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THE SITUATION ROOM

Obama Campaign Playing Race Card?; Big Oil Making Big Bucks; Cindy McCain's Cuban Company Ties?

Aired July 31, 2008 - 18:00   ET

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


WOLF BLITZER, CNN ANCHOR: And happening now, John McCain's campaign accusing Barack Obama of using his race for political advantage. Wait until you hear how the Obama campaign is responding.
And McCain is speaking exclusively to CNN about this explosive charge. Stay with us for that.

Also, you're pain is Exxon's profit. You might not believe how much profit the nation's largest oil company has now made in the last quarter and makes every minute you're pumping gas.

And you might want to have a drink over this one. John McCain's wife may soon be doing business with a company that sells beer in Cuba. With Fidel Castro's name involved, there is always going to be controversy brewing -- all that and the best political team on television.

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

Right now, John McCain's campaign is accusing Barack Obama of a politically poisonous act, playing the race card.

We want to welcome our viewers in the United States and around the world.

This potentially explosive charge involves something Obama said and how McCain's campaign pounced. Even the candidate himself talked exclusively to CNN about what is going on.

CNN's Suzanne Malveaux has the Obama campaign's reaction. She's standing by.

But let's go to Dana Bash first. She's working this story.

It's all of a sudden becoming a big flap, Dana. Give us the background.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, the name of the game right now, Wolf, for the McCain campaign is trying to define Barack Obama and trying also to set the terms of the campaign narrative.

Given that they're running of course against the first African- American nominee, today, that meant getting on record about the issue of his race.

(BEGIN VIDEOTAPE)

BASH (voice-over): The issue of race exploded onto the presidential campaign trail with this statement from John McCain's campaign manager, Rick Davis: "Barack Obama has played the race card, and he played it from the bottom of the deck. It's divisive, negative, shameful, and wrong."

He was referring to Obama's comments at three different Missouri campaign stops Wednesday, reacting to McCain's increasingly negative tone with a version of this.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: Nobody really thinks that Bush or McCain had a real answer for the challenges we face. So, what they're going to try to do is make you scared of me. You know, oh, he's not patriotic enough. He's got a funny name.

(LAUGHTER)

OBAMA: You know, he doesn't look like all those other presidents on the dollar bills, you know?

(CHEERING AND APPLAUSE)

OBAMA: That he's risky.

BASH: In an exclusive interview with CNN's John King, McCain said it's fair to accuse Obama of playing the race card.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: I'm sorry to say it, that it is. It's legitimate. And we don't -- there is no place in this campaign for that. There is no place for it. And we shouldn't be doing it.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: They say that's not the case.

MCCAIN: OK, John.

KING: OK.

MCCAIN: I will let the American people judge.

(CROSSTALK)

BASH: That even as McCain's own campaign was aggressively calling reporters to push and explain their race card charge. Adviser Steve Schmidt calling Obama's remarks a "disgusting accusation," saying, "This campaign will not allow John McCain to be smeared in this way."

An Obama spokesman respond by saying; "Barack Obama in no way believes that the McCain campaign is using race as an issue. But he does believe they're using the same old low-road politics to distract voters."

(END VIDEOTAPE) BASH: Now, the reality is that dating back to the Democratic primaries, Obama often warned that his opponents would use race against him. But the McCain campaign is trying to be much more aggressive in laying down markers against Obama. And this one really is protective, Wolf, that if race is an issue in this campaign, Obama is the one who brought it up.

BLITZER: It doesn't get much more sensitive or as we said earlier poisonous potentially than this.

Suzanne, so take us behind the scenes. It's, as we say, a very sensitive issue for both of the campaigns. You cover the Obama campaign. What are they thinking? What are they have saying?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, it certainly is a very sensitive issue, but they also very feel confident here that they believe that the McCain campaign has essentially been smearing Barack Obama, that they have mischaracterized him, making him really kind of a caricature, the latest example comparing his celebrity status to Paris Hilton, that type of thing, Britney Spears.

They believe they're in a strong position to take him on over this issue. As you heard Dana mention, they came out strong saying that they don't believe that McCain is necessarily talking about race, using race here. But they have launched a new Web site. It is called lowroadexpress.com. And it's essentially used to answer all of those kinds of things that they are calling frivolous, demeaning type of characterizations of Obama, something that they feel is a part of an aggressive campaign, that all of this, that they really are on the side of strength here.

They believe that this is something. And the reason why is because they have got editorials from some of the main media outlets, "Cincinnati Enquirer," "New York Times," et cetera. So, looking at that Web site, they believe they have got a very strong case -- Wolf.

BLITZER: Suzanne, thanks very much. We will have more on the story later.

CNN, by the way, is launching a fresh effort today to help you get to know the presidential candidates, where they stand on the major issues. Each hour, we're bringing you more of what they're saying out on the campaign trail to help you decide in their own words.

Today, in Cedar Rapids, Iowa, Barack Obama talked about the need for health care and other issues you deeply care about.

(BEGIN VIDEO CLIP)

OBAMA: Think about if we, in fact, designed that new fuel efficient car here in the United States, and we created a new electricity grid, so that when you plug in that car, it's using that energy wisely and smartly, and we can distribute energy from wind and solar and all across the country.

Think about how many jobs that would create. Think about a rejuvenated auto industry and what that would mean to the Midwest, Michigan, Ohio, Iowa, Illinois, Missouri. I mean, that's got to be the agenda for the future.

So, that is, I think, something we have got to get a handle on. Number two, our health care system is a huge drain on families and businesses.

(APPLAUSE)

OBAMA: And I know that gas prices have gotten so much attention lately that the health care issue has not been talked about as much in the news.

But families, silently, they're still suffering. You know, there are a lot of people -- there are people in this audience who don't have health insurance. There are people in this audience who have got health insurance, but have seen their co-payments, their deductibles, their premium rising, so much that they're being priced out of the market.

There are people here who lost their job and are just barely hanging on, trying to figure out how to get another job just for their health care, not even thinking about possibilities of getting a decent wage.

So, I have already put forward a plan where everybody who needs health care can get it and everybody who has it can afford it. And we're going to make the system more efficient by investing in information technologies, investing in prevention. So that is a critical part of the economy.

Investing in infrastructure, rebuilding our roads, our levees, when we talk about levees, we should be continually upgrading our infrastructure, our ports, our locks, our dams, so farmers can get crops to market. We should be doing that on a -- we should have engineers put together a capital budget, prioritizing what projects are needed, when they're deteriorating.

And we should plan that each and every year. It shouldn't be this random political pork barrel process. And if people tell you we can't afford it, you just remind them we are spending $10 billion to $12 billion a month in Iraq. And if we can spend $10 billion to $12 billion in Iraq, we can spend $10 to $12 billion putting people back to work rebuilding our economy right here in the United States of America.

(END VIDEO CLIP)

BLITZER: In his own words, Senator Barack Obama.

Later, we are going to be giving you some of what Senator McCain had to say today on energy and oil prices, among other subjects.

Let's check in with Jack once again. He's got "The Cafferty File."

JACK CAFFERTY, CNN ANCHOR: Notice any difference between these two guys when they address these audiences?

BLITZER: Yes, lots of differences.

CAFFERTY: Like what?

BLITZER: They have different styles. They're very different men.

CAFFERTY: What else?

BLITZER: Go ahead. Tell me.

CAFFERTY: McCain reads everything. He reads everything, except his name.

BLITZER: No, no, he doesn't.

(CROSSTALK)

CAFFERTY: He keeps walking back over and looking down at his paper. Come on. He reads everything.

There's a long history in the Bush administration that simply ignores subpoenas from Congress, not that Congress has gone out of its way to exercise any oversight of the executive branch. But, when it does, once in awhile, President Bush just laughs out loud and ignores them, like a bunch of unruly kids who are acting up in order to get attention.

Well, they got the attention of a federal judge. U.S. District Judge John Bates says the president's top advisers are not immune from congressional subpoenas. Imagine that. Bates says there is no legal basis for the administration's argument and that former legal counsel Harriet Miers, among others, must testify before Congress.

Now, Judge Bates says Miers and others can assert executive privilege during that testimony, but they have to show up in person and do it. Democrats call the ruling very good news. They say that Miers, White House Chief of Staff Josh Bolten and Karl Rove must now testify before Congress.

Of course, the White House says it disagrees with the judge's ruling and will decide in the next day or two if it will appeal the decision. Karl Rove has become just the latest Bush administration figure to extend his middle figure to the legislative arm of our government, figuratively speaking, when he defied a subpoena to testify earlier this month.

The House Judiciary Committee voted yesterday to cite Rove for contempt of Congress. But this is only a recommendation. Nancy Pelosi will have to decide whether to bring it to a vote of the full house. And we all know how aggressive Pelosi has been when it comes to oversight of the Bush White House. With Madam Speaker, it's all about politics. And, besides, they're going on vacation for five weeks. Here's the question: What does it mean for President Bush when a federal judge rules his people are not immune from congressional subpoenas?

Go to CNN.com/caffertyfile. Post a comment on my blog -- Wolf.

BLITZER: Jack, thank you.

Almost $90,000 a minute, that's the rate at which the nation's biggest oil company earned its biggest ever profits. We get some reaction from the candidates and the American public.

And Cindy McCain may soon be linked to a company that does business in Cuba. And it's not sitting necessarily all that well with some Cuban Americans.

And new this hour, another Air Force missile mishap. What happened when a vehicle carrying the weapon tipped over on a country road in North Dakota? We will tell you right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The nation's biggest oil company reporting its biggest ever oil profit today. We're talking about ExxonMobil, and some major, major dollars in the company's second-quarter profit report.

Our senior correspondent, Allan Chernoff, is tracking this story.

(BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT (voice-over): In the four minutes it took Debra Perette to get her tank filled up, ExxonMobil earned $357,000, a rate that generated a gusher of profit, $11.7 billion during the second quarter.

DEBRA PERETTE, DRIVER: It's sickening to see that they make so much money, and we suffer for it. They should take less profit and help the little people out.

CHERNOFF: A new CNN opinion poll finds more than two-thirds of Americans believes U.S. oil companies like ExxonMobil are a major cause of higher gas prices, followed by foreign oil producers, as well as energy speculators.

UNIDENTIFIED FEMALE: I blame a lot of the oil companies because I do think they're gouging the American people.

CHERNOFF: Barack Obama called ExxonMobil's profit outrageous.

OBAMA: No United States corporation has ever in American history made that much of a profit in a quarter. Never happened before. But while big oil is making record profits, you're paying record prices at the pump.

CHERNOFF: John McCain responded with a call to find more oil. MCCAIN: We must begin immediately in drilling offshore, so we can get some of the oil that's off our own coasts.

(CHEERING AND APPLAUSE)

CHERNOFF: ExxonMobil says that is an answer to high oil prices. Congressional Democrats say a better answer is to stop giving oil companies tax subsidies.

SEN. CHARLES SCHUMER (D), NEW YORK: And big oil, despite all its riches, has not delivered anything to anyone but itself. It is the most selfish group of companies that I have ever seen.

CHERNOFF: But for investors expecting even more profit, ExxonMobil didn't deliver enough. The stock fell nearly 5 percent on the news.

(END VIDEOTAPE)

CHERNOFF: Tough crowd on Wall Street. ExxonMobil stock is down 15 percent since mid-May.

An interesting note, ExxonMobil said some of its businesses, like refining and selling gasoline, actually saw profits decline. ExxonMobil said recently it's going to get out of the gas station business because of declining profits -- Wolf.

BLITZER: Tough crowd, indeed, out there. All right, Allan, thank you -- Allan Chernoff reporting.

The big oil companies, by the way, say that even though they make a lot of money, billions and billions of dollars in profits, it's not necessarily out of line with what other major corporations make. In the last quarter, as we just heard, ExxonMobil had a profit margin of about 11 percent.

We compared that to some other big companies. Microsoft showed a 27.5 percent profit. On the manufacturing side, Caterpillar showed almost 8 percent. Wal-Mart had about a 3 percent profit margin.

As we said also a few moments ago, CNN is now launching a fresh new effort to help you get to know the presidential candidates a bit better, where they stand on the most important issues. Each hour, we're bringing you more of what they're saying on the campaign trail to help you make your decisions. We heard just a little while ago from Senator Barack Obama.

Now Senator McCain on the nation's energy crisis and the environment.

(BEGIN VIDEO CLIP)

MCCAIN: I think one of the great tragedies of this crisis that we are in, as you know, who is being hurt the most? We know who it is. It's the lowest-income Americans that drive the farthest, that have the oldest cars. That's one of the terrible, many terrible aspects of this energy crisis that we're in.

And it took 30 years, by the way, my friends, to get into it. And we're not going to get out of it tomorrow. But we can embark today -- by the way, in case you missed it, the Congress is gridlocked. We're gridlocked on energy. I guarantee you, they're not going to miss their August recess, but they're not going to do anything about the energy issue in America.

Now, let me just say, I talked about -- I talked about...

(SHOUTING)

MCCAIN: Easy.

(LAUGHTER)

MCCAIN: We talked about the national security aspects of it, $700 billion a year being transferred. We talked about the economic impact.

Can we just talk a minute about the issue of our environment? We -- I do believe that greenhouse gases are affecting the climate of the Earth. And we can continue that debate and we should continue to have it. But there is no better way of addressing it in a most effective fashion than going to wind, tide, solar, nuclear, alternate fuels, automobiles that are hybrids and hydrogen, electric batteries.

(APPLAUSE)

MCCAIN: So, we have a nexus here in my view of these major challenges. And one of the ways through the energy dependence on foreign oil and reducing our costs are directly related to green technologies.

My friends, I was in Detroit not long ago. And I saw the new automobile that is going to be put out by General Motors called Volt. Now, I want every American to have the opportunity to buy this one or any other product that will eliminate their dependence on foreign oil and reduce the price of a gallon of gas.

So, let's give every American up to a $5,000 tax credit to buy one of these new generations of automobiles. Let's do that to encourage them to do that.

(APPLAUSE)

(END VIDEO CLIP)

BLITZER: John McCain speaking in Racine, Wisconsin, today.

Remember that U.S. Air Force base with the so-called loose nukes and the controller asleep at the switch? This hour, there is some new information coming in, another embarrassing mishap there. We will update you on what we know.

And a powerful U.S. senator enters his plea to corruption charges and wants something from the judge.

And another health scare out of Hollywood, the Hollywood legend Elizabeth Taylor. We will have details on her condition.

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

(COMMERCIAL BREAK)

(NEWS BREAK)

BLITZER: A near record usually means good news, but not necessarily this time. Coming up, how Americans feel about the country and who they think should fix it.

Plus, the Cuban controversy, it's a new one. John McCain's wife might soon be working with a company that does business in Havana.

And, later, what in the world is this? A creature of some sort that supposedly washed ashore in the Hamptons. There it is. We will unravel the mystery and much more right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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

Happening now, an explosive issue heating up this presidential contest, charges and countercharges unfolding today. And it's all about playing the so-called race card. We're sorting it all out for you.

And ready for a reality check? We asked people how things are going in the United States right now. It's been a while since moods were this, this bad.

And the Cuba connection -- a potential merger of beer companies involves Cindy McCain's, anti-Castro Cuban-Americans, and the political cost of doing business in Cuba, all of this, plus the best political team on television.

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

BLITZER: A near record sounds like something good, right? But people are telling us in a brand-new poll how they think things are going in the country right now, and they're not very happy about it.

Our senior political analyst, Bill Schneider, goes behind the numbers.

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP, BUDWEISER AD)

UNIDENTIFIED ACTOR: How you doing?

UNIDENTIFIED ACTOR: How you doing?

UNIDENTIFIED ACTOR: How you doing?

UNIDENTIFIED ACTOR: How you doing?

(END VIDEO CLIP)

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): That's not just the greeting from a Budweiser commercial. It's also a question the polls have been asking for 35 years. How well are things going in the country today?

The answer right now? Yikes. Fewer than a quarter of Americans believe things are going well, the lowest number since the spring of 1980, when the country faced recession, rising energy prices, and a hostage crisis.

Turns out that question is a pretty good political indicator. In the fall of 1980, 32 percent said things were going well. President Carter lost.

In 1992, 35 percent said things were good. The first President Bush went down.

Good times? That would be 1984, when it was morning in America. Seventy-four percent thought times were good. Ronald Reagan reelected.

Times stayed good through 1988, when Reagan's vice president won. Nearly 70 percent thought things were good in 1996, when Bill Clinton won a second term.

With only 24 percent of Americans happy right now, Barack Obama is running hard on the change issue.

OBAMA: We have to change course and then we're going to have to take some immediate action.

SCHNEIDER: But John McCain asks, what sort of change?

MCCAIN: I believe that in a troubled economy, when folks are struggling to afford the necessities of life, higher taxes are the last thing we need.

SCHNEIDER: Why is the election closer than it should be with so many unhappy voters?

Take a look at those unhappy voters. They really don't like President Bush and they really do like Senator Obama.

And Senator McCain? They kind of like him, too.

SCHNEIDER (on camera): But not as much as Obama, which is why Obama is leading. But it's not a slam-dunk.

Bill Schneider, CNN, Washington.

(END VIDEOTAPE) BLITZER: Senator Barack Obama is accusing the McCain camp of taking the low road with negative ads. And the McCain campaign is now accusing Senator Obama of playing the race card. It doesn't get more poisonous than this.

Let's discuss with our senior political analyst, Gloria Borger; our own Jack Cafferty; and Tara Wall of "The Washington Times". They're all part of the best political team on television.

I want to play this little exchange, Jack, that John King had with John McCain just a little while ago.

I'll play the clip right now.

(BEGIN VIDEO CLIP)

KING: Your campaign manager says he's playing the race card by saying that, by saying that you're trying to scare people and make them think this guy doesn't look like past presidents.

Is that a fair criticism for Rick Davis to say the Barack Obama is playing the race card?

MCCAIN: It is. I'm sorry to say that it is. It's legitimate. And we don't -- there's no place in this campaign for that. There's no place for it and we shouldn't be doing it.

KING: They say that's not the case.

MCCAIN: OK. John. OK.

KING: Senator, thank you.

I appreciate it.

MCCAIN: I'll let the American people judge.

(END VIDEO CLIP)

BLITZER: All right, Jack, you're part of the American people, what do you judge?

CAFFERTY: Well, I think the McCain campaign better be careful about, you know, living in glass houses and throwing stones. And here's why I say that. I think it's very much playing the race card to put a highly educated, articulate, middle-aged black family man into a television commercial with two blonde bimbo airheads with a combined I.Q. of a box of cereal. And if you have any doubts about what I'm talking about, it's the same kind of thing that was done to Harold Ford down in Tennessee in 2006 and it stinks. It's more subtle, but it stinks just the same.

BLITZER: We heard a similar complaint earlier, Tara, from Donna Brazile. They think it was a racial overtone in that ad with Paris Hilton and Britney Spears...

TARA WALL, "WASHINGTON TIMES": Oh, come on...

BLITZER: ...comparing them to Senator Obama.

WALL: You know, Wolf, that's a stretch. There's going to be a lot of time in this campaign to dissect whether something is racist or not. It is too early for these kind of shenanigans. This is -- this is ridiculous.

I mean let -- are we going to pick apart every single ad to pick apart if there's a white person, a black person, a yellow person?

The McCain campaign did one thing this morning and that is get on the offensive and say -- get on the defensive and defend themselves and say listen, you know, enough of this. We -- you know, Barack Obama is above putting -- he is the candidate. He doesn't need to draw in voters by saying they're going to make me look like the boogeyman, they're going to -- because they say that I'm inexperienced, that equals them saying that, you know, he's black...

BLITZER: All right...

WALL: ...and, you know, they're racist. That's -- that does not equate to the same thing. When there are legitimate claims of racism -- you know, this is like crying wolf. Let's put it into perspective here. It was a light-hearted ad that Obama himself reacted to in a light-hearted manner.

BLITZER: All right. Gloria, here's the controversial statement that Senator Obama made yesterday that generated this very angry reaction from Senator McCain and his campaign today.

I'll play it for everyone.

(BEGIN VIDEO CLIP)

OBAMA: The only strategy they've got in this election is to try to scare you about me. They're going to try to say that I'm a risky guy. They're going to try to say well, you know, he's got a funny name and he doesn't look like all the presidents on the dollar bills and the $5 bills.

(END VIDEO CLIP)

BLITZER: All right. Now, the McCain campaign, as you know, Gloria, they suggested he's a risky guy, more or less, because he doesn't have the experience, the background. But I don't think they've ever said anything about that he doesn't look like other presidents on a dollar bill or said anything about his funny name.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: No, they have not. And the McCain campaign made a lot of phone calls to reporters this morning saying that this is what drove them over the edge, that, of course, John McCain has never said any such thing.

But when you take a step back, Wolf, what both of these campaigns are doing is inoculating themselves on the race issue. Barack Obama is talking about race because, after all, he is an African-American. And he has talked about race throughout this entire campaign in a way where he says and, by the way, I'm black, OK?

And what the McCain campaign is doing here is saying, look -- they laid down a marker protectively today and said don't try and use the race issue on us because we're going to say that you raised it first.

So both of these campaigns are protecting themselves in a way from what may yet be to come.

BLITZER: Jack, you know...

CAFFERTY: Did you...

BLITZER: Go ahead, Jack.

CAFFERTY: No. I just -- I was watching Bill Schneider's piece. Twenty-four percent of the country thinks things are fine, 76 percent of the country thinks things are not so fine. This is one of the reasons the public is up to their eyebrows in the Washington politics, because we have got a string of very serious problems and issues confronting this country and we're sitting here talking about race and whether taking a birth control pill is abortion and a bunch of nonsensical crap that doesn't mean anything to anybody if there's no gasoline, if the country goes broke, if there are no jobs, if the war in Iraq doesn't end soon, if the military is destroyed...

BORGER: Right.

CAFFERTY: It's nonsense.

BORGER: Well, and I would agree with you. But I also think that is why the American public could be turning off of this election. That is why I think Barack Obama missed an opportunity by not going out there with John McCain and doing these town hall meetings, because these candidates are both trying to define each other.

When you both stand next to each other in front of the American people, the American people make up their own mind.

BLITZER: I think Jack makes a great point, Tara, that there are so many really important issues. But the McCain campaign obviously knew what they were doing when they threw out the words "race card" today. They knew this was going to generate -- you hear the Republican nominee make that specific charge in that exclusive interview that John King had...

WALL: Absolutely. And...

BLITZER: They knew what they were doing.

WALL: Right. And I, you know, I agree with Jack in that absolutely, Americans want to focus on issues, talk about the issues with both of the candidates. They want to hear from them on these issues. There's nothing wrong from having light-hearted ads from time to time. There's nothing wrong with raising legitimate issues about whether he's qualified, whether he's experienced, that have nothing to do with race. And I think that we need to...

BORGER: But...

WALL: We certainly need to focus in on that. And I think the McCain campaign, though, rightfully drew the line and said look, we are not going to stand here and be called racist when we have done nothing racist.

BORGER: Right. But he didn't...

WALL: It's one thing...

BORGER: ...call them racist.

CAFFERTY: Is it OK...

(CROSSTALK)

CAFFERTY: Is it OK to be...

(CROSSTALK)

WALL: I'm speaking...

CAFFERTY: Is it OK to be...

WALL: ...in general terms.

I'm speaking generally speaking...

CAFFERTY: Is it OK to do commercials about...

WALL: That's their approach to this.

BLITZER: Yes.

CAFFERTY: Now, let me ask you a question.

Is it all right, then, to do commercials about the fact John McCain doesn't know the difference between Sunnis and Shias, that Joe Lieberman has to whisper...

WALL: Hey, that's...

CAFFERTY: ...in his ear in a foreign country and correct him on an issue that he's been running his entire campaign on, which is how qualified he is to be commander-in-chief?

Is that a fair commercial to put on the air?

WALL: Well, absolutely, it's fair, if that's a legitimate issue to raise. If people have concerns about his judgment because of those -- those particular issues, why -- why not?

It is fair game.

I mean are they just more, you know, outraged because John McCain is making light of some things that, you know, some people find amusing?

And, again...

CAFFERTY: You keep...

(CROSSTALK)

WALL: ...Barack Obama himself...

CAFFERTY: You keep saying he was making light.

WALL: ...was not too offended.

CAFFERTY: There was nothing making light about it. There was nothing funny about that commercial.

BORGER: And...

CAFFERTY: Go watch the Harold Ford stuff.

(CROSSTALK)

WALL: I watched the Harold Ford stuff, which was also legitimate.

BLITZER: All right...

WALL: And I did think the...

BLITZER: All right, guys...

WALL: ...the celebrity one -- listen, it did not -- I've seen racist ads and this does not rise to the level of racism.

BLITZER: All right, guys.

WALL: That's absurd. That's just all the liberal bloggers are talking about this.

BLITZER: Gloria, button it up because we've got to go.

BORGER: Thank you, Wolf.

You know, this is about the McCain campaign trying to break through. It hasn't been able to break through. And what we've seen in the last week or two is a campaign that's been increasingly aggressive and tough and negative. From John McCain saying that Barack Obama would rather lose a war than an election to this recent issue over race, they're getting aggressive because they feel like they're not breaking through.

BLITZER: All right. We'll leave it right there. Gloria, Tara, thanks to both of you.

Jack, we've got "The Cafferty File" coming up.

It may not necessarily go down well with Cuban-Americans, but a beverage company that does business with Havana may soon be linked to John McCain's wife.

So what is the McCain camp saying?

And a breakthrough from space -- why scientists are so excited about what's happening on Mars.

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

(COMMERCIAL BREAK)

BLITZER: John McCain's wife Cindy may soon be linked to a beverage company that actually does business in Cuba. And that may not necessarily go over all that well in South Florida and the area's politically powerful Cuban-American community.

CNN's Jim Acosta is in New York. He's working the story for us.

So what is this connection between Cindy McCain and Cuba?

JIM ACOSTA, CNN NATIONAL CORRESPONDENT: Well, Wolf, it's no secret Cindy McCain has a family company that is a big distributor for Anheuser-Busch. What's not so well-known is that Anheuser-Busch may be about to merge with a beverage company that owns a beer in Castro's Cuba.

(BEGIN VIDEOTAPE)

ACOSTA (voice-over): They're not singing "this Bud's for you." It's an ad for Cristal, a beer made in Cuba and owned by InBev, the Belgian-based beer giant that's in the midst of a hostile takeover of Anheuser-Busch.

Now, controversy over the merger is brewing among anti-Castro Cuban-Americans in politically crucial South Florida over Cindy McCain's ties to Anheuser-Busch.

NICK GUTIERREZ, ATTORNEY FOR BLANCO-HERRERA FAMILY: Cindy McCain is a distributor and shareholder of Anheuser-Busch. Now we seem to have everybody's attention.

ACOSTA: Nick Gutierrez represents the family that claims to have founded Cristal beer. The family accuses InBev of profiting off the brew that was seized by Fidel Castro. Gutierrez wants McCain to enforce the U.S. trade embargo against Cuba and punish InBev for doing business there.

GUTIERREZ: I'd like to see Senator McCain come out and say, look, this is where I stand. My wife has nothing to do with this merger. She's not an officer or director. She's got nothing to do, obviously, with InBev's, you know, nefarious activities in Cuba. But I'm a presidential candidate. And to me, U.S.-Cuban relations is an important topic.

ACOSTA: In a statement, two Cuban-American congressmen went further: "It is extremely disturbing," they said, "that Anheuser- Busch may be purchased by a company with ties to the Cuban terrorist regime."

Insisting the Arizona senator is a strong embargo supporter, the McCain campaign tells CNN, if the deal goes through, the McCains would sell their shares in Anheuser-Busch. But the campaign adds Cindy McCain's company would remain an InBev distributor in the U.S.

MCCAIN: As president, I will not passively await the day when the Cuban people enjoy the blessings of freedom and democracy.

ACOSTA: The race could be tight in Florida. One new poll in the state shows Obama with a slight edge. An Obama win there would leave the McCain campaign with one serious hangover.

(END VIDEOTAPE)

ACOSTA: InBev released its own statement to CNN, saying its activities in Cuba "do not violate U.S. law" -- Wolf.

BLITZER: An interesting story.

Jim, thanks very much.

Jim Acosta is in New York.

He's known as The Terminator and he runs a state that's as big as a lot of countries -- even bigger. Why a quarter of million Californians right now aren't necessarily happy with their governor.

Is Arnold Schwarzenegger going too far?

And a judge rules that President Bush's staff isn't immune to subpoenas. Jack Cafferty and your e-mail coming up.

Plus, look at this -- a beak and a leathery body. There it is. Jeanne Moos finds it "Moost Unusual."

(COMMERCIAL BREAK)

BLITZER: Let's check in with Lou to see what's coming up at the top of the hour -- Lou, what are you working on?

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Wolf, thank you.

Lawmakers grilling the government's top food safety official, Dr. David Acheson, about the FDA's disappointing performance during the salmonella outbreak. But Acheson has no idea still how to fix our broken food safety system. I'll be joined by the chairman of the Congressional committee grilling Acheson today. And rising concern about Mexico's out of control drug cartel wars. We'll have an exclusive report on this government's efforts to help Mexico fight those cartels.

And a new front in the war on our middle class working men and women facing higher taxes, cuts in services, as states now tackle a worsening budget crisis.

And rising anger at the Democratically-led Congress's refusal to lift its ban on offshore drilling. The leaders of a bipartisan group of congressmen with a plan to help all Americans will join me here tonight.

We hope you will, as well, 7:00 p.m. Eastern for all of that, all the day's news and more, from an Independent perspective -- Wolf, back to you.

BLITZER: Thanks, Lou.

See you in a few moments.

Let's check back with Carol. She's monitoring some other important stories incoming into THE SITUATION ROOM.

What's going on -- Carol?

CAROL COSTELLO, CNN CORRESPONDENT: Well, Wolf, the name Terminator might fit a little too well for Arnold Schwarzenegger. The California governor has ordered 22,000 state jobs be cut and steep pay cuts for 200,000 other state employees. Union members are protesting t cuts, but Schwarzenegger says he needs them because of a multi-billion dollar budget deficit. The state's cash is dwindling and legislators have yet to agree on a new budget.

FEMA in the hot seat today as lawmakers demand answers about millions of dollars in aid that was meant for Hurricane Katrina victims but never reached them. FEMA actually gave the aid away mistakenly thinking it was a surplus. A FEMA official acknowledged mistakes were made and pledged the agency would learn from those mistakes and communicate better with states it assists.

And scientists have long suspected there is water on the red planet and now they have real proof. NASA's Phoenix Lander robot actually tasted icy water from a soil sample from Mars. NASA can now figure out what that water is made up of, how long it's been there and maybe -- maybe determine if there is or was life on Mars.

Back to you -- Wolf.

BLITZER: Well, when they get bottled water, we'll go there. That's a big story, too, right?

COSTELLO: That would be a huge story.

BLITZER: That would be huge.

All right. Thanks, Carol, for that.

Let's go back to Jack. He's got "The Cafferty File" -- Jack.

CAFFERTY: That's pretty funny, actually. Bottled water.

(LAUGHTER)

CAFFERTY: I like that. Wolfman doing the jokes.

Question -- what does it mean for President Bush when a federal judge rules his people are not immune from congressional subpoenas?

Terry in North Carolina: "It's about time this administration is held accountable. These people are guilty of a lot more than breaking into an office in the Watergate Hotel and those guys all went to prison. It will be interesting to see what direction this will take."

Will in California: "Unfortunately, it doesn't mean much. These are Congressional subpoenas. Following up on this would mean they might miss that big vacation they have planned."

Harry in Kentucky: "Nothing really. After all, you said it yourself, they can claim executive privilege at the hearing. That's a hearing that produces no more results than ignoring the subpoenas to begin with."

Bobby writes: "It disabuses them of the notion they're above the law. It means that Bush's cronies, preposterous as it may seem, must abide by the law, just like the rest of the American people."

Not necessarily.

Eric in Mountain View, California: "Maybe it means we can finally start charging these people for the crimes they've committed over the last seven plus years. I doubt it. I think Rove will just show up and claim executive privilege anyway. But I would hope it's just the tip of the iceberg when it comes to holding the administration accountable for their actions."

Bob in North Carolina says: "It means someone has finally read the Constitution. The three branches of government are supposed to provide checks and balances. As it stands now, all we have is got you politics from the two parties. I think the founders had it right."

And Greg in Lancaster, Texas: "Now tell me again why Speaker Pelosi took impeachment off the table."

I can't tell you.

If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile and look for yours there, among hundreds of others -- Wolf.

BLITZER: She said it would distract from other important critical issues that the Congress really has to focus in on and that would be too much of a distraction. CAFFERTY: Oh.

BLITZER: That was the answer.

CAFFERTY: Thank you.

BLITZER: Jack, see you tomorrow. Thank you.

CAFFERTY: Bye.

BLITZER: In today's Political Ticker, Democratic dreams may be just that -- a dream. A grassroots group called Vote Vote says it's abandoning its effort to get Hillary Clinton on the ticket with Barack Obama. Some of Clinton's supporters say there's little chance of her getting the V.P. spot. Sources tell CNN Clinton will speak at the Democratic National Committee in Denver on Tuesday night of the convention. But Wednesday is the night the vice presidential candidate typically speaks at the convention.

Remember, for the latest political news any time, you can check out CNNPolitics.com. The Ticker there is the number one political news blog on the Web.

It supposedly washed ashore on Long Island. There it is. That's what washed ashore. Rumors are rampant right now on the Internet about what they're calling the Montauk monster. CNN's Jeanne Moos finds it "Moost Unusual."

And Pakistani villagers villager desperately trying to escape a battle between security forces and Islamic militants.

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

(COMMERCIAL BREAK)

BLITZER: Here's a look at some of the Hot Shots coming in from our friends over at the "Associated Press."

Two Serbians watch former Bosnian leader Radovan Karadzic appear before the U.N. War Crimes Tribunal.

In Pakistan, villagers leave as Pakistani security forces battle Islamic militants.

In China, a security guard looks at the Olympic basketball gymnasium.

And in Virginia, the governor, Tim Kaine, jokingly closes the door on a radio station employee taking a picture on his cell phone.

Some of this hour's Hot Shots -- pictures worth a thousand words.

OK. We showed you some cool pictures. Now check this out. But we warn you -- these pictures may not necessarily be for the squeamish. Kind of weird, definitely most unusual.

This is a story for CNN's Jeanne Moos.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): Montauk, Long Island used to be known for its nice lighthouse. But now...

UNIDENTIFIED FEMALE: That's pretty disgusting.

UNIDENTIFIED FEMALE: Ew, what is that?

Seriously, what is that?

MOOS: Avert your eyes if you're sensitive. They're calling it the Montauk monster -- so ugly it has folks crossing themselves.

UNIDENTIFIED MALE: Oh my god.

UNIDENTIFIED MALE: Oh, man.

MOOS: The photograph was taken by this woman several weeks ago.

UNIDENTIFIED FEMALE: This is the actual shot.

MOOS: ...when the so-called monster washed up on the beach. Now the Web is awash with it. It first appeared on a gossip site called Gawker and folks have been gawking at it ever since.

UNIDENTIFIED FEMALE: This is really not real.

Is it real?

MOOS: It's real according to a 22-year-old lifeguard named Colin Davis (ph), who, along with his friends, recovered the remains.

UNIDENTIFIED MALE: This thing stinks.

MOOS: Colin says they're keeping them in the type of zippered bag you'd put a comforter in.

UNIDENTIFIED MALE: We have a bag of bones and a skull, decomposing black like borderline goo.

MOOS: But the big question about the remains still remains.

UNIDENTIFIED FEMALE: What do you think it is?

MOOS (on camera): What do you think it is?

(voice-over): Guesses range from turtle without the shell to semi-aquatic rodent. It's the beak-like snout and flipper-like limbs that confuse folks.

UNIDENTIFIED MALE: We're going to definitely take it and try to have some expert analyze it. But, you know, in the meantime, we're having a great time with it. It's a really cool beast.

MOOS: Decked out in beach gear, we sampled opinion on the concrete beaches of Manhattan.

UNIDENTIFIED MALE: It's some sort of hog.

UNIDENTIFIED FEMALE: Yes, it's a bird-like pig.

UNIDENTIFIED MALE: Part pig, part eagle.

MOOS: Posted on person: "It's a dead pit bull. What's wrong with you people?"

Most experts seem to think, based on its teeth, that it's a dog or a raccoon.

UNIDENTIFIED FEMALE: A raccoon?

MOOS: No, it's not Mr. Bigglesworth.

UNIDENTIFIED MALE: That's right, Mr. Bigglesworth, we're back.

MOOS: Some think it may have washed up from the nearby Plum Island Animal Disease Center, where they investigate diseases. But the director categorically denies the creature is from there.

UNIDENTIFIED MALE: It's something that the scientists have not identified yet.

MOOS (on camera): Well what an -- what creature could that be?

UNIDENTIFIED FEMALE: My husband?

UNIDENTIFIED MALE: I'm not that much of a beach person, but it doesn't look like anybody I know.

UNIDENTIFIED FEMALE: I'm pretty sure it's an alien.

MOOS: You really can't look at it?

UNIDENTIFIED FEMALE: No. I really -- I'm squirmish (ph).

MOOS (voice-over): No, you're squeamish. It's squirmish.

Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

BLITZER: And this reminder -- you can check out our new SITUATION ROOM screensaver and stay up to date on all the latest political news. You can download it at CNN.com/situationroom.

I'm Wolf Blitzer in THE SITUATION ROOM.

Up next "LOU DOBBS TONIGHT" -- Lou.

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