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JOHN KING, USA

BP's New Cap; Stimulus Money; Financial Reform Package

Aired July 15, 2010 - 19:00   ET

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


JOHN KING, HOST: Thanks, Wolf and good evening everyone. Tonight breaking and hopeful news from the Gulf of Mexico. But from both BP and the government cautions not to get too optimistic. Still, for nearly four hours now an image we have been waiting to see for 87 days. No oil flowing into the Gulf of Mexico. BP says tests of its new cap are going well so far. It also says it could be a day or two before we know whether the oil flow can be stopped permanently.

(BEGIN VIDEO CLIP)

DOUG SUTTLES, CHIEF OPERATING OFFICER, BP: I know everyone is so interested in what we're seeing here but I do think we have to be very cautious through this 48-hour period at not jumping to the conclusion that the flow will have to resume.

(END VIDEO CLIP)

KING: Why the caution and what next? CNN's Ed Lavandera has been tracking this all day and joins us from New Orleans -- Ed.

ED LAVANDERA, CNN CORRESPONDENT: Hi, John. Well this is far from over but here in the next couple of hours we'll be nearing the end of that first six-hour window. Remember, we've been told to kind of look at this integrity test as a 48-hour test broken up into six- hour windows. I'm not sure exactly what kind of update we're going to get from BP officials but the longer that this test goes on, the better sign that is.

But just a short while ago Admiral Thad Allen released a statement. And part of what he included there at the end is really kind of perhaps a hint of what to expect in the coming days. And he seems to be really toward leaning toward this option where at some point here in the near future valves will have to be reopened. We'll once again very likely see oil return into the Gulf but that will be so that they can connect the riser pipes to coming out of that blowout preventer and the containment cap and run four lines to ships on the surface of the water to collect the containment.

They say they are able to collect the oil -- excuse me -- they say they are able to collect about 80,000 barrels a day and if the government estimates are correct on the flow rate which is right now at a highest of about 60,000 barrels a day they say with all of that they'd be able to capture all of the oil that would be leaking into the Gulf of Mexico. The picture would look a little different but they say the end result would be the same that no more oil would be leaking into the Gulf of Mexico. So that's what we'll be looking out for here in the coming days to see how this integrity test continues -- John.

KING: And, Ed, heading into this the big delay was because there was a business of a disagreement or a difference of opinion between the government scientists and the BP team about whether it was safe to go forward with this test. Any indication now that we are into the crucial test that BP and the government have any differences?

LAVANDERA: Not that we can tell right now. Assuming that since they've moved forward with this that they're all kind of on the same page. But we do know that their scientists will be huddling intensely, they'll be monitoring the pressure readings to make sure no damage is done to that well bore that goes deep into the earth. And that's what essentially this disagreement was or the hang-up was and why the integrity test was delayed. So that is the crucial aspect. They'll be monitoring closely. They want to make sure that these pressure tests don't cause any more damage to that well bore that goes deep into the earth.

KING: Ed Lavandera is staying on top of this for us. And as Ed noted there are big technical questions, so just what are they and what should we be looking for? Joining me on the phone is Steve Wereley, a mechanical engineering professor at Purdue University. Thanks for joining us, Mr. Worley. Let's just start right now as you watch this unfold what are your biggest questions right now?

STEVE WERELEY, PURDUE UNIVERSITY (via phone): Well, the biggest question, is the well bore in good shape? And that's what Ed just said. That's what the next 48 hours is going to tell. You know, it's really positive news to see that the cap that they've placed on top of the BOP (ph) is holding pressure right now. You know it's sealing up the well. The only question is, is it leaking into the sea floor?

KING: And as you raise that question I want to do a little then and now with Admiral Thad Allen. He is the incident commander. And a couple of days ago there seemed to be more optimism that once they closed this down that as long as it held they could use it as a permanent cap to seal the well. I want you to listen to what Thad Allen told our Wolf Blitzer just a couple of days ago.

WERELEY: OK.

(BEGIN VIDEO CLIP)

ADMIRAL THAD ALLEN, NATIONAL INCIDENT COMMANDER: But we have a significant chance to dramatically reduce the amount of oil that's being released into the environment and maybe shut the well in all together in the next week.

(END VIDEO CLIP)

KING: Maybe shut the well all together is what he said then. But listen to what he said in his statement released just a few moments ago. He says "it remains likely that we will return to the containment process, using this new stacking cap connected to the risers to attempt to collect up to 80,000 barrels of oil per day until the relief well is completed." Why, Mr. Wereley, would they seem to be backing away from the idea that this could be a shut the well down cap and instead they seem to be thinking that is a great option if the weather turns bad, but instead we'll most likely go back to using it still to draw the oil to the surface?

WERELEY: Well, I suppose, I mean, there's lots of conjecture that the well bore is not in good shape. And if -- you need to know a little bit about engineering in order to understand this. If the well bore is not in good shape, this process of closing down the valves on the new cap is going to put the well under tremendous pressure. And so I would think if you, if you're producing all of the oil that the well can deliver, the pressure -- there won't be any pressure increase. And, you know, and then you can reserve increasing the pressure for the storm situation.

KING: And so as you watch now then obviously we're looking to see what the pressure readings are in these first six hours and then how they take them on from there. They also say they will do some seismic tests. I assume that and those tests will tell us if there is a problem down along the base of the well.

WERELEY: Exactly. And it's unclear to me how long BP or the government needs to see these pressure readings at stable levels in order to conclude that the well bore is in good shape. I presume 48 hours is meant to be, you know, a time period that's excessively long and that we would probably hear back before then about the results of this test.

KING: One last quick question. They are very close with one of these relief wells. If this worked so well as a containment vessel why not keep bringing the oil to the surface and containing it in the ships above and finish the relief well? Because they've stopped the drilling of that relief well during this operation.

WERELEY: Yes, I'm not sure why they stopped the relief well. Maybe they don't want to break into the damaged well while they're evaluating this cap. I mean, that would cause some pressure fluctuation. One thing I should point out that nobody has been talking about yet is the "top kill" failed, you know, back in May, the "top kill" failed and the reason that it failed was that the -- there was too much flow coming up the well bore. Now that the well is shut in something like the "top kill" should be possible. It should be possible to kill the well even without the relief well. I mean, it should be possible to start it up and kill it very soon. But I haven't heard anybody talking about that option yet.

KING: That's an excellent question and we will put it to BP as soon as we get the opportunity. Steve Wereley, appreciate your time tonight. We'll check in with you in the coming hours to see how this goes forward. Also watching this extremely closely the president of the United States. Earlier today our senior White House correspondent Ed Henry asked the president what he thought of today's dramatic developments.

(BEGIN VIDEO CLIP) UNIDENTIFIED REPORTER: Sir, you have heard that the oil has stopped flowing in the Gulf?

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I think it is a positive sign. We're still in the testing phase. I'll have more to say about it tomorrow.

(END VIDEO CLIP)

KING: Ed, take us behind the caution. The president obviously has to be happy with what has happened today and also has to be very, very nervous based on the history here of getting too optimistic.

ED HENRY, CNN SENIOR WHITE HOUSE CORRESPONDENT: They're right. They are very wary inside the west wing behind me. I can tell you the president's top aides call it the G's, the Greek debt crisis and the Gulf oil spill. They believe this president had some momentum coming out of the health care reform signing this spring. Within a couple of weeks that was stunted both by the Greek debt crisis, which has spilled over here to the U.S., sort of stunted the economic recovery and just as important this Gulf oil spill slowed the momentum of this administration.

They hope now this will mean they're starting to turn the corner. When you talk to the president's most senior aides they say they are not doing any celebrating until these tests are done and they know for sure from both BP and their own government scientists like the energy secretary tell them this is going to stick, John.

KING: It is a great point you make, Ed, because how do they view this as getting in the way of the president's larger agenda? If you look at his approval rating it's held pretty stagnant really since the beginning of the year and certainly since the oil spill. They'd like to get back up to 50 by the election. If you ask the American people, country right track or wrong track the wrong track number has actually spiked up since the oil spill and most pollsters will tell you it's part of the narrative. That it's mostly the economy but people keep looking around for something to be happy about and when you see those images of the oil that certainly doesn't help. How do they see it there?

HENRY: Well they see it two different ways. First of all in terms of the impact on his agenda they say inside the west wing, look, this president got the stimulus bill, he got the health care reform. Now he's got Wall Street reform that he's going to sign in the next few days. They think his agenda has been moving forward despite this from a substantive standpoint, but they realize that this Gulf oil spill in particular has taken them off that monotonous, you know, the straightforward, stick to the jobs, jobs, jobs issue that he talked about in the State of the Union.

It has deterred from that message so they're hoping that if they turn the corner here -- they've already gotten some accomplishments in their back pocket now, but they want to go to the American people like he did go to Michigan today and focus in on jobs. They have not been able to do that in large part because of this Gulf spill in recent weeks -- John.

KING: Ed Henry at the White House. And in response to Ed's question the president did say he would talk about this tomorrow. We'll check back in with you then, Ed, and see how the president is feeling about this on day two.

And when we come back, something the president did want to talk a lot about today.

(COMMERCIAL BREAK)

KING: The president was on the road for a few hours today in one of the places hardest hit by the punishing recession. The unemployment rate in Michigan still above 13 percent and today's trip was a snap shot of the White House political argument in this tough mid-term election year.

Just four in 10 Americans approve of how the president is handling the economy and many Americans don't think the nearly trillion dollar White House stimulus plan was worth it. Add in high unemployment not only in Michigan but across the country and history suggests it could be a punishing year for the president's party when voters pick a new Congress this fall.

But the president wants you to think again. Out in Holland, Michigan he highlighted a new factory that will make batteries for electric cars. It was financed in part by $151 million in stimulus money, money the president says would not exist if Republicans had their way.

(BEGIN VIDEO CLIP)

OBAMA: There are some folks who want to go back and think that we should return to the policies that helped to lead to this recession. Some of them made the political calculation that it's better to obstruct than to lend a hand. They said no to tax cuts. They said no to small business loans. They said no to clean energy projects. Now, it doesn't stop them from being at ribbon cuttings (ph).

(END VIDEO CLIP)

KING: In fact among those on hand for the ribbon cutting was the local congressman, Pete Hoekstra, he's a Republican and a Republican who voted no on the stimulus funding. He is running for governor in this year's campaign. He joins us from Grand Rapids.

Congressman Hoekstra, let me just with that question. Isn't it at least a tad hypocritical for you to be on hand for this event at a ribbon cutting at a factory that's being funded in part by stimulus money that you said was a bad idea?

REP. PETE HOEKSTRA (R), MICHIGAN: No, not at all. I was invited by L.G. (ph), the company that benefited from that. It's an honor to have L.G. (ph) moving into our community, moving in with federal tax dollars, much of that money came either from the citizens of West Michigan or their kids will end up paying for the debt. No it's not at all inappropriate to be there and to join with people in our community to welcome this new company into our community.

KING: Is it any evidence on your part now that perhaps that vote was a mistake, that stimulus money is helping creating jobs in a state that still has a 13 plus percent unemployment rate?

HOEKSTRA: No, absolutely not. Since the passage of the economic stimulus bill our unemployment rate in Michigan has gone up. The number of jobs employed, the payroll in my hometown has gone down by 2,000 people. This stimulus bill has not helped my community or helped the state.

KING: And yet the outgoing governor, Democrat Granholm, she says without this money there would not be thousands of jobs being created at new battery plants, just these battery plants around Michigan and there are other ones in Massachusetts, in North Carolina, out in California. Would you prefer then that the federal stimulus money not come to these factories and that these batteries be made and therefore the jobs be in Japan or South Korea?

HOEKSTRA: I think what we have to do is we've got to overall improve our economic climate on a federal level and at the state level. These jobs probably would not have come to Michigan without the stimulus money because we've got the worst tax code in America. It is expensive. It is complicated. We are over regulated. We've created an anti-jobs environment in Michigan. I wish the governor rather than looking for incentives was out trying to create a better business climate for the state of Michigan and we'd all be better off.

KING: Help me understand how you would approach that then. Is it that all federal money like this is bad? The federal government has loan guarantees or direct assistance leveraged with some private money. Is that a bad idea? Government money leveraged like that for example if you're elected governor -- you're running for governor in this year campaign -- would you do away with any Michigan economic development funding that said did the same thing. Here is a piece of seed money from the state. You have to match it with private money and create jobs right here at home?

HOEKSTRA: I would get away with most of those types of economic incentives. This is not seed money. This was $150 million paired up with $150 million of additional tax breaks at the state and local levels. Just before the ground breaking I talked with another local company in Michigan. They said, Pete, we're creating as many if not more jobs than what this plant will create and we're doing it with all of our own money. We're not getting one dollar of federal money. Why should this company get $300 million of tax breaks from the federal and the state level and this company gets zero? You know, it's an unfair system where the government is picking winners and losers.

KING: Then why not stay away from the event today and say I'm sorry I'd like to be there but I can't lend my name to a factory that I think is getting money from a source that should not exist?

HOEKSTRA: My constituents, the new company coming into my community, they wanted me to be there. They invited me to be there. I'm going to respect the office of the president. I respectfully disagree with his policies, but I respect the office. It's a great honor to have the president come into our community, you know, you know what we need is we need that type of civility in politics if we're going to address the tough issues that face us as a nation.

KING: Another one of the tough issues facing you and your colleagues here in Washington and it could face you if you win this race for governor this year is what about help to the states for teachers and firefighters and police officers? There was some of that money in the stimulus program and as you know there is a debate in Washington now about whether states like Michigan should get billions more from the federal government because they're still having a lot of states including yours is still having budget problems. Do you think that there should be more money for states, for teachers and firefighters and police officers or is it time that states figure out how to do this by themselves?

HOEKSTRA: Yes, don't ask Washington. Don't ask the federal government to do what states should do. States should hire their firefighters, their police officers, and their teachers. Get rid of the bureaucracy and the mandates. Imagine how much money would stay in the states if we didn't have to fill out all of the federal mandates under "no child left behind" or the money under race to the top, the mandates there. Cut bureaucracy and red tape. Make the system more efficient. The federal government should focus on what its constitutional responsibilities are. The states should focus on what their constitutional responsibilities are and we'd all be better off.

KING: Congressman Pete Hoekstra is a Republican candidate for governor in the state of Michigan. Sir, we thank you for your time today.

HOEKSTRA: Hey, great, thank you.

KING: Still a lot more to come tonight. Stay with us. When we come back we'll break down what we're all watching, the drama underneath the Gulf of Mexico. We'll give you a BP viewing guide, show you all the cameras available to you at home and we'll share with you the big moment when the oil was stopped at least for now.

In "One-on-One" tonight Congressman Barney Frank, he's the architect in the House of that big financial reform bill signed today, sent to the president today, signed later this week. How will it affect your money? We'll ask the congressman when he comes right here.

On my "Radar" tonight we'll follow the money in some big races in this year's campaign and also the early Republican maneuvering for 2012. And in the "Play-by-Play" you don't want to miss this when we break down the tape. John McCain on a border rematch he wants with President Obama.

And Mitch McConnell, this Mitch McConnell says Republicans got their groove back -- really -- he said that. We'll break down Mitch McConnell's GOP 101.

(COMMERCIAL BREAK)

KING: In "Wall-to-Wall" tonight consider this a BP viewing guide. Everybody is wondering will this cap hold? Well you can watch at home if you want. You can see some of these feeds. BP puts out as many as 12 live feeds at a time. As you can see there are bars on this one. Nothing coming from that. Many of them are murky.

This is a scanner up top obviously. Let's take a closer look though at some of the most critical feeds that we're watching at CNN and you can watch at home if you log on to these sites. Right here, this is the stacking cap right in here. Earlier today -- and we'll show you this is a minute -- there was all oil still flowing out of here. Right now no oil flowing out. We're keeping an eye on this.

Down here this is murky but you will see from time to time remote operated vehicles. You see one moving down here. The remote operated vehicles, they have lights on them. They carry tools. Sometimes they're the ones that bring the wrenches in to shut down the valves. You'll see them moving around. That's part of the structure there now as we watch the under water camera. One of those vehicles I told you about, you see the lights right there, they have lights on them, they carry tools.

This is part of the stacking cap structure over here. Sometimes they're just taking pictures. Sometimes they bring them in closely to perform some operations or help the people up on the top just get a closer look at what's happening down there. Now let's show you a quick time lapse, this is the last 22 minutes of first oil flowing out. Then the oil stopped.

You'll watch how it plays out. Again, we put the sequence together in rapid fire for you all over the last 22 minutes and bang. Right there, this is that cap. You saw oil and dispersants at the beginning of the scene. Right now it has been this way for four hours now, exactly four hours in just a minute. No oil flowing out. BP testing the pressure. So what are they looking for?

Let's walk over to the "Magic Wall". We'll take a closer look at some of the big questions as this operation unfolds. Here is our animation of what this looks like down there. You have the base of the well here. You have the old blowout preventer here that didn't work. And then they have the new stacking cap that they brought in right now.

One of the questions they're looking for, number one, they're trying to make sure that there is no leak as they turn this down. If you don't get any leaks here, where this attaches to the stack, they want to make sure no leaks there. The bigger question, though, and one of the reasons they are increasingly saying they may not use this as a permanent fix is they're worried about a leak down here along the sea bed floor where the well goes deep underground. Nothing they can do about it down there at this point.

They're worried that as they stop the pressure up here it puts pressure back down and perhaps there was some damage in the explosion down along the sea floor. That's one thing they worry about there. Let's just take a closer look at this capping stack, take these ones out of the way so we can see this more clearly. This is the structure we're talking about. They turned these valves earlier today. This is what they shut down to stop the flow of oil.

We're watching this. They say later tonight they'll have their first set of readings then they could go as long as two days to determine whether they trust this is the big question and then how much do they trust it? Do they trust it to shut down the well permanently until they can drill the relief wells underneath, so semi permanently I should say, or do they decide we don't want to have this as a permanent solution, reopen some of these valves, but use the lines to bring the oil up to the ships up on top of the water.

That is the big question. We are tracking this. Again, you can log on to the live feeds if you want to see them at home. Next we'll try to explain another big development today. The Senate passed and then Congress sent to the president a sweeping financial reform package. They say it's the biggest financial changes since just after the great depression. One of the men who helped write it, Chairman Barney Frank, is right here to go "One-on-One" and explain what happens (INAUDIBLE).

(COMMERCIAL BREAK)

ANNOUNCER: It's time to go "One-on-One".

KING: Congress gave final passage sent down to the White House today a new law. The official title the Dodd-Frank Wall Street Reform and Consumer Protection Act named in honor of Senate Banking Committee Chairman Chris Dodd and my guest right here in studio, Massachusetts Democratic Congressman Barney Frank who is the chairman of the House Financial Services Committee and he's here to go "One-on-One".

Mr. Chairman thanks for joining us. If you don't mind, I'd like to ask you to take a few steps over here so we can just go through this. It's a sweeping bill that's thousands of pages and it's very complicated stuff, so I want you to help me explain to the average family out there, the average consumer out there, let's start with this. There is a new consumer protection agency in this bill. For somebody who next week or once this becomes law is applying for a credit card say or a new mortgage how does it affect them?

REP. BARNEY FRANK (D-MA), CHAIRMAN, FINANCIAL SERVICES COMMITTEE: Very favorably. It's the best set of additional consumer protections we've ever had. And by the way, while it's in the Federal Reserve it is in fact independent. The way it works out -- the best way to explain this it will receive its mail at the Federal Reserve but nobody in the Federal Reserve System will be allowed to open it. It's simply there (ph) (INAUDIBLE) physically (ph). It was a kind of a political thing, but they are totally independent. First of all, it will regulate the kind of abuses or prevent the abuses that people had with their credit cards. We had a situation where you could owe money to the credit card company, you got into a dispute with another merchant, even though you've been paying your bill on a regular basis and you had a balance you're allowed to have they retroactively raised the rate.

We had these problems with overdraft protection that you didn't ask for, kind of like the old Mafia protection. You got protection and they almost encourage you to overdraft your check and then hit you hard on it. As to mortgages, the single biggest cause of the problem were people getting mortgages who shouldn't have gotten them because there was a mistaken view that I've long been critical of that you make everybody a homeowner when many aren't able to.

That will be made flat out illegal. So the consumer protection will be very strong on credit cards, bank loans, payday lending. One other thing, the bill has a fiduciary responsibility in consumer protection.

Anybody now and this would deal with the Madoff thing, any broker/dealer who sells you an investment product will now have a fiduciary responsibility for the first time a fiduciary responsibility that is they have to act in your best interests or you can sue them.

KING: Help me on this one. Shut down collapsing firms. This is part of the big debate. This too big to fail, does it still exist? Will somebody's tax dollars go out to bail out an AIG or somebody else down the road?

FRANK: I want to be conciliatory and say Sarah Palin was half right about our legislation. We have death panels, but they're not in the health care bill for old ladies. They're in this bill for banks.

Under this rule, first of all, the power of the Federal Reserve, section 13-3 of the Federal Reserve Act to prop up AIG and pay off their debts has been repealed. There will be no more power from the Federal Reserve unilaterally as they did in 2008 to do that.

Secondly, if an institution gets to the point where it can't pay its debts as AIG did, this bill says it dies and is put out of business. The shareholders lose everything. The CEO is fired. It does say that there may be a need, and this goes back to Secretary Hank Paulson under the Bush administration, to do something to put it out of its misery with some money, but the money will not come from the taxpayers.

If the failure of a large institution causes a need for there to be some kind of financial cushion of the damage it would cause, that comes from an assessment on large banks, hedge funds, and investment banks.

KING: Let's close this one. Let me try one more hedge fund registration. What does that mean for somebody? People don't understand these hedge funds, but banks are doing shady business moving money back and forth?

FRANK: Well, it's not shady necessarily but what happens is we don't know what's going on and you can get into trouble if too many people are on the same side of the boat. It starts to tilt.

We haven't had any way of checking this. Under President Bush the head of the SEC tried to make the emergency fund. They went to court and said the law doesn't require us to do it. This law now says that hedge funds and private equity firms will have to register with the SEC and report what they are doing.

Because part of the problem we had was there were all these debts and leverage and nobody knows about it. If you don't know there is a problem you can't correct it. It's not necessarily they're doing anything wrong but there shouldn't be this major financial activity without some monitoring of it going on.

KING: One of the big Republican criticisms is they say you still don't do anything to fix Freddie Mac and Fannie Mae. They say you guys have put these into a government conservatorship but haven't enacted fundamental reforms and they say actually a lot of the problems were in those agencies not in all of these other things you fixed.

FRANK: Well, AIG was not Fannie Mae and Freddie Mac. Secondly, they're right. There was a failure (INAUDIBLE) about Fannie Mae and Freddie Mac, but it was my Republican colleagues (INAUDIBLE), but they like people to forget they controlled Congress from 1995 to 2006 and nothing happened on Fannie Mae and Freddie Mac when they were the majority.

We when we came into the majority in 2007, we did pass the law working with Secretary Paulson and in 2008 Secretary Paulson put them in conservatorship so the argument they haven't been changed is nonsensical.

The fact is that Fannie Mae and Freddie Mac were changed more drastically than anybody else. They are not working the way they were before, which was causing problems. They are in conservatorship and they are in effect being controlled by the government and not doing irresponsible things they were doing before.

So this is just kind of political rhetoric without a basis. Again, they blame me because when we were in the minority and the Republicans were the majority, nothing happened to Fannie Mae and Freddie Mac and I guess the assumption is I was secretly controlling tom delay and my argument that proves that I wasn't is --

KING: Not long been my theory.

FRANK: Well, there's Tom, I would tell you this guy, delay, if he was taking advice from me, he wouldn't have gone on the dance show. I think I can prove it wasn't me.

But the fact is Fannie Mae and Freddie Mac, yes, they've caused a lot of the problems. They are now in conservatorship and not doing that and we do plan in the next phase to replace them. But they have been more substantially changed than any other element in the financial picture so far.

KING: Chairman Barney Frank, we appreciate your help understanding this. I will bring you back as it gets implemented. I'm sure there will be a few hiccups as they write the regulations. We'll bring you back. Appreciate it. Thank you.

Who is having a better year fund raising for the 2012 Republican presidential wannabe? You know, you care. We'll follow the money when we return. Ever hide in a bathroom to avoid a meeting? Not sure what Pete on the street is up to tonight, but apparently that's his focus.

(COMMERCIAL BREAK)

KING: Today's most important person you don't know is an example of heroism, bravery, patience. Vernon Baker is one of only seven African-Americans from World War II to receive the Medal of Honor. He died this Tuesday at age 90.

Baker had to wait more than 50 years until 1997 to receive the nation's highest military honor. He was never questioned about his bravery under fire in Italy. That's well documented, undeniable, but in the 1940s so was racism. No African-Americans received the Medal of Honor during the second World War, none.

It took a half century for the military to set things right. By the time Baker received his award from President Clinton the other six African-American winners were dead. Now, Baker has joined them. But he left us a book and its title says it all "Lasting Valor" an honor far too delayed and well deserved.

Let's take a look at some stories on my radar tonight. In an interview on NBC's nightly news just a few moments ago President Obama said nobody in his White House is satisfied with where the country stands right now on the economy although they are convinced the president says we're on the right track. He also predicts voters will remember, not his fault we got into this mess.

(BEGIN VIDEO CLIP)

OBAMA: What I'm prepared is to be held accountable for the policies I put in place, but Americans don't have selective memory or they're going to remember the policies that got us into this mess as well.

(END VIDEO CLIP)

KING: Can the president sell that message? Let's sort it out. Joining me tonight, our senior political analyst, Gloria Borger and our National Political correspondent Jessica Yellin.

That is a familiar reframe from this president. I guess the question is in an election a little over a hundred days from now can he sell that?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, he hopes he can. I mean, remember, I inherited the mess and now he is hoping that people are going to remember that but he also, you know, this president is going to be judged on the way he handled the economy.

It's the defining issue, not of only the last couple years but also of this decade and he knows it. There are going to be lots of folks out there saying, why did you have to do health care? Why do you have to do immigration? Why didn't you just, and you'll remember this phrase, focus like a laser on the economy?

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: I was at a briefing at the Treasury Department today. It was on housing policy, but they kept making the very same point. That remember where we were at the end of 2008. Remember how bad things were when we got into office.

It's changed so much, can't you remember that? It was almost a plea. I think that that is a fair point to make. I'm not convinced that voters will remember it.

KING: Not as horrible, vote me, is a tough message to sell.

BORGER: Yes, it's completely valid, but again, as we were discussing last night, you've got to look at those unemployment numbers. That's what people are feeling right now. And even though they've passed financial reform today and people want Wall Street regulated, they're still thinking, why did we bail out?

KING: All right. Let's move on because as the president tries to make his case about this year, there are a number of people who would like to be on the ballot in 2012 out raising some money.

Mitt Romney way ahead in fund raising among the potential 2012 Republican presidential candidates. Here are the latest numbers covering April, May, and June. Romney raised more than twice as much money as Sarah Palin or the Minnesota Governor Tim Pawlenty also has double the cash on hand. But all three out raised Mike Huckabee. Tell us anything?

BORGER: Yes. You know, to me it's not much of a surprise because everybody sort of assumes Mitt Romney is running again. The way the Republican Party generally works and, John, you can disagree on this. I don't know.

You can, too, Jessica, but I think they tend to nominate the person whose turn it is. Now, is there going to be a fight if Sarah Palin runs? Well, Romney was the guy left standing next to McCain, right? But Sarah Palin --

YELLIN: Romney has been focused like a laser on this from very early days, out there fund raising. What is also interesting is how much they're giving away? Out of all those folks it is Pawlenty who has given away almost all the money he raised in the first quarter and Sarah Palin is the one who has made the biggest change. You know she gave away only $9,500 her first quarter this year? Almost nothing that jumped up to -

BORGER: That's not even a minute of a speech.

YELLIN: Right. It jumped up to $87,000 now.

KING: Here are some troubling numbers this year for the Democrats. We'll look at some Democratic big races this year. Some Democrats might be in trouble when it comes to the big Senate races.

The National Journal Hotline reports in the second quarter Republicans out raised Democrats in six key races for open Senate seats, New Hampshire, Pennsylvania, Ohio, Florida, Indiana, Illinois.

Those are all big targets and this is much different the Hotline pointed out smartly. In 2006 when you looked at the big races back then, the Democrats tended to have the advantage. That is part of the intensity gap.

BORGER: Absolutely about enthusiasm. The latest Gallup poll said that 59 percent of Republicans and those independents who lean Republican are enthusiastic about going out and voting. It's not the same for the Democrats.

YELLIN: And this is clearly bad news for Democrats, but you also have to point out those races do not have the strongest Democratic candidates running in them. You have to look at the individual races and where there are incumbents, a Reid, Barbara Boxer in California, they are raising money quite effectively.

KING: One more because we love conspiracy theories here on "John King USA." Take a look at this mailer. Went out during the Republican primary for governor attacking Terry Branstad in Iowa called him a liberal along with President Obama, Nancy Pelosi, Bill Clinton. Good hit from the Republicans, right?

Eight hundred thousand dollar ad campaign wasn't funded by his conservative opponent, but by the Democratic Governors Association. They now tell CNN, we saw an opportunity with this political hypocrisy and took advantage of it.

YELLIN: Whose hypocrisy?

KING: With their own in political hypocrisy.

BORGER: My gosh.

YELLIN: I mean, this is why people are cynical about politics. This says it all.

KING: If you give money to the Democrats, you think they're going to use it to say your president and speaker and majority leader have this lousy health care plan and he is for it?

BORGER: Do you know what it shows you though? It shows you that they're afraid of Brandstad. I mean, it shows you - you know, he is up in double digits in the polls and so - against --

YELLIN: They know their own president and speaker of the House are weak and toxic to be associated with.

KING: I'm guessing there a few people are out there saying I want my money back. Jessica, Gloria, thanks for coming in. Next to the play by play, a rematch of sorts between John McCain and President Obama. (COMMERCIAL BREAK)

KING: If you're just joining us, here is what you need to know right now. A little more than four hours ago at 3:25 Eastern time this afternoon the oil stopped flowing into the Gulf of Mexico. Part of an integrity test on the new cap on the well.

The test was supposed to run about 48 hours and both government and BP officials are cautioning against any early celebrations. Also, a new statement from National Incident Commander Thad Allen that his focus remains ultimately on sending oil to surface ships once the test at this cap is over.

A lot of fun in the "Play-by-Play" tonight. Let's break down the tape. Republican strategist, Adolfo Franco and Democratic Strategist, Maria Cordona. Let's start with a rematch of sorts.

John McCain last night was on a program. We'd like to say on another network the other evening and he was asked about what he thought the motivation was, why did the Obama Justice Department sue the State of Arizona over its new immigration law?

The administration says it thinks that law is wrong, unconstitutional. John McCain says he thinks the Democratic administration is trying to motivate Latino voters.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R) ARIZONA: More and more I am convinced that this is all about solidifying the Hispanic vote. It's just not a reasonable lawsuit to sue a state for doing what the federal government should have been doing.

It doesn't make any sense and the fact is that I think that this lawsuit will not stand in court. But it may satisfy a portion of the president's political base.

(END VIDEO CLIP)

KING: Pretty calmly delivered, but a pretty big charge to say the Justice Department would sue a state essentially for turnout.

ADOLFO FRANCO, REPUBLICAN STRATEGIST: Well, I think he's absolutely right. There is no question about it. First of all, everyone knows that there will be absolutely nothing on immigration reform this year so there has to be a distraction by this White House.

This would be the third go around, John, in terms of Arizona being sued over so-called preemptions and probably the first to its one and the third lawsuit, Senator McCain is right will be won by the state of Arizona as well.

There is no legal argument here. There's no basis and it's certainly is a huge waste of taxpayers' money. I think that those resources would be better spent on the border or elsewhere. So it's absolutely a political tactic. KING: Political tactic - so the president not only the Obama White House they convinced their Attorney General Eric Holder --

FRANCO: Who's never read the law, of course.

MARIA CARDONA, DEMOCRATIC STRATEGIST: By the way, the Department of Justice is not political. I think sometimes to the chagrin of the White House so that is an aside. It's interesting that you said if nothing happens on immigration, it will be the fault of the Republicans for not having stepped up to the plate.

What I find interesting about what McCain said, two things. First of all, he used to consider Hispanics his base. So he clearly is saying he has no support among the Hispanic community, which is true.

Number two, he talks about the failure of the federal government in getting anything done on immigration. He is part of the failure, a number one reason why we don't have comprehensive.

FRANCO: There is no --

CARDONA: Abdication of responsibility.

FRANCO: The speaker can --

KING: I'm going to play judge and put a stay on this argument. We'll continue it another day.

Washington has been buzzing all week long about something the White House press secretary said last Sunday and because of it a lot of House Democrats got pretty mad and had a big meeting at the White House last night.

First, let's remind you what Robert Gibbs, the White House press secretary said on Sunday on "Meet the Press."

(BEGIN VIDEO CLIP)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I think there are no doubt that there are a lot of seats that will be up, a lot of contested seats. I think people are going to have a choice to make in the fall.

But I think there is no doubt there are enough seats in play that could cause Republicans to gain control. There is no doubt about that.

(END VIDEO CLIP)

KING: Among those who we know from our sources was very mad, was the speaker of the house, Nancy Pelosi. She went to the White House. She's delivered the tough message in private, but in public, she says everything is fine. She also, I call this a little maybe amateur psychology.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI, (D-CA) HOUSE SPEAKER: They fully intend to win. The comment can be interpreted many ways. I think it was a Rorschach test, but from our standpoint. We are pleased with what the White House has been doing and what they will continue to do.

(END VIDEO CLIP)

KING: What is your Rorschach reading of Robert Gibbs?

FRANCO: Look, John, just look at the contrast on both those clips over there. I think Mr. Gibbs was forth right and honest and has said what everybody in Washington and beyond has been saying now for months.

The news gets more grim for the Democrats every day. Seventy two House seats in play. Of those 72, 12 are Republican. The Republicans need 39 seats to take control, the math is just there.

But most importantly, as look at the speaker's face and delivery. She is not credible. Nobody believes it. It's the worst type of spin control I have seen. I have to give it to Mr. Gibbs. He was honest and forth right.

CARDONA: This is -- they're both -- they're both doing their jobs. We know, it is all about the expectation. She absolutely was right in saying what she said. But I also think -

KING: Do you believe it?

CARDONA: Yes, I actually do believe it. And here's what I think Republicans are going run into a problem. If Republicans do not take back the House in November. If they win 38 seats, it will be a failure.

FRANCO: Well, OK.

KING: OK.

FRANCO: Thirty eight --

KING: Let's have the conversation.

FRANCO: We're losing 38 and 38 seats is a victory for a political party. I will remember that.

KING: The Senate minority leader, the Senate Republican leader, Mitch McConnell spoke to a group of young Republicans today and he said the Republicans got their groove back. He knows how to speak to young people and he also laid out what he thinks is on call at Republican 101. This is how Mitch McConnell thinks Republicans will win in November.

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL, (R-KY) MINORITY LEADER: It doesn't take a genius to see the government is completely out of control. It doesn't take an accountant to see we have a debt crisis. It doesn't take a political scientist to see the Democrats are in charge, doing little or nothing to address these or other serious problems that we all face.

(END VIDEO CLIP)

KING: Hang on one sec, freeze the video. Before I let you guys in, the speech is pretty good. Read the speech from front to back. It's a well constructed. Mitch McConnell should not be standing in front of the fire hydrant.

Got to set the room up a little better. That's his argument. Republicans should go. Governments too big. Democrats aren't fixing your problems.

FRANCO: Well, but that's absolutely the message the American people have been sending to Washington. He's just simply articulating the message of bigger deficits, ineffective government, high unemployment, and, these administrations' policies exacerbated the situation. He reflects the move of the country.

CARDONA: The response from the Democrats needs to be it doesn't take an elephant to remember what it was like just a few short years ago when Republicans were in charge.

KING: Unemployment up 25 percent over --

Thank you. Maria, Adolfo, thanks for coming in. Where is the strangest place you ever hid to avoid someone? Pete on the street is investigating.

(COMMERCIAL BREAK)

KING: Let's check in with Campbell Brown for a preview. Hi, Campbell.

CAMPBELL BROWN, CNN ANCHOR: Hey there, John. We are going to continue CNN's coverage of today's dramatic news that the oil has finally stopped flowing into the Gulf of Mexico. We'll focus on what lies ahead. All that at the top of the hour.

Plus, pre-sexually abusing children, after many years, the Vatican is finally laying down the law. But is it too little, too late? We'll talk about that as well.

In the heartland, swindlers, bilk faith-based investors out of nearly $200 million. So-called investments hawked on Christian radio. Many have lost their life savings. We've a special investigation into that -- John.

KING: Now, if I wanted to hide from our off beat reporter Pete Dominick, I would do something like this and disappear down. What about you, what would you do to avoid meeting somebody? Pete is on the Street. PETE DOMINICK, JOHN KING USA'S OFFBEAT REPORTER: That's right, John King. This comes up because apparently in Blagojevich trial, they said that he used to hide from his budget director and other people in the bathroom, that's right the governor of Illinois. I went out and asked people where they hide at work.

(BEGIN VIDEOTAPE)

DOMINICK: Governor Blagojevich, this Illinois guy, apparently hid in the bathroom to avoid his budget director. Ever doing anything like that, Sir?

UNIDENTIFIED MALE: Doesn't everybody?

DOMINICK: Do you ever like try to skip the meeting like in the hide in the bathroom? Hide in the closet?

UNIDENTIFIED MALE: All the time. Working is the worst part of life.

UNIDENTIFIED MALE: George Costanza used to go under the desk. I have a guy like that. My VP of marketing, he hides under his desk.

UNIDENTIFIED FEMALE: I go into the supply closet. Take a breather.

UNIDENTIFIED FEMALE: Break room.

DOMINICK: Break room, you hide in there. Nobody knows you are in there?

UNIDENTIFIED FEMALE: Yes.

DOMINICK: Maybe that's why you are unemployed?

UNIDENTIFIED FEMALE: Maybe.

UNIDENTIFIED MALE: Bathroom, closet. Around the corner. Under the hoop.

DOMINICK: Sir, you have a lot of hiding places.

UNIDENTIFIED MALE: Yes.

DOMINICK: Sometimes you get in the closet.

UNIDENTIFIED FEMALE: No, baby, no closet. I go to do a job. I do my job that's it.

DOMINICK: Do you ever go hide in the bathroom when you are supposed to be working?

UNIDENTIFIED FEMALE: Yes, done that before.

DOMINICK: That's what I thought, Miss. Slackers!

UNIDENTIFIED MALE: I'm hiding right now.

DOMINICK: Who are you supposed to be meeting with right now?

UNIDENTIFIED MALE: My boss got the earlier train. I am taking the later train, so I don't have to talk to him all the way home.

DOMINICK: Hopefully he doesn't watch this. Take a long bathroom break, Sir?

UNIDENTIFIED MALE: I didn't take a long break.

DOMINICK: Hold on a second. John, get out from under the desk. They're chanting your name. Get out from under the desk. John, I was hiding.

(END VIDEOTAPE)

KING: Pete, go run and hide. We'll see you tomorrow. That's all the time we've got tonight. We'll stay on top of the BP spill. We'll see you tomorrow and "CAMPBELL BROWN" starts right now.