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THE SITUATION ROOM

Pedestrian and Vehicle Curfew Imposed in Baghdad; Bob Woodward's Bombshell Book Describes Dysfunctional White House; Henry Waxman Interview; John Murtha Interview

Aired September 29, 2006 - 17:00   ET

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


WOLF BLITZER, CNN ANCHOR: Happening now, some of the most stunning claims ever made about the Iraq War. Bob Woodward's bombshell book describes a White House so dysfunctional there were allegedly secret attempts to fire Donald Rumsfeld and staff clashes that the president himself had to referee. The White House says much of the book is ridiculous.
Also, hate speech. Osama bin Laden's deputy calls President Bush a liar. In a brand new videotape just out, Ayman al-Zawahiri blasts the president as having a personal agenda in the war on terror.

And a window into what's being described as a corrupt state of affairs. A congressional report details what it calls "sordid subculture" of one lobbyist's attempt to influence politicians and their staff, even inside the White House. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

We begin this hour with breaking news in Iraq. We've just learned some very disturbing information, a very strict curfew has been imposed in Baghdad, effective immediately through Sunday. Let's go straight to the Iraqi capital.

CNN's Arwa Damon is standing by with details. What do we know, Arwa?

ARWA DAMON, CNN CORRESPONDENT: Well, Wolf, actually, what we know right now is not much more than what the average Iraqi would know if they were watching state television, al Iraqiya. That is where the announcement first came, that a pedestrian and vehicle curfew is being imposed in Baghdad, a city of seven million people, effective at 11:00 p.m. local on Friday, to carry through until 6:00 a.m. on Sunday. That is well over a 24-hour, in fact, a 36-hour period in which this entire city is not allowed to move outside of its home.

Why? We're not entirely sure yet. What we do know is that clashes have erupted since sunset in some Baghdad neighborhoods, one being Dora (ph) which is in southern Baghdad, it's a mixed neighborhood, clashes there are quite regular. They happen all the time.

Whether or not tonight's clashes that erupted -- again, it could be between armed gunmen fighting armed gunmen, militia on militia. It could be militia on Iraqi army. We're not entirely sure. The details are coming in. But what we do know is this strict curfew has been imposed on Baghdad, a city of 7 million people, for a time period of at least 36 hours, Wolf.

BLITZER: So Arwa, in practical terms, as far as you and our other CNN colleagues are concerned, in Baghdad right now, this means, what? You have to stay put? You can't go anywhere?

DAMON: Pretty much. And I would go so far as to say that it affects us less than it affects the average Iraqi. Remember they're the ones that are not going to be able to go out. We live in a relatively secure environment, but the average Iraqi -- again, this announcement came very late at night.

A lot of Iraqis are going to be waking up tomorrow morning, perhaps not even knowing that this ban has been put into place. If they don't check the local TV stations, if they're not checking in on the news, they may not know what's happening. This really caught everybody in the capital by surprise, Wolf.

BLITZER: And Saturday is a Muslim -- it's a regular day. It is the holy month of Ramadan. Friday is the holy day. So business as usual supposedly on Saturday, but not this Saturday or Sunday, either. Arwa, we're going to stay on top of this story together with you, Arwa Damon reporting from Baghdad.

The White House is on the defensive this afternoon. Besieged by questions about a new book that paints a very unflattering picture of the president's handling of the war in Iraq. Bob Woodward's "State of Denial," as the book is called doesn't even go on sale until next week, but it's already stirring up controversy with the potential for serious political fall-out.

We'll take you live to the White House in a moment. First, though, to CNN's Mary Snow where -- Mary Snow is joining us from New York. CNN has obtained now a copy of the book, Mary, entitled "State of Denial."

MARY SNOW, CNN CORRESPONDENT: And Wolf, it's 526 pages long. It details divisions and tensions within the Bush administration on how to handle the Iraq War. And Bob Woodward said the facts presented to the public and those inside the White House were often not the same.

(BEGIN VIDEOTAPE)

M. SNOW (voice-over): "State of Denial: Bush at War Part III" claims tensions were so high between defense secretary Donald Rumsfeld and secretary of state Condoleezza Rice at one point the president told Rumsfeld that he had to return phone calls from Rice, a claim the secretary of state is quoted as saying is "ridiculous."

Woodward also writes that former White House chief of state Andrew Card tried to persuade the president twice to fire Donald Rumsfeld, but the president refuse, a claim a senior White House official confirms to CNN.

But perhaps the most damaging claims that the administration is withholding information on the amount of violence in Iraq. In an interview airing Sunday, Bob Woodward tells CBS' "60 Minutes" there is intelligence that the violence is expected to get worse in 2007.

BOB WOODWARD, AUTHOR, "STATE OF DENIAL": In public, you have the president and the Pentagon are saying, oh, no, things are going to get better. No. There's public and then there's private. But what did they do with the private? They stamp it secret.

M. SNOW: The book says there are attacks on coalition forces every 15 minutes. White House spokesman Tony Snow said he was not authorized to talk about classified information but replied ...

TONY SNOW, WHITE HOUSE PRESS SECRETARY: The president, contrary to the assertion, was not in fact painting a rose-colored picture. He has been saying that it's a tough war, it's a long war, it's a war that's going to outlive this presidency.

M. SNOW: And on the hunt for weapons of mass destruction, Woodward said that Vice President Dick Cheney was so involved with the search for WMD in Iraq that he called chief weapons inspector David Kay with specific satellite coordinates.

Woodward writes, "Cheney was asking as kind of a super- investigator, trying to ferret out the elusive WMD, Kay concluded. But there was always loose ends in intelligence, disparate bits of information that could lead to all kinds of wild conclusions. It continued to remind Kay of the blockbuster novel "The Da Vinci Code."

(END VIDEOTAPE)

M. SNOW (on camera): This is the third book Woodward has written about the Bush White House. Critics had accused him of being to soft on the administration in his previous books -- Wolf.

BLITZER: Not in this one. Mary, thank you very much. Mary Snow reporting. No surprise that the book was a major topic of discussion at the daily White House briefing just a couple of hours or so ago. And it comes as the president is trying to shore up support for the war on terror.

Let's bring in CNN's Kathleen Koch. She is joining us from the north lawn of the White House with details -- Kathleen.

KATHLEEN KOCH, CNN CORRESPONDENT: Wolf, press secretary Tony Snow today dismissed the book, saying that it's nothing new, that as the president delivered yet another speech on the war on terror designed to bolster both his poll numbers and his party.

(BEGIN VIDEOTAPE)

KOCH (voice-over): Support moderates, fight extremists, the rallying cry in President Bush's latest speech on the war on terror. The president used Afghanistan as an example of how building new democracies takes time and commitment.

There was a clear reference to the difficulties the U.S. is facing in Iraq. But the president only directly mentioned Iraq when taking issue with the assessment of the recently released national intelligence assessment, that the war there is fueling terrorism worldwide.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Iraq is not the reason terrorists are at war against us. They're at war against us because they hate everything America stands for.

KOCH: The president did not respond to the criticisms on the Iraq War in a new book by Bob Woodward. "State of Denial" portrays an administration plagued with infighting and a president unwilling to heed early calls for more troops.

T. SNOW: In a lot of ways, the book sort of like is cotton candy. It kind of melts on contact.

KOCH: Democrats were quick to say the book, like the NIE, is more proof a failed policy in Iraq.

HOWARD DEAN, DNC CHAIR: You can't fight a war if you ignore the military. The president has never listened to the military.

REP. NANCY PELOSI, (D) MINORITY LEADER: He has a tin ear. He won't accept the facts and tell the truth to the American people.

KOCH: One political analyst warns the piling on effect of bad news on Iraq could chip away at the poll gains the president has made since beginning his series of speeches on his strong suit, national security and the war on terror.

STU ROTHENBERG, ROTHENBERG POLITICAL REPORT: Even if the president would like to have the discussion be generally about terrorists and the bad guys and what we're doing, there seems to always be another bit of breaking news that contradicts him and makes his policy look in an unfavorable light.

(END VIDEOTAPE)

KOCH: So while the White House downplays the Woodward book, it certainly does raise doubts about the administration's conduct of the war in Iraq. Certainly not the kind of thing that the White House wants to see, Wolf, just roughly five weeks before the midterm elections.

BLITZER: Kathleen Koch at the White House, thanks very much.

Let's get some more now on this new book. We're joined by CNN national security advisor John McLaughlin. Served as the deputy director of the CIA during the course of what of much this book has written -- we have a copy of the book. We've been going through it very carefully.

There's a lot of references, as you know, John McLaughlin, to you in this book. And I want to give you a chance to respond to some of Bob Woodward's assertions and some of his reporting in this.

Page 282, "But the real villain at CIA," David Kay, the chief U.S. weapons inspector, "thought was John McLaughlin. Tenet had made his way on the political side of the intelligence world but McLaughlin had been with the agency for more than 30 years. He was the professional and Kay felt he had also been the one who clung most stubbornly to the belief that Iraq had mobile biological weapons labs.

Kay also recalled that McLaughlin at one point had told him it didn't matter what Kay said or found, he would always believe the aluminum tubes had been part of a nuclear program. McLaughlin had taken the aluminum tubes account and made it his own, a big mistake for someone as high as the deputy." I want you to respond.

JOHN MCLAUGHLIN, FORMER CIA DEPUTY DIRECTOR: Well, first, Wolf, of course, I haven't read this book yet. I'm hearing all of this for the first time today.

I'm not going to join in the name calling here. But on the specific allegations, that I clung to the idea that biological weapons labs and aluminum tubes were somehow involved in weapons programs, that's just nonsense.

If you were to talk to the analysts there who worked on these programs, they will tell you that I was among the most vigorous questioners when evidence came forward. I would always probe, I would always try and get to the bottom of it. And the bottom line here is that I supervised both David Kay and his successor, Charlie Dulfer. Told them to get the truth, report it as they saw it and that's exactly what they did.

BLITZER: Well, in the book, that's not what David Kay seems to recall. There's another section here ...

MCLAUGHLIN: By the way, that's the first time I've ever been called a villain in all of my government career. I'm just not going to join in the name calling on it.

BLITZER: We're going to get a little bit more on this. In this book, "State of Denial," there's a reference to the chemical and biological weapons that Saddam supposedly had, which we obviously now know he did not have. And the effort to produce and stockpile these weapons.

Supposedly, according to this book, David Kay came to you and said they don't have them, but they could produce them relatively quickly. It meant that they would maintain some ability to make chemical and biological weapons but they wouldn't actually produce and stockpile the weapons until they needed them.

And then the book goes on to say, quote you, "'Don't tell anyone this,' McLaughlin wrote back, as Kay recalled, 'This could be upsetting. Be very careful. We can't let this out until we're sure.'"

The suggestion being, what, if in fact this is true?

MCLAUGHLIN: Well, I didn't say that. I don't talk that way. Anyone who knows me knows I don't caulk that way. The only thing we told David Kay was go out and find the truth and we will publish it. And I think that's what he would say. For example, just let me read you what David said in his congressional testimony to the Senate Armed Services Committee January 28, 2004. He said he was hired to quote, "speak the truth as we found it. I have had absolutely no pressure, prior, during the course of my work with the Iraq Survey Group or after I left to do anything otherwise."

BLITZER: So when he suggested you were admonishing him and warning him, be careful, don't say that because that could cause an uproar ...

MCLAUGHLIN: I myself in the confines of the administration that summer when WMD hadn't appeared was saying, it's quite possible that he didn't have these weapons. He may have had a capability to do what we call mobilize and surge. But we need to get to the bottom of it, we need to find out what's going on. And that's exactly what we did.

BLITZER: Here's another quote from the book, this on page 311. "John McLaughlin, the CIA deputy director insisted that the failure of the intelligence community on WMD," weapons of mass destruction, "was the result of a perfect storm, that everything went wrong at once but it couldn't have been anticipated. 'We thought that was garbage,' Silberman said," that's Judge Laurence Silberman who was in charge of the post mortem. "'There were some fundamental flaws. The very worst thing was the chemical stuff.'"

MCLAUGHLIN: Well, I know Judge Silberman well, have a lot of respect for him and he and I had discussed that particular phrase that I use, "perfect storm." I think frankly the commission didn't understand what I was saying.

I wouldn't deny that there were mistakes made. And Lord knows the CIA examined this thoroughly starting in the summer of 2003. We covered walls with charts examining everything ...

BLITZER: After the downfall of Saddam Hussein?

MCLAUGHLIN: After the downfall of Saddam Hussein, covering everything we had ever said, every source we had ever encountered and so forth.

What I had in mind when I told the commission this was a perfect storm was not that there hadn't been mistakes, to be sure there had, and we documented them ourselves. There were strategic factors here though at play, which I thought came together with the mistakes that were made, strategic factors like the fact that we lost our U2 coverage over central Iraq, the fact that we had agent networks rolled up in the mid '90s, fact that most of the outside experts who looked at Iraq were even more convinced than we were that he had weapons of mass destruction.

My point to the commission was all of these things created an environment in which the potential for mistakes was magnified.

BLITZER: Here is another quote not directly related to you but to your boss, who is George Tenet, the director of the CIA and Cofer Black, one of your colleagues at the CIA, had been a spy for many years, worked his way up, now involved in counterterrorism.

MCLAUGHLIN: Great officer.

BLITZER: In this scene that Bob Woodward reports on, they came and met with then-national security advisor Condoleezza Rice at the White House, in the summer of 2001 before 9/11. I'll read this to you.

"They both felt they were not getting through to Rice. She was polite, but they felt the brush-off." This when they were warning of al Qaeda operations, threats against the United States.

Is that your recollection? Because you were a player inside the CIA in that crucial summer of 2001, just weeks before 9/11.

MCLAUGHLIN: Well, I don't think I was in that actual meeting. I certainly heard about it, but unless I check my calendar, I can't tell you I was physically there. What I understand it to have been was a very serious briefing about the growing threat. It wasn't the first one we had done that spring and summer.

I think it was very starkly stated -- and this was very consistent with what we were doing and hearing all summer long. Director Tenet told the 9/11 commission and I told the 9/11 commission that our red lights were going off that summer. We didn't know time, place, didn't know target, but we were getting ...

BLITZER: But did you get the impression the White House was lackadaisical? That they were sort of uninterested?

MCLAUGHLIN: Let me say this. Let me give you what I think is a balanced statement on that because I think people are wrong at this point to want to say Bush was right, Clinton was wrong, Clinton was right, Bush was wrong. What was going on that summer were a series of meetings that I was in, deputies level meetings where we were looking at the policy toward the Taliban and toward al Qaeda and bin Laden.

Those of us in the intelligence community who were deeply involved in fighting al Qaeda for years and receiving all these reports did chafe during that summer at what we felt was a kind of lack of urgency about the problem.

On the other side of the coin, I have to say the Bush administration was trying during that summer to put together a comprehensive approach to al Qaeda. They wanted to get al Qaeda attacked fundamentally, if you will. They just ran out of time. Principal's meeting that took place following up on all of these deputies' meeting was on September 4th, of course which was to approve all of the programs. Of course, September 11th happened seven days later.

So yes, this was an urgent briefing, a sharp briefing, but I'll just leave it at that. Director Tenet, by the way, I think will have the final word on this. He's writing a book, and I'm sure he'll characterize this. I'll let him speak for himself. BLITZER: We'll be anxious to hear from him. We'll invite him on the program, will read his book when that book comes out. John McLaughlin, thanks very much for coming up.

MCLAUGHLIN: You bet.

BLITZER: Our national security advisor, the former deputy director of the CIA.

And we have a couple of important programming notes on this story. Saturday and Sunday night at 8:00 p.m. Eastern, you're going to want to see CNN PRESENTS special, "Donald Rumsfeld, Man of War."

That airs Saturday and Sunday night. Monday night, Bob Woodward will join our Larry King to talk about the book "State of Denial," his new book stirring up so much of a debate here in Washington and across the country. LARRY KING LIVE airs 9:00 Eastern Monday night only here on CNN.

Let's go to Jack Cafferty in New York. He's got the "Cafferty File." Jack?

JACK CAFFERTY, CNN ANCHOR: A little different subject matter, Wolf.

The middle class in this country is worse off financially than ever before. A new study warns that few Americans have saved enough in case of a financial setback like losing a job or a medical emergency.

The study also says Americans have taken on a record amount of debt while paying more for lots of things from health care to energy, transportation, food, and education.

Meanwhile, what is our leadership doing about all of this? Well, not very much. I was watching "Imus in the Morning" this morning on the network with all the call letters and no viewers and he had Senator Joe Biden of Delaware on as a guest.

And Biden said this, "We're going to hell in a hand basket." He talked about how everything seems to be stuck for the middle class. He said "We're not debating the war in Iraq or what to do about Iran. We're not debating about what to do about health care costs, we're debating whether we can use water boarding to torture prisoners." Words to that effect.

Here's the question. The American middle class is in the worst shape it's ever been. Why? E-mail us. CaffertyFile@CNN.com. Or go to CNN.com/CaffertyFile -- Wolf.

BLITZER: Jack, thanks very much. You're going to want to read this book, "State of Denial." Five hundred sixty pages. And there's stuff that will pop up almost on every page.

CAFFERTY: You ought to mention this later in the show. We've got Howard Kurtz on IN THE MONEY this weekend. Howard works for "The Washington Post", which is where Bob Woodward works. He's talking about this book on "IN THE MONEY" this weekend. Saturday at 1:00, Sunday at 3:00. So if you want a jump on the Mike Wallace interview, you can check out Howie's reaction to some of this stuff.

BLITZER: That's Jack weekend show, "IN THE MONEY," Saturday 1:00 p.m. Eastern, replayed Sunday 3:00 p.m. Eastern. If you like Jack Cafferty here in THE SITUATION, Jack, they're going to love you on the weekends "IN THE MONEY" -- Jack.

CAFFERTY: I'll send you a check. Thanks, Wolf.

BLITZER: Thank you very much.

Up ahead, terror on tape. There's a new message from the number two leader of al Qaeda, this time directly addressing President Bush. We'll have details of what he says.

Also, he's a leading Democratic critic of the war in Iraq. Congressman John Murtha, he is standing by to join us right here in THE SITUATION ROOM.

Plus, Congressman Henry Waxman, he's the ranking Democrat on the House Government Reform Committee. He'll join us to talk about the congressional report detailing hundreds of contacts between disgraced lobbyist Jack Abramoff and the Bush administration. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Unfolding right now here in Washington, a story that even the White House says involves a fair amount of sleaze. A new congressional report reads like a dirty laundry list of alleged secret deals to influence politicians and their staffs. At the center, the corrupt former Republican lobbyist Jack Abramoff. The report says he literally had hundreds of contacts with White House officials.

And joining us now is Congressman Henry Waxman of California. He's a ranking Democrat on the Committee on Government Reform. Congressman, thanks very much for coming in.

REP. HENRY WAXMAN (D), CALIFORNIA: Thank you. I'm pleased to be with you.

BLITZER: This report -- and I read it in detail -- shows the real underbelly, the seedy side of Washington politics, of lobbying, what really goes on. But did you come up with any criminal activity? We know that Abramoff is a criminal. He's pleaded guilty. But criminal activity on the part of members of Congress or members of the executive branch of the U.S. government?

WAXMAN: This report was done on a bipartisan basis with Chairman Tom Davis, Republican, Virginia, and myself. And what we did is examine the documents from Abramoff and all the people he lobbied with, and we wanted to look at his attempt to influence the White House. What we have is what his side of the story is, at least what he was telling his employees. But it raises enough questions that I think we need to have answered from the White House, from Karl Rove, and especially from Ken Mehlman because it suggests that the lobbyist was paying for tickets to concerts and sporting events and meals in fancy restaurants, where they were asking for things from the White House, and contributions they claim were given at the White House in exchange for other policy decisions that were made by the White House at Abramoff's request.

BLITZER: The White House issued a statement reacting to the report saying this, among other things -- it says, "The report is based on billing records that are widely regarded as fraudulent and how they misrepresent Abramoff's activities and level of access. So there is no reason why they should suddenly be viewed as credible."

He was well known as someone who was trying to boast his power in Washington to inflate his influence in order to get more money out of his clients, especially those Indian tribes.

WAXMAN: Well, the White House is obviously spinning it because they claimed when Abramoff pleaded guilty that they barely knew him. Our records that we have show that there were around 400, 500 contacts that Abramoff and his associates had with people in the White House, their exchanges of e-mails into the White House and out of the White House, and visits that they made, and contacts they had at dinners and sporting events. But it wasn't just the contacts. It's what Abramoff got from those contacts.

BLITZER: What did he get from Karl Rove, for example? Because I didn't see anything specific. In fact, the report, your summary concluded that as far as his efforts to get presidential appointments, people into high positions in government, he failed almost across the board with only one success.

WAXMAN: Well, that's not quite accurate because he was able to get -- and I'm not saying it was from Karl Rove himself. There were other people who worked with him like Ken Mehlman who seemed to be much more involved.

BLITZER: Ken Mehlman was then the political director in the White House.

WAXMAN: That's right.

BLITZER: He's now the chairman of the Republican National Committee.

WAXMAN: But Abramoff didn't want a particular person to stay in at the State Department who was against Abramoff's interest in the Mariana Islands. Abramoff wanted $15 million for the Choctaw Indians even though the Bush Justice Department said it wasn't merited. And Abramoff eventually got that. And his e-mails indicated his efforts to try to convince ...

BLITZER: But as far as Karl Rove is concerned, is there any evidence in this report that you came up with that suggests he did anything wrong?

WAXMAN: No. And there's nothing that I've concluded that anybody's done anything wrong, but there's a lot of suspicion and a lot of questions that have to be answered because if the evidence we have turns out to be accurate, then I think that there may well have been criminal activities by some people at the White House. And I'm not saying Karl Rove, but some others.

BLITZER: And do you want to mention any names? Or do you want to go that far?

WAXMAN: Well, I don't want to go that far. I don't think it would be fair. But if people were contacted at the White House, simply if they took advantage of the tickets and the meals, well, there's a law that says they're not allowed to take more than $20 without paying for it. Now, maybe they paid for it. That's an answer we need to that question.

But there are other issues where policy matters seem to have been made under the influence of this lobbyist context, and there's a law that says decisions should be made on the merits, not with regard to lobbying or gifts or political favors.

And so we need to find out further from the White House whether there is an influence that was inappropriate in getting decisions to give $16 million to these Indians or replacing people in different jobs in the administration.

So there's a lot here to look at and explore more fully. And what we want now is to work together on a bipartisan basis to get further answers.

BLITZER: I think that's fair enough. And we'll look forward to your work. Unfortunately -- or at least I guess most people would agree the Congress failed to deal with lobbying reform in this session, but we know we'll be back after the elections. You'll have another opportunity, Democrats and Republicans working together. Henry Waxman, thanks very much for coming in.

WAXMAN: Bye-bye.

BLITZER: And the current chairman of the Republican Party is mentioned in the report as we just heard. Ken Mehlman is to have said to have been lobbied by Jack Abramoff when Mehlman was the White House political director. In response to the Congressman Waxman's allegations about Mehlman, Mehlman's office released this statement to us.

"In his capacity as political director of the White House, it was not unusual for Ken Mehlman to receive requests from supporters, which he would in turn forward to the appropriate contact. Throughout his career and during his time at the White House, he was always worked within the bounds of what was both legal and appropriate.

To our viewers, you're in THE SITUATION ROOM, where new pictures and information is arriving all the time. Happening now, new, more stunning claims about the war in Iraq. In his new book, Bob Woodward alleging that the White House is hiding the wars true realities, describing a dysfunctional White House deeply divided over the war and alleging feuds so bitter that key players to this day do not get along.

Also, a U.S. congressman who has recently attacked the war in Iraq, now himself under attack. That would be Democrat John Murtha. He confronts a scandal from 25 years ago that's now being dragged back up with his name being dragged back in. Congressman Murtha standing by here to respond.

And terrorist tirade. In a just-released videotape, Osama bin Laden's right-hand man calls President Bush a failure and a liar and Ayman al-Zawahiri says the president is fighting the war on terror with a personal agenda. I'm Wolf Blitzer, you're in THE SITUATION ROOM.

More now on the breaking news story we're following out of Baghdad, a strict curfew has now been imposed throughout the weekend. CNN's Arwa Damon is joining us once again from the Iraqi capital with more -- Arwa.

DAMON: That's right Wolf, the curfew is set to begin at 11:00 p.m. today, Friday, that is a couple hours ago, to last until 6:00 a.m. on Sunday. That is what we know. What we don't know is why. The U.S. military, who we've been in touch with, said that they too are in the dark.

A Sunni politician who we spoke with also says that his sources within the Iraqi security forces don't know why this is happening. But what else we do know is that there have been clashes that have erupted since sunset in three Baghdad neighborhoods. These are major neighborhoods where clashes do erupt -- Wolf.

BLITZER: Arwa Damon we'll stay in touch with you. Thank you very much. As soon as we know why this curfew was imposed, we'll tell you, our viewers.

And there are new developments in a story that made headlines during the fighting between Israel and Hezbollah back in July. Four United Nations observers were killed when their post in southern Lebanon came under Israeli attack despite repeated calls to hold fire. Now there's an official United Nations report that is out on the incident. Let's bring in our senior U.N. correspondent Richard Roth. Richard?

RICHARD ROTH, CNN SR. UNITED NATIONS CORRESPONDENT: Wolf, it was one of the most controversial episodes of the summer Israeli Hezbollah war. Four U.N. observers killed because of Israeli fire.

(BEGIN VIDEOTAPE)

ROTH (voice-over): Two months after Israel bombed a U.N. bunker in southern Lebanon an internal U.N. board of inquiry says it cannot explain why Israel attacked the facility. A 500 pound laser guided bomb killed four U.N. observers. U.N. investigators say they have been denied access to commanders who might have been involved.

STEPHANE DUJARRIC, U.N. SPOKESMAN: The U.N. inquiry is unable to determine the why of the attacks and especially why they were not halted despite the fact that we had made numerous calls, both from the field and from headquarters, to our counterparts in the Israeli government and the military.

ROTH: Israel has already apologized for the strike. Its own internal review concluded it was an error due to inaccurate maps. But the U.N. says the Khiyam outpost was there for 30 years, was well known to Israeli military commanders and Israel had been given detailed maps.

The U.N. found no evidence of Hezbollah activity in the area the day of the attack. There are two well-known Hezbollah bases not far from the U.N. location, but the U.N. says the bomb hit its intended target. Precision guided munitions are precision guided, they are meant to hit the target they hit, which was the United Nations.

(END VIDEOTAPE)

ROTH: Right after the incident, Kofi Annan said the attack was apparently deliberate. Today a senior U.N. official saying and his comments apparently borne out by the facts. Back to you Wolf.

BLITZER: Thanks very much. Richard Roth at the U.N.

And coming up, details of the new terror tape from al Qaeda's second in command. What does he have to say directly to President Bush? Stay with us, you're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Our CNN security watch and a new terror tape al Qaeda's number two leader Ayman al-Zawahiri posted on an Islamist Web site only a couple of hours or so ago. Our justice correspondent Kelli Arena is joining us. She has some details -- Kelli.

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Wolf, on the first part of this tape, Ayman al-Zawahiri attacks President Bush, calling him a lying failure. He talks specifically about captured al Qaeda leader Khalid Shaikh Mohammed, disputing claims from the Bush administration that interrogations of KSM and other detainees have helped in the war on terror.

(BEGIN VIDEO CLIP)

AYMAN AL-ZAWAHIRI, AL QAEDA LEADER: And I tell him, you fool hearty charlatan. If the arrest of Khalid Shaikh Mohammed, may God free him, has helped you in this so-called war on terror, why then are your forces retreating in secret from the south and east of Afghanistan and being replaced by the forces of NATO? Which are screaming for help due to the horribleness of what is happening to them at the hands of the Taliban and al Qaeda?

(END VIDEO CLIP) ARENA: This tape is nearly 18 minutes long. It's actually two tapes with two entirely different backgrounds, different clothing. In the second part of the tape, Zawahiri moves on to the Pope, calling him a charlatan for his recent comments on Islam. Then he urges Muslims to fight holy war in Darfur against what he calls crusader U.N. troops.

Now interestingly Wolf, there is no mention of Osama bin Laden, despite rumors that he died of typhoid. And terrorism analysts who have seen this tape say that this is all part of a strategy for al- Zawahiri to stay relevant. Interestingly though they say he may be working against himself because this is the 14th tape that he's released so far this year Wolf. And with each tape, it becomes less and less important.

BLITZER: And the production value, the lighting and the captions is all getting pretty dramatic over there. Kelli thank you very much.

Coming up, Democrat John Murtha, he's fighting back. There are new developments involving a 25-year-old scandal. I'll explain. And Congressman Murtha will be here to respond. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back. More than 25 years ago a scandal on Capitol Hill ensnared several members of the United States Congress. One person implicated was Democratic Congressman John Murtha of Pennsylvania. Amid an investigation, Murtha was cleared. Right now, the conservative publication, "The American Spectator" says its obtained FBI surveillance video of Congressman Murtha during the sting operation. Why might some be revisiting this scandal right now?

And joining us now, Democratic Congressman John Murtha of Pennsylvania who has been an outspoken critic of the president's policies involving the war in Iraq for some time. Congressman, we'll get to Iraq in a moment. I want your reaction, though, to this new article that appears in this conservative publication "The American Spectator", going back a few decades to revive the old ABSCAM scandal, suggesting now in this transcript that they have, the video, the full video that they have, that you, in effect, were trying to make deals with Arab sheiks for investments in your district.

REP. JOHN MURTHA (D), PENNSYLVANIA: Well that's true. I was trying to make deals with Arab sheiks. I had no idea, they offered me money, and I didn't take it. And I've defeated 12 opponents since then. They bring it up every campaign. But in this case in particular, since I've opposed some of the policies of this administration, they service everything. This happened 25 years ago.

BLITZER: Here is one of the quotes from this article, from the transcript, January 7, 1980. This is quoting you. I'll read it, it says, "I haven't been here a long time but I know the right people and I know the system and I went to the ballgame with the president. In other words there were three of us -- me, Tip O'Neill who was then speaker of the House, and that's it. So I've got as much influence, and I know as much about the g**damn workings as any -- you're not going to have any trouble."

The suggestion being in this article that you are getting close to, in effect, selling your services for your influence.

MURTHA: They put the money out there, and I told them I didn't want it. I was only interested in investment of my districts, Wolf. That was all I'm interested in. We had 24 percent unemployment.

BLITZER: And so you were trying to get them to come into your district and make investments.

MURTHA: Exactly, that's what I told them.

BLITZER: In the course of this effort, did they actually offer you money?

MURTHA: They offered me $50,000.

BLITZER: And you said to them?

MURTHA: I said, I'm not interested. I'm only interested in investment of my district.

BLITZER: At what point did you realize that they weren't really Arab sheiks, that this was an FBI sting?

MURTHA: I don't know how much later it was. Maybe a few days or a few weeks later. I had no idea. But I talked to several people, I said, where can we put a big investment from some Arab sheiks in our district, so we get some jobs going? We were struggling. The steel industry was going down, so was the coal industry. Something I've been working with my whole political career.

BLITZER: So what the article is suggesting in "The American Spectator" is that the authorities should take another look at this case and see if they have any evidence of criminal wrongdoing on your part. I see you smiling over there. What's your reaction to that?

MURTHA: My reaction, this is a right-wing smear because I oppose the policy of this administration.

BLITZER: And so you think this is payback? They're trying to go after you because you've been so critical of the president's policies in Iraq?

MURTHA: Well, this is exactly what's happened. All over the country. They're asking questions of one candidate, if this happened, would you vote for the person? If they did this, would you vote for the person? I mean, this is a policy decision. I try not to be distracted from the real issue, what's going on in Iraq. I've been critical of the policy. This is not a personal thing.

This is purely a difference in the policy, which is not going well. And I say it over and over again. And it's frustrating to have this kind of a reaction from these guys when they can't discuss the policy without getting personal. BLITZER: Are they getting personal in any other ways in this campaign? You're up for reelection, obviously, November 7th.

MURTHA: We've got the swift voters are coming in on Sunday, and they're criticizing me for all kinds of things, cut and running and boot Murtha they're saying. But, you know, I have tried to stick to the facts. I've tried to stick to what's going on in Afghanistan and Iraq. Eight billion dollars. We will have spent, Wolf, $962 billion in the last nine months on our defense department.

These are three bills that we passed this year. Eight billion dollars a month, $11 million an hour and it's not getting better -- it's getting worse. And the president today is starting the same rhetoric that he had about Iraq. He's starting the same thing about Afghanistan. You've got to be realistic.

This has to be a practical solution. The solution is the Iraqis have to handle this themselves. Without 130,000 troops there for -- we're going into the fifth year, and it's gotten worse instead of better. Four hundred incidents a week last year and now it's 800.

BLITZER: I think there's about 145,000 troops there right now and according to General Abizaid it's going to stay at that level at least through the spring. One final question -- yesterday the president said the party of Harry Truman, referring to your party, the Democratic Party, is now the party of cut and run. What do you say to that?

MURTHA: Well that's the kind of rhetoric that doesn't play. The people looking way beyond this -- the only thing that's going to change this president's stature is when he starts telling the truth, when he starts saying what realistically is happening in Iraq. He can't continue to paint a rosy picture about something that's going wrong. This is a failed policy wrapped in illusion.

BLITZER: Bob Woodward has a book out called "The State of Denial", which suggests that there's a lot of denial going on in the Bush administration, in the White House. It sort of paints a picture of an administration, a dysfunctional administration, as far as the war in Iraq is concerned. I don't know if you've seen the book yet.

MURTHA: I haven't read the book but I read the excerpt from it. This has been going on for the last two or three years. And the public bought it for a while. But when they see the results rather than the rhetoric, they begin to realize that it's not working. You can't fool the public forever. And they talk about it hurts the troops when you say this kind of stuff. The troops know when they don't have body armor, the troops know when things aren't going well.

The troops know when they have to go out there every day in 120- degree heat and these guys sit on their fat backsides in the White House giving them orders to go out every day and face IEDs and be killed and slaughtered. And I see them in the hospitals. I see the results of this kind of stuff. This is outrageous to take personal attacks rather than talk about the policy. And look at it realistically and hold nobody accountable except the young enlisted people.

BLITZER: John Murtha is the Democratic congressman from Pennsylvania. Congressman thanks very much for coming in.

MURTHA: Nice talking to you, Wolf.

BLITZER: And still to come, very little savings, mired in debt. Why is the American middle class so bad off? Jack Cafferty is wondering. He has your e-mails. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Vietnam is bracing for the expected arrival this weekend of a powerful typhoon. The storm has killed at least 48 people in the Philippines, dozens more are missing. Forecasters say the storm has gained strength, with winds gusting up to 160 miles an hour. Vietnam is preparing to evacuate thousands of people from its central coast. Let's get some more on this deadly typhoon headed for Vietnam. Our internet reporter is here. She has the situation online.

JACKI SCHECHNER, CNN INTERNET REPORTER: Wolf, we got this video in from Toby Wahlenberg in Manila in the Philippines. And he sent this into our new iReport system. And you could see the storm progress. This is over the course of 90 minutes. It starts out clear and then you can see how it gets progressively worse.

He's edited the 90 minutes down to about 42 seconds so you can see the whole thing. He says he took this Wednesday morning from a third floor window, and there was plenty of debris to clean up afterwards. You can see just how bad that got. Now, where the storm is right now, it is currently in the Sea of Japan. The eye is likely to hit Danang. It's supposed to pass over early Sunday morning. Again, the winds at 132 miles per hour with gusts up to 160 -- Wolf.

BLITZER: All right Jacki. Thank you.

Coming up in our 7:00 p.m. Eastern hour, new details on the sudden surprise resignation of Florida Republican Congressman Mike Foley over some e-mail messages to a young male congressional page.

And straight ahead Jack Cafferty's question of the hour. The American middle class is in the worst shape ever. Why? Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's check in with Lou Dobbs, he's getting ready for his program that begins right at the top of the hour -- Lou.

LOU DOBBS, CNN ANCHOR: Wolf thank you. Coming up at 6:00 p.m. Eastern here, tonight the Senate expected to vote to build a 700-mile fence along our 2,000-mile long southern border. But is the Senate playing politics with national security? We'll have that special report. And the government of Mexico has spent nearly $2 million trying to stop this Congress from building that border fence. Another effort by the Mexican government to interfere in U.S. national affairs, we'll have a live report.

And as the Bush administration tries apparently to turn the United States, Mexico, and Canada, without anyone's approval, into what amounts to one giant country, we'll tell you who, if anyone, is standing up for U.S. national interests in the U.S. Congress. All of that and a great deal more ahead here tonight. We hope you'll be with us. Wolf, back to you.

BLITZER: All right Lou, thanks very much. Let's check in with Jack Cafferty in New York. Jack?

CAFFERTY: Maybe we should have invaded Mexico instead of Iraq. The question this hour, the American middle class in its worst shape ever. We want to know why you think that's the case.

Jerry writes, "Jack if you let millions of unskilled folks come across the border, live here free, have babies here free, use the ER/police/EMS/fire department, schools for free, it's going to greatly affect the middle class. Movie stars still get $20 million for a movie, football players $10 million for a season and Congress keeps voting themselves raises, it won't hurt them.

Jay in Atlanta writes, "We're in bad personal financial shape for the same reason we're in bad national financial shape. We have lost our self certitude. We're hooked on foreign oil, foreign drugs, foreign cars, and we borrow foreign money to spend in deficit. And we increasingly have less the world wants from us."

Ken writes, "The middle class is suffering because they allow their unions and politicians to exploit them by not securing the border and evicting illegal aliens that wreck pay and benefits."

Don in Florida, "Jack I believe the middle class was probably doing a little worse during the great depression and certainly was worse off when the great Jimmy Carter produced the first and only sustained stagflation in the history of our country."

Brian in Jersey City, "Here's your answer in two words, Jack, 'American Idol.' We have been distracted by bread and circuses while the government whittles away the middle class and takes away our freedoms one by one. In the meantime, we seem to care more about Britney Spears than we do about our lifestyle. I guess stupidity carries its own penalty."

If you didn't see your e-mail here you can go online to CNN.com/CaffertyFile and read some more of them there -- Wolf.

BLITZER: Jack, thanks very much. See you at 7:00 p.m. Eastern.

Up next, a letter left behind by the gunman responsible for that Colorado high school shooting. Stay with us. You're in THE SITUATION ROOM. (COMMERCIAL BREAK)

BLITZER: Let's check back with Zain, she has another quick look at some other important stories -- Zain.

ZAIN VERJEE, CNN ANCHOR: Wolf, Florida authorities are trying to pin down the identity of the gunman who allegedly killed a sheriff's deputy yesterday. They believe he's Angelo Freedman, a SWAT team shot the suspect dead today after an intense search. Police say he raised the slain deputy's gun in his right hand when they found him hiding under the thick brush. Another deputy was injured in yesterday's shooting and he's expected to recover.

The gunman who held six female high school students hostage and killed one of them mailed a chilling letter to his brother the same day as the attack. Police in Bailey, Colorado say Duane Morrison's letter mentioned Morrison's quote, "pending death" and apologized. That same day Morrison shot to death a 16-year-old girl and then turned the gun on himself -- Wolf.

BLITZER: Zain, thanks very much. See you back here at 7:00 p.m. Eastern. We're in THE SITUATION ROOM weekday afternoon's 4:00 to 6:00 p.m. Eastern, back at 7:00 p.m. Eastern for another hour. Until then, thanks very much for joining us. I'm Wolf Blitzer. Let's go to "LOU DOBBS TONIGHT", Lou is in New York -- Lou.

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