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Fallout over Barton Apology to BP CEO Tony Hayward.

Aired June 17, 2010 - 17:00   ET


WOLF BLITZER, CNN ANCHOR: Thanks very much, Don. Happening now, a major distraction from the very tough questions for the CEO of BP.

This hour, the backlash after a Republican's surprising apology to BP, and his allegations of a White House, quote, "shakedown."

Also, residents of one Alabama town are learning whether they were able to keep the oil at bay. They didn't wait for help from the feds. They took matters into their own hands.

And another shocking example of remains mishandled at Arlington National Cemetery. Gravestones discovered in a ravine, and they may have been there for years.

I'm Wolf Blitzer, you're in the SITUATION ROOM.

This day was supposed to be a chance for lawmakers to try to get answers from BP and to vent their anger over the worst oil spill in U.S. history. But one Republican congressman provided a major distraction and a deep embarrassment for GOP leaders. Joe Barton of Texas accused the White House of a shakedown, forcing BP to create a $20 billion victims compensation fund. And he even went as far as apologizing to the star witness, the BP CEO, Tony Hayward.


REP. JOE BARTON (R), TEXAS: I'm only speaking for myself. I'm not speaking for anybody else, but I apologize. I do not want to live in a country where anytime a citizen or a corporation does something that is legitimately wrong is subject to some sort of political pressure that is, again, in my words, amounts to a shakedown. So I apologize.

JOE BIDEN, VICE PRESIDENT OF THE UNITED STATES: There's no shakedown. It's insisting on responsible conduct and a responsible response to something they caused. And I find it outrageous to suggest that if, in fact, we insisted that BP demonstrate their preparedness to put aside billions of dollars, in this case, 20 billion, to take care of the immediate needs of people who are drowning.


BLITZER: Later, Congressman Barton publicly said he was sorry if his remarks were misconstrued. But his clarification apparently wasn't strong enough for the Republican leadership. We're told they pressured Barton to release this more emphatic statement. I'll read part of it to you.

"I apologize for using the term 'shakedown' with regard to yesterday's actions at the White House in my opening statement this morning. And I retract my apology to BP. As I told my colleagues yesterday, and said again this morning, BP should bear the full financial responsibility for the accident on their lease in the Gulf of Mexico."

That statement from Congressman Barton, coming in under pressure from the Republican leadership. Let's bring in our Congressional Correspondent, Brianna Keilar. She's working the story for us.

It seems like this whole incident, what Barton was saying and what he later said, seems to overshadow the actual testimony of Tony Hayward.

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: It did, Wolf. It stole the show. This was unforeseen. And it's gotten so much attention here, because going into this hearing this morning, it was all about "what is Tony Hayward going to say?" This is the culmination of weeks, now, of these high-profile oil hearings.

But to be sure, this was still a very interesting hearing, and it certainly was interesting to see what the lawmakers were saying. Because while you have this political battle playing out behind the scenes, Democrats and Republicans were very united in their intense frustration with Tony Hayward's answers to their questions. Or, to have these lawmakers tell it, his lack of answers to their questions.

Listen to one exchange that Hayward had with a Texas Republican, and then another one with the Democratic chairman of this whole committee.


MICHAEL BURGESS (R), TEXAS: You mean, difficulties that they'd had, the multiple gas kicks, the losing the tools down the hole, the length of time they've been over the hole, the decisions to move quickly because we'd spent too much time over this well?

TONY HAYWARD, CEO, BRITISH PETROLEUM: I had no prior knowledge --

BURGESS: Who would have had that information?

HAYWARD: Certainly the drilling team in the Gulf of Mexico. As --

BURGESS: But you're the CEO of the company. Do you have any sort of technical expert who helps you with these things who might have been there?

HAYWARD: With respect, sir, we draw hundreds of wells a year all around the world.

BURGESS: Yeah, I know. That's what's scaring me right now. HAYWARD: I can't pass judgment on those decisions.

REP. HENRY WAXMAN (D), CALIFORNIA: Even though you've worked 28 years in the oil industry, you're the BP CEO, and you've said like a laser, safety's the biggest issue. And you had people under you making these kinds of decisions. And now you're reviewing them. Do you disagree with the conclusion that this was riskier to use this particular well lining?

HAYWARD: I'm not prepared to draw conclusions about this accident until such time as the investigation has concluded.


KEILAR: Now lawmakers have accused Hayward of doublespeak, of being evasive, of copping out, and that is Democrats and Republicans alike.

But on one hand, you know that BP is facing this fact that the U.S. government is looking into whether criminal charges are warranted here, so certainly Tony Hayward, knowing that in the back of his mind, that what he says could potentially get him into legal trouble.

But I'll tell you, Wolf. It is so frustrating, bipartisan frustration here for these lawmakers.

BLITZER: Very frustrating. They basically gave him the questions they were going to ask in advance. He didn't answer a lot of them, perhaps because the lawyers said don't answer those questions. Brianna, thanks very much.

This was one of the first days in several days that we didn't see President Obama front and center in response to the oil spill. But Americans' faith in him, and their faith in government clearly are being tested right now. Our senior political analyst Gloria Borger is here with a brand new CNN poll.

Does the public trust the federal government, Gloria, right now to get the job done?

GLORIA BORGER, CNN POLITICAL ANALYST: Well, this is what's so interesting, Wolf. Because you know, generally people in this country don't trust the government to take out the garbage. But when it comes to cleaning up this mess, we asked that question. Take a look at this result.

"Who do you trust more to improve the situation in the Gulf of Mexico?" Government, 54 percent. BP, 32 percent.

But then, Wolf, what we did was we looked at these numbers along the political divide. Republicans verses Democrats. And you see in these numbers, 60 percent of Republicans trust BP more than the government.

So when we see this debate between the Tea Partiers and other Republicans about the role of Republicans. The Tea Partiers, you heard this from Joe Barton, believe that government took too much of a role in setting up this escrow account, and that government should not take over for cleaning up the oil spill.

BLITZER: Overall --

BORGER: Very different here.

BLITZER: How do the folks feel about the $20 billion escrow account that BP has now set up.

BORGER: Well, that's why Joe Barton had so much trouble, and that's why he had to apologize. Because, if you look at our poll, we show you that people really, really like this escrow account, by about 82 percent. Disapprove, 18 percent. So they want this escrow account.

BLITZER: And this poll was taken after the president's --

BORGER: It was.

BLITZER: -- Address to the nation from the Oval Office Tuesday night. So the question is this. How does the American public feel about the president right now?

BORGER: Well, they're still not thrilled. About 59 percent disapprove of the way he's been handling this crisis. That's up about eight points from May.

But the good news for the White House in all of this, Wolf, if there is any good news, is that the president's overall approval rating for the last six months has remained at about 50 percent. So while they disapprove of the way he's handling the spill, that hasn't really affected his overall approval with the American Public.

BLITZER: He still has a strong reservoir of support out there.

BORGER: He does, and he still has a reservoir of trust with the American public.

BLITZER: Gloria, thanks very much. Gloria Borger, our senior political analyst.

Congressman Joe Barton's apology for his apology to BP hasn't necessarily put this uproar to rest. We'll get reaction from the Louisiana Democrat who's been very emotional about the damage to the Gulf. Congressman Charlie Melancon, he's standing by.

Also, how encouraged are Israel's allies by its decision to ease its blockade of Gaza. I'll ask Britain's special Middle East envoy, the former prime minister, Tony Blair. He'll join us live, here, in THE SITUATION ROOM.

And new challenges for the controversial Democratic senate candidate in South Carolina. The mystery man, Alvin Green, under fire from within his own party.

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


BLITZER: Let's get right to Jack for the Cafferty File. Jack.

JACK CAFFERTY, CNN CORRESPONDENT: Just about the last thing that Arizona needs is a federal lawsuit over its now immigration law. Governor Jan Brewer tells she would the feds used that money to, quote, "Help me build a fence on my border."

Governor Brewer sent a letter to Attorney General Eric Holder, urging the Department of Justice not to file suit, because there are already five federal lawsuits pending. They are all challenging Arizona's new immigration law, which goes into effect July the 29th, and requires police to check the immigration status of people who are detained for other crimes.

Governor Brewer says that every conceivable constitutional issue or question will be raised in those other five lawsuits, and she wants the courts to dismiss all of them.

I addition, the governor has hired outside council to defend Arizona's new law, since the state's attorney general is opposed to it. Governor Brewer says other border states, like California and New Mexico, which both oppose Arizona's law, are simply not facing the same problem as Arizona is. She refers to her state, Arizona, as, quote, "the gateway for all illegal immigration, drug cartels, and gangs coming into the U.S."

And she's got a point. 3500 acres of southern Arizona along Mexico's border, including a national wildlife refuge, have been closed to U.S. citizens for nearly four years because of increased violence tied to illegal immigration. Officials warn visitors to Arizona to beware of heavily armed drug smugglers and human traffickers.

It's no wonder, is it, that a majority of Americans support Arizona's new law. Here's the question, then. Should the federal government sue Arizona over its new immigration law? Go to to post a comment on my blog.

BLITZER: Thanks very much.

Just moments ago, CNN caught up with the Republican congressman Joe Barton of Texas. He's at the center of quite a storm right now for his earlier in the day apology to the BP CEO Tony Hayward for the way the White House treated BP yesterday in forcing it to establish that $20 billion escrow account. Listen to what he just told CNN moments ago.


REP. JOE BARTON (R), TEXAS: I had a prepared statement, but that's not the statement that I used. It was an extemporaneous statement to answer your question.


BARTON: I have not, but I'm more than willing to.

UNIDENTIFIED FEMALE Have you talked to the White House or the vice president, did you call to apologize to them personally?

BARTON: Excuse me? You're telling me something I don't know.

UNIDENTIFIED FEMALE : The vice president called your shakedown remark this morning "outrageous."

BARTON: Well the vice president has the right to free speech, so I respect the vice president.

UNIDENTIFIED FEMALE: So you didn't contact the White House?

BARTON: I have not, no.


BARTON: Thank you.


BLITZER: Joe Barton, speaking to our producers and reporters from CNN up on Capitol Hill just a few moments ago. Let's get some reaction to what's going on. Democratic congressman Charlie Melancon is a member of this Energy and Commerce Committee. He's joining us from Capitol Hill.

You're from Louisiana, you have a lot at stake, your folks have a lot at stake. When you heard Congressman Barton this morning say this, and I'll play the little clip, I want you to tell me what went through your mind. Listen to what he said earlier in the day.


BARTON: With the attorney general of the United States, who is legitimately conducting a criminal investigation, and has every right to do so to protect the interests of the American people, participating in what amounts to a $20 billion slush fund that's unprecedented in our nation's history.


BLITZER: The point he's making is that it was a "shakedown." That was the word he originally used. They were negotiating what to do with that escrow account. The attorney general was in that meeting at the White House.

Was it appropriate for the attorney general to sit in on that four-hour meeting yesterday, Congressman?

REP. CHARLIE MELANCON (D), LOUISIANA: I can't give you a good answer to that, my being one of the few people that aren't an attorney, maybe, in the legislature. But what I do know, you've got consensual parties, we've got a responsible party. We don't want to see the people of Louisiana have to go through what the people in Alaska went through, waiting five, ten, fifteen years or so to get resolved the settlements on legitimate claims.

And we're already having problems in Louisiana. The ranking members kind of threw me back. It offended me. On behalf of the people from Louisiana, the entire Gulf Coast. Obviously, he needs to go down there and visit with the people that are out of work, or their business is shut down. You can go through the grocery store in Grand Island, shoot a gun down an aisle, and you won't hit anybody. That's not normal during the summer.

And the shrimpers' boats are parked, unless they were lucky enough to get their boat hired to put out boon. It's a bad situation. What was a bright spot on the economic barometer, if you would, for the United States for the last two or three years or so right now has the potential to be one of the darkest and gloomiest, I guess maybe a black hole for lost jobs if this moratorium does get put in, and it's put in in the wrong way. It shuts down. It's not going to be good.

BLITZER: You know him, Joe Barton. You've worked with him for a long time. He represents a district, I think, from Houston. Were you surprised how blunt he was at what he said earlier in the day?

MELANCON: Joe can be quite blunt, and I don't have a problem with people that are matter-of-fact. I just don't think that was a very well thought-through statement. Or, maybe, we just found out where Joe's going to work when he leaves the Congress.

BLITZER: Well, that's a serious allegation, if you think he's going to go to work, I assume you think for the oil industry. Is that what you're saying?

MELANCON: I'm not making any accusations. It's just that we represent people. I don't represent corporations. There's people that own corporations, but I represent the people of my district, and if the people of his district were hurting or potentially hurting as bad as the people of my district, I don't think he'd be making those statements just so. That's why I think maybe he just needs to maybe come back down to south Louisiana and take a look. Talk to some of these people.

Our people are hard working. There as hard working people as you're going to find in this country. It's about dignity. It's about making a living, making your own way. They fish, they hunt. I talked to a friend of mine that's a fishing guy. He's putting out boon right now. That's not at all what he wants to be doing. He may not have been a rich man, but at least he was doing what he wanted to do.

BLITZER: Let's get to Tony Hayward. I heard your questioning of him. He showed up, he expressed his contrition, he apologized once again. But when it came to substantive answers to technical questions, even though he's been with BP for almost 30 years, he really didn't have a whole lot of answers. How disappointed were you, Congressman? MELANCON: Well, my expectations weren't let down, because I didn't really expect to get much more than proforma kind of standard responses.

BLITZER: But Bart Stupak and Henry Waxman gave him the questions a few days ago to prepare.

MELANCON: Isn't that something? But I'm sure his lawyers just said, "This is what you're going to respond no matter what the question is." And that's kind of what we got today.

But at the same time, they got to ask some questions, they got to put some on record. They asked questions, members asked questions that he couldn't answer, and said OK, well, we'll let you respond to us in written form so we can put them in the record.

And then as the investigation and the oversight goes forward, there's a method of who's going to be interviewed and the questions that will get asked just to kind of cross-tab them, if you would, to make sure that we're getting honest answers when we are getting answers.

BLITZER: Congressman Melancon, good luck to you. Good luck to all the folks down along the Gulf. I know how concerned you are. I've got to tell you, we're all concerned. People not only here in the United States, but all over the world, based on the reaction we're getting. We appreciate what you're doing.

MELANCON: Thank you, sir. I appreciate it.

BLITZER: If you use a Blackberry or a cell phone, a new U.S. Supreme Court ruling impacts you very directly, and you may want to think twice before you start texting.

And a convicted killer only a few hours away from facing, get this, a firing squad here in the United States. Details of an especially controversial execution. That's coming up.


BLITZER: Lisa Sylvester is monitoring some of the other top stories in THE SITUATION ROOM right now. Lisa, what do you have?

LISA SYLVESTER, CNN CORRESPONDENT: Hi there, Wolf. Well, watch what you text from your work cell. The Supreme Court made a landmark ruling today that a California police officer's constitutional rights were not violated when the department searched his work pager and found sexy text messages. Justices avoided making a broader decision on employees' privacy expectations with company equipment because they say technology used now is every changing.

Secretary of State Hillary Clinton is pushing the Senate to back a new U.S./Russian nuclear arms treaty, while ensuring Republicans that it won't affect missile defense plans. GOP leaders worry Russia now has the opportunity to ditch the agreement if it feels threatened by more missile development. The pact sign by President Obama and Russian president Dmitry Medvedev in April would cut both countries' nuclear weapons reserves by a third.

And for the first time in almost 25 years, U.S. auto makers are turning it around, surpassing foreign brands on quality. J.D. Power and Associates says domestic car owners had fewer problems with their new vehicles in the first three months than those with imports. Porsche was the top brand for reliability, and Ford showed some of the biggest gains in quality. And I know, certainly, Ford has been working on that, so they've apparently been meeting those goals, Wolf.

BLITZER: That's very encouraging news. Thank you. Lisa will be back.

BP already the target of enormous anger here in the United States. And now, get this, we're learning more about the oil giant's ties to one of America's leading adversaries, Iran.

And will today's grilling of the BP chief Tony Hayward hurt the Obama Administration's relationship with Britain? I'll ask the former prime minister, Tony Blair. He's here, in THE SITUATION ROOM.


BLITZER: Members of Congress hurled all sorts of criticism in the face of BP's CEO Tony Hayward today. Lawmakers accused BP of being oblivious to safety, irresponsible, and of stonewalling. The hearing may fuel concerns in Britain that U.S. officials are coming down way too hard on them. Let's talk about that and more with the former British prime minister, Tony Blair. He's now serving as a special envoy to the Middle East. And there are dramatic headlines coming out of the Middle East, Prime Minister. We'll talk about that in a moment.

But how worried are you that BP, which used to be called "British Petroleum," that there's a CEO, Tony Hayward, who's British. How worried are you this could spill over and effect the special relationship between the U.S. and the U.K.

TONY BLAIR, FORMER PRIME MINISTER OF GREAT BRITAIN: I believe that the relationship between the British nation and the American nation's a very strong, deep relationship. It's got ties of history, ties of values, and there are things that we do together, as in Afghanistan today, that make that relationship very, very strong. So I think it will remain strong.

Look, I think people in Britain also totally understand why a catastrophe of this nature, particularly for the people down in the Gulf of Mexico, means that there's huge anger and concern and anxiety, to make sure that this is fixed, and fixed as soon as possible.

But I think between our two nations, this relationship is strong and will remain strong.

BLITZER: If you've been watching these hearings up on Capitol Hill, there's a long history, apparently, of BP's failures to deal adequately with safety issues. When you were prime minister, you had a deal with BP and offshore drilling. Did you have a concern about BP and its safety record?

BLAIR: This wasn't something that -- I mean, it's three years since I've been prime minister, obviously. This wasn't an issue for me as prime minister, no. But again, I'm sure, of course, these issues will be gone into in a great deal of depth.: There will be people obviously anxious to learn the lessons but, of course, primarily to get things fixed and I'm absolutely sure from all -- I've been here on middle east business really, but from all the discussions I've had with people, the administration, BP, everybody is working 24 hours a day seven days a week to get this fixed and get it fixed as soon as possible.

BLITZER: Let's hope they do. Let me make a turn to the Middle East. Prime minister, you're the so-called quartet's special envoy. The Israelis announcing that they are now going to relax this blockade of stuff coming in to Gaza. What's your reaction to this? Is this enough, or does Israel need to do more?

BLAIR: This is definitely a welcome step, and what we now need to do is hammer out the details, but essentially I think what Israel wants to do is to say let us -- let us get to a policy that makes sense which is that we keep our arms and combat material from Gaza from getting into the hands of people who would harm innocent civilians and let in those items for daily life, food stuffs, household items, also those things necessary to repair the power and the water and sanitation, the housing and to allow legitimate business to conduct itself in Gaza.

So I think, you know, we have to work out details of this, but the principle today of liberalization of policies, making sure we let in those things that people need to live and to start to return to normal life in Gaza and keep out the weapons, that principle is absolutely right.

BLITZER: The Iranians say they are going to send what they call a humanitarian ship to Gaza and that the Israelis better not stop it or inspect it. Is that a serious threat from the Iranians, or is that just bluster?

BLAIR: I honestly don't know, but what I do know is the whole purpose of what we're trying to do is get a practical solution to this, and the practical solution is that Israel's got to be able to check things that are coming in to Gaza. I mean, the fact is there are people who fire rockets from Gaza and who are trying to attack Israeli civilians as well as Israeli soldiers, so Israel has had a perfect right to protect its security.

What we've got to do is, however, to help the people in Gaza to lead a more normal life, and that means getting in, you know, far more stuff than we've been able to get in over the past months, past years actually and make sure that for all the items that are necessary for people to lead normal lives and daily living, we get those in, but I hope very much we can get sufficient movement over the next few days.

That people go through the proper and legitimate crossings between Gaza and Israel and Gaza and Egypt. BLITZER: Very quickly, prime minister. The Israelis say they are establishing this commission of inquiry with some independent outside observers participating. Does the United Nations stay out of this? Should the U.N. have their own investigation, or is the Israeli investigation enough?

BLAIR: Well, there's still an ongoing debate about that frankly, and I think there will be people in the United Nations who feel they want to continue with trying to get agreement on a different type of tribunal. I think what Israel has announced again is significant and important, and for me personally think the single most important thing is to get the closure policy and respect of Gaza changed so that we can get in what people need to live their lives, and I'm conscious of the fact particularly that this is important because over half the population of Gaza is under the age of 18 and there are around about 300,000 of them actually under the age of 4 so, you know, that's my focus really now.

BLITZER: Good luck. I know you've got a tough mission. We're counting on you to help over there.

BLAIR: Thank you.

BLITZER: Thanks very much, prime minister, for coming in.

BLAIR: Thanks, Wolf. Thank you.

BLITZER: Every aspect of the oil giant BP is under scrutiny. Nearly two months after the worst oil spill in U.S. history. One possible concern right now, the company's deals with Iran. Brian Todd has been looking into this part of the story for us. Brian, what have you learned?

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, these partnerships with an Iranian firm have brought both BP and that Iranian company some handsome profits in recent years, but right now the Iranian firm is under much tighter scrutiny, and BP has another public perception headache.


TODD: It's paying for this cleanup with net revenues that dwarf all but two other publicly traded oil companies. Some of that money comes from BP's ventures that are also shared by an Iranian firm suspected of ties to Iran's nuclear program. The Rhum field in the North Sea producing about a million dollars worth of gas a day is half controlled by BP and half controlled by the Iranian oil company. That's a subsidiary of a firm called NAFT Iran. U.S. officials tell CNN NAFT Iran that it's run by the Iranian regime. This week the U.S. treasury department citing expanded U.N. sanctions banned Americans from doing business with NAFT Iran while not citing its own evidence that NAFT Iran might be tied to Iran's nuclear program, a passage on the treasury department website says, "NAFT Company Tehran was listed by the Japanese government as an entity of concern for biological, chemical and nuclear weapon proliferation." MARK DUBOWITZ, FOUNDATION FOR DEFENSE OF DEMOCRACIES: This is a shot across the bow to the energy industry get out of these business relationships.

TODD: Mark Dubowitz runs the Foundation for Defense of Democracies, a think tank that monitors Iran's energy deals and presses for more sanctions. Another venture involving BP and NAFT Iran, an oil field off Azerbaijan. BP controls a quarter of it, Naft Iran 10 percent but Dubowitz and other analysts make another important point.

This situation is certainly not unique to BP, is it?

DUBOWITZ: That's correct. This is a problem beyond BP. There are scores of international energy companies that continue to do business with Iran, both inside Iran and outside of Iran.

TODD: In fact, that field off Azerbaijan is controlled by Norwegian, Azari, Russian and Turkish companies. We couldn't reach officials at NAFT Iran for comment. Contacted by CNN, a BP official said BP had no say in who joined in. He said it was the call of the governments called into question in Britain and Azerbaijan to bring both BP and the Iranian firm into those deals. Despite repeated attempts, we couldn't get comment from British or Azari officials in time for this story.

BP said it was the British government that brought us into this, it was their call. Same with the Azari government with the Azerbaijan field. Do you buy that?

DUBOWITZ: I think most of the international companies that are publicly traded and that are a part of western democracies have a certain amount of flexibility and discretion to make their own business decisions.


TODD: BP's ties to Iran do run a bit deeper than most companies. BP was founded in the early 20th century as the Anglo Persian Oil Company, but BP officials say they have done more than most companies in recent years to separate them from Iranian oil interests and analysts back them up on that saying BP has cut off several oil trading agreements and a lot of other deals in recent years.

BLITZER: I've sign some reports suggesting that the Iranian firm, Brian, is actually a shareholder in BP.

TODD: That's right, "Time" magazine citing Bloomberg news. "Time" first reported this story. They say that this firm, let me get the number for you, it's pretty staggering, has more than 24 million shares worth of BP, worth nearly $800 million, according to this information. I asked the BP official about that, and he said they are not allowed to reveal who their shareholders are and he says they cannot control who buys shares in their company.

BLITZER: Well, if they were holding those shares since this explosion, they have lost half the value of those shares over these past nearly 60 days, Brian. Thanks very much.

TODD: Right.

BLITZER: New predictions about how much oil BP will recover from the gulf. Just ahead, can its estimates though be trusted? I'll ask a member of the government's task force who is gauging the rate.

And will South Carolina Democrats overturn the results of their own Senate primary? Stand by. There's new information.


BLITZER: In South Carolina today, Democrats are deciding whether to throw out results of a Senate primary election. An unknown and unemployed military veteran Alvin Greene won the nomination last week over a political veteran Vic Rawl. A lot of mystery and controversy though surrounding the vote. Let's bring in our national political correspondent Jessica Yellin who is working this story for us. What's the latest as far as protests and other stuff is concerned?

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: There's a lot of action happening on this tonight, Wolf, and it's really one of the most peculiar elections anyone has ever covered. South Carolina Democrats, they are mystified and embarrassed that had Alvin Greene, a man the party has never heard of and did no campaigning, won. Now his opponent Vic Rawl, who is a longtime state legislator is challenging the results of the election.

Tonight he's challenging them saying there were voting irregularities, and there is a hearing going on before the South Carolina state Democratic Party's executive committee. One of the things Rawl's attorney is arguing to them right now is that in some counties Rawl won overwhelmingly in absentee voting but then lost by a landslide on Election Day when electronic voting machines were in use. There are also anecdotal stories from some voters that they tried voting for Vic Rawl but his name didn't come up. The electronic voting machine only let them select Greene. This hearing before the state Democratic committee is going to be over whether there were actual voting irregularities. That's the only thing they can decide on. They could redo the election, but it's important to note they have never decided to overturn a statewide race like this one, Wolf. It's never happened before, so it seems unlikely here. Again, hearing that evidence now, they could decide as early as tonight.

BLITZER: They will take a look at the voting irregularities.


BLITZER: They have to go back to those paper ballots. That's an easy way to recount and find out what's going on. All right Jessica. Thanks very much.

YELLIN: Exactly.

BLITZER: This is a story we'll continue to watch for you for all of our viewers. Other important news we're following, a grand jury has just returned an indictment against the alleged Times Square bomber. Stand by. Details of what the new documents says, and what one writer calls a weird malaise hanging over the Democratic Party. We'll talk about that and more in our strategy session.


BLITZER: Let's get to our strategy session. Joining us now is our CNN contributor Roland Martin and our other CNN contributor John Avalon, he's a senior political columnist for Guys thanks very much for coming in. Roland I'll start with you and I want to read a few lines from E.J. Dionne's column today in the "Washington Post." He's a political columnist. "A weird malaise is haunting the Democratic Party. From Plaquemine's Parish to Wall Street, we are seeing what happens when a government takes two hands off an approach to private economic actors and yet the GOP is managing to sell the idea that the big issue in this election should be government spending. Professor Obama and his allies ought to be ashamed of this." Those are pretty strong words from E.J.

ROLAND MARTIN, CNN POLITICAL CONTRIBUTOR: Well, first of all, he doesn't make any sense, because, look, the Republican party, they have to sell a particular narrative, and so what you saw coming out of the 2008 election, you saw them returning to this whole notion of fiscal conservatism. They felt health care too overreaching, far-reaching, and also the stimulus bill, bailout, so they are tagging President Obama and Democrats as free spending liberals and trying to go back to what made Republicans strong in the early '80s. That's what you're supposed to do. They have a narrative. Democrats have one. I don't see what the issue, is E.J.

BLITZER: A lot of us remember the word malaise that haunted the Jimmy Carter administration, if you're of a certain age you'll remember that. John, what do you think of E.J.'s basic point when he says a weird malaise is haunting the Democratic Party?

JOHN AVALON, CNN POLITICAL CONTRIBUTOR: I think the point he is trying to make is that there should be a case after BP for more government action and for more government spending but that narrative isn't working. That message isn't playing. We spent over $400 billion in stimulus funds since the Obama administration began and we're still down 2.8 million jobs. Increasing numbers of voters say that the number one the next government should do is focus on cutting the deficit and cutting government spending. So I think the appetite for that kind of Keynesian stimulus spending just is not there among swing voters in particular. Democrats may try to switch that narrative around but it's not working to date and the spending hasn't evidently improved unemployment today.

MARTIN: Well Wolf the real issue for Democrats is simply coming out in 2009, really started with health care, the Obama administration, you saw basically how the DNC was gutted and focused on Obama for America. They also lost the people who put them in office. They lost that enthusiasm so the gap that exists between enthusiastic Democratic voters and enthusiastic Republican voters is playing a part here. That's the real issue. People are saying he's not doing what we thought he was going to do. That's I think also you see the evidence in the polls as to why Democrats are down and Republicans are up.

BLITZER: John, you're shaking your head.

AVALON: I don't think this is a failure of play to the base politics. This is about losing the center and losing independent voters. President Obama campaigned on a return to fiscal responsibility. Now, events overtook it and there was a decision to go ahead with stimulus spending, but it's that frustration of big government and big business and not being able to balance their budget having so many small business owners and middle class Americans feeling alienated and frustrated so the answer isn't to move to your left, it's to reconnect to the center. That's how you win elections.

MARTIN: It's not move to the left but you also have to talk to your base. The reality is here. If you lose your base, you can forget the center. You have to shore up your base and the core voters, if you look at the elections in New Jersey, in Virginia, Massachusetts, the people who put him in office were not coming back to the polls, so beyond the independents, his own folks are not there. That contributes to the low numbers.

AVALON: I disagree. I think that's a mirror image of the play to the base politics. If you look at New Jersey and Virginia, what happened is independent voters who voted for Obama in '08 swung hard towards Republicans. That's the narrative I see.

MARTIN: Young voters were not there, African-Americans were not there, Latinos were not there, core base voters for the Democratic Party.

BLITZER: The white house is kicking off what they are calling, John, right now a recovery summer. They are still really worried about a nearly 10% unemployment rate that looks like it's going to hold for the time being.

AVALON: Yeah. I mean, and it sounds -- it's got a great label and needs a good theme song. Again, the stimulus spending too date hasn't really date has not succeeded.

The stimulus spending is a band-aid on a budget and it can help the short-term employment, but in the long term, the job creation will come from the private sector and not the government, so there is a credibility gap here, and they can try to pump up the optimism going into the election, but today, that spending has not resulted in an increase in employment, and we are still down.

BLITZER: And Roland, really quickly?

MARTIN: Well, one of the problems you did not put enough money in for infrastructure. When you do that, you are targeting private sector, and when you had one-third going to tax cuts and only one- third to the infrastructure, and that is part of the problem. You have to be able to employ people, and infrastructure should have been 2/3 of the overall stimulus plan and it wasn't.

BLITZER: That is a smart discussion. Guys, thanks very much, Roland and John. Appreciate it.

Jack Cafferty is asking should the federal government sue Arizona over its new immigration law? Jack Cafferty will be back in a moment with your e-mail.

And one Alabama town didn't want to wait for the federal government to fight the oil spill, and the residents took the matters into their own hands, and we will find out if it worked.

And the attorney general has a new warning for mortgage scammers. We will explain.


BLITZER: Let's get back to Jack with the Cafferty File. Jack?

CAFFERTY: Question this hour, should the federal government sue Arizona over its new immigration law?

D. writes from Arizona, "I totally support our governor in this issue. I'm proud of her. For having the courage to take this stand, she, like we all, is tired of the lack of help we have received from the federal government with regard to protecting our civil rights and our borders."

Sandra writes from Temecula, California, "Sue them for what? Trying to enforce the laws already on the books and protect the state from the criminals and the high cost of supporting the illegals? Maybe Arizona should sue the federal government for not doing its job."

Stan in Boston says, "Why do people tell us what a majority of people want a law when we are discussing whether the law is constitutional? It is irrelevant to the discussion. A majority of the people in the country are Christian and would you say that a law requiring everybody to be Christian is okay because a majority supported it?"

Robert writes, from Arizona, he's retired colonel in the U.S. air force. "I served five counterdrug tours of duty along the border as a military intelligence analyst and I can tell you first hand that our state's border and I live in Prescott, Arizona, is indeed one very dangerous place to even consider visiting. The federal government has no business suing Arizona. The Arizona law, and I have read it, is written exactly like the federal law, and the government under both Bush and now Obama has failed to enforce our immigration laws."

Tom writes from Ecuador, "Not necessary. I am confident it will be challenged by others and in the fullness of time it will be decided by the Supreme Court."

Norm writes, "The federal government should thank Jan Brewer and Arizona for doing their job and then the government should step up to the plate and secure our nation's borders. The United States is a sovereign nation."

And Lynn says, "No, how dare they waste our tax dollars to try to challenge what the majority supports. Typical Democrats."

If you want to see more on this, you can find it on my blog, Wolf?

BLITZER: Jack, thank you.

Republican house leaders are taking credit for Congressman Joe Barton's decision to restrict the surprising apology to BP, but is the damage from Barton's remarks already done? Much more on this story coming up.

And the room is ready for a rare execution, here in the United States by a firing squad.


BLITZER: Lisa is monitoring some of the other top stories in THE SITUATION ROOM right now. Lisa, what do you have?

SYLVESTER: Hi there Wolf. Well, Catholics in Cuba are hoping for a visit from Pope Benedict. One of the country's Catholic bishops said today that he hopes the pope can make it to the island in 2012 for the 400th anniversary of the discovery of the image of Cuba's patron saint. It will be the first papal trip to the communist run country since John Paul II traveled there in 1998.

Attorney General Eric Holder's message to mortgage hustlers, "We will find you." The justice department introduced today what it calls operation stolen dreams, a 21-agency force on the lookout for mortgage scammers. Already close to 500 people have been arrested in cases that represent $2.3 billion in losses. Wolf--