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Senator Busted in Sex Sting in Men's Bathroom; Bush: World Should Be Afraid of Iran

Aired August 28, 2007 - 17:00   ET

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

WOLF BLITZER, HOST: And to our viewers, you're in THE SITUATION ROOM. Happening now, the senator busted in a sex sting in a men's bathroom says he's not gay. Just moments ago, Larry Craig suggested he's the victim of a witch-hunt.
President Bush says the entire world should be very afraid of Iran. He says acts by Iran's leaders puts U.S. troops at risk at Iraq and talks about a possible nuclear holocaust.

But in a twist, Iran says it really just wants to help in Iraq.

A painful reminders of the storm that unleashed unimaginable horror. We're nearing the second anniversary of Hurricane Katrina. This hour, I'll speak with the man many people blame for the government's failure in the aftermath of Katrina, the former FEMA director, Michael Brown.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

Senator Larry Craig of Idaho is doing damage control now that his June arrest in an airport bathroom in Minneapolis has come to light.

We learned within the past hour that the Republican leaders in the U.S. Senate want a review of Craig's case. Craig made a statement only moments ago in Boise, Idaho.

We want to play that statement for you right now in full.

(BEGIN VIDEO CLIP, COURTESY KBCI, BOISE, IDAHO)

SEN. LARRY CRAIG (R), IDAHO:

First, please let me apologize to my family, friends and staff and fellow Idahoans for the cloud placed over Idaho. I did nothing wrong at the Minneapolis airport. I did nothing wrong and I regret the decision to plead guilty and the sadness that decision has brought on my wife, my family, friends, staff and fellow Idahoans. And for that I apologize.

In June, I overreacted and made a poor decision. While I was not involved in any inappropriate conduct at the Minneapolis airport or anywhere else, I chose to plead guilty to a lesser charge in hopes of making it go away. I did not seek any counsel, either from an attorney, staff, friends or family. That was a mistake and I deeply regret it.

Because of that, I have now retained counsel and I am asking counsel to review this matter and to advise me on how to proceed.

For a moment, I want to put my state of mind into context on June 11. For eight months leading up to June 11th, my family and I had been relentlessly and viciously harassed by "The Idaho Statesman". If you saw the article today, you know why.

Let me be clear: I am not gay. I never have been gay.

Still, without a shred of truth or evidence to the contrary, "The Statesman" has engaged in this witch-hunt.

In pleading guilty, I overreacted in Minneapolis, because of the stress of "The Idaho Statesman's" investigation and the rumors it has fueled all around Idaho.

Again, that overreaction was a mistake and I apologize for my judgment. Furthermore, I should not have kept this arrest to myself and I should have told my family and my friends about it. I wasn't eager to share this failure, but I should have anyway because I am not gay.

I love my wife, my family. I care about friends and staff and Idaho. I love serving this great state. Over the years, I have accomplished a lot for Idaho and I hope Idahoans will allow me to continue to do that.

There are still goals I would like to accomplish and I believe I can still be an effective leader for our state. Next month, I will announce, as planned, as many of you have already been told, whether or not I will seek reelection.

As an elected official, I fully realize that my life is open for public criticism and scrutiny and I take full responsibility for a lapse in judgment I made in attempting to handle this matter myself.

It is clear, though, through my action I have brought a cloud over Idaho. And for that, I seek and ask the people of Idaho to forgive me.

As I mentioned earlier, I have retained counsel to examine the matter. And from that, I will make no further comment.

This statement will go up on my Web site today at craig.senate.gov. Any additional comments will be on the Web site. I am sure this is an issue that is not yet over and I will respond accordingly to all of you in the press. As I have always appreciated your willingness to accommodate me, I hope you appreciate my openness to all of you.

Thank you very much.

(END VIDEO CLIP)

BLITZER: And he did not answer any questions. He simply walked away holding hands with his wife.

Republican Senator Larry Craig, only moments ago, making that statement in Boise, Idaho.

Dana Bash is standing by in Boise.

Jessica Yellin is standing by on Capitol Hill, our Congressional correspondents.

Dana, first to you.

If he had nothing to hide, he did nothing wrong, he didn't tell even his wife or his family members and that's going to raise, especially out in Idaho, a lot of questions about who this senator really is.

DANA BASH, CNN CORRESPONDENT: Big time, Wolf.

It already is.

You know, this just happened just a few minutes ago, but I can tell you, first of all, I was standing with a leading conservative voice here in Idaho.

I talked to him right after Senator Craig's statement and I said what do you think?

And he said, you know, I still think that Senator Craig probably needs to resign because the statement that he heard him make simply, from his point of view, was not credible.

Another influential Republican I spoke to just moments ago, who was sitting with some Republican movers and shakers in this state, and he said -- he asked me not to use his name, but here's what he said: "I think Larry Craig's political career is over."

Because, the bottom line is whether or not Larry Craig is gay, in these conversations that I've had, from their point of view, is almost irrelevant when you look at the incident that went down and the explanation that Larry Craig is giving.

They are simply saying that this is potentially -- that this is a judgment issue. This -- one source I just spoke to, this influential Republican, said this is a clear case where Senator Craig used incredibly bad judgment, if nothing else, and that Senator Craig's career is in serious jeopardy right now. This source said that he can potentially see in the next 24 or 48 hours, a group of his friends and colleagues, old friends and colleagues -- remember, Senator Craig has been in public service here for almost 30 years -- going to him and saying Senator, enough is enough.

BLITZER: Because I assume a lot of people will say if he did nothing wrong and it was a big misunderstanding what happened at that men's room, why would he go ahead and plead guilty and why would he not even talk about it to his family and his friends, the Republican leadership. Dana is on the scene for us in Boise.

I want to go to her college, our other Congressional correspondent, Jessica Yellin.

She's up on Capitol Hill.

And the Republican leadership, even before the Democratic majority in the Senate, said they want to refer this matter to the Senate Ethics Committee for further investigation -- Jessica.

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: That's right, Wolf.

The Republican Senate leadership here saying that this is a serious enough issue that they would like the Senate Ethics Committee to look into it. And I'm told that this came about after the Republican leadership held a conference call earlier today. And they agreed among themselves that this is an important enough issue to be referred for three reasons.

One was because the senator did plead guilty to the charge. That on its own warranted a serious enough attention on this matter that they thought the Ethics Committee should look into it.

The second reason is they were troubled by an element of the police report where the officer contends that after he told Senator Craig he's under arrest, allegedly, Senator Craig pulled out his business card, which states that he is a U.S. senator and said, "What do you think of that?"

That was worrying, also, to the Senate leadership.

And then, finally, they also point out that Senator Craig is saying this was a misunderstanding, though he pled guilty, he disputes the facts. And so for that reason, as well, they think an investigation is appropriate.

Now, note, none of these people is publicly saying they're asking him to resign or announce that he's not seeking re-election. On all of that, they're taking a wait and see approach.

But they do say they would like the Ethics Committee to take some action. This is just a referral. It's up to the Ethics Committee to now decide whether they will, in fact, investigate.

BLITZER: All right, Jessica, stand by, because we're going to continue our coverage of this.

Jessica Yellin on Capitol Hill.

Dana Bash in Boise, Idaho.

I want to bring in Jack Cafferty once again, with The Cafferty File.

Who, what a story -- Jack.

It's a pretty amazing, amazing development.

CAFFERTY: Well, forget the fact that the phrase Senate Ethics Committee is considered by many to be an oxymoron. The senator pled guilty to a crime committed in a public bathroom in an airport and then didn't tell anybody.

What exactly is there to investigate?

That escapes me.

He's toast. It's so over, that -- I mean he doesn't know it yet, but it's over.

Anyway, because of the subprime loan debacle -- this is much more serious, in many respects -- more and more Americans are facing foreclosures on their homes.

And Washington is trying to decide what, if anything, should be done about it.

The "New York Times" reports that in the next 18 months, these low teaser rate loans will expire on more than two million adjustable rate mortgages. When that happens, of course, the mortgages are adjusted upwards, the monthly payments rise right along with them and people that can't afford that increase in the monthly payment face the prospect of losing their home.

Couple that with dropping real estate prices and a pullback from mortgage lenders in general and it could make it much more difficult for home buyers to either refinance, allowing them to stay in their home, or to sell their home outright so they could move somewhere else.

Washington has different ideas on what to do about all of this. The Bush administration reluctant to bail out people who get in trouble. Democrats are also against a broad bailout, but they are suggesting some smaller measures that would help some people renegotiate their loans and be able to stay in their homes.

This will give you an idea how serious this potentially is. A group of business economists is now saying that the risk of massive defaults on subprime mortgages, along with all of the excessive debt in this country, pose a bigger short-term threat to our economy than terrorism.

Serious stuff.

Here's the question -- when it comes to Americans defaulting on their mortgages, should the government step in?

E-mail caffertyfile@cnn.com or go to cnn.com/caffertyfile.

You know, we've been talking to people for years about the easy credit in this country, Wolf. And it looks like on these subprime mortgages that the chickens are in danger of coming home to roost in a big, big way.

BLITZER: You noticed the Dow Jones down almost another 300 points today once again.

CAFFERTY: Yes.

BLITZER: A lot of worried investors out there, primarily because of what you were just talking about, Jack.

CAFFERTY: Yes.

(INAUDIBLE) stuff.

BLITZER: Thanks very much.

He says he is not gay. We're going to have more on our top story, Senator Larry Craig. We'll talk about his reaction to the rumors swirling over his bust in a men's bathroom. I'll speak about it with our senior legal analyst, Jeff Toobin. He's standing by live.

President Bush says you should be very afraid. He's warning certain acts could plunge the Middle East into a nightmarish scene. He's speaking of a nuclear holocaust, the president saying Iran could be to blame.

And it's causing painful reminders -- we're nearing the second anniversary of Hurricane Katrina. Standing by, the man many people criticized in the aftermath of the storm. I'll speak live with former FEMA Director Michael Brown on this, the second anniversary of Katrina.

Stick around.

Lots of news right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Two years ago tomorrow, Hurricane Katrina slammed into the New Orleans area, the Gulf Coast.

President Bush arrives in the Crescent City tonight and tomorrow he talks about federal recovery efforts. But according to our new poll, Americans don't think the government's doing a very good job.

Let's go to our special correspondent, Soledad O'Brien.

She's on the scene for us in New Orleans -- what are people there, Soledad, saying about this rebuilding effort, now two years after this storm?

SOLEDAD O'BRIEN, CNN SPECIAL CORRESPONDENT: You know, Wolf, if you had to pick on a single word, then I think that word would be they're very, very frustrated. It seems like the money is coming far too slowly. The progress is nowhere near enough two years later. And while I think a lot of people here feel that Americans have certainly opened their hearts and their wallets to people who suffered so terribly in the Gulf Coast, they feel let down by their local leaders, the state leaders and the federal government, too.

(BEGIN VIDEO TAPE)

(BEGIN VIDEO CLIP, SEPTEMBER 15, 2005)

GEORGE BUSH, PRESIDENT OF THE UNITED STATES: Throughout the area hit by the hurricane, we will do what it takes. We will stay as long as it takes to help citizens rebuild their communities and their lives. And all who question the future of the Crescent City need to know -- there is no way to imagine America without New Orleans. And this great city will rise again.

(END VIDEO CLIP)

O'BRIEN (voice-over): President Bush in New Orleans two weeks after Hurricane Katrina devastated the city.

But in a new CNN/Opinion Research Corporation poll, 55 percent of Americans we questioned don't think the Crescent City will ever completely recover from the storm.

While Washington's committed more than $110 billion in grants and loans to the region, the money has been slow in getting to the people who need it the most.

BUSH: We want the people down there to understand that it's going to take a while to recover. This is a huge storm.

O'BRIEN: The White House says it's living up to its responsibility. But the government's response to Katrina damaged Mr. Bush politically, giving Democrats running for president plenty of ammunition.

JOHN EDWARDS, PRESIDENTIAL CANDIDATE: And you go to these parts of New Orleans, and the work is not getting done. The money is not getting to the ground.

SEN. HILLARY RODHAM CLINTON (D), NEW YORK: And I will pledge to you this -- if we don't get done what you deserve to have done by the time I'm president, then when I'm president, this will be one of my highest priorities.

O'BRIEN: More than half of those we questioned say Washington's rebuilding efforts are not enough.

So what are the people in the hard hit Lower Ninth Ward think?

We asked.

UNIDENTIFIED FEMALE: If he hasn't given up, he's working mighty slow.

UNIDENTIFIED MALE: The American people really have abandoned theirself, because if they opened their mouth and speak, we are the government.

UNIDENTIFIED FEMALE: It's two years tomorrow and we're still living in a trailer.

(END VIDEO TAPE)

O'BRIEN: You know, one of the things we heard, Wolf, a lot, was the sense that there's a policy of benign neglect. In other words, maybe there's a sense that the help is slow in coming because America doesn't want people to really come back and repopulate the Gulf Coast, New Orleans specifically, in the way it once was.

You hear that, whether you're talking about the Lower Ninth Ward or you're talking about the middle class communities in the Lake View District.

All across, I've heard that so many times, not only over the last couple of weeks, but the last several months, as well. And I think people feel that maybe the government is not funding the money fast enough because they don't want people to really come back -- Wolf.

BLITZER: Soledad, you're going to have a lot more on this subject coming up on "A.C. 360" at 10:00 p.m. Eastern later tonight.

Give us a little preview of what else we can expect.

O'BRIEN: You know, we're going to be talking a lot about the recovery, what's actually happening here in the Gulf Coast. And, of course, tomorrow we've our special documentary, "Children of the Storm," where we handed out cameras to a bunch of kids and really told them to share with us the story of their lives.

What do they think of the progress?

What do they think of what's been happening and what, in a lot of cases, hasn't been happening?

We'll have a preview of that, as well, tonight on "A.C. 360," which I'll be filling in for Anderson -- Wolf.

BLITZER: And tomorrow at 8:00 p.m. Eastern, "Children of the Storm," an excellent documentary that Soledad has been working on.

Thanks, Soledad, very much for that.

Let's continue this subject.

Joining us here in THE SITUATION ROOM is Michael Brown. He's the former director of the Federal Emergency Management Agency, FEMA.

He was running FEMA during Hurricane Katrina and its immediate aftermath.

Michael Brown, thanks very much for coming in.

MICHAEL BROWN, FORMER FEMA DIRECTOR: Thank you, Wolf.

BLITZER: You've had two years to think about it now. On this second anniversary, what goes through your mind most of all about what happened two years ago, the immediate aftermath?

BROWN: Well, a lot of anger because I recall telling Secretary Chertoff back in 2004 and 2005 that this country was not ready for a catastrophic event. I had been to the tsunami in Southeast Asia. And I came back and I told the president and I told Chertoff that we're not ready. We don't have the plans, the processes in place to do this.

And I think two years later, when we look at these photographs, it's proof that we're not ready for this kind of thing.

And I think, too, when you look at right now they're trying to redo the Natural Response Plan. This is the fifth rewrite of this thing since DHS was created. We're in the middle of hurricane season. They put one out without even talking to state and local governments. It shows that DHS is just completely dysfunctional.

BLITZER: Because a lot of our viewers will remember the president saying "Brownie, you're doing a heck of a job."

You were the victim. You were the criticized bitterly for not doing your job as the FEMA director.

But what you're saying -- and you've been consistent on this -- is you had given warnings, but your superiors were not paying attention.

BROWN: Well, you go right back to what the Associated Press released in that videotape where I'm briefing the president and I'm talking about my concerns about the Superdome, I'm telling the staff to jam the supply lines up as much as we can. The system simply was not capable of handling that. And I don't believe it's capable of handling it today.

BLITZER: Here's the statement that the John Edwards campaign put out today, a document. And you're the -- you're addressed in here: "The director of FEMA, Michael Brown, was patently unqualified for the job. Edwards will enact a new requirement," this campaign statement says, calling it "Brownie's Law," "...ensuring that senior political appointees actually are qualified to perform the job to which they are appointed."

When you see this kind of criticism still two years later directed at you, what do you say to the John Edwards campaign?

BROWN: Well, first of all, that's a cheap shot pandering for votes coming from a hollow politician. And, frankly, if John Edwards hadn't liked my qualifications, he could have voted against me when I was confirmed by the United States Senate.

And if you look at what Congress has done in terms of revamping the FEMA law, I qualify under those qualifications. I have more emergency management experience than John Edwards has experience as a U.S. senator.

BLITZER: Do you like any of the candidates out there on the Democratic or the Republican side? BROWN: Well, I like them all. And, in fact, there are several of them that I like on both sides, because a lot of them are beginning to address the issues of what needs to be done to homeland security. Divergent opinions like Hillary Clinton talking about pulling FEMA out. Mitt Romney talking about that DHS needs to be broken up into smaller pieces. Make Huckabee talking about we need to rearrange things.

So I think that on both the Democratic side and the Republican side, they're at least starting to talk about this issue.

BLITZER: So two years after you were unceremoniously dumped, if you will, by this administration, what's it like being Michael Brown today?

What are you doing?

I'm sure a lot of the viewers are interested what's going on with you.

BROWN: Well, life is good. I was just down in the Gulf Coast because of Hurricane Dean. I represent a company called The Cotton Companies that does hurricane and disaster recovery.

We were prepared to go in and start rebuilding. We rebuild schools, hospitals, hotels and resorts. The Cotton Company does an incredible job of rebuilding.

So we're trying to get businesses to recognize that they need to be prepared so they can rebuild as quickly as possible and get back in business.

I'm representing a company called InferX, where we're trying to show the federal government that you can actually do this kind of data mining that we do now with the passenger records and everything, yet preserve privacy.

So, that and speaking all over the world. I'm going to London next month.

BLITZER: So there is a second act...

BROWN: Oh, there's a second act and life is good.

I'm talking with Wolf Blitzer.

BLITZER: All right, Michael Brown is here in THE SITUATION ROOM.

Thanks for coming in.

BROWN: Thank you, Wolf.

BLITZER: And still ahead, Iran says it's not an agitator in Iraq but an advocate for stability there. President Bush says acts by Iran's leaders are putting U.S. troops at risk right now and he's warning certain acts by Iran threaten "a nuclear holocaust." And some say it's the difference between what they appear to be in public versus what they're doing in private. Our Carol Costello is standing by. She'll look at the psychology of what some see as split behavior by politicians.

Stick around.

You are in THE SITUATION ROOM.

(BEGIN VIDEO CLIP, COURTESY KBCI, BOISE, IDAHO)

CRAIG: Thank you all very much for coming out today.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: An arrest at an airport sex sting in June, a guilty plea to disorderly conduct and the specter of a review now by the Senate Ethics Committee.

Republican Senator Larry Craig of Idaho says he did nothing wrong. He insists he is not gay. He says he made a mistake by pleading guilty.

(BEGIN VIDEO CLIP, COURTESY KBCI, BOISE, IDAHO)

CRAIG: While I was not involved in any inappropriate conduct at the Minneapolis airport or anywhere else, I chose to plead guilty to a lesser charge in hopes of making it go away. I did not seek any counsel either from an attorney, staff, friends or family. That was a mistake and I deeply regret it.

(END VIDEO CLIP)

BLITZER: Our senior legal analyst, Jeff Toobin, is on the phone with us.

What do you make of Senator Craig's statement?

We played the whole thing right at the top of the hour.

Legally speaking, what do you think the chances that he has to try to reopen his guilty plea and get it reversed?

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: Slim and none are his chances of getting his guilty plea reopened.

The whole point of what's called the allocution, when the judge asks the defendant questions about pleading guilty, is to establish that the defendant really wants to plead guilty.

I was in the courtroom yesterday in Richmond, Virginia when Judge Hudson did it with Michael Vick. It took 15 minutes. It sometimes takes a pretty long time to go through all those questions. All those questions were gone through with Senator Craig. And you have in your hand the paper that he signed, admitting he had committed this crime and that he was waiving his rights to a trial.

To attempt to go back and reopen it is virtually impossible under Minnesota law or the law of any other state.

So I...

BLITZER: The only explanations that I've seen in the past -- and you're the lawyer -- is if there's someone who doesn't speak English, necessarily, or argues that he or she had a bad lawyer, was getting a disservice by getting the advice from the legal counsel and saying this was a bad decision.

TOOBIN: Or under the influence of drugs or being extorted, being forced under threat of violence, to commit to plead guilty. I mean really extraordinary situations.

This is a United States Senator -- a highly educated, experienced, important person who is called on to make judgments about life and death in the U.S. Senate. He certainly is capable of deciding whether he can plead guilty to a crime.

He did plead guilty to a crime and I see no way any court in Minnesota or anywhere else would let him get out of it.

BLITZER: He's got some big problems awaiting him right now.

All right, Jeff Toobin.

Thanks very much.

We'll continue to watch this story.

Let's move on to some other news, though.

Regarding the cauldron of violence and instability raging in the Middle East, President Bush warns things -- get this -- could even get a lot worse -- a lot worse. The president says a very specific act could plunge the region into a nightmarish situation and the country he says could cause that would be Iran.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Iran's active pursuit of technology that could lead to nuclear weapons, threatens to put a region already known for instability and violence under the shadow of a nuclear holocaust.

BLITZER: In the speech the president delivered today in Nevada, he said that Iran's nuclear pursuit threatens the security, his words, of the entire world. He also said actions by Iran put American lives at risk in Iraq. But in a surprise move, Iran's president says his nation is not an agitator but an advocate for the war torn country.

Let's go to CNN's Brian Todd. He is watching this story for us. The Iranian president, Mahmoud Ahmadinejad, he's trying to insist that he just wants peace.

BRIAN TODD, CNN CORRESPONDENT: That's right. He's trying to prove that by once again signaling to the Iraqis that if their nation is going to survive, America is not the country that will see it to the finish line.

From Iraq's forceful neighbor an ominous boast, America's power in Iraq is collapsing. The Iranian president tells reporters when it falls apart completely --

MAHMOUD AHMADINEJAD (through translator): We are prepared to fill the gap with the help of neighbors and regional friends like Saudi Arabia and with the help of the Iraqi nation.

TODD: An Iranian official at the United Nations tells CNN that his country does not intend to intervene militarily in Iraq, only to work with other powers to bring stability. But Mahmoud Ahmadinejad's comment draws fire in the U.S. The president saying Iran already has an unacceptable military presence in Iraq, helping Shia militias kill American troops and Iraqi civilians.

BUSH: The Iranian regime must halt these actions and until it does, I will take actions necessary to protect our troops. I have authorized our military commanders in Iraq to confront Tehran's murderous activities.

TODD: Activities Iran has always denied. Analysts says when he talks about filling a power gap, Ahmadinejad has designs well beyond Iraq.

TRITA PARSI, AUTHOR, "TREACHEROUS TRIANGLE": It is more about taking over American vote in the Middle East as one of the strongest nations in that region.

TODD: Western officials believe that also means pursuing a nuclear weapon which Tehran also denies. Iran may have a new adversary in that chess game, French President, Nicolas Sarkozy, who warns there are no good choices if the Iranians don't curb their nuclear program.

PRES. NICOLAS SARKOZY, FRANCE (trough translator): An alternative I consider catastrophic, an Iranian bomb for the bombing of Iran.

TODD: One French official told me Sarkozy is not threatening action by France, just warning of an escalation. Either way Ahmadinejad is brushing it off quoted as saying Sarkozy is inexperienced and maybe does not understand the meaning of his own words and is only saying that for political consumption in France.

Wolf.

BLITZER: Well, I take it he's also brushing off the notion of some sort of U.S. military action against Iran.

TODD: Yes, he did. He said flat out there is no possibility of that and he said that even if the U.S. government decided to attack Iran, "They would be unable to carry it out."

BLITZER: Brian Todd watching this important story for us. Thanks Brian very much.

Meanwhile, we are also gauging just what this diplomatic exchange of words between the United States and Iran, what it exactly means.

Joining us now, correspondent in Baghdad, Michael Ware. Michael, you heard the president raise the ante today, speaking about the possibility of a nuclear holocaust because of what Iran is up to. How do you interpret that?

MICHAEL WARE, CNN CORRESPONDENT: Well, clearly, yes that is a new rhetorical assault by the Bush administration against Tehran. We are certainly seeing the heat, the pressure rising here in this relationship. Now, clearly, for Iran, the pursuit nuclear energy is very closely wedded to the situation here in Iraq. They're clearly using Iraq as leverage on the nuclear issue.

However, the Iranian officials that I speak to here in Baghdad are very firm. They defend what they describe as their natural right to pursue nuclear energy. Yet, they once more reiterate, they insist that this does not mean that they are chasing nuclear weapons. So President Bush obviously can raise this as an issue but once more the Iranians will be batting it away.

BLITZER: When I interviewed General Ray Odierno, the number two U.S. military commander in Iraq on Sunday, he suggested Michael that in the past 30 to 60 days Iranian involvement in improvised explosive devices, killing U.S. troops, Iraqis in effect whom they oppose that's has escalated increase despite these two rounds of talks that the U.S. Ambassador in Baghdad, Ryan Crocker, has held with these Iranian diplomats in Baghdad. Is that what you are hearing on the ground from other sources as well?

WARE: Absolutely, Wolf. There's clear evidence of that. Western or U.S. military intelligence believes that essentially Iran is surging. They know the clock is ticking down on America's timeline, for its public mandate here in Iraq. So they are trying to apply the pressure.

Indeed, between those two historic meetings, one in May and one in July, we actually saw an up tick in the attacks by what military intelligence say are Iranian supplied weapons.

Now, we've had a lot of focus on this particularly lethal roadside bomb, the EFP. But there is another Iranian supplied weapon the U.S. military had been yet to talk about and President Bush just touched upon. We raised this with the military on the weekend at the last meeting. It is the 240 millimeter missile. Now, this is being fired almost exclusively at coalition forces, primarily the Brits in the south. But also Americans in Baghdad and just south of Baghdad. Indeed, this month, we saw one of these massive rockets with a 110- pound warhead slam into an American base and hit the dining hall, wounding at least 25 Americans. This is the biggest, baddest kind of rocket or mortar that's out there in the war. Now, it was introduced in July last year. And we saw an increase in the use of what the Americans say are these Iranian supplied missiles called the Fallack One (ph) in the lead-up to the first meeting of the ambassadors. Then we saw an up tick in the roadside bombs in the lead-up to the second meeting. Obviously, Iran is using its military strategy to help its political gain.

BLITZER: Michael Ware, doing some excellent reporting for us as always from Baghdad. Michael, thanks.

WARE: Thank you, Wolf.

BLITZER: Also in Iraq, today fighting between two Shiite militias has left more than 50 people dead. Officials say the clashes began in the southern city of Karbala and spread to Baghdad. Officials also saying one group torched the offices of the other in separate neighborhoods in and near the capital. The fighting began last night as thousands of pilgrims attended a Shiite religious festival birthday in Karbala. The pilgrims go there to celebrate the birthday of a revered Shiite Imam. That Imam is said to have disappeared centuries ago. Believers say he will one day return to save the world.

Going after the Taliban in Afghanistan. There is a new weapon that could be what U.S. troops are looking for.

And Senator Larry Craig says he's sure the issue over his arrest and his guilty plea is not over. If history is anything to go by, he's right.

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

(COMMERCIAL BREAK)

BLITZER: Our Carol Costello is monitoring some other stories incoming to THE SITUATION ROOM right now.

Carol, what do you have?

CAROL COSTELLO, CNN CORRESPONDENT: A couple of things, Wolf.

A Nevada miner is missing and believed to be trapped after a cave-in early this morning at a gold mine near Winnemucca. Two mine rescue teams are now at the scene. Officials say the miner was working on a roof bolter when the ground shifted. It's not clear how far underground the accident happened.

Backdrop of the Iraq war, the U.S. Army is turning to the National Guard to boost recruitment. The military is finalizing a plan to give $2,000 bonuses per recruit to any National Guard soldier who helps sign up somebody into the army. Under the plan, a recruit would join the National Guard but also indicate he or she plans to shift to active duty after basic training.

Movie star Angelina Jolie was in Iraq today. The U.N. refugee agency says the actress and U.N. goodwill ambassador visited a refugee camp near Iraq's border with Syria for several hours. She also met with U.S. troops. The U.N. says Jolie wants to draw attention to the plight of tens of thousands of families who have been uprooted by the current violence.

That's a look at the headlines right now, Wolf.

BLITZER: All right. Carol, thank you.

Just ahead, the psychology of split personalities. That's what some people are talking about amid speculation that one U.S. senator busted in a sex sting in a men's bathroom is gay, something the senator is flatly denying.

And it's a financial crisis for many Americans. People either undergoing a foreclosure or the process prospect of one. Should the government step in? Jack Cafferty with your email.

All that still ahead right here in THE SITUATION ROOM.

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BLITZER: American troops are facing increased attacks in Afghanistan right now. The U.S. military is deploy anew high-tech weapon to use in the fight against the Taliban. Let's go to our pentagon correspondent Barbara Starr. She is standing by.

Barbara, tell our viewers what we are talking about.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well Wolf, some are calling it the sniper in the sky, a new weapon on its way to Afghanistan to hunt down Taliban and al Qaeda.

It has been a nasty summer for U.S. troops in Afghanistan. In Gardez in eastern Afghanistan, early Tuesday a suicide bomber detonated his vest, killing three U.S. soldiers. Also on Tuesday, a daylong firefight raged across Kandahar Province in the south. 100 insurgents were killed.

A senior U.S. military official says the Taliban are using more hit-and-run tactics. The U.S. is responding. This new weapon, called the reaper, is on the way. It is a heavily armed unmanned drone the air force says can stay in combat longer than a fighter jet. Nearly a dozen may be in Afghanistan by the end of the year. With the reaper fully armed with hell fire missiles and 500-pound laser guided bombs, it can stay aloft for 14 hours. It may even watch for insurgents across the border in Pakistan.

COL. CHARLES BARTLETT, U.S. AIR FORCE: There is a greater demand for capability by the war fighter to have persistent intelligence surveillance reconnaissance capabilities to actually see and hear where the Taliban are, where the insurgents are and then to be able to track them.

STARR: In these mountains of Afghanistan, U.S. troops are at risk. On August 22nd, a U.S. fire base in Nuristan Province was attacked. 11 U.S. troops were wounded. On August 11th, insurgents twice attacked the U.S. base in Uruzgan Province. Earlier that week, 75 Taliban made an initial assault on the same U.S. position.

Now Wolf, despite all their attempts the Taliban have not made it inside a U.S. fire base in Afghanistan. The air force hopes this new weapon, the reaper, will help keep it that way.

Wolf.

BLITZER: Thanks very much, Barbara. Barbara Starr at the pentagon.

Up ahead here in THE SITUATION ROOM, when it comes to Americans defaulting on their mortgages, should the government step in? Jack Cafferty with your e-mail that's coming up.

And Miss Teen South Carolina. Jeannie Moos takes a most unusual look at the most unusual beauty pageant Q&A.

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

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BLITZER: Check in with Jack Cafferty for the Cafferty File.

Jack.

JACK CAFFERTY, CNN CORRESPONDENT: Wolf, the question this hour is when it comes to Americans defaulting on their mortgages, should the government step in to help? There is a debate about that going on in Washington as the number of people who become victims of these sub prime mortgages is expected to increase by up to 2 million in the next few years.

Jan writes, "It appears the U.S. fed has already begun bailing out the banking system so nowhere there would take a hit. It's instead left to the lowly taxpayer to bear the brunt of the sub prime debacle. The blame needs to be where it belongs. A congressional investigation should ferret out those who condoned this "Enron-type" accounting and the predatory lending practices and place the blame AND the reimbursement damages right where it belongs, on the wealthy investors."

Al in California, "I think it's a good idea to have the government repay any taxpayer who lost money in the current mortgage debacle. At the same time, they could repay me for money I lost at the casino, at the race track, in the stock market. After all, those were investments, the same as these stupid mortgages that people couldn't afford in the first place. Jack, why should my tax dollars or yours for that matter go to help idiots who have made bad investments?"

Justin in San Marcos, California, "Simply put, NO! I'm one of those who took out an adjustable loan, but I wasn't stupid. We actually spent less than our budget because I know the difference between a good thing and too good to be true. Call me old fashioned but the only thing the government should do is never allow these predator loans ever again." And we got a bunch of mail on the good senator.

Jerry writes from Florida, "I know this isn't answering your question but the ordeal with Senator Craig is just too good. I love all the reasons and excuses he has to offer and the mistakes he made. The biggest mistake was putting a hit on the police officer. He and Foley must have been buddies in Washington. For a party that is against gay marriages and homosexuals, the Republicans sure do have a lot of perverts."

And Ann in Rapid City, South Dakota, "Hey, I am weary of elected representatives and senators getting caught, and then dragging the little woman out when he faces the music. I would have more respect for them if they came out the wives and said hey, he did. Let him explain it. Now I'm not going to stand here by my man any longer."

If you didn't see your e-mail here, you can go to CNN.com/CaffertyFile. We post more of them online along with video clips at the Cafferty File. They're fascinating. Aren't they, Wolf?

BLITZER: It certainly is and let me give your new book a plug, Jack, as I like to do. "It's Getting Ugly Out There," September 10th, that's when the books will start being in bookstores. You know, when the paperback version of your up and coming bestseller comes out, you are going to have a new chapter on some of these characters you didn't write about in this book because it is too late. You have already gone to press.

CAFFERTY: I know. We will have to do a whole thing on Gonzales and on Craig. You know, one thing you can always count on is there will be a new batch of worms that will be along to help us out.

BLITZER: See you back here in an hour, Jack.

CAFFERTY: Thanks Wolf.

BLITZER: Thanks very much.

Still ahead, a different look at the case Larry Craig.

We'll be right back.

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BLITZER: He's been a strong proponent for a traditional conservative agenda. Today's turn of events involving Senator Larry Craig no doubt has people on Capitol Hill as well as back in Idaho scratching their heads.

Let's go to Carol Costello. She's looking into this story for us.

Carol.

COSTELLO: Well Wolf, this isn't the first time Senator Craig has faced questions about his sexuality. Actually, they have been swirling for two decades.

Gay rights groups call Senator Larry Craig the worst kind of Jekyll & Hyde. Conservative in public but something very different in private. That he was arrested in a men's bathroom and convicted of disorderly conduct comes as no surprise.

MATT FOREMAN, NATIONAL GAY AND LESBIAN TASK FORCES: I just thought here is another one of these anti gay bigots caught with his pants down. And it is just such a recurring pattern. I would like for it to end, frankly.

COSTELLO: Senator Craig has voted against same-sex marriage and against extended protection for gays against hate crimes. He describes himself as a traditional family man, yet that bathroom incident. Psychiatrist Dr. Gail Saltz says in general people who exhibit split behavior are conflicted about their sexuality, anguished about it, especially if they were raised to believe it is wrong.

DR. GAIL SALTZ, PSYCHIATRIST: The only way to make this acceptable, so to speak, to deal with the anxiety of thoughts that you may be gay is to say to yourself I am so not gay. I am the utter opposite of it.

SEN. LARRY CRAIG (D), IDAHO: I am not gay. I never have been gay.

COSTELLO: Senator Craig has repeatedly denied he's gay and he has denied it again saying his plea of guilty was a mistake caused by stress from media scrutiny.

CRAIG: In pleading guilty, I overreacted in Minneapolis because of the stress the Idaho statesmen investigation and the rumors it has fuelled all around Idaho.

COSTELLO: But rumors surrounding Senator Craig's sexuality have swirled for more than 20 years. In 1982, responding to questions about homosexual contact between congressman in pages, then Congressman Craig told NBC news --

CRAIG: I have always been aggressive and up front with what I believe in. And when I have people telling me that a whole series of false accusations are made against my character, frankly it makes me mad as hell.

COSTELLO: Despite his anger, the accusations continued making their way to a liberal blog written by Mike Rogers. It is dedicated to outing politicians.

MIKE ROGERS, BLOGACTIVE.COM: I think it is important that we expose this kind of hypocrisy in government where elected legislators want to live their lives one way and expect people to live by a different set of rules.

COSTELLO: Craig surely knew his reputation was on the line. So why plead guilty to disorderly conduct in a public bathroom knowing his admission would become public record? Dr. Saltz has a theory. SALTZ: There's something that will drive that need to be found out, be punished and have to pay a price because in fact they do feel very, very guilty.

COSTELLO: And as you heard, Senator Craig has now hired a lawyer to try to change that guilty plea.

Wolf.

BLITZER: All right. Thanks Carol. We're going to have a lot more on this story coming up in one hour right here in THE SITUATION ROOM. Until then, thanks for watching.

Let's go to "LOU DOBBS TONIGHT."

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