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THE SITUATION ROOM

California Wildfires; Democratic Tax Plan

Aired October 25, 2007 - 19:00   ET

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


WOLF BLITZER, CNN ANCHOR: Thanks very much, Lou.
Happening now, a reprehensible act of arson, tonight the hunt to catch suspects behind some of southern California's horrific wildfires, the fires are easing, but the death toll is rising.

Plus, Republicans are calling it the mother of all tax hikes, but House Democrat Charlie Rangel says his new trillion dollar plan will give middle class Americans a break, this hour the new war over your taxes.

And new evidence that mob bosses once plotted a hit on Rudy Giuliani. And the Republican presidential candidate is more than happy to let voters know about it.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Tonight, more money and manpower aimed at catching the person or people who deliberately set one of California's devastating wildfires. There is now a $150,000 reward on the table. The total number killed directly by the wildfires now stands at three, after two bodies were found in a burned-out home. Ten places still are burning across the region, but firefighters are making new headway against the flames now that winds are easing.

Right now officials say 13 fires are fully contained. All residential areas in the city of San Diego now are open. But people are being allowed to return to more than a dozen other communities in San Diego County. That is still a problem out there. We have correspondents standing by across the danger zone with firefighters, the victims to keep you up to the minute on California's fire emergency.

The giant Santiago fire in Orange County tonight confirmed the work of an arsonist and the reward in the case now raised to $150,000. CNN's John Zarrella is watching this story for us. All right, what is the latest on the arson investigation, John?

JOHN ZARRELLA, CNN CORRESPONDENT: Wolf, even more shockingly the fact that this may not be the only of the fires caused by an arsonist, but $150,000 reward now offered for the Santiago fire, any information leading to the arrest of the person or persons responsible. That reward expected to go up. Fire investigators are telling us privately, listen, it is going to be very difficult to find whoever did this.

(BEGIN VIDEOTAPE) ZARRELLA (voice-over): The fire started here Sunday, where the Santiago and Silverado (ph) Canyons meet. The burned out land is now marked by crime scene tape. Federal Alcohol Tobacco and Firearms agents spent today at the scene looking for more evidence. This, they say is one of the two places where the Santiago Canyon fire was set and there is no question investigators say, it was arson. Orange County fire officials who got to the scene on Sunday first say that within minutes it had spread miles.

CHIEF CHIP PRATHER, ORANGE CO., CALIF. FIRE DEPT.: 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.

ZARRELLA: The version is just in its initial stage. No arrests have been made. No search warrants issued and investigators won't say what evidence they have collected. Many resident who live here spend their time at the bottom of the canyon road, waiting. They want only two things. To be allowed home, and to get their hands on whoever did this.

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

ZARRELLA: Others like John Cunningham (ph) are so angry they don't even want to talk about it.

(on camera): How do you feel knowing now that somebody did this on purpose?

UNIDENTIFIED MALE: I'm not even prepared to go there right now. So, bigger concerns right now. The family is safe. I believe the house is OK and I believe the professionals are on it.

ZARRELLA (voice-over): The Santiago Canyon fire has burned at least 25,000 acres, forced thousands from their homes and as difficult as it may be to comprehend, this may not be the only one of the California fires caused by arson.

(END VIDEOTAPE)

ZARRELLA: Now, in fact there have been at least five arrests since Tuesday of people possibly responsible, although they are not linked right now to any of these other fires. But people that they have found who are trying or apparently trying to set fires. A couple on the side of a road, a couple down in San Diego. So from San Diego north to Los Angeles, Wolf, at least five people have been arrested for attempting to set fires. But again, apparently there is no link at this time to these massive fires here in southern California. Wolf?

BLITZER: John Zarrella thanks very much. Tonight, President Bush is promising quick help to California's fire victims after getting a firsthand look at what he calls a sad situation. His trip to the fire zone is raising more questions about the federal government's response now compared to Hurricane Katrina then. Our White House correspondent Ed Henry is traveling with the president.

(BEGIN VIDEOTAPE)

ED HENRY, CNN WHITE HOUSE CORRESPONDENT (voice-over): Aboard Marine One, President Bush flew over homes charred to the ground. But unlike his Hurricane Katrina flyover, which fed an image of being out of touch, Mr. Bush actually touched down in southern California.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We are not going to forget you in Washington, D.C.

HENRY: The comforter in chief consoling Jay and Kendra Jeffcoat (ph). All they have left is the remnants of a spiral staircase and a cocker spaniel named Trevor (ph). Amid the devastation, the president dismissed comparisons between Katrina and the wildfires.

BUSH: There are all kinds of time for historians to compare this response or that response.

HENRY: But in part this was about trying to exercise the demons of Katrina. So after a critical endorsement from popular Republican Governor Arnold Schwarzenegger.

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I want to say thank you first of all to President Bush for his tremendous support and for his immediate help in this terrible disaster.

HENRY: The president returned the favor with a broad side at Louisiana's Democratic governor, Kathleen Blanco (ph).

BUSH: It makes a significant difference when you have somebody in the state house willing to take the lead.

HENRY: There were also images of the president embracing first responders and briefing showing a commander in chief in charge, all carefully orchestrated to show this time the president is fully engaged. And local Republicans hammered the point that unlike in Louisiana, California officials only relied on the feds for secondary help.

REP. BRIAN BILBRAY (R), CALIFORNIA: In San Diego they didn't wait for the federal government to show up. They got the job done as much as they could locally, and then used federal assistance as a supplement. So I think that is how the system is actually designed and it has worked great.

HENRY (on camera): Officials here say this could be a blueprint for communities around the country in terms of disaster preparedness. Locals taking the lead, the federal government finishing the job.

Ed Henry, CNN, with the president in San Diego.

(END VIDEOTAPE) BLITZER: Exhausted fire crews are focusing tonight on the massive Harris fire southeast of San Diego where more than 80,000 acres have burned so far. Our senior correspondent Allan Chernoff spent the day on the fire lines. Allan, tell our viewers what you saw.

ALLAN CHERNOFF, CNN CORRESPONDENT: Wolf, the firefighters are putting in grueling hours, 20, 30, even 40 hours a shift for some people to try to prevent this, the ultimate homeowner's nightmare. Today on the front lines, they were pouring in extra resources at the Harris fire to try to control that fire which has been so stubborn.

(BEGIN VIDEOTAPE)

CHERNOFF (voice-over): 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.

UNIDENTIFIED MALE: 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.

BATTALION CHIEF ANDY MENSHEK, SAN MIGUEL FIRE DEPT.: It is only 8:30 in the morning and it is really starting to take off again. And normally in the morning here in San Diego when it is cool, the humidity rises and the fire will slow down. But it has picked up.

(SOUNDS)

CHERNOFF: Down below, crews work to build a barrier, burning fuel that the fire might use to expand.

UNIDENTIFIED MALE: This is one of the most critical areas of the fire. Behind us it is a wide open path to the next 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 always ashes, embers and even some little flames. 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.

UNIDENTIFIED MALE: (INAUDIBLE)

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. It is hard work, grueling hours, you know and it can be dangerous, so. MACHO ROSA, U.S. FOREST SERVICE: That's the tree right there. (INAUDIBLE) This is what we are trying to take away...

UNIDENTIFIED MALE: Right.

ROSA: ... which is hot. If you could do that, if you can separate the two, you have a good chance of putting out this spot.

CHERNOFF: It is critical work. As we watch, flames erupt from nearby brush, controlled for now, but under the close watch of the firefighters.

UNIDENTIFIED MALE: Helicopters flying (INAUDIBLE) fire still want us to check that out?

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

(END VIDEOTAPE)

CHERNOFF: Turns out that chopper was rented by the local utility which was checking its power lines and fortunately all four people onboard escaped without serious injury -- Wolf.

BLITZER: Allan Chernoff thanks very much. And if you would like to help the victims of these fires out in California and impact your world, you can log on to CNN.com/impact, follow the instructions there. It is a good idea. It will make you feel good, too, and you will be doing some other people a lot of good.

Let's go to Jack Cafferty. He is in New York. He has got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: The U.S. State Department in Baghdad has begun offering tens of thousands of dollars in cash to victims and families of those who were killed in last month's shootings involving Blackwater security forces. In some cases they are reportedly trying to give out envelops filled with $12,500 per death. Some Iraqis have turned down the money. They are worried that accepting it would limit future claims against Blackwater.

They say the payments are an insult and a humiliating sum. One man told "The Washington Post" that his brother's funeral and wake cost more than what he was offered. Others say they want to sue Blackwater in a U.S. court or they want the Blackwater contractors to face charges in an Iraqi court. Prime Minister Nuri al-Maliki has made it very clear he wants Blackwater out of the country.

There are those who have taken the money, some of them desperate to pay medical bills that resulted from those shootings. These types of compensation offers are more common in the U.S. military than the State Department, but a spokeswoman describes them as condolence payments. And says the money is not meant to be a final settlement of their claims, that families can still sue Blackwater. She also adds the offer of money is not an admission of culpability. And of course it's not hush money, either. So here is the question. Should the United States embassy in Iraq be offering cash to victims and relatives of those killed in the shootings involving Blackwater? E-mail your thoughts to CaffertyFile@CNN.com or go to CNN.com/CaffertyFile -- Wolf.

BLITZER: Jack Cafferty, thank you. By the tens of thousands evacuees make their way home. When they get there though many find that they have lost everything, but one family found something very precious in the rubble.

Also, fighting the fires from the air. We are going to take you up in what is called a super scooper tanker, able to drop more than 1,200 gallons on each of its water bombing runs.

And as a prosecutor he targeted drug dealers and mobsters, now there is word that some of them once plotted to kill Rudy Giuliani. We'll tell you what's going on right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: We will get right back out to southern California for more on these fires that have devastated huge chunks of the state. That's coming up, but there is other important news we are following as well.

The Bush administration today slapping tough new, unprecedented 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 -- Zain.

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

(BEGIN VIDEOTAPE)

VERJEE (voice-over): The U.S. is taking aim at this Iranian military wing. The Bush administration says it is 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 Corp or the IRGC and the QUDS (ph) force.

VERJEE: The U.S. blames the QUDS (ph) 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 are going to act like an outlaw country, we are going to treat you as an outlaw country in the international economic system.

VERJEE: But already Russian president, Vladimir Putin (ph), 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.

BUSH: So I told people that if you are interested in avoiding World War III, it seems like you ought to be interested in preventing them from having knowledge necessary to making a nuclear weapon.

(END VIDEOTAPE)

VERJEE: Wolf, it is worth noting that Mohamed El Baradei (ph), the head of the world nuclear watchdog agency, has criticized the U.S. for its rhetoric on Iran and has also said that Iran hasn't used its nuclear materials to make weapons. Wolf?

BLITZER: Zain Verjee at the State Department. Thanks.

The Revolutionary Guards in Iran, by the way, are not Iran's regular army. They are a lot more important than that. Almost 30 years ago when the Islamic Revolutionaries took power in Iran they didn't trust the existing army. They created their own force, the Army of the Guardians of the Islamic Revolution. That is what they are called.

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 is not the regular Iranian army. That is the Revolutionary Guard. The QUDS (ph) force is the covert wing that primarily operates outside of Iran. The Iranian president, Mahmoud Ahmadinejad, joined the Revolutionary Guard back in 1986.

Now to an issue important to all of us. That would be taxes. Right now some congressional Democrats say they have a plan to save tens of millions of people a staggering amount of tax money, and yet, some Republicans call the plan, and I'm quoting now, "the largest individual income tax increase in history."

Let's go to Capitol Hill. Our congressional correspondent Dana Bash has more on this new plan that was unveiled today -- Dana.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Wolf, Democrats you remember rode into power promising to restore fairness in the tax code, especially when it comes to that squeezed middle class. They say this is exactly what their new massive tax bill is aimed at, affecting that middle class. The Republicans call it a political godsend. (BEGIN VIDEOTAPE)

BASH (voice-over): A trillion-dollar Democratic proposal would give tax breaks to low and middle income Americans and pay for it with a tax hike on high-income earners.

REP. CHARLES RANGEL (D-NY), WAYS AND MEANS CHAIRMAN: We have attempted to restore equity and fairness to the system.

BASH: The top House Democratic on tax issues called it the mother of all tax bills. Republicans raced to give it another name.

REP. JOHN BOEHNER (R-OH), MINORITY LEADER: The mother of all tax bills has turned out to be the mother of all tax hikes.

BASH: At the heart of the plan is a repeal of the so-called AMT, a tax intended for the wealthy but hits the middle class. The bill would also increase deductions for married couples and individuals and reduce the corporate tax by nearly 5 percent. All that would cost over a trillion dollars.

To pay for it, taxes would go up for higher income Americans. A 4.6 percent tax increase on couples earning over $500,000 and individuals making more than $250,000. And profits for Wall Street investment managers would be taxed at a higher rate.

RANGEL: Some people have been able to manipulate the system to get tax advantages in the code.

REP. ADAM PUTNAM (R), REPUBLICAN CONFERENCE CHAIR: The impact of Democratic leadership on our economy means higher taxes, less growth, and more regulations.

BASH: GOP lawmakers who have been on the defensive on issues from Iraq to children's health were down right giddy, eager for an old fashioned fight over taxes. Sending out some 60 press releases hitting Democrats in fiscally conservative swing districts and this one. Asking if Hillary Clinton agrees with supporter Charlie Rangel's trillion-dollar tax attack.

REP. ROY BLUNT (R), MINORITY WHIP: You know very seldom in politics do your opponents give you this kind of gift.

(END VIDEOTAPE)

BASH: Now the reason Republicans see this as a political gift is because their voters, Republican voters, are so incredibly disillusioned right now and nothing fires them up more than the threat of a Democratic tax increase. Now, Wolf, House Democrats say this is not even going to come up for a vote until next year, Republicans say that is fine with them, because it is closer to Election Day. Wolf?

BLITZER: All right, Dana thanks very much.

An effort described as heroic and unbelievable. Thousands of firefighters working around the clock battling the southern California wildfires. We are going to talk to one of the fire commanders on the front lines.

Also crucial air tankers grounded by bureaucracy. We're going to have details of disturbing new allegations.

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

(COMMERCIAL BREAK)

BLITZER: Carol Costello is off today. Brianna Keilar monitoring some other important incoming stories coming into THE SITUATION ROOM right now. What is going on, Brianna?

BRIANNA KEILAR, CNN CORRESPONDENT: Wolf, new developments regarding a deadly superbug that likely kills more Americans than AIDS. This is the staph infection that's called MRSA or Mursa (ph). And officials in New York now believe that it killed a seventh grade student who died today in Brooklyn. But in the statement, the city's health department says there is no reason to believe that other children or employees at the school where it happened are at increased risk of infection.

And many thought his confirmation was a virtual certainty when he was first nominated to be attorney general, but now it appears Judge Michael Mukasey's nomination has hit a snag. Two top Democrats who sit on the Senate Judiciary Committee say their votes for Mukasey hinge on whether or not he will say that water boarding is torture. That is coming from Committee Chair Patrick Leahy and the Senate's number two Democrat Dick Durbin.

And this story is an attention getter for parents. About one million baby seats are being recalled. This are called Bumbo Baby Sitter Seats and it is feared they could cause major head injuries that includes skull fractures. The Consumer Product Safety Commission has already received 28 reports of head injuries. Officials are warning parents not to place the seats on any elevated surface with children in them. These are baby seats that were sold at major U.S. retailers between August 2003 through this month.

He reportedly suggested that blacks are not as smart as whites, and now after international outrage, the Nobel Prize-winning scientist James Watson is resigning his job at a distinguished New York research institution. In a statement, Watson, who co-discovered the structure of DNA, says he was going to resign at some point anyway, but he says he regrets leaving under the cloud of controversy -- Wolf.

BLITZER: Brianna, thank you.

It is a ground and air war against the California wildfires. We're going to take you along for the frightening ride for a big water drop on the inferno.

Plus, they are exhausted and overworked and their battle is not over yet. We get the inside story on how California's heroes are now holding up.

And the vote that almost got Rudy Giuliani killed. There are new details emerging about the presidential candidate's bad blood with the mob. That, a lot more right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now, the White House says President Bush will veto the latest house bill that would expand the very popular state health insurance program for children, just like he did the last one. The margin of today's vote in the House of Representatives is not enough to override his presidential veto.

And the giant Airbus A380 making history with its maiden commercial flight from Singapore to Sidney, Australia. The 455 passengers bought their tickets at an online auction, some people paid tens of thousands of dollars for the tickets.

I'm Wolf Blitzer, you are in THE SITUATION ROOM.

All residents of the city of San Diego are though you cleared to return home. But for some in the region, it is a wrenching ordeal, returning to find little, if anything, left. CNN's Brian Todd made the emotional journey with one family.

Brian.

BRIAN TODD, CNN CORRESPONDENT: Wolf, one order from the mayor and this neighborhood came alive. The emotions we saw from all families returning ran the spectrum. With little notice they poured back in, hundreds of families returning to a devastated neighborhood in Rancho Bernardo. Most are elated and relieved.

SUSAN BERKOWITZ, SAN DIEGO RESIDENT: I can't believe what everything looks like. I really feel for the people whose houses are not standing. I, we are incredibly, incredibly lucky.

TODD: For others, normalcy returns with the simple things; hanging out with friends in front of the house; playing with the dog.

UNIDENTIFIED FEMALE: Yes, you were a nervous wreck, you poor thing.

TODD: Just yards away, others are digging through the devastation.

UNIDENTIFIED FEMALE: You can feel the heat coming from it, still warm if there.

TODD: Here families escaped just a few minutes before the Witch fire destroyed her home. Despite almost total loss, some things did make it. When they returned they found these family pictures wrapped in had a blanket on a front yard. Eva's convinced a firefighter risked death getting these out for them.

EVA PETERS, LOST HOME IN WILDFIRE: Knowing that other people realize just what is important to the people in these houses, that they would be brave enough to not only care about trying to save your house but if they don't save it, go in there and try to save some of the memories that you can't recreate. They did what they could, and they are heroes. It is amazing what they have done.

TODD: Eva says she doesn't know hot firefighter was but has three words for him or her, god bless you. Despite all this devastation, she says not only are they going to move back in this area but they will rebuild right on this spot.

Wolf.

BLITZER: All right. Brian, thank you. Brian Todd, on the scene for us.

Crews trying to beat back the blazes have ten more to go and right now, crews are working to save property and people.

Earlier I spoke with Brian Fennessy, the San Diego fire department deputy chief. He was over at Qualcomm Stadium. I asked him how the firefighting heroes are fairing, and about reports they have been working 20 out of 24 hours.

DEP. CHIEF BRIAN FENNESSY, SAN DIEGO FIRE DEPT.: You bet. And that is the right word, heroes. You know, they are just beat down. I mean, the fire front that came throughout city of San Diego was overwhelming. You know 20 out of 24, that is not accurate. Try maybe 48 out of 48, maybe 60 out of 72. These firefighters, just unbelievable effort.

We were prepared this time. Unlike 2003, when we got surprised and the cedar fire came into the city of San Diego and burned hundreds of homes, we anticipated this fire coming. In fact, we determined it a threat to the city when it was 20 miles away and five hours away. It beat our timeline, it got here three hours, but this time we had equipment in place ready to meet that fire front head on.

And I'm not overemphasizing or exaggerating when I tell you about the heroics, not only of the firefighter but of police officers. I mean, I'm hearing stories about doors being kicked down. People being drug out of their homes. Animals being drug out of their homes. If you can imagine chaos. The firefighters couldn't see. We are talking 60 mile an hour winds plus. Smoke to the ground. Embers catching on them. Cars flying by. People panic. Surreal. And one of the more important things, we don't have any injuries. The evacuations went very, very well.

BLITZER: It was an amazing work. One quick question, Chief, before I let you go. You have been fighting fires for a long time. What would motivate someone to start a fire like this? Because they suspect arson in at least some of them.

FENNESSY: I'll tell you what. It gives me chills just to hear that. You know, I can't tell you what motivates people to do that. I know you know our arson teams have a number of reasons why people would do that but it is just unfathomable.

That Harris fire before the Witch fire started, our fire department helicopter was on and we air-vacced several of the firefighters that were burned and are currently in the burn ward and I tell you what, if those arsonists could see those people and see the pain that they are in now and their families are this, you know, it is just unimaginable.

BLITZER: The deputy fire chief speaking with me earlier. Firefighters are calling in air strikes to battle the flames.

We take you up in a super scooper tanker. We have exclusive pictures we will show you. Able to dump more than 1,000 gallons on the flame and refill with another load on the fly.

Long before he was a presidential candidate, Rudy Giuliani was a federal prosecutor targeting mobsters. Now there is word that they once targeted him.

Stay with us. You are in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: This just coming in to THE SITUATION ROOM. Authorities now say four charred bodies have been found just east of San Diego in a migrant camp. According to a supervisor with the U.S. border patrol, the bodies of three males and one female adult were found burned in a canyon about 33 miles east of San Diego. The four bodies were found by agents of the U.S. border patrol. The four are believed to be illegal immigrants. We are on top of this story. It looks like this death toll as a result of the fires in California increasing.

CNN's Kyra Phillips is joining us now with an exclusive look at the pair word against the fire. Tell our viewers where you are and what the air war is all about?

KYRA PHILLIPS, CNN CORRESPONDENT: You bet. I'm at Gillespie air field in El Cajon, California. That's in the San Diego are. Wolf, as you know, my hometown where I grew up.

You can see the Blackhawks. There's one that just landed right over here and it has a bucket like this attached to it. We just went airborne with them inside the air operations. This bucket here holds about 670 gallons of water and for the first time we were able to go up with the California National Guard in those Blackhawks. We hovered about 200 feet above the wildfire and we actually watched how they scoop the water up from Lake Poway, fill the baskets and doused the flames. It was unbelievable. You could see the firefighters on the ground giving the thumbs up.

And my pilot of the air operations today is Lieutenant Colonel Myles Williams. We just landed. And I got to tell you, one of the first things I said because this is your first day flying out here. When you were above the flames, what were you thinking? What was going through your mind?

LT. COL. MYLES WILLIAMS, CALIFORNIA NATIONAL GUARD: I hope I don't have a compressor stall.

PHILLIPS: There is lot to thing about. Tell me what is going through your mind?

WILLIAMS: It is power management. It's communication. It's watching the other aircrafts and talking to the other aircraft and talking to helicopter coordinator and managing the internal communications of the aircraft. So there's a lot of stuff going on.

PHILLIPS: When do you know you have done a good job?

WILLIAMS: When the ground crews, the guys out there really doing the hard work, give us a call on the radio and say good drop.

PHILLIPS: So they say that to you?

WILLIAMS: Oh, yes, that's a good drop. That's what we want to hear.

PHILLIPS: We were just 200 feet above that blaze. You could see the firefighters. What did you think, I mean, it was so smoky, you could smell the fire. It was intense.

WILLIAMS: Yes, you just, you just try to keep control of the aircraft, of course. Aircraft control is obviously paramount. And just fly safe. And try to get the job done.

PHILLIPS: Myles, thanks so much.

WILLIAMS: Thank you.

PHILLIPS: Actually Myles is being mellow right now but I can tell you when we landed, everybody's adrenalin was pumping. He was saying to me when you start going through thick smoke, Wolf, you have to worry about visibility. You have to worry about that water hitting the blaze right on target. But like Myles said, as soon as the firefighters look up or they radio in hey, thanks a lot, you helped us, you hit it perfectly. That's when they know they have done the job right.

BLITZER: It's dangerous enough, Kyra as you know, flying low altitude helicopters to begin with even when there is not a whole lot of air traffic, even when the weather is perfect. It is pretty dangerous out in these kinds of conditions. But these guys and gals, they have a job to do and they know what they are doing.

PHILLIPS: You know, you make a great point. Because as we came in lower and came above those fires, now I understand what everybody talking about when they were talking about the winds and how the winds were fueling the fires. That's what these guys were trying to do today was prevent the fire from merging with another. This was the Witch fire that we were hovering over. It's the second of the infamous fires out there. There's the Witch and the Harris. You could actually see how the water was cooling things down and helping sort of slow the flames to help those firefighters. It helped safe the lives and those homes, Wolf.

BLITZER: Can you still smell it in the air where you are right now? The smoke, the fire? PHILLIPS: Oh, absolutely. You can smell it from here. You can feel it. There is ash all over me. Even in the helicopter, it was blowing, because we had the doors open on the Blackhawks and it was all over us. That's how close we were. And it is intense. The smell was really strong.

BLITZER: Kyra Phillips, doing an excellent job for us as usual. Kyra, thanks very much. She is back home in San Diego.

Firefighters have been calling in air strikes on the raging infernos throughout southern California. But did they got a late start with the water and chemical bombardments? There is word that tanker aircraft and helicopters were actually grounded by bureaucracy. Let's turn to CNN's Randi Kaye. She is watching this story for us.

So Randi, what are you learning?

RANDI KAYE, CNN CORRESPONDENT: Wolf, we have learned that everybody seems to have an opinion about this. We too went on one of these water drops today just like Kyra did with the Navy actually, and you can see just how powerful this aerial assault can be. Our buckets were dropping more than 300 gallons of water on the fire below.

Now, Cal Fire is the state agency that is in charge of aerial assault in wildfires. And we asked why the aerial assault didn't occur sooner, why these planes weren't up in the air. Because the National Guard is telling us that Cal Fire didn't call for additional resources until late Sunday which, Wolf, was a full day after the first fire started here in California. So, the Cal Fire spokesman telling us today that the assets were there, but the weather was the problem. Well, here is what our pilot and also a former San Diego fire chief had to say about this.

Would you say that the state has made good use of those who could be airborne to fight this?

COMMANDER LEW GRAYE, U.S. NAVY PILOT: I think they have. I think the first day the fire was going so fast that there was not that much that could be done from the air.

JEFF BOWMAN, FORMER SAN DIEGO FIRE CHIEF: The federal assets that are staged around the United States, in my opinion, should have been moved not west coast, so that when the wind allowed them to fly, they could have been here and flying. My understanding is some of them still are not here.

KAYE: Now, the marines also told us today that they actually offered up their helicopters to help fight this wildfire on Sunday. But they weren't requested until two days later, on Tuesday, Wolf.

Wolf.

BLITZER: And Randi will have a lot more coming up at the top of the hour on a special edition of "AC 360." Randi, thanks very much.

The Harris fire has burned more than 80,000 acres in San Diego County. And only 10 percent contained right now. The entire thing is being monitored in real time by cameras on top of a mountain. And guess what, all available on line as well.

Let's bring in our internet reporter, Abbi Tatton. What are these cameras showing us, Abbi?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, these are the latest images we have just grabbed off the website a few minutes ago. Time lapsed video from this afternoon; four cameras on top Lion's Point. This is to the east of San Diego, still in San Diego County. You can see certainly some activity in the pictures there. But these are cameras that have been watching the Harris fire over the last few days sometimes from the very midst of it. And these pictures are nothing to what they grabbed yesterday morning.

I'm taking you to 3:00 a.m. yesterday. And again, time lapsed video. You will watch all through the day the flames a few feet away and then coming all the way around the cameras that are on this unmanned tower. The cameras part of a publicly funded research project led by a scientist at the University of California San Diego, by the name of Hans-Verner Braun. He told me it has been firefighters checking in own these images online to see the progress of the fire.

What you are looking at here is actually a You Tube video, a San Diego resident put all the images together and put it online. It has been very popular online today, tracing the Harris fire for the last few days. Now we're coming into the evening. This Harris fire still a big problem with more than 80,000 acres.

Wolf.

BLITZER: Thanks very much, Abbi for that.

He used to go after mobsters and drug dealers. That was back when Rudy Giuliani was a federal prosecutor. Turns out they may have been going after him. And the Giuliani campaign doesn't mind letting all of us know about it.

And Secretary of State Condoleezza Rice is the target of a red and pink protest, and barely bats an eye. Jeanne Moos standing by with a most unusual look.

(COMMERCIAL BREAK)

BLITZER: Drug dealers, mob members. Presidential candidate Rudy Giuliani battled them all back in the 1980s as a federal prosecutor. Now it appears some members of the mafia wanted to kill him many years ago.

CNN's Deborah Feyerick is in New York and has details.

Deb.

DEBORAH FEYERICK, CNN CORREPSONDENT: Wolf, when you go after the mob, chances are the mob may go after you. But if you survive, it's a pretty good story, especially if you are running for the White House, positioning yourself as tough on crime. It happened some 20 years ago. Mafia boss John Gotti trying hard to convince his crime bosses to put out a hit on a young ambitious federal prosecutor now running for president who at the time was making life difficult for the crime syndicate. The vote by the five capos turned out 3-2 against whacking Rudy Giuliani. Here is how he described it this morning on had a syndicated radio talk show.

RUDY GIULIANI, PRESIDENTIAL CANDIDATE: That was one vote I won, I guess.

UNIDENTIFIED MALE: Thankfully, that's a vote you want to win.

FEYERICK: The claim that New York City's five mafia bosses known as La Cosa Nostra talked about sanctioning a hit on Giuliani came to light Wednesday during a Brooklyn trial of a former FBI supervisor. Lindley Devecchio is accused of helping arrange four gang murders by linking information to a mob informant. According to the informant's file, "John Gotti and Carmine Persico were in favor of the hit. The bosses of the Luchese, Bonanno and Genovese families rejected the idea, despite strong efforts to convince them otherwise by Gotti and Persico." Giuliani, who says the FBI told him about the hit years ago, has told a similar story before.

GIULIANI: The one that really embarrassed me was when I was first U.S. attorney, they put out a contract to kill me for $800,000. After five and a half years of being U.S. attorney, they put out another contract to kill me, another group, for only $400,000.

UNIDENTIFIED MALE: That's all you are worth? Come on.

GIULIANI: So I thought my goodness, my value, my market capital would have been cut in half.

FEYERICK: Many people in the Giuliani orbit here in New York City have known about the alleged plot. But this is the first time anyone has heard it was supposedly discussed by the five crime bosses. The Giuliani campaign would not comment nor for that matter would about half had a dozen mob experts we reached out to.

BLITZER: Thanks very much more that. Deb Feyerick.

Jack Cafferty is joining us from New York with the Cafferty File.

Jack, you remember covering Giuliani when he was a federal prosecutor back in the 1980's.

JACK CAFFERTY, CNN CORRESPONDENT: Used to interview him fairly regularly on a local news program I did here in New York, "Live at Five." He made life very difficult for organized crime in the city. He busted up a lot of their operations. He put a lot of their people in prison. And it is not surprising that at some point they were discussing whether or not he ought to continue to thrive among us.

Anyway, the question this hour is this. Should the U.S. embassy in Iraq being offering cash to victims and relatives of those killed in the shootings that involved Blackwater? John writes from New Jersey, "I don't want my taxes paying restitution for criminal behavior committed by U.S. corporations. Blackwater pays is in it for the profit. How in the world can we be expected to cover their losses? Blackwater pays."

Bob in Maryland writes, "Yes, Blackwater was acting as the agent for the U.S. government, so the government is liable for their actions. If you create a frontier, don't be surprised to get cowboys. We should then take any costs out of Blackwater's hide but that won't happen. They know too much about their employers."

Joe in Los Angeles, "Blackwater should pay the settlement to the victims and the families, not had the U.S. government. I'm sure Blackwater is making had a mint contracting with state department. So make them pay up for any negligence or maliciousness themselves, like any other American corporation."

Al in West Virginia, "No, Jack. Typical Americanism, everything has a price, anyone can be bought. You think if necessity killed a civilian in the U.S. they would offer $12,500? No, but that's what we think an Iraqi's life, apparently is worth."

Jeff in Texas, "I disagree with condolence payments because it makes the U.S. look guilty even though it was a private organization. And it's very demeaning to anyone who lost a family member or friend. Overall it makes the U.S. look worse than they already do in the Middle East."

And finally this from Seth in Washington, "The state department shouldn't be offering money. They should be turning over suspects. If we expect Iraq to stand up as a sovereign nation of laws, then any corporate contractors operating in Iraq should be subject to Iraqi law, whether construction, transportation or security-related. If Blackwater security forces had gunned down a dozen people in Louisiana following Katrina, they would be on trial for murder right now. Or maybe they wouldn't. Now I'm scaring myself. I think it is getting ugly out there."

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

Wolf.

BLITZER: Jack, thanks very much.

Coming up at the top of the hour, a special edition of "AC 360, in the Line of Fire."

Anderson, what are you working on tonight?

ANDERSON COOPER, CNN CORRESPONDENT: Wolf, I'm in the Rancho Bernardo neighborhood near San Diego. We are following people as they return home. Some people returning to everything; others to nothing. A lot of emotion on this street today. We are also live on the fire lines. Firefighters still working around the clock, battling blazes that continue to move on.

Also tonight, the arson investigations are heating up. Two of the fires now believed to be the work of arsonists. We're going to take a very close look at the investigations and showing what investigators looking for on the ground.

And was enough done to prevent wildfires by government officials? We are keeping them honest on that.

Join me for that and more, Wolf, at the top of the hour.

BLITZER: Thanks, Anderson very much. Mock blood and real controversy; we're going to take a closer look at the anti-war group behind a close encounter with the secretary of state.

(COMMERCIAL BREAK)

BLITZER: A free-throw provocative image, an in your face protest. This encounter between an anti-war activist and the secretary of state was hard to ignore.

Our Jeanne Moos takes this most unusual look.

JEANNE MOOS, CNN CORRESPONDENT: It's amazing how much newspaper ink a little red food dye on your hands will get you. At least if those bloody hands are shoved in the face of the secretary of state. Newspapers that printed a black and white version missed the point. What a difference color makes.

DESIREE FAIROOZ, CODE PINK PROTESTOR: War criminals.

MOOS: Desiree Fairooz from the anti-war group Code Pink and four others ended up getting arrested. That ever so arresting image ended up everywhere from "The New York Times" picture of the day to Rosie O'Donnells blog to conservative websites. Anti-war posters wrote, the look on Condi's face is priceless. What I found most striking is the lack of any look.

FAIROOZ: It was an opportunity to see her face to face, eye to eye, woman to woman, one to one and let her know what I thought of her.

MOOS: Fairooz is a Texas teacher and temporarily left her husband and grown kids and moved to Washington to live at the Code Pink house. The one with the names of the departed Bush administration biggie's checked off. From curtains to mailbox, the house is decorated in pink. This is where the group's members sit and watch congressional hearings so they can relay instructions to protesters trying to get on camera.

SAMANTHA MILLER, CODE PINK: We test our hearings and let them know if they need to move a little bit to the left.

MOOS: That way they can position the assess sign rabbit ears precisely above the witness's head.

The White House had harsh words for Code Pink's bloody hands stunt.

DANA PERINO, WHITE HOUSE PRESS SECRETARY: I think it is despicable and unfortunately it seems increasingly Congress is being run by Code Pink.

MOOS: This wasn't Fairooz's first action. There she was last month trying to work an anti-war banner behind a former national security advisor.

UNIDENTIFIED MALE: You have to get that sign u-turn.

FAIROOZ: Come on, please.

What's the matter?

UNIDENTIFIED MALE: Goodbye.

MOOS: The protesters relented. As for the Condi incident, one critic posted that lady is lucky she didn't get shot. And some praised cool as a cucumber Condi and chatted aimlessly as the protesters was dragged off.

FAIROOZ: I think she's actually cold and calculating.

MOOS: Fairooz concedes her husband is a bit cold about her leaving to oppose the war but you've got to hand it to Code Pink, they know how to create images that are bloody irresistible to the press.

Jeanne Moos, CNN.

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