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THE SITUATION ROOM

Wildfires Rage in Texas, Oklahoma; Interview With Louis Freeh

Aired December 29, 2005 - 19:00   ET

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


ALI VELSHI, CNN ANCHOR: You're in THE SITUATION ROOM, where new pictures and information are arriving all the time. Standing by, CNN reporters across the United States and around the globe to bring you the day's top stories.
Happening now, it's 6:00 p.m. in Texas and Oklahoma, already devastated by deadly wildfires, they're facing new blazes now with no relief in site.

In Gardez, Afghanistan it's 4:30 in the morning and we are with U.S. troops and they try to fight terrorism with good deeds and dollars. We've got a CNN exclusive.

And at 7:00 p.m. here in Washington, the FBI has taken a lot of heat for security failures before 9/11. Now, former FBI director Louis Freeh tells his side of the story. I'm Ali Velshi in for Wolf Blitzer. You're in THE SITUATION ROOM.

Well, it's turning out to be a horrifying holiday weekend for thousands of people in Oklahoma and Texas, where wild grass fires are sweeping across the plains, destroying homes and lives. Fires are reported in more than 20 of Oklahoma's 77 counties, with four major ones burning right now in the east central part of the state in Oklahoma County.

The flames kicked up again late this afternoon. Michaelann Ooten is with the Oklahoma Department of Emergency Management. She's joining me on the phone now from Oklahoma City. We are looking in the meantime at live pictures of -- from a helicopter just east of Oklahoma City. Michaelann, thank you for joining us.

MICHAELANN OOTEN, OKLAHOMA DEPARTMENT OF EMERGENCY MANAGEMENT: Good evening.

VELSHI: Tell us what the situation is from where you see it.

OOTEN: We do have four active large fires burning across the state. Those are in the ones that you saw there. Certainly in Seminole, Oklahoma City, Achille, and in Marietta. We have been sending up helicopters equipped with buckets throughout the day to provide some aerial fire suppression. Unfortunately, at nightfall those helicopters are not able to do that work anymore. So we're depends once again on the local firefighters, who've been in the trenches in some cases for days working these fires.

VELSHI: Michaelann, our severe weather expert Chad Myers was saying earlier that, you know, given the speed with which these grass fires are spreading, the helicopters, as helpful as they are -- you said it's kind of like shoveling out of a blizzard with a spoon. It's a lot of fire, and it's spreading pretty quickly, especially as the winds picked up later on this afternoon.

OOTEN: Yes. We saw that throughout the afternoon. The firefighters would make headway in a particular area and then an ember would move to another field, and we'd have another wildfire. We've been chasing these since Tuesday, and in some cases, in some areas of the state, they've been dealing with this off and on for the last three or four weeks.

OOTEN: Michaelann, that's got something to do with the kind of weather you've been having. Let's bring in our meteorologist Chad Myers. He's joining us now from the Weather Center in Atlanta -- Chad?

CHAD MYERS, CNN METEOROLOGIST: Michaelann, I was wondering about the big fire around Paul's Valley. It shut down I-35 both directions as the smoke was over the interstate there. The fires actually were right in the median at times. How is that fire?

OOTEN: That was on Tuesday, and that fire has since been contained. But it was a very devastating fire at that time. We've had others since then. And I know there have been places that have continued to rekindle since then.

MYERS: It is going to be another windy night. Typically the winds have been dying off around sunset. But there's a cold front coming your way tonight that may actually shift the winds. Is that going to help or hurt?

OOTEN: Well, we'll have to see. But the only thing that can really help us at this point -- the biggest help could be some measurable precipitation. As you know, we don't see any in the immediate forecast. So we'll deal with whatever is handed our way. But hopefully, those winds can come down at least for the next two days because we're looking at Sunday being a terrible day as far as high wind.

VELSHI: Michaelann, we're looking at live pictures on one side of the wall, from a television affiliate helicopter. But on another side of the wall, we've been getting -- we've been seeing intermittent pictures of these military Chinook helicopters, the ones we've been talking about, going to water sources, filling up those large buckets and dumping them on the fires.

Those military helicopters you were saying cannot fly at night, or are not flying missions at night? So at this point what we see burning is going to burn?

OOTEN: Well, actually, what we see burning is still being assisted by brush pumpers and bulldozers and specialized crews from our forestry officials who are on the ground. So we'll continue to monitor and send whatever resources we can on the ground. But that is true. The helicopters cannot fly at night for safety reasons. VELSHI: One last thing, Michaelann. Fortunately, we've not seen a loss of life. We've seen loss of property in Texas and Oklahoma. But what we have seen is we've seen pictures and we've heard reports of cows and horses and wildlife having to escape this fire. What do you know about that?

OOTEN: I do know that this afternoon especially there were a lot of horses and cattle that had to be evacuated. The good news is we're not hearing cases of a lot of those livestock being killed. They were able to get out of the way of the flames, and that's especially good news.

VELSHI: Michaelann Ooten is with the Oklahoma Department of Emergency Management joining us from Oklahoma City. Michaelann, thank you very much. We'll continue to check in with you.

Let's bring you up to date on what has happened to get us to this point. CNN's Kimberly Osias is monitoring those developments, and she joins us now -- Kimberly?

KIMBERLY OSIAS, CNN ANCHOR: Well, Ali, of course you heard Michaelann say this has been going on for days in Oklahoma and Texas. No relief in sight. Firefighters battling those brilliant blazes that you saw. Four people have died in these fires, and hundreds of homes in both states have been damaged or destroyed.

(BEGIN VIDEOTAPE)

OSIAS: Frightened animals run from the flames that flared up once again this afternoon east of Oklahoma City. National Guard helicopters are fighting the fires from the air. But they just can't fill their buckets fast enough to gain the upper hand.

Wind gusts up to 30 miles an hour fan the flames as they consume more buildings and land, 30,000 acres in Oklahoma alone. In Texas, Governor Rick Perry toured the hard-hit community of Cross Plains. Fire's destroyed more than 90 homes there, as well as the town's 120- year-old Methodist church. Residents are heartbroken, but vowing to rebuild.

PATRICIA COOK, CROSS PLAINS RESIDENT: We're strong in our faith, strong in God, strong in each other.

OSIAS: Perry has already declared a state disaster. And he's asking for federal help as well. He compared damage to some communities with what Hurricanes Katrina and Rita did.

GOV. RICK PERRY (R), TEXAS: Cross plains is as devastated as any of those communities when you look at the number of people that live here and the percentage of homes that have been lost.

(END VIDEOTAPE)

OSIAS: And unfortunately, conditions aren't expected to improve, and officials are bracing for even more fires. Oklahoma has even banned fireworks, and some shows that were planned for New Year's Eve have been canceled -- Ali?

VELSHI: OK, Kimberly, we'll continue to keep up to date with you. Thanks so much.

Let's take it over to the situation online. Our Internet reporter Jacki Schechner is also following this situation. Jacki, what do you see?

JACKI SCHECHNER, INTERNET REPORTER: Ali, this is an Internet- based system specifically. It's called the drought index. It's from the Wireland Fire Assessment System. And you can take a look at this general area here, and you can see where the conditions for organic material on the ground to be highly flammable.

Let me show you this map in animation, if I can. And you can see as it starts over here. It should actually refresh. There you go. October, November, clears out mid-November, and then December again, we have those drought conditions.

We're following also online from the National Oceanic and Atmospheric Administration, noaa.gov, the conditions in this general vicinity. They have a 12-hour span that you can go on and click through yourself. Let's take a look at the temperatures. You can see how these change over time.

And then the other thing that you can follow that Chad was talking about was the wind speed and direction. And it doesn't really look like it's changing that much between 7:00, 10:00 tonight. It'll drop down a little bit overnight, but really not that dramatically. So we're going to keep an eye on this, and we'll keep an eye, obviously, on all of the weather conditions in general -- Ali?

VELSHI: All right, let's take a look at the right side of the screen, there. You can see those fires are burning. They're still burning actively. Jacki was just talking about the brush and how it catches fire. Let's take it back to our severe weather expert, meteorologist Chad Myers in Atlanta.

It's the brush, it's the dryness, it's the winds. What do you see from your perspective about the outlook for this?

MYERS: Ali, in November, there was a quarter of an inch of rain. In December, there has not been one day that it has rained in Oklahoma. Not one. So since November 1st, there's been this much rain everywhere across Oklahoma. Now, this fire we're talking about for today, Oklahoma City right in the middle of the screen, a couple of miles to the east of Oklahoma City between Spencer and Jones.

So it is not really in the center part of Oklahoma City. It is in Oklahoma County. It would have been nice to get some rain up there, but the rain is only into Kansas, not quite down to Oklahoma, or for that matter, down into Dallas, either, where they could use a couple of showers.

Back to a couple of other maps I want to show you. The winds have died off a little, Oklahoma City, 12. Remember, Ali, about two hours, that was 23. That's some good news.

VELSHI: Chad, one quick thing. Jacki was showing us that map about the brush. That's a big part of the problem here. It's not just trees, it's just brush.

MYERS: Right. There's an awful lot of dry grass on the ground in Oklahoma. It grows. It's hay. The cows eat it, the horses eat it. The same cows and horses we saw today. Then it catches on fire. When it's a foot high, you can get flames 15 feet in the air and sparks flying everywhere.

VELSHI: We'll keep checking in with you. Our meteorologist and severe weather expert, Chad Myers at CNN Center.

Coming up, more on the fires whipping across the plains. We're going to go live to reporters on the ground in Texas and Oklahoma.

Plus, the spread of bird flu. Another grim milestone in China. What does it tell us about the danger to people everywhere?

Plus, we're tracking those wildfires. We will keep on doing that. The danger of more of them. We'll have some live reports for you. Stay with us. We're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

VELSHI: We're continuing to monitor live pictures of those fires. That is central, east central Oklahoma that you have just been looking at.

To Iraq now, and a bloody day in Baghdad. The post-election upsurge in violence has claimed more lives, including another American. CNN's Jennifer Eccleston is in the Iraqi capital.

JENNIFER ECCLESTON, CNN CORRESPONDENT: Ali, the U.S. military announced the death of a soldier in the eastern Baghdad neighborhood after the convoy the soldier was traveling in was struck by an IED, what a U.S. commander today referred to as the insurgent's deadly weapon of choice and an effective weapon of choice.

Now, the IED, the improvised explosive device, is the primary source of deaths among American forces serving in Iraq. Of the U.S. casualties just this week, one half were a result of IEDs.

And also today, a suicide bomber detonated an explosive belt at a checkpoint leading to the central Baghdad office of the Ministry of Interior. Three police died in that early morning attack, as well as one civilian. And eight others, including policemen, were wounded -- Ali?

VELSHI: Jennifer Eccleston in Iraq.

Has Al Qaeda found a new target? Well, the group's Iraqi faction is claiming responsibility for the rockets that were fired into Israel from Lebanon this week. How are Israelis reacting to the stunning statement? Well, let's turn to Guy Raz in Jerusalem -- Guy? GUY RAZ, CNN CORRESPONDENT: Ali, Israeli security officials are treating the claim with some skepticism. Al Qaeda is known to be hostile towards Shiite Islam, and southern Lebanon is Shiite country. Many members of Al Qaeda are adherents of the (inaudible) strain of Islam, and southern Lebanon tends to be under the control of the Shiite militia group Hezbollah.

So it's unlikely Al Qaeda was able to operate freely in southern Lebanon. But at the same time, security officials are monitoring that claim, because if, in fact, it was an Al Qaeda operation, it would be the first time the terrorist organization has managed to strike so deeply into Israel.

Meanwhile, Israeli security officials are saying a suicide bombing earlier in the day could have been much, much worse. A temporary Israeli military checkpoint near the West Bank city of Tulkarem was set up yesterday after military intelligence received word that a suicide bomber may attempt to enter Israel.

Well, that happened today, and the bomber detonated those explosives at that checkpoint killing one Israeli soldier and two Palestinians. The militant Palestinian group Islamic Jihad took responsibility for that attack. And it's understood that the bomber was himself a member of the Palestinian police force -- Ali?

VELSHI: Guy Raz in Jerusalem. Thanks, Guy.

In China, a frightening announcement. A third person has died from bird flu. This is the seventh case of the virus that spread to humans in that country. CNN international correspondent Tara Duffy is with us now from Beijing.

Tara, bring us up to date.

TARA DUFFY, CNN INTERNATIONAL CORRESPONDENT: Ali, this latest case is a 41-year-old factory worker from China's southeastern coastal province of Fujian. At this stage, we do not know if she had any contact with birds, which is what we're waiting to find out because all these other seven cases of human infections of bird flu have all been through people who either worked closely with poultry, poultry workers, or people who raised poultry in their homes.

So at this stage, we're still waiting to find out whether or not she came in contact with poultry. What we do know is that so far, there have been no reported cases of bird flu among the poultry population in this province. And so far, the people who have come in close contact with her also are showing no symptoms of avian flu. So this really is a test to see whether or not we can find out just how she contracted the virus -- Ali?

VELSHI: Tara Duffy, we'll all be keeping an eye on this. Thanks so much. Tara Duffy in Beijing.

Well, still to come in THE SITUATION ROOM, it's called the Growler, but the price tag has people grumbling. Is this modern military machine worth it? Doesn't look all that modern.

Plus, they spent 18 years in prison for a crime they say they didn't commit. Now they are free. We'll show you what happened here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

VELSHI: I don't know if you've all seen the V-22 Osprey. It's this amazing flying machine. Well, that's it right there. It flies any kind of direction you want it to. But the Marine Corps is getting a new lightweight vehicle that fits inside this whole tilt rotor aircraft.

The vehicle looks like an old jeep, but it's a lot more expensive than an old jeep. A lot more expensive than an old jeep. Our senior Pentagon correspondent Jamie McIntyre is on this story of the Growler, I think they're calling it -- Jamie?

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: It's the military version of the Growler. Now, you can buy one of these Growlers, sort of an off-road vehicle, from a kit. It costs you anything from $7,000 to $14,000. But the military version that we're looking at there, $100,000. And people are asking, "Well, why spend that much money for something that looks like basically a dune buggy?"

And particularly, you can see there, it's not going to offer much protection against the kind of roadside bombs and big ambushes that U.S. troops are facing in Iraq. Why would you buy this?

Well, the Marine Corps says, "If you think about it, it makes more sense than you want." First of all, they need something that will go in this V-22, which is their way for marines to get to the battlefield from now on. The marines aren't thinking so much about amphibious landings. They're talking about flying in where they need to go.

And when they get there, they need to have a vehicle that they can move things around. It's not meant to be a frontline combat vehicle. But in order to get this little light vehicle onto the V-22, they had to shrink it. They had to make it narrower so it would fit in the five by foot cargo hold in the V-22.

And they had to completely change the dynamics of it so it wasn't top heavy anymore. They needed to add more power train. They needed to put armor underneath it and blast proof seats and all kinds of stuff that the Marines want. And so that's why they say it costs so much money. They claim it's a bargain, some critics still think -- they're not sure that $100,000 is what they ought to be spending for it.

VELSHI: I've got to say, paying $100,000, at least it should have a better paint job than that. Jamie, good to talk to you. Thanks so much. Jamie McIntyre, senior Pentagon correspondent.

Just ahead, the plains in flames. Oklahoma and Texas are still tinderboxes. People are dead, homes destroyed, and thousands of acres are scorched. Is there relief in sight? We'll check in on the ground.

And later, as one of the nation's top lawmen, some blamed him for failing to see terror threats that were leading to 9/11 and beyond. Former FBI chief Louis Freeh goes one-on-one with Wolf Blitzer to tell his side of the story. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

VELSHI: Welcome back to THE SITUATION ROOM. We are staying on top of the wildfires burning across Oklahoma and Texas. Charles Bassett of CNN affiliate KWTV is tracking the Oklahoma fires in eastern Oklahoma County. Hollani Davis of CNN affiliate KTXS is in Cross Plains, Texas. First to Charles Bassett.

Charles, what's the situation where you are?

CHARLES BASSETT, REPORTER, KWTX: Well, it's been a tough week out here for Oklahoma County firefighters. Definitely a tough day. Just along right here in northeast Oklahoma City where we are, the fire has charred about 1,000 acres. The fire burned a mile and a half long, about a quarter mile wide.

Let's tell you -- let's show you why Oklahoma County firefighters are having such a tough time. Look at the grass down here. This is what they're dealing with. This is like straw. You know, you combine this with a discarded cigarette or with any kind of outdoor burning and mix that in with all the winds we're having out here, and you're going to have a very dangerous situation.

Now, this fire started early this afternoon. It was brought under control a short while ago, but there are still some hot spots that are flaring up. The fire burned close to some homes. A Chinook helicopter was brought in to drop water on the flames. That did help the firefighters out here a lot.

At least 14 different departments have responded to this fire, and they have been battling fires out here all week long. No word on how this fire started. Firefighters out here are urging some caution. We do have the holiday weekend coming up. A lot of people like to get involved with fireworks and everything. They're telling people to stay away from that, and they're going to be on alert, because we do have another high wind day coming up on Sunday. And they want people to be cautious about that.

VELSHI: Charles, we've been watching that Chinook helicopter. We know you've had no rain out there, and stations like yours are telling people what they can do to protect their own property. You showed us that grass. That's one of the things they've said, make sure that you've mowed everything down to almost nothing so that there's very little to catch on fire if those fires approach your property.

BASSETT: Absolutely. A lot of people are getting out with water hose, trying to protect their property. But they're telling people, you know, get up next to your house. If you have firewood next to your house -- remember, we are in winter here in Oklahoma. And it gets cold here. Remove that firewood from your house. Keep the dry grass cut down around your house. You know, just home maintenance, and that will keep the fire away.

VELSHI: Charles Bassett of our CNN affiliate KWTV joining us. Thank you for that, Charles, and we'll continue to use the good services of your television station.

Let's turn our attention to south of there and slightly west to Cross Plains, Texas, which is southwest of Dallas. We find Hollani Davis of our CNN affiliate KTXS in a shelter for those people who've been displaced by the fire that has already scorched thousands of acres.

What's the update Hollani?

HOLLANI DAVIS, REPORTER, KTXS: Well, also a tough couple of days HERE in Cross Plains, Texas. Just two nights ago, a scary sight as nearly 20 percent of this town was on fire. At least 33 emergency crews from different areas came in to try to save the town and do what they could. Unfortunately, it was just too late. This fire sprung up quick and there was just no way to get it out.

Two people died in this fire. Fire officials say, though, that they feel very, very lucky. It could have been much worse, but the devastation, if you go out on the streets, is very bad. At least 115 homes are completely destroyed. More than 40 homes are partially destroyed. And they still don't have a word on how many businesses are lost.

Right now, behind me, you are seeing volunteers with the American Red Cross. They're stacking the pantry. Of course, at least 1,000 people are out of a home. And they're homeless. They have no food. So they are here at this shelter. It is set up at the First Baptist Church. Several families are staying here until they can find more permanent homes.

VELSHI: Hollani, thanks so much for joining us. Hollani Davis of CNN affiliate KTXS in Cross Plains, Texas. We'll continue to keep up-to-date on what is happening in Texas and Oklahoma.

Kimberly Osias joins us now with a closer look at some other stories making news - Kimberly?

OSIAS: Well, Ali, let's start in New York. Two Long Island men are free tonight after spending 18 years in jail for a crime DNA evidence says they didn't commit. A judge today cleared John Restivo and Dennis Halstead of raping and murdering a 16-year-old girl back in 1984. A third man was cleared last week. DNA testing on evidence recovered from Theresa Fusco's body did not match any of the three men.

President Bush and his top aides may wish they were the first lady Laura Bush. A new CNN-"USA Today"-Gallup poll shows Mrs. Bush the most popular of the bunch. Nearly three-fourths of those asked said they have a favorable opinion of her. Her husband, on the other hand, the president, was a distant second with 46 percent. Defense Secretary Donald Rumsfeld and Vice President Dick Cheney were about even, logging just over 40 percent.

And the body of a Jersey City police officer who had been missing since his vehicle drove off a drawbridge into the Hackensack River Christmas night has now been found. Divers found Officer Robert Nguyen's body tonight about 90 feet from where the vehicle hit the water. The body of the second officer in the vehicle was found shortly after the crash. The two had just delivered safety flares to the bridge operator. Ali?

VELSHI: Kimberly, thanks very much. And I know you're also involved in keeping an eye on the developments in the fire. So we'll check in on that again -- Kimberly Osias.

At the close of 2005, more than four years after 9/11, many Americans still worry about the state of homeland security. And they wonder how the government failed to put down the terrorist threat before the attacks.

Well fingers have been pointed at former FBI Director Louis Freeh. Now Freeh has a book out that gives his side of the story. Freeh recently talked with Wolf Blitzer right here in THE SITUATION ROOM.

(BEGIN VIDEOTAPE)

WOLF BLITZER, CNN ANCHOR: The 9/11 Commission report, as I've read it -- I'm sure you've read it as well -- comes down very harshly on the FBI during the years you were the FBI director, among other things saying the FBI did not dedicate sufficient resources to the surveillance or translation needs of counterterrorism agents. Surveillance personnel were more focussed on counterintelligence and drug cases.

And the White House chief of staff under Bill Clinton, John Podesta, wrote a piece wrote a piece in The Washington Post the other day saying, "The bureau under Freeh's leadership stumbled from one blunder to the next with little or no accountability. The nadir, as the nation knows too well, was reached in the astonishing string of failures that helped leave America vulnerable to the attacks of September 11th, 2001.

"The face of this record, Freeh, has now published, 'My FBI,' a book distinguished by its shameless buck-passing. Nothing, it seems, was ever Louis Freeh's fault."

Your response?

LOUIS FREEH, FORMER FBI DIRECTOR: Well, you've asked me two long questions, Wolf -- rhetorical questions, but let me try to answer those.

First of all, John Podesta talking about the nadir and the FBI is quite comical when you look at the presidency that he was chief of staff for.

But leave that aside, John Podesta -- it's interesting he's making all of these criticisms right now, because when he was chief of staff, first of all, he never brought any to my attention. And you know what, if I was that bad, the president should have fired me. So it's interesting to sort of hear the record.

With respect to the 9/11 Commission, I agree with a lot of their findings, particularly the finding that neither President Bush nor President Clinton, nor their national security advisers put the country on a war footing before September 11. And a lot of their criticisms are valid.

But let's remember that prior to September 11, when our enemy was not only declaring but waging war against the United States, blowing up embassies -- they almost sank an Aegis class warship, the USS Cole, in October of 2000. Our response -- and I'm talking about two administrations -- was to get arrest warrants for bin Laden, put him on the top 10 list.

And I went over to President Musharraf in the spring of 2000, asked that he help me arrest and take custody of bin Laden. By the way, he was of no help. He told me that he had spoken to Omar Mullah, who told him that bin Laden was no longer working in terrorism.

So the perspective before 9/11 was quite different. The country did not declare war -- war as you and I would understand it -- until September 11.

And while we're on the subject, the 9/11 Commission, it was interesting to read, at least press accounts, of Able Danger. It appears, from very credible sources, including very decorated military officers, that prior to September 11, actually in 2000, the Able Danger unit had identified...

BLITZER: That was a unit of the Pentagon that supposedly identified Mohammed Atta and some of the others, according to some of those people who say they were involved. Did any of that information ever reach the FBI?

FREEH: Well, absolutely not. In fact, if you read the media accounts, the military officers were forbidden from giving that to the FBI. In fact, they had (inaudible) with the FBI. Now, my point is, that was the kind of tactical intelligence -- had the FBI had it, you know what, that would have been very, very helpful.

FBI agents might have reacted to that. The 9/11 commission apparently was told this before they wrote their report, and we still haven't gotten a straight answer as to what they did with it.

BLITZER: But forget about Able Danger for a moment. As significant potentially as that might be, and there are presumably investigations, reviews under way right now to determine what, if any, role they may have had. But there were FBI agents who were connecting the dots, who were screaming about some of these 9/11 hijackers leading up to it. But apparently it didn't reach your desk or you were unaware of what some of your own field agents were getting.

FREEH: Well, I mean, you're talking about two incidents in the summer of 2001. Which, I wasn't there, by the way, but let's leave that aside for the moment. You're talking about two pieces of information. One came out of Phoenix and one came out of Minnesota.

Connecting them together in hindsight, which is a very easy exercise, by the way, hypothetically and theoretically could maybe take you where the 9/11 commission, by the way, did not go. They said that no combination of facts known prior to September 11 could have prevented the hijackings. I think that's very significant. What you're doing is you're taking two pieces of information, in hindsight, when those pieces of information came to the agents' attention, they came in the multitude of other facts. To go back and do it in hindsight is very easy, but I think ultimately unfair exercise.

BLITZER: But with hindsight, I'm sure you spend a lot of time looking back on your eight years as FBI director and say to yourself, if only I had screamed a little louder, shouted a little louder, complained, gone public, and said, you know what, I might have had a greater impact on preventing that tragedy.

FREEH: I think anybody who served in those positions during that period, and we're talking about two administrations at least, still feels personally responsible for September 11 and wishes in hindsight we could have done more and maybe we could have prevented it. And I ask myself that question all the time.

BLITZER: So you do take some personal responsibility for this?

FREEH: Of course.

(END VIDEOTAPE)

VELSHI: All right, coming up next, Louis Freeh takes on his former boss Bill Clinton. Does he think the former president did enough to prevent a pre-9/11 terror attack?

And later, home prices gone wild. How high are they where you live? And is that market ready to crash? You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

VELSHI: All right, well in his recently released book, former FBI Director Louis Freeh says his relationship with his ex-boss, Bill Clinton, wasn't good. Investigations of the Clinton White House caused friction between the two of them. But Freeh also raises questions about Clinton's handling of the terror threat in the years before 9/11. More now of Wolf's interview with Louis Freeh.

(BEGIN VIDEOTAPE)

BLITZER: Let's talk about another issue that's come up in your book, the whole Khobar Towers bombing. You write in your book on page 25: "The story that came back to me from 'usually reliable sources,' as they say in Washington, was that Bill Clinton briefly raised the subject only to tell the crown prince that he understood the Saudis' reluctance to cooperate.

Then according to my sources, he hit Abdullah up for a contribution to the still to be built Clinton presidential library." Referring to the effort to try to get the Saudis to cooperate with the FBI investigation into the deaths of those U.S. military personnel.

Jay Carson, Bill Clinton's spokesman now, responds with this statement: "Freeh was not even in the meetings he describes, and thus is totally wrong with his baseless allegations. President Clinton repeatedly pressed the Saudis for cooperation on the Khobar Towers investigation, which led to the eventual indictments." Your usually reliable sources, as you point out, were they American sources or Saudi sources?

FREEH: Well, I'm not going to get into that. That's an exercise that you wouldn't do with a journalist. You're certainly free to try it with me. I'm not going to talk about it. But let me, let me...

BLITZER: Because you may know that sources, people very close to the former president say your sources were not FBI agents. They were Saudis. And that they were just being mischievous in what they were saying to you, specifically one high-ranking Saudi official whom I won't name. I don't know if you've heard that, but I want your response.

FREEH: Well, my response is, I don't know what information you're talking about. And no, I was not at the meeting. Neither was the president's spokesperson, by the way.

I will say this, even going back to, you know, May of 2001, if you read the New Yorker article carefully, it was confirmed, it was confirmed in that story that Bill Clinton never seriously pursued the request by the FBI to get into Saudi prisons where we could speak to the people who were not only responsible for the bombing, Wolf, but who ultimately told us it was done at the behest of senior members of the Iranian government.

The best corroboration I have of that is it took President Bush 41, 48 hours to perfect that request, where for two and a half years, the president and his national security adviser not only didn't pursue it, but what do you say about a president and a national security adviser that, after telling the country this is a critical case, we will do everything we can to find out who murdered our 19 heroes, neither of them in two and a half years ever asked me how the case was going. Never asked me for a progress report or what we were doing.

BLITZER: But what about the allegation that at that same meeting he tried to hit up the Crown Prince Abdullah, now the King Abdullah, for a contribution to the Clinton library? Are you standing by that? Are you sure that that conversation was at that specific meeting? Because as you know, the National Security Adviser Sandy Berger and others who were there are flatly denying that.

FREEH: Well, I don't want to comment on Sandy Berger's credibility or the president's credibility. And, you know, when you say standing by, I'm repeating on page 25 -- you did accurately read it -- what I was told by sources. But regardless of what I was told by sources -- and I am sticking by that, by the way. I've reconfirmed it with my sources.

And I wasn't the only person that was told it. We were told together. The national chief of my counterterrorism division was there with me. But I think what's important here is that for two and a half years, this was not done.

And when Mr. Podesta writes that Mr. Clinton's efforts led to the indictment, that's ridiculous. We couldn't get an indictment out of the Justice Department under the Clinton administration. The U.S. attorney assigned to the case by the way, had never investigated a criminal case.

With the same evidence, very important, with the same evidence, in eight weeks Jim Comey, who just left as deputy attorney general, indicted the case. Five days before the statute of limitations was going to bust the counts. That's the fact of the indictment.

BLITZER: We've got to leave it right there. Louis Freeh, the book "My FBI: Bringing down the Mafia, Investigating Bill Clinton, and Waging War on Terror." Thanks, Director Freeh, for joining us.

FREEH: Thank you, Wolf.

(END VIDEOTAPE)

VELSHI: Coming up next, the National Security Agency already at the center of the secret spying controversy, is now getting more heat. Did the NSA break federal rules on Internet privacy? And how does that affect you?

Later, is it a buyers or a sellers market? New numbers on home prices and how you can check the latest listings online.

(COMMERCIAL BREAK)

VELSHI: All right, turning now to a CNN exclusive. U.S. troops in Afghanistan are battling terrorism by trying to spread goodwill. Our Becky Diamond went on patrol with U.S. troops along a dangerous road today, and she's got the story from Gardez, Afghanistan -- Becky.

BECKY ANDERSON, CNN ANCHOR: U.S. soldiers in Afghanistan fighting a war on terror block by block. There's a very dangerous road that travels by Gardez, the town I'm in, through the mountains and into Pakistan. And this road has been the site of many insurgent attacks.

And it's along this road that the U.S. military hopes to win the loyalty of local villagers who reside by this road. And they're doing this through a combination of deeds and dollars. I went out with the U.S. patrol this morning, a provincial reconstruction team, that reached out to village elders and found a site where the U.S. military's donating $5,000 to build an irrigation system.

Hoping that by bettering the circumstances of this village, the villagers will then repel any possible criminal or terrorist activities. Ali, back to you.

VELSHI: Becky Diamond in Gardez, Afghanistan -- thanks, Becky.

First there was the flap over wiretaps without warrants. Now the National Security Agency is under the microscope again, and critics don't like what they see. Brian Todd's been looking into the NSA and whether it broke federal rules. Brian, what's this story about?

BRIAN TODD, CNN CORRESPONDENT: Ali, you're right. This is in fact the second controversy over private issues to hit the -- privacy issues, excuse me, to hit the NSA in the past couple of weeks. And this one may have invaded your computer.

(BEGIN VIDEOTAPE)

TODD (voice-over): Take a look at Ari Schwartz surfing on the NSA's Web site.

ARI SCHWARTZ, CENTER FOR DEMOCRACY & TECHNOLOGY: So here's the privacy and security link.

TODD: Until, this week, this activity would have made Schwartz vulnerable to online monitoring. Schwartz and other privacy activists say the NSA placed files, called cookies, on the computer's of people of visited the agency's Web site to track their Internet surfing activity.

STEVEN AFTERGOOD, FED. OF AMERICAN SCIENTIST: A cookie is a piece of software that is used an many Web sites to track individual users and their preferences.

TODD: Companies or agencies can only track that activity on their Web sites, not outside, unless they partner with a third party.

Contacted by CNN, an NSA spokesman said the agency never uses third parties. But it's against government regulations for federal agencies to have cookies on their Web sites that don't shut down when someone exits the site. An NSA spokesman acknowledges the violation, but says it was inadvertent, telling CNN, quote, "after being tipped to the issue, we immediately disabled the cookies. The software program used cookies for session management, and not to collect personal user data."

Experts like Ari Schwartz believe the NSA did not seriously or purposely jeopardize anyone's privacy. But he has a larger concern.

SCHWARTZ: They don't seem to have a privacy team in place that can deal with even the most basic privacy issues, let alone the more difficult issues that they're facing every day now with the president giving them so much authority.

TODD: An NSA official tells CNN they do have teams in place to deal with those issues, and that's how they were able to shut down the cookies in the first place. We spoke to Daniel Brandt, the privacy activist who discovered the problem, and he said the agency did not shut them down until he contacted them this week -- Ali. VELSHI: Hey, Brian, Jacki was showing us some stuff about cookies earlier. Is it legal for any Web site to have cookies on their Web site that can track you?

TODD: In fact, it is. Private companies can do it. Stores, online shopping sites, they're allowed to have these cookies on the Web site to track visitors' shopping habits and other preferences when they come back. It is against the law for the feds to have them on their Web site, unless the cookie shuts down as soon as you exit and doesn't pop up again.

VELSHI: And Jacki was showing us one earlier that she had that lasts until 2010 if you don't get it off your computer.

Brian, thanks very much. Brian Todd.

Let's find out what's coming up at the top of the hour on "PAULA ZAHN NOW." Heidi Collins is filling in for Paula. Hello, Heidi.

HEIDI COLLINS, GUEST HOST, "PAULA ZAHN NOW": Hello, Ali. Nice to see you. And that is right, coming up at the top of the hour, what has gone wrong in Milwaukee? Why was a driver pulled out of his car and beaten by a mob? And how are they going to stop it?

Also tonight, you've probably heard about Web sites where you can find a date, but who would come up with a site that's especially designed for cheaters? We will meet that man.

And if your life was in danger, what would your dog do to help? Stay tuned for a dog that is certainly a life saver -- Ali.

VELSHI: All right, Heidi, thanks very much. Heidi Collins in New York.

Still ahead, are you looking for a bargain home to buy? In most parts of the country, you can forget about it. But in some markets, homes are going for almost twice what they should cost. If you are willing to try any place, we'll tell you where you can still get a good deal. Stay with us in THE SITUATION ROOM.

(COMMERCIAL BREAK)

VELSHI: Here's a look at some of the hot shots coming in from the Associated Press. These are pictures that are likely to be in your newspaper tomorrow.

In Cross Plains, Texas, Wilburn Herring (ph), after searching all day through the remains of his house, takes a smoke break. His home burned in the grass fires at Cross Plains.

Edinburgh, Scotland, Viking enthusiasts set fire to a long boat. Part of celebrations leading up to New Year's Eve.

Near Davenport, Iowa, ice fisherman Pan Hagner (ph) is surrounded by holes drilled through four inches of ice. Hope he's catching something. And in Turkey, film director and clarinet player Woody Allen entertains an audience in Istanbul.

That's today's hot shots. Pictures, they say, are worth a thousand words.

Well, sales of existing homes dropped for the second month in a row in November, and the National Association of Realtors says inventories hit their highest level in 19 years. That's another sign that the air might be going out of the housing balloon. And a new study shows that many of the nation's real estate markets are severely overvalued. This analysis by National City Corporation and Global Insight looks at the country's 299 largest markets.

(BEGIN VIDEOTAPE)

VELSHI (voice-over): Of the 10 most overvalued markets, eight are in California and two are in Florida. But get this, of the 30 most overvalued markets, 28 are in California and Florida.

Topping the list, Naples, Florida, where you'll be hard-pressed to find any bargains. The report shows that a single family median- priced home there sells for $329,970. That's 84 percent more than the analysis says it should cost: $180,956.

By these calculations, Merced, California is the second most overvalued housing market in the country. Homes there cost 77 percent more than they should.

In 10th place, Riverside, California, overvalued by 65 percent.

Finding its way into that top 30, Atlantic City, New Jersey, 59 percent overvalued.

If you live in Miami, your home might be 55 percent overvalued. Los Angeles, 54 percent.

Let's go way down the list. The 100th most overvalued city is Chicago at 21 percent.

Two hundredth place? That's Atlanta. There, you might get a relative bargain. The median home there is only 2 percent overvalued.

If it's bargains you want, look for a home in the Lone Star State. Nine of the 10 most undervalued housing markets are in Texas.

The other is Montgomery, Alabama, eighth from the bottom. The median home there is 12 percent undervalued.

Next to last is El Paso, Texas, where homes are 18 percent undervalued.

And finally, there's College Station, Texas, last on the list -- or maybe first if you're looking for a deal. The median home there is undervalued by 23 percent.

(END VIDEOTAPE)

VELSHI: Estimates of fair value are compiled by looking at each town's population density, their income levels and interest rates. They also take into account historical price premiums and discounts for each area. Now, one of those places that has always had a premium is New York City, and as the housing market softens, you may have questions about the value of homes in your neighborhood. Jacki Schechner's been looking at homes in my neighborhood, online -- Jacki.

SCHECHNER: We're going to start out West, in California, because it's warmer there, and that's where my head is right now. But there's -- the sites online are using Google maps, and doing what they call Google mashes, taking information and putting them together with the maps. You can find out information like what are the homes in the area you're looking at selling for? HomePriceRecords.com, just one of those.

Take a look at this. For example, tells you the square footage, the address, maps it out for you, when was it sold and how much it was sold for. This is all public record, that's put together with a Google map.

Another one is Trulia.com. This is if you're in the market for a new home. You can find out exactly what the property entails. Some of them even have pretty pictures. I went out to San Diego, because, again, nice and sunny and warm there.

And another one, a private company, ForSaleByOwner. They take their listings, put them online, and give you all that information on a map -- Ali.

VELSHI: We'll talk about my neighborhood another time. Jacki Schechner.

Thank you for joining us. Tomorrow at 4:00 p.m. Eastern, Robert Novak's final interview on CNN. Let's take it over to Heidi Collins now, sitting in for Paula Zahn.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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