a ton of money. this hour, how he's dealing with the new messes that the country simply can't afford right now. and from the seat of power to an iron cage in a courtroom, the ousted egyptian president hosni mubarak goes on trial for allegedly ordering the killing of protesters. i'm wolf blitzer, you're in "the situation room." sort of vacation right now, they're on leave while tens of thousands of american workers are going without a paycheck because of their inaction. a lot of new anger and fingerpointing over the partial shut down of the federal aviation administration. senators went on break yesterday without extending the agency's funding. today the president is urging them to get back to work and solve this expensive and very embarrassing problem. let's begin our coverage this hour with cnn's ted rowlands joining us live from chicago's o'hare airport. this is an outrage, ted, what is it like out there? >> well, wolf, people around the country are absolutely disgusted by this, especially those people who are out of the jobs. neal bolden has two kids and a mortgage and now without warning he doesn't have a paycheck. >> i'm incredibly frustrated. incredibly disappointed, particularly in our congressman and in our senators. they went on vacation for four weeks when they could have taken an extra day and finishedt 1200 more people out of work as the president but republican critics say that's only more window dressing for a white house that hasn't been able to deliver on its numerous job creation promises. >> this is a real problem for the administration. they have to demonstrate that they know how to on a day-to-day basis focus on this issue and really do something about it. that just hasn't happened so far. >> reporter: responding to that criticism in his daily briefing jay carney appeared annoyed. >> the idea that the president of the united states should not venture forth into the country is ridiculous. >> reporter: now, the president said that he's been reaching out to congressional leaders to find a way to get this resolved, even without perhaps having them return here to washington. in the meantime, the administration is also looking at options to see if those faa employees can still get paid. wolf? >> yeah, 4,000 faa employees, dan, who were furloughed and tens of thousands of construction workers basically are being told to stop working because you're not going to get paid and that could go on for five week physical they don't get back to town. >> that's right. that's always the ripple effect of any measure that is not, you know, taken care of by congress. the direct impact on the employees of whatever it might be in, in this case, the faa. and also those construction workers that are involved in these projects all around the country and more than 20,000 of these workers and also no funding for them, so they can't show up for work, wolf. >> everyone stresses, though, dan, it's still safe for everyone to fly. they don't have to worry about that part of the story, right? >> ray lahood was saying that. that the safety system is still very concern eed but a lot of concern. they would love for that funding to come through and make sure that those employees, those faa employees all get their paychecks. >> it's ridiculous. think about what $1 billion could do for a problem resolved easily. thanks very much. dan lothian over at the white house. republicans, by the way, pushing back hard against the democrats. senator orrin hatch tells me that member of the president's party could have easily ended this standoff if they backed down on provisions to make it easier for airline workers to unionize. >> they just think they've got a good political issue here and they're crazy. they're the ones costing $30 million a day and they're the ones that won't budge. they're the ones that want and it's all over that improper change of labor law. the power of the united states senate and house where bureaucrats just determine to overturn the law. >> senator hatch blocked the compromise agreement that could have been worked out yesterday. he'll be here. we'll have more of the interview in the next hour here in "the situation room." he'll explain why he decided to do that. now another financial crisis. the city going bankrupt that its workers are being asked to sacrifice a big chunk of their retirement nest eggs. a nightmare we could see in more and more communities across the united states. let's go to cnn's mary snow in central falls, rhode island, watching what's going on. mary, what's it like there? >> well, you know, it's really a lot of concern. this is a very rare move, wolf, to file for bankruptcy. this is rhode island's poorest and smallest city. but state officials here are saying the failed retirement system should serve as a warning. particularly to other cities fire chief john garvey heard the warnings about pension problems, but he says they were down the road and he expected that road to be a long one. >> there was always idle talk around here about the pensions, but we never thought it would come to this. we always thought there would be enough there. >> reporter: now, there isn't. it follows years of fiscal mismanagement and declining revenues for rhode island's smallest city. troubles with its schools were so severe, all its teachers were fired at one point. central falls schools are now run by the state and volunteers operate the library. it was the city's pension obligations that put it over the edge and into bankruptcy court. central falls pension fund is underfunded by an estimated $80 million. retirees now face the possibility their pensions will be cut in half and they will be required to pay more for health benefits. they don't collect social security. chief garvey feels cheated. he's been on the force for 25 years, long enough that his son has joined him and his retirement plans are now shelved. >> i don't really feel as though it was my fault. you know, my contributions came out of my paycheck ever since day one. so, why it shouldn't be there unless somebody else did something wrong? >> reporter: there's anger but long-time residents like paul landry say it's hard to point blame. landry has worked at his family's hardware store for 50 years and says everyone paid for promises the city couldn't keep. >> one mayor after another mayor and another mayor and then they just pushed aside and no one's accountable for what they have. >> reporter: state officials say central falls, population 18,000, should serve as a cautionary tale. other cities in rhode island may also be vulnerable and this small state has one of the most expensive retirement systems in the country. something the state treasurer is tasked to fix. >> nobody wants to make the tough choices. central falls proves that. these choices will be made for you. if you don't act quickly enough, consequences will be devastating and, so, as hard as this is now for me, for the governor, for union leaders to come to the table to fix it, it is much easier to fix it now than when you're at the brink of bankruptcy. >> and, wolf, central falls official motto is the city with a bright future. but now lawyers for various interested parties are fighting over its dwindling assets. wolf? >> what's next for this city now that it's filed for bankruptcy? >> well, first, it is expected that there is going to be a legal challenges to these proposed cuts but basically lawyers for all parties involved are in court today, the first bankruptcy hearing. there has to be a restructuring plan presented within 30 days and what this means is a cut of a third of the city spending, which means more layoffs. >> mary snow in central falls, rhode island, a city that has filed for bankruptcy. thanks very much, mary, a city that could be a prelude to other cities all over the country. meanwhile, a lot of nervous eyes today on the new york stock exchange. we'll tell you how the markets closed after days of painful losses. and a final push by the syrian military in a city that spilled the most blood in the anti-government uprising. terror and the tanks are attacking. stay with us here in "the situation room." finally, there's a choice for my patients with an irregular heartbeat called atrial fibrillation, or afib, that's not caused by a heart valve problem. today we have pradaxa to reduce the risk of a stroke caused by a clot. in a clinical trial, pradaxa 150 mg reduced stroke risk 35% more than warfarin. and with pradaxa, there's no need for those regular blood tests. pradaxa is progress. pradaxa can cause serious, sometimes fatal, bleeding. don't take pradaxa if you have abnormal bleeding, and seek immediate medical care for unexpected signs of bleeding, like unusual bruising. pradaxa may increase your bleeding risk if you're 75 or older, have kidney problems or a bleeding condition, like stomach ulcers. or if you take aspirin products, nsaids, or blood thinners. tell your doctor about all medicines you take, any planned medical or dental procedures, and don't stop taking pradaxa without your doctor's approval, as stopping may increase your stroke risk. other side effects include indigestion, stomach pain, upset, or burning. if you have afib not caused by a heart valve problem, ask your doctor if pradaxa can reduce your risk of a stroke. [ martin luther king jr. ] i still have a dream that one day on the red hills of georgia, the sons of former slaves and the sons of former slave owners will be able to sit down together at the table of brotherhood. i have a dream today! [ male announcer ] chevrolet is honored to celebrate the unveiling of the washington, d.c., martin luther king jr. memorial. take your seat at the table on august 28th. the authentic, the rare, the hard to define. to those always searching for what's pure and what's real from we who believe we know just how you feel. haagen-dazs. jack cafferty is here with the cafferty file. jack? >> wolf, in case you needed it, here's another sign just how bad this economy is. illegal aliens are leaving the united states and returning to mexico in search of a better life. that's correct. one mexican official told the "sacramento bee" newspaper mexico has become a middle class country where it's now easier to buy homes on credit, get higher education and find a job. not so here in the colonies where the employment picture remains grim, indeed. major corporations are announcing another round of layoffs and companies like cisco, goldman sachs, lockheed martin and merck and thousands of american jobs being eliminated. a report from payroll processor adp shows that although the private sector added jobs in july, the growth was well below what's needed for a steady economic recovery. meantime, as we await the monthly jobs report from the government due friday morning, consider this. mexico's unemployment rate 4.9%. the u.s. unemployment rate. you do the math. it's estimated that about 300,000 illegal aliens have left california alone since 2008. experts say the weaker u.s. economy along with rising deportations and tougher border enforcement means fewer illegal aliens, but there have also been significant improvements in mexico. that country's economy is now growing 4% to 5%, according to the u.n., mexico's average standard of living, which includes things like health, education and per capita income is higher now than in russia, china and india. turns out, mexicans might just have better luck achieving the american dream south of the border in their own country. here's the question. what does it say that illegal aliens are leaving the united states and going back to mexico in search of a better life? go to cnn.com/cafferty file to post a comment on my blog. did you think you'd hear that story, wolf? >> rough out there for everyone. >> amazing stuff. >> jack, thank you. the attorney general of the united states eric holder announcing the bust of a child huge pornography ring accused of unspeakable crimes. sexual exploitation were babies. jean meserve is here with shocking details. >> this is a shocking story just to warn our viewers here. u.s. officials say one of the worst instances of internet child abuse they have ever investigated and also one of the most sophisticated. hard drives, cameras and the kind of technology exploited by cyberforensic investigators to uncover the members only online bulletin board for child pornography called dream board. they describe the images as horrific. >> the board may have been the vehicle for the distribution of up to 123 terror bytes of child pornography, which is roughly equivalent to 16,000 dvds. >> reporter: of the 72 people charged so far, 52 have been arrested in 14 countries. the investigation is continuing. more than 600 dream board members were required to post images every 50 days or risk expulsion, officials say. the more they posted, the more access they got to material on the site. >> the payment system would be a barter system. >> reporter: members were encouraged to create porn, instructed to keep the children 11 or younger. some were just infants. one part of the board mandated that children be in pain, "if the girl looks totally comfortable, she is not in destress. it does not belong in this section." >> this is an encouragement of the torture of children for sexual gratification. >> reporter: the board told members how to mask their identities and erase their internet footprints. experts at the immigration and customs crime center that investigated the case say the use of sophisticated passwords has made cracking porn cases more difficult and ever larger hard drives are making it harder to find evidence. >> the haystack was the size of my fist. now the haystack's huge because technology. >> reporter: the center and missing and exploited children say it is significant that law enforcement was able to penetrate this ring, but the center says the problem of child porn is vast and they believe it is growing. wolf? >> probably just the small, small part of this problem. thanks, thanks very much. a high school student's ten hours of terror. a man reportedly broke into her home and tethered her to a suspected bomb. you're going to find out who came to her rescue. he's known as the master of suspen suspense, but alfred hitchcock may have a final surprise for film bul buffs even after his d. [ jelani ] neither of my parents went to college. something that was drilled in me early on, you know, college is the place for you. it's my number one goal. ♪ students like me, who take these ap math and science classes and have these opportunities, this is where the american dream lies. when i write that book, you know, i plan to dedicate it to my school. ♪ those hopes and dreams that you have, you know, they're within reach. and i'm living proof. dow snaps it eight-day losing streak. lisa sylvester is monitoring that and other stories. >> looked like the dow would match its longest negative streak since 1978. it plummeted as much as 176 points today. the dow reversed direction and shot up 29 points. the s&p 500 also rallied closing up six points. in sydney, australia, a teenage girl is safe after a harrowing ten-hour ordeal. bomb squad police swarmed her house after receiving a call the 18-year-old was trapped with an explosive device. it's not confirmed if the suspected bomb was actually strapped to her neck as part of a possible extortion plot. the incident is under investigation. an incredible discovery for film buffs. researchers combing through a vault in new zealand have found a long lost film by the legendary alfred hitchcock. hitchcock helped direct, design the sets and edited the white shadedo back in 1923 when he was only 23 years old. only three of the film's six reels survived. so, we don't know what he intended or how that movie will end. >> i'm sure a lot of people will want to see. thanks very much, lisa. republican presidential candidate jon huntsman is getting more aggressive about criticizing his primary rivals. how he compares to his toughest competitors and whether the tea party deserves to have so much influence. a bloody new offensive in the crackdown in syria. the united states is now taking a stand, but is it too little, too late? vrrooom...vrrroooomm vroom vrrooom vrrroooomm vrrroooomm vrroom vrrrooomm vrrroooooooommmmmm mmmm mm. 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[ coughing continues ] log on to lungusa.org and tell washington: don't weaken the clean air act. an accident doesn't have to slow you down. with better car replacement, available only from liberty mutual insurance, if your car's totaled, we give you the money to buy a car that's one model-year newer... with 15,000 fewer miles on it. there's no other auto insurance product like it. better car replacement, available only from liberty mutual. it's a better policy that gets you a better car. call... or visit one of our local offices today, and we'll provide the coverage you need at the right price. liberty mutual auto insurance -- responsibility. what's your policy? stories we're working on in our next hour. stand by. stunning images of the man who once ruled egypt with an iron fist. hosni mubarak locked up in a cage and facing a potential death sentence. uncovered. one of the biggest cyberattacks in history. an international hacking plot targts the u.s. and some of the most powerful companies in the world. and hamburgers and fries with the president. as a reward for getting the debt deal done, he takes top staffers out to lunch. you're in "the situation room." jon huntsman is in the midst of a five-day swing. the only republican contender to support the debt legislation signed by president obama yesterday. it's a sore subject for many tea party activists who fiercely oppose the compromise. i spoke with huntsman recently about the tea party and his opponents. >> does the tea party have too much power in washington right now? >> the power that the tea party has is commensurate with the voice of the people who put them there. the voice of the people who elected members of the tea party caucus are outraged at where we are in terms of our fiscal situation. as well they should be. so, they elect people, send them to congress, send them to senate and folks are now, i think, expressing the aspirations and the goals of the tea party voters who put them there. i think it's an expression of our democracy. people are outraged and members of congress who were put there by tea party voters i think are right in expressing that outrage, as well. >> do you see yourself as an advocate of the tea party? >> listen on the financial and economic side, when you look at cutting, when you look at tax reform and when you look at balancing the books, i think we're all together on that. >> i want to get to a little politics right now. name three republican candidates, three of your rivals and you tell me why you're more qualified to be president than them. mitt romney. >> i have a real record as governor. we were number one in terms of job creation in this country as a result of record tax cuts, regulatory reform and getting back on our feet. i think massachusetts was about number 47 in terms of job creation. i think that's material. also, we live in a very unpredictable world. i think having some knowledge of how the world operates and having some knowledge of our largest trading partner and significant challenge in years to come, which is china, is very material to the voters. >> michele bachmann. >> i have been governor and chief executive and i have international experience and people will compare and contrast and see that we're both good people and both willing to serve our country but in terms of the background we bring to the table, there ar