down instead of talking about the policies that they would pursue. And there's a reason we didn't hear about the economy at the Republican convention, because they don't have any economic policies that would put the middle class first.

You know, we've got two months before election day. And, you know, Wolf, you and I have been through this before. We know that the world is going to change a million times over between now and election day. People are going to start paying attention to, actually, the policies behind the speeches. And that's what's going to matter.

BLITZER: What is Sarah Palin's greatest weakness, from your campaign's perspective?

CUTTER: Well, you know, I would say that her greatest weakness is what she says actually doesn't hold up. I mean she said she's against earmarks, but then we find out that she hired a lobbyist to lobby for them.

She says she was against the "Bridge to Nowhere" and then we found out that she actually campaigned for them. You know, what actually is holding up as true in her speeches? That's why America is looking toward her first interview. She's got to start answering some of these questions and be accountable for what she says. I think that's her greatest weakness right now.

BLITZER: You're working directly for Michelle Obama.

What is Michelle Obama going to do specifically to try to undermine the support that Sarah Palin is bringing in among women?

In this new CNN/Opinion Research Corporation poll, among men, McCain has an advantage, 51-44. But among women, McCain is behind 45- 52. But I know you'd like that so-called gender gap to be much greater than that.

CUTTER: Well, Michelle Obama isn't about undermining anybody. Michelle Obama is about talking about her husband. That's what she does most effectively. She's traveling this country talking to all Americans, including women, about why she thinks her husband will be an extraordinary president.

You know, I think when the facts are on table and there's an equal measure of what those facts are, in terms of how the policies, Obama versus McCain, impacts the American family, then, you know, that case is made.

Hillary Clinton said it best -- you know, let the case rest.

BLITZER: Will we see Hillary Clinton and Barack Obama together out on the campaign trail?

CUTTER: Well, we'll have to see about that. But you'll definitely see Hillary Clinton and Barack Obama campaigning out there across the country.

BLITZER: Stephanie Cutter, thanks for coming in.

CUTTER: Thanks, Wolf.

O.J. Simpson -- he's in court once again, facing possibly life in prison. Day one of his latest trial. We'll update you on that.

And Chavez and Putin -- are they a modern day Khrushchev and Castro?

New cause for concern for Washington. We'll update you on all of that right here in THE SITUATION ROOM.


BLITZER: Carol Costello is monitoring some other important stories incoming into THE SITUATION ROOM right now -- Carol, what's going on?


Lance Armstrong is reportedly staging a comeback. A cycling journal reports on its Web site that the 36-year-old Armstrong will come out of retirement next year to compete in five road races, including the Tour de France, which he won seven times. Citing anonymous sources, VeloNews reports Armstrong will race for no salary and post his internally tested blood work online.

Jury selection started for the O.J. Simpson robbery kidnapping trial today. The case dates back to that encounter last year with two sports collectors in a Las Vegas hotel. The former NFL star and his only remaining co-defendant have pleaded not guilty to 12 charges. Simpson says he is confident of acquittal. But if convicted, he could go to prison for life.

And Harry Potter fans won't be getting an encyclopedia about their favor wizard. A New York judge today ruled against a Web site operator who wanted to publish "The Harry Potter Lexicon." The judge said it would call irreparable jury to J.K. Rowling. She has issued a statement saying she took no pleasure in the lawsuit, but is delighted it's been resolved favorably -- back to you, Wolf.

BLITZER: Thanks, Carol.

We'll check back with you His lead in the polls, as you just saw, it's gone and his rival has a new rock star running mate.

So what's Barack Obama's doing about this?

Details of his new push-back. That's coming up.

Also, some disturbing video of a controversial incident allegedly involving U.S. troops and multiple civilian deaths.

Plus, it's the terror plot that changed the way all of us have to fly. There's now a verdict in a frightening case.

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


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

Happening now, Barack Obama fighting a whole new race against a reenergized McCain campaign. We'll go inside the Democratic candidate's new push-back.

And why Sarah Palin's campaign speech may sound familiar. Is the GOP vice presidential candidate repeating herself? Stay tuned.

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

An increasingly popular woman on the rival ticket, a virtual tie in the polls -- the heat now on the Obama campaign. But the Democratic candidate is pushing back with a strategy that includes his former rival, Senator Hillary Clinton.

CNN's Suzanne Malveaux has the latest from the campaign trail -- Suzanne?

SUZANNE MALVEAUX, CNN CORRESPONDENT: Hey, Wolf. Barack Obama started his day off as dad, in the as candidate. He dropped his daughters off for their first day of school here in Chicago before he headed to Michigan to do battle.


MALVEAUX: With polls showing Barack Obama and John McCain in a dead heat, the fight to the finish is on.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: It is good to be back in Flint.

MALVEAUX: Obama today in Flint, Michigan, touted his economic plan claiming McCain's would leave working Americans behind.

OBAMA: If you've hung on to your home, you've seen your home values plummet. If John McCain thinks that the economy's fundamentally sound, he needs to come to Flint and meet some of those folks who have been losing their homes.

CLINTON: No way, no how, no McCain, no Palin.

MALVEAUX: She's back, but on Obama's side.

CLINTON: Barack and I have may have started on two separate paths but we are on one journey now, and that journey leads straight to the White House!

MALVEAUX: Hillary Clinton today in central Florida. Launched Obama's all-out effort to win over more female voters who may be considering supporting the McCain/Palin ticket.

CLINTON: I speak to many of our Hispanic Americans who are here. Like Wanda and her family. Many from -- many from Puerto Rico where I had the best time campaigning I've ever had.

MALVEAUX: And Hispanic voter who's favored her in the primaries. The primaries here in Florida and Michigan were held earlier than allowed leading Obama to bypass the states during the height of the campaign season. Now, he's making up for lost time.

UNIDENTIFIED MALE: She stopped the bridge to nowhere.

MALVEAUX: A new McCain ad calling the Republican ticket the original mavericks has the Obama camp seeing red. A spokesman calls it a lie.


MALVEAUX: On Thursday, Barack Obama will sit down and have a private lunch with former President Bill Clinton in New York. Wolf, it is just another sign that the Obama and Clinton camps are working together for a Democratic win -- Wolf?

BLITZER: All right. Suzanne, thanks, Suzanne's in Chicago.

At the same time, Senator John McCain is going after Obama on pork barrel intending. Here's the candidate in his own words earlier today in suburban Kansas City, Missouri.


SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: We understand who we work for. We don't work for a party and we don't work for a special interest. We don't work for ourselves. We're going to work for you, and we're going to drain the swamp in Washington, D.C. and we're going to take on the special interests. We're going to reform government.

And we fought corruption. I didn't care whether they were Republicans or Democrats. I've fought big spenders in both parties. And you know, here's an interesting fact. Governor Palin just mentioned she vetoed a half a billion dollars in earmark pork barrel spending and Senator Obama asked for nearly a billion dollars in pork barrel earmark spending. $932 million, almost a million dollars for every single day he was in the United States Senate. It's remarkable.

And my friends, I'm going to tell you this right now. I will veto every pork barrel earmark spending bill that comes across my desk. You will know their names. We will make them famous and we'll stop this.


BLITZER: That was John McCain speaking earlier today.

McCain's running mate, Sarah Palin, is giving essentially the same stump speech over and over again on the campaign trail. She's been going out together with John McCain since the convention.

Let's talk about that and more with our CNN political contributors, the Democratic strategist James Carville is joining us from New Orleans and Republican strategist Leslie Sanchez.

We've listened, we're listening very, very carefully to what all the candidates are saying and hearing a very similar speech coming from Governor Palin. They all give believe the same stump speech. Listen to some of the things she's been saying over and over again. James, listen to this.


PALIN: I told Congress, thanks but no thanks for that bridge to nowhere.

Thanks but no thanks on that bridge to nowhere.

There is only one man in this election who has ever really fought for you.

There is only one man in this election who has ever really fought for you.

That luxury jet, it was over the top. So I put it on eBay.

That luxury jet was over the top. I put it on eBay.


BLITZER: All right, James. How do the Democrats counter a Sarah Palin who's clearly emerged as a rock star out there?

JAMES CARVILLE, DEMOCRATIC STRATEGIST: First of all, she's a rock star with a teleprompter. She did not do very well today. She showed a fundamental not even any understanding of the housing market which some people say is an issue.

Secondly, maybe Leslie can straighten this out. She supported the bridge to nowhere. She campaigned on it. She went there and said that she was for it, then after it was not put in, she kept the money that was going to be for the bridge to nowhere. It's a little bit hard difficult for me to understand where they're coming from here because she was a big supporter of the bridge.

BLITZER: When she was running for governor, she was as one of her close advisors confirm to us earlier, Leslie, she was for the bridge to nowhere before she came out against the bridge to nowhere. Answer what James's question.

LESLIE SANCHEZ, REPUBLICAN STRATEGIST: I'm happy to answer both questions, Wolf. You know, and any other Democratic questions I guess we're going to get. The bottom line was she did campaign on that issue and once she did move into government, there's a very clear record of the actions she took. She wanted to review this program and saw it was wasteful and countered not only Ted Stevens but a lot of Republicans in Alaska who were securing those dollars and said there were higher priorities for the state and fundamentally zeroed out that line item and looked at relocating those same dollars.

And it's interesting because the Alaska Democratic Party had all this basically giving her credit for zeroing that out and took those pains down from the internet to the best that they could before people captured them, James. So I think there's a lot of hearsay.

CARVILLE: She campaigned -- am I wrong? She was for it in the campaign. And she went there, and said that this is not nowhere. And then after she got the money from Ted Stevens, who she worked for, got her the money, she kept the money. That's just a fact. You can -- so we now know that she was for the bridge to nowhere. We can move on to something else. She had $27 million in earmarks. Go ahead I thought we agreed that she was for it. We agreed that she was for the bridge to nowhere.

SANCHEZ: I don't think anybody's moving away from the fact that she talked about it in the campaign when she was running for office, saw that it was wasteful and there were higher priorities and reprioritized. This is a tough decision that people have to make when they're a leader in government.

BLITZER: All right, let's move on, James.

CARVILLE: We agree fundamentally she was for the bridge to nowhere.

BLITZER: Let's move on and talk about the earmarks, the pork barrel spending. John McCain, James, says he's opposed all -- he's never accepted it for himself, for his state. He's opposed it all long and points out that Barack Obama brought in a billion dollars in so-called pork barrel spending to Illinois. What should Barack Obama be doing to deal with this issue?

CARVILLE: I'm a little confused here. As I understand it when she was mayor of this town of 6500 people, she hired a Jack Abramoff protege to lobby and got $27 million in earmarks. That figures out to about $4,000 a person. So I'm a little -- maybe Leslie can help me. Did she hire a Jack Abramoff related lobbyist to get $27 million for that town? Because that's what I read in the paper.

SANCHEZ: If we can, I'd like to focus on the top of the ticket, James. I'm happy to answer your questions maybe offline. Let's talk about the real issue which is this almost billion dollars in government earmarks and spending that Barack Obama has asked for. We don't know how effective he's been in actually getting any of those dollars but in terms of his prowess on Capitol Hill. The bottom line is he has come up with a government solution, a regulation for government spending as a proposal for every type of social ill in America. The bottom line, he hasn't yet, James, tell us how he wants to pay for it other than saying he wants to stick it to corporations that many. People work for.

BLITZER: Hold on.

CARVILLE: I just want to say we agree as mayor she hired a Jack Abramoff connected lobbyist to get $27 million in earmarks for a town of under 7,000 people. We've already agreed on two things here. We're making progress.

BLITZER: Hold on. Here's what John McCain says and we've heard it over and over again over these past few days since the convention. He opens up his speech now with this. Listen.

(BEGIN VIDEO CLIP) MCCAIN: America knows it's time for change, and it's time for the right change.


BLITZER: He's talking about change and he says, James, he can bring that change because he's got a proven track record as a "maverick."

CARVILLE: Let's say something else Leslie and I can agree on. He said on "Meet the Press" this spring that there wasn't a single big thing that he and George Bush disagreed on. That doesn't sound like change to me.

SANCHEZ: Let's get to the bottom line. This is somebody who has the biggest challenge that John McCain had at the beginning of this campaign was getting conservatives to rally around him because he's been such a maverick and really been difficult, a thorn to many in the Republican Party. He's been independent on campaign finance, independent on earmarks. Immigration reform and the list goes on and on.

The distinct difference between the two candidates is somebody who's reached across the aisle in a bipartisan way to get these things done. That's what a lot of voters are looking for, not more of this partisanship you know gotcha type of politics because I think James is promoting. Bottom line, what do these gentlemen and ladies want to do to secure America? And keep us prosperous.

CARVILLE: We've made great progress. We agreed that John McCain said there was no big issue to disagree with Bush on.

SANCHEZ: Sorry. I didn't say that, James.

BLITZER: We'll leave it there but continue this discussion. James, we're happy that Hurricane Ike is moving apparently from where you are with your family in New Orleans.

CARVILLE: It was so good in New Orleans. We wish the people in Houston nothing but the best. Please don't hit Houston.

BLITZER: That's right. Thanks very much to both of you.

Russian warships not far from U.S. shores. What the Russian navy is doing that's bringing back cold war memories.

And gruesome images from cell phone video may offer proof so- called proof that a U.S. air strike actually killed dozens of civilians.

We're watching these stories right here in THE SITUATION ROOM.


BLITZER: Scary moments from the early '60s when the Soviet Union brought its might to America's backyard. The times, the players, even the countries have changed but is there still cause for concern? Let's go to Brian Todd. He's working this story for us. All right. What's this one all about?

BRIAN TODD, CNN CORRESPONDENT: Wolf, a standoff is brewing that harkens right back to the days of the cold war. These two leaders, Vladimir Putin of Russia, Hugo Chavez of Venezuela, both have big problems with the U.S. right now. They have been cooperating militarily and about to flex their muscles right in America's backyard.


TODD: For the first time since the cold war, two U.S. antagonists gear up for saber rattling near American shores. Switch out Khrushchev and Castro for Putin and Chavez. Later this year, Russia may hold joint naval exercises with Venezuela in the Caribbean. Tensions are at a boil or Russia's offensive in Georgia but the Russians say [ speaking foreign language ]

ANDREI NESTERENKO, RUSSIAN FOREIGN MINISTRY SPOKESMAN (through translator): This is a planned event unrelated to the current political situation and developments in the caucuses.

TODD: Still, the announcement comes just days after a U.S. navy command ship docked in Georgia. The Americans call it a humanitarian mission. The Russians a provocation, something Russian officials insist they won't do in the Caribbean.

NESTERENKO (through translator): If these exercises take place according to the approved schedule, they won't be targeting any third country.

TODD: But they will show off some serious firepower. Steaming toward the Caribbean will be the nuclear powered Peter the Great, a cruiser twice the size of its American counterpart. One expert calls it a carrier killer, armed with hundreds of missiles capable of reaching the U.S. It will be joined by the anti-submarine destroyer. Two prize vessels in a Russian navy that's a shell of its former self.

SEAN MCCORMACK, STATE DEPT. SPOKESMAN: I suppose if it is in fact true then they found a few ships that can make it that far.

TODD: All digs aside, U.S. officials tell CNN they're taking a wait and see approach to the exercises. Should Americans be worried? Analysts say this may not be an immediate threat but --

STEPHEN FLANAGAN, CTR. FOR STRATEGIC & INTL. STUDIES: What is it is a concern about is that Russia continuing to engage in these kind of efforts to provoke and suggest there is a growing tension and a new conflict coming with the united states and with the west generally. So I think it's important that we continue to work to defuse some of this.


TODD: And Russia's alliance with Venezuela is a long-term concern for the United States. Russia has been a major arms supplier for Venezuela for seven years now. Two years ago, they signed a $3 billion to sell Venezuela fighter aircraft, attack helicopters, assault rifles. Hugo Chavez has been flush with oil money for a long time and all too willing to spend that men on weapons. Guess who's the best provider, Russia.

BLITZER: All right. Brian, thanks very much. Echoes of the cold war right now.

Meanwhile, gruesome images from an Afghan village may offer new proof that a shocking number of civilians died in a recent U.S. air strike. Our Pentagon correspondent Barbara Starr has been looking into this and we should caution viewers, some of you may find her report disturbing. Barbara, what are you learning?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Wolf, this is the kind of surprise no U.S. military commander wants.


STARR: New evidence of what may be the worst case of civilian casualties in the Afghan war. Grainy cell phone video shows dozens of bodies after U.S. air strikes on august 2nd. The U.S. had said seven Afghan civilians died here, but Afghans insist, these are some of the 90 men, women, and children killed.

CNN has not independently verified the video. Two U.S. military officials say, these are the images that were shown to General David McKiernan be, the top U.S. commander. After being shown the video by the united nations, McKiernan took the extraordinary step of asking for an outside military review of a U.S. investigation on the incident completed just last week. Saying in a statement, "The people of Afghanistan have our commitment to get to the truth." Afghans are furious at the rising civilian casualties which a human rights watch report says tripled between 2006 and 2007.

TOM MALINOWSKI, HUMAN RIGHTS WATCH: The big problem in Afghanistan is that U.S. and coalition don't have enough troops on the ground. And as a result, be they're relying too much on air power to compensate for their disadvantage in manpower.

STARR: The coalition blames the Taliban.

BRIG. GEN. RICHARD BLANCHETTE, ISAF SPOKESMAN: The enemies of Afghanistan continue to use these tactics of melding into the population, attacking from areas where there are innocent civilians.

STARR: The U.S. air strikes came after troops on the ground came under fire. Two days later, U.S. intelligence looked at pictures of all cemeteries in the region and found no evidence of large numbers of fresh graves, leading to the conclusion only a small number of civilians had died.


STARR: The question now is if that video is accurate. Why didn't U.S. military investigators know it was out there -- Wolf.

BLITZER: I don't know the answer to that, but I'm sure you'll be working on that. Thanks, Barbara, very much.

The plot that led to drastic security changes at the airports we all use, it's why you have to pack those tiny little plastic bottles in a see-through bag. Now the evidence of what liquid explosions can do to an airplane. You'll see the dramatic evidence coming up.

On a much, much lighter note, Michelle Obama busts a move, her appearance on Ellen. That's coming up right here in THE SITUATION ROOM.


BLITZER: The case led to some drastic changes at airport security. It's why you're limited to those small little three-ounce containers of liquid and now the verdicts are in Let's go to Deb Feyerick. She is working on the story for us. What are you learning, Deb?

DEB FEYERICK, CNN CORRESPONDENT: Well Wolf, surprisingly, this is a mixed verdict. Three men believed to be the ring leaders were found guilty of conspiracy to murder. Prosecutors could not prove the second charge and convince the jury that the men were ready to carry out their deadly plot by using homemade bombs to blow up American planes.

Here's some new details regarding the way we changed we fly.


FEYERICK: Prosecutors say this is what could have happened to as many as seven flights, coordinated midair explosions by suicide bombers that would likely have killed 2,000 people or more. The plot allegedly by these eight men was stopped August 2006. But it changed the way Americans fly in the U.S. and around the world. Liquids carried on board limited to three ounces, stuffed in a single see thru quart-sized bag. British prosecutors believed once the first plane exploded there would have been virtually no way to save the others. Sajjan Gohel specializes in Islamic terror groups.

SAJJAN GOHEL, ASIA-PACIFIC FOUNDATION: The intention of plots like this has always been to kill, to create disruption, to create economic political and social consequences.

FEYERICK: At trial, prosecutors showed suicides are martyred in videos. The defendants talked about holy war, revenge against the U.S. and al Qaeda leader Osama Bin Laden. Plane schedules presented as evidence suggest the alleged bombers were targeted United and American Airline planes from London Heathrow bound to major cities in the U.S. and Canada.

Prosecutors say the suicide bombers planned to use plastic soft drink bottles filled with a hydrogen peroxide liquid explosive, detonated by adding another substance carried on board in hollowed out AA battery. Throughout the trial the defendants claimed they wanted to create a publicity stunt, not kill anyone. Indeed London Heathrow Airport came to a virtual standstill at the time. Experts warn aviation with its global ramifications remains a prime al Qaeda target.

GOHEL: Al Qaeda will never forget about the United States and that there will always be their primary target.


FEYERICK: British prosecutors are considering asking for a retrial but during this trial, which took weeks, a police bug picked up the ring leader talking to another defendant whether to take his children on suicide missions and he was applying for a British passport for his baby son at the time of his arrest so this is still ongoing, Wolf.

BLITZER: All right. Thanks very much, Deb Feyerick for that update.

Barack Obama is getting ready to speak near Detroit. We'll bring you that speech once we see him, speaking, this is videotape, but once he starts speaking outside Detroit we'll go there live.

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


BLITZER: We go right to Lou Dobbs getting ready for his very special show not only today but all week. We saw the Democratic convention and Republican convention. Tell us about this week's convention.

LOU DOBBS, CNN ANCHOR: Wolf, the first thing that you think of when you watch the Republican convention and Democratic convention if you're thinking and an independent thinking person at all is where are the discussions about the issues that matter most to the American people, because they were -- the issues not being discussed, for example what is happening with public education in this country? What's happening with border security, national sovereignty? What does this country really have a reason to exist, because borders remain undefended, the ports are still insecure. We have a host of issues and if we're going to be talking about all of those things here tonight.

And you ought to see the studio, Wolf. We'll save it as a surprise, we've got us a convention going. It's not quite the same size as the Republican folks or Democratic folks but in our own humble independent way we've got a pretty good venue going here, don't you think?

BLITZER: Are you going to accept the nomination?

DOBBS: Will I accept the nomination? As I have said long ago, and several times, the answer would be no, thank you.

BLITZER: All right. Good answer. Lou, we'll be watching not only today but all week. Lou's got a special week.

DOBBS: Appreciate it.

BLITZER: An independent perspective on these conventions. Stay with us for that, in one hour it starts.