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THE SITUATION ROOM

Fed Sends Wall Street Spiraling; Leaving the Fix Up to Congress; Looming Threat of Government Shutdown; Honoring Heroes for Five Years; Interview with U.S. Ambassador to the U.N. Susan Rice; Western Delegations Walk Out of Ahmadinejad Speech; Palestinian Quest for Statehood Prompts Israeli Concerns; Aging Ohio Bridge Serves as Jobs Bill Backdrop; Addressing Global Unease

Aired September 22, 2011 - 17:00   ET

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


WOLF BLITZER, HOST: Brooke, thanks very much.

Happening now, a mass walkout at the United Nations after the Iranian president, Mahmoud Ahmadinejad, unleashes a vicious tirade against the United States. There's disturbing questions about the September 11th attacks, a jab at the U.S. operation that killed bin Laden and a whole lot more.

Plus, the United States gets tough with Pakistan, holding the country, at least partially, to blame for a string of deadly insurgent attacks in Afghanistan. We're learning new details about dramatic action the Pentagon and the CIA are taking.

And Wall Street plummets amidst new fears of a looming global economic crisis.

I'm Wolf Blitzer in New York.

You're in THE SITUATION ROOM.

(BELL RINGING)

BLITZER: But we begin with a tumultuous day on Wall Street. The Dow closing down 391 points, about 3.5 percent, after the Federal Reserve sent markets around the world spiraling with a grim new economic forecast.

Let's get right to CNN's Alison Kosik.

She's monitoring all that's going on on the New York Stock Exchange, where at one point today, Alison, the Dow tanked morning 500 points.

What's going on?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: That's right.

You know what's going on?

These worries about a recession really were amplified in the markets today. And I'm not just talking about in the U.S., but overseas, as well. The Federal Reserve actually spooked everybody first. This was yesterday. The Fed coming out yesterday, giving a really bleak assessment of the U.S. economy, warning of significant downside risks to the economic outlook. Translation there, that the economy will get significantly weaker.

Then overnight, we got some weak manufacturing reports out of Europe, out of the U.K., even China, which had been an engine of growth out of the Great Recession. So that really spooked the markets, as well, because you have to remember, Wolf, you know, we're all interconnected. It's only been one economist to tell us you know what, Europe is probably in a recession and the U.S. is teetering on the brink of one -- Wolf.

BLITZER: So, basically, it doesn't look very promising right now.

What are they bracing for tomorrow?

KOSIK: Tomorrow, we're -- we're trying to see if we're going to -- if this volatility may -- may sort of come -- come to a head, sort of, you know, calm down a bit. You know, the fact is, is that, you know, the markets had been looking to the Fed for some help. And the Fed came out with this stimulus measure to basically sell short-term bonds and buy up longer term ones to, hopefully, lower long-term interest rates, with the idea of sparking these lower interest rates to get people to refinance their mortgages, get banks -- get businesses, rather, to reinvest and to invest and grow their businesses and ultimately, hire.

But many people are wondering if this is really going to make any difference at all, because the economy is having such a problem growing jobs at this point. One analyst says, you know, with this stimulus measure, it can't make the economy worse. But many say they don't think it's going to make the economy any better, either -- Wolf.

BLITZER: Amid growing concerns of a -- potentially, of a double dip recession.

All right, Alison.

Thank you.

In Washington, Republicans seem to be sending the Federal Reserve message a blunt message when to stay out of it when it comes to turning this crisis around.

Let's go to CNN's Joe Johns.

He's working this part of the story -- Joe.

JOE JOHNS, CNN CORRESPONDENT: Wolf, members of Congress have tried to meddle with the Fed before. But when you look at the whole picture, what we've been hearing from Republicans on the campaign trail is now being echoed on Capitol Hill.

(BEGIN VIDEOTAPE)

JOHNS (voice-over): Some found it hard to believe with job growth stagnant and fears mounting about a double dip recession.

First, the four top Republicans in the House and Senate sent a letter to Fed Chairman Ben Bernanke telling him not to do anything to stimulate the economy out of fear it could make things worse. And then when the speaker of the House got asked about it, he said the Fed ought to leave the fix up to the political system.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: It appears to us that they're taking actions because they don't believe the political system can do what needs to be done. Frankly, I think that's enabling the political process rather than forcing the political process to do what it should do. And that's to deal with our deficit and our debt.

JOHNS: But wasn't it the political system that made such a mess of raising the debt ceiling just last month that the country's credit rating got downgraded?

And it's not like both parties decided to send a consensus message to the Fed asking for restraint. No. This was from four leaders of one party.

A former top economist at the Fed said he was shocked.

JOSEPH GAGNON, PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS: Especially because it's in -- because it's in a partisan way. If this were with the broad support of both parties and the president, that would be one thing. But to have it be only by the leaders of one party is worrisome.

JOHNS: Worrisome even to some Republicans. Former Bush administration official, Tony Fratto, who worked for the Treasury Department, Tweeted: "Even if I agreed with the GOP letter -- I don't -- I disagree with the effort to put public political pressure on Bernanke."

Bernanke, by the way, is an appointee of Republican president, George W. Bush, which makes it all the more curious that Republicans now running for president are slamming Bernanke for his sometimes controversial interventions into the U.S. economy.

It got almost scary when Rick Perry weighed in.

GOV. RICK PERRY (R), TEXAS: We would treat them pretty ugly down in Texas. I mean printing more money to play politics at this particular time in American history is almost treacherous -- or treasonous.

JOHNS: Newt Gingrich said instead of reappointing Bernanke, he'd send him packing.

NEWT GINGRICH (R), FORMER SPEAKER OF THE HOUSE: I would fire him tomorrow.

(END VIDEO TAPE)

JOHNS: Firing the Fed chairman isn't likely. However, the president doesn't have to reappoint him at the end of his term in 2014 -- Wolf.

BLITZER: That controversy not going away.

Joe, thank you.

Let's get to another economic battle playing out on Capitol Hill in Washington. This one, again, with the potential to trigger a government shutdown only eight days from now. Yesterday, we told you about a House bill which failed, in part, because of a dispute over emergency relief funding.

Today, we're learning Republican leaders will propose cutting more spending to offset the amount of disaster relief money in the measure.

Let's talk about it with our chief political analyst, Gloria Borger -- Gloria, the House speaker, John Boehner, was pretty frustrated today.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Yes.

BLITZER: But you really can't blame him.

BORGER: No, I don't blame him. You know, in this situation, Wolf, it probably helps to be one of 12 children growing up, because he probably learned a lot of patience.

You know, on the one hand, I think he was sort of surprised that he lost 48 Republicans on what was supposed to be kind of a routine bipartisan measure, because they thought this bill was way too expensive. And then, on the other hand, he lost the Democrats who didn't want to pay for disaster relief at all with spending cuts.

So I think that, you know, this is a speaker who's completely frustrated, Wolf. And in the end, at the beginning of the day today, he told Republicans, look, this could boomerang and we end -- may end up having to cave to the Democrats and have this cost us more money.

So take a listen.

(BEGIN VIDEO CLIP)

BOEHNER: You know, they could vote no. But what they're, in essence, doing, is they're voting to spend more money, because that's exactly what will happen.

(END VIDEO CLIP)

BORGER: So the latest option, Wolf, may to take more money from the Department of Energy, to get more Republicans on board.

But that would mean that he would lose Democrats. And even if it passed, who knows what would happen in the Senate.

So, Wolf, it's just more of the same that we've been seeing this entire summer.

BLITZER: So I guess the bottom line question, Gloria, is there going to be a government shutdown?

BORGER: Well, I hope not. I don't think so. House Speaker John Boehner said today, look, there's not going to be a government shutdown. Hopefully, this vote, if it occurs this evening, will help a allay some of the problems.

But really, this just shows you the difficulties that this speaker has keeping his own troops in line. I mean these Republicans, lots of them, I was told, are worried about being primaried by more conservative Republicans in their districts. So they do not want to vote for any new spending, even if it's for disaster relief, without offsetting with some -- with some spending cuts.

It's very difficult.

BLITZER: You and I remember, Gloria, and a lot of our viewers, of course, remember that, when Republicans shut down the government back in 1995...

BORGER: Right.

BLITZER: -- it helped the then president, Bill Clinton, the following year, get reelected because the polls showed the American public blamed the Republicans for the shutdown.

Here's the question -- are Democrats hoping, privately, for the same thing right now?

BORGER: Well, you know, in 1995, Wolf, it was a bit of a different situation, right, because the Republicans controlled both the House and Senate. I think now the Democrats like having John Boehner in an uncomfortable position. But, in the end, the Democrats I talked to understand that this would boomerang against all of them. I mean you know Congress already has a 14 percent approval rating. If this were to lead to a government shutdown, which, again, I think is unlikely. But if it would, I think they would have an approval rating somewhere in the negative territory, if that's possible.

So I don't think anybody wants to bring this to the brink.

BLITZER: Yes. I don't think there will be a government shutdown.

BORGER: Right.

BLITZER: All right, Gloria.

BORGER: Right.

BLITZER: Thank you. Meanwhile, the Iranian president, Mahmoud Ahmadinejad, launching a fiery war of words against the United States at the United Nations. You're going to want to hear what the U.S. ambassador to the U.N. is saying and she's responding. My interview with Ambassador Susan Rice. That's coming up.

Plus, bags of yellow powder marked "radioactive" -- CNN's exclusive access in Libya.

(COMMERCIAL BREAK)

BLITZER: For five years, we've been introducing you to individuals, our CNN Heroes. We've revealed out top 10 heroes for 2011. The nominations have come from you.

And now, our own Anderson Cooper explains how you can help choose one as our Hero of the Year.

ANDERSON COOPER, CNN ANCHOR: Now that we've announced the top 10 CNN Heroes of 2001, I want to show you how you can vote for the CNN Hero of the year. This is the main page of CNNHeroes.com. Now, down here, you'll notice the list of all top 10 CNN Heroes. Each one will receive $50,000, plus a shot at becoming CNN Hero of the Year.

That's where you come in. Here's how you can vote for your favorite CNN Hero.

First, you can learn more about all the Heroes by clicking on their fan pages. I want to show you how -- how to do that. As an example, I'm going to go here and click on Patrice Millet. We're just using Patrice as an example to walk you through the voting process. Any of the 10 nominees would be worthy of being CNN Hero of the Year and that is entirely up to you.

Now, After you look at each fan page, pick the person who inspires you the most and click on "vote now," which is right over here, on the right.

Click on that and a new page comes up. It shows you all the top 10 heroes. Choose the person you want to vote for.

For now I'm going to, say, randomly pick Taryn Davis. So if I pick Taryn Davis, again, just as an example, her photo will show up here, under the "your selection" area. Then it shows you a security code over here. You type in that security code. You click on the red box, which is over here for vote. And there's something new this year. You can vote online and on your mobile device, your laptop, your tablet, pretty much any Smartphone or cell phone with a browser. Just go to CNNHeroes.com.

And remember, you can vote up to 10 times a day for your favorite hero through Wednesday, December 7th.

BLITZER: And the winner will be announced in an all star tribute December 11th.

Jack Cafferty, you've got The Cafferty File.

JACK CAFFERTY, CNN CORRESPONDENT: You're my hero, Wolf.

Welcome to the big city.

BLITZER: It's nice to be here.

CAFFERTY: As the Republican race for the White House heats up, here's something the GOP probably is not too comfortable with.

WOLF BLITZER, HOST: Brooke, thanks very much.

Happening now, a mass walkout at the United Nations after the Iranian president, Mahmoud Ahmadinejad, unleashes a vicious tirade against the United States. There's disturbing questions about the September 11th attacks, a jab at the U.S. operation that killed bin Laden and a whole lot more.

Plus, the United States gets tough with Pakistan, holding the country, at least partially, to blame for a string of deadly insurgent attacks in Afghanistan. We're learning new details about dramatic action the Pentagon and the CIA are taking.

And Wall Street plummets amidst new fears of a looming global economic crisis.

I'm Wolf Blitzer in New York.

You're in THE SITUATION ROOM.

(BELL RINGING)

BLITZER: But we begin with a tumultuous day on Wall Street. The Dow closing down 391 points, about 3.5 percent, after the Federal Reserve sent markets around the world spiraling with a grim new economic forecast.

Let's get right to CNN's Alison Kosik.

She's monitoring all that's going on on the New York Stock Exchange, where at one point today, Alison, the Dow tanked morning 500 points.

What's going on?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: That's right.

You know what's going on?

These worries about a recession really were amplified in the markets today. And I'm not just talking about in the U.S., but overseas, as well. The Federal Reserve actually spooked everybody first. This was yesterday. The Fed coming out yesterday, giving a really bleak assessment of the U.S. economy, warning of significant downside risks to the economic outlook. Translation there, that the economy will get significantly weaker. Then overnight, we got some weak manufacturing reports out of Europe, out of the U.K., even China, which had been an engine of growth out of the Great Recession. So that really spooked the markets, as well, because you have to remember, Wolf, you know, we're all interconnected. It's only been one economist to tell us you know what, Europe is probably in a recession and the U.S. is teetering on the brink of one -- Wolf.

BLITZER: So, basically, it doesn't look very promising right now.

What are they bracing for tomorrow?

KOSIK: Tomorrow, we're -- we're trying to see if we're going to -- if this volatility may -- may sort of come -- come to a head, sort of, you know, calm down a bit. You know, the fact is, is that, you know, the markets had been looking to the Fed for some help. And the Fed came out with this stimulus measure to basically sell short-term bonds and buy up longer term ones to, hopefully, lower long-term interest rates, with the idea of sparking these lower interest rates to get people to refinance their mortgages, get banks -- get businesses, rather, to reinvest and to invest and grow their businesses and ultimately, hire.

But many people are wondering if this is really going to make any difference at all, because the economy is having such a problem growing jobs at this point. One analyst says, you know, with this stimulus measure, it can't make the economy worse. But many say they don't think it's going to make the economy any better, either -- Wolf.

BLITZER: Amid growing concerns of a -- potentially, of a double dip recession.

All right, Alison.

Thank you.

In Washington, Republicans seem to be sending the Federal Reserve message a blunt message when to stay out of it when it comes to turning this crisis around.

Let's go to CNN's Joe Johns.

He's working this part of the story -- Joe.

JOE JOHNS, CNN CORRESPONDENT: Wolf, members of Congress have tried to meddle with the Fed before. But when you look at the whole picture, what we've been hearing from Republicans on the campaign trail is now being echoed on Capitol Hill.

(BEGIN VIDEOTAPE)

JOHNS (voice-over): Some found it hard to believe with job growth stagnant and fears mounting about a double dip recession.

First, the four top Republicans in the House and Senate sent a letter to Fed Chairman Ben Bernanke telling him not to do anything to stimulate the economy out of fear it could make things worse. And then when the speaker of the House got asked about it, he said the Fed ought to leave the fix up to the political system.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: It appears to us that they're taking actions because they don't believe the political system can do what needs to be done. Frankly, I think that's enabling the political process rather than forcing the political process to do what it should do. And that's to deal with our deficit and our debt.

JOHNS: But wasn't it the political system that made such a mess of raising the debt ceiling just last month that the country's credit rating got downgraded?

And it's not like both parties decided to send a consensus message to the Fed asking for restraint. No. This was from four leaders of one party.

A former top economist at the Fed said he was shocked.

JOSEPH GAGNON, PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS: Especially because it's in -- because it's in a partisan way. If this were with the broad support of both parties and the president, that would be one thing. But to have it be only by the leaders of one party is worrisome.

JOHNS: Worrisome even to some Republicans. Former Bush administration official, Tony Fratto, who worked for the Treasury Department, Tweeted: "Even if I agreed with the GOP letter -- I don't -- I disagree with the effort to put public political pressure on Bernanke."

Bernanke, by the way, is an appointee of Republican president, George W. Bush, which makes it all the more curious that Republicans now running for president are slamming Bernanke for his sometimes controversial interventions into the U.S. economy.

It got almost scary when Rick Perry weighed in.

GOV. RICK PERRY (R), TEXAS: We would treat them pretty ugly down in Texas. I mean printing more money to play politics at this particular time in American history is almost treacherous -- or treasonous.

JOHNS: Newt Gingrich said instead of reappointing Bernanke, he'd send him packing.

NEWT GINGRICH (R), FORMER SPEAKER OF THE HOUSE: I would fire him tomorrow.

(END VIDEO TAPE)

JOHNS: Firing the Fed chairman isn't likely. However, the president doesn't have to reappoint him at the end of his term in 2014 -- Wolf.

BLITZER: That controversy not going away.

Joe, thank you.

Let's get to another economic battle playing out on Capitol Hill in Washington. This one, again, with the potential to trigger a government shutdown only eight days from now. Yesterday, we told you about a House bill which failed, in part, because of a dispute over emergency relief funding.

Today, we're learning Republican leaders will propose cutting more spending to offset the amount of disaster relief money in the measure.

Let's talk about it with our chief political analyst, Gloria Borger -- Gloria, the House speaker, John Boehner, was pretty frustrated today.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Yes.

BLITZER: But you really can't blame him.

BORGER: No, I don't blame him. You know, in this situation, Wolf, it probably helps to be one of 12 children growing up, because he probably learned a lot of patience.

You know, on the one hand, I think he was sort of surprised that he lost 48 Republicans on what was supposed to be kind of a routine bipartisan measure, because they thought this bill was way too expensive. And then, on the other hand, he lost the Democrats who didn't want to pay for disaster relief at all with spending cuts.

So I think that, you know, this is a speaker who's completely frustrated, Wolf. And in the end, at the beginning of the day today, he told Republicans, look, this could boomerang and we end -- may end up having to cave to the Democrats and have this cost us more money.

So take a listen.

(BEGIN VIDEO CLIP)

BOEHNER: You know, they could vote no. But what they're, in essence, doing, is they're voting to spend more money, because that's exactly what will happen.

(END VIDEO CLIP)

BORGER: So the latest option, Wolf, may to take more money from the Department of Energy, to get more Republicans on board.

But that would mean that he would lose Democrats. And even if it passed, who knows what would happen in the Senate.

So, Wolf, it's just more of the same that we've been seeing this entire summer.

BLITZER: So I guess the bottom line question, Gloria, is there going to be a government shutdown?

BORGER: Well, I hope not. I don't think so. House Speaker John Boehner said today, look, there's not going to be a government shutdown. Hopefully, this vote, if it occurs this evening, will help a allay some of the problems.

But really, this just shows you the difficulties that this speaker has keeping his own troops in line. I mean these Republicans, lots of them, I was told, are worried about being primaried by more conservative Republicans in their districts. So they do not want to vote for any new spending, even if it's for disaster relief, without offsetting with some -- with some spending cuts.

It's very difficult.

BLITZER: You and I remember, Gloria, and a lot of our viewers, of course, remember that, when Republicans shut down the government back in 1995...

BORGER: Right.

BLITZER: -- it helped the then president, Bill Clinton, the following year, get reelected because the polls showed the American public blamed the Republicans for the shutdown.

Here's the question -- are Democrats hoping, privately, for the same thing right now?

BORGER: Well, you know, in 1995, Wolf, it was a bit of a different situation, right, because the Republicans controlled both the House and Senate. I think now the Democrats like having John Boehner in an uncomfortable position. But, in the end, the Democrats I talked to understand that this would boomerang against all of them. I mean you know Congress already has a 14 percent approval rating. If this were to lead to a government shutdown, which, again, I think is unlikely. But if it would, I think they would have an approval rating somewhere in the negative territory, if that's possible.

So I don't think anybody wants to bring this to the brink.

BLITZER: Yes. I don't think there will be a government shutdown.

BORGER: Right.

BLITZER: All right, Gloria.

BORGER: Right.

BLITZER: Thank you.

Meanwhile, the Iranian president, Mahmoud Ahmadinejad, launching a fiery war of words against the United States at the United Nations. You're going to want to hear what the U.S. ambassador to the U.N. is saying and she's responding. My interview with Ambassador Susan Rice. That's coming up. Plus, bags of yellow powder marked "radioactive" -- CNN's exclusive access in Libya.

(COMMERCIAL BREAK)

BLITZER: For five years, we've been introducing you to individuals, our CNN Heroes. We've revealed out top 10 heroes for 2011. The nominations have come from you.

And now, our own Anderson Cooper explains how you can help choose one as our Hero of the Year.

ANDERSON COOPER, CNN ANCHOR: Now that we've announced the top 10 CNN Heroes of 2001, I want to show you how you can vote for the CNN Hero of the year. This is the main page of CNNHeroes.com. Now, down here, you'll notice the list of all top 10 CNN Heroes. Each one will receive $50,000, plus a shot at becoming CNN Hero of the Year.

That's where you come in. Here's how you can vote for your favorite CNN Hero.

First, you can learn more about all the Heroes by clicking on their fan pages. I want to show you how -- how to do that. As an example, I'm going to go here and click on Patrice Millet. We're just using Patrice as an example to walk you through the voting process. Any of the 10 nominees would be worthy of being CNN Hero of the Year and that is entirely up to you.

Now, After you look at each fan page, pick the person who inspires you the most and click on "vote now," which is right over here, on the right.

Click on that and a new page comes up. It shows you all the top 10 heroes. Choose the person you want to vote for.

For now I'm going to, say, randomly pick Taryn Davis. So if I pick Taryn Davis, again, just as an example, her photo will show up here, under the "your selection" area. Then it shows you a security code over here. You type in that security code. You click on the red box, which is over here for vote. And there's something new this year. You can vote online and on your mobile device, your laptop, your tablet, pretty much any Smartphone or cell phone with a browser. Just go to CNNHeroes.com.

And remember, you can vote up to 10 times a day for your favorite hero through Wednesday, December 7th.

BLITZER: And the winner will be announced in an all star tribute December 11th.

Jack Cafferty, you've got "The Cafferty File."

JACK CAFFERTY, CNN CONTRIBUTOR: You're my hero, Wolf.

Welcome to the big city.

BLITZER: It's nice to be here.

CAFFERTY: As the Republican race for the White House heats up, here's something the GOP probably is not too comfortable with. Most of the 10 poorest states in the country are Republican. Mississippi's the poorest, followed by Arkansas, Tennessee, West Virginia, Louisiana, Montana, South Carolina, Kentucky, Alabama, and North Carolina. And the list doesn't even include Texas, where Rick Perry is the governor and one in five people lives in poverty.

In a piece on CNN.com, Roland Martin writes that Republicans expect to one all 10 of these states in 2012, although President Obama did win North Carolina by a slim margin in 2008 and West Virginia is usually considered Democratic. Martin points out despite the red leanings in these states, you don't hear a lot about poverty. In fact, the word "poor" has rarely come up at the debates thus far. The only exceptions were Rick Santorum discussing welfare reform, Ron Paul suggesting the U.S. get rid of the minimum wage, and Mitt Romney using the phrase "energy poor."

Overall Republicans believe their economic agenda is the best way to get people back to work, and many in the GOP are quick to blame President Obama for the rise in the poverty rate. But how about addressing the root causes of poverty more directly, especially when millions of people in these so-called red states are suffering?

The Census Bureau reports 46.2 million Americans live below the poverty line. That's a record. That translates to the grand total of $22,000 bucks a year for a family of four. Minorities are especially hard hit -- 27 percent of blacks live in poverty, 26 percent of Hispanics, 10 percent of whites.

So here's the question: What does it say that most of the ten poorest states in the country are all Republican?

Go to CNN.com/CaffertyFile and post a comment on my blog, or go to THE SITUATION ROOM Facebook page.

And one additional note -- CNN is looking closely at the subject of poverty all this week. So if you want to know more, just where it is.

BLITZER: Good idea. Always leave the dial where it is. Even if they don't want to know more about this, just leave it. Those are orders. Thank you.

It was a computer hacking system that brought down Sony's PlayStation network for weeks. The FBI now announcing an arrest.

And taking the jobs bill campaign to the opposition's backyard -- President Obama's message in Ohio.

(COMMERCIAL BREAK)

BLITZER: Jaycee Dugard, whose girl was kidnapped and held for 18 years, is now taking legal action. Our own Lisa Sylvester is monitoring that. Some of the other top stories in THE SITUATION ROOM right now.

What's going on, Lisa?

LISA SYLVESTER, CNN CORRESPONDENT: Hi, there, Wolf.

Dugard was only 11 when kidnapped in 1991. Now, she is suing the federal government for negligence. The complaint says the government had parole supervision and responsibility for her kidnapper when Dugard was abducted. Says any money will be donated to the Jaycee Foundation, which helps families recover from abduction and other traumatic experience.

A member of the hacking group is under arrest in connection with the massive attack on the Sony PlayStation network. The FBI arrested 23-year-old Cody Cressinger of Phoenix this morning. The network was down for weeks and millions of users accounts were compromised in the April hacking.

France is issuing its first fine connected to a controversial law banning burqas. The woman sought out the $162 fine to take the case to a higher court. Authorities say the ban on Islamic face covering is a national security issue as well as a defense of the country's secular values. Critics though say it is a violation of religious freedom.

BLITZER: Lisa, thank you.

BLITZER: Is Iran building a nuclear bomb? Just ahead, my interview with U.S. ambassador to the United Nations. You're going to want to hear why she says she's gravely concerned.

Plus, Rick Perry and Mitt Romney battling for the top spot in the White House. We're going to tell you which one is getting a new boost in a critical campaign state.

(COMMERCIAL BREAK)

BLITZER: Iranian President Mahmoud Ahmadinejad incites a walkout at the United Nations with a speech full of fierce attack attacks on the United States and its allies in the western world. All of this coming at a time of heightened concern about Iran and its nuclear capabilities.

(BEGIN VIDEOTAPE)

BLITZER: Susan Rice is the United States ambassador to the United Nations.

Ambassador Rice, thanks very much for joining us.

Quickly, on Iran, is there any doubt from the U.S. government's perspective that Iran is trying to build a nuclear bomb?

SUSAN RICE, U.S. AMBASSADOR TO THE U.N.: We are gravely concerned about Iran's nuclear ambitions and their nuclear program and that's why we've taken such aggressive steps to try to set them back. The most important step we took was a little over a year ago here at the United Nations when we got the toughest sanctions regime on Iran imposed. We've also paired that with strong domestic legislation and we've utilized that to its fullest ability. We've got the European Union and a number of important trading partners to increase the economic pressure.

And that is precisely because we're concerned about the program, and it has to either be resolved, we hope, through negotiations or if not, through increased pressure.

BLITZER: But as far as the intelligence is concerned, you think that they are absolutely --

RICE: You know better than to expect me to comment on intelligence. But let me just be very clear -- the United States is gravely concerned about Iran's nuclear program and its ambitions to have what we believe is nuclear weapon.

BLITZER: Was there ever serious consideration to not allowing Ahmadinejad to come this year to the United Nations? Michele Bachmann was on my show this week --

RICE: Michele Bachmann was perhaps not aware that we have a treaty obligation as the host state of the United Nations. We are obliged when we agreed to take that responsibility in 1945 to allow representatives of all U.N. member states to travel to the United Nations.

Now, in the case of Ahmadinejad and some other unsavory heads of state who are under sanctions or other violations, they have a very limited ability. When they come to the United States, they're not allowed to travel outside of New York City. They can't engage in the normal activities that a head of state in good standing could. We have that ability and we have imposed those limitations on Ahmadinejad every year.

But we would be in violation of international law in our commitments in hosting the United Nations if we were to bar him or any other head of state from visiting.

BLITZER: Let's talk about the Israeli-Palestinian --

RICE: Can I just say before we go to that, we find what Ahmadinejad does and says when he comes to the United Nations absolutely odious, hateful, anti-Semitic, unacceptable, which is why the United States for three consecutive years, including today, have led a walkout of his speech. Inevitably he comes here and says something outrageous, dishonest, and offensive, and that leads to a walkout.

So there's no indication or no suggestion that by his presence here that there is any acceptance of his policies, his rhetoric, or anything else, absolutely the opposite, and that's why many of our allies join with us in that walkout in making that point very clear.

BLITZER: That certainly was a dramatic moment. Once again, the Israeli-Palestinian conflict, Palestinians are deeply disappointed by what the president said this week, maybe more what the president didn't say this week, mainly Israel must go back to the 67 lines with mutually agreed land swaps. And they're even suggesting that from their perspective, the U.S. role in negotiating the Israeli-Palestinian agreement is at the end right now. They're looking to France and other countries. You're smiling.

RICE: First of all, the United States remains centrally involved in this effort because both sides now that only the United States can play the crucial role that needs to be played.

But that doesn't mean there isn't a space and need for others to be on board. In fact, ever since the president gave his important speeches in May in which he laid out so-called principles, U.S. vision for peace, in which he talked about the need for there to be an agreement based on the 67 lines with mutually agreed swaps, it was because you know, we want very much to see other partners join us.

And we've been working on that through the quartet, through our European contacts and our contacts with other states in the region. So this is not a U.S. or others prospect. This is everybody together. But the U.S. will certainly continue to play a role.

But Wolf, the Palestinian concern about what President Obama said yesterday, first of all, the United States has been clear from the outset that the only way to accomplish the goal we all share of a Palestinian is through direct negotiations. There's no shortcut. That's just a statement of fact.

BLITZER: So, when President Abbas tomorrow presents a letter to the U.N. Security Council calling for full membership for the Palestinians, what happens?

RICE: Well, that's going to launch -- and we fully expect that will happen -- a complicated procedural process where he will submit the letter to the secretary-general of the United Nations. The secretary-general will review it, and assuming it's in proper order, he's obliged to transmit that to the Security Council.

I suspect that starting early next week, the Security Council will begin private discussions of that letter the application, and we'll be in that case able to gauge the degree of readiness or concern or opposition. But the Palestinians know that this is going to result in their becoming full members of the United Nations, because as we've made very plain, if it were to come to it, and if it were necessary, the United States would exercise its veto.

BLITZER: Do you have nine votes lined up among the 15 in the Security Council that would block any such vote?

RICE: We need to see where each member state comes out in this process. There's lots of discussions, but nobody has final word on that until members sit down and declare their positions.

But I can tell you this, Wolf, there are several states that share our concern that this is a premature action and a counterproductive one. And various states come to that conclusion from different perspectives, for different reasons, but the United States will by no means be alone in making the point this is not the way to achieve a Palestinian state. Much as we all want to see that happen, this will, we're very concerned, only set that back process backwards.

BLITZER: Good luck.

RICE: Thank you.

BLITZER: Ambassador Susan Rice.

RICE: Good to see you.

BLITZER: Good to see you here in the United Nations.

RICE: Good to be with you.

(END VIDEOTAPE)

BLITZER: CNN has obtained rare, up-close video of Israeli Defense Forces training and supplying settlers with military weapons. The Israeli government is concerned that the Palestinian quest for statehood could trigger widespread unrest in those Palestinian territories where these Israeli settlements are located.

Here's CNN's Fionnuala Sweeney.

(BEGIN VIDEOTAPE)

FIONNUALA SWEENEY, CNN INTERNATIONAL CORRESPONDENT (voice-over): A nighttime military activity gets under way in the Israeli settlement of Susiya in the West Bank, but this is not the Israeli army. These are local settlers on exercise.

The scenario: a Palestinian gunman has come into their settlement and taken over their house. All are volunteers, reservists in the Israeli army, teachers, farmers, businessmen and lawyers by day. By night, fast responders prepared to defend their settlement in the event of an attack until the army arrives.

Often a flash point for violence between Israelis and Palestinians, the West Bank is a little more tense than unusual these days now that Mahmoud Abbas has gone to the United Nations to seek recognition of a Palestinian state. What might happen on the ground after he leaves New York is at the back of everyone's mind.

YITZHAK KLEIN, SUSIYA RAPID DEPLOYMENT FORCE (through translator): We have no interest in what's happening this month of September. However, we won't let anyone into the town because that's what we're here for.

SWEENEY: The team coordinates their actions with the Israel Defense Forces. Their equipment is issued by the army. Elsewhere in the West Bank, on a main road used by both Israelis and Palestinians, people power of a different kind. But these are not Palestinians showing support for Mahmoud Abbas at the U.N., but local and international members of recently formed committees, first responders to any attacks on Palestinian villages.

TOM ROBERT, POPULAR COMMITTEE: We just got a call from (INAUDIBLE), just south of Nablus. Settlers from Yitza (ph) settlement have just come into the village, and they're attacking people in the village and attacking cars and property.

SWEENEY: The cars are welcomed and guided through the village in question to the spot where the Israeli army has been keeping settlers and villagers apart. The committee's stated purpose, to document disturbances to pass on to human rights groups and journalists in order to help Palestinian villagers. Their actions aren't coordinated with the Israeli army.

FOUD ATTA, POPULAR LOCAL COMMITTEE (through translator): Journalists are not interested in the story here, and the coverage of Palestinians being attacked by settlers is neglected. That's why we're trying to document what's going on here. We hope in the future we can help more.

SWEENEY: By the time they arrive at the scene of the trouble, the settlers are nowhere to be seen. The Palestinian youth now turn their anger on the army. They're soon dispersed by tear gas from the soldiers. When the diplomatic smoke clears in New York, thousands of miles away, nerves on the ground will still be unsettled.

Fionnuala Sweeney, CNN, Jerusalem.

(END VIDEOTAPE)

BLITZER: Just a couple of hours ago here in New York, I had the rare opportunity to chat, at least a little bit, with the Iranian president, Mahmoud Ahmadinejad, along with CNN's newest anchor, Erin Burnett. Our own Piers Morgan was there, as well as some other invited American journalists.

Erin is standing by to join us live in the next hour. We're going to talk about what we heard from the Iranian leader and the Iranian leader's answers to my specific questions on President Obama, what he thinks about President Obama. Does he still stand by his earlier comment at Columbia University a few years ago when he said there are no -- repeat, no -- homosexuals in Iran?

You'll hear what he had to say today, all of this on camera. That's coming up in our next hour.

Also, a very disturbing discovery in Libya. An exclusive look at what was found inside two huge warehouses and the implications if it falls into the wrong hands.

And creating jobs by rebuilding bridges. President Obama drives his point home in his rival's territory. (COMMERCIAL BREAK)

BLITZER: President Obama says the way to job creation, at least in part, is through the repair and improvement of the transportation links around the country, so he brought his push for the jobs bill to an aging bridge connecting Ohio and Kentucky.

CNN White House Correspondent Brianna Keilar is traveling with the president following all these developments.

All right. So what's this story, this job creation initiative that he undertook today, all about?

BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: Well, the story today was about job creation, Wolf, but a lot of it was about who is standing in the way as the president sees it for creating jobs and this jobs proposal that he's put forward that does include $50 billion in surface transportation spending for bridges and for roads.

He came here. The backdrop, what's behind me, the Brent Spence Bridge, which spans Kentucky and Ohio, the home states of Senate Minority Leader Mitch McConnell and House Speaker John Boehner. No accident, a bridge that the president traveled over en route to this event, a bridge that gets more than twice the amount of traffic it was originally supposed to hold when it was built in the '60s. And for that, has been labeled functionally obsolete.

But is a replacement something that would create jobs? That is something that Republicans have been slamming the president on, because the answer is no, or certainly not very quickly.

Speaking to an Ohio Department of Transportation spokesperson, I was told the earliest you would see ground broken would be mid to late 2013, perhaps as late as 2015. That spokesperson saying it really isn't the best example of a shovel ready project.

But, Wolf, the White House firing back there. White House Press Secretary Jay Carney saying that the White House never said that this was a shovel ready project, that more than anything, it's symbolic of the crumbling infrastructure around the country that could be repaired to put construction workers back to work -- Wolf.

BLITZER: Was this more of a political event today, or an actual White House substantive jobs creation event? What kind of vibes are you getting out there, Brianna?

KEILAR: You know, Wolf, it certainly feels like a campaign event. You hear supporters yelling, "Four more years!"

The White House is insistent that this isn't a campaign event, nor are the other three events that the president has used to promote his jobs bill. But what you can't miss is that all four of these events in the last couple of weeks have been in swing states that President Obama won in 2008 and is hoping to hold on to. And so the battle for the White House, well under way, and as it is, we're seeing President Obama really taking a different tone, a very aggressive tone, calling out Republicans by name.

Listen.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The bridge behind us just happens to connect the state that's home to the Speaker of the House --

(BOOING)

OBAMA: -- with the home state of the Republican Leader in the Senate.

(BOOING)

OBAMA: Now, that's just a coincidence. It's purely accidental that that happened.

(LAUGHTER)

OBAMA: But part of the reason I came here is because Mr. Boehner and Mr. McConnell, those are the two most powerful Republicans in government. They can either kill this jobs bill or they can help pass this jobs bill.

(END VIDEO CLIP)

KEILAR: Now, Wolf, you'll recall during the bruising debt ceiling battle, the president really repositioned himself as sort of the grownup in the room, the reasonable. And in the aftermath of that, what did he see? Dismal approval ratings. And so now we're seeing a very different approach, a more aggressive approach, than we saw this summer.

BLITZER: Brianna Keilar reporting for us, traveling with the president.

Brianna, thank you.

Nervous investors had a rough day on Wall Street today amid deep concerns over the European debt, and there's an ongoing unease about the instability in the Arab world, as well, something that CNN's Fareed Zakaria has written about in this week's "TIME" magazine.

We spoke about both concerns.

(BEGIN VIDEOTAPE)

BLITZER: And Fareed Zakaria is joining us now, the host of "FAREED ZAKARIA: GPS," also of "TIME" magazine, our sister publication.

Fareed, the markets, way down once again today. You've been working on this story for a while. Is there any reason Americans should be optimistic looking forward? FAREED ZAKARIA, HOST, "FAREED ZAKARIA: GPS": You know, the markets are down, and if you look at interest rates, interest rates are also falling, falling, further and further, and both things are telling you one thing. The markets are very worried about growth.

You know, what the interest rate is telling you is that they're not worried about inflation. They're worried about a recession. And what the Dow Jones is telling you is that companies are now worried they're not going to find enough consumer demand.

So it's tough to be optimistic other than to say, look, in the long run, things have to get better because demand does pick up. If you think about people's spending power, you know, cars wear out, people buy them. But right now, what is most disturbing is you have the spirit of turmoil, markets saying where is the growth, and you don't have governments anywhere really doing much about it. You don't have government in Europe or in the United States.

BLITZER: Because the Europeans think the U.S. could be entering a double-dip recession right now.

ZAKARIA: Right. We may be entering a double-dip recession. I'm not sure that's going to happen, but we are certainly entering a really slow growth period, and the entire European project seems in peril. The euro might be collapsing.

And one of them is a kind of heart attack. The other one is a slower problem. Both just terrible for growth.

BLITZER: Let's change the subjects to the new article you have in the new issue in "TIME" magazine entitled "The Storm Before the Calm."

You think this Arab Spring in North Africa and the Middle East, it's going to be rough, but eventually, it's going to be good for all of us. What's the point?

ZAKARIA: You know, we're looking at the stuff that's going on, whether it's the storming of the Israeli Embassy in Cairo, whether it's some of these people in Libya who now are kind of Islamic fundamentalists, or in Egypt, and it's worrying us, and it's understandable, because it's all new and it's unsettling. But the point I was trying to make in that piece is, if you think back over the long run, these are highly dictatorial, repressive systems that have opened up. You're going to see some messy stuff that will come out.

But over time, the region is becoming more dynamic. People's aspirations are being met. And that's -- that can only be good.

Look at Turkey as a perfect example. Turkey has become economically more dynamic, politically more confident because it is a democracy now, a full-fledged democracy. Not everything they do is to our liking, but it's better to have a stable, democratic country that is ultimately responsible -- and look at the responsible role they're playing in Libya, in Syria, even on Iran. Rather than cutting a few deals with dictators who may not be in power the next day, and hoping that's how you're going to make peace.

BLITZER: You've got a special interview Sunday on "GPS."

ZAKARIA: I have the Turkish prime minister. And he explains why he's broken relations with Israel. He explains -- it's a really interesting voice to hear, because it may be the new voice of the Middle East -- more confident, less dependent of the U.S. As I say, we're not going to like everything we hear, but you've got to listen because it's not going away.

BLITZER: "FAREED ZAKARIA: GPS," it airs Sunday mornings, 10:00 a.m., replayed 1:00 p.m. Eastern. The new article in the new issue of "TIME" magazine, the cover -- I love the cover -- "Why Mom Liked You Best."

Nothing to do -- you didn't write that article.

ZAKARIA: I'm not going to comment on that. My mom would go crazy if I was saying that.

BLITZER: Fareed, thanks very much.

ZAKARIA: A pleasure.

(END VIDEOTAPE)

BLITZER: A new poll in the presidential race. The Republican presidential front-runner, Rick Perry, taking on Mitt Romney. You're going to see what's going on, who's in the lead.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: A boost for the Republican presidential front-runner, Rick Perry, in Florida. A new Quinnipiac University survey shows the Texas governor with 46 percent support among registered Republicans, while former Massachusetts governor Mitt Romney gets 38 percent, if the primary came down to those two candidates.

Meanwhile, President Obama's fighting to keep the GOP presidential contenders from taking his job. And in some cases, that could come down to Jewish voters.

Here's CNN White House Correspondent Dan Lothian.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, Jewish voters make up about two percent of the electorate. President Obama won the majority of that vote, 78 percent, back in 2008. Historically, Jewish voters have supported Democrats, but in the race to 2012, Republicans sense an opportunity, even as the Obama campaign leans on the president's record to hang on to its base.

(BEGIN VIDEOTAPE)

LOTHIAN (voice-over): The volume of this narrative is getting louder. Is President Obama losing support among Jewish voters? Not surprisingly, the answer is no in one corner --

ALAN SOLOW, OBAMA CAMPAIGN OUTSIDE ADVISER: I think it's more perception than reality.

LOTHIAN: -- and yes in the other.

UNIDENTIFIED MALE: The reality is they have a policy problem.

LOTHIAN: The treatment of Israel and the question of Palestinian statehood are threatening to define the president, and his record, says longtime supporter and fund-raiser Alan Solow, is being distorted.

SOLOW: We, as we will do with every constituency group, need to fight back against those misrepresentations and clarify the record.

LOTHIAN: As part of that effort to fight back, the Obama campaign's Jewish outreach director, Ira Forman, held a 40-minute conference call Tuesday with community leaders and fund-raisers, inviting them to join with this e-mail message: "It will be up to supporters like us who know the truth to get the word out."

Those who need to bone up on the facts are directed to the campaign Web site, a mix of testimonials and policy achievements.

The timing of all of this, says Solow, is critical, with the approaching Jewish holidays Rosh Hashanah and Yom Kippur.

SOLOW: So that's going to be a point in time where millions of Jews across the country are going to gather together. And in a year when politics is on everybody's mind, there's no question that there will be lots of discussions amongst voters about the president and his record.

LOTHIAN: It's a record that opponents want to explain, too, but for different reasons.

MATTHEW BROOKS, EXEC. DIR., REPUBLICAN JEWISH COALITION: We're going to embark on the largest, most aggressive, most expensive, most sophisticated outreach effort ever undertaken in the Jewish community.

LOTHIAN: The Republican Jewish Coalition launched this Web ad this week to highlight frustrations over the administration's direction on Israel.

UNIDENTIFIED MALE: I feel that Jewish voters are rejecting President Obama.

LOTHIAN: They are buoyed by poll numbers showing support for the president slipping among Jewish voters.

UNIDENTIFIED MALE: The key battleground states in places like Florida, in places like Ohio, in places like Pennsylvania, it could mean the difference between winning and losing.

(END VIDEOTAPE) LOTHIAN: Solow doesn't put much stock in poll numbers this far out from Election Day. While he thinks there will be some ups and downs, he believes that the percentage of the Jewish vote that President Obama will get in 2012 will be similar to what he received in 2008 -- Wolf.

BLITZER: Dan Lothian, thank you.

Jack Cafferty's here with "The Cafferty File" -- Jack.

CAFFERTY: The question this hour is: What does it say that most of the 10 poorest states in the country are Republican?

John in Florida Keys writes, "I think it means those 10 states have more under-educated, down and out desperate folks who are easily influenced by the Republican BS. You know, like I'll make gas $2 when I'm president, or there's no such thing as global warming, or let's pray for rain, or the best one, it's OK to default on our debt. Yes, we are fast becoming a third world country. Sanity is slipping away."

Joshua writes on Facebook, "I hope Democrats hammer this point home over and over again until people finally get it, even the stupid ones."

Mark writes, "Obviously, it means even poor people have enough sense to vote for traditional values and are opposed to the tax and spend policies of liberals which, by the way, do not in any way help them leave their poverty status."

James in San Diego writes, "It's a preview of what the entire country will look like if the Republicans get back in control of Congress and the White House."

Sandra writes, "Jack, one, possibly the Republicans don't have the best ideas about how to fix the economy and create jobs. And, two, maybe the poor should start looking around for a candidate who actually supports their needs. Apparently that trickle-down thingy isn't even working in the Republican states."

Bill in Pennsylvania says, "It's simple. You have to be able to think to see through all the 24/7 hate mongers' propaganda."

"There is a good reason Rush Limbaugh makes $400 million for his radio show. It's propaganda and it works. He delivers followers, the unthinking ditto heads. Some of them can even actually find their ways to the polls."

And Ron says, "It tells me the 10 poorest states are also the 10 dumbest."

If you want to read more on this, you can go to my blog, CNN.com/CaffertyFile, or through our post on THE SITUATION ROOM'S Facebook page.

We got a lot of responses on the Facebook page to this question, more than usual. BLITZER: Good. Happy to hear that, Jack. Thank you.

CAFFERTY: You bet.

BLITZER: Two huge warehouses full of potentially dangerous materials. An exclusive look at what military forces have now found in Libya.

(COMMERCIAL BREAK)

BLITZER: A potentially dangerous find in Libya, and CNN is getting exclusive access. Here's our senior international correspondent, Ben Wedeman.

(BEGIN VIDEOTAPE)

BEN WEDEMAN, CNN SR. INTERNATIONAL CORRESPONDENT: We came upon this site about 15 minutes' drive to the northeast of the southern Libyan city of Sabha. There, on a military base, we were shown by an NTC field commander two huge warehouses full of thousands of blue barrels with indistinct markings. But some of them had a yellow tape on them which said "radioactive."

We also found in one of those warehouses several bags of yellow powder, also closed with this tape marked "radioactive." We showed pictures of those bags to experts outside of Libya, and they say that is most likely yellowcake, which is crude uranium. And, in fact, to create enriched uranium for the use and the production of nuclear weapons, you need much more in the way of processing that Libya actually possesses.

The real danger, of course, is that local people will get on this base and get their hands on this material, which is very dangerous if improperly handled. Also in the site, hundreds of what seemed to be surface-to-air missiles, and the worry is that those missiles could easily blow up next to any nuclear material, causing danger for the entire area.

I'm Ben Wedeman, CNN, reporting from Sabha, southern Libya.

(END VIDEOTAPE)