>> gretchen: come to new york, visit dylan's. >> steve: we're going to talk to you in the after the show show. join us tomorrow, caesar milan, the dog whisperer will join us live. we hope you do, too. >> brian: bye. bill: good morning, down they go, inch by inch, we're talking about jobs, jobless claims dropping last week, that's good news, down to 445,000, the lowest level we've seen since july, but to bring down that unemployment number, we need to go much lower, well below 400, well below 300 before the unemployment picture changes here. that's one of the lead stories. here's another one, how bad is the housing market? there's a new report laying out the grim news for homeowners in debt. if the government does not step in to help, one in five americans could lose their homes, 20 percent. stunning. good morning, everybody, i'm bill hemmer. wish we had better news.

we'll find it, though, because we have two hours! martha: good morning, everybody, i'm martha maccallum, that number is truly staggering, 11 million homeowners, struggling to make their mortgage. bill: analysts say you have a nightmare scenario for the u.s. banking system and the overall economy. that's the baseline, what we're trying to build on. stuart varney, host of varney & company, what did the -- does the report tell stphus. >> it's a picture of the distress the at ground level level. you mentioned the statistic, one in five in deep level, that's 20 people out of every 100. who the are -- who are the 20? let's break that down. of the 20, nine are way, way behind on the monthly mortgage payments, they'll never catch up, they're probably going to go into foreclosure fairly soon, another six have fallen behind, they're trying to catch up with their payments, but their outlook

is grim, half of them will go into foreclosure, the remaining five are so deep underwater, it's not even funny. they owe 20 percent more than the value of the home that they're paying off on. so all of the money that they're putting out every month is lost, essentially. bill: 20 percent of americans, i looked at that and i thought that's an exaggeration, that's hyper pollby. >> that aim from the a.m.herst mortgage insight a. mortgage company. bill: that covers the country, right? >> yes. bill: we -- pwhepbgs dollars that unless the government steps in, the federal government could do what, then? >> what they've done already hasn't worked, it's not stopped the foreclosure phase, 300,000 every month for 17 straight months, it has not stopped the downside move in housing prices, housing remains in crisis. so what they've done already hasn't worked. what can they do in the future? it would take dramatic and

drastic action, and frankly, bill, i do not know what the government could do to arrest this housing crisis and completely turn it around. >> you argue the mod fission plans they put in place haven't worked. >> they simply haven't worked. three hundred thousand households have been helped, hept in their homes and stabilized, that's it, meanwhile, we've bailed out freddie and fanny, they have a $400 billion credit line. bill: we own them, don't we? >> we own them. >> stick them in your back rocket. -- back pocket. see you at 9:20, stu. martha: let's look at the damage from that rare round of tornadoes. yesterday we showed you these pictures, and this is arizona, twisters in the town of belmont, 20 miles west of flagstaff, one tornado shoved 28 cars of a freight train right off the

track, it must have ripped right through that train track area, another smashed through a mobile home lot. freddie macers say at least four tornadoes touched down, the first before dawn yesterday, a rude awakening indeed for folks there. >> the roof threw off and the sheetrock was falling on us, and we were all screaming, making sure everybody was okay. >> we were sleeping, all of the sudden i wake up to my husband yelling run, and i ran, and he put me into the bathtub, shut the door and that was the safest place to be. >> things started vibrating and it went over and we scooted across and then it was done in a second like that. and then we looked up and, of course, yelled for each other, wanted to know if we were alive or dead and we were alive, thank god. >> thank god is right. there were minor injuries, though. no one was killed in all of this, belmont, though,

pretty much totaled. bill bell it's graphic to watch. if you're in that area, send video to you report, fox.dom, give us your name, location, if you give us an idea of what we're looking at we'll be able to share with that -- share that -- we'll be able to share that with viewers. tough weather there. martha: you know what that means, right? that means a lot of things, president obama is back on the campaign trail today, he's trying to protect his party's majority in congress and in governor's races he will bring the presidential clout to typically blue states illinois and maryland, in his home state he is trying to shore up electoral gun you'llous. -- gun you'llous. in maryland, he will stump for incumbent governor martin o'malley.

>> in the debate last night, front running candidate rubio against candidate meek, and governor charlie crist,. >> mr. rubio means what he says, the fact that he's willing to make sure that people from tamperra to orlando to daytona sit in traffic for the next 20 years, he wants to make sure he stands up on behalf of the right wing ideology that he stands on, charlie crist stands on a wet paper box as it relates to the issues that he stands tporbgs because you don't know where he is. >> as the congress knows, i'm prolife but i'm also prowoman. i think that's an extremist

view, marco, i think it's the wrong thing. i mean, wanting to punish teach e. want to go punish women, want to go punish seniors, you haven't been drinking the koolaid, my friend, you've been drinking too much tea and it's wrong. we have to have less part anship. >> the voting record is virtually identical to nancy pelosi's and governor crist has changed his position on virtually every issue because he's trying to take away the democratic votes from ken dick meek. i think people deserve a senator that's going to go to washington, d.c., stand up for their country and take an alternative. i'm the only one willing to stand up and to that. >> meek and crist are fighting for second place, both trailing behind the tea party favorite, the party known as tax enough already, that's marco rubio from florida. martha: this could be the race that tips the empire

balance of power in the u.s. senaat. it's one to watch and it is washington state, rossi stands off against patty murray, a staunch supporter of president obama. here is what rossi is saying now. >> unfortunately she thinks he's doing the right thing, she's heading in the wrong direction and that's why we're going to compare and contrast what we want to do. for small businesses to be successful, they need modest taxation -- taxation, fair and predictable -- martha: so who's fighting to win that one? vice president joe biden and former president clinton there, heading there to get involved. an upset for rossi could get republicans if he takes control of the u.s. senate. we're going to meet rossi here in "america's newsroom" live, just moments from now.

stick around for that and all the hot political developments heading into the mid terms are right at your fingertips, wherever you are, download the app on our website, fox news.com. bill: there are new developments now in a tragedy highlighting tension over the mexico-u.s. border security, today, texas governor rick perry expect as talk with felipe calderon for a search for an american tourist's body. the man and his wife were jet skiing on a lake that straddles the texas-mexico border, the government is urging mexico to step up its efforts to recover hartley's body. he also renewed the call for a federal government to increase border security. >> the fact of the matter is we're going to have to have federal resources to help

secure that border and frankly, coordinate w-g our friends in mexico as well, until washington fully engages in texas and feels comfortable that sur citizens are being protected we're going to continue to press this issue, taking the fight to the criminal element that continually attempts to export our -- to exploit our border. bill: that was perry from last night. you remember hartley's wife has been on national tv. and she says that her husband was shot in the head while they were jet skiing on that lake. in a moment we'll talk to the ambassador to the u.n. john bolton, he says the obama administration needs to wake up when it comes to drug violence on behalf of mexico,-the chaos comes here. he joins us live in a moment, with a warning on that. martha: here's a question as you get ready to vote in november, about 26 days away now, is it about the candidates and about the issues, where you live, or is it going to really be

about president obama and his polices? we have brand new poll numbers that shed interesting light on what voters are thinking there when they go in to cast their ballot. bill billion the party known as taxed enough already is out with targets for 2012. we're not making that up. we're going to talk to a leading party member about that and some interesting polling numbers that may tell us a story for what we will see in 26 days.

martha: the outrage in bell, california, here's what they will wake town, folks, the former city manager who paid himself a princely sum is out of jail, robert rizzo convinced the judge that the $2 million he coughed up for jail, don't worry, it wasn't from illegal activity, he said, he said his mother-in-law, she sold some homes she owned to get out of jail. he's been in jail the last 15 days, he and other bell officials accused of bilking taxpayers out of $5.5 million in taxpayer funds. the people in bell haven't been too happy about that. bill: a lot of embarrassment in shame in bell, california. balance of power at stake, voters will use the midterm toss a send a clear message to the white house.

the fox poll says voters will express op, to the polices, 34 percent -- 41 percent, 34 percent say they express support. mary catherine, good morning to you. maria cardone, former adviser to hillary clinton and former director at the dnc, good morning, you know what they say, all politics are local, that's what we live by, right? i don't know, mary catherine does that political adage stand up or is this about what we've gone through at the white house and with a democratic congress? >> when it comes to politics you have to do the work on the ground, but there are national elections and this is clearly a national election, people are thinking about obama and the administration likes to indulge in the fact that it has nothing to with -- to do with health care, but the polls shows they do care

about health care. what's striking is the joe manchin race, it has shown that democrats and many in general are thinking we like joe manchin -- manchin but don't like him caucusing with the democrats. bill: manchin can keep his governor's position, he's hugely popular, and you mentioned health care, maria, there's a survey out by the bill in -- by the nil washington, d.c., they went to a dozen battle ground districts, they found 56 percent of voters in these districts would consider health care as a major issue in their vote this year. 56 percent of voters surveyed in that -- in these key battle ground states want that legislation appealed. that's a direct reflection of what mare credit catherine is describing there. >> well, i guess i would say two things, bill. the first one is to keep in mind the survey was only in

12 districts. there are more than 40 competitive districts that republicans are looking at in terms of trying to take over congress this year. this is only a survey that talked about 12. and the second thing, in terms of health care reform, republicans love to talk about repeal, love to talk about how even democrats are running away from it but the fact of the matter is a lot of democrats are starting to run on the key pieces of the health care reform that have just come into play. bill: they are? >> yes. it's only been about -- >> bill: hang on one second. that's not the information we have. there is actually one house democrat that is running an ad that touts his vote on health care. one. >> well, there have been several democrats in the last week and a half, bill, that have started to talk about the specifics of the health care reform that are just starting to come into play, for example, the fact that kids can stay on their parent's health care until 26 years old, preexisting

conditions, you cannot now not be denied by insurance companies for your kids and for those americans who have preexisting conditions. those are a big deal. >> i'm sorry, are they bundling those arguments in their television ads or is this just what they're talking about on line in the town hall meetings? >> no, they're starting to talk about this in town hall meetings and frankly -- >> bill: so the statement i just made is still accurate for now. mary catherine, what were you going to say? >> i actually spent the week watching the first tv ads coming out of the top 64 tossup and leading races -- races and the house and i felt almost nothing related to health care, unless it was south dakota, saying dinot vote for this. it's very clear that folks are distancing themselves from the president, manchin himself is suing the administration over mining stuff now. bill: that came out yesterday, right? that was something else. >> the balance of the tv kph-rgs always certainly is

antiadministration for democrats as oppose -- >> i've got to go, thank you both. it's great having you both on by the way. i just want to make this one point. this year's primary vote, the turnout was up 50 percent from the last time around. 50 percent. >> that is exactly right. and so the last point that i'm going to make is that democrats are starting to bundle the message. if they're going to talking about nationalizing this election, they're going to continue to underscore this this election is about a choice of going back to the disastrous polices that put us on the brink of a financial collapse, or trying to continue to move forward for economic progress. bill: we'll say what voters say. maria, thank you. nineteen past. martha. martha: back to a story we've been following closely here in "america's newsroom", she is an admitted illegal immigrant who falsified her documentation to her former boss, meg whitman. the question, will she be deported?

you may be surprised at the answer to that. bill: another incident on an american killed on the american border. hillary clinton, describing what happened in mexico a few weeks back. remember this? >> these drug cartels are now showing more and more indices of insurgency, so it's looking more and more like columbia looked 20 years ago. bill: ambassador john bolton agrees with secretary clinton. the ambassador is next, live in three minutes.

martha: well, there is new outrage today as reports are surfacing of another american killed in mexico, this time, it was a college student. texas officials say that 19-year-old jonathan torres

was shot in metamoros, mexico, police are trying to find the shooter of that man and this as the search for a tourist reaches a fever pitch south of the border. tiffany hartley claims her husband was shot by pirates while water skiing. that investigation continues to be underway. shocking violence, literally unfolding every day and it seems to be getting worse. john bolton is a former ambassador to the u.n. and he joins me. ambassador bolton, welcome. always good to see you here. talk to us about why you say that the president, president obama, needs to wake up and pay much more attention to this issue. >> well, the level of violence in mexico over the past four or five years, drug-related violence, has been growing astro momcle, estimates of 28 -- astro momcle, i'm not talking about drug overdose, i'm

talking about drug violence, the drug cartels in mexico, strengthened their hand, they've been instrumental in corruption of police and judiciaries throughout mexico, the government itself is challenged, and that violence has now spilled over into the united states, the incidents you mentioned, and a variety of others, because drugs in this country are largely distributed through criminal gangs with direct ties to the drug cartels. martha: i want to pull up silhouettes of five of the mayors who have been killed in mexico and i want to remind everyone, this is five of 11 mayors, just try to imagine for a moment if the mayors of 11 cities and towns across this country had been murdered, two of these people, one of the mayors and one of his colleagues were stoned to death in mexico. is all of this a sign, ambassador bolton, that calderon's crackdown on the cartel social security working -- is working and the violence is getting

worse or has he lost control of this country? >> i think we're at a critical point where may well lose control of this country. that's what secretary of state clinton was referring to when she compared correctly the situation in mexico to columbia -- colombia, 20, 25 years ago before the cartels challenged the government there. this is more serious from the u.s. perspective. it's right on our border. this is a case of what might look to be a foreign policy issue with direct impact on our country and we've had governors like rick perry of texas, january brewer of arizona, trying to alert people to the danger and the federal government in washington seems to be igtouring it. martha: in fact, president obama, when hillary clinton haeud ma -- made that statement, he said no, no, no, mexico is not what colombia was 20 years ago. she's wrong about that. >> maybe the white house needs to communicate with the state department because

secretary clinton is right, and that weighs on what we're going to do about it. martha: i'm sorry for jumping in but what should the president do about it, what can you do? >> this is further evidence why we need control over the border. it's not just a question of illegal immigration, it's the drug cartels, bringing the illegal drugs and violence into the united states. this should be a major priority for the president. he rarely talks about the use of illegal drugs, as a law enforcement threat that it poses. martha: ambassador bolton, thank you for bringing our attention to this issue, very serious, incredible violence going on there. thank you sir. bill: 27 minutes past the hour. martha n. a moment, major american companies threatening to drop employees from the 4*e89 ca -- health care plan, saying they will not afford it under the new law. if more taxpayer money be need to cover more americans? we'll look at that possibility and tell you

what it means to many. martha: folks are watching this election closely, and who isn't, thinks that this senate race may be the one that could tip the balance of power, "dino rossi says his opponent doesn't know how to get americans back to work. that's his argument. >> we have an 18 year incumbent senator, number four in leadership and she's ranked the most liberal senator in washington, d.c. every vote that senator murray takes, whether it's for health care or not reauthorizing the 2001, 2003 tax cuts, it's killing jobs. >> what the outcome in washington state could mean for the rest of america. we're going to talk to dino rossi, coming up.

bill: we showed thank you

yesterday, want to get back to this again, the house yesterday and also on the senate, specifically right now, we're going to look at the senate side and see where things stand. democrats have the majority, right now, democrats are at 57, the senate, republican, 41, the gop needs to pick up ten solid seats to get a clear majority come november 2nd, so what happens? in the races to watch, there are 37 senators right now up for grabs, 37 senate seats. we've broken them down into the races that we're watching, the republicans over here on my left and the democrats over here on our right, inth morning, in the state of illinois, this is barack obama's former senate seat, okay, in the state of illinois, this is great race, and the winner is seated right away, on november 3rd, according to state law, right now, mark kirk, and gun you'llous, they're -- giannnoulis, they're in a race too close to call.

that's where it stacks up. steve brown is finding out what's happening up there. steve, good morning. >> good morning. this is a race in a state, keep in mind, that has no statewide elected republicans, and hasn't had one for four years, and yet, this is a race where the president is coming in to help giannnoulis raise money for a second time. on top of that, the first lady is coming into town next week to assist with the giannnoulis campaign, trying to get democrats motivated. you point out that the race is extraordinarily tight and again, without the help of the white house, it raises questions as to what this race might look like. here's a sound bite from tom bevin from real clear politics. >> illinois is one of the four tossups that are sort of left out there right now, so it's a critical piece of the puz nel terms of democrats retaining control of the senate. >> and it's interesting in that the white house has to

spend this and energy sending the first couple in and the first lady to help rile up illinois democrats in the home of the president and the first lady. bill: that in itself is telling. the polling gives the slightest edge to the republicans right now. what is his take on all the attention that he's getting, i guess, in the race specifically from the folks in washington. >> for mark kirk, it's kind of a fixed blessing. they have to be happy that the white house needs to be here quite so much because it suggests the race is slipping away but on top of that, it makes republicans a little nervous and you got to believe that mark circumstance is one of them in that the white house is spending so much tile and energy and might be able to pull off this win. >> you can take nothing for granted in the state of illinois and for us, we're going to run this election right through the tape. it's good that we're ledding in the polls right now but i have to earn the support of the people of illinois. >> kirk coming down the

stretch, there will be a dumb of de -- a couple of debates that kirk will take part in, but it will be later in the month when voters will decide. bill: is there early voting in illinois? >> there is absolutely early voting. you can register for permanent absentee voting in illinois. bill: thank you, steve. martha: it's a high stakes race that may not end up getting called until the morning after november 2nd, some are saying. it is one of the big ten senate races that everybody is watching, it's between republican dino rossi and 3-term senator, she's been in there is three years, patty murray. murray is a strong supporter of president obama, she helped back stimulus so the white house is bringing out the big guns to support patty murray in this race. joe biden will go next week, and then bill clinton as well. here's the real politics

average, it shows rossi trailing just under 4 percent against patty murray, republican dino rossi joins me now. weur -- sir, welcome. this is getting pretty intense in washington. i know the last couple of the last three or four weeks or so, your numbers started to improve, that started bringing coffers your way, now she's got pretty big guns coming in from washington to help her. how does it feel from where you stand? >> well, actually it feels great from where we are, though she has hat the first lady, and the president a couple of times, and clinton will come out, but the number one contributor is lobbyists and mine are people. she outspent me 3-1. if we have enough money it defend herself we have a race. we have 17.4 unemployment in

washington, people are worried about making the mortgage and feeding the kids. that's what the issue is going to be. martha: what will turn the tide in september? what message are you putting out to close that gap against her? >> we started talking about the fact that she's been there one years and she has an one year record of taxing and spending and growing government that's indenies i believe -- indefensible and she's running on what kind of pork she can bring to washington and francoo frankly, tkwhro*pbg is the year to be talking about pork. martha: one of the issues you've tousled over is the jobs for boeing, the airtanker deal which is very big for jobs in washington state. i know you said your family has had employment with boeing over the generations, that it's a very personal issue for you, but you've been accused of not really caring whether they keep that contract by patty murray. >> senator murray ran a bunch of negative ads, taking two words out of what i said and putting it up on

air and the local newspapers called her ads dishonest and grossly malicious, and that's backfired on her. that's one of the reasons why people understand that we have an 1-year incumbent that's desperate to have six more years. if you like the way things are going, vote for her, good you oweo if you want to go a go a different direction, come with me. go to dino.com and find out -- find out more. we'd love to have the help. martha: we offered her a spot to come on and argue her points as well. in the meantime, i'd like to look at one of her campaign ads that's running. >> as a part owner of a bank, dino rossi wants to continue to play roulette with our money. >> dino took wall street's dollars. >> then announced he'd repeal nary layings that would protect our investment in savings. >> dino rossi, out for himself. >> and not on our side. martha: said you took wall

street money and want to repeal the financial reforms that have been put in place. what do you say to that charge? >> i tell you, that's more ridiculous. the idea that we need wall street reform but what what she did. what she voted for, she's going to kill jobs in the state of washington, small business has less money available to them from the community and regional banks. this is really, when you have a desperate incumbent, an incumbent that is just desperate to have six more years, and she's trying to hide her record and she's ranked the most liberal senator in washington, d.c. by the nonpartisan national journal and that's an elective, self proclaimed bernie sanders from vermont, she voted for the earmarks, all those things. martha: this is going to come down to the wire by the looks of the polls here and the obama administration and democrats have helped to bring in $1.3 million into her campaign, as you say, she's got a lot of money coming into this campaign now. this is when starts to count, that the ads flood the air ways, there are folks out there just

starting to pay attention to what's going on in washington state. what's your battle plan against all that? >> quell, it's been pretty amazing. people have been coming in and volunteering and contributing to this campaign, because they realize we can win. ted barnes referred to this seat, this is -- with 50 seats, joe biden is in charge with 51, he's not so, that really makes a big difference. >> that are that are -- martha: that's a lot of pressure on you mr. rossi. you how you holding up with that. if you're the senate majority not, how does that affect new. >> it doesn't change anything, we put enough miles to go to seattle five times. i'm going to earn every one of these votes and i want people to stick with me. i can't do this by myself. martha: patty murray, we hope she'll come and we'll hear her as well. thank you very much. >> thank you for having me.

martha: as we mentioned, fair and balanced at fox news, we have invited patty murray to join us, she hope to talk to patty murray. bill: door is always open, right? we got a door mat and everything, right there, step right up. martha, check this out. are we going to go to dow 11,000 today? martha: maybe. bill: 30 points away, right? >> yeah. bill: 10970. we closed up 22 points yesterday and some reaction to the jobs numbers, but a lot of analysts right now also think this recent run is a reaction to what people expect to happen in november. martha: yeah, i think they're probably right about that. we'll keep an eye on the markets. bill: 20 points and counting. when that happens -- >> martha: bell is going to ring, bill is going to put on a funny hat. bill: wait until you see that, it's supercool! we break it out for the big events. martha: we have an alarming attack to tell but on the tanker convoys in

afghanistan. this is a very serious situation. look at these pictures coal out of here. forty vehicles have now been destroyed and there is word this morning about who is really the influence behind these attacks and this may surprise you. bill: they are the new kid on the block and they say they are here to stay. a new poll out shows how likely voters truly feel about taxed enough already. the tea party movement, who they're targeting in 2012 already. that's next, in only three minutes. stay tuned for that, america.

>> these numbers are historic, and it's almost fearful to see them rebuild because sean, what this means is the left will become even more desperate and adamant to destroy those running on a common sense, conservative agenda, those republicans who are going to be benefiting from this voter turnout. bill: so is that the case? sarah palin with sean hannity on fox. this is a new poll, those what likely voters think about the tea party movement 45 percent say it's favorable. 34 percent disagree. president and ceo of freedom works, that works with taxed enough already, good morning to you. what do you make of the

poll? do the numbers surprise you, do you consider them to be higher or lower than what you'd expect? stkpwhraoeu think they're about where i expected them to be and that's remarkable is how resilient the tea party brand is, despite these withering, nasty attacks being orchestrated from the president, the white house, and his operatives, both inside and outside the democratic establishment. bill: we also found a poll that showed 71 percent in a poll that got reflected on republicans as to whether or not they supported your message or not. we can put that up. it's favorable, jump favorable, the tea party, 71-10 percent. i think there's something on your movement that's been written about in the "wall street journal". you're not just thinking 26 days from now, you have a plan in place to november 3rd and you have singled out republican senators that will be a target in either a primary or general election in 201,

cork from tennessee, olympia snowe from maine, orrin hatch from utah and the senator from utah. what's wrong with the republican? >> what you're seeing is a commitment from the tea party activists across the country an an understand thank one election doesn't solve this problem, that we're going to need a full commitment from all legislators to fix the problems like overspending, to fix the problems like government-run health care, and i think what we're looking at, in those races and in others, is that commitments to both for kissical responsibility, already you're seeing olympia snow change her position in support of extending the tax cuts for everybody. so we're going to look at their behavior in office over the next few years, but if they're not with the program, if they're not willing to make those tough choices, i think they will have -- >> bill: , well, senator snowe says the party is

right, we've lost our way on fiscal issues. she agrees with you on that. senator hatch said these people are angry, justififiably so and then continues, i'm not taking it for granted. he's a believer too, according to that statement. >> well, government those to those who show up and what the tea party movement is doing dog is creating an incentive for politician toss bee have better in office and it's not just about elections, we have to be there on every one of these votes, and frankly, if these senators start voting the right way, if they start getting serious about reigning in the federal budget, it's going to be very difficult for a challenger to credibly beat them. bill: well, what you have seen in the primary season already, to be honest, it's been effective in some of these races and we'll see what happens in 26 days. but i'd like to bring you back on november 3rd. i think it's interesting to see in your forecast in the future, whether that can be effective. max kibbe, thank you with us, from taxed enough

already. martha: listen to this, one in four democrats are now saying they want to repeal health care reform. really? why did they push so hard to pass it? and are they truly commit to overturning it now?

bill: reportedly it is a done deal, the iphones coming to verizon. that's a big change. according to reports, apple is working on a version that verizon will start selling next year, it will resemble the iphone four, sold by at&t, but would use verizon- based wireless technology. martha: here's the latest, folks. meg whitman's disgruntled housekeeper making a loft

headlines in recent weeks, she accuses whitman of knowingly hiring her as an illegal immigrant. the question is, will she be deported? that is what bill o'reilly asked homeland security secretary janet napolitano last night. >> we got to go to the nicky diaz situation. as you know she was an illegal alien, worked for meg whitman, running for governor of california nine years, she comes out, i'd mits to the nation she had a bogus social security null and was employed for nine years, she lied to an employment agency in california, that's how she got to mrs. whitman's house in the first place. what is homeland security, ice, going to do about her? >> i don't know the answer to that question. >> shouldn't you know, madam secretary? you're in charge. this is a huge case. shouldn't you know the answer to that question? >> well, i'll know it at some point but i don't know it right now. i think obviously, this is ultimately a matter for california voters to decide. martha: all right, there you

have it. whitman denies nicky's claims, saying it's a political stunt created by her opponent democrat jerry brown. more on this later. take a look at the new u.s. reinforcements heading into afghanistan, four legs, fur, and a nose for trouble, the highly trained dogs sniff out i.e.d.s which account for 70 percent of the death and injury to troops this year and next year the u.s. is going to triple the size of the canine battalion. adam housely will tell us about these special animals. hey adam. >> reporter: they are special animals, going in with the marines, next monthing going to afghanistan for a six-month tour. while i talk to you real quick, why don't you do one of the clearing exercises you guys have. these dogs, martha, will go over to the hillside, if lance corporal takes them over there. this is the team from camp pendelton, the first batallion marines, and snap

will go over to this hillside in afghanistan, they'll go ahead of the handler and sniff out i.e.d.s. 75 percent of the injuries are by ieks, they injure a lot of innocent people in afghanistan. and these dogs will go ahead, they'll sniff them out, find the i.e.d.s and the bomb team did come in and difuse that weapon. the good news is the dogs don't actually get injured themselves, they go ahead, they sniff it out, they point to where the i.e.d. might be and get out of the way and that's where the explosive teams come n it's an incredible program, started three years ago, there are 13 dogs at camp pendelton going in next week and we're told they are ready to go, and martha, back to you, there goes snap, they will actually find what's supposed to be the i.e.d. off in the distance. martha: that is fascinating,

those dogs are serving their country and doing a great job. our thanks to the marines, doing a fantastic job as well. incredible story and beautiful dog. what a great looking team, all of them. thank you very much. to find out more about this canine mission and send well wishes to our troops, go to our live shots page on foxnews.com. bill: cool stufplt there's an environmental disaster threatening thousands. a look at the area affected by this sean ami of toxic sludge, already claiming five lives. wow, look at that video. then there's this: >> then she tried to manipulate the libertarian party and run on the ballot. that didn't work, either. and now lisa is trying to pretend she's running to serve us? yeah, right! >> martha: oh boy, a new ad takes aim at lisa murkowski, she lost the senate gop primary against joe miller,

still trying to keep herself in as a write-in candidate. that, and the extremes some candidates are going to out there, when we come back. but la quinta is! la quinta inns and suites? yeah, buddy changing? lets take a gander captain they are changing! they have thousands of new rooms! and lots of neato new lobbies! they're even better than before book rooms at lq.com hey, who's captain here? (laughing) wake up on the bright side at la quinta inns and suites la quinta!

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journal," saying that pakistan's intelligence agency, the isi, is prodding attacks like these, on nato convoys, egging on taliban commanders to ramp up the fighting. and, that is how we start a brand new hour of "america's newsroom," everybody, welcome, i'm martha maccallum. bill: i'm bill hemmer. the big story continues today, explosive allegations, thought to be symbolic of our deteriorating relationship with a vital ally and by the way, billions of your tax dollars have been handed to pakistan for military development and for social development, even today. martha: where is the money going and how is it working out. >> steve centanni live in washington, steve, this is a huge question. how does this affect our already troubled relationship, between the united states and pakistan? >> reporter: well it is -- if the report bears out it's not good, an additional strain on the relationship, as you know, the u.s. apologized for the killing of two pakistanis, in a cia drone attack, just recently. but, even so, pakistan closed

down one of the main supply routes into afghanistan. through the khyber pass. earlier this week, the white house reportedly informed congress pakistan lacked the political will to confront al qaeda, and, now, there is a "wall street journal" report the pakistani intelligence service, isi, is urging the taliban to keep on fighting. martha. martha: what evidence is there that the isi is undercutting the nato strategy. >> reporter: among other things the journal interviewed a taliban leader who said he was under pressure to kill everyone, including policemen, soldiers, civilians, just to intimidate people and said he refused and the isi tried to arrest him and this, as that he be aand other insurgents are attacking convoys and fuel tanks, and 40 vehicles destroyed yesterday and the afghan government is reaching out to some taliban leaders, in preliminary talks, aimed at ending the violence, martha. martha: isn't the u.s. giving

pakistan billions of dollars in aid to fight the extremists? it seems at odds with what we are hearing. >> reporter: as bill mentioned billions in military and development aid since pakistan is a key ally in the the effort in afghanistan, experts say the in increased attacks, upset a delicate balance, while pakistan wants to help fight the militants, the government has internal public opinion to deal with and the attacks along the border are turning opinion against the u.s. an nato. martha: wow, what a situation, steve centanni, thank you so much and julian barns the "wall street journal" reporter behind the report is going to be my guest about a half-hour from now, right here in "america's newsroom." we'll have that. bill: crushing problem, too, martha, as we said, here, for allied forces in the afghan war and roads and supply routes, few and far between and the rural and undeveloped nation of afghanistan. there have been 7 attacks on tankers and supply trucks, just the past week. 90 vehicles, blackened and burned, after being ambushed, 6

people killed, defense department says about 75% of all of the supplies for the afghan war travel through or over pakistan. into afghanistan. martha: talk about the intrigue within the beltway on this one, there is lots of talk in washington, that secretary of state secretary of state hillary clinton could be eyeing another run at the white house. but not in 2012, in 2016. according to a new report out there, advisors have been talking, saying mrs. clinton may still have interest in the presidency. contrary to the fact that she says all the time that she is not interested, so far she is deflecting the talk and continuing her support... she says she likes her job as secretary of state. we'll see. bill: something to talk about and it was only 2008, two years ago, right, we know how long that year went and the midterms, a number of current office holders going to extremes to try and keep their jobs, here is in

a example, lisa murkowski, staging a write-in campaign and getting slammed for it by her opponents. listen here: >> now, lisa is trying to pretend she's running to serve us? yeah, right! >> i'm here to tell you, you are disenfranchised, no more. >> you lost, lisa, and it is time you respect that this senate seat doesn't belong to you. bill: with that, dan springer is live in wasilla, alaska and how does she justify the senate write-in campaign, what kind of a challenge is that, dan. >> reporter: as you saw, she's getting hammered by her opponents, the republicans in the race and the democrats and all the groups supporting the republicans, and have run ads, called spoiled lisa and she says, mine, mine, mine, in the witch's voice and is blasted for what they say is a sense of entitlement and the seat belongs to her and her argument is, look, 85% of alaskans did not

vote for any of the candidates in the primary and she's giving them a choice and she was asked by the voters after she lost, the republican primary, to run a write-in candidacy and tried in some degree to get on as a libertarian and met with the libertarian candidate and that didn't go anywhere and she's the latest in a long string, recent string of politicians who apparently refuse to give up, bill. bill: it seems to be a trend, doesn't it, and we have seen other people do the same thing and are about to see the measure of results, whether successful or not. fairly soon. >> we are so used to politicians when they lose in the primary, it appears as if they'll be losing in the primaries, and they -- their base left them and they bow out gracefully and in recent years we are seeing the opposite, a lot of the high-profile politicians, saying we will be changing parties, running as independents, and a couple of examples, charlie crist in florida, republican governor, switching to an

independent to run in the u.s. senate race because he's lost his support in his party and arlen specter, lost the support in pennsylvania and decided to switch parties and become a democrat. although he lost in the democratic primary the last time around and there are numerous examples, rolland burress, in fact sued to keep his office, senate seat for two whole months after being appointed by disgraced bogovernor rod blagojevich, and it's not always working out as they try to hold on to power. bill: thank you, dan, live in wasilla. martha: we have some -- a "fox news alert," information on 30-year rates, 15-year rates on mortgages, fell, get that, to their lowest levels on record. you have to go back to 1971, to find rates like this: the 30-year fixed mortgage rate is at 4.27, right now, 15, if you can pate off in 15 years, 3.72% and the problem is not a lot of action in the homemaker, regardless of these rates, and, the reason that you are seeing

the rates fall, is because there has been a flood into u.s. treasuries, and, that has increased the price of treasuries and lowered the yield on the treasuries and that is pushing these 30-year and 15-year fixed mortgages rates to the lowest levels. bill: if you want to buy, now is this time. martha: cheap money to find a banker who will lend it to you. right. bill: right. martha: we have been showing pictures of this, a deadly tsunami of toxic sludge. is threatening half a dozen european nations. if you can believe this. torrents of industrial waste, burst from an aluminum plant, what a horrific situation it is, the red flood, destroyed a town and killed at least four people, and, now europeans are rushing to prevent more damage as the flood leaks into europe's second largest river. and, that could contaminate so many different areas, greg palkot is live with more, it is look a bad movie but it is happening, greg. >> reporter: very bad and dangerous movie and it has the potential to be an ecological

catastrophe, what one expert in the region told me, a short while ago. about 100 miles southwest of budapest, hungary and the fear is the sludge could get into the danube river and pollute the rest of hungary as well as countries beyond, it started out on monday, a reservoir full of the toxic stuff, an aluminum plant burst sending a wall of the toxins six feet high through small villages and farms and four dead and three are missing, 120 injured and the sludge burns the skin, deadly if inhaled and in -- injected and killed off fish and wildlife in the past day or so, instantly and since monday the government has been in action and the reservoir is sealed off and military called in, in an emergency cleanup and chemicals have been put into the river water to counteract the toxin and i'm told a short while ago by officials in hungary it is having some good effect. martha: unbelievable. you see the people, some don't

have masks on while doing the cleanup, and what do they think the long term effects may be of the toxicity in the sludge? >> reporter: as horrible, martha, as it is to the immediate area, that is the bigger concern. the experts i have been talking to. that danube river flows through six countries in europe and experts tell me, countries immediately adjoining hungary are bracing for the first effects, serbia and croatia and the stuff can stay around for years and years and can affect wildlife and can affect human and everyone's very concerned about it, right now, focusing all of their attention on it. martha: awful, awful situation. your heart goes out to them, greg, thank you very much. bill: looking at they're, we'll get in a moment, trying to confirm from our fox affiliate, south beginnd, indiana, evacuat due to a gas leak, crossing the wires and we'll get the information, in a moment, shocking new reports said the white house misled the public on the gulf oil spill, blocking

scientists from telling americans how bad the catastrophe had become and the administration for its part is now firing back. that is up in a moment, and... martha: soda, soft drink, pop, call it what you will depending on the part of the country you live in, a group of americans may have a tough time buying any of the soda, say it isn't so, bill! i need my coke. bill: back and forth on the housekeeper saga in california. wow, question: do americans care about the personal issues this time around, is it just a different kind of year? our panel debates, after the break. whitman and brown. >> i want her to help me get an immigration... ms. whitman just... [inaudible]. acid can lead to more attacks. ♪

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bill: got a little bit of information, south bend, indiana, our fox affiliate reports now that most of the downtown area in south bend, indiana has been evacuated because i've gas line break, about a three block area, and evacuated in south bend, northern part of the state, home to notre dame, university of notre dame includes most downtown businesses, evacuation does, and, the county-city building and no injuries are reported, right now, but, emergency crews are on the way to the scene, many of them already there, working to repair the leak and contain it for the moment. a fox affiliate has a team on location, when we get more we'll

bring it to you, gas break in south bend, indiana, evacuation underway. martha: in the meantime, new polling out in california, shows voters may not be thinking about meg whitman's housekeeping controversy when they head to the polls. according to rieuter's, she's down 7% according to the poll that coil out october 2 through 4, one of the early ones we are seeing the impacts of the whole nicky diaz incident, the disgruntled housekeeper who accused whitman of treating her badly though she was paid $23 an hour and gloria allred as we have seen is defending her and did so again last night on greta. listen to this. >> because she wants people to know how she was treated when she was an employee of -- >> when she lied and lied and violated the law. >> gloria, she lied and violated the law and she's --

>> she did not know that. >> she lied and violated the law and is not the ideal spokesperson for the issue. martha: "on the record" and allred says meg whitman is not the best candidate, and, we know that she has done campaign work for jerry brown in the past, and to you, michael reagan done is know and, welcome, gentlemen, to both of you and we wanted the great panel, because you know a lot about california and california politics and how it all works and michael reagan, the numbers don't look good for meg whitman now, is it because of this? >> no, it's not because of that at all. greta was absolutely right, nicky is not really a spokesperson for this and should have told meg in '03 she was illegal and, go to megwhitman.com and see the letter, the social security administration says you cannot use the letter to fire this bomb, you would be violating federal and/or state law and,

the husband did the right thing and the problem with meg whitman in california is relating to the workers and -- in california and she's a billionaire and spent $140 million and if i'm running her campaign i'll talk about the fact that if you don't like washington being one party rule, why would you like california to be a one party rule with jerry brown in charge of california and the democrats in charge in the house and the senate in california and redistricting around the corner, california will not get better with jerry brown. martha: that is the argument, we have seen california in the past, with your father as governor many, many years ago, it has -- slipped between republican and democrats on continued hill and what is the issue, donny fowler, and, jerry brown has been around a long time in california and is he representing the past in this situation? and if so why are folks going for it. >> on the immigration issue, meg whitman is doing the typical do as i say not as i do and voters

will not tolerate that and she spent $140 million to be in a tied race and losing by a few points. martha: hold on a second, listen to all of it laid out here, right? and, the impression of -- meg whitman didn't do anything wrong and if anybody did it, the housekeeper misrepresented herself and falsified documents in the order to get employment. >> she didn't know when she hired her but knew a year -- >> they received a letter and i don't want to hash through it again but they received a letter they say could not be used to fire her and passed along to her and said you better address the letter and straighten it out. do you think, here's the big question, i'm very curious about in the election. does anybody care about the stuff right now or are they more concerned about the fact that california is $159 billion in debt? do these issues hold water or are they more concerned about the economic situation. >> as you know, we do have a republican governor now and a

democratic legislature and it's not really a partisan issue, the debt problem but as far as meg whitman goes, voters care about what she does, more than what she says and when they aren't consistent, like on the immigration issue, where she says she wants to punish employers who hire -- >> that has nothing to do with that. >> employers have a responsibility to find out more about their employees, and she didn't live up to her own standards on this. martha: does any of that really matter. does it matter? you know, in the situation, you look at what california is dealing with, michael. >> this isn't the issue, and, that is a game that is being played. throw the illegal immigrant into the mix with gloria allred and the issue in california is 12.7% unemployment. we are bankrupt in the state of california. we need to change what is going on. and, it needs to change with a strong governor at the top -- do i agree with everything meg whitman does, no but i know jerry brown and lived under a jerry brown governorship in california and we don't need a

retread of jerry brown and speaking of redistricting, he'll redistrict in favor of the unions and there are two races in california that are viable at this point in time because of the way the districting has taken place. martha: i'm out of time -- >> meg whitman -- made a lot of her money, billions of dollars more -- >> founding and creating ebay. >> and she wasn't ceo of -- made a lot of money from wall street banks that have been bailed out. martha: michael reagan, can she turn it around -- >> yes. yes. it can be turned around, it is being turned around all over the country, in the u.s. and every state, we're ahead in nine or ten senate races that used to be democrat. and it can be turned around, but, in fact she has to get out and relate to the voter at the water cooler not the voter at the... martha: a problem connecting with california voters is what i am hearing from you, michael reagan and donny fowler, thank you, we'll watch it closely and

talk about carly fiorina and boxer, next time as well, thanks, gentlemen. bill: could be late into the night, on that, right? business is getting around the health care law with help from the federal government. is that your money? and what it is can mean for your health care, gasparino is on that next. martha: a fire chief responds after crews are accused of letting a house burn down. >> as a result of the fire all firefighters and support agencies in the county have been unduly condemned, criticized and threatened. not just on the local level but on a national level. without the facts being completely explained. or annuity over 10 or even 20 years? call imperial structured settlements. the experts at imperial can convert your long-term payout into a lump sum of cash today. so you think your kids are getting enough vegetables? yeah, maybe not.

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martha: a pointed response and warning from the fire department that let a home burn down over

reportedly $75. ashes all are left -- that is left of the house in tennessee and we showed on the tennessee-kentucky border, burned to the ground as firefighters watched because the owners didn't pay the $75 subscription fee for rural fire coverage. now, the chief is firing back in this case, at critics, who say it was a heartless move. >>. bill: the home burned as a result of not paying a rural fire subscription and it was not the fault of the fire department or the city, but rather the fault and failure of the family not to pay the subscription, we heard on the news clips, he paid his taxes, he probably did pay his taxes but none of his tax money went into this courthouse and was redirected to any of these fire departments. martha: this is getting a lot of attention, the chief warned that your house will burn if you don't pay that rural fee.

because, no county taxes go to the city firefighters. the family says they've always paid in the past and didn't get around to it, last year. bill: we mentioned this the other day, the obama administration now instituting a wave of changes in its own health care law, companies like mcdonald's saying they may drop coverage for some of the workers ahead of the new health care regulation, now the white house is granting what is called a waiver, allowing many businesses to get around the new health care law, what about all of that? charlie gasparino, senior correspondent for the fox business network, charlie, hy r charlie has a great new book out, "unholy alliance", i know that was a lot of work for you. >> yes. mcdonald's and other corporations that employ people at a minimum wage, they don't

offer you the rolls-royce of health coverage, they offer these sort of -- what it is called, mini-meds or something to that effect. sort of the a leaned down health coverage that doesn't give you everything. bill: like a mcnugget instead of the big mac, i guess. >> pardon me. bill: a mcnugget instead of a big mac. >> absolutely. bill: and washington says, no, no, no, we'll help you. >> the health care -- entire, you know, full monte of health care has not been implemented as you know. we could have a change in congress which will delay some stuff. and, so what you have here is these companies basically threatening not to offer health care coverage, you know, if -- because of the cost structure that they are starting to have to pay, and, the obama administration says don't do that, we'll give you a waiver, you can get around it at least for now. bill: a subsidy. >> a subsidy, substitute until they figure out what is going on and what i find fascinating is it seemed they had no idea it

would happen. nobody in congress, really, understood the health care law, right? but, it looks like the administration... bill: 2400 pages will do that. >> but at least you would think the administration would know what they are pushing. >> logic more, if more employees are going to -- don't have employers they'll have to go to a government plan and if this pot grows bigger and bigger it will take more money to run it. >> listen, one of reasons why i wrote my book is because there is crony capitalism that is involved, so involved between big government and big business, and i bet you some of these big businesses, would love not to basically have to cover their employees, and stick 'em in one of these government plans. and, that could be the wink-wink-nod-nod behind the scenes. bill: come back and when you make sense of it, we'll put you on, congratulations with the book, on the fox business network. you look great in the new spot. did you see?

you look great. martha: all right. we're going to -- we're in the new studio and in the meantime covering a big story today. and here's what it is. the taliban choki attacking conf food and fuel and pakistan is supposed to be on our side, a shocking new report says they are egging on the attacks against our convoys. what do we do now, the reporter that broke the story is next. bill: west virginia governor joe manchin is running for senate, he has a 66% approval rating but he might be trailing his republican opponent in the race for the senate and that is not the unique matter. the man who says 95 seats held by democrats could be up for grabs is our guest in minutes. martha: soda could be off limits, bill. say it isn't so. not just for students, for kids, but for you and me, too. the caffeine buzz kill, whose

idea was this. bill: i drink water. martha: you do? bill: a lot of it. martha: you know, i have to have my pop, cold over ice, sometimes there is nothing better. bill: i'll get back to you. let me tell you about a very important phone call i made.

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as with all medicare supplement plans, you can keep your own doctor and hospital that accepts medicare, get help paying for what medicare doesn't... and save up to thousands of dollars. call this toll-free number now. bill: a "fox news alert." now, two breaking news stories, need to update you on, one here at home and one oversees, south bend, indiana, the downtown area has been evacuated, because of a gas line break. and, all the businesses and the folks have been moved out of there. that includes most downtown businesses in the county-city building and luckily no injuries reported, so far but the crews are on scene there. they are working to repair the leak and also, a fox news team is on the scene. when we get more information on that we'll bring it to you, the home of university of notre dame, south bend, indiana, that is what is happenings in northern indiana. there is also another breaking news story from overseas, for that, we'll fly over to karachi, pakistan, southern part of the

country, where moments ago, it has been reported that two explosions have been confirmed by our producer working outs of islamabad. police report blasts at a famed shrine, the sufi shrine, in southern pakistan, the town of karachi, many reported wounded, the early reports, 4 dead, 15 injured and many times in cases like these, the story and the numbers can change. unfortunately, aoften is the case the numbers go higher rather than lower, two explosions in karachi, happening right now, a "fox news alert" from overseas and more information when we get it. martha: wow. in the meantime, you know, this is america's election headquarters, and that is what you come here for these days, let's go to the race in maze zaer, at stake in missouri is the seat of christopher kit bond, the most recent fox news poll gives republican candidate roy blunt a slight edge for robert carnahan of the carnahan family famous for politics in missouri, carl cameron joins us

live from springfield, missouri. carl, less than a month to go. what are you seeing in the show-me state in terms of the dynamics of the race. >> reporter: this is one of those states where the republicans are defending a seat that is open, which means they have got to win it in order to make it possible to pick up the democratic seats that would give them the majorities in the a 2010 takeover. this seat, because it is open, has been one that is hard fought by both sides and the republican incumbent is roy blunt, a member of congress, former member of the leadership, longstanding well-known g.o.p. family and politician here in missouri. and, his democratic challenger is robin carnahan, she's the secretary of state from and also very, very well-known political family in missouri. her mother was -- father, rather, was the governor, and ran for senate and was tragically killed in a plane crash and her mom took over the seat for a time, and was a senator as well. it is a case of two establishment candidates running

against one another, and, outside g.o.p. groups have been pouring money in here, martha, basically to make sure that republicans and blunt win here, as part of their overall strategy, to take back the senate from democratics. they have to protect their open seats and win ten of those democratics occupied seats. martha: it's an interesting race given that there does not appear to be a tea party element here, it is too, as you say, well established in the missouri political names and we'll see what happens, thanks for staying on top of it for you, we'll check back with him in the coming dayses. bill: here's a number for you, martha, 95 democratic congressional seats could be within republican reach at the moment, according to a political analyst, larry sabato and his crystal ball and has a solid track record and he tipped the scale toward the republican party in 21 house races and today shifts three more toward the right side of the aisle and with a peek inside the crystal ball, professor sabato and we

check in once a week now and you moved 21 to the republican side last week and now, three more for a total of 24. what are you seeing out there in these races? >> well, essentially, bill, i'm seeing the factors that we thought would play out in the summer, play out in the fall. not that much has changed. well, the bad economy is at the root of everything and just about all the key issues, spokes are radiating out from the bad economy and, labor day we projected a republican house, a gain for the republicans, total of 47 seats, we're holding to that, we are going to reevaluate that number, right prior to the election, but, essentially, i think you are look at a very likely scenario, whereby republicans take over the house, they are not going to win, you know, 60, 80, 100 seats, some of these predictions, i've heard are ridiculous. but, i think, you know, 47 up to low 50s is reasonable. bill: that is remarkable. you are going 47 to 50, they

need 39 for a majority and what a night that would be for the republican party and that is on the house side. you were out this morning with your crystal ball, saying both parties have hurt their chances on the senate side an point to the state of delaware and you look at west virginia. we have been looking at the race trying to figure out what is happening there, joe manchin is hugely popular. the democrat and, is beaten in the race by five points, 37 races for the senate and does it rank up as the number one shocker for you? >> it is one of the top shockers. there are a lot of shockers going on and we may have surprises on election night, but you are right to say this is a surprise, because, when the race started, after senator byrd died in june, just about everybody thought that the governor who has a high popularity rating, 60s, 70. eric: would win easily and he has one big problem and let me summarize it in one word.

obama. obama's ratings in west virginia, i have seen them as low as 29% and this republicans have a fairly easy task. they simply stamp joe manchin as obama rubber stamp, that is what their ads are all abou for joe manchin he has to be able to hold the democratic base, keep the liberals happy, moderates happy and at the same time, convince the independents that he is not going to be and obama rubber stamp, though he has a "d" next to his name. bill: can he do that? i mean, before you answer that -- john mccain over... john mccain -- on thank you -- hello. and the primary, they went heavily for hillary clinton over barack obama, too. the trend is still -- >> yes, this is a strongly anti-obama state, frankly, it explains a lot of what is happening in west virginia, and kentucky and tennessee, and lift other places, so, look, that is

one of the factors i look at. i look to see where barack obama's pop popularities rating is, in a state before making any calls or predictions. it is one of the key factors anybody would look that the. bill: larry, thank you, larry sabato, check it out on-line, the crystal ball, the westbound is thecenterforpolitics.org/crystal ball. bill: see you soon. martha: we love larry's crystal ball, fascinating. moving on here, back to soda, folks. kicking soda cans to the curb? the fight against sugary drinks, how lawmakers are involved. this has got me a little hot under the collar. bill: you like that one? i guess not, a shocking report concerning one of our closest allies in the war in afghanistan and sources telling the "wall street journal," pakistani officials are encouraging the taliban to hit u.s. forces. in moments we'll talk to one of reporters who is blowing the lid off the story, up in three short minutes.

after this.

>> i'm jenna lee on happening now, a growing foreclosure scandal big banks accused of mismanagement of hundreds of thousands of foreclosures and the white house reportedly contemplating a big move, we have breaking details on that. plus, a shocking report from the "wall street journal," about pakistan, you must hear this. that is what the car -- the car chase that didn't end in capture

and an in-depth look at a tea party gathering in virginia. you don't want to miss it. see you in a few minutes. martha: all right, speaking of that report it is shocking and it concerns one of our closest allies in the war on terror, according to details in a brand new "wall street journal" story this morning, members of the pakistani spy agency known that's isi are pressuring taliban militants to fight the u.s. and its allies in afghanistan, that is the opposite of what we intend them to be doing. julian barns is one of the reporters who uncovered the story and he joins me now. julian, welcome. you know, i think, people have often had suspicions about the isi and what their motives are and nevertheless, we pour money into pakistan because they are the best bet as an ally in the situation. is it disintegrating. >> that is a good question. the u.s. is putting a lot of pressure on pakistan to do more in the war on terror and now, we have this news that the isi is

essentially working against our interests, in afghanistan. martha: tell me about reporting the story. you know, and who you spoke to, not to reveal your sources but give us a sense of how you uncovered the fact that the taliban and the isi, which is pakistani's intelligence agency, our ally, that they are working together and now we see what they are doing to the convoys, trying to get into afghanistan. >> that is an absolutely legitimate question. we spoke to both u.s. officials who have heard this from captured detainees, and from taliban members that they are negotiating with to lay down their arms and also, we interviewed several taliban commanders in various parts of afghanistan, who themselves reported the pressure from the isi, officers, to keep fighting. martha: it is incredible. we're looking at pictures right now and away know that a lot of that is retaliation for the

drone attacks the u.s. has been carrying out all along the ber, some of which in recent days have hit siecivilians, for whic the u.s. apologized. is that the crux of this, what it is about or an excuse another isi to join forces with the taliban against us? >> well, what the isi's motivation here is, is there are elements within the isi that is trying to hedge their betses. who think the u.s. is going to leave the region and they want to retain influence with the taliban and want to influence the reconciliation talks that are going on. the issues of the drone strikes in north waziristan and the border strikes that -- by the nato forces that killed the frontier corpsmen are related, but, is a slightly different issue. martha: interesting. now, we also know this week hamid karzai is in talks with the taliban, general petraeus said, you know, we're sort of bystanders in the process and watching that as it unfolds and hopeful, and guide where we need

to. you know, there was a ton of stories in your paper and other places and reporters here as well, about whether or not, you know, karzai is trustworthy in this whole situation. what is your take on that based on the reporting you have been doing on the pakistani side. >> the pakistanis are nervous about the reconciliation talks and want a hand in them and don't think karzai is reaching out to them enough. and, so that is part of what this isi interference may be about, to try to get a bigger hand in those reconciliation talks. u.s. officials have told me they are not exactly sure, you know, what is going on in these talks and they have influence over them but karzai is leading them and exactly what he wants to do, they don't know. martha: this -- your reporting puts the presidents of the united states in a difficult position in dealing with our pakistani exposed allies who we give billions of dollars to, if indeed they are fighting against us on the ground. julian barnes, excellent

reporting, very good story, thanks for being with us today, we'll continue to follow your work. >> thank you, martha. bill: a man hunt underwayen south florida, a wild car chase and we always say that these ends the same way every time, except for this case. because, in this case the bad guys got away and you ask how does that happen, choppers in the air and police on the ground. when will they catch them? we'll find out in minutes and food stamps with a catch a record number of americans receive money for food and one city tells people what they con not buy. with the food stamps.

martha: new car recall to tell about this morning, folks, involving gm, the company announcing a safety recall, close to 4,000 cadillac srx crossovers, it is citing possible damage to the power steering line in the 2010 models and if the line is damaged, power steering is in danger of leaking fluid and that could start an engine fire. doesn't sound like a good situation, the majority of the affected cars are in the u.s., gm says and look in your snail mail, folks, they'll send you a letter, if you need to deal with the recall. bill: love the cadillac. martha: i know you do, you are a big fan. bill: yeah. martha: the feds are pushing back against a brutally critical report in the response to the bp oil leak after an independent panel ripped the obama administration's handling of this, accusing the white house of blocking scientists from telling americans how bad things could get and questioning if the administration misled the public about the amount of oil in the water. the administration argues it was clear about worst case scenarios and said the response was full force and immediate and there is

the oil in the the water... lot of people think it went away faster that in thought it would be in the end. bill: the government says nearly 42 million americans are getting food stamps this summer and in new york, lawmakers want to crack down on how folks use the food stamps, looking to ban people from buying sugary drinks, with those stamps. rick leventhal, our nook city newsroom, good morning. why the focus first on soda. >> for one thing, apparently drinking one soda a day can pack on 15 pounds a year. a 20 ounce drink like this can contain as many as 16 packs of sugar. nutritiousists say it's a reason why obesity is on the rise in america especially in low income neighborhoods, enter new york mayor michael bloomberg who is not shy about trying to mandate healthier lifestyles, releasing web and print ads to discourage sugar and fat intake and banned smoking in public places, transfats in restaurants and

posting of calorie counts in menus and now wants to forbid the 1.7 million people on food stamps from using the food aid to by sugar-sweetened drinks for two years, a test program to see if it makes them thinner and the mayor says they'd receive the same amount of benefits and can now spend the stamps on food and drinks that provide real nourishment. bill: the sugar data, it's not a done deal, yet. >> the mariyor mayor cannot enforce it bout without the usda, which makes the rules for the food stamp program and you can't use to it buy cigarettes, beer, wine, liquor, pet food, vitamins, household goods tor prepared foods like deli sandwiches and now, the mayor pushing to add sugary drinks to the list, any beverage with more than 10 calories per 8 ounces, except for milk products and fruit juice without added sugar. a spokesman for the agriculture department tells fox the agency is reviewing and considering new york's proposal. bill: what is next, huh. martha: you can't do that. can't tell people that.

>> reporter: if you want this, bill i can give you the sugar... martha: what about milk shakes, you know how much sugar is in a milk shake. >> reporter: i don't know. martha: they put tons of ice cream in it, where do you draw the line and tell people here's your food stamps and you can only buy these things, if you want to buy diet coke and skittles with your food stamps, that is what you will do. >> milk shakes is a milk product and mate be... bill: gets your vitamin d, rick, thank you, man, rick leventhal in our newsroom. okay, the saddest story of the day... martha: what could it be, think about this, who is saying this. 26 years of -- 126 years of post season baseball. and, it was only the second time that this has ever happened. >> halladay, one strike away, the '02, ruiz -- and roy

halliday! has thrown a no-hitter! martha: phillies, halliday, throwing a no hitter, in the playoffs and, the doc, 28 cincinnati reds came to the plate and 27 walked bag to the dougout, and, don larson is the only other pitcher who held a no hitter in october in the post season and his was in the 1956 world series and you know who was watching the game, our friend from ohio, bill hemmer, who was not excited about that. bill: he was awesome, unhittable. clearly. martha: no kidding. bill: game 2, friday night, to give him another chance, we'll see. martha: brian kilmeade said this morning, the sports announcers would not talk about it for the whole game and didn't want to jinx it, hush-hush, they knew what was happening but didn't want to say it. bill: game 2 friday night, south korea down plays the threats from the north, the new warning and why it's getting attention,

coming up on "happening now." [ manager ] you know... i've been looking at the numbers, and i think our campus is spending too much money on printing. i'd like to put you in charge of cutting costs. calm down. i know that it is not your job. what i'm saying... excuse me? alright, fine. no, you don't have to do it. ok? [ male announcer ] notre dame knows it's better for xerox to control its printing costs. so they can focus on winning on and off the field. [ manager ] are you sure i can't talk -- ok, no, i get it. [ male announcer ] with xerox,

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martha: good things happen in october, fox news channel was formed, 14 years ago. bill: can keeps getting better and better, bigger and bigger. thanks to our viewers,

whether you listen on satellite, watch it on cable or follow it on your website, we could not do anything here without you. martha: collaborative effort. bill: we tip our hats to our viewers and listeners. thank you very much. fourteen years ago, i think i was in second grade? >> [laughter] >> martha: that's a good one! bill: true story. >> martha: i was seven months pregnant, 14 years ago. bill: i was in second grade. see you friday, everybody. martha: more tall tales, coming up. jon: good morning. we begin with this fox news alert, i'm jon scott, mortgage rates on 30-year and 15-year fixed mortgages, now at their lowest levels on record, this comes as several major banks have suspended foreclosures because of suspicious paperwork on thousands of foreclosure documents. and there are major political implications at this hour as well. muchor