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The Situation Room

Tax Cut Battle Continues; Unrest in Egypt; Chef On Kim Jong-un; Women Brutalized By Egyptian Security; Battle of the Super PACs; Romney Defends Negative Ads; FAA Orders More Rest For Pilots; 17,000 Birds Culled After Avian Flu Discovered; Power Plants Must Limit Mercury Emissions; Bank of America Settles Lending Case

Aired December 21, 2011 - 16:00   ET

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

WOLF BLITZER, CNN ANCHOR: Happening now: new pressure and tactics, but no end to the stalemate over extending the payroll tax cut. Will the new year mean a new chunk out of your paycheck?

Also, the latest ad from Mitt Romney's campaign, this one featuring his wife, Ann. We will hear her message to voters.

Plus, Egyptian women rise up against the country's military rulers. Outrage over a brutal beating, it's boiling over right now. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

The White House is stepping up pressure on House Republicans to approve a two-month extension of the payroll tax cut. It's set to expire at the end of this year. President Obama called House Speaker John Boehner today and the White House has even put a countdown clock on the home page of its Web site. It says if the House does not act, taxes on the middle class will increase starting the 1st of the year.

Let's go to the White House. Our chief White House correspondent, Jessica Yellin, is standing by with the latest on this dramatic political showdown.

What is the latest, Jessica?

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: Hi, Wolf.

Well, the latest is that the White House believes there is only one way for the nation to avoid an increase in the payroll tax cut, and that is for Speaker John Boehner to bring that Senate-passed two- month extension to a vote. Just this morning, Speaker Boehner said that's not going to happen.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: We're here, we're ready to work. We're looking for our counterparts to sit down with us so that we can do what the president, bipartisan leaders in the House and Senate all want, and that's to extend the payroll tax cut for one year.

(END VIDEO CLIP) YELLIN: Now, midday today, the president held approximately a 10-minute conversation with the speaker, as you mentioned, in which he urged him to vote on this Senate-passed bill and the White House is saying there is simply no time to get the yearlong version done before the new year.

Here's Press Secretary Jay Carney.

(BEGIN VIDEO CLIP)

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: We urge the House leadership, Speaker Boehner to reconsider that position to allow the Senate bill to come up, to allow the House of Representatives to vote on it, because we are confident that it would pass with both Democratic and Republican support.

(END VIDEO CLIP)

YELLIN: Wolf, from the White House's perspective, the speaker is isolated politically on this issue. It's not just House and Senate Democrats who object to the speaker's position, but also some -- many Senate Republicans.

And now the conservative "Wall Street Journal's" editorial page has criticized the speaker for refusing to hold a vote on this two- month extension. The White House sees pressure mounting on Speaker Boehner, Wolf.

BLITZER: What would be the problem, what do you say at the White House, Jessica, if they accepted the challenge from the speaker and let the Senate name some conferees, sit down with the House conferees, and they have the rest of this week, all of next week to come up with some sort of compromise that presumably might have a chance at least of passing by December 31? What does the White House say is wrong with what the speaker is asking?

YELLIN: The view here is, first, they do believe in a one-year extension and believe that one will get done in next year, in January of next year, but that there just isn't time between now and December 31 for all the T's to be crossed and the I's to be dotted, and to simply get this thing done and ensure that taxes don't go up, they need this two-month extension, the nation needs this two-month extension passed.

And their point is they're not the only ones who believe this. Senate Republicans also agree, including Senate Minority Leader Mitch McConnell, and that's why he cut this deal and passed the two-month extension. So it's a question of getting it done over the holidays, Wolf, and a matter of time.

BLITZER: There's a growing split between the Senate Republicans who voted for this compromise, voted 89-10 in the Senate, and the House Republicans, who are opposed to this two-month extension.

Jessica, thanks very much. As Jessica just mentioned, congressional Republicans who read the "Wall Street Journal" editorial page this morning did get a certain shock. The conservative editorial page slammed them over the payroll tax cut battle.

The White House press secretary, Jay Carney, even mentioned it in his daily briefing today.

(BEGIN VIDEO CLIP)

CARNEY: Follow the advice of numerous Republican senators. Follow the advice of the "Wall Street" editorial page, words I never thought I would speak.

(LAUGHTER)

CARNEY: Follow the advice of Senators McCain and Corker and Grassley and others and pass the bipartisan compromise, make sure that Americans don't have their taxes go up on January 1.

(END VIDEO CLIP)

BLITZER: Here's part of what that "Wall Street Journal" editorial said. It was the lead editorial in the newspaper.

And let me read it to you, a line. "Given how much Mitch McConnell and House Speaker John Boehner have handled the payroll tax debate -- given how Mitch McConnell and House Speaker John Boehner have handled the payroll tax debate, we wonder if they might end up reelecting the president before the 2012 campaign even begins in earnest." That's a direct quote from take editorial in "The Wall Street Journal."

Let's talk about it with CNN's political director, Mark Preston, who's here.

Mark, it's highly unusual for House Republicans and Senate Republicans, the leadership of both the Republicans in Congress to be at this war amongst themselves.

MARK PRESTON, CNN SENIOR POLITICAL EDITOR: Amongst themselves. And when you have Senate Republicans appear as if they're aligning with the White House against the House Republicans, it's devastating, as you said.

In "The Wall Street Journal" today, you do not want to be on the wrong side of their editorial page if you are a Republican, certainly not on economic thought. Wolf, I was talking to a Republican strategist down in Florida about 15, 20 minutes ago and I said how's it playing down there? The strategist just was exasperated. He said this is not going to help us heading into 2012, not only with the presidential election, but this doesn't help with these down-ballot races as Republicans try to hold on to the House and try to take back the Senate.

BLITZER: Because they think -- the fear among these Republican is that they're giving the Democrats and the president a gift, that if there's no increase, there's no extension of the payroll tax cut, the Republicans will be blamed. The president will get a bonanza, if you will, politically.

PRESTON: And the Republicans are being blamed right now. This is a Christmas gift right now to the Democrats. They couldn't have played this out any better politically because what we're seeing right now, Wolf, is how this would affect everyone's wallet individually.

We have run pieces where it talks about how much this actually affects people, so right now, Republicans are on the wrong side of this issue.

BLITZER: Because who would have thought that even Tea Party favorites in the Senate like Marco Rubio, for example, he voted to have this two-month extension, but the House Republicans are saying two months is not good enough. You need a full-year extension. That's what this battle is all about.

PRESTON: It is. And it really -- I think you hit the nail on the head when you talk about the Tea Party. The Tea Party is what helped Republicans take back the House and really gave a lot of energy to Republicans as they head into Congress. But it mostly the Tea Party right now and certainly on the House side that has caused them angst with really our establishment Republicans.

Look, John Boehner was for this and then he had to be against it.

BLITZER: When you say that, because a lot of people are saying that John Boehner as speaker is showing -- is proving himself, they say, to be weak right now, that he sort of gave indications to Mitch McConnell, the Republican leader in the Senate, he could live with this compromise. The Senate overwhelmingly passed it.

But then when the Tea Party activists and others in the House got wind of it, they hated, and then he capitulated. What are you hearing about that?

PRESTON: Well, and, look, what we have to understand is what is John Boehner's role. He's the leader of the House Republicans. So when he was a segment, certainly growing segment of House Republicans to say that they are not going to go and support this, in many ways, he has to help them. He has to support them doing that.

Another way you could say it is that maybe John Boehner should have been more forceful with them and told them, take the two-month extension, which is what I'm hearing from Republicans, and let's live to fight another day. Let's deal with it in the new year. Let's not deal with it right before Christmas, when people are hurting and people are losing their houses. But the fact of the matter is, it is the Tea Party influences that got us to where we are now.

BLITZER: Yes, a lot of these freshmen, they revolted against that compromise and the Republicans are certainly paying a price for it right now.

Mark, thanks very much.

The White House meanwhile is using another tactic to pressure those House Republicans and it's Twitter. It sent out a tweet today highlighting the extra money American workers will see coming out of their paychecks starting January 1, unless Congress acts.

CNN's Mary Snow is working that part of the story for us.

What's happening here, Mary?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, as the White House uses those numbers to pressure Republicans, some House Republicans are trying to turn the pressure up on Democrats to come back and negotiate.

But with no action, changes are just days away from now for millions of Americans.

(BEGIN VIDEOTAPE)

SNOW (voice-over): With Washington in gridlock over the payroll tax cut extension, if it's not passed, roughly 160 million Americans will see their paychecks shrink.

CNN Money's Jeanne Sahadi says the change will start right away.

JEANNE SAHADI, CNN CORRESPONDENT: The payroll processors have to make a edition come January 1 what the rate is going to be. If they don't hear from Congress, they have got to go according to the law, and the law says payroll tax rate will go up 2 percentage points come January 1.

SNOW: For an average family making $50,000 a year, that means roughly $40 less in your paycheck every two weeks. That $40 number is a number the White House seized on to launch a Twitter campaign asking Americans what $40 means to them.

(on camera): A lot of the responses are about filling gas tanks. This gas station here charges $3.59 a gallon. For many people, $40 doesn't even fill their gas tank.

(voice-over): This person writes: "Forty dollars means milk, bread, eggs, cereal, apple, cheese, juice off a grocery list."

But critics adding their 2 cents write: "Your $40 won't even by a donut when Barack Obama gets finished destroying the U.S. dollar with stimulus, quantitative easing, et cetera."

House Republican Congressman Fred Upton says there's no disagreement that the money means a lot to Americans, but he says the payroll tax cut should be extended for a full year and that Democrats should come back to Washington to negotiate, instead of passing the Senate Democratic plan to extend the tax cut for only two months.

REP. FRED UPTON (R), MICHIGAN: It's now time to sit down and negotiate. Good grief. Today's already Wednesday. There's no reason why we couldn't have been sitting down appointing conferees before that.

SNOW: If there's no agreement at all to extend the payroll tax cut, it would mean families making $35,000 a year would pay $700 more a year. For a family making $90,000 a year, it would be $1,800 more. And for those earning $110,000 and more, it would add up to $2,300- plus.

(END VIDEOTAPE)

SNOW: And, of course, there's a cost to trusting government as people across America voice disgust in government gridlock.

Now, one other potential scenario, Wolf, is that an agreement is worked out in January to extend the payroll tax cut and if that happens, there is a good chance that the extension would be retroactive. That would mean people would get their money back.

BLITZER: Well, as they say, where there's a will, there's a way. Congress can do whatever it wants.

Let's a little bit talk about the unemployment benefits for a lot of people that would expire at the end of this year if there's no deal. How many people are we talking about?

SNOW: Yes. There are estimates that about 1.8 million people in the month of January would see their unemployment benefits expire. And what's at stake here is the unemployment benefits that would go up to 99 weeks, and that that extension was not passed. So, 1.8 million Americans are estimated to lose those extra unemployment benefits.

BLITZER: More pressure on the Congress to come up with a deal.

All right, thanks very much, Mary Snow reporting.

Meanwhile, a former chef tells all about North Korea's mysterious new leader. What was Kim Jong-un like as a teenager?

Plus, my own assignment to North Korea exactly one year ago. I will share some of what I saw inside the world's most isolated country.

(COMMERCIAL BREAK)

BLITZER: North Korea's new leader has reportedly already exercised his military authority. A South Korean news agency cites a source as saying Kim Jong-un issued his first military command just before his father's death was announced. He ordered all military units to halt field exercises and training and return to their bases, possibly to prevent defections during this transition of power.

We're also getting new insight into the new leader from a former chef, who also gives a glimpse into the family's lavish lifestyle.

Here's Anna Coren in Seoul, South Korea.

(BEGIN VIDEOTAPE) ANNA COREN, CNN CORRESPONDENT (voice-over): As North Korea mourns the loss of its Dear Leader, the world is anxiously waiting for his youngest son, Kim Jong-un, to reveal what sort of successor he will be.

One man with a personal insight is Kenji Fujimoto. For 13 years, he worked as Kim Jong-il's personal chef, one of the few outsiders allowed in to this secretive and reclusive world.

He says he was a meat and sushi chef from Japan who would be invited to Kim Jong-il's private parties and drink with him. "He would ask me, do you like me? I would tell him I love him and kiss his hand."

The two men shared a passion for fine food and while many North Koreans were starving, Kim Jong-il would send Fujimoto around the world to buy ingredients for lavish dishes. He says he traveled to Iran for caviar, Denmark for pork and Thailand for mangoes and for pies.

"On a trip to Japan, I bought a whole tuna for $40,000 U.S. dollars, he tells us. I would do this trip a few times a year."

But while in Pyongyang, Fujimoto spent time with the young Kim Jong-un, whom he described in his 2003 memoir after defecting to Japan as a chip of the old block, believing this teenager would one day succeed his father.

"He would always take the lead over his brothers," says Fujimoto. "He was always going to succeed his father."

(on camera): Kim Jong-un has inherited a country with nuclear capabilities, a crippled economy and a humanitarian crisis. The U.N. estimates a quarter of the population is facing starvation. And while many are concerned that Kim Jong-un will follow in his father's footsteps, Fujimoto believes this Swiss-educated leader is worldly and very aware of what his country does not have.

(voice-over): "I believe he is aiming at reform in open society," explains the chef. "He will look to China as an example so that the country can move forward."

While there are fears Kim Jong-un and those around him may act to prove his leadership, Fujimoto is hopeful he may bring stability to the Korean peninsula and lead his country out of the wilderness and into the international arena.

Anna Coren, CNN, Seoul.

(END VIDEOTAPE)

BLITZER: I was in North Korea exactly one year ago, accompanying the veteran American diplomat, Bill Richardson, on a mission to try to ease nuclear tensions.

Here is some of what I saw in the world's most isolated country.

(BEGIN VIDEOTAPE)

BLITZER (voice-over): Today's trip takes us into the countryside. Once again, we're the only car on the road.

(on camera): We're in the vehicle, and we've just left Pyongyang. We're on the road to an apple orchard. Not exactly sure what we're about to see, but supposedly, it's an impressive sight they're taking us to.

(voice-over): With electricity scarce, there are no lights in the tunnels except for our car's headlights. It's pitch-black inside.

(on camera): We drove out to the countryside and we're here overlooking all of these fruit trees. It's like row after row after row after row. Obviously, it's snowy out there, and you can't see any fruit.

But eventually, I guess, once the time is right, you'll see a lot of apples and other fruit growing right behind me.

(voice-over): The visit is well-choreographed. Our guides take us to a little cottage where we meet an elderly woman and her grandson. Inside, a picture of the great and dear leaders, whom we're told had visited this farm. Unlike so many homes in North Korea, this one has electricity.

GAY DILLINGHAM, BILL RICHARDSON'S ENERGY ADVISOR: At the most people have these brickettes that are made out of coal they can bring to their homes and put into their little furnaces, and those are the lucky ones. The grandson was quite curious about all our cameras, so I gave him my camera so he could take pictures which he really liked.

BLITZER: Back in the city I had another scare.

(on camera): One point I go out into the lobby and I see a TV up on the screen and I'm with my handler and it looked like they just broke away from some opera, you know, some heroic opera and they go into some marshal music, militaristic kind of music. I've been to totalitarian regimes. I know that.

When I go into that kind of marshal music, that usually is a signal to their people to get ready. It's a bad situation, we're about to go to war.

(voice-over): What if they closed the airport? We'll be stuck in North Korea. That night we have dinner with the vice foreign minister. It's off the record, but we're getting a better sense of how the decision-makers in North Korea think.

TONY NAMKUNG, BILL RICHARDSON'S SENIOR ADVISER: I think it's a good sign that they are putting people up who are able to engage the world. I was very much impressed with him.

(END VIDEOTAPE)

BLITZER: And this note, on Friday -- this coming Friday, we're going to have a special edition of THE SITUATION ROOM. You can see the entire documentary, "Six Days in Pyongyang," chronicling my assignment there one year ago. Mark your calendar, Friday, this Friday, 5:00 p.m. Eastern, 2:00 Pacific.

Newt Gingrich issues a challenge to Mitt Romney to reject negative campaign ads. Romney responds with a challenge of his own.

(COMMERCIAL BREAK)

BLITZER: New plans for Japan's quake damaged nuclear power plant.

Mary Snow is monitoring that and some other top stories in THE SITUATION ROOM right now.

Mary, what's going on?

SNOW: Wolf, today, Japan unveiled a decades-long plan to scrap the Fukushima plant which was crippled by a powerful earthquake and tsunami in March. The first phase begins within two years and involves removing nuclear fuel from spent fuel pools. Crews will start removing fueled debris within two years, a job that will last at least two decades. The plant is scheduled to be decommissioned within 40 years.

The U.S. is stepping up its pressure on Syrian President Bashar al-Assad to step down immediately. Today, the White House issued a statement saying al-Assad is not worthy to rule his nation after violating his commitment to end a deadly crackdown on protesters.

Syria's main opposition group is calling on the U.N. Security Council to protect the Syrian people from genocide. It says in just two days, about 50 people have been killed.

And for the second year in a row, Pakistan has been declared the world's deadliest country for journalists to work in. The Committee to Protect Journalists says among the 43 journalists killed worldwide this year, seven died in Pakistan. Another non-profit group issued an even higher death count. Reporters Without Borders says it documented 10 journalist deaths -- Wolf.

BLITZER: Mary, thanks very much.

An unprecedented uprising by Egyptian women outraged by the beating of one of their own by government forces. We'll talk to one woman journalist who had her bones broken. She has a very strong message to Egypt and to the world. That's coming up next.

(COMMERCIAL BREAK)

BLITZER: It's a truly horrifying image. A woman being brutally beaten by Egyptian security forces and it has created outrage of the country's military rulers. It's boiling over in Egypt and beyond.

CNN's Mohammed Jamjoom is in Cairo.

(BEGIN VIDEOTAPE)

(CHANTING)

MOHAMMED JAMJOOM, CNN INTERNATIONAL CORRESPONDENT (voice-over): They march to prove they're not afraid. Over 1,000 women showing they will not be cowed, despite the tensions and a growing crackdown in Cairo. Many converged on Tahrir Square to voice extreme anger about the brutality recently faced by female protesters, holding up placards, reminders of horrific scenes like this one -- an Egyptian woman being beaten by riot police, dragged, partially stripped of her clothing, even stomped on.

(on camera): The women marching today, not just expressing outrage of the treatment of female protesters these past few days, also expressing extreme anger at the supreme council of the armed forces.

(voice-over): When former President Hosni Mubarak was ousted, the military took over, promising to establish a democratic government. But protesters are calling for the counsel's removal, accusing them of betraying Egypt's revolution, blaming them for the brutality.

UNIDENTIFIED FEMALE: What the army is doing (INAUDIBLE), it's an international crime. We should be -- they should be tried for this.

JAMJOOM: Underscoring just how tense and volatile the situation here has become, a protective ring was formed around the women as they walked. As more men join the predominantly female crowd, the numbers grew as the march went on, expressing defiance and solidarity in the face of danger.

RAGIA OMRAN, HUMAN RIGHTS ACTIVIST: I'm here to violently condemn the attacks on Egyptian men and women by the Egyptian army. We will not be quiet. We will not let this happen again, and we will continue to voice out our anger against this military junta that is killing this country.

(END VIDEOTAPE)

BLITZER: And Mohammed Jamjoom is joining us now from Cairo, Mona Eltahawy, the journalist, is joining us from New York.

Mohamed, first to you, you just came from the hospital where you met with one woman who was with this woman who was brutalized here. She herself is in pretty serious condition. What did she say to you? What's going on?

JAMJOOM: Well, Wolf, we had scheduled an interview with a woman named Azza Helar Suleiman (ph). She was a woman whose beating at the hands of the security forces had also been caught on that same tape that we reference that in our piece a few minutes ago. We got there today. We were given access to her by family, but it was a horrifying scene. Inside that hospital room, she was writhing in agony, screaming in severe pain.

Her head was bandaged. We were told her skull had been fractured due to multiple blows to the head by the riot police. She had abrasions to her face, a lot of bruises. We couldn't ask her any questions, we tried, but she was in too much pain.

She was screaming out that she felt like she was going to die, that she needed helped. At that point, we were told that she might be taken to the ICU. So we don't know right now what her condition is or how much she has worsened over the past few hours.

We're trying to find that out. But if I can take you back to the video of her beating, we talked earlier about the video of a woman in a blue bra. She had been partially stripped of her clothing. She had been beaten by security forces, stomped on even.

The woman who we spoke with today as she went to visit, she tried to help this woman up. She went to her side then the riot police converged upon her. They started kicking her. They started beating her.

She sustained multiple blows to the head by clubs. It's amazing that she could have survived this. This is just one of many videos that's sparking so much outrage here in Cairo right now and across Egypt. People just can't understand why women protesters are being brutalized in this fashion by the riot police.

BLITZER: I certainly can't understand that. Mona, you were just there and you were brutalized. They broke your arms. They're still in bandages right now. Briefly remind our viewers what happened to you on the streets of Cairo.

MONA ELTAHAWY, EGYPTIAN JOURNALIST: Well, about three and a half weeks ago, Wolf, when I was on close to Tahrir Square, I was surrounded by riot police who beat me and broke my left arm and my right hand and they sexually assaulted me.

I had their hands all over my body. I was literally taking hands out of my pants, hit on the head and taken to the Interior Ministry and Military Intelligence. And detained for 12 hours, during which I was denied any medical care.

So those images that are coming out of Cairo right now hit very close to my broken bones. It's very difficult. I've not been able to watch any of those videos because it's too traumatic, but if there's one positive thing that has come out is that it has exposed once and for all how sadistic the Egyptian military and police forces are.

How sadistic the Supreme Council of the Armed Forces are and how it's high time that we held field marshal and his generals who formed that military junta, which ruled Egypt right now. We have to hold them accountable and take them to court for crimes against the Egyptian people.

BLITZER: Mona, that woman, the iconic photo the whole world now has seen in the blue bra, she's brutalized by the Egyptian military the way that she is. She came with a scarf. Obviously, a religious Muslim, what's the point? Why is this violence against women all of a sudden and it look like it's all of a sudden, escalating so awfully?

ELTAHAWY: Well, I mean, you know, to be clear, the violence against men and women has been horrendous over the past few months, but when it comes to women specifically, Wolf, they have been a system in place since the Mubarak regime since 2005 by which female activists and journalists are targeted by the use of sexual violence as a way of silencing, shaming and humiliating them and keeping them off the streets.

Now clearly it has failed because women continue to be on the streets. Women are on the street in the thousands yesterday. This woman that you mentioned was on the street demonstrating peacefully. I don't like to refer to her bra because I think she's much more than her bra.

Some people are quoting blue bra. I prefer to call her as some of my friends on Twitter call her, the hail woman, because she is iconic. She is an icon for all the Egyptian woman who refuse to be silence and refused to be terrorized by the sadistic military forces in Egypt.

And what she has done is that she has removed this mask of denial that the military junta have worn for too long. Remember in March, they subjected female activists to so-called virginity test, which are sexual assault.

So Mubarak used sexual violence against women. The military used virginity test. They beat me, sexually assaulted me and they beat and sexually assaulted this woman here.

The military junta in Egypt must go and the march yesterday in Cairo, not only maintains my optimism, but it's clear that Egyptian women are rescuing this revolution and saying no to violence not just against women, but against men as well.

BLITZER: Mohammed, is there any indication the authorities, the rulers in Egypt are going to punish anyone for these acts of brutality?

JAMJOOM: Not at this point, Wolf. It's interesting. Last night after the march, there was a statement issued by the Supreme Council of the Armed Forces in which they expressed regret for the violations against Egyptian women, but this just didn't watch with the female activists that we've been speaking with.

The people we've been talking to say they have been systemically targeted for abuse. That it has continued and nobody thinks, that we've spoken with the activists, that we've spoken that are out day after day.

Nobody believes that the Supreme Council of the Armed Forces is going to hold anybody accountable, any of the riot police they have appeared in these videos brutalizing these women and these men and that just heightens the frustration and heightens the tension here -- Wolf.

BLITZER: Mohammed Jamjoom, Mona Eltahawy, guys, thanks very much. What an awful, awful story. We'll stay on top of it. Appreciate it.

Other news we're following including Newt Gingrich and Mitt Romney in a war of words right now over negative ads. One of them even features Romney's wife and you're going to find out why Newt Gingrich is so angry and what he wants Romney to do about it. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: We're only about 12 days away from the Iowa caucuses. The battle for that critical state is being waged increasingly on the air with ads funded by so-called super pacs. That's especially true for one of the Republican frontrunners. CNN's Jim Acosta is monitoring all these ads. It's hitting brutal out there in Iowa.

JIM ACOSTA, CNN POLITICAL CORRESPONDENT: It's an air war, Wolf, and it is heating up. Among the top contenders in the GOP field, Mitt Romney can safely be dubbed super pac man with all of the resources necessary to gobble up Newt Gingrich.

(BEGIN VIDEOTAPE)

ACOSTA (voice-over): It's not the "Occupy Wall Street" protesters who are bugging Newt Gingrich these days.

UNIDENTIFIED FEMALE: -- has more baggage than the airlines.

ACOSTA: It's the attack ads occupying the air waves in Iowa. Political Action Committee or PAC running this ad restore our future just happens to be managed by Mitt Romney's former campaign operatives and is financed in large part by big donors, who still work at Romney's former private investment firm. Turning the GOP race into a high stakes version of PAC man.

NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: I've just a loss. I object to negative smear campaigns. These are his people running his ads doing his dirty work while he pretends to be above it.

ACOSTA: Asked about the ads, Romney made no apologies.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: If you can't stand the heat in the kitchen right now, wait until Obama's kitchen shows up.

ACOSTA: So far in Iowa, the pro-Romney super PAC has spent more money on ads than the Romney campaign itself. Combined they are outspending Gingrich by more than 7 to 1. Employees have given more than a million dollars to restore our future.

Just 84,000 to the Romney campaign. That's because contributions to federal candidates are limited to $2500, but there are no limits on donations to Super PACs. No wonder Gingrich wants Romney to make it stop.

GINGRICH: I condemn any further negative ads and I ask that PAC -- but anything short of that is bologna.

ACOSTA: Romney points out that federal law prohibits him from ordering the Super PAC to stop the negative attacks.

ROMNEY: My goodness, if we coordinate in any way whatsoever, we go to the big house.

ACOSTA: But he can do more than that.

VIVECA NOVAK, CENTER FOR RESPONSIVE POLITICS: There's nothing in the law that prevents Mitt Romney from holding a press conference and saying I really wish restore our future would cease and desist from running any ads.

ROMNEY: Corporations are people.

ACOSTA: The former governor argues he's already being hammered by ads from pro-Obama Super PACs, featuring this now infamous photo from Romney's days at (inaudible). Besides the Romney campaign says it's also running positive spots with the candidate's wife, Ann.

UNIDENTIFIED FEMALE: If you really want to know how a person will operate, look at how they've lived their life.

ACOSTA: Take that, Mrs. Gingrich, who's the star of a new ad from her husband who's determined to keep things merry.

UNIDENTIFIED FEMALE: From our family to yours, Merry Christmas and Happy New Year.

(END VIDEOTAPE)

ACOSTA: I feel better already. A pro-Gingrich Super PAC is also gearing up, but it's months behind the pro-Romney Super PAC in fundraising. As for with Super PAC is spending the most money in this campaign, that distinction goes to the group backing Rick Perry. It's another sign that PAC man fever is spreading -- Wolf.

BLITZER: And don't forget the Ron Paul ads, which are really, really hammering Newt Gingrich as well. So he's getting hammered by all of these guys.

ACOSTA: Millions of dollars are going into these ads in Iowa and many of them are directed at Newt Gingrich right now. It's no wonder that he has had up to hear what these ads -- Wolf.

BLITZER: Yes, and I'm still surprised he's holding back because that goes against his nature, but maybe that will change.

ACOSTA: You've got to wonder how long that can last.

BLITZER: Yes, all right, thanks very much, Jim Acosta.

Let's get to our "Strategy Session" and digest what's going on. Joining us right now, our CNN contributor, the Democratic strategist, Maria Cardona and joining us from New Orleans, our CNN political contributor, the Republican strategist, Mary Matalin.

How much longer can Newt Gingrich, Mary, how much longer should he try to avoid getting into this fight to simply take this high road?

MARY MATALIN, CNN POLITICAL CONTRIBUTOR: Well, he's doing the right thing. Going to these town halls and saying ask me whatever. I think they all, the longer he talks about process as opposed to what go got him back in the game in the first place, which is his conservative advocacy and taking it against Obama.

That's not, Obama, helping him. He should get out of process and you know, Mitt Romney's point is spot on. The Obama campaign is going to unleash furies.

They're going to have the most demonic, vicious campaign we've ever seen because they can't defend their record. So Mitt makes a good point and Newt needs to get off a process and back to just talking about the issues and how they contrast with Obama's.

BLITZER: I know you're a good Democratic strategist, Maria, but if you were advising Newt Gingrich right now, what would you tell him?

MARIA CARDONA, CNN CONTRIBUTOR: I would tell him to fight back and to get up on the air right now, Wolf. I mean, have we learned nothing from the Kerry campaign and what happened in 2004 with the swift vote ads against him?

Look, I think the reason that Gingrich is not fighting back right now and I think it's very disingenuous of him to sit there and asked everybody to play nice is because he doesn't have the millions of dollars that Romney has and that his rivals have to do so.

So I think if he did have that, he would not hesitate for a moment to go up on the air and try to eviscerate his rivals the way that they're trying to eviscerate him right now. I do think there is one small thing here we need to think about.

It might be a little bit too much. You have so many negative ads by so many of his rivals and such little time, it could backfire and make Newt Gingrich, in fact, the impossible, make him look actually like someone who is nice and wanting to be above the fray.

BLITZER: Mary, go ahead.

MATALIN: The point is, you can't offer a strategy that's impossible to execute. You can't say go up on the air when he doesn't have the money to go on the air. We're also talking not about general election voters.

We're talking about sophisticated Iowa caucus goers who know how to distinguish between a false attack, a false negative and some real concerns.

All these voters have been looking for from the beginning and this goes into New Hampshire and South Carolina, is that one, we have a fighter that can take it to Obama.

And I think these have been fair fights in a sophisticated electorate in a state ironically that's not going to be dispositive because --

CARDONA: But here's the problem. He's been -- he's been ahead up until now in all of the polls. So instead of going and having book signings, he should have been raising a lot of money, Mary. I think if he had done that, if he had taken advantage of the huge surge that he had for the last two months, he could have that money in the bank right now.

BLITZER: Let me interrupt. Mary, hold on for a second. It doesn't take a whole lot of money. You don't need a whole lot of money to hold a news conference in Iowa and blast Mitt Romney and just go after him point after point after point. That doesn't cost anything.

MATALIN: That's right. So Maria, I know you're a great strategist. I'm just saying what he didn't do six months ago cannot be made up for today. What he's doing is the best he can do. Some combination of what Wolf suggested. Wolf, you're a great strategist. They say all these things are answerable.

CARDONA: That's exactly right. When you said he should go up -- he should, but with the money that he has, you can do web videos. The DNC does it all the time. Those cost nothing, also. But don't be disingenuous in trying to act like you're above the frame when you know that if you had the money to do that, you will be up on the air eviscerating your rivals.

BLITZER: Mary, can Santorum or Perry or Bachmann surprise us in 13 days?

MATALIN: Yes, Santorum has lived there. He's been in 99 counties. He's very popular with the religious right there. And I think Perry is going to surprise us. He's really got his footing. He's got money.

He's got organization. They like him there. And he's got -- he's kind of got the intensity and the momentum going in at the right time, so if there is a surprise, Rick Perry will be it.

BLITZER: All right, Maria and Mary, guys, thanks very much. I'm going to be speaking live next hour by the way, with Rick Santorum. He got a huge Evangelical endorsement yesterday. We'll get to Rick Santorum in Iowa. That's coming up live in our next hour.

Meanwhile, a contentious interview between our own Gloria Borger and Republican candidate Ron Paul.

(BEGIN VIDEO CLIP)

GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: Well, it's just a question, I mean, it's legitimate. It's legitimate. These things are pretty incendiary --

RON PAUL (R), PRESIDENTIAL CANDIDATE: -- because people like you. BORGER: No, no, no.

(END VIDEO CLIP)

BLITZER: We're going to show you the entire exchange that's coming up in our next hour as well. Plus, the FAA unveils some new rules to try to keep pilots arrested and travelers safe.

And President Obama gets ready for Christmas. We're going to show you what was on his shopping list earlier in the day.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: Merry Christmas to you. Appreciate it.

(COMMERCIAL BREAK)

BLITZER: Commercial airline pilots are being ordered to get more rest between flights. CNN's Brian Todd is working the details of the new rules just announced by the FAA. What's going on?

BRIAN TODD, CNN CORRESPONDENT: Wolf, this is all about avoiding key mistakes in the cockpit that cost lives. Mistakes like those partially blamed for the crash, which inspired these new rules.

(BEGIN VIDEOTAPE)

TODD (voice-over): February, 2009, a snowy blustery night in Buffalo. A commuter plane stalls on approach, crashes five miles the runway. Fifty people are killed.

It's later determined the main cause of the crash was the pilot mishandling the control column. But Susan Bourque, who lost her sister, Beverly Ekert in the crash, says she was shocked to learn of another contributing factor.

SUSAN BOURQUE, SISTER KILLED IN BUFFALO CRASH: Pilots who were fatigued, we believe, ignored that and got into the cockpit of that plane.

TODD: The pilots were tired, it was learned, partly because one had commuted from Tampa to Newark to get on the flight. The other had come from Seattle. The crash spurred federal officials to come up with new rules on pilot fatigue and rest. Rules now unveiled.

RAY LAHOOD, TRANSPORTATION SECRETARY: Sends a message to passengers that when they get on a plane, it's going to be safe to fly and the pilots are going to be well rested.

TODD: The new rule says pilots will have a minimum ten-hour rest period between shifts. Two hours longer than they have now. That means another new factor, the opportunity for 8 hours of uninterrupted sleep.

The new rules limit a pilot's actual time in the air each day to eight or nine hours depending on the time of the day they start. And for the first time, the government's defining and limiting the so- called pilot duty period.

From when a pilot arrives for work to when their last flight is completed. Mark Weiss flew commercial planes for more than 20 years. In the rain by an airport, he discussed the impact of fatigue.

MARK WEISS, THE SPECTRUM GROUP: A day like today, making an instrument approach to this runway, it's a very demanding process. When you're fatigued and tired, you're not in complete control of your faculties and this is not the time to find that out.

TODD: The new rules don't apply to cargo pilots because officials say it would cost that industry too much. That was also a complaint from the passenger airlines at first. They've worried about flight rescheduling and staffing. The lobby for the airlines now says they'll take another look at the rules.

(END VIDEOTAPE)

TODD: The new rules won't take affect for another two years. Officials say that's because it will take that long for the airlines to change their scheduling practices, for the pilots to be re-educated about fatigue and maybe even for the pilots union to renegotiate some contracts with the airlines -- Wolf.

BLITZER: I think part of this is simply changing the pilot culture that's been out there for so long.

TODD: That's right. The pilot we spoke, Mark Weiss, says pilots, number one, they get paid -- a lot of them get paid according to the hours they fly.

So some of them are not going to want to cut down those hours, but he says it's also a mind set the pilots have. They all have this mind set he says, I can do this. Let's get the mission accomplished no matter what.

He says you've got to get them in a position where they can say, and not feel bad about saying I'm tired. I haven't had enough rest. It's unsafe. They don't have that mindset right now. They got to change all that.

BLITZER: So it's a little macho thing going on.

TODD: It is a macho thing.

BLITZER: Brian, thanks very, very much.

Coming up in our next hour, Ron Paul's contentious interview with Gloria Borger. You're going to find out what put him in a testy mood.

And if you're a last minute holiday shopper, you're in good company. President Obama was hitting the stores today. We went along. Details of where he shopped, what he bought. That's coming up.

(COMMERCIAL BREAK)

BLITZER: Here's a look at this hour's "Hot Shots."

In Hungary, a sculpture who created a statue of the late Steve Jobs gestured next to his artwork. In New York, ballet dancers for the "Nut Cracker" pose after ringing the opening bell at the stock exchange.

In Sri Lanka, schoolgirls play on the shores of a beach in Colombo and in Australia, look at this, tiger cubs tear apart a wrapped Christmas present at the zoo. "Hot Shots," pictures coming in from around the world.

Swift action in Asia that prevented an outbreak of bird flu. Mary Snow's monitoring that and some of the other top stories in THE SITUATION ROOM right now. Mary, what else is going on?

MARY SNOW, CNN CORRESPONDENT: Wolf, more than 17,000 chickens at a Hong Kong poultry market are being recalled after a chicken has been tested positive from avian flu. The market has been declared an infected place and farmers are now banned from chickens there for three weeks. The government is working to find out the origin of the infected chicken.

For the first time, U.S. coal and oil fired power plant operators will have to limit emissions of mercury and other hazardous air pollutants. The Environmental Protection Agency finalized a rule today imposing those restrictions. Mercury is a toxin known to damage children and developing fetuses.

The Justice Department just announced a $335 million settlement with Bank of America over discriminatory lending practices by the bank's country wide financial lending unit.

Attorney General Eric Holder says a federal probe found discrimination against 200,000 qualified African-American and Hispanic borrowers from 2004 to 2008.

Holder says minority borrowers who qualified for prime loans were steered into higher interest rates subprime loans. Shares of Bank of America rose about 1 percent after today's announcement. The Dow also gained ground today inching up 0.2 percent.

And President Obama did a lot, did what a lot of Americans did today. He hit the stores for some last minute Christmas shopping and didn't go alone. His dog, Bo, tagged along. So appropriately enough, the president's first holiday stop was Pet Smart.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: All right. I'm ready. This is holiday, Bo. How you doing? Good. Merry Christmas to you. This is for the girls now.

UNIDENTIFIED FEMALE: What are you getting, sir?

PRESIDENT OBAMA: You know, how are you?

UNIDENTIFIED FEMALE: How are you doing? Merry Christmas!

PRESIDENT OBAMA: In case you guys were wondering, just dance for the Wii. The girls -- beat me every time on these various dance games, so -- I'm going to -- I'm going to and you guys will never get a picture of me doing it because I get -- every time.

I do have a credit card and I've got cash, too. Let me try -- let's see if my credit card still works. It will be really embarrassing if it doesn't - -if it doesn't go through.

(END VIDEO CLIP)

SNOW: Well, it turns out, it did go through and all that shopping apparently made the president hungry. He headed straight for a pizzeria in Delaware, Virginia. He walked out with three pies -- Wolf, I'm glad I'm not the only one who hasn't finished my Christmas shopping.

BLITZER: And you're not. There's a lot of other people just like you, Mary.

Thanks very, very much.