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Crisis in Somalia; Thirty U.S. Troops Die in Helicopter Crash in Afghanistan; Second-Guessing S&P on All Sides

Aired August 8, 2011 - 17:00   ET


WOLF BLITZER, HOST: Thanks very much, Brooke.

Happening now, breaking news -- another massive stock sell-off. The Dow plunging more than 630 points on hint of panic after the historic downgrade of America's credit rating. This hour, the financial nightmare unfolding -- what it means for your investments that are hemorrhaging money right now.

President Obama is taking new shots at the downgrade and at the rating agency, Standard & Poor's. And we're taking a hard look at questions about S&P's credibility.

Plus, 12 million people -- 12 million people at risk of starving to death. Anderson Cooper joins us from the frontlines of the famine in and around Somalia, exposing the horrors and how the world can help.

I'm Wolf Blitzer.


A disastrous day on Wall Street. Many investors' worst fears realized in the first trading session since the downgrade of America's credit rating. The Dow Jones Industrials closed down 634 points, falling below 11,000 in one of the biggest losses on any day of all time. The Dow's losing streak is getting worse. It has plunged over 1,800 points in the past two weeks and lost almost 15 percent of its value. All three major indices today way, way down.

Take a look at the S&P 500, a very strong indicator of what's happening to your retirement savings. It lost 6.5 percent today of its value and is down almost 18 percent from its high point in April. All told the impact on all of our investments is enormous, in the range of more than $2 trillion lost in equity since late July, $1 trillion in equity lost today -- your portfolios, your 401(k)s, your IRAs -- $1 trillion less today than at the start of the day.

Let's go to CNN's Richard Quest and our chief business correspondent, Ali Velshi.

They've been watching this drama unfold all day today -- Richard, is there a simple answer to what has happened, why this market simply collapsed today?

RICHARD QUEST, HOST, "QUEST MEANS BUSINESS": Fear, basically. Fear about what is happening to the U.S. economy, the slowdown, the inability to deal with the long-term debt problem.

There's never a single reason, if you like, when, on an average Monday in August, the market falls out of bed. But if you look at the way in which the market did fall today, it was the financials that led the way. Bank of America, which is being sued, off 20 percent. JPMorgan down 9 percent. American Express down 8 percent.

But interestingly, the smallest losses were from those defensive stocks, those non-cyclicals -- Procter & Gamble, Coca-Cola, the Johnson & Johnsons.

So factoring this altogether, Wolf, you have in -- you have a financial system that is deeply unhappy with what's happening in politics. And today was the day they decided it was time to head for the door.

BLITZER: Is it -- Ali -- just the result today, at least today, of the S&P downgrading America's credit rating or are we seeing something much bigger at play right now?

ALI VELSHI, CNN ANCHOR: Today was the upside down pineapple cake of economic reason. The thing that was supposed to happen as a result of a downgrade of the United States was that interest rates were supposed to go up -- interest rates, as determined by Treasury bonds. The 10- Year Note, upon which our mortgages are based, went up in value, which meant the interest rate went down. The United States pays less to borrow money today than it did on Friday, before we were downgraded. So you should have send the response in bond markets.

You didn't at all. Bond investors took this whole S&P thing in stride. Stock investors, who are less affected by this, clearly didn't. They are jittery. I don't want to offend Richard, but it's because of people who speak with his accent and others. It's the Europeans that got us jittery last week. The European markets...

BLITZER: All right...

VELSHI: -- are in greater danger...

BLITZER: All right...

VELSHI: -- than ours. And -- and this is just a continuation of not knowing what's going on.

Richard, take the blame where it's supposed to be. It's your people who did this.

QUEST: No. And, Ali, I've got to -- I'm now just going to interrupt you. Ali, you're -- you're right up to a point, but you're mainly wrong on the main point.

The reason those bond markets continued to fall on the yield, which, of course, they are still the biggest, most liquid markets. But it's worries about the economy. They know interest rates are not going up anytime soon.

VELSHI: Yes, right.

QUEST: The U.S. economy is slowing down. And that is why...

VELSHI: You're right. And nobody wants to...

QUEST: -- bond yields continue to...

VELSHI: And nobody wants to buy European bonds.

QUEST: -- remain low.

VELSHI: So what happened is people, Wolf, decided that, you know what, the Europe -- the U.S. just got a little risker. So they thought, oh, where should I put -- where should we put our money?

And they looked at all the options in the world -- European stock markets, American stock markets, commodities, oil. Nah. They said no to everything, except U.S. bonds, gold and silver. So people went to the safest investments. Again, I point out, I -- I'm using Richard to make the example, if Europe wasn't in the mess that it was in right now, people would realize that the American debt mess is not like the European debt mess, which is a real structural problem that is very difficult to solve. The U.S. debt mess is just a matter of politics and discipline. It can actually be solved in 24 hours if we wanted to solve it. We could come up with a plan.

So Europe is -- is dodgy and Americans are nervous.


VELSHI: Is that fair, Richard?

QUEST: Ali's mathematics is almost as poor as S&P's on the $2 trillion mistake. There is an element the U.S. debt markets are still the largest, safest, most liquid in the world. And they will always be a safe haven.

But gold rose, as well. This is equities fell out of bed because of what's happening in the economy and what's happening with U.S. jobs, what's happening in the political process. And, yes, that is going to transmit itself throughout all markets eventually.

Ali is choosing to put the most favorable -- favorable and rosy scenario on what is otherwise an unfavorable picture.

BLITZER: So let me -- Ali, very quickly, what, if anything, can be done in the short-term to turn this situation around?

I -- I reported that $2 trillion in equity, over the past two weeks, has simply gone away.

VELSHI: Yes. I'll tell you the thing that could have been done -- and you and I spoke about this beautiful on Saturday, where we were covering this downgrade -- is if on Sunday night, Congressional leaders, Republican and Democrat and the administration and the Treasury, instead of writing press releases about each other and about S&P for downgrading America's debt, got together and held a press conference and said, we get it, this is a mess. We really, really messed up over the last several weeks. We telegraphed a message that we are disorganized and undisciplined and we're prepared to hold paying our bills hostage to our politics.

If they had come out there and said we're going to get that AAA rating back, I think we would have been there.

But you wake up this morning and all you are greeted with in the world today is confusion -- confusion about why this downgrade was done, whether the math was right on it, why Moody's didn't downgrade but S&P did...

BLITZER: All right...

VELSHI: -- why S&P now decides the U.S. is a bad bet, after 2008, thinking that Lehman Brothers and AIG were terrific bets.

If you can make sense of this, then -- then you should be in the market, Wolf...

BLITZER: All right, guys...

VELSHI: And most people are saying I can't.

BLITZER: Stand by. Stand by. Both of you stand by, because there's no two reporters better than you, when it comes to this kind of a story.

We'll get back to you Ali, Richard.

Two hours or so before the markets closed on Wall Street, President Obama tried to reassure investors and the nation, indeed, the world, while taking a shot at the decision to downgrade America's credit rating.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Markets will rise and fall, but this is the United States of America. No matter what some agency may say, we've always have been and always will be a AAA country.


BLITZER: Let's go to our White House correspondent, Dan Lothian.

He's standing by -- Dan, this was an added event to the president's schedule. He sought to reassure investors, I'm sure. It didn't exactly work out, because when he started speaking, the Dow was down about 400. At the end of the day, it was down more than 600.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: That's right. And this was the first time that we heard from the president in person since that S&P downgrade. And as you pointed out, the president trying to reassure Americans, but also making a point to members of Congress that this is an opportunity for them to tackle the issue of the deficit and the debt in a significant way.

But nonetheless, the confidence of a lot of Americans has still been shaken yet again.


LOTHIAN (voice-over): The stock was still hours away from the closing bell, but deep in the red when President Obama walked in the State Dining Room to reassure Americans that the U.S. remains a AAA country.

OBAMA: What sets us apart is that we've always not just had the capacity, but also the will to act, the determination to shape our future.

LOTHIAN: But the Republican National Committee, which is raising doubts about the president's economic team to turn things around, called on Mr. Obama to, quote, "relieve Treasury secretary, Timothy Geithner, of his responsibilities immediately in light of the credit downgrade and the market plunge."

But Geithner, over the weekend, made it known he was staying put at the president's request.

With so much uncertainty surrounding the U.S. economy, there's added urgency to the work of the yet to be selected super committee. Even President Obama made news indicating he'll be weighing in.

OBAMA: I intend to present my own recommendations over the coming weeks on how we should proceed.

LOTHIAN: Recommendations, a senior administration official, told CNN that would achieve balanced deficit reduction.

The bipartisan group of lawmakers will be charged with finding up to $1.5 trillion in savings. The S&P downgrade may push that number higher.

The recommendations that the president plans to lay out would essentially be the grand bargain with some tweaks?

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: What we do not lack is policy ideas or plans, including have in terms of a very clear consensus on -- on the measures we can take to address the long-term drivers of our debt.


LOTHIAN: Now, Speaker John Boehner, who often has harsh words for the president, said that he welcomed the news that the president will be making these recommendations.

But still, Wolf, one of the big issues is revenue, essentially, raising taxes on wealthier Americans. We heard from Majority Leader Cantor, who sent a statement out saying that he believes that the whole issue of revenue should not be on the table.

So still some divide there, even as the market slides and the -- and the U.S. economy continues to be under immense pressure.

BLITZER: And, as you know, the president did say he would support some modest modifications in Medicare spending, which is not going to be pleasant for liberals and for those on the left in the Democratic Party to be hearing about.

LOTHIAN: That's right. Liberals have made it very clear that that's not something they want to get touched. On the other side, you have conservative Republicans who are saying they don't want any of this revenue on the table at all.

But as the president pointed out, in order to get this fixed, there has to be some sort of bipartisan effort. And so he's calling on these lawmakers, once they return from their vacations, back in Washington, to make some significant gains in these areas.

It will be interesting to see if that S&P downgrade is the push that they need.


We're going to have a lot more on this story, including with our own Erin Burnett, coming up later.

Dan Lothian at the White House.

Thanks very much.

Also, we're following the brutal riots in London. The city, at least parts of it, right now, in flames. Stand by for the latest on the unrest and what's behind it.

And a trickle of aid finally getting through to famine-stricken Somalia.

CNN's Anderson Cooper is in the region. He'll join us live to show us just how horrible the suffering has become and how you and the world can help.


BLITZER: Jack Cafferty is here with the Cafferty File -- Jack.

JACK CAFFERTY, CNN CONTRIBUTOR: I guess we ought to all send Congress thank-you notes. Don't know where to send them, though. They're on vacation for five weeks. Before they pushed through that phony bill on deficit reduction and the debt ceiling, they were told by the ratings agencies a minimum of $4 trillion in cuts would be necessary to preserve this country's AAA credit rating.

They passed, and the president signed, less than $1 trillion in cuts. Oh, and we may or may not get an additional trillion or so from that special commission, but that remains to be seen. Don't hold your breath. Whatever.

Even if we get that, it's still not nearly enough. Meanwhile, the president is celebrating his birthday and Congress is partying it up on vacation. The country has lost its AAA credit rating for the first time in our history. Standard & Poor's, one of the ratings agencies, says that there's a 1 in 3 chance the United States' credit will be downgraded again in the next six months to two years if the government doesn't come up with the cuts necessary to satisfy the current AA-plus rating.

Meanwhile, the rest of the world is in shock, markets around the world selling off, trillions of dollars in valuation being wiped out. Our stock market is headed straight south, and our citizens are watching as their savings and retirement plans are becoming worth less and less by the hour. A lifetime of hard work and sacrifice disappearing right before their eyes, and the president parties and Congress is on the vacation.

No one deserves a government that treats its people this way. No one. And none of these people who voted for this bill deserves to be re- elected, not a single one of them. Sadly, though, a lot of them will be. The Reids and Pelosis, Boehners and McConnells -- they'll all be there after the 2012 election, along with many of the rest of the incumbents. And that, you see, is the real problem. The country's being destroyed, and we continue to send the destroyers back to Washington. I guess, in the end, we get what we deserve, don't we.

Here's the question -- what will it take to change things in Washington, D.C.? Go to, post a comment on that blog.

Wonder if those rich people who were opposed to those tax increases would have rather had a small tax increase than what's happening to their portfolios these days.

BLITZER: Because they've lost -- you know how much? We just figured out, since July 22, equity in U.S. stocks portfolios, the 401(k)s, IRAs -- $2.9 trillion disappeared since July 22, $2.9 trillion. Just gone. Your portfolio, mine, everybody's.

CAFFERTY: Well, what did the government expect was going to happen if they flew in the face of a warning from the rating agencies, If you don't get your spending under control, we're going to downgrade your credit rating? Did they think that wasn't going to happen? I mean, they told us up front, Either do this, or you're going to be downgraded.

Now we've been downgraded and people are being wiped out. And Congress is on vacation and the president is having a birthday party. Ain't that grand?

BLITZER: Well, the only good news today -- you know what the only good news today is, Jack?

CAFFERTY: What's that?

BLITZER: You and I and all our CNN SITUATION ROOM team -- we're celebrating our sixth anniversary here in THE SITUATION ROOM. So that's the only good news of the day. CAFFERTY: Well, that is good news. I remember the very first day we started this, and it was even money whether we were going to see the end of the first week.


BLITZER: Yes, August 8. All right, Jack. Thanks very much. You've been a key player all these six years. Appreciate it very much.

Standard & Poor's is defending its decision to downgrade America's credit rating despite the new nosedive in the stock prices and big questions about S&P's credibility.

Let's go back to New York. CNN's Mary Snow's looking into the company's reputation. A lot of second guessing, Mary. What are you finding out?

MARY SNOW, CNN CORRESPONDENT: Yes, and Wolf, that second-guessing is coming from all sides. Critics are questioning Standard & Poor's authority and its track record leading into the 2008 financial crisis.


(voice-over): Three credit rating agencies, same facts, three different outcomes. The last time Standard & Poor's, Moody's and Fitch gained so much attention was when they were slammed for giving top ratings mortgage-backed securities. The bipartisan financial crisis inquiry commission concluded that the three credit rating agencies were key enablers of the financial meltdown. Standard & Poor's also gave Lehman Brothers an A rating before its collapse.

Its credibility is under fire from both the right and the left after its downgrade of U.S. debt. The federal government challenged its calculations.

LAWRENCE SUMMERS, FMR. TREASURY SECRETARY: Look, S&P's track record has been terrible. And as we've seen this weekend, its arithmetic is worse.

GEORGE WILL, "WASHINGTON POST" COLUMNIST: Standard & Poor would have forfeited its good reputation if it had a good reputation to forfeit these days, it having missed the entire mortgage-backed securities problem right under its nose.

SNOW: S&P is on the defense.

DAVID BEERS, GLOBAL HEAD OF SOVEREIGN RATINGS, S&P: George Will and everybody else who has an issue with our ratings should take some time to actually look at the track record of our government ratings, particularly our ratings on national governments, the group that I head.

SNOW: NYU economy professor Lawrence White, who's been critical of the agencies, says S&P has been slow in downgrading countries like Greece, but he finds the country ratings generally on target. LAWRENCE WHITE, NYU STERN SCHOOL OF BUSINESS: The reputation issue is really a two-piece issue. There's the mortgage-related securities, where they clearly messed up, but there's this other area, where they are -- their reputations are still intact.

SNOW: S&P has been looking for $4 trillion in savings with the debt deal, far more than the $2 trillion agreed over the next 10 years. Maya MacGuineas, president of the nonpartisan Committee for a responsible Federal Budget, says despite its checkered past, the agency confirmed what was already known.

MAYA MACGUINEAS, COMMITTEE FOR A RESPONSIBLE FED. BUDGET: If we stop looking at the credit agencies, whether they're sort of on target with every call they make or not, and start looking at our own fiscal situation, it's tough to deny that we're not on a sustainable path and that this downgrade actually makes a lot of sense, I'm afraid.


SNOW: And following the S&P's downgrade of U.S. government debt, Moody's came out today to confirm the country's AAA rating. Fitch is still doing a review. But all have issued warnings to the U.S. to make changes -- Wolf.

BLITZER: Mary, thanks very much. Mary Snow's in New York, reporting. Much more on this story coming up.

Also, London in flames as vicious riots enter a third day. Just ahead, the latest on the escalating fury over a fatal shooting.

Plus, it's the end of an era on Capitol Hill. Up next, why the historic page program is now coming to an end.


BLITZER: I'm Wolf Blitzer in THE SITUATION ROOM. More stories we're working on for our next hour. A new casualty in the unprecedented downgrade of the country's prized AAA credit rating. Is your home mortgage loan now at risk? Also, the escalating war of words in the Republican race for the White House, why some candidates now say it's time to, quote, "downgrade President Obama."

And a city plunged into darkness. Ahead, the crippling new effects the war against Gadhafi is having on Libyan civilians.


But first this. For the first time in five years, a relief agency has now air-lifted emergency aid into the Somali capital of Mogadishu. That's where 100,000 starving Somalis are desperate for food and water in the wake of a devastating famine, that region now suffering its worst drought in six decades.

Let's go straight to Kenya. That's where our own Anderson Cooper is standing by with the latest. Anderson, set the scene for us. You're going to be reporting from there for the next few days. How bad is it?

ANDERSON COOPER, HOST, "AC 360": It is very bad. There's famine now in areas in southern Somalia, and the fear is that with the drought continuing, no rains to come for several months, that famine is going to spread. And this is territory controlled by al Shabaab, this Islamic extremist group, the terrorist group, so says the United States...

BLITZER: I think we've just lost our connection, unfortunately, with Anderson. We're going to try to reconnect.

Let me just give you this programming note while we await to reconnect with Anderson. "ANDERSON COOPER 360" has a new time. It starts tonight. He'll be live from Somalia. Anderson along with our chief medical correspondent, Dr. Sanjay Gupta, will be reporting live tonight from the region's devastating famine. It's a new time for "AC 360," 8:00 PM Eastern, only here on CNN.

And by the way, if you want to help with the crisis in the region, be sure to go to for more information.

We're going to try to reconnect with Anderson and get some more. But obviously, technical difficulties are totally understandable, given what's going on in Kenya and neighboring Somalia. But Anderson, Sanjay, our whole team -- they're going to be reporting live from the region starting at 8:00 PM Eastern tonight.

Meanwhile, the British prime minister, David Cameron, is cutting his vacation short and heading back to London as brutal riots enter a third day.

Our own Lisa Sylvester is monitoring that, some of the other top stories in THE SITUATION ROOM. What's going on in London, Lisa?

LISA SYLVESTER, CNN CORRESPONDENT: Hi, there, Wolf. Well, part of that city is now in flames, and police have been clashing with gangs of youths who have been looting and smashing store windows, this just hours after more than 100 people were arrested in connection with riots Saturday night.

The recent violence was prompted by the fatal shooting of a black man on Thursday after his cab was pulled over by police. Authorities won't say who shot him or why he was stopped.

And 45,000 Verizon workers are hitting the picket lines. The mass strike is the first for the telecommunications giant since 2000. The company had been in talks with the union since June, but they couldn't reach an agreement before the contract expired Saturday. Striking workers include technicians and customer support employees servicing homes and businesses across the Northeast.

And Tropical Storm Mophia (ph) is battering North Korea with heavy rainfall and gusty winds. The storm, which was downgraded today from typhoon status killed four people in Seoul, South Korea, and left others missing. Meanwhile, in China, hundreds of thousands were evacuated but no fatalities have been reported there. A new sign smoking could be even worse for your health if it is done in the morning. Two new studies published in "The Journal of the American Cancer Society" now show that smokers who light up within an hour of waking up have an increased risk of developing lung, head and neck cancers. The study suggests these smokers have higher levels of nicotine in their bodies and they may be more addicted.

And the historic House page program -- it is coming to an end. Republican House Speaker John Boehner and Democratic Minority Leader Nancy Pelosi issued a statement today citing advances in technology and the high cost as the reasons for cutting the student program. House pages -- you know, they have aided members of Congress in a number of roles on Capitol Hill for years -- Wolf.

BLITZER: End of an era there on the Hill. Thanks very much, Lisa.

The U.S. military is launching an investigation of the shootdown of a helicopter like this one in Afghanistan. Questions are emerging about the chopper and about the weapons used in the attack.

We'll be right back.


BLITZER: We've reestablished our connection with CNN's Anderson Cooper. He's in Kenya right now, not far from Somalia.

Anderson, you were telling us what's going on. Millions of people are literally in danger right now. Potentially, they could die from starvation.

What's going on?

COOPER: Well, right now in northern Kenya, you have about 400,000 Somalis who have populated what's become the world's largest refugee camp. You can actually see it from space. I think we have an image of that for you.

There's also about 100,000 or so in Yemen and another 100,000 in Ethiopia. And as you mentioned earlier, Wolf, about 100,000 internally displaced Somalis who have now gone into Mogadishu looking for food.

It is a very complex situation. It is a drought here, the worst drought in some 60 years. There's also the conflict in Somalia that has divided that country now for many years.

You have a weak central government. Virtually no government at all. And they've been battling this insurgency against an Islamic extremist group, al-Shabaab.

So there's a lot of moving parts to this, Wolf, but the bottom line is some 29,000 children have died, say relief workers, in the last three months. Twenty-nine thousand children under the age of 5 have died from malnutrition. And the fear is that many more may day in the weeks and months ahead -- Wolf. BLITZER: So you're in Kenya right now, not far from Somalia, but you're heading towards Mogadishu. This is the first time that people can really get in there, given the collapse of the rebels who are in there taking over control.

How dangerous is that environment, though, Anderson? A lot of viewers want to know if you're going to be in any serious danger over there.

COOPER: You know, I'm honestly not too sure. I mean, the transitional government is saying that al-Shabaab has left the city.

We had planned to go there even when they hadn't left the city. So we'll see. I mean, we're obviously taking a lot of precautions, and we'll be very careful.

But we think it's an important story. Not a lot of people have been in Mogadishu reporting. CNN has one person there. So we're going to be trying to spend the next two days there seeing what we can see.

And again, there are acute food shortages in Mogadishu, as well as all throughout southern Somalia. We'll be reporting on that, Wolf, tonight and tomorrow as well.

BLITZER: Yes. And Dr. Jill Biden, the wife of the vice president, she is there with a delegation where you are, right? Haven't they just gotten there? Or are they on their way?

COOPER: Well, they arrived today. They were here for about an hour or so.

They also came with Dr. Frist. Former senator Bill Frist and Jill Biden were here.

Kind of a fact-finding mission. They talked to a number of refugees. They talked to relief workers here. They tried to assess the needs of the people here.

We did an interview with Jill Biden and with Dr. Frist, and that will be on "360" tonight.

BLITZER: We'll be watching, Anderson. Be careful over there. Thanks very much for what you're doing.

Other news we're following.

We're learning more about the downing of a U.S. helicopter in eastern Afghanistan over the weekend and the 30 U.S. troops who were killed. Their remains are being flown to Dover Air Force Base in Delaware right now. Should be arriving at some point tomorrow.

Let's bring in our Pentagon correspondent, Barbara Starr, to talk about, report on what's going on.

Military officials, they are opening up a bit about what happened aren't they, Barbara?


You know, over the course of the war in Afghanistan there's been over a dozen shootdowns of military helicopters. This one, like all of them, sadly, there have been losses. This is, however, a catastrophe for U.S. Special Operations Forces, and officials are finally telling us more about exactly what happened.


STARR (voice-over): Aaron Carson Vaughn (ph), Matt Mills (ph), John Brown (ph), Kevin Houston (ph), Michael Strange (ph), just five of the 30 U.S. troops killed in the Taliban shootdown of a U.S. helicopter.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: And their loss is a reminder of the risks that our men and women in uniform take every single day on behalf of their country. Day after day, night after night, they carry out missions like this in the face of enemy fire and grave danger.

STARR: Twenty-two of the fallen were Navy SEALs from the same team that led the raid to kill Osama bin Laden. Their commander on that mission, Admiral William McRaven, spoke as he began a new job Monday as the head of all Special Operations Forces.

ADM. WILLIAM MCRAVEN, U.S. SPECIAL OPERATIONS COMMAND: Our thoughts and prayers are with you and with all the families of our fallen heroes. We will never forget your sacrifice, nor the ultimate price your loved ones paid to protect this great nation.

STARR: It happened in the remote Wardak Province of eastern Afghanistan. The SEALs had been called in to assist a unit of Army Rangers caught in a firefight while looking for a Taliban commander. As the helicopter approached, the Rangers saw a rocket-propelled grenade fired by an insurgent hit the chopper, according to a senior military official.

Military sources tell CNN investigators will look at several key questions, including, is there reason to believe the Taliban have any advanced shoulder-fired weapons now? Was the helicopter equipped with all the necessary equipment to avoid a shootdown? Were there other armed helicopters nearby? Could they have fired at Taliban forces on the ground?

Several U.S. military officials tell CNN at this point, they do not believe the Taliban knew the helicopter was carrying members of the same unit that killed Osama bin Laden.


STARR: Now, Wolf, as you say, the remains of the fallen will be returned to Dover Air Force Base sometime tomorrow. Difficult to say this very precisely, but we must.

We are told by the U.S. military the remains are in such poor shape due to the catastrophic nature of this incident, they cannot yet be identified. They will do that at Dover. But because they cannot be sure which remains are in which casket, there will be no media coverage of the event, we are told, and that is something that's not likely to change. The Pentagon is holding firm to that now -- Wolf.

BLITZER: All right, Barbara. Thanks very much.

Barbara Starr, working the story for us. What a story.

President Obama feeling the heat across the political spectrum in the wake of an unprecedented credit downgrade for the United States. Ahead, why some are accusing him of being afraid of conflict.

And Rick Perry for president in 2012? Ahead, new signs he could be about to jump into the race.


BLITZER: All right. Let's get right to our "Strategy Session."

Joining us, our two CNN political contributors, the Democratic strategist Paul Begala and the Republican strategist Mary Matalin. Paul is a senior strategy for the Democratic fund-raising group Priorities USA and Priorities USA Action.

Guys, thanks very much for coming in.

Paul, I'm going to throw this out to you and then Mary will respond.

You probably saw that article in "The New York Times" yesterday by Professor Drew Westen of Emory University, an article entitled, "What Happened to Obama?" He's very critical of the president from the left -- because he's from the left -- for not really standing up to the Republicans. He refers to Dr. Martin Luther King, Jr.'s arc of history comment, and he writes this: "With his deep-seated aversion to conflict and his profound failure to understand bully dynamics in which conciliation is always the wrong force of action, because bullies perceive it as weakness and just punch harder the next time, he has broken that arc and has likely bent it backward, at least for a generation."

Now, that's criticism of the president's style coming from the left, not from the right. Is that fair criticism?

PAUL BEGALA, CNN CONTRIBUTOR: Well, and coming from the man, Dr. Westen, who, I have to say, I like and admire his book "The Political Brain." It's one of the best books I've ever read about communicating. Left or right or center, I highly recommend it.

But yes, I think it's a little overdrawn, to say the least. I think it's a little unfair.

You hear this a lot from liberals right now. It's a political problem that the president has. But I think it's very curable.

I mean, it was just a few weeks ago that he showed the kind of boldness and courage on national security policy in approving the raid that killed Osama bin Laden. I think a lot of liberals are saying, let's see that same kind of boldness here.

These moments of strength come, and we don't know when for every president. George W. Bush, standing on that rubble pile, when Mary Matalin was working for him in those tragic days after 9/11. My old boss telling, Bill Clinton, telling Newt Gingrich, if you want someone to cut Medicare as much as you want to, you'll have to find someone else to sit behind that desk. And if you shut down the government, that's the way it goes.

Those moments of strength. Ronald Reagan, firing the air traffic controllers when they went on strike in contravention of the law.

I think these moments will come for this president on domestic matters, but you can't force them. And I don't think anybody wanted him to allow the Tea Party Republicans to push us into default, and so he kind of had no option but to conciliate on that deal.

BLITZER: Did he stand up to the bullies appropriately, Mary?

MARY MATALIN, CNN CONTRIBUTOR: Listen, this president does not have a personality problem. He has a policy problem.

If he is going to blame or liberals want to blame the president's problems on a minority in the minority -- this is what they do, they demonize -- these bitter Tea Partiers are the reasons that we're in the economic calamity we are -- then they are delusional. It's not a debt ceiling problem we have, it is a debt problem.

We have a debt to GDP ratio problem, we have a jobs problem. They're connected. Both of these crises have been -- the president's policies have made both those problems exponentially worse. That's the reality.

It's not personality. It's not bullying. It's not psychobabble. It's the political will to fix what is plaguing now all of the countries around the world.

They don't have personality problems with their leadership. They all have the same debt to GDP ratio issues. They have welfare states that are unsustainable, promises made that can't be paid for, aging populations and flagging economies that are being pulled down by these bloated welfare states.

That's the problem. And the president's issue is not his personality, but his political will to do what every economist and common sense dictates, which is to correct that debt and fix those entitlements.

BLITZER: All right.

Paul, let me move on to a fellow Texan, one of your fellow Texans. We're talking about the governor of Texas, Rick Perry.

Now word he's going to announce basically on Saturday, the same day as the Iowa Ames straw poll, that he in fact going to be running for president of the United States. What do you think about the timing of this announcement? He's not going to flatly say he's running, but for all practical purposes, he'll be running.

BEGALA: Well, it seems to be a testament to the weakness of the front-runner, Mitt Romney. Republicans always nominate the oldest white guy in line, and that's Mitt. But this time he seems -- Mitt Romney seems extraordinarily weak.

Governor Perry could be an exceptionally powerful opponent for Mitt Romney and the rest of that field. He is a candidate for -- everyone who thought George Bush was just a little too cerebral for them -- and he's remarkably dumb -- but he's a great debater, he's a great speaker, he can rally the base of the Republican Party as well. Maybe -- I want to see him actually debate Michele Bachmann, who is a very passionate speaker, who really has done a great job of rallying the base of her party.

But if I were Mitt Romney, I would be quaking in my Guccis right now.

BLITZER: He's going to be announcing his intentions Saturday in South Carolina. I wonder why in South Carolina, but that's where he's going to be doing it.

Mary, by the way, the oldest white guy running in the Republican field is Ron Paul, the congressman from Texas.

BEGALA: Oh. Good point.

BLITZER: So it's not necessarily Mitt Romney.

But what do you think? Rick Perry, does he immediately emerge as one of the front-runners, do you think?

MATALIN: Well, before I say anything, we're pretty old white people here, Wolf. Happy anniversary. It's your sixth anniversary. We've known each other for over 26 years, so congratulations on all your good work.

BLITZER: Thank you.

MATALIN: Yes, the conservatives are serious. We want an electable candidate in the general election, but one that is unquestionably conservative -- a fiscal conservative, a social conservative, a strong national defense conservative.

Rick Perry has the best -- he just has a great jobs record, and he's creating jobs and keeping debt low without raising taxes, moving the impediments to job creation. And he has a clear bona fides on the social side. So, yes, he's going to be a significant -- it's going to open this race wide open when he gets in.

BLITZER: I'm anxious to see if he'll be in our CNN Republican presidential debate on September 12th in Tampa, Florida. It will be interesting to see if Rick Perry joins the rest of the Republican candidates.


BLITZER: Guys, thanks very much for joining us.

BEGALA: Wolf, I wanted to add what Mary said though. Six years ago you took on this show, and you have now seen us through, what, three House Speakers, two Senate majority leaders and two presidents? And you've just done a great job. I really appreciate the chance to be a part of this.

BLITZER: And you guys have been there from day one. Appreciate it very much.

To all of our viewers, you're in THE SITUATION ROOM. Like to say that.

Stand by for more breaking news here in THE SITUATION ROOM. Massive stock sell-off in this, the first trading session since the U.S. credit rating was downgraded.

I'll speak with CNN's Erin Burnett. How much worse could it get?

And the spiral of violence and death in Syria. A surprising new condemnation of the government in Damascus. We'll tell you what's going on.


BLITZER: Rare condemnation today from the Arab world of the bloody crackdown in Syria. Saudi Arabia, Kuwait and Bahrain all say they are recalling their ambassadors from Damascus. This is something even the United States government has not yet done.

This, is as we get word from inside of Syria of yet more deadly violence. The regime is restricting journalist access, as you know, to the country.

So let's bring in CNN's Arwa Damon. She's trying to follow what's going on in nearby Beirut.

Almost every time we speak, Arwa, we can say the same thing, it's going from bad to worse.

ARWA DAMON, CNN INTERNATIONAL CORRESPONDENT: That's right, Wolf. And it seems like the Syrian military is not only intensifying its crackdown, but it is widening it, despite all of this international condemnation, and now what we are hearing from some Arab leaders as well.

On Sunday morning, troops entered the eastern city of Deir Ezzor. Residents again reporting, as we have been hearing, indiscriminate tank shelling, arrests appearing to happen at random, snipers being stationed on rooftops, people being prevented from accessing hospitals. And in Hama, the city that we have been talking about for over a week now, the siege there continues.

And there's been some disturbing video posted to YouTube. We do have to warn our viewers that they might want to turn away at this point. But it's showing how residents are being forced to turn their gardens into graveyards.

In this video, you see these makeshift gravestones crudely etched with the names of just some of the victims of the regime's brutal way of handling these demonstrations. You see a number of bodies also being buried there. And so the image that continues to emerge from Syria is one of just growing and spreading brutality by this regime -- Wolf.

BLITZER: And the latest estimates, human rights activists in Syria, outside, they believe more than 2,000 people have now died in all of this violence. Is that right?

DAMON: That's right, Wolf. That's the latest that we are getting.

Bearing in mind, though, that the estimates for Hama, where the siege began, as I was saying, over a week ago and for Deir Ezzor are not entirely accurate, quite simply because communications into those two areas has been extremely difficult. And so many activists fear that in those two areas alone, the death toll could be much higher that's what has been predicted.

And all things are pointing to one fact, or what would seem to be one fact, and that would be that this is a regime that is increasingly turning its back on reforms and seems to be more intent on using brute force to try to silence these voices of dissent. Analysts say that these are desperate actions by a regime that has never been challenged to such a degree, one that appears as if it is going to ignore even the Arab leadership as long as it is confident that it still has an ally in Iran. And so it's going to be interesting to see how the government reacts in the coming days, and especially what sort of statement, if any, comes out of Iran -- Wolf.

BLITZER: That's interesting. These Arab countries recalling their ambassadors from Damascus.

Arwa, thanks very much. Saudi Arabia, Kuwait and Bahrain.

A disastrous day on Wall Street today. Just ahead, we'll get the latest on just how much worse potentially it could get.

And two critical mortgage giants just the latest casualty of the credit downgrade. Could your home loan now be at risk?


BLITZER: Jack is back with "The Cafferty File" -- Jack.

CAFFERTY: The question this hour -- I got a lot of mail on this. People, they get it. What will it take to change things in Washington, D.C.?

Brian says, "Change Washington? Sorry, but barring divine intervention, I'm not optimistic at all. We want it all, but want the other guy to pay for it. In addition to good old-fashioned greed, what we've got here is a failure to communicate." Which is a line from that Paul Newman movie "Cool Hand Luke." Tommy writes, "The root of the problem, gerrymandered congressional districts. Too many congressmen live in districts where their biggest worry isn't from the other party's candidate, but rather getting primaried by someone in their own party."

"Districts are drawn to protect the incumbent. Thus, congressmen have no incentive to move to the center and compromise. They instead move to the left or right extremes to protect themselves from a primary candidate from their own party."

Jim writes, "With a broken government, Obama needs to abandon compromise and override an inept Congress. If Harry Truman could obliterate 100,000 innocent Japanese civilians using nuclear weapons, surely Obama could ruffle some conservative feathers. Game on."

Minesh writes from Michigan, "The only change agent in Washington is the Tea Party. As long as we keep voting for big government spendaholics like George W. Bush, Obama, Pelosi, Reid, and Boehner, we will keep getting a disastrous credit rating."

Zev writes, "My solution: Operation Clean Slate. Let's replace every member of Congress, use the primaries to oust the incumbent. Then vote Democrat or Republican, but at least the incumbent won't win."

Christi suggests, "Revolution."

And Sterling writes, "The mother of all enemas. The far right and the far left need to move to the far side of the planet so that those of us in the middle who work for a living can make a permanent fix to this mess."

If you want to read more on this -- got a lot of good mail -- go to my blog,, or through our post on THE SITUATION ROOM'S Facebook page.

Do you know where that is, Wolf?

BLITZER: Yes, of course.


BLITZER: Everybody does. Jack, thank you.

CAFFERTY: All right.

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