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THE SITUATION ROOM

Rig Alarm Disabled Before Blast; Storm Forces Gulf Evacuations

Aired July 23, 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 oil disaster site now being evacuated as tropical depression Bonnie gets closer and closer. I'll speak with the incident commander, Thad Allen, about his worst fears about this coming storm. Stand by.

Also, an emotional reunion for Shirley Sherrod that capping a week of controversy over race and her forced resignation. We're digging deeper into a history of discrimination by the U.S. agriculture department, and money owned to black farmers.

And a former Republican senator may be out to get Michael Steele. I'll ask Norm Coleman if he's serious about a possible challenge for his party's top job.

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

Up first this hour, a failed flaw aboard the deepwater horizon rig when it exploded and unleashed the worst oil disaster in U.S. history. We're just learning now, just now, that an alarm system, get this, had intentionally been disabled for about a year before the April 20th blast that killed 11 workers. The platform's chief electronics technician testified today before a federal panel. He explained that the rig's fire and gas sensors were active, but its computer system was inhibited word so it wouldn't trigger any kind of general alarm or an automatic engine shutdown. Listen to this.

(BEGIN VIDEO CLIP)

MIKE WILLIAMS, TRANSOCEAN, CHIEF ENGINEER TECH: When I discovered it was inhibited about a year ago, I inquired as to why it was inhibited. And the explanation I got was that from the OIM down, they did not want people woke up at 3:00 in the morning due to false alarms.

UNIDENTIFIED MALE: Did you voice a concern to anyone about the possible safety issues with that?

WILLIAMS: Yes, sir, I did.

UNIDENTIFIED MALE: Who actually recommended that they skip an inhibited sake (ph)? Who on the rig was in charge of that system?

WILLIAMS: The operators, the BP operators were the first level. (END VIDEO CLIP)

BLITZER: Williams says the alarm was one of several critical systems that weren't working like they should around the time of the blowout.

To the tropical depression right now that's churning toward the Gulf of Mexico. Bonnie was downgraded just a short while ago and is moving quickly over Southern Florida after making landfall near Biscayne Bay earlier this morning. Forecasters now say the storm could strengthen as it moves into the Gulf later tonight. BP has suspended work on the relief well designed to permanently seal the leak. The incident commander, Thad Allen, has ordered ships in the area to go to shore, leaving the new well cap unattended for at least 48 hours. Allen says it's not yet clear how the storm might affect the spill, itself.

(BEGIN VIDEO CLIP)

ADM. THAD ALLEN (RET.), NATIONAL INCIDENT COMMANDER: There's been some question about the fate of the oil during the storm passage. I think there's a good and a bad part to that. Sometimes, the increased activity on the surface, wind and wave activity, can actually help the emulsification of the oil and the distribution of biodegradation of the oil. On the other hand, you have a chance of a storm surge driving it up into beach and marsh areas where it wouldn't have been drilling, otherwise.

So, we're mindful that those are two opposite consequences and prepared to move out and aggressively attack this one to see once the threat has passed through, but in the meantime, preservation of life and preservation of equipment are our highest priorities.

(BEGIN VIDEO CLIP)

BLITZER: I'll speak with Admiral Allen about the storm right here in the SITUATION ROOM. That's coming up in our next hour. Stand by for that.

But let's go right now to our severe weather expert, Chad Myers, for the latest on this storm. Walk us through where it's been, where it's heading.

CHAD MYERS, AMS METEOROLOGIST: It came onshore right Miami-Dade and moved across the Everglades and is now exiting on the other side of Florida. So across from the Bahamas right on across South Florida now back into the Gulf of Mexico. And in a normal storm, it would start to redevelop, and it could be something very big. But what we have, it's hard to see. This is kind of the invisible shield here. Look under the word "of". There's a spin out here in the middle of the Gulf of Mexico. That is an upper level low pressure system, the kind that actually make big snowstorms for buffalo sometimes, Wolf, in the winter time.

You hear the weather guy say, an upper level disturbance made this big snow that we didn't know was coming. Well, because you can't see it very well. There it is. You can't see it very well either here but notice all of this cloud cover that's being torn off the potential tropical storm hurricane here. Now, it's only a tropical depression. Because of all of this cloud cover and all this tearing, this thing can't live and it's not living. That's why it's lost a lot of its energy already. Here's what's going on. Here's the upper level low. It's back out here. I'll draw here so you can kind of see it better. It will shift off to the west. So, they will move away.

But as it moves away, the hurricane or the tropical storm or now the tropical depression doesn't get to be anything because of the wind. A tropical system wants to be all by itself. It really, really likes to be out there and not have any wind with it whatsoever. Because this isn't going to happen, because there is going to be wind, this thing will not grow to like it would be. Here is the eye of the hurricane, sinking motion, clear skies. Here is the eye wall. Big storms here. This wants to be up and down. Up and down.

That's how the heat engine runs of a hurricane. When you take the tops of the storms and you blow them apart, you don't get this up- and-down motion anymore, and you don't get the storm to get bigger. And this storm, I think, is a dud at this point in time. Great news. It is forecast to be a 45-mile-per-hour storm as it moves over the oil. I think it might not ever get back to be a tropical storm at all.

BLITZER: So out of an abundance of caution Admiral Allen removed all those ships, those workers. Was that a mistake you think?

MYERS: Oh, no, absolutely not. You don't want to have those guys and women out there in even 35-mile-per-hour winds. No. There was no reason to leave it out there. The well was secure. It was a perfect move.

BLITZER: All right. Let's move on, Chad. We're going to check back with you.

All along the Gulf Coast right now, some local authorities fear that the feds are, in fact, being too cautious in their response to this storm. David Mattingly is picking up this part of the story. You can't blame Admiral Allen for being very cautious. He doesn't want to interfere with folks' lives if you will, David.

DAVID MATTINGLY, CNN NATIONAL CORRESPONDENT: That's right, Wolf. And you can't blame him for wanting to protect all that equipment and all the assets that they've committed to this cleanup procedure. But right now, the argument is about what to do with that equipment. The local officials are saying the federal government is trying to take that stuff too far away for safe keeping when it should be kept a lot closer to shore, and they're removing it a little too quickly for their taste. In fact, in this area alone, there's an elaborate system of barges in place to stop the oil from coming this way.

The oil has come this way every single time there's been any kind of tropical system. So, the idea of a possible tropical storm coming this way and a direct hit means there could be a lot more oil coming with it. So, there was a big fight about those barges. In fact, one local official that I talked to today actually issued a legal threat.

(BEGIN VIDEO CLIP)

KEVIN DAYS, ST. TAMMY PARISH PRES.: They were moving everything out of here, South Louisiana to who knows where?

MATTINGLY: Whether you wanted it to move or not?

DAYS: That's correct.

MATTINGLY: Is this true, you actually threatened to arrest anyone who moved --

DAYS: Yes. I mean, I'm sorry about those actions, but I'm going to defend this area against the oil and take whatever action is necessary. I issued an executive order that said no assets that are dealing with BP oil recovery or any of its contractors could relocate any of their assets out of my parish.

(ENDVIDEO CLIP)

MATTINGLY: Now, it's probably not going to come down to anybody getting arrested over this because they did talk it out. There were some very heated meetings yesterday and went on for hours, I'm told. They finally worked it out. They're going to keep the barges a little closer into shore where they will be able to replace them quickly after the storm passes. That's making everyone happy at this point. But I also talked to Admiral Allen about this. And he was talking about the need to protect this equipment, this vital equipment in fighting this oil, and he says his decisions were driven by his experience from hurricane Katrina.

(BEGIN VIDEO CLIP)

ALLEN: The intention right now is to put the vessels in a safe place so they can return as quickly as possible to resume their operations. I'm still haunted by the specter of flying in over New Orleans on the 6th of September as a principal federal official and looking down at New Orleans to a parking lot full of buses that were flooded and not used for evacuation because they were not moved in time.

(END VIDEO CLIP)

MATTINGLY: But a lot of local officials here keep pointing out that they respect that point of view, but they keep saying, look, this isn't hurricane Katrina and the best news they could be getting right now is watching what Chad was just talking us through that this storm seems to be falling. They hope it stays that way -- Wolf.

BLITZER: And we can only hope. And I'll be speaking a lot more about this in our next hour with Admiral Allen. David, thanks very much for that.

A day after Shirley Sherrod finally spoke to the president of the United States, she got very emotional at a reunion with the couple that played a key role in the entire controversy surrounding her. We're going to let you listen in. Stand by.

And new evidence that corporate fat cats got richer by more than a billion dollars even as taxpayers were bailing out their firms.

And now, we can see the planet Mars like we've never seen it before.

(COMMERCIAL BREAK)

BLITZER: The former agriculture department employee, Shirley Sherrod, says President Obama didn't actually say he was sorry when they spoke about her forced resignation, but Sherrod says she believes he apologized simply by talking to her on the phone yesterday. Sherrod capped a week of controversy today by reuniting with a white Georgia couple that credited her with helping save their farm. They were mentioned in the speech given by Sherrod that was taken way out of context by a conservative blogger who accused her of racism. Now that Sherrod's essentially been vindicated, she enjoyed this reunion arranged for a CNN special report. Listen to this.

(BEGIN VIDEO CLIP)

SHIRLEY SHERROD, FORMER AGRICULTURE DEPT. EMPLOYEE: How many of your children live here in the area?

UNIDENTIFIED FEMALE: They all live here.

UNIDENTIFIED MALE: Except one.

SHERROD: We're going to have to get together because my mother now want to meet you all too. So we just have to --

UNIDENTIFIED MALE: She can't -- an age in (ph).

SHERROD: Yes, she is.

UNIDENTIFIED MALE: Neither one of us going to have too much more time here. We better get around it.

SHERROD: One of my sisters, when she called, she lives in Albany. She said, they're part of the family now. I want to go down and meet them.

(END VIDEO CLIP)

BLITZER: You have a lot more in the next hour on the woman behind the controversy and this programming note. Stay with CNN this weekend for a special report, "Who is Shirley Sherrod?" It airs Saturday night at 7:00 and 10:00 p.m. eastern right here on CNN.

Americans aren't any happier with President Obama's handling of the economy right now even after passage of a massive overhaul of financial regulation. Our new CNN Opinion Research Corporation Poll shows the president's approval rating on the economy is down to 42 percent remaining well below the 50 percent mark. Today, the president urged the Senate to do more to boost the recovery bypassing a small business jobs bill.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We made enormous progress this week on Wall Street reform, on making sure that we're eliminating waste and abuse in government, and in providing immediate assistance to people who are out there looking for work. But ultimately, our goal is to make sure the people who are looking for a job can find a job. And that's why it's so important for the Senate to pass the additional steps that I've asked for, to cut taxes and expand lending for America's small businesses, our most important engine for hiring and for growth.

(END VIDEO CLIP)

BLITZER: The House passed a similar jobs bill, by the way, last month.

President Obama promises that the days of taxpayer bailouts for big banks are over. Over. But many Americans still feel the sting of the financial meltdown that left so many CEOs richer and richer. Let's bring in our White House correspondent, Dan Lothian. He got new information for us. Dan, what do you know?

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Wolf, what we saw today was more evidence that during the peak of the financial crisis, sort of the end of 2008, early 2009, when a lot of these big firms were getting bailouts at the time, some of those executives, for them it was business as usual. The big question now though is what will prevent all of this from happening again?

(BEGIN VIDEOTAPE)

LOTHIAN (voice-over): For Americans out of work, under water, and out of cash, another punch in the gut. Bailed out firms like CitiGroup, Goldman Sachs, and Bank of America shelled out an estimated $1.6 billion to executives at the height of the meltdown. In what White House Compensation Czar, Kenneth Feinberg, calls ill-advised payments.

KENNETH FEINBERG, SPECIAL MASTER FOR EXEC. COMPENSATION: It was an exercise in bad judgment. The 17 companies should have not made these payments.

LOTHIAN: Feinberg's blunt review spelled out in this report finds the firms did nothing illegal, but President Obama said Wall Street reform signed into law this week will help put a stop to this excess.

OBAMA: The need for this reform, by the way, was underscored by the report issued by Ken Feinberg.

LOTHIAN: But perhaps, more shocking for taxpayers, the compensation czar is powerless to recoup even one dime of those big payouts. Some experts argue there were other ways to apply pressure. SARAH ANDERSON, INSTITUTE FOR POLICY STUDIES: I think that the pay czar could have been more of a hardball negotiator. He could have told these companies, OK, if you want to go ahead and pay out these massive bonuses, fine, but don't expect one more dime of government support ever. No more bailouts. No more tax subsidies.

LOTHIAN: Instead, Feinberg is asking these big firms to essentially police themselves by adopting a so-called emergency brake provision.

FEINBERG: That would allow their boards and compensation committees to terminate compensation contracts if there is a prospective another financial emergency.

(END VIDEOTAPE)

LOTHIAN (on-camera): Now, some of the companies say that they've already taken steps to address this issue but not all of them are onboard. And by the way, Wolf, I should point out that 11 of the 17 companies have already paid back the bailout money that they got from taxpayers.

BLITZER: Do they think at the White House this has basically been a lost week in terms of trying to get their message on the economy out? They got some major legislation passed, signed into law, but at the same time, a lot of folks were paying attention to the Shirley Sherrod controversy not what the White House was trying to project.

LOTHIAN: That's right. I mean, they're not putting it into those terms like saying that it's a lost week. But certainly, last week, when they laid out their agenda for this week, they really wanted to have a parade of accomplishments. And as you pointed out, the Sherrod story did steal a lot of the spotlight. And so, what you saw today from the president, he came out and he really wanted to say, essentially, here is what you missed.

We addressed the issues on Wall Street. We addressed the government waste. Also unemployment insurance. We're looking forward to helping small businesses as well. The president wanted to end the week on an exclamation point at the end of all of these accomplishments saying, quote, "we made enormous progress this week" -- Wolf.

BLITZER: Dan Lothian, thanks very much for that.

We're just getting this into the "SITUATION ROOM" right now. New estimates, economic estimates coming in from the White House, depressing numbers. The white house now expecting that unemployment in the United States will remain at least 9 percent, not only this year and next year but until 2012.

A pretty depressing estimate. It's about 9.5 percent right now, but they're now saying for the next year or two, it probably will remain at or above 9 percent. We're getting more information coming into the "SITUATION ROOM". We'll update you on these numbers shortly. But that's not necessarily very encouraging on a Friday late afternoon.

So what likely happened during that deadly march attack on a South Korean war ship? Our Chris Lawrence has some new video that shows the ship being blown apart.

And this monstrous thing, just part of the damage done by vicious flash flooding in Wisconsin. We'll have the very latest.

(COMMERCIAL BREAK)

BLITZER: Mary Snow is monitoring some of the other top stories in the SITUATION ROOM right now. Mary, what's going on?

MARY SNOW, CNN CORRESPONDENT: Hi, Wolf. Well, jazz singer, Al Jarreau, was hospitalized in the French Alps in intensive care. Jarreau's publicist says he became weak from the altitude. He's now in stable condition, but doctors told the 70-year-old singer to take some time off from his tour to recover. Jarreau has canceled several shows in Europe over the next week.

The District of Columbia School System says it's firing 226 school teachers for poor performance. The teachers were evaluated based on student achievement and classroom visit by education expert. In response, the Washington Teachers Union says that a large majority of these teachers believe his evaluation system isn't a fair one. It plans to challenge the firings of about 81 teachers.

Heavy flooding in Milwaukee causing no deaths but lots of damage and evacuations. The flash flooding ripped through Wisconsin's largest city last night dumping up to 8 inches of rain. The international airport was shut down with 2 feet of water in the medians surrounding the runways. City officials also reported a sinkhole, many flooded basements, and lightning striking two people.

And check this out. It's being called the most accurate map of Mars ever. Using cameras aboard a spacecraft, NASA took 21,000 images over eight years. They've now been combined into a giant map. Researchers and the public can go on to several websites to see for themselves and explore the surface of the red planet. Pretty spectacular -- Wolf.

BLITZER: Amazing stuff. All right. Thanks very much, Mary. We'll get back to you.

That massive oil spill in the Gulf of Mexico is taking its toll on tourism all along the Gulf Coast. Now, residents of Mississippi are looking into a new ad campaign to help build up America. Let's go to CNN's Tom Foreman -- Tom.

TOM FOREMAN, CNN CORRESPONDENT: Hey, Wolf. Mississippi has launched the second phase of a massive ad campaign to try to convince tourists that they really should not be afraid of the beaches here. They're beautiful. There are many attractions. The water is clean. Yes, there are some booms out here. Yes, they're cleaning up some tar balls here and there, but by and large, everything is normal except there are no tourists here. To do this, they're spending $15 million that they were given by BP to help the Mississippi Coast, and they're producing ads like this.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: The Mississippi Gulf Coast -- charming towns, border exciting casinos, world class golf courses all around every corner, and our cuisine and culture are something we celebrate.

(END VIDEO CLIP)

FOREMAN: Those ads are playing in a broad crescent of places across the southeast. This is the target audience right now for several reasons. One, because those are people who are very familiar with the Gulf Coast who have come here a lot and that they think they might be able to reach with this message a little better than they can further away. Secondly, those are people who are close enough that maybe they can lure them in for some late summer tourism or even autumn tourism because they know the main bulk of the summer tourism is already lost. They have to do all they can to recover. They're hoping that this ad campaign right now can help them build up again a little bit from some of their losses this summer -- Wolf.

BLITZER: Tom Foreman with the CNN Express, thank you.

Once the weather improves in the Gulf of Mexico, BP plans to move ahead with what's called the static kill operation. We're going to show you how the procedure to permanently seal the ruptured well might work.

A new insight into how a South Korean warship was sunk. Stand by for some gripping video we've now received of a ship blown up and split in two.

And liberal activists venting their frustration with President Obama. They're warning top Democrats that they'll pay for ignoring their concerns.

(COMMERCIAL BREAK)

BLITZER: You're in the "SITUATION ROOM". Happening now --

With an emotional and heartfelt reunion, CNN arranges the first meeting in decades between an ousted African-American government employee, Shirley Sherrod, and the very people she was wrongly accused of discriminating against. We're going to have the exclusive ahead. That's coming up.

And it could be BP's best to offer (ph) permanently sealing the ruptured well in the Gulf of Mexico. We're going to give you an inside look at how the procedure known as static kill might work.

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

The midterm elections in November are only around the corner, and with every passing day, the frustration level is building and building with those who say the White House simply hasn't delivered on the change it promised. Our national political correspondent, Jessica Yellin, is following this story in Las Vegas -- Jessica.

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Wolf, many of the progressive activists here say they're disappointed with President Obama. They feel he is compromising with conservatives too much and passing up too many fights, and they vow to use their online power and fund raising ability to change that.

(BEGIN VIDEOTAPE)

YELLIN (voice-over): Remember that army of progressive activists who helped make candidate Obama president? Adam Green was one of them. Where has the love gone?

ADAM GREEN, PROGRESSIVE CHANGE CAMPAIGN COMMITTEE: He said he would stand up to big, powerful interests for the little guy, and unfortunately, he has shown a real refusal to fight on issue after issue. He chose to cut deals with the insurance companies and the pharmaceutical companies as well as Wall Street as opposed to really taking them on in a big, profound way.

YELLIN: Today, he's co-founder of the Progressive Change Campaign Committee. At this conference of progressive activists, that frustration with Democrats in Washington is intense.

ARSHAD HASAN, DEMOCRACY FOR AMERICA: For us, we want to build a better party because the Democratic Party in large part is corrupt and broken and ineffective.

UNIDENTIFIED FEMALE: Safer (ph) seat should never mean that you are safe from the accountability of an independent progressive movement.

YELLIN: They're deeply disappointed the president gave up on a public option during the health care fight and even ran ads pressuring him not to abandon it. They're enraged he endorsed offshore drilling before an energy bill was even introduced. And they promise to use their online organizing and fund raising power to push his agenda their way. The White House is aware of the dissatisfaction.

DAVID AXELROD, WHITE HOUSE SENIOR ADVISER: My admonition would be don't make the perfect the enemy of the good.

YELLIN: But these progressives don't buy that argument, and they warn the president and Democrats neglect them at their own peril.

GREEN: Well, certainly Democrats in 2010 could suffer from turnout problems among regular people who decided, you know, that they voted for big change and they didn't get it. And our message to Democratic politicians, including President Obama, is, you know, being bold equals good political results. Being not bold equals a loss in turnout and possibly a loss in elections.

(END VIDEOTAPE)

YELLIN: Many of the activists here say it's no surprise that Democratic voters are less energized this year than Republicans. They say that's because the president needs to take bolder action to energize his base. One step they'd like to see him take in that direction, they want him to name Elizabeth Warren, an outspoken consumer advocate and progressive favorite, to head up the new consumer protection bureau -- Wolf.

BLITZER: All right. Jessica, thanks very much. By the way, the consumer protection bureau is a key part of the new Wall Street reform bill that President Obama signed into law this week. The consumer protection bureau was in fact Warren's idea. We'll see if the president follows up on that or not.

Some members of the mainstream news media are being slammed for showing their liberal bent online, communicating with one another on a list for journalists. Some conservatives say the so-called "JournoList" is proof there is a vast left-wing conspiracy against conservatives and the right. Howard Kurtz of CNN's "RELIABLE SOURCES" wrote about the JournoList in his column in The Washington Post today. I want to bring him in.

Howie, thanks very much for joining us. First of all, we've been obsessed sort of this week watching this story unfold, but most of our viewers have no idea about this JournoList. Tell them what it is.

HOWARD KURTZ, HOST, "RELIABLE SOURCES": Well, it was 400 people who thought they were communicating with each other off the record. These were leaked to Tucker Carlson's Daily Caller Web site. And most of the people on the list and the people who were making the most partisan comments that are stirring some controversy now, Wolf, are what I would call out-of-the-closet liberals. They were left-leaning bloggers and commentators who were acting like liberals. But at times it seemed like they were coordinating almost talking points to go after John McCain, Sarah Palin, and other Republicans.

BLITZER: Because Fred Barnes, the editor of The Weekly Standard, he wrote a piece in The Wall Street Journal, and among other things, he said this. "Now after learning I've been targeted for a smear attack by a member of an online clique of liberal journalists, I am inclined to amend my response. Not to say there's a media conspiracy, but at least to note that hundreds of journalists have gotten together on an online listserv called JournoList to promote liberalism and liberal politicians at the expense of traditional journalism."

He was saying he never believed that there was a liberal conspiracy, but now he is not necessarily all that convinced.

KURTZ: Well, again, most of these are not news reporters. But Fred Barnes has a reason to be ticked off, because in one of the most offensive messages by a liberal writer, named Spencer Ackerman, in defending Barack Obama during that Jeremiah Wright controversy in the campaign, he says, well let's just pick a conservative, I don't know, Fred Barnes, Karl Rove, who cares, and call them racist.

In other words, no evidence, in an effort to get them to back off on the Jeremiah Wright matter. And so when they talk about "we on the list" ought to do this or that, they sound in some instances like political strategists who are trying to drive a message. And that's why this has kicked up quite a fuss here within the Beltway.

BLITZER: There have always been advocates writing these kinds of pamphlets or whatever, trying to make their points because they deeply believe in what they believe in. But journalists are supposed to stay away from that. Yet there were mainstream journalists who were part of this, what the right now sees as something that journalists should not necessarily be part of, the difference, in other words, between journalists and liberal bloggers is significant.

KURTZ: Right. And that's a fair point. But I've gone over a lot of these leaked messages and, you know, the most partisan, the most incendiary stuff, sometimes lambasting Rush Limbaugh, for example, you know, comes from people who are in the opinion business, not beat reporters.

I'll tell you another person who has gotten some ammunition out of this JournoList flap is Sarah Palin, because as there were some of these e-mails talking about the best way to attack her after John McCain picked the Alaska governor as his running mate. So she now writes on Facebook, which, as you know, is the way she broadcasts to the world, that the media is filled with "sick puppies," Palin says, and she is complaining about "the hordes" -- this is back in '08, "the hordes of Obama's opposition researchers/reporters."

Again, most of them were not reporters, they were commentators, but Sarah Palin seizing the opening to beat up on her favorite target, the "lamestream" media.

BLITZER: But some were in fact journalists, mainstream journalists, if you will. The question is this, how damaging will this be to journalism?

KURTZ: It certainly doesn't help the reputation for people out there who already think that journalists lean to the left. The people who defend this, the founder of it is a guy named Ezra Klein, who is now a blogger at The Washington Post, say, look, you can go through these things and we were talking to each other and debating and having these debates, but very hard to point to any instance where we all then went out and wrote the same thing as a result.

So if it was a vast left-wing conspiracy, it wasn't a very effective one -- Wolf.

BLITZER: Howard is going to have a lot more on this coming up on "RELIABLE SOURCES" Sunday morning, 11:00 a.m. He has got, in fact, a lot to discuss this Sunday morning...

KURTZ: Sure do.

BLITZER: ... including what happened to Shirley Sherrod. All right. that's 11:00 a.m., "RELIABLE SOURCES," Sunday morning.

We're tracking Tropical Depression Bonnie right now as it heads toward the Gulf of Mexico. Just ahead, retired Admiral Thad Allen tells me what could go wrong in the disaster zone as the wind and the rain move in. And what the federal government owes African-American farmer. We're digging deeper into a big issue this week, concerns about racism, long-standing racism, I should say, within the Agriculture Department.

(COMMERCIAL BREAK)

BLITZER: New signs today that North Korea could become more of a threat to the United States as new information emerges about what might have happened during that deadly attack on a South Korean warship. Our Pentagon correspondent Chris Lawrence is monitoring these developments for us.

Chris, what are you finding out?

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Well, Wolf, just today a group of colonels from the United Nations military command confronted the North about this subject. A meeting with North Korean army officials right there on the border, they said that sinking the South Korean ship violates the truce that ended fighting in the Korean War. And they reminded the North to honor that agreement.

(BEGIN VIDEOTAPE)

LAWRENCE (voice-over): If you want to see how South Korea's warship was sunk, look at this clip from YouTube. That's what U.S. Navy investigators did, to find this video of the Australian military using one of its old warships for target practice.

But investigators believe it is probably what happened to the Cheonan, too. In the video, a warhead detonates under the surface. The blast blows the ship out of the water. The video shows how the Australian ship splits in two and sinks.

Unlike this empty vessel, 46 South Korean sailors were killed when their ship went down in March. South Korean investigators blame the North. North Korean officials deny it. Right into the middle of this tension comes a major military exercise by U.S. and South Korean navies, led by the nuclear aircraft carrier George Washington.

Starting Sunday, 8,000 troops and 100 aircraft will stage training exercises in the same seas where the Cheonan went down. That's no coincidence. The Navy says it's sending a signal to officials in North Korea.

JOHN PIKE, GLOBALSECURITY.ORG: It's close to the scene of the crime. It certainly reminds North Korea that regardless of how war in the peninsula would start, it would only end one way, with their utter destruction.

LAWRENCE: John Pike is the director of globalsecurity.org. He says internal politics are fueling the North's provocation, specifically Kim Jong-il trying to hand over power to his inexperienced and lightly-regarded son.

PIKE: Demonstrating that the young crown prince is an iron- willed commander who is not afraid to confront the South with military action.

LAWRENCE: This week the nominee for U.S. intelligence chief warned Congress, this could be a dangerous new period of North Korea using attacks to advance political goals. The North says the upcoming military drills violated sovereignty and promises a physical response to the U.S. threat.

(END VIDEOTAPE)

LAWRENCE: But obviously the U.S. Navy is not backing down. Those military exercises going ahead as planned this weekend. But Secretary of State Hillary Clinton seemed to keep the door open to a possible peace down the road. Even as she was announcing new sanctions against the North, she also said the U.S. is willing to negotiate with the North Koreans towards normalizing relations and even providing some economic assistance -- Wolf.

BLITZER: Do we have any idea, Chris, what the U.S. and South Korea have planned right now?

LAWRENCE: Yes. We're looking at about 20 surface ships and submarines. And as far as aircraft, the U.S. will be flying the F-22 Raptor for the first time in that part of the world. The U.S. Navy says this is clearly -- is going to send a signal to North Korea about its partnership with South Korea -- about the U.S. partnership with South Korea.

It's supposed to be the first of several exercises to come, but the Navy says the make-up of those future exercises can be adjusted if the North comes out and agrees to stop its provocative acts.

BLITZER: All right. It's a very tense moment. Chris, thank you very much.

Concerns about racism in the U.S. Department of Agriculture. We're digging deeper on what the federal government owes African- American farmers.

A new report that one former U.S. senator could be gearing up for a run against the GOP party chairman, Michael Steele, are those reports true? I'll ask him. That's coming up in our "Strategy Session."

(COMMERCIAL BREAK)

BLITZER: Get to our "Strategy Session." Joining us, our CNN political contributor, the Democratic strategist, James Carville. Also joining us, the former Republican senator from Minnesota, Norm Coleman. He is the CEO of the American Action Network.

Guys, thanks very much for coming in. Just getting some revised estimates from the White House, James, that they now expect unemployment in the United States will remain at or above 9 percent until 2012, 2012. Right now it's 9.5 percent. That has got to be pretty discouraging if the economy and jobs, jobs, jobs are issue number one. JAMES CARVILLE, CNN POLITICAL CONTRIBUTOR: It's very discouraging, particularly discouraging for these people that are out of work. You know, this is very typical. I was talking to someone today and reading this book, and this is very typical of what happens after financial crises.

And this is not -- unfortunately, it's not surprising. It's going to take a while to dig ourselves out of this. And people have done a study -- these two people did a study of financial crises around the world and their conclusion is that it takes a long time to dig out and unemployment stays persistently high. So this is very unfortunate, but this is apparently the reality of what we're in.

BLITZER: And the political ramifications, Senator Coleman, are significant. In our new CNN/Opinion Research Corporation poll, you take a look at this, registered voters, not likely voters, not all Americans, registered voters' choice for Congress right now, 49 percent say they would vote for a Republican, 44 percent say they would vote for a Democrat. Back in May, 46 for Republicans, 47 for Democrats.

So despite all of the legislative achievements of the Obama administration and the Democrats, the numbers are clearly going in the Republicans' favor right now. So here is the question to you. Does this automatically mean a landslide for Republicans in November?

NORM COLEMAN, CEO, AMERICAN ACTION NETWORK: There is no automatic landslide. But, Wolf, let's be clear that these numbers are a bad sign, you know, for this administration. It's not just about recovering from financial crisis. You have -- there was a promise that unemployment wouldn't rise above 8 percent if we passed the $863 billion stimulus package.

Well, now you've got this admission of long-term unemployment. We passed what's going to be a trillion dollar health care program, "Obamacare," and health care costs rose last month. They rose the last reported month when they were supposed to go down. So what you have here is policies this administration has set forth that have not generated confidence, have not generated jobs.

And, Wolf, jobs are the alpha and omega in politics. They're the beginning and end, and this signals a poor end for a lot of Democrats.

BLITZER: No one knows that better than James Carville, who coined the phrase "it's the economy, stupid," back in '92. So what do the Democrats do about this between now and November, James?

CARVILLE: Well, I mean, first of all, and they have to campaign and remind people of the fact that this year more jobs probably will be created under Barack Obama -- private sector jobs, than George Bush created in eight years. And isn't that something when you stop and you think about that?

You think of the fact that this economy was shedding 750,000 jobs a month when this president took office. By the way, interest rates were a part of a percent. They had no tools in their tool kit. And their mistake was, if you want to accuse them of something, they didn't correctly estimate the severity of the hangover of this financial crisis, which was caused by taking leverage rules up 40 to 1.

But look, they're not going to win three election cycles in a row. But I think once this thing gets focused down and you're going to see things that are -- you know, that we're going to lose seats but we may not lose as many as people think. We might pick up this seat right in Louisiana. A good chance we can do that.

BLITZER: All right. Senator Coleman, do you want to be chairman of the Republican National Committee?

COLEMAN: I'm not going to even talk about the chairmanship of the Republican National Committee because, Wolf, the other side wants to talk about that instead of these bad poll numbers, instead of high unemployment, instead of a trillion dollars in debt and a trillion dollars in interest because of debt.

So we're not going to talk about that for now. Between now and November we have to focus on making sure that Nancy Pelosi is the first former woman speaker of the house.

BLITZER: But you know, Senator, I asked you the question because all of these reports now are circulating, including in Politico and cnn.com, that you're thinking seriously about challenging Michael Steele, if he wants to run for re-election after the election.

COLEMAN: Wolf, I hope we can share this tape with other networks and other programs because I'll say it here. Between now and November, I'm going to work with Chairman Steele to make sure that we move this country forward to a path of fiscal responsibility, replace the spendthrift, out-of-control Democrat majority in the House and in the Senate, and move this country to a path of fiscal responsibility. That is going to be my focus.

Listen, the reality is, is that there have been concerns about the RNC. That is a reality. Fund-raising hasn't been what a lot of folks would like, et cetera. But that's not the focus of right now. The other side wants to get off of almost 10 percent unemployment, they want to get off huge deficits.

BLITZER: All right. I'll take that...

COLEMAN: We are going to keep the focus on...

(CROSSTALK)

BLITZER: Leaving that door wide open, Senator. That sounds like a wide open space...

CARVILLE: Sounds like we've got a candidate in December, Wolf.

(LAUGHTER)

BLITZER: Yes, all right, we'll see what happens. James... COLEMAN: I am working with Chairman Steele.

BLITZER: Good luck. James in New Orleans, I know that the weather that is moving in your direction. We hope only the best. And we hope it passes smoothly.

Guys, thanks very much.

CARVILLE: Thank you.

BLITZER: We're going to follow up on the revelation now that an alarm system on board the Deepwater Horizon was deliberately, get this, disabled before the rig exploded. I will speak with the president's point man in the Gulf, Thad Allen, we'll get his reaction. That is coming up. Stand by.

And fleeing Arizona, Latinos rushing to avoid the state's tough new immigration law.

(BEGIN VIDEO CLIP)

"CARLOS": Little by little, they're pushing us out.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: It has been a very real fear in Arizona now, ever since the governor signed that tough new immigration law into law, what if Latinos fled the state in droves? We may be seeing some evidence of that right now.

Here is CNN's Thelma Gutierrez.

(BEGIN VIDEOTAPE)

THELMA GUTIERREZ, CNN CORRESPONDENT (voice-over): In a middle- class suburb near Mesa, Arizona, a family is packing it up, preparing to flee the state. They asked us to call them "Carlos" and "Samantha."

"CARLOS": This is the living room. This is my boy's room.

GUTIERREZ (on camera): Yes, they are all empty.

"CARLOS": Yes, I mean, everything we worked for.

GUTIERREZ (voice-over): They say they were living the American dream, a house, two kids, a small jewelry business that catered to Latinos. But when his customers, many of whom were immigrants, started losing their jobs and leaving the state, his business collapsed. Now, he says he, too, wants to get out before SB-1070 goes into effect.

(on camera): You love the state.

"CARLOS": Arizona, yes.

GUTIERREZ: And now?

"CARLOS": Little by little, they are pushing us out.

GUTIERREZ: They are saying that you are leaving because you want to go. You don't have to go.

"CARLOS": I don't -- I don't have to go, but for my family's sake.

GUTIERREZ: Your wife is undocumented.

"CARLOS": Yes.

GUTIERREZ (voice-over): Carlos is a legal resident, their children are American, but he says he can't run the risk that his wife could be arrested and deported.

(on camera): You are one family who is leaving. Do you think that there are others?

"CARLOS": Oh, there is many. There is a lot of people that left from here as soon as it started.

GUTIERREZ (voice-over): Todd Landfried agrees.

TODD LANDFRIED, ARIZONA EMPLOYERS FOR IMMIGRATION REFORM: There is an empty car dealership. This is just another strip mall in a Latino neighborhood of Mesa.

GUTIERREZ: Landfried represents a group called Arizona Employers for Immigration Reform. He drove us through Mesa, Arizona, and pointed out what he says is the fallout from the state's tough immigration laws, and a bad economy.

LANDFRIED: Any time you start running people out of a state, you make it harder for the businesses that provide services to those people, whether they are here legally or not. They are not going to be able to fill their strip malls. They're not going to be able to fill their apartment complexes.

RUSSELL PEARCE, ARIZONA STATE SENATE: But what comes with that invasion of illegal aliens is the destruction of the rule of law and the damage to the tax-payer. There is a cost to that.

GUTIERREZ: Russell Pearce is a state senator and author of SB- 1070. He also lives in Mesa, Arizona.

(on camera): Do you believe that there is any correlation between those empty businesses and Russell Pearce's law?

PEARCE: Well, I think there is a correlation, probably. I think there is a correlation between Sheriff Joe and his work. I think there is correlation to the tough economy. I don't think I can take credit for all of that. I would be willing to take credit for all of that.

GUTIERREZ (voice-over): Credit, he says, for forcing people like "Carlos" and "Samantha" to self-deport.

(on camera): (SPEAKING SPANISH), what do those boxes represent to you?

"SAMANTHA" (through translator): A lot of memories.

GUTIERREZ: (SPEAKING SPANISH), you don't want to go?

"SAMANTHA" (through translator): After 18 years of being here, we have to start all over again in another state.

GUTIERREZ (voice-over): "Carlos" says he will remember Arizona as the state that allowed him to achieve his American dream, and as the state that took it away.

Thelma Gutierrez, CNN, Mesa, Arizona.

(END VIDEOTAPE)

BLITZER: Severe weather heading for the Gulf of Mexico right now. Will it hurt efforts to permanently stop the oil spill? I will ask the government's point man on the job, retired Coast Guard Admiral Thad Allen. He is here in "THE SITUATION ROOM".

And a CNN exclusive, we will take you inside of the emotional reunion we arranged between ousted government employee Shirley Sherrod, and the couple she was wrongly accused of discriminating against.

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