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THE SITUATION ROOM

Scotland Frees Lockerbie Bomber; How Should the U.S. Respond to Escalating Violence in Iraq?; President Goes on Conservative Talk Radio to Sell Health Care Reform; Lockerbie Bomber Arrives in Libya to a Hero's Welcome; Government Ending Cash for Clunkers Program Monday Night; Ailing Senator Ted Kennedy Writes Letter Seeking Quick Replacement in Case of Death

Aired August 20, 2009 - 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: Rick, thanks very much.

Happening now, breaking news. A convicted terrorist returns home, walking free from a Scottish prison after two decades -- two decades after unleashing the worst terror attack ever on British soil, but only after serving only seven years of his life sentence.

I have an exclusive interview with the Scottish justice secretary who made that controversial decision to set him free.

Also, ailing Senator Ted Kennedy fearing he may not be there to cast his critical vote on health care reform. Now he's taking an extraordinary step to ensure someone would do it in his place.

Plus, the government's hugely popular cash for clunkers program rapidly running out of gas as dealers complain they're not getting reimbursed for the millions of dollars they're shelling out. I'm Wolf Blitzer in CNN's command center for breaking news, politics, and extraordinary reports from around the world. You're in THE SITUATION ROOM.

We're following breaking news this hour. The man convicted of blowing up Pan Am flight 103 just before Christmas 1988, is now a free man, on Libyan soil. The Associated Press reporting now that Abdel Baset al Mohammad Megrahi has arrived in Tripoli after walking out of a Scottish prison today, granted compassionate release based on his terminal prostate cancer. It's a very controversial decision strongly opposed by the United States government and many of the victims around the world. The victims' relatives around the world.

Let's go to Scotland. CNN's Diana Magnay is joining us now with more on this dramatic development. All right Diana, tell us what happened.

DIANA MAGNAY, CNN CORRESPONDENT: Well, Wolf, about eight hours ago now the Scottish justice minister made this announcement, and shortly after that the extraordinary sight of a man who, as you say, has served only seven years leaving Greenoen prison behind me a free man. And, remember, he was convicted of killing 270 people in the Lockerbie bombing in 1988. So, he's now touched ground in Libya. And we heard from his lawyer earlier, really the only statement that anyone has heard from al Megrahi over the last eight years.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Many people, including the relatives of those who died in and over Lockerbie, are, I know, upset my appeal has come to an end. But nothing more can be done about the circumstances surrounding the Lockerbie bombing. I share their frustration. I have most to gain and nothing to lose about the whole truth coming out until my diagnosis of cancer. To those victims' relatives who can bear to hear me say this, they continue to have my sincere sympathy for that unimaginable loss that they have suffered. To those who bear me ill will, the only thing I can say is I do not atone that to you.

(END VIDEO CLIP)

MAGNAY: As he admits himself, this is not a statement that will go down well with many of the victims' families, which are incredibly polarized, Wolf. There are those, particularly those in the UK, who believe Megrahi is innocent, that there was a wider conspiracy, that he was framed, that Libya was framed, and there are those on the other side of the spectrum who believe that this man was guilty, should not be shown compassion, and should have spent the rest of his days in that jail behind me. Wolf?

BLITZER: Diana, as you take a look at this from those you've spoken to in Lockerbie themselves, the victims' families there, what do they say? We know that the American families are outraged, and I'm going to be speaking with one of them in a few moments, but what about the families in Lockerbie?

MAGNAY: The families in Lockerbie, they were 11 Scottish victims killed there. They say really which is sort of in communion with the feeling in the village that these things should not be dwelt on anymore, that they should be allowed to move on and that it really is immaterial to them whether al Megrahi is released or not. I was surprised to hear that said. There are other families in the UK who believe that he was innocent and are glad that he will be going back. But definitely the sentiment in Lockerbie perhaps because this was the sight of such great carnage 20 years ago was these people died in our fields. Whether he's released or not will not bring them back, let us move on. Wolf?

BLITZER: Diana, thanks very much. Diana Magnay reporting for us from Scotland.

The Obama administration worked very hard to try to prevent the release, and the State Department is warning Libya not to give al Megrahi a hero's welcome or a state funeral. President Obama wants to see his confinement continue in Libya.

(BEGIN VIDEO CLIP)

OBAMA: We thought it was a mistake. We're now in contact with the Libyan government and want to make sure that if, in fact, this transfer has taken place that he is not welcomed back in some way but instead should be under house arrest. We've also, obviously, been in contact with the families of the Pan Am victims and indicated to them that we don't think this was appropriate. (END VIDEO CLIP)

BLITZER: Just a little while ago, I had an exclusive and very lengthy interview with a man who ultimately made the decision to release al Megrahi, Scotland's justice secretary, Kenny Macaskill.

(BEGIN VIDEO CLIP)

BLITZER: Is there any precedent in Scotland where a mass murderer, someone who killed 270 people in cold blood has been freed to go home to his wife and family because he's suffering from cancer?

KENNY MACASKILL, SCOTTISH JUSTICE SECRETARY: This crime is unprecedented in our small country. It's actually the worst atrocity -- terrorist atrocity ever perpetrated anywhere within the United Kingdom. So it's a circumstance that has never happened before. And I hope that it's a circumstance that will never reoccur.

BLITZER: Are there precedents where murders, just regular murderers, someone who killed someone in cold blood and served only a very small portion of his or her sentence, has been free to go home and spend the rest of his life with his wife and kids because he or she is suffering from cancer?

MACASKILL: Well, each and every compassionate release that has been granted, and there have been 30 granted since the year 2000, is done under individual circumstances. And as we were seeing, in Scotland, justice is equally tempered with mercy. Those who commit an offense must be punished and have to pay a price.

Equally, we have values that we seek to live by, even if those who perpetrate crimes against have not respected us or shown any compassion. Here is a dying man. He didn't show compassion to the victims, American or Scottish. That does not mean that we should lower ourselves, debase ourselves, or abandon our values. He was justly convicted, but we're allowing him some mercy to return home to die.

(END VIDEO CLIP)

BLITZER: You can see the full interview by the way with the Scottish Justice Secretary Kenny Macaskill, that's coming up in about two hours during our 6:00 p.m. Eastern hour. That's going to be here in THE SITUATION ROOM. You're going to want to see this interview. Relatives of the Pan Am 103 victims are reacting strongly, as you can imagine, expressing new heartbreak and outrage more than two decades after the initial crushing blow. Bert Ammerman is joining us now from New York. His brother was one of those 270 people killed in the bombing, 189 of those 270 were Americans. Is that right, Bert?

BERT AMMERMAN, BROTHER OF PAN AM 103 VICTIM: That's correct, Wolf.

BLITZER: All right. And one of them was your brother. So, you listen to the justice secretary of Scotland say, in effect, that -- he tells me this in the interview -- two wrongs don't make a right. That's why the compassion was justified to show al Megrahi -- how do you react to that?

AMMERMAN: It's absolutely ludicrous. I mean, I listened to his interview live this morning, and I've commented on it. He continuously contradicts himself to make the statements he made. This wasn't about one individual. This is bigger than Megrahi. This is about state-sponsored terrorism. This is making a statement to terrorists throughout the world and countries that support it that the United States and United Kingdom are weak on state-sponsored terrorism. The man massacred 270 people. He was convicted of that, 259 at 31,000 feet. The compassion he got was life imprisonment, not capital punishment. He should have died of natural causes in confinement and had an appropriate burial in Libya.

BLITZER: So, when you saw him board that plane and get on that plane to fly from Scotland to Libya, I guess it must have brought back some horrible thoughts in your mind.

AMMERMAN: Wolf, this is 20 years now. This is the second worst day in the 20 years. The first one obviously is when Tommy was killed along with 269 other people. To me, it looked like a victory caravan with the convoy to the airport, watching Khadafy's son come down the steps to give him a hero's hug. I honestly thought it was like a presidential transition that we do every four years when the president leaves. He walks up the steps and I said why don't we really make this surreal, why doesn't he turn around like Nixon did in '74 and salute and go off into the sunset? This has not been a real good day.

BLITZER: As we're speaking right now, the Associated Press is reporting that thousands of people have shown up at the airport in Libya to welcome him as a hero. And we're going to be getting those pictures fairly soon, we're seeing some of them right now, but we hope to be getting the video fairly soon. What does that say to you?

AMMERMAN: Oh, exactly what I said for months about this. If you let him go, he goes back as a hero, he's going to get a hero's welcome. I listened to President Obama's comments and that really concerns me. "We are in contact with the Libyan officials. We don't want a hero's welcome. He should be under house arrest." My comment, Mr. President, and if they're not, what are you going to do about it? It really shows weakness. And to see him go back with a hero's welcome is absolutely mind-boggling.

But Wolf, in all honesty, this morning it finally hit me. Maybe our loved ones were guilty for being on the flight and the families have been guilty for trying to pressure our government to do what is right. We had to force our government for an independent investigation of Pan Am 103, we had to force them through the Aviation Security Act of 1990, we had to force them to get these guys indicted, we had to force them to get a trial, then we had to fight the Clinton administration not to give American businessmen passports. Then I had to watch Bush 43 commend Khadafy on denouncing terrorism and watch President Obama shake Khadafy's hand. And now compassionate release? I guess we're the guilty ones.

BLITZER: Bert Ammerman, our condolences to you, to all the families of the victims of Pan Am 103. Thanks very much for coming in.

AMMERMAN: Thank you.

BLITZER: Just to remind our viewers, the full interview with the Scottish justice secretary will air during our 6:00 P.M. Eastern hour. Let's go to Jack Cafferty right now, he's got "The Cafferty File." You can't blame those folks for being outraged, Jack. A lot of people around the world are.

JACK CAFFERTY: And it's absolutely outrageous.

A spike in deadly violence in Iraq is raising new questions about the withdrawal of U.S. combat forces. Insurgents launched six bombings that hit Baghdad within an hour yesterday, two of them targeting seats of power, official government buildings. The attacks killed at least 100 people, wounded more than 500 others. The deadliest day since U.S. troops pulled out of Iraqi cities back on June 30th.

Prime Minister Nuri al Maliki is blaming Sunni insurgents linked to al Qaeda in Iraq, and the government is making quick moves to try to beef up security. They're adding more check points in Baghdad, tougher vehicle searches, random security stops. Also, they arrested 11 high- ranking security officials from inside the Iraqi army and police and are detaining them for questioning.

The attacks followed today by a bicycle bomb at a restaurant that killed two more people are a huge blow to Iraq's government's attempt to return life to normal. Al Maliki had just recently ordered the reopening of streets in Baghdad, the removal of a lot of those concrete blast walls from the capital's main roads. Meanwhile, there are worries now about what these coordinated attacks say about the Iraqis' readiness to keep the country secure, especially heading into the upcoming elections.

It's exactly what everybody feared would start happening once the U.S. role in Iraq was reduced. President Obama has ordered all U.S. combat troops out of Iraq by next August and all remaining U.S. troops out of the country by the end of 2011. Here's the question, "How should the United States respond to the escalating violence in Iraq?" Go to cnn.com/caffertyfile, post a comment on my blog. Wolf?

BLITZER: Jack Cafferty, thanks very much.

President Obama takes his health care reform pitch to talk radio. In a very unusual move, he's been broadcasting from the White House today.

Also, Ted Kennedy suffering from brain cancer, but eyeing a critical vote on health care reform. Now he's moving to make sure someone will cast his vote if he can't.

Plus, credit card interest rates right now, they're soaring. Why are some banks charging you as much as 50 percent more at the same time they're taking in billions in government bailout dollars?

(COMMERCIAL BREAK)

BLITZER: President Obama taking his health care reform pitch to a conservative talk radio audience. The Philadelphia based Michael Smerconish broadcast his show live from the White House today interviewing the president on health care and more as Mr. Obama took questions from his listeners.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE (via telephone): Hi, Mr. President. Thanks for taking my call.

PRESIDENT OBAMA: Hi, Tracy.

UNIDENTIFIED FEMALE (via telephone): Hi. Until I heard you say that a private option is just a sliver of your health care proposal recently, I think myself, as any American, thought that pretty much was your purpose result.

OBAMA: I know.

UNIDENTIFIED FEMALE (via telephone): My question is, could you please quickly list five or six bullet points of what legislation must include for you to be willing to sign it, for instance, employer mandates, tort reform, illegal immigrants, what about them, and must it include a public option?

OBAMA: I'd be happy to. First of all, you mentioned illegal immigrants. This has been an example of just pure misinformation out there. None of the bills that have been voted on in Congress and none of the proposals coming out of the White House propose giving coverage to illegal immigrants. None of them. That has never been on the table. Nobody has discussed it. So, everybody who's listening out there, when you start hearing that somehow this is all designed to provide health insurance to illegal immigrants that is simply not true and has never been the case.

MICHAEL SMERCONISH, TALK RADIO HOST: What is their fate, if I might ask? Because there's a 1986 law on the books that says if you show up at an ER, you have to be treated.

OBAMA: Well, that will continue because we don't want a situation in which some child, even if they're an illegal immigrant, shows up at an emergency room with tuberculosis and nobody is giving them treatment and then they're going back to the playground and playing next to our kids. So, I think there is -- there is a basic standard of decency where, if somebody's in a death situation or a severe illness, that we're going to provide them emergency care. But nobody has talked about providing health insurance to illegal immigrants. I want to make that absolutely clear.

(END VIDEO CLIP)

BLITZER: All right, let's bring in our chief national correspondent John King, the anchor of CNN's "State of the Union," which airs Sunday mornings. Is the president going there, even though he's a conservative radio talk show host, he was somebody who was sympathetic to the president during the campaign. Didn't he endorse him?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: He did endorse him. Look, there are a half dozen, maybe eight or nine national conservative talk show hosts listened to by conservatives. Of all of them, this is the safest place for President Obama. And probably the talk show host, while respected, has a broad audience least-listened to among movement conservatives, those who are most against the president's plan.

But look, the president is using every means of communication at his disposal to go out here and it is on talk radio that the White House would say a lot of what they would call mischaracterization, misperceptions or outright misleading statements about the bill have been made.

So, it's a chance to speak to a national audience. He took calls from Boston, from Indianapolis, from New York, from Philadelphia, Smerconish did endorse him in the campaign. But the president realizes he has a bit of an uphill battle right now in health care. You heard him dealing with the illegal immigrant there. Anything they can do, the more they can get the president out there, they're trying to do it. If he can maybe not turn around conservatives but independent support. A lot of them listen to that program. Independent support for the health care plan is not bad. So this is the president using every asset at his disposal.

BLITZER: Let me make a turn to the top story we're following right now, the only person convicted of killing 270 people at Lockerbie for Pan Am flight 103, these are the first pictures we're now getting in from Libya where his plane has just landed. He has arrived, John. And look at that. Thousands of folks have showed up there to give him a hero's welcome. The Scottish justice minister saying they showed him compassion because he's suffering from prostate cancer and doesn't have a whole lot of time left to live, although it's unclear exactly how long he has to live. These pictures are going to outrage a lot of folks.

KING: Including the brother of the victim you just interviewed. The families will be outraged by these pictures, Wolf, the hero's welcome. This is exactly what President Obama said earlier today on that radio program. He hoped the Khadafy government would prevent this. He wanted a very low key arrival back home and this will put a lot of pressure on the administration as well because as you know since late in the Bush administration they have been trying to bring Libya back into the international community.

It gave up the nuclear program. It was just a congressional delegation. Senators McCain, Lieberman and others were just in Libya meeting with top government officials. There has been an effort to bring them back into the world community. There will be a lot of pressure on the state department now, Secretary Clinton, and on the White House, President Obama, to do something now to punish, to push back against the Libyan government for allowing those images essentially celebrating the arrival back home of a terrorist who killed more than 200 people.

BLITZER: There is a lot of irritation in the United Kingdom, especially Scotland right now for letting him go back to Libya because the assumption always would be that these pictures, this wild celebration that we're seeing right now would ensue and a lot of folks are saying, at least here in Washington, they had assurances from the government of the United Kingdom that once he would be allowed to serve his life sentence in Scotland he would serve his life sentence.

KING: And the administration did object when it became clear that this was a possibility of releasing this man and letting him go home. But now that he is released, the dynamic shifts. The White House can convey its displeasure at the Scottish authorities all it wants. These pictures are now out there for the world to see and as we show them Wolf, it will hurt the families, number one. That's the first thing we should think of just as human beings, it's going to hurt the families. But then it will cause diplomatic pressure on the administration to do something to respond, to retaliate is a strong word, they don't like that in diplomatic circles. But to do something to make clear its displeasure to the Khadafy government for this ceremony right here.

BLITZER: We'll see you Sunday morning 9:00 A.M. on "State of the Union," John thanks very much.

All right. There's another story just coming into THE SITUATION ROOM right now. Let's go to CNN Money's Poppy Harlow watching this story for us. Poppy, cash for clunkers. What are you learning?

POPPY HARLOW, CNNMONEY.COM: Coming to an end. Official word from the U.S. transportation secretary Ray Lahood saying the cash for clunkers program Wolf, will end Monday night at 8:00 P.M. Eastern. Of course, this was a wildly popular vehicle trade-in program, started with a billion dollars in funding, got $2 billion additionally from the U.S. government. Secretary Lahood saying, quote, "This program has been a lifeline to the automobile industry, jump-starting a major sector of the economy, putting people back to work." The tally so far on the number of vehicles sold as a result 457,000 at U.S. dealers across the country. He said about 1.9 billion in rebates so far for those trade-ins. Of course, these offered rebates for people to trade in their gas guzzlers for more fuel-efficient vehicles, up to $4,500 in rebates.

This will end Monday night, urging all automakers to turn in those rebate forms complete by Monday night at 8:00 P.M. Wolf, there's been a lot of controversy over a lot of dealers saying they've even pulled out of the program because they say they have not been paid back quickly enough by the government. But Ray Lahood yesterday and today affirming those dealers will be paid back. But again, cash for clunkers coming to an end Monday at 8:00 P.M. I am sure this weekend we will see a rush to U.S. auto dealers. The full story will be on cnnmoney.com, you can check there for the latest. Wolf?

BLITZER: If you have a clunker, this is the time to go get rid of it and maybe get as much as $4,500 back from the federal government if you buy a new car. Thanks very much for that, Poppy Harlow, working the story.

Dozens of Mexican drug lords indicted in the United States, accused of selling $5 billion worth of cocaine and heroin. American officials say they can get them but skeptics are warning of what happens next.

Plus, hundreds of thousands of keepsakes belonging to the late artist Andy Warhol. Archivists are sifting through them right now, finding some very unusual and even bizarre items.

(COMMERCIAL BREAK)

BLITZER: You're in THE SITUATION ROOM. Happening now, breaking news. The man convicted of blowing up Pan Am flight 103 back in 1988 now back on Libyan soil. He's a free man after being given compassionate release by Scotland. He's getting a hero's welcome in Libya right now. We're following this highly controversial decision which the Obama administration is strongly against.

It has been almost a month since three U.S. hikers were seized at the Iranian border with Iraq. Now their families are going public. You'll hear what they say the three were doing in the region.

And is she really a he? Why a South African world-champion runner is being asked to take a gender test. I'm Wolf Blitzer, you're in THE SITUATION ROOM.

Stricken with brain cancer, Senator Ted Kennedy is trying to make sure his seat is filled quickly should anything happen to him. Our senior congressional correspondent, Dana Bash, is joining us now with more on what's going on. Dana, tell us about the extraordinary letter that the senator has written.

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: That's right, Wolf. Well, look, the sad reality is that Ted Kennedy isn't sure he'll make it to a health care vote this fall. And since reforming health care has been his mission for 47 years in the Senate, he's trying to make sure at the very least someone would be able to cast a vote in his place.

(BEGIN VIDEOTAPE)

BASH (voice-over): Rare, recent pictures of Ted Kennedy returning from a sail in his legendary family compound on Cape Cod where he now spends all his time. But Kennedy, suffering from brain cancer, knows time is not on his side.

So, he's formally asking Massachusetts officials to change state law so he's quickly replaced in the Senate when he's gone. Sending this poignant letter of request. "As I look ahead, I am convinced that enabling the Governor to fill a Senate vacancy through an interim appointment followed by a special election would best serve the people of our commonwealth."

What's behind this? Massachusetts law allows five months to go by before a special election to fill an open Senate seat. Given Kennedy's dire condition, that could mean his seat would be vacant at a time Democrats are desperate for votes on an issue he's worked towards for 47 years -- health care.

SEN. EDWARD KENNEDY, (D) MASSACHUSETTS: This is the cause of my life.

BASH: Kennedy made a brief dramatic return this spring to attend a White House summit on health care.

KENNEDY: Now is the time for action.

BASH: But the ailing senator has been absent from the health care debate and though he's a proud liberal, he's a skilled legislator respected by Republicans who say his presence has been missed.

SEN. MIKE ENZI, (R) WYOMING: It would work differently if he were here and an active part of it.

BASH: Still, Massachusetts Republicans oppose changing a law to all but insure Democrats have a critical health care vote releasing a statement saying, "The integrity of a representative republic is bigger than any person or legacy." The irony here is Massachusetts law was just changed in 2004 to prevent exactly what Kennedy is asking. Then some Democrats feared GOP Governor Mitt Romney would choose a republican to temporarily fill democrat John Kerry's seat if he won the presidency.

(END VIDEOTAPE)

BASH: Now, a Kennedy associate tells CNN that this letter, which not only asks for a change in the way Kennedy is succeeded but essentially acknowledges he probably won't be around too long was, quote, "Very tough." As you can imagine, Wolf, very tough for him to write. It was delivered to Massachusetts leaders this week but actually was written on July 2nd, and at the time he was sitting down to write and pen a slew of letters to various people.

But Kennedy sources tell us that one reason he didn't deliver it at the time is because after consulting with some of his colleagues and friends he concluded it would disrupt an already intense and tumultuous health care debate and discussions that were going on in the Senate.

BLITZER: Good point. Is there any indication, Dana, that Vicki, the senator's wife, would be interested in filling that seat?

BASH: It's a question everybody is asking, because she is somebody who's a confidant and an associate, obviously the wife of Ted Kennedy, but somebody who is supposed to be very politically astute.

I asked an associate of Senator Kennedy, and I got a very quick response. The answer was, definitely not.

BLITZER: Dana Bash, thanks very much.

Twenty-seven people, including a U.S. service member, were killed today, as Afghanistan voted in its second presidential election since the fall of the Taliban. U.S. and foreign troops have been fighting and dying to try to secure the country.

According to one report, turnout could be far lower than the 70 percent who cast ballots in the 2004 election. Results aren't expected for at least a few days.

CNN's Ivan Watson has an exclusive report from a relatively safe part of the country.

(BEGIN VIDEOTAPE)

IVAN WATSON, CNN CORRESPONDENT: In the tents behind me, election workers are counting the ballots after today's vote. They're being watched closely by election observers, many of them coming from some of the candidates for president and provincial council who have been competing in today's election.

At this polling center here in Bamiyan Province in central Afghanistan, more than 5,000 voters are estimated to have come to cast their ballots. And they were fortunate compared to many other parts of Afghanistan, because there were few security threats in this province.

The Taliban insurgency has not been able to take root here. Despite that, we do have a report coming from the governor of this province that a rocket was lobbed at a town in the north of the province. We also know that at least one American serviceman was killed in eastern Afghanistan by a deadly mortar strike, reports of other clashes taking place in southern and eastern Afghanistan.

Some of the breakdown of security for this election comes down along ethnic lines. In the provinces where the Pashtuns, the ethnic Pashtuns predominate, there where the Taliban insurgency has the most support, those were the areas where there are -- there were the biggest threats.

There are very few Pashtuns in this province. There are predominantly ethnic Hazaras. And, as a result, you had a very peaceful election, the governor here calling it a wonderful election. And we have also heard from one of the candidates for president, the opposition candidate, Ashraf Ghani, saying -- quote -- that "The Afghan public has proven the capacity for civil dialogue."

The counting of these ballots, it will continue for some time to come, because ballot boxes are being delivered from remote mountain locations, where donkeys and packed horses had to be used to deliver the polling equipment. And we're not expected to get a final result on this election until mid-September.

Ivan Watson, CNN, Bamiyan in central Afghanistan.

(END VIDEOTAPE)

BLITZER: Federal prosecutors today indicted dozens of alleged Mexican drug lords, men accused of pumping billions of dollars worth of cocaine and heroin into major cities of the United States.

Our homeland security correspondent, Jeanne Meserve, is following this story for us.

A lot of those folks indicted, Jeanne, they're at large right now, aren't they?

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: That's right, Wolf.

Now, the administration says the indictments announced today are an important development in the war against drug traffickers, but some are skeptical.

(BEGIN VIDEOTAPE)

MESERVE (voice-over): "El Chapo" Guzman, the head of Mexico's Sinaloa drug cartel, just one of the 43 drug traffickers indicted Thursday for selling more than $5 billion worth of cocaine and heroin on the streets of cities and towns all across the United States.

ERIC HOLDER, U.S. ATTORNEY GENERAL: These are not symbolic acts that we are taking today. Our intention is to indict these people, to get these people to the United States, and to put them in jail for extended periods of time. This is not simply an expression of displeasure by the United States government.

MESERVE: The Justice Department says about half of those indicted have been arrested, but most of the biggest players are believed to be in Mexico, and neither previous indictments, nor large rewards, have resulted in their capture.

However, administration officials say the -- quote -- "historic and heroic battle" being waged against the cartels by Mexican President Felipe Calderon has changed the game and made success more likely.

HOLDER: This is an ongoing struggle, but I don't think the fact that it is an ongoing struggle necessarily means it is one that we cannot win.

MESERVE: But some experts disagree. They say, even if all the individuals indicted Thursday are eventually put behind bars, others will quickly take their place.

TIM LYNCH, DIRECTOR, CATO INSTITUTE PROJECT ON CRIMINAL JUSTICE: If the question is what is really going to change two or three years from now, I think the law enforcement people are just going to be fighting a different cartel.

(END VIDEOTAPE)

MESERVE: Of course, it is not just going after people. It is going after money. Officials say more than $22 million was seized during this investigation. They are seeking the forfeiture of another $5.8 billion -- Wolf, Back to you. BLITZER: All right, Jeanne, thank you.

A mummified foot, a nude picture of Jackie O., a 23-year-old piece of cake -- what other bizarre items are in Andy Warhol's massive collection of keepsakes?

Plus, relatives of three American hikers detained in Iran are now making a high-profile effort to win their release. Former prisoners tell us what those hikers are likely going through right now.

(COMMERCIAL BREAK)

BLITZER: You might want to check the fine print on your next credit card bill. Interest rates are soaring, and some of the biggest hikes are coming from banks that are actually taking billions of bailout dollars from the federal government.

Let's go to CNN's Mary Snow with a simple question, Mary. What's going on?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, today marks the first phase of new regulations on the credit card industry going into effect. And companies have been boosting rates ahead of the tougher rules.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Twenty-six-year-old Matthew St. Clair has been digging his way out of the $12,000 mound of debt he racked up in college. He's made quite a dent, but was alarmed by a recent bill.

MATTHEW ST. CLAIR, CREDIT CARD CUSTOMER: We're increasing your rate." That caught my attention.

SNOW: St. Clair learned that American Express raised rates on cash advances by 4 percentage points, enough, he says, for him to not use it, because his rate would then be 25.24 percent.

American Express cites the business and economic environment for the hike. And it's not alone. Those who follow the credit card industry report widespread hikes of rates and fees.

CURTIS ARNOLD, FOUNDER AND OWNER, CARDRATINGS.COM: We have seen a dramatic tick-up, particularly in the last 60, 90 days.

SNOW: Adam Levin founded a credit education Web site. He says credit card issuers are raising rates while they still can. Phase one of reform legislation signed by President Obama in May is now kicking in, with the bulk of the new rules to follow in February.

ADAM LEVIN, FOUNDER, CREDIT.COM: They're using this period of time in order to jockey and front-run before the implementation of the legislation.

SNOW: The Web site BillShrink.com compared cards between January and June and found, of major issuers, Capital One changed rates the most, raising purchase rates and balance transfers 50 percent.

When asked about changing rates, Capital One said it had to make adjustments to reflect external conditions. The Pew Safe Credit Cards Project surveyed hundreds of credit card providers and found even the lowest advertised rates went up 20 percent, to 11.99 percent in the first half of the year.

SHELLEY HEARNE, PEW SAFE CREDIT CARDS PROJECTS: It happened at a time right when banks were actually getting money cheaper from the federal government.

SNOW: But the group representing the credit card industry says they're not out to get customers.

SCOTT TALBOTT, SENIOR VICE PRESIDENT FOR GOVERNMENT AFFAIRS, FINANCIAL SERVICES ROUNDTABLE: The bulk of Americans are seeing a change in their interest rate or in their credit limit because of a change in the borrower's risk profile.

SNOW: But Matthew Saint Claire says he doesn't get it, since his profile has improved as he whittled down his debt. He's hoping to avoid using credit cards in the future, but worries about his friends.

ST. CLAIRE: And I have got friends now that are filing for bankruptcy at 26. So, that's something I know my parents probably didn't see in their lifetime, but it's pretty -- pretty common now with my friends, which is pretty scary, truthfully.

(END VIDEOTAPE)

SNOW: And, Wolf, coincidentally, starting in February, there will be tighter restrictions on cards issued to anyone under 21.

Now, other rules going into effect today, companies must now give customers 45 days advance notice before any significant changes. Bills also have to be made out 21 days before the due date. That's in order to cut down on late payments -- Wolf.

BLITZER: All right, Mary, thank you.

What a lot of people might call junk, the pop artist Andy Warhol called a work of art. Now archivists are sifting through cardboard boxes containing of hundreds of thousands of items he collected over the years, ranging from a 23-year-old piece of cake to an autographed nude photo of Jacqueline Kennedy Onassis.

Let's go to our Internet reporter, Abbi Tatton. She is here in the THE SITUATION ROOM to tell us what else are in these boxes -- Abbi.

ABBI TATTON, CNN INTERNET REPORTER: Well, Wolf, these are not boxes. These are the time capsules, more than 600 containers of stuff collected by Andy Warhol that archivists from the Andy Warhol Museum in Pittsburgh are currently painstakingly going through and cataloging. And if we open one of them up, we will show you why this is taking so long. Each one of these has got hundreds and hundreds of items in them, everything from gifts to photographs, bits of old food in some cases, wads of cash in others.

This is the reason. For -- up until his death in 1987, Warhol kept a cardboard box, like one of these, next to his desk, and anything that passed through his hands, he would put it in there, and, at the end of each month, seal it up, send it off to storage.

Look at some of the things that have been catalogued so far. These are necklaces bearing a photograph of John F. Kennedy. That's a handwritten thank-you note from Barbara Walters from 1977, a photo booth self-portrait of the artist here. There's probably a quarter- of-a-million-plus items that they're going through, year two a the six-year project. They're just a third of the way through at this point.

BLITZER: Wow. Amazing stuff. What other items stand out?

TATTON: Well, Matt Wribican is an archivist who's been going through this stuff absolutely years. And we talked to him and asked him that question.

He noticed -- noted a nude poster of Jackie O. signed by Jackie O. They were friends. And it was probably sent as a joke. He also noted to us the time he found a mummified foot, human foot, probably from ancient Egypt. He had no idea what it was until he saw toes.

BLITZER: Ooh.

TATTON: Apparently, Warhol had a foot fetish.

BLITZER: He kept everything.

TATTON: Absolutely everything.

BLITZER: Wow. All right. Thanks very much, Abbi, for that.

Deadly violence as Afghans vote for president today, almost eight years since the fall of the Taliban. Could President Obama face the same kind of opposition President Bush faced with the war in Iraq? We're checking that out.

And a first lady first -- Michelle Obama makes her debut on the list of the world's most powerful women.

(COMMERCIAL BREAK)

BLITZER: Poppy Harlow is monitoring some other important stories incoming to THE SITUATION ROOM right now.

Poppy, what's going on?

HARLOW: Well, for investors, investors really liking what AIG's new CEO had to say today. The insurer's shares surged more than 20 percent at the close, closing just over $32 a share.

Chief executive Robert Benmosche said he was optimistic about paying back billions of dollars in federal aid and getting the company back on its feet, Wolf. AIG owes taxpayers for than $80 billion from the $182 billion bailout it got last year. AIG plans to pay back that money by selling off many of its assets.

And, in California, lawmakers are divided over Governor Arnold Schwarzenegger's plan to grant early release to thousands of inmates. The measure, which could save the state more than a billion dollars, is being proposed before the state legislature today, but it's growing opposition from some Republicans and law enforcement groups.

And, finally, most of the crew of a hijacked Russian ship landed in Moscow today. The ship was commandeered off the coast of Finland almost a month ago. The Russian navy took it back Monday without a shot fired -- Wolf.

BLITZER: Thanks, Poppy. We're going to get back to you soon.

We're getting new video coming into THE SITUATION ROOM right now, the Pan Am 103 bomber arriving home in Libya just a little while ago, to a hero's welcome, after his controversial release from a Scottish prison.

Alex Castellanos and Julian Epstein, they are standing by live. We are going to talk about that more in our "Strategy Session."

Plus, President Obama pitches health care reform to a conservative talk radio audience. The details of his unusual broadcast from the White House, that's coming up as well.

(BEGIN VIDEO CLIP)

MICHAEL SMERCONISH, RADIO TALK SHOW HOST: ... last weekend. You know, a great deal has been made as to...

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: Pictures coming in from Libya right now, the convicted killer of 270 people, Pan Am 103, receiving a hero's welcome in Libya, after Scotland decided he should go free because he's suffering from prostate cancer.

Let's talk about this and more with Julian Epstein. He is a Democratic strategist. He's the CEO of LMG, a public affairs firm here in Washington. And Republican strategist and CNN political contributor Alex Castellanos.

The Obama administration wasn't happy with this decision by -- by Scotland.

JULIAN EPSTEIN, DEMOCRATIC STRATEGIST: It was outrageous. And it gives compassion a bad name. And President Obama was right to condemn it. Senator John Kerry condemned it.

I think you will hear unanimous opinion amongst Democrats and Republicans that this was foolish thing for Scotland to do. The -- the issue now is Libya. And Libya has been looking to come into the community of nations. It's been looking to be a broker in the region on nuclear issues and a whole bunch of other issues.

And the question for the Obama administration is, what are they going to do to push back? The video that you showed on your screen just a few minutes ago was a very, very negative message for Libya to be sending out to the world, where they have a hero's welcome for a guy that's responsible for the death of 270 people.

BLITZER: And I think that's anger that Julian expresses, that cuts across political lines here in Washington.

ALEX CASTELLANOS, CNN POLITICAL CONTRIBUTOR: This is -- this is going to be purple America. This is not red and blue. I think everyone is going to be on the same page here.

And I think the issue Julian was -- raised is right. Libya admitted culpability in the bombing. They -- Libya paid over $2 billion to the families of the victims. But, since then, Libya has withdrawn its admission of responsibility here. And we're -- it seems like the Western world is rewarding them for that at this point.

So, the Obama administration is right to stand up strongly against it. They should. When you're president, you get credit for -- for what happens that's good and bad, even if you're not immediately responsible. So, politically, it's dangerous for him not to get outraged.

BLITZER: We are going to have a special interview, exclusive interview, coming up in our 6:00 p.m. Eastern hour -- a little bit more than an hour from now -- with the Scottish -- the Scottish justice secretary, in which I ask him some tough questions on why he made the decision.

And he says it was his decision, says he wasn't pressured by anyone to make that decision. He made it. And he has his explanation. You guys are going to be anxious to hear what he has to say. I think our viewers in the United States and around the world will be interested as well.

As a Democratic strategist, how worried are you that opposition could build to the president's strategy in Afghanistan right now -- and historic elections are under way right now -- that opposition could build in the -- to the war in Afghanistan, as opposition built during the Bush administration to the war in Iraq?

EPSTEIN: Not very, so long as the president doesn't make the two mistakes that President Bush made. One is not to make it a partisan war. President Bush, I think, did make the Iraqi partisan war.

BLITZER: How did he do that? EPSTEIN: Thank you, Karl Rove. Thank you, Andy Card. Thank you, all the Bush political operatives that said, if you don't vote with us, you're voting against us -- you know, you're not patriotic. They made it a political issue in 2002, and 2004, and 2006. They lost in 2006. I think the history is pretty clear on that.

The second thing that President Bush didn't do was, he didn't explain to -- make the case to nation. Obama has got to make the case to the nation. The situation in Afghanistan is very different from Iraq. In Afghanistan, you had recent polls, a BBC poll -- a BBC/ABC poll, that showed anywhere between five and eight out of 10 Afghanis...

BLITZER: But you see -- let me interrupt for a second, Alex, because you see he's losing some of that support, and even some in the Democratic Party...

EPSTEIN: Not in Afghanistan.

BLITZER: In Afghanistan. Even some in the Democratic Party are wondering, you know, is he sending a lot more soldiers and Marines; is that a good idea?

CASTELLANOS: You know, during the campaign, it's so easy to say George Bush is -- is wrong everywhere. He's wrong in Afghanistan. He's wrong in Iraq.

It turns out maybe he -- President Bush wasn't. Why were we in Afghanistan? Because the Taliban, a rogue government, was supporting al Qaeda. We wanted to cut this body of the snake away from the head of the snake. Guess what? Al Qaeda is now in exile somewhere in Pakistan, and the Taliban's gone.

President Obama has not given a reason. It puts on the table, so, why are we still there? And, yes, that can hurt him, not only on the left with the base of his party that's anti-war, but the -- mainstream America is wondering, why are we sending troops there?

BLITZER: Guys, guys, hold...

(CROSSTALK)

BLITZER: ... hold your thought. The next time, we will continue this conversation. Unfortunately, we're out of time.

(LAUGHTER)

BLITZER: But we will continue.

Guys, thanks very much.

The world's most powerful women, does the first lady, Michelle Obama, make the cut in a new list of the world's top 100?

Also, your answers to this hour's question: How should the U.S. respond to the escalating violence in Iraq? Jack and your e-mail coming up.

(COMMERCIAL BREAK)

BLITZER: On our "Political Ticker": power women.

"Forbes" magazine has a new list just coming out, and the German chancellor, Angela Merkel, is ranked number one in the world. The second most powerful woman in the world, Sheila Bair, the chairman of the Federal Deposit Insurance Corporation right here in Washington. Secretary of State -- Secretary of State Hillary Clinton comes in -- get this -- at number 36. The first lady, Michelle Obama, comes in at number 40.

Let's go to Jack Cafferty right now. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: I think that survey's not very good. How does Hillary...

(CROSSTALK)

BLITZER: You would put Michelle much higher?

CAFFERTY: Well, much higher. How does Hillary Clinton rank higher than the first lady? She's a Cabinet member.

BLITZER: Yes.

CAFFERTY: I don't understand that. Plus, wasn't she a lot higher last year, Hillary?

BLITZER: I don't remember.

CAFFERTY: I think, in the same survey, much higher, yes. That was back when she was running for president.

Anyway, on to other things.

How should the United States respond to the escalating violence in Iraq?

Kevin in California: "We need to admit that we can not stop a religious war between Shiites and Muslims and -- Sunni and Shiite Muslims that has been going on for 1,300 years. We need to get the heck out of Iraq -- unless, of course, we get all their oil."

Sam in Florida says: "I know it sounds terrible, but it seems like the only way Iraq runs smoothly is under a dictatorship, like when Saddam was in charge. I remember when our leaders saw nothing wrong with the way Iraq was being governed, as long as Iraq was at war with Iran. I think our military should leave Iraq, don't look back. If the Iraqi government can't take care of their problems by now, maybe it will take a civil war in that country to see who is going to prevail."

B. writes: "Jack, Iraq is a sovereign nation. We ought to respect that, stay out of their affairs. Obama has specified our exit schedule. We ought to stick to it or even accelerate it."

A.P. says, "Don't we have enough problems back at home, instead of worrying about problems in Iraq?"

Skyler writes from Iraq: "I'm coming -- commenting from Iraq at the moment. And I can tell you from experience doing multiple tours as an intelligence analyst that I see and brief these kinds of increases or decreases all the time in enemy activity. There is no doubt about the attacks that occurred recently, but we have to keep in mind that Iraqi security forces have shown their capability and willingness to keep stability within their respective districts and cities. At this point, they should be left to do the job they are highly capable of doing."

Darren writes: "We have already done enough damage there. We ought to continue withdrawing our troops. Let them get back to their civil war, which we interrupted back in 2003."

If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile. Look for yours there, among hundreds of others -- Mr. Blitzer.

BLITZER: Thank you, Jack.

And, to our viewers, you're in THE SITUATION ROOM.