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THE SITUATION ROOM

Rep. Rangel To Face Ethics Hearing; President Shares Regret with Sherrod; Bomber's Release Questioned; President Obama Trims the Fat; Top Secret America Revealed; Behind Russian Spy Swap; Using the Oil Spill to Prosper

Aired July 22, 2010 - 17:00   ET

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


WOLF BLITZER, CNN ANCHOR: Thanks very much, Rick. Happening now, the ousted employee, Shirley Sherrod, gets what she wanted, a conversation with the president of the United States. Will their phone chat put an end to this conversation of race and her resignation or will keep it going?

And severe weather right now threatening to set back operations in the oil disaster zone once again. We're tracking the storm system and whether recent progress in the Gulf of Mexico could be at risk.

And a former CIA and insider's take on Russian spying and intelligence failures here at home. I'll talk to Valerie Plame Wilson, the outed operative who was at the center of a political firestorm.

I'm Wolf Blitzer. You're in the "SITUATION ROOM".

All that coming up, but first, there's a developing story up on Capitol Hill. I want to go to our congressional correspondent Brianna Keilar. She got new information about veteran Congressman Charlie Rangel. Brianna, what are you learning?

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: The Ethics Committee is going to be taking formal action against the New York Democrat. In fact, a senior Democratic source tells us that the Ethics Committee has issued what's really the Congressional equivalent of an indictment and that he's going to be going on trial before the House Ethics Committee. So what this entails is the committee attorneys who have been investigating Charles Rangel will serve as prosecutors, present a case against him and then Rangel's attorneys will present their case.

It goes down very much like a trial and, Wolf, we're not exactly sure what the charges, if you will, what the charges are that Charles Rangel are facing, but we certainly know that there are a number of questions of possible ethics violations that have been hanging over his head for months and months, more than a year.

BLITZER: You know, I want to talk a little bit about some of those possible charges, but you caught up with him earlier, we did, on the Hill, and he spoke to you, right?

KEILAR: Yes, and let's take a listen to what he said. This was as soon as the news was breaking, and here's what he told reporters.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: This comes at a time, you know, we're close to elections, people are going to be looking at things to tar democrats with. You know, could potentially information on this, not necessarily against your future, but could Republicans use that against the Democratic Party?

REP. CHARLES RANGEL, (D) NEW YORK: Now that's a good question because, one, I don't know what Republicans are going to do, but if you're going to ask my personal political feeling, this couldn't happen at a better time for me, whatever it is, because it gives me an opportunity to respond to my friends and constituents that has been supporting me for close to 40 years, and all I've been able to give them is trust me. Well, now, the facts are going to get out, and I think that's good.

(END VIDEO CLIP)

KEILAR: But certainly, Wolf, it's been a difficult time over the last several months for Charles Rangel. Back in early March, remember, he stepped down as the chairman of the Tax Writing Committee in the House, a very powerful post, and again, we don't know exactly what the charges are that he's facing here, but no doubt, Wolf, they're serious.

BLITZER: But some of the possible charges have been out there for some time. Quickly, give us a few of them.

KEILAR: Perhaps the largest one, Wolf, has to do with $75,000 in income that Rangel got from a rental property that he owns in the Dominican Republic, and he failed to pay taxes on those earnings. This as he was just the head of the head of the Tax Writing Committee, and we also know that he has at least been admonished in the past for traveling to the Caribbean, corporate sponsored traveling in 2007 and 2008, and the Ethics Committee did hold him responsible for that as well, but there's a number of other lesser issues and maybe some we don't know about as well, Wolf.

BLITZER: All right. Brianna, we'll stay in close touch. Thanks very much.

Let's move on to other news we're following today. President Obama apparently decided he couldn't or shouldn't keep his distance from Shirley Sherrod any longer. Today, he spoke on the phone with the former agriculture department employee and expressed his regret for the events that led to her forced resignation. So, where does this leave the controversy and a huge political debate over race in America? Let's go to our White House correspondent, Dan Lothian. Dan, walk us through how this phone call came about.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: First of all, Wolf, White House agents have been trying to reach out to her since yesterday. In fact, they made two calls, but they did not get through. We're told by a White House producer, rather a CNN producer, who was with her that she had been getting a lot of crank calls, and so, she wasn't answering her phone. Perhaps, that's why the White House could not reach her. Nonetheless, a White House aide did reach out to her today, told her to call back in ten minutes. She did around 12:35 and was connected to the president and had about a seven- minute phone call.

The president apologizing and expressing regret for the events of the last few days. The president also talking about his memoir and how he has dealt with racial prejudice, and then the White House putting out a readout of that call where the president discussed how this misfortune can present an opportunity for her to continue her hard work on behalf of those in need, and he hopes that she will do so. That sounds very much like the president was prodding her a bit to accept another federal government job. The White House saying that's simply not the case, that the president was not putting any pressure on her at all.

Now, that CNN producer who was with her when that call was made was asked that the cameras not roll during the private conversation, but after the phone call, Miss Sherrod said she was pleased.

(BEGIN VIDEO CLIP)

SHIRLEY SHERROD, FORMER AGRICULTURE DEPT. EMPLOYEE: Just had the conversation with the president and was very, very good conversation, well pleased with how it went, and he wanted me to know he supportive, and I've been dealing with some of the same issues he's had to deal with through, you know, especially over the last five years. Just a good conversation.

(BEGIN VIDEO CLIP)

LOTHIAN: Now, Miss Sherrod said that they never talked about the accusation that someone at the White House put pressure over at the agriculture department for her to step down. She said right now, she hasn't decided what her next step will be, Wolf.

BLITZER: Dan, stand by for a moment. I want to go a little bit more in depth on this sensitive subject with our senior political analyst, Gloria Borger. She's here in the SITUATION ROOM. Got some new poll numbers.

GLORIA BORGER, SENIOR POLITICAL ANALYST: We do.

BLITZER: Americans in general and African-Americans in particular on how they view race relations in America right now.

BORGER: Yes, and the question we first asked is how they view President Obama. Take a look at this. When we asked how he's doing. The approval rating among blacks was overwhelming, as you can see, 93 percent, Hispanics 57 percent which is still good, but, of course, he's not passed immigration reform, but the real problem for Barack Obama and for Democrats is that 37 percent number of approval among whites.

If you look deeper into the poll, the real problem that the president has and the Democrats have is that white men, some of them calling themselves independent voters, are deserting the president and the Democrats in increasing numbers. If that continues, Wolf, it's going to be a big problem for them in the midterm elections.

BLITZER: Are African-Americans happy about race relations right now? They're obviously happy with the president.

BORGER: Right. They're happy with the president. What's interesting is we see that they become more disconcerted about race relations. Back in 2008 when Barack Obama was elected, 44 percent said that relations between blacks and whites will always be a problem so that was under 50. Now, it's up 15 points, 59 percent. So, ironically, you have an African-American president. People were optimistic.

Whites were at 41 percent in 2008. It's gone up to six points, but people were optimistic, particularly African-Americans, and just look at the week we've had, Wolf, with the NAACP and the tea party and Shirley Sherrod, and so, you can understand why that number had gone up.

BLITZER: But a big part of the sampling was done before the most recent developments involving Shirley Sherrod.

BORGER: That's right. It was done, and you know, if we had done it today, that 59 percent number might well be higher among African- Americans.

BLITZER: What are they saying, Dan, at the White House about race relations and this entire controversy?

LOTHIAN: Well, you know, Robert Gibbs today pointing out that this is a teachable moment but not stressing or defining who the teacher is in this scenario, but nonetheless, he did say that there were a lot of questions that should have been asked that were not. Take a listen.

(BEGIN VIDEO CLIP)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: The next time I hear about an event like this and a decision that's made somewhere, you stop and ask, did we look at the whole context? Did we look at everything? Do we know when that story was? Do we know what her background is? Do we know how the story ends? Certainly, I think some stuff like that is helpful and reflective.

(END VIDEO CLIP)

LOTHIAN: Now, privately, some White House aides have been angry that on a week when they should have been celebrating some of their economic accomplishments that instead this story has dominated the headlines, but publicly, Robert Gibbs today, when I asked him if they were frustrate that this story had sort of drowned out all of these economic accomplishments, he said no.

BLITZER: All right. Dan Lothian, thanks very much. Gloria Borger thanks to you as well. We're going to have a lot more on this story coming up later.

Before the deepwater horizon rig exploded we're learning that many workers on board were living in fear, constant fear. Stand by for details of a new report that has been obtained by CNN.

Also, what liberals want from President Obama? Their demands and dissatisfaction now on display in Las Vegas. Jessica Yellin is out there.

And an openly gay soldier, a West Point grad, is discharged on this day from the United States army. What's going on? Stick around. You're in the "SITUATION ROOM".

(COMMERCIAL BREAK)

BLITZER: Let's get to the oil disaster zone in the Gulf of Mexico. A new severe weather system could be on track to strike the Gulf Coast just when progress is being made toward a long-term solution. Let's check in with David Mattingly. He's joining us from Theodore, Alabama with more. I think a lot of folks, David, are worried about weather right now.

DAVID MATTINGLY, CNN NATIONAL CORRESPONDENT: That's right, Wolf. Everybody watching that storm, and today, we actually got some good news from Admiral Thad Allen who says they now have enough confidence in that well to leave it abandoned for several days if a storm comes through, and they're actually preparing for that, so that is good news that they'll be able to abandon that well, leave it closed and not have to open it up and let oil back out into the Gulf of Mexico for a storm.

But as this storm comes through, it's going to disrupt operations out there, anywhere from 10 to 14 days, and right now, the Coast Guard is already taking some steps to get all their equipment to safety.

(BEGIN VIDEO CLIP)

CAPT. STEVE POULIN, U.S. COAST GUARD INCIDENT CMDR.: We're starting to relocate equipment from low-lying areas. We're moving it to higher ground, and we're taking the precautions that we think we need to take to make sure that we're prepared if the storm does come this way. We're watching the trajectories closely.

(END VIDEO CLIP)

MATTINGLY: Part of the equipment they're going to be bringing in, they're going to be pulling in a lot of the boom that's been deployed. This is one of the major deployment areas for boom. They bring a lot of this in to be cleaned and repaired. They've been doing a lot of work out here in this good weather, but as that storm comes in, there's going to be a lot of boom coming in because they don't want to leave it out there during a storm so that it gets pushed into the sensitive wetlands or sensitive coastal areas that it's actually trying to protect.

These booms could do a lot of damage on their own in a storm surge. So, that's part of what they're doing. They're also looking. They're going to be making a decision a little bit later today if they should start disconnecting that drilling operation that's drilling the relief well for the BP well. So, that decision coming soon as well. Everything in a stage of flux right now watching to see what happens with that storm -- Wolf.

BLITZER: All right. We're going to watch it closely. Chad Myers is going to be joining us later for more detail forecast because the ramifications are enormous right now. Thanks, David Mattingly on the scene.

Let's take another look right now and a new slip in President Obama's poll numbers. His approval rating has dip below the 50 percent mark for the first time since March in our brand new CNN Opinion Research Corporation Poll. Check out the disapproval numbers in the poll, 38 percent of those who disapprove of the way the president is doing his job think he's simply too liberal, 9 percent, however, say he's not liberal enough.

Our national political correspondent, Jessica Yellin, has been talking to liberal activists. She's joining us now from Las Vegas where there's a convention under way, the Net Roots Nation Convention. What are you hearing from folks attending this convention, Jessica?

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Wolf, these are the folks who constitute that 9 percent who think the president is not left enough, and they're progressive organizations and bloggers who think right now that Congress -- the leadership in Congress and at the White House is too beholden to corporate interests and too willing to capitulate to the right, and they are organizing to try to move them and the agenda to the left. And they actually -- you called them liberals. They say they're not.

The difference in their view is that the liberals define an older world view where just having the right perspective is enough, the correct perspective is enough, but they didn't fight for it enough. These folks say they're willing to use polling, online fundraising, the power of the blogs to fight even within their own party to move the agenda and are willing to target a number of leaders in Congress and even the president, Wolf.

BLITZER: They are also -- I'm sure, a lot of buzz about the Shirley Sherrod story that's going on out there and a conservative blogger who basically got this whole story going. What are you hearing?

YELLIN: A lot of talk about it, Wolf, and I spoke with Marcos Moulitsas, who is the founder -- one of the key leaders in this movement and the founder of Daily Kos Online. He blames the media in part for, in his view, running with right wing -- that's his language, right wing attacks, as he puts it, but he also blames the White House for not vetting enough. Listen to what he had to say.

(BEGIN VIDEO CLIP)

MARKOS MOULITSAS, DAILY KOS FOUNDER: Right wing outrage. Instead of capitulating, they should have gotten all the facts, and they should have gone to war against these people who are out to destroy them. I mean, Andrew Breitbart has made it very clear that he wants nothing short and the destruction of the NAACP and of Barack Obama, and so when you realize that you have an opponent, an enemy who's out to destroy you and puts out material, vet it first before caving to it.

(BEGIN VIDEO CLIP)

YELLIN: Wolf, they say they hope that the White House has learned a lesson, and they also say they think the White House is more willing to respond to attacks from the right than to attacks from progressive, and they wish that the White House would listen to them, folks here, more -- Wolf.

BLITZER: I'm sure. They do. All right. Jessica, thanks. We'll check back with you. Jessica is in Vegas right now.

A former CIA insider take on that infamous Russian spy swap. I'll ask an the outed officer, Valerie Plame Wilson, just how far the U.S. will go to protect its own operatives.

And what prompted Queen Elizabeth to rescind one guest invitation to her annual summer garden party? We have the details coming up.

(COMMERCIAL BREAK)

BLITZER: Lisa Sylvester is monitoring some of the other top stories in the Situation Room right now. Lisa, what else is going on?

LISA SYLVESTER, CNN CORRESPONDENT: Hi, Wolf. 2.8 million jobless Americans are about to get their unemployment benefits back. President Obama was set to sign an extension for unemployment benefits this hour ending a seven-week standoff. Today, the House gave final approval to push back the deadline and file for extended benefits until the end of November. Unemployed workers stopped getting the checks in early June.

And the Utah attorney general's office is launching an investigation into the leak of government data for an illegal immigrants' list. Two state employees are accused of being involved with the list which contains personal information for 1,300 purported illegal immigrants. The list, which officials say contained inaccurate information, was anonymously sent to media and government offices across Utah last week. An accompanying note said those on the list should be deported.

And the guest list for Queen Elizabeth's annual summer garden party for public service was at least one short today. That is because the invitation to far right politician, Nick Griffin, was rescinded after according to the palace, he blatantly politicized it. The palace says his presence would have posed a security threat and caused discomfort for others. Griffin solicited questions for the queen on his party's website.

And South African activist and former archbishop, Desmond Tutu, says he is retiring from public life. The Nobel peace prize recipient will time his retirement with his 79th birthday which is this fall. Tutu rose to prominent in the 1980s as an opponent of apartheid. He said he'll slow down to sip tea with his wife in the afternoons, watch cricket and to travel to visit his children and grandchildren, and that is a nice way for retirement -- Wolf.

BLITZER: I hope he enjoys his retirement. He deserves it. He's worked hard for many, many years. All right. Thanks very much, Lisa, for that.

Safety problems aboard the deepwater horizon oil rig revealed. CNN obtained some portions of a confidential study of conditions before the rig disaster.

Also, was the U.S. duped by an Iranian scientist who may have been working as a double agent? I'll talk about that and a lot more with the former CIA insider, the outed operative, Valerie Plame Wilson.

(COMMERCIAL BREAK)

BLITZER: An openly gay soldier and outspoken critic of the "don't ask, don't tell" policy has revealed today he's been formally discharged from the United States army. Lieutenant Dan Choi, a West Point grad, was arrested back in March for handcuffing himself to the White House fence in protest for a policy that bans gays from serving openly in the United States military.

Our Pentagon correspondent, Chris Lawrence, is joining us now with more. Chris, I'm sure Lieutenant Choi knew this was coming. He had been removed for some time. It was only a matter of time before he was formally discharged, I assume.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Yes, Wolf. You know, we spoke with Lieutenant Choi this afternoon, and he knew it was coming, but he told us, quote, "You know, you prepare yourself." He said I had built up an armor, but it is still an emotional roller coaster. Now, Lieutenant Choi says he just got a phone call today from his battalion commander letting him know about the discharge, but, you know, when I called the Army National Guard up there in New York, they said they'd emailed him four times, they left messages. They had even sent his discharge papers to his family's home.

Now, we know that some senior military officials have come out publicly saying they're not going to actively or aggressively try to discharge service members under "don't ask, don't tell" at this point, but Lieutenant Choi was a different case because his case was well into the pipeline already, and he had made several, you know, public scenes, you know. At one point, he went on a hunger strike. He had appeared at some blatantly political events in his uniform and most recently he chained himself to a fence outside the White House to protest the "don't ask, don't tell" policy.

BLITZER: So, are they saying because of those activities, chaining himself to the fence, for example, that's why he was discharged today, otherwise, they would have let him go on for some time?

LAWRENCE: No. Those are just examples of how public he took it. What they're saying is, you know, they're not going -- there's not going to be any witch-hunt out there where they are actively going out and trying to find people to discharge under "don't ask, don't tell." Lieutenant Choi was very different. He was very public about his homosexuality and about the cause that he believed in the military.

BLITZER: It's interesting, I got to say, because the president now says he wants to get rid of this policy, the secretary of defense. They're reviewing it over at the Pentagon where you are right now. Where does that stand this review before it formally gets thrown out, the whole policy of "don't ask, don't tell?"

LAWRENCE: Yes. I just checked on that this afternoon, Wolf, and right now, as of today, about 40,000 troops have returned their questionnaires to the military. That's out of about 400,000 that the military sent out. Equal mix, active duty and reservists. They're asking them questions to gauge exactly, you know, what's going to be the military position. What are they going to recommend coming out of this as to how this could affect the service. Some of the questions include, you know, how much did serving with a gay or lesbian service member affect your unit's morale?

If "don't ask, don't tell" was repealed and you were assigned to an open bay shower, what would you do? So, those are some of the questions that the troops are right now filling out, and then this commission will take those answers, process them and will at some point get an idea of where exactly the military feels that it stands on this issue.

BLITZER: All right. Thanks very much, Chris Lawrence with that update. We'll continue to watch this story, a very sensitive story indeed.

Let's go to our strategy session right now. Joining us are CNN political contributors, the democratic strategist, Paul Begala, and the Republican strategist, Ed Rollins. Both of whom worked in the White House for different presidents, different administrations. Paul, to you, first, how could this blunder have happened the way this Shirley Sherrod -- the Department of Agriculture employee, was so badly mistreated from so many folks, but let's focus in on the White House first?

PAUL BEGALA, DEMOCRATIC STRATEGIST: Well, you know, I asked that question of the White House official, and I got a response, Wolf, that I have to confess I never gave to you when I was working at the White House, and you were covering us, and that was humility. My source in the White House said, look, we made a mistake. I reminded him of what otter said in "animal house" to flounder. You messed up, you trusted us. You know, the White House believes they made a big mistake here in believing the right wing media.

They should have known better, and they're very candid about it. I have said both Tom Vilsack who's now offered her a job back is still viewed as a stand-up guy in this, and the president did the right thing to call this woman who've been maligned in part by his government.

BLITZER: You made mistakes when you served in the white house, too, Ed. Give us your take on how this blunder occurred.

ED ROLLINS, REPUBLICAN STRATEGIST: It was too quick. I mean, they obviously should have -- even if she did what they thought she did should have given her due process. I think that they are so overly sensitive on the racial interest because of the tea party and the NAACP and the bottom line at any white house you need to at least stop and think what your actions are and make sure you have all the facts, on any decision at the white house, let alone one like this.

BLITZER: One of the problems here, and correct me if I'm wrong, Paul, because you're close to a lot of insiders, they were trusting Tim Vilsack over at the department of agriculture that he knew what he was doing.

BEGALA: Well they have high regards still at the White House for Tim Vilsack. You know he was the governor of Iowa and then now he's gotten great reviews particularly from farmers as our agriculture secretary. They did not throw him under the bus when I contacted my sources at the white house, and I admire that, too. The one new thing that I learned today is that Willie Nelson has even weighed in on this, Willie of course is a country singer but also one of the great defenders of the American farmer. He wrote a blog post today at the Huffington Post where he said I know this woman Shirley Sherrod and she has been a great friend to the Americas farmer. When Willie Nelson is on your side -- I'm from Austin, my in-laws in Austin if you don't believe in Willie we call you an atheist. So when Willie's backing her up that's even better than the president with all due respect.

BLITZER: Should the president do anything else right now, Ed, follow up the phone call, a teachable moment, deliver a speech, invite her over to the oval office, or should he just sort of move on to other issues?

ROLLINS: He's called and apologized. Obviously the secretary has apologized profusely. They have offered her a job. They can't repair the damage that was done to her, but I think at the end of the day, you know, the longer you keep this going the more dangerous it becomes to her and everybody else. The key thing is to remember the mistake and be very, very sensitive to both the issue and to human beings who work for you in the government.

BLITZER: And to remember the lessons learned from this mistake. Let me move on to talk a little bit about Lockerbie and the convicted terrorist who was released more than a year ago, Paul. He's now in Libya, back in Libya, al Megrahi. Scotland now says, you know what, to the U.S. senators who want a full investigation to see if BP played a role in encouraging the U.K. and Scotland to release this convicted terrorist because of potential oil deals off the coast of Libya. Scotland is saying thanks, but no thanks, we're not cooperating with any Senate investigate. Smart or not so smart?

BEGALA: It's outrageous. I think the senate foreign relations committee Robert Menendez, not the chairman, will be chairing this hearing looking into whether BP pressured the Scottish officials to release this terrorist, and I'm glad that the committee is doing this. I'm infuriated that the Scots are not cooperating. They made a decision to release a man who murdered 270 people, 189 of whom were Americans, and it's clear they were wrong. They claimed that the guy had three months to live. That was 11 months ago. Now there's some reporting that one of the doctors who examined him was paid by the Libyans and now says the guy might live for ten more years. It's just an outrage and I'm glad the senate's looking into this. I hope the Obama administration will back up the Senate here. I know the president raised this issue in their meeting with Prime Minister David Cameron in their meeting.

BLITZER: Was it a coincidence or more than a coincidence, Ed, that a few months after he was sent back to Libya, the terrorist, BP got the oil deal off the coast of Libya in.

ROLLINS: This whole story smells, I mean, to high heaven. I think the bottom line is the Scottish behavior here convinces me that something went on. There's no doubt in my mind that BP made some kind of a deal here. I think -- I agree totally with Paul. This is a bipartisan answer and it ought to be a bipartisan solution. This is outrageous. Americans were killed. They lied to us basically to allow him to be free, and I think that we ought to fully investigate, it however we can, and the Scottish government doesn't want to cooperate, we shouldn't cooperate with them the next time they need our help.

BEGALA: Let's stop drinking scotch.

ROLLINS: I do like Irish whiskey but I've a scotch drinker so I won't stop there.

BLITZER: A drastic step which I suspect a lot of folks are not going to take but will it have an impact on U.S./UK relations, relations between the Obama administration and the new government, this coalition government of the British prime minister David Cameron?

BEGALA: Well, at one level it probably has to because there's 189 dead Americans who cry for justice. At the same time, there's been a lot of reporting that David Cameron, who is now the prime minister from the Tory party, the conservative party, he opposed this release, and so, you know, I can see he and President Obama sitting around complaining about the messes they inherited from the predecessors. They run these two great countries and I think looks like the United Kingdom and Scotland has wronged the United States of America and I think we need our government to stand up for the memories of those dead Americans.

BLITZER: There's no doubt that David Cameron and the opposition, he strongly opposed the release of al Megrahi, Ed. Give us a final thought.

ROLLINS: Listen, we've had too strong a relationship with Britain. It's new government and we need to do everything we can to cooperate with them. I would hope over a period of time Cameron would encourage the Scots to cooperate with us fully.

BLITZER: Thanks very much for coming in.

Top secret America exposed as too big and too difficult to manage. The former CIA officer Valerie Plame Wilson, she's getting ready to speak to us about problems within the U.S. intelligence community and more.

And should the world be worried about a meeting between two notorious figures, the man who confessed to the Times Square bomb plot and the leader of the Taliban in Pakistan?

(COMMERCIAL BREAK)

BLITZER: President Obama is renewing his pledge to reduce government waste signing into law today a measure requiring federal agencies to spend at least $1 million annually on audits directed at improper payments and fraud. He noted that last year the government improperly spent, get this, $110 billion, with a "b," billion dollars. The president also discussed ways his administration is already trying to trim some of the fat.

BARACK OBAMA , PRESIDENT OF THE UNITED STATES: We began by combining, by going through the budget line by line and proposing $20 billion worth of cuts each year by targeting programs that are wasteful, duplicative or in some cases just plain ridiculous like the $35 million we're spending for a radio navigation system for ships since we now have a thing called GPS. We don't need it. Or the $3 million that was spent on consultants to create seals and logos for the department of homeland security. Their logos and seals are fine. Or the billions of dollars slated to be spent on a fancy new presidential helicopter fleet I didn't want and need because marine one is also fine.

BLITZER: $110 billion improperly spent. Mr. Obama says it's his goal to reduce improper federal payments by $50 billion between now and 2012. We wish him good luck on that mission.

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

LISA SYLVESTER, CNN CORRESPONDENT: Hi there, Wolf. Rangers in Wyoming's Grand Teton National Park are searching for a missing climber today. Sixteen climbers were plucked off the mountain during a severe lightning storm Wednesday. Fellow climbers say he fell out of sight over a cliff but it's unclear how far he slid. Storms have hampered the complicated rescue operation which involves rangers dangling from hovering helicopters for hours at a time.

And look at what torrential storms have left behind in northeast China. A state run news agency says more than 152,000 people have been displaced after the collapse of 57,000 homes. The rains this year have been the worst in a decade claiming the lives of at least 700 people with hundreds more missing. The Chinese government blames the massive flooding on aging reservoirs badly in need of reinforcement. And model Naomi Campbell remains a reluctant witness in the war crimes tribunal of former Liberian dictator Charles Taylor. Prosecutors have been trying to tie Taylor to what's known as blood diamonds that fueled brutal conflict in Sierra Leone. After witnesses reported Campbell bragged of being given a large uncut stone by Taylor, the supermodel was subpoenaed to appear next week and Campbell is trying to postpone that appearance.

BLITZER: All right Lisa. Thank you.

An insider's perspective on the infamous Russian spy swap. Just ahead, I'll speak with the outed CIA operative Valerie Plame Wilson and ask her how far the U.S. will go to protect its own operatives.

And a confidential report revealing a climate of fear aboard the deepwater horizon in the weeks before it exploded. We're investigating.

(COMMERCIAL BREAK)

BLITZER: It's called "Top Secret America," a "Washington Post" investigative series revealing an undercover U.S. national security operation. Perhaps too big, too big, way too big. It's raising serious concerns about whether the country is as safe as it should be. Joining us now to talk about that and much more, the former CIA officer Valerie Plame Wilson, the 2003 leaking of her identity sparked a huge national political firestorm that all of our viewers remember. Valerie is in Los Angeles right now promoting a new documentary entitled "Countdown to Zero." We'll talk about that in a few moments. Valerie, thanks very much for coming in.

VALERIE PLAME WILSON, FORMER CIA OFFICER: Thanks for having me.

BLITZER: It was a three-part series, very long, very detailed. The gist said this in this article in the "Washington Post." I'll read it to you. "The top secret world the government created in response to the terrorist attacks of September 11th, 2001, has become so large, so unwieldy and so secretive that no one knows how much money it costs, how many people it employs, how many programs exist within it or exactly how many agencies do the same work." You've had a chance to review it. Do you agree with that assessment?

WILSON: The sad truth is for those of us in the intelligence community who care about it, involved with it, this is not news. This is something that we have known since 9/11. It is so unwieldy and bureaucratic that I am afraid that we are not as safe as we should be.

BLITZER: Well, when you served as a clandestine officer in the CIA, you saw this explosion in the growth. How did it directly affect your work?

WILSON: It comes mostly in the -- incredible growth of contractors. It's now estimated that it's up to 60 percent of our intelligence budget which I find unbelievable that so much of our core intelligence functions have been outsourced so it calls into question the loyalty. I mean, who are they loyal to? Is it to their government or to whomever is writing their paycheck? There's institutional knowledge that's at stake and it's the article, the whole series points out very well. No one really has a grip on what -- who is reporting on what. There is a heavy repetition, and I believe that my former CIA colleagues feel as everyone in the intelligence community feels this burden.

BLITZER: Well, one of the criticisms before 9/11 was the left hand of the U.S. intelligence community was not talking to the right hand of the U.S. intelligence community. The dialogue and the communication was terrible. Has that been repaired based on your inside information?

WILSON: I don't think it has to the extent that it needs to be. In the aftermath of 9/11, the 9/11 commission, I think in what was a knee jerk reaction, put together the -- the director of national intelligence which is sort of a super structure over the whole community, and -- and it doesn't really make things more -- it does not make our intelligence gathering more effective.

BLITZER: Should they get rid of that job, the director of national intelligence who is supposed to coordinate and oversee the 16 separate intelligence gathering operations?

WILSON: Well, as you know, in the CIA was formed in the aftermath of the attack on Pearl Harbor because it would centralize intelligence, and so that we would not have a surprise attack like that again. We've -- what's happened with the DNI, he has neither the legal authority nor the real responsibility to shape up what needs to happen.

BLITZER: Let me pick your brain on a couple of espionage stories that have surfaced over these past few weeks. The Iranian scientist who supposedly was on the U.S. payroll came over here and gave the CIA a lot of inside information, but now has gone back. In recent days the Iranians was saying he was always a double agent, wanted him to come here, pick the brains of the CIA and tell us what he learned and now he's back in Tehran. What do you make of that charge?

WILSON: There's two possibilities. One, that he was a plant from the beginning or that he, you know, lost heart and decided to go back. Neither scenario is a good one for us. I find it very strange. How would he have done this internet video where he says he was abducted and, you know, is being held against his will? How did he manage to post that video? There are a lot of questions there, and none of them are good news for U.S. intelligence, particularly on Iran which maybe he had just a little bit, and we got overexcited, but if you'll recall what happened to Saddam Hussein's son-in-law, defected, went to Jordan and told us a lot about the Iraqi nuclear weapon programs and went back and was kissed on both cheeks by Saddam Hussein and then summarily executed.

BLITZER: We'll see what happened to the Iranian scientist in coming weeks and months.

This Russian spy swap. Was that a good idea, bad idea? You know some of the details. Anna Chapman, of the lovely redhead part of that Russian espionage ring in the United States.

WILSON: Everyone always talks about the cute redhead, first off. I was taken with how the speed in which the swap occurred. Clearly the FBI had been following this for a decade so they were prepared for this possibility. I was taken with the fact that they didn't seem to be reporting on anything of much value. My -- this is just my speculation. Maybe it was a program that started under the cold war before the internet era and through bureaucratic inertia, it's continued on, because it seemed what they were giving their Russian handlers was a couple of clicks and a Google search would have provided with. They put a lot of effort into this, and not a lot of bang for the buck.

BLITZER: I know you are in L.A. to promote "Ground Zero" which is a documentary trying to get everybody to do away with the nuclear arsenals. Is that realistic given the reliance that U.S. and Russia or China or some of the other countries have?

WILSON: I think that it is realistic, and all of us that have worked on this, it comes from the same producing team from "Inconvenient Truth" we wouldn't do it if we didn't think that we could in fact veer off of the path. I don't think it'll be anytime soon. But no one has expectations that we will do this unilaterally. It must be done very thoughtfully and in a disciplined fashion where you said there is a set plan that we will go through to ultimately get to zero. I think that you need to have that as the ultimate objective.

BLITZER: It is getting good reviews, "Countdown to Zero" this new documentary. There is a new movie coming out in November which is the movie of your own book "Fair Game." Naomi Watts plays you and Sean Penn plays your husband Joe Wilson, the former U.S. diplomat, and it is obviously something that you are looking forward to, right?

WILSON: It is. It's the most surreal thing. But, it's a very powerfully told story, and Naomi and Sean do, of course, beautiful jobs, and it is an important piece of the history.

BLITZER: We will look forward to that as well. Please come back. Valerie Plame Wilson, thank you very much.

WILSON: Thank you for having me.

BLITZER: It is the biggest concern right now in the Gulf of Mexico. A severe weather system may hit the region.

And also, our terrorist expert is joining us on a revealing new video that's just out. It shows the man who confessed to the failed Times Square bomb plot meeting with a key Taliban leader.

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BLITZER: The oil spill in the gulf is certainly taking a devastating toll on residents, and despite that, some are using the spill to try to build up America. CNN's Tom Foreman is joining us in Biloxi, Mississippi right now. Some of these residents, Tom, they are taking advantage of the opportunities to rebuild their lives and get some homes. What are you seeing? What are you hearing?

TOM FOREMAN, CNN CORRESPONDENT: Well, you know, Wolf, it is the only thing they can do. They have been coming back and forth and I have been coming back and forth along this coast all summer long talking to a lot of different residents, and what they are doing is really is the same thing you do in a flood. They are sort of backing and filling. They are trying to take up the slack for all of the business they lost. They know they have lost a lot of fishing jobs. They know they have lost an awful lot of tourism here, and so, what you see is hotels and restaurants and pawnshops and gift shops and anything that you can putting out the welcome mat in many ways for all of the cleanup workers saying, that we have to get all of the business we can while we can. Nobody here has any idea that it is going to fill in across the gulf for all that they have lost, but in some little pockets, particularly some of the smaller towns that didn't get so much of the tourist trade or the fishing trade, it has helped them, because it has forced people into the areas some.

But Wolf, that is what they are doing now. They are trying, and this is building up America, and it is about people finding solutions, and this is sort of a temporary solution for them, because they know this is bad for the region, but if they can do enough of it, they think that they can offset some of the losses, as I said, back and fill, and protect themselves a little bit until maybe the situation gets a little better, and they can start to really rebuild again. Wolf

BLITZER: They are rebuilding again from Katrina five years ago. How do they think that the oil spill is going to affect them in the long term?

FOREMAN: You know, Wolf, that is really the problem that everybody here has told me over and over again as I have come back, they want to be optimistic. They want to build-up, but what they are saying is that nobody knows how it will affect them. They reopened some fishing today and talked about whether or not the oil is coming in, and how much oil is coming in and how much is not going to come in and they know they have lost the tourism for the summer by and large, and many of them are upset about that, because I have to tell you that most of the beaches I have gone to are the same where people can come here and have a great time, but the estimates are all over the map, and I have seen estimates of quarter million jobs lost and $10 billion lost in this part of the coast, and others say it is more like 20,000 jobs and only a little bit, good bit less money talking about there, but no matter how you slice it, it is bad news, but the question is how bad. Wolf, people here feel like they won't know that until they know for sure that the oil has stopped, and they have had time to see how much is going to come in, and see how much the losses expand. Wolf?

BLITZER: We will hope for the best and wish them only success. Tom Foreman, thank you very much. We will take a quick break and much more news after this.

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