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THE SITUATION ROOM

New Sanctions on Iran; California Wildfires Blaze On; Valerie Plame Interview

Aired October 25, 2007 - 17:00   ET

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


BLITZER: The U.S. slaps sanctions on Iran's Revolutionary Guards, accused of backing terrorists and building a nuclear weapons program.
Will the Islamic Republic give in to the pressure?

And her identity was a secret until she was outed in a Bush administration leak. I'll speak this hour with former CIA operative Valerie Plame Wilson about her life as a spy and what she calls her betrayal by the White House.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

Better weather conditions are finally giving crews a break as they battle 14 major wildfires in Southern California. But those flames are still threatening 25,000 homes right now, as we get new word that one of the biggest fires is now confirmed to be the result of arson.

Here's how it looks from the air -- 723 square miles charred so far. That's about half the size of the entire State of Rhode Island.

Among the latest developments, President Bush on the ground in Southern California seeing the devastation for himself. All the residents of the City of San Diego who had to evacuate are now cleared to return home. And the death toll from the fires now stands at three, with the discovery of two bodies inside a burnt out home.

We have CNN correspondents at all the key locations in this disaster, covering every angle of the story.

One fire battalion chief calls it unconscionable and reprehensible. The giant Santiago Fire in Orange County now confirmed to be the work of an arsonist. And the reward in that case is now raised to $150,000.

CNN's John Zarrella is on the scene for us -- John, is that Santiago Fire, first of all, still threatening homes?

JOHN ZARRELLA, CNN CORRESPONDENT: No question about it, Wolf.

Last night, the fire had consumed more than 20,000 acres. They had reported then that it was about 50 percent contained. Today they backed down on that, at 30 percent contained. Thousands of people have been forced to evacuate. Hundreds of firefighters are still on the scene working it. Terribly smoky here all day.

And that reward you mentioned, the $150,000, expected, in fact, to go up even higher, probably before the end of the day here in Orange County.

Now, we spent the day -- this morning -- out at one of the three scenes, one of the three points of origin that has been determined to be where this fire started on Sunday afternoon, at about 5:50 in the afternoon. It is an incredible burned out -- it looks like a moonscape out there. Everything totally charred in all directions -- through the valleys, up the canyon -- off the mountainsides. A horrible, horrible scene out there.

While we were there, Alcohol, Tobacco and Firearms agents out there, as well, looking for different pieces of evidence that might be out there. But they all admit that it's going to be very, very difficult for them to find any evidence in that charred rubble.

At the same time, fire officials are saying that first ones who were on the scene saying that it only took minutes for that fire to spread miles.

(BEGIN VIDEO CLIP)

CHIEF CHIP PRATHER, ORANGE COUNTY, CALIFORNIA FIRE DEPARTMENT: The person or persons who did this either are exceptionally lucky or they have some knowledge about where you might want to do the most damage when you set a fire.

(END VIDEO CLIP)

ZARRELLA: Now, residents at the bottom of the hill are telling us that they want to go back home. And, at the same time, there's nothing more they want, Wolf, than to get their hands on whoever did this.

(BEGIN VIDEO CLIP)

MIKE THOMPSON, SANTIAGO CANYON RESIDENT: I can't believe that anybody would actually do something like that to -- to people they don't even know. If you want my true -- true feelings, I'd like to have 15 minutes with the guy alone.

(END VIDEO CLIP)

ZARRELLA: Now, again, a $150,000 reward. Investigators are telling us, quite candidly, this is going to be very, very difficult for them to find whoever did this -- Wolf.

BLITZER: John Zarrella on the scene for us.

Thank you, John, very much.

All the residents of the City of San Diego, as we reported, are now cleared to return home. But for some evacuees in the region, it's a wrenching ordeal -- returning to find little, if anything, left.

Let's go back to CNN's Brian Todd.

He's watching this part of the story -- you went out with one family, Brian.

What did you find?

BRIAN TODD, CNN CORRESPONDENT: Wolf, this is what we found -- a home completely destroyed that this family escaped just in the nick of time.

(BEGIN VIDEO TAPE)

TODD (voice-over): Eva Peters says flames from the Witch Fire were on her street getting closer when her family escaped. Within minutes, they were gone and so was their home of seven years on Aguamiel Road. Taking us through the rubble, along with her 16-year- old daughter Michaela (ph), she looks for anything to salvage -- maybe papers under melted glass. But even now, they pose a hazard.

EVA PETERS, LOST HOME IN WILDFIRE: You can feel the heat coming off of this. Yes, it's still warm in there.

TODD: She finds humor in some of this -- a ragged tree out back they had hoped would burn survived. Little else did. Before long, it all sinks in -- just what was lost.

PETERS: My husband and I collected so many things and special things that we'd made for each other -- anniversary gifts that were in there, wedding pictures. All of this was in there and we can't re- create any of that. We had -- we had fish. I mean it's not -- a fish tank something you can just pick up and walk out with. My daughter's life as a teenager has been here.

TODD: But some things did make it. When they returned, they found these family pictures wrapped in a blanket on the front yard. Eva is convince a firefighter risked death getting these out for them.

PETERS: Knowing that other people realized just what is important to the people in these houses -- that they would be brave enough and courageous enough to not only care about trying to save your house, but if they don't save it, that they will go in there and try and save some of those memories that you can't re-create. They did what they could and they're heroes. It's just amazing what they've done.

(END VIDEO TAPE)

TODD: Eva says she doesn't know who the firefighter was, but has three words for him or her -- God bless you. She says that despite all this devastation, they're not only going to move back into this area, Wolf, they're going to rebuild right on this spot.

BLITZER: Brian Todd on the scene for us.

Thank you, Brian.

And almost 200,000 acres, San Diego County's so-called Witch Fire is a monster. But its devastation falls short of the Cedar Fire which broke out in the same region exactly four years ago today. It exploded to 80,000 acres in only 10 hours and by the time it was put out weeks later, 280,000 acres were burned, more than 2,200 homes destroyed and 14 people killed. That was four years ago.

Let's go back to Jack in New York for The Cafferty File -- Jack.

CAFFERTY: What was Brian saying?

Those people said they're going to rebuild in the same place?

Why would you do that?

I mean what -- you know, you just said four years ago there was a fire that was even bigger, killed a bunch of people.

I mean why would you continue to build in place where every few years there are devastating fires?

I don't understand.

Anyway, ho, ho, ho -- Christmas season will soon be upon us. In fact, in some places, it's already begun.

And what do American kids get for Christmas?

Why, toys. Santa Claus brings lots and lots of toys. But here's the problem this year -- 80 of the stuff on his sleigh he has to pick up in Beijing. And that leaves Santa's helpers -- i.e. Mom and dad -- with not very many options.

The recalls of Chinese made toys are now numbing in the tens of millions because of issues like poisonous lead paint and little magnets on some of them that could be harmful if swallowed.

Just today, Mattel issued its fourth toy recall. Nevertheless, the American toy companies continue to make or buy their products in Chinese factories and the recent recalls have not slowed down China's exporting of toys to the United States at all.

So have yourself a merry little Christmas. Just make sure you have the local emergency room number close by when your kids start opening their gifts.

Here's the question -- how confident should American parents be in the safety of toys from China?

E-mail your thoughts to caffertyfile@CNN.com or go to CNN.com/caffertyfile -- Wolf.

BLITZER: Thanks, Jack.

Jack Cafferty will be back shortly. Up ahead, stunning before and after images of the secret Syrian site attacked by Israeli war planes.

Was it a nuclear reactor designed by North Korea? Iran's nuclear program and alleged sponsorship of terror bringing harsh punishment now from the United States Why the U.S. government is now targeting part of the Iranian military.

And why do Americans keep building areas -- in areas so vulnerable to the forces of nature?

From fires to floods, we're flirting with disaster.

Stick around.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The Bush administration slapping tough new sanctions on Iran -- barring major military and financial organizations from doing business with Americans. The main target -- Iran's Revolutionary Guard.

Let's go to our State Department correspondent, Zain Verjee.

She's watching this story for us.

What's behind these latest actions -- Zain.

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Well, Wolf, the U.S. really wants to turn up the heat on Iran. This is the first time the U.S. has targeted the military of another country with sanctions.

(BEGIN VIDEO TAPE)

VERJEE (voice-over): The U.S. is taking aim at this Iranian military wing. The Bush administration says it's so entrenched in Iran's economy, that it runs or is involved in front companies that are suspected of helping build Iran's nuclear program.

CONDOLEEZZA RICE, SECRETARY OF STATE: Many of the Iranian regime's most destabilizing policies are carried out by two of its agencies -- the Islamic Revolutionary Guard Corps, or the IRGC, and the Quds Force.

VERJEE: The U.S. blames the Quds Force for supporting terrorists in the Middle East and arming insurgents that kill U.S. troops in Iraq. The latest move freezes the U.S. assets of those military connected companies. It also freezes assets of three major Iranian banks and an office of the defense ministry.

RICE: No U.S. citizen or private organization will be allowed to engage in financial transactions with these persons and entities.

VERJEE: The State Department is hoping the move will create a ripple effect -- scare banks worldwide from doing business with Iran and hopefully drag Iran back to nuclear negotiations.

SEN. JOSEPH LIEBERMAN (I), CONNECTICUT: If you're going to act like an outlaw country, we're going to treat you as an outlaw country in the international economic system.

VERJEE: But already, Russian President Vladimir Putin, who has supported sanctions against Iran in the past, now says new international sanctions are a dead end. Last week, he warned against military action in Iran and threats like this.

GEORGE BUSH, PRESIDENT OF THE UNITED STATES: I told people if you're interested in avoiding World War III, it seems like you ought to be interested in preventing them from having the knowledge necessary to make a nuclear weapon.

(END VIDEO TAPE)

VERJEE: And it's worth noting, Wolf, that Mohamed ElBaradei, the director general of the world's nuclear watchdog, has criticized the U.S.'s rhetoric on Iran and he said, last month, actually, that Iran's declared nuclear material has not been diverted to making weapons -- Wolf.

BLITZER: All right, Zain.

Thanks very much.

Zain Verjee reporting for us.

The Revolutionary Guards are not Iran's regular, regular army. They're more important than that. Almost 30 years ago, when the Islamic revolutionaries took power in Iran, they didn't trust the existing army as a result, they created their own army -- the army of the so-called Guardians of the Islamic Revolution.

The Guards have their own intelligence wing, their own air, naval and ground forces. Take a look at these military exercises earlier this year. That's not the regular army. That's the Revolutionary Guard. The Quds Force is the covert wing that primarily operates outside of Iran.

Iran's president, Mahmoud Ahmadinejad, joined the Revolutionary Guard back in 1986.

More than a month after Israeli jets launched an air strike on a secret target deep inside Syria, both sides are still keeping quiet about it. It's alleged to have been a nuclear site. Now, we have some before and after images.

Let's go straight to our Pentagon correspondent, Barbara Starr -- Barbara, what are you learning?

BARBARA STARR, PENTAGON CORRESPONDENT: Well, Wolf, officially the administration is still not acknowledging anything about this incident. But the lid of secrecy may just have come off all of it today.

(BEGIN VIDEO TAPE)

STARR (voice-over): In early August, a commercial satellite snapped this picture in a remote area of Northeastern Syria. A month later, Israeli war planes bombed a target in Syria. And now, this is what that site looks like -- the building gone, the ground scraped clean.

No one in the U.S. government will confirm it, but private analysts looking at commercial satellite images say evidence is mounting this is the site Israel attacked and that the destroyed building was a partially built nuclear reactor designed by North Korea.

David Albright, who inspected Iraq's nuclear program, has been looking at commercial imagery of this area for weeks.

DAVID ALBRIGHT, INSTITUTE FOR SCIENCE & INTERNATIONAL SECURITY: This is the boxy building that could possibly be a reactor.

STARR: This could be evidence of heavy construction equipment.

ALBRIGHT: Here's what we suspect was a pump station and that water would be pumped out of the river to be used as cooling water for the reactor.

STARR: Syria insists it was not a nuclear facility.

BASHAR JAAFARI, SYRIAN AMBASSADOR TO THE UNITED NATIONS: There is only a center for research for the deserted areas -- arid and deserted areas in the -- in Syria -- an Arab center for the study of the arid areas.

STARR: President Bush refuses to talk about the attack.

(END VIDEO TAPE)

STARR: And, Wolf, there are still many questions. Perhaps the main one -- what was going on at this site a few months ago that made Israel feel it had to take quick action -- Wolf.

BLITZER: Thanks, Barbara.

Barbara Starr at the Pentagon.

Still ahead, while San Diego residents return home, thousands of homes are still threatened by the fires raging in the rugged mountains northeast of Los Angeles.

And a former CIA operative, her identity leaked in a Bush administration scandal, now tells us about her life as a spy and what she calls her betrayal by the White House.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The San Diego fires are now blamed for two more deaths. The bodies discovered in the burnt out rubble of a house. The victims apparently ignored orders to evacuate.

Let's head out to our chief national correspondent, John King.

he's out in the fire zone for us.

What's it looking like today -- John?

JOHN KING, CHIEF NATIONAL CORRESPONDENT: Wolf, when you consider all of the acres burned -- nearly a million people displaced from their homes -- it is truly remarkable that only three deaths have been directly attributable to the wildfire. Two of them happened right here in this hillside community and police blamed stubbornness.

(BEGIN VIDEO TAPE)

KING (voice-over): It is here, about five hours apart late Wednesday and early Thursday, that police found the two charred bodies, buried in the rubble of the Witch Creek blaze in the hillside property they refused to leave, even after neighbors warned of the approaching danger.

(on camera): The view from the property is breathtaking. But if you look over the hill and down into the valley, you can also see the path scorched by the Witch Creek Fire. And as it swept through this area and came on up, you can see right here the awesome combination of the heat and the wind as the fire came up over the hill and attacked the property.

(voice-over): The hilltop house is destroyed -- the molten metal proof the fire's intensity. It was midnight Monday when neighbors pleaded with the man and woman to leave. Police first visited Tuesday and a cursory search of the rubble turned up no human remains.

(on camera): But the police returned Wednesday after family members filed a missing person's report. It is down the hill a bit from the residence in this garage and workshop building where the bodies were discovered and taken away by the medical examiner.

(voice-over): 15834 Highland Valley Road is in a remote area of Poway, just north of San Diego. The road in winds past downed power lines and scorched fields. The Christmas tree farm escaped with little damage. But much of the terrain is scorched, especially up the hillside, where chickens wander amid the rubble and the yellow tape marks the spot where, even as the ferocious blaze approached, a man and a woman ignored pleas to leave.

(END VIDEO TAPE)

KING: Now, the medical examiner's office says it believe the two victims are related, but positive identification is pending examination of dental records, Wolf, because the bodies were burned beyond recognition. The Sheriff's Department also says that the criminal investigation here remains open. But it says that is simply routine until the medical examiner's work is done. The sheriff's department saying no foul play is suspected. It blames the fires -- Wolf. BLITZER: John King on the scene for us out in California.

Thanks, John, very much.

Let's head out to J.T. Alpaugh, the helicopter pilot who's been helping us better understand what's going on.

He is joining us on the phone.

You're getting ready to take off in one of your helicopters, J.T.

What's it going to be like when you take off in terms of the conditions right now?

J.T. ALPAUGH, HELINET PILOT: Well, Wolf, what's happened is that Santa Ana condition has actually died down within the last 24 hours. And you can see it from that shot over your shoulder how extremely smoky it is. All that smoke now not being blown out to the ocean, but settling and pouring into the Los Angeles Basin, filling the area with smoke.

That makes it extremely difficult for the news helicopters to get that visual shot, because we're up at altitude, to stay away from the firefighting aircraft. But even the visibility for them is extremely tough right now.

So the blessing is, is that the wind has died down, giving the firefighters a chance to stop this fire and get ahead of these fires. The problem being is that the -- there's so much smoke down there, it becomes very difficult and the visibility is very poor down low when they're trying to get in there to get those fires out.

BLITZER: And you can still smell it and feel it and sort of touch that stench that's permeated the entire area?

Is that right?

ALPAUGH: Absolutely. This -- the entire -- the smoke has just completely filled the Los Angeles Basin, the San Fernando Valley, all the way down into Orange County and down to San Diego. It is just thick black smoke just completely covering the area. And it's extremely hard to breathe through these areas.

Now, people that are sensitive, with breathing disorders, have been having a hard time here. And they're getting a lot of reports of people going to the hospital with respiratory issues. Extremely nasty out here in Southern California with all this smoke.

BLITZER: What about the fires themselves?

The weather has improved and that's helping, clearly. But some of these fires are continuing.

How much longer do you -- do you sense -- because you've been covering these fires for a long time in California -- how much longer before all the fires are out? ALPAUGH: Well, that's kind of hard to tell. Again, the resources are so spread out throughout Southern California over so many of these fires, so there's less personnel to stop these fires. And I talked about this before. It's almost like stepping in front of a locomotive -- you just can't stop it. You have to attack it from the flanks, try to knock it down and slow it down, and then get in front of it and stop it.

But right now personnel -- and fire personnel, even though they're heroic -- doing heroic things, they are spread out and they are spread out so far, there is no telling when they're going to be able to stop these fires. The wind is helping. The wind has stopped. That gives them the opportunity to stop that.

What you're looking at there is a Kmax helicopter. That's a specific long line, very heavy lift helicopter with that Bambi bucket hanging down below it -- 500 gallons of water.

Get in there, you can see that helicopter in the smoke there, getting into that smoke -- that visibility going down, trying to get in there and fight that fire from the air.

But, again, the resources are really spread out very thin throughout all of Southern California. Very difficult. They're just going to have to keep the fight on and they'll get a handle on this. It's just going to take a little bit of time.

BLITZER: J.T., be careful when you get up in that helicopter in the next few hours.

Appreciate your help.

ALPAUGH: Thanks, Wolf.

BLITZER: One of the hardest hit areas by the fires is Lake Arrowhead, which is east of Los Angeles. But even there, the destruction could have been worse. Federal officials say that's, in part, due to forest thinning -- a sometimes controversial tactic used by the U.S. Forest Service. By cutting trees, bushes and branches, fuel breaks are created to stop the spread of the flames. The work is tough and expensive, and residents must also remove vegetation on their own land for the homes to be saved.

Up next, exhausted fire crews throwing extra resources at one of the biggest fires in Southern California. We're going to take you to the fire lines.

Plus, the former operative at the center of the CIA leak scandal -- Valerie Plame Wilson -- right here in THE SITUATION ROOM talking about what she calls was her betrayal by the White House.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK) BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now, President Bush visiting Southern California's fire zone. As the death toll rises to three, investigators confirm that the giant Santiago Fire is arson.

Also, the House of Representatives once again passing a bill expanding a popular State Children's Health Insurance Program. President Bush vetoed roughly the same bill earlier this month. He says he's going to do it again. And the margin of the latest vote is not big enough to override the president's veto.

Iowa Democrats poised to move up their crucial presidential caucuses, likely joining the Republicans -- get this -- on January 3rd.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

There is progress on some Southern California fire lines, but not enough on the massive Harris Fire southeast of San Diego, with more than 80,000 acres burned so far.

Our senior correspondent, Allan Chernoff, spent the day on the fire lines.

He is joining us now.

I assume those firefighters, Allan, must be exhausted.

ALLAN CHERNOFF, CNN CORRESPONDENT: Wolf, some of the firefighters are putting in 20, 30, even 40 hours without sleep in an effort to prevent this from happening. Obviously, they do not always win. And that Harris Fire has been very tough.

Today, extra resources were poured in on the frontlines to fight a fire that really has been so stubborn.

Fire battalion Chief Andy Menshek sees trouble early in the morning. Santa Ana winds that were supposed to be gone are blowing again. The Harris fire is spreading.

ANDY MENSHEK, SAN MIGUEL FIRE BATTALION CHIEF: The fire is up on the hill and that fire is going to come down.

CHERNOFF: Ten helicopters and an airplane scout the fire to advise troops on the ground and determine where to drop water. Resources are strong today as the Harris fire has become San Diego County's top priority.

MENSHEK: It is only, you know, 8:30 in the morning and really starting to take off again. And normally in the morning here in San Diego, when you cool the humidity and rises and the fire will slow down but it is picked up.

CHERNOFF: Down below crews work to build a barrier and burning fuel if fire might use to expand.

MENSHEK: This is one of the critical areas of the fire. Behind us it is a wide open path to 20 miles of unburned fuel.

CHERNOFF: Last night, a crew set a backfire over here to prevent the Harris fire from rolling down that hill and crossing over this dirt road. After the backfire, of course, there are ashes, embers, and even some little flames, so right now there is a crew here doing mop-up work to prevent any of the ashes from blowing over that road and expanding the Harris fire even further. Crews spray water, packed with foam on the embers.

JASON MCAHEREN, U.S. FOREST SERVICE: A lot better than them just regular water because the foam helps it stick to the tree.

CHERNOFF: Then the hard work of shoveling to suffocate all the embers.

JENNY KRUZAN, U.S. FOREST SERVICE: You can't do this job unless you love it. You have to love it to do it because it's hard work, grueling hours, you know it can be dangerous.

MACHO ROSA, U.S. FOREST SERVICE: That's the tree here. This is the charcoal. This is what we are trying to take away which is hot. If you can do that and separate the two, you have a good chance of putting out this fire.

CHERNOFF: It is critical work. And as we watched flames erupt from nearby brush. Controlled for now, but under the close watch of the firefighters.

UNIDENTIFIED MALE: Do you still want us to check that out?

CHERNOFF: On our way back word comes back that a chopper is down, yet another reminder of the dangerous work these firefighters do. Andy fears some of his colleagues may be hurt.

It turned out the helicopter was rented by the local utility to survey power lines and fortunately all four people onboard escaped without serious injury.

Wolf.

WOLF BLITZER, CNN ANCHOR: Allan Chernoff, thanks very much.

More and more Americans are living in areas that are especially vulnerable to the forces of nature. It is great when nature continues but catastrophic when nature does not.

Let's get some analysis. Our special correspondent, Frank Sesno is here. A lot of people are flirting with potential disaster.

FRANK SESNO, CNN SPECIAL CORRESPONDENT: No question, more and more all the time. In fact, one of the questions I'm hearing, it's interesting because we do this segment every week is "what if," and the what if the California fires, prelude to more. Every time you turn around there seems to be a billion dollar disaster happening out there.

Take a look at the map here. If we look down and see the hurricanes of the five costliest and most devastating hurricanes in our history, four of the last five occurred in just the last three years.

Out on the west coast we have fires, we have earthquakes and, again, often hitting the billion dollar mark. A big part of the problem is this is some of the most expensive and crowded real estate in the country.

What if we keep building like this, property line jowl in precarious places? Places like the tinder-dry canyons of California, the hurricane-prone coasts of the Carolinas, the below sea level neighborhoods of New Orleans. Places that can go from this to this; charred, windswept and waterlogged. What if these places keep getting hammered? It will affect more people, cost more money, and we could find ourselves in an insurance nightmare. It is a growing danger. Allstate has quit insuring homes in California. And it's dropped earthquake coverage across much of the country. What if that continues? We will need some kind of government-backed catastrophic insurance, Senator Dianne Feinstein says.

SEN. DIANNE FEINSTEIN (D), CALIFORNIA: Companies must not be allowed to cherry pick the United States and only insure areas that are safe and secure and say to other areas that on your own.

SESNO: What if the disasters keep coming and get worse? They will, many scientists argue, as climate change, drought and development collide.

In 2003, the San Diego fires burned nearly 400,000 acres; destroyed nearly 3,000 homes and businesses, nearly 4,000 vehicles. California's fires that season caused close to $2 billion in damages. This year's fires could be even worse.

What if the disasters continue? They will. California's fires like the hurricanes back east and tornadoes in the Midwest are as regular as the seasons; part of the natural landscape. A risk we take.

UNIDENTIFIED FEMALE: Yes. We will come back and rebuild.

SESNO: A risk we take. Well, that's the really interesting thing. But look at what's happening.

We go back to the map a minute, some of the real estate I was talking about. Go down to Miami Dade County, what's happening in Florida and the last six years alone up nearly 150 thousand people; out to San Diego County, Los Angeles county, explosive growth. Those are numbers just in the last six years. Little New Hanover County, North Carolina and look what's happened there. 22,000 doesn't sound like much but that's up 14 percent in just six years. We are continuing to move to these beautiful places, coasts in particular. But that are subject to the natural disasters. And just gets more expensive. BLITZER: It is obvious because when it is beautiful in those areas, it is great. And most of the time it is beautiful but as you point out, when things go bad, they get really, really bad.

SESNO: They do. And it's really beautiful until you get your insurance bill because a lot of the insurance rates are going sky high.

BLITZER: Frank Sesno, thanks very much, our special correspondent.

Listen to what Valerie Plame Wilson says about Richard Armitage and the others who blew her CIA cover.

He had no rights to go talking to a reporter about where I worked. That was strictly off-limits. And, you know, Bob Novak, he's changed his story so many times that it is hard to keep it straight.

BLITZER: The outed CIA Valerie Plame Wilson right here in THE SITUATION ROOM. That interview coming up.

Also, a worry over the world's oil supply, a forecast that's truly shocking.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: She was an undercover intelligence operative, her identity an official secret until it was leaked in a major Bush administration scandal. And now she's speaking out.

Joining us now, Valerie Plame Wilson. She's the author of the new book "Fair Game; My Life as a Spy, My Betrayal by the White House." She is the former CIA spy.

Thanks very much for coming in.

VALERIE PLAME WILSON, AUTHOR, "FAIR GAME": Thank you for having me.

BLITZER: It started with the article that your husband wrote, Joe Wilson, the former U.S. ambassador, "What I Didn't Find in Africa" in "The New York Times." And some people have suggested that he should never have written that article because knowing how critical that article was of the president and the vice president of the administration, people were going to start asking well, what was he doing in Niger looking for uranium at a time he was so critical of this administration? Why would they send him there to begin with and that whole process eventually resulting in your being outed?

WILSON: Joe wrote this op-ed piece as a matter of principle and conscience and wanted to understand how that whopper of the 16 words got in the president's state of the union address.

And I think it is important to note that at the time of his trip to Niger, which was February 2002, not only was he eminently qualified having served as the charged affair at our embassy in Baghdad during the first gulf war, you were there, but he had also lived on the continent of Africa for over 20 years. And he had done some missions like that before for the CIA. It is a known quantity and was at least six months after that when he finally crystallized his thoughts and ideas on what our policy should be toward Iraq before he entered the public debate.

BLITZER: Because the whole notion of nepotism that, you know, you played a key role in I guess eventually deciding for him to go; at least according to the senate intelligence committee. You have seen their report which they came out with in 2004. "Some CPD counter proliferation officials could not recall how the office decided to contact the former ambassador. However, interviews and documents provided to the committee indicated his wife, a CPD employee, suggested his name for the trip. The CPD reports officer told Committee staff that the former ambassador's wife "offered up his name."

WILSON: Let me tell what you that reports officer came in and told me the day after that report was released. He came in, shut the door, sat down, and almost burst into tears. He said they twisted my testimony. Val, remember, I was the one who suggested Joe.

BLITZER: Why didn't that come out? Why didn't he go public or CIA correct the record? This was a senate intelligence committee report.

WILSON: In fact, the CIA did say I had nothing to do with the trip. He went back to his supervisor, different chain of command, and to ask if he could re-testify and he was not allowed to do so. That quote that you cited was, I think it's important to note, was in the additional views portion of the report which was written exclusively by four republican senators it was so distorted and biased it felt, as I write about in the book, sort of like falling down the rabbit whole where black is white and white is black. One of the most preposterous claims was that Joe's report actually strengthened analysts' views that this alleged sale of the uranium had taken place --

BLITZER: That was one of the conclusions, too. I saw that. But you did write after this -- your friend at the CPD suggested that maybe Joe Wilson would be a good guy to send to Niger to look for this uranium that supposedly was going to Saddam Hussein. An email, "My husband has good relations with both the Niger Prime Minister and the former Minister of Mines not to mention lots of French contacts both of whom could possibly shed light on this sort of activity." So you did encourage the trip.

WILSON: No. What that e-mail was a response to was a direct request by my boss to tell the chief of the counter proliferation division, you know, Val, let them know what's going on here. We asked you, Valerie, to ask your husband to come in to headquarters the following week so we can discuss what to do. Let the chief of the division know what's going on. So they extracted truly out of context. I was seeking to tell the chief of the division, remember this guy, this is why the boss thinks it is a good idea to have them come in and discuss --

BLITZER: If you have to do it over again, would you have wanted Ambassador Joe Wilson, your husband to write the article in "The New York Times"?

WILSON: Yes. We would do it all over again.

BLITZER: Even knowing that your identity was going to be revealed as a result?

WILSON: You know it has been a very painful 4 1/2 years. That's for sure. But Joe and I have never lost sight of the fact that what happened to us is mere inconvenience compared to the families of service men serving in Iraq who get the worst possible news because of the manipulations and the way we got into this war with Iraq which has turned into a complete debacle.

BLITZER: Bob Novak, the guy that wrote the article, and those words July 14th, 2003 column of his, "Wilson never worked for the CIA but his wife Valerie Plame is an agency operative on weapons of mass destruction." Those words obviously caused this whole uproar with you. He says that the official who leaked that information to him first was Richard Armitage, the deputy secretary of state, who is not necessarily, in his words, a political operative. He was just talking perhaps inadvertently. Do you accept that?

WILSON: I would say that Mr. Armitage did a very foolish thing. He has been around Washington for decades. He should know better. He is a senior government official. Whether he knew where exactly I worked in the CIA, he had no rights to go talking to a reporter about where I worked. That was strictly off-limits. And, you know, Bob Novak, he's changed his story so many times it is hard to keep it straight.

BLITZER: He said this week on Monday, he said, "What she doesn't have in the book is the fact she was brought back from an overseas assignment according to my sources because the CIA feared she had been outed many years ago by the agent Aldrich Ames," the convicted Soviet spy. Is that true?

WILSON: What I will tell you is this. The CIA referred this case to the justice department in September 2003 because they thought a crime had been committed and need to be investigated. And it is Mr. Novak have been as well who uphold the myth that I was somehow not covert. I was until the time he used my name and blew my covert identity in his column.

BLITZER: And do you believe that any of your what they call assets overseas have been hurt, arrested, picked up, tortured, because your identity was released?

WILSON: A damage report was done. I haven't seen it. I don't believe any members of Congress have seen it. But this is why what the senior administrations did in blowing may cover identity is treasonous because it puts in jeopardy those assets that were contributing to our national security and whom we have promised to protect.

BLITZER: Who do you blame? Do you blame the president, vice president? Who do you blame when all is said and done, the dust settles for obviously releasing your identity but also perhaps endangering others around the world.

WILSON: Well, special prosecutor Patrick Fitzgerald in a filing said he can't conceive of any evidence that would disprove a conspiracy by a multitude of people in the White House to discredit and undermine Mr. Joe Wilson. So, you know, the list of suspects is long.

BLITZER: Is there any names higher than others? Any names you want to name right now as someone responsible for this whole unfortunate series of events?

WILSON: Well, Joe and I have filed a civil suit, as you may know. It is now under appeal. And in it we named the vice president, Mr. Rove, Mr. Libby, Mr. Armitage and we have room for lots of John Does as evidence will allow to come forward because there clearly was a conspiracy to undermine Joe because he had the audacity to question the reason, the primary rationale, for going to war with Iraq which was the nuclear threat.

BLITZER: You miss being a spy?

WILSON: I do. I loved my career. I was proud to serve my country and I got to do amazing things, everything from paramilitary training and literally jumping out of airplanes to later working on counter proliferation issues from which I derive ad great sense of satisfaction. I loved what I did.

BLITZER: Let me thank you on be half of a lot of our viewers for your service to our country. Thank you for writing this book, "Fair Game; My Life as a Spy, My Betrayal by the White House." Valerie Plame Wilson, thanks for coming in.

WILSON: Thank you.

BLITZER: Lou Dobbs getting ready for his show that begins in a few moments right at the top of the hour.

Lou, what are you working on?

LOU DOBBS, CNN ANCHOR: Right at the top of the hour, Wolf, thank you.

Tonight we are reporting on the all-out assault against the huge wildfires in California. It looks like that assault is beginning to prevail against those wildfires. The fires have already burned more than 700-square miles.

We will also have a special report tonight on the hunt for arsonists being blamed for some of those fires.

Also, disturbing new evidence tonight that major toy brands are putting their profits ahead of the safety of American consumers and workers in toy factories in communist China. We'l have that report.

And America's middle class, is it being pummeled by spiraling debt, skyrocketing expenses for housing, healthcare, cars, and credit? And what's the Bush administration and the Congress doing to help out our middle class? And should it be helping? Among my guests tonight, an economist, former government adviser who says the war on the middle class is really a myth. We'll have a frank and full exchange of views on that.

Please join us for that and a great deal more, all of today's news at the top of the hour on CNN.

Wolf, back to you.

BLITZER: Thanks, Lou. We'll see you in a few moments.

Afghanistan unraveling; Defense Secretary Robert Gates sounding the alarm and pushing U.S. allies to step in.

Also, how confident should person parents be in the safety of toys from China? Jack and your e-mail, a lot more right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Carol Costello is off today. Brianna Keilar monitoring some other important incoming stories right here in THE SITUATION ROOM.

What's going on, Brianna?

BRIANNA KEILAR, CNN CORRESONDENT: Wolf, a very cool story to tell you about. A bit of history in orbit today. Peggy Whitson, the female commander of the International Space Station, welcomed Pamela Melroy, the female commander of the latest space shuttle mission, with a handshake and a big hug. This is the first time women have been in charge of both spacecraft. And over the next few days, the shuttle crew will unload a new laboratory module and attach it to the space station.

Defense Secretary Robert Gates is scolding America's European allies for not providing enough troops or resources for the war in Afghanistan. He warned military leaders from 38 European nations today that the war's outcome is at a real risk and NATO's credibility is at stake.

Also, a scary forecast for the world's oil supplies. The German based energy watch group says that the world has reached the point of maximum oil output and by the year 2030, production levels will be half of what they are now. This report says this will eventually lead to wars and disaster. Today oil traded and closed at record highs, more than $90 a barrel.

In news affecting small businesses, the commerce department reports a 4.8 percent increase in new homes sales in September. But says the sales figures for August were worse than previously reported. The housing market, of course, in a slump because mortgage defaults created a crisis in the lending industry, Wolf.

BLITZER: Thanks Brianna. Thanks very much.

Toys from China, tens of millions of them have already been recalled. Jack Cafferty is asking how confident are you feeling about the safety of toys made in China. Your e-mail and Jack. That's next.

(COMMERCIAL BREAK)

BLITZER: Here's a look at some of the Hot Shots coming in from our friends over at the Associated Press, pictures likely to be in your newspapers tomorrow.

In Indiana, Muslims shout slogans during a rally.

On the West Bank, priests pray at a holy site near Nablus.

Nearby, but seemingly a world away, a Palestinian man push's cart next to a burning tire. Protesters were calling for the release of Palestinian prisoners held by Israel.

In Ohio, an elephant holds a pumpkin with a face of the Steelers quarterback on it. The pumpkin was smashed along with several others. The Cincinnati Bengals play the Steelers Sunday.

Some of this hour's Hot Shots, pictures often worth a thousand words. They take their football seriously.

Jack Cafferty in New York.

Jack.

JACK CAFFERTY, CNN CORRESPONDENT: I want to meet the guy who says I think I'll spend the afternoon carving the face of the Steelers quarterback on a pumpkin.

BLITZER: And then give it to an elephant.

CAFFERTY: And then take down to it the zoo and give it - you want to stay way far away from people like that.

The question is this. How confident should American parents be in the safety of toys from China?

Steve in Georgia, "If ever there was a time to send a signal to corporate America via voting with our wallets, now is the time. They put toy profits in front of our children's safety, Jack. I plan on showing them the same respect they showed our children by boycotting the companies."

Ricki in Pasadena, "Not at all. Likewise clothes, jewelry, dishes. We should boycott Chinese goods and buy America. We are systematically giving away our economy. For every penny we save on cheap goods, we lose. Whatever happened to the campaign to buy things with labels that said made in the USA?" Andy writes from Atlanta, "My kids aren't small anymore, but let me tell you nonetheless how confident I am in Chinese products: if it says China on the label, I don't buy it. I wish I had the start-up costs for a toy factory right here on U.S. soil. I'm surprised some of our wealthier citizens haven't gone that route already."

Donna in California, "I'm so tired of these so-called American companies making so much money at the expense of American jobs and now health. I told all my family that I am thinking about our family and America this Christmas. And this year, all the kids will get good old American savings bonds at Christmas time, along with a little something made in America for fun. I'm hunting for American made toys and I won't rest until I find them."

Patricia in Dallas, "Our daughter-in-law just wrote the family an e-mail saying they don't want any toys from China as gifts for our grandbabies this Christmas or for their birthdays. She gave us several other toy makers as options, all from Europe. I was very proud of her for taking a stand for the sake of the kids."

And Ken writes, "It's not only toys. Everything I've ever bought that was "Made in China" was junk. Pure garbage and food from there is poison! Jay Leno tells us that metal manufacturers in the U.S. had to return a shipload of lead to China. They found toys in it."

If you didn't see your e-mail here, you can go to CNN.com/Caffertyfile. We post more of them online, along with video clips of the Cafferty File.

Wolf.

BLITZER: Jack thanks very much. See you back here in one hour, 7 p.m. eastern.

That's it for us. I'm Wolf Blitzer in Washington.

Let's go to Lou in New York.

Lou.

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