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No Food for 4 Days for Refugees; Pop Stars Took Gadhafi Millions; House Probe Stokes Muslims' Fears; Sheen Fired from Hit Sitcom; Civil War in Libya; Congressional Hearing or Witch Hunt?

Aired March 7, 2011 - 18:00   ET

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


WOLF BLITZER, CNN ANCHOR: I'm Wolf Blitzer. You're in THE SITUATION ROOM.

The eyes of the world are on Libya right now. We're following all the latest developments this hour. Among them, NATO is now conducting what are called surveillance flights of Libya around the clock. Meanwhile, momentum is building at the United Nations for a no-fly zone over Libya, with the U.S., Britain and France working on a draft resolution. And with the conflict now entering its fourth deadly week and growing in scope and scale every single day, CNN now considers what's happening in Libya to be a full-scale civil war.

We have an update on the situation on the ground in Libya. We received it just a little while ago from CNN's Arwa Damon. She's in the eastern city of Benghazi, which is now under rebel control.

(BEGIN VIDEOTAPE)

BLITZER: Are they digging in for a sustained, long-term civil war? What's the sense you're getting over there?

ARWA DAMON, CNN CORRESPONDENT: You know, Wolf, a few days ago, when we were talking to the opposition leaders, they truly believed as if this would be all over in a few days and at this point they would already be in Tripoli.

Now it seems as if the fight that they're encountering, much tougher than they anticipated. The soldiers -- or the opposition soldiers, if you want to call them that, that out there are really just civilians. They don't have much military experience. And it's been quite a learn as you go process that has been very challenging. And I think now there is the realization that they're not going to have that easy path all the way from Benghazi to Tripoli.

So they most certainly do appear to be digging in, intensifying their efforts, trying to rally together and form at least a military plan so that they can strategically move forward at this point.

BLITZER: Are they seeking U.S., European recognition, from the Arab world as well? Do they want the world to recognize this opposition force in Benghazi as the legitimate government of the Libyan people?

DAMON: Yes, Wolf, they most definitely do. In fact, the decree that they issued over the weekend states quite simply that they declare themselves to be the sole authority that can speak on behalf of all of the Libyan people to the international community.

They very much do want to be viewed as being a valid entity. They say that this is critical in reaching their ultimate goal, which is, of course, bringing down the government of Colonel Moammar Gadhafi. And they're very aware of the fact that they do also need this legitimacy as they do try to go forward.

They have to prove not only to their own people, but to the international community, that they are capable of governing, that at the end of the day they would be capable of bringing about a democratic government in this country. But they also realize that they are still dealing with a very chaotic situation, bearing in mind that most of the people who are involved in the opposition leadership have very little experience actually governing or putting together the type of democratic government that they are trying to establish.

BLITZER: Are they also appealing for weapons and a no-fly zone? Is that in the conversations you have had with them? Are those two major requests that they're making?

DAMON: They most certainly are, Wolf. And they're very worried about the time that it could be taking for some sort of a no-fly zone to be established.

They are very adamant in that they do not want to see -- most of them don't want to see any sort of foreign military presence in Libya, but they do want a no-fly zone, because they're growing increasingly anxious that Gadhafi could up his aerial bombing campaign. They're even worried that he could resort to using chemical weapons.

And they do also realize that they are outgunned by those soldiers who are staunchly loyal to Colonel Gadhafi himself, many we're talking to saying that they would like to see airstrikes being carried out by the U.S., by NATO, by some sort of an outside force to at least level the playing field here, Wolf.

BLITZER: Arwa Damon on the scene for us in Benghazi -- Arwa, thanks very much.

(END VIDEOTAPE)

BLITZER: Meanwhile, Britain is scrambling to explain an embarrassing blunder in its response to the Libyan crisis.

CNN's Brian Todd picks up that part of the story.

Brian, what's going on?

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, the British government says this was an innocuous diplomatic mission to meet with Libyan rebel leaders and merely assess the situation on the ground. But sources tell us most members of that British team were not diplomats. (BEGIN VIDEOTAPE)

TODD (voice-over): What starts out as a mission to help rebel forces in Libya backfires for a key U.S. ally. A group of British special forces soldiers and a diplomat were reportedly dropped off in the cover of night by helicopter. They were captured and briefly detained by angry rebel leaders, sources tell CNN.

They were caught with weapons, reconnaissance equipment and multiple passports, according to the "Guardian" newspaper. Britain's foreign secretary called them all diplomats and he had to face a grill on the floor of Parliament.

WILLIAM HAGUE, BRITISH FOREIGN SECRETARY: Last week, I authorized the dispatch of a small British diplomatic team to eastern Libya in uncertain circumstances which we judged required their protection. They were withdrawn yesterday after a serious misunderstanding about their role, leading to their -- leading to their temporary detention.

DOUGLAS ALEXANDER, BRITISH MEMBER OF PARLIAMENT: The British public are entitled to wonder whether, if some new neighbors moved into the foreign secretary's street, he would introduce himself by ringing the doorbell or instead choose to climb over the fence in the middle of the night.

(LAUGHTER)

TODD: The team was later released and extracted from Libya to a British warship. One expert says the mission may end up hurting the rebels.

RONALD BRUCE ST. JOHN, LIBYAN SCHOLAR: What the British did by sending people in there threatens to undermine the claim that it's a homegrown revolution driven by young idealistic people who simply want to get rid of the regime.

TODD: British officials tell CNN the team was there to meet with opposition leaders and get a better reading of the political, humanitarian and military situation on the ground.

(on camera): As embarrassing as this episode is for the British, experts, including a former U.S. defense secretary, tell us that if the major powers want Moammar Gadhafi out and are prepared to support the opposition, it's normal, even advisable, to send assessment teams in, despite the dangers.

(voice-over): William Cohen led the air campaign over Yugoslavia as defense secretary.

WILLIAM COHEN, FORMER U.S. SECRETARY OF DEFENSE: To have people on the ground, whether it's our diplomats, whether it is people that are simply reporting, newspaper and news media people, all of that would be important to understanding who are the people who are rebelling and what are their goals and whether they are going to be moving forward.

(END VIDEOTAPE) TODD: William Cohen says missions like this have to be put into broader context, that the major powers have to look at each Middle East country individually, look at what their interests are, and understand what their role is and the consequences of coming down on one side or the other.

Missions like this, he says, help you understand that. Now, British officials tell us they intend to send another team into Libya. They again say this will be a diplomatic mission to -- quote -- "strengthen dialogue" -- Wolf.

BLITZER: Brian, aside from possibly hurting the rebels in the short term, this could also have other consequences. They could go against the U.S. and its allies.

TODD: That's right. Experts say that first it could play into Gadhafi's claims that foreign powers are intervening in his country. Those are at the very least exaggerated claims. And he could also use those for propaganda. But they say, on a wider contempt, it could fuel suspicion in the rest of the Arab world that Western powers are somehow trying to hijack this revolution.

That's something that the U.S., Britain and their allies don't really need to have happen right now as they weigh their options.

BLITZER: I know they're very sensitive to that. Brian, thanks very much.

The White House says all options are on the table right now as the U.S. watches the civil war in Libya unfold, including sending U.S. troops to the region, although the White House press secretary, Jay Carney, says that's not at the top of the list. Neither is arming the Libyan rebels at least for now.

Let's get more with our senior political analysts David Gergen and Gloria Borger. They're both here.

Gloria, let me start with you. Listen specifically to what Jay Carney said today.

(BEGIN VIDEO CLIP)

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: You have to be very cognizant of when you pursue these options what it is you're trying to accomplish. And I think that it would be premature to send a bunch of weapons to a post office box in eastern Libya. We need to not get ahead of ourselves in terms of the options we're pursuing.

And, again, I would refer you to the fact that we are reviewing and implementing actions with great haste.

(END VIDEO CLIP)

BLITZER: Because I know, based on my reporting, they don't have a lot of good information on who these rebels really are. GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Right. They want to find out, I was told, who's who, where they are on universal rights, representative democracy, economic rights.

They have to be sure certainly before you arm them who they're going to be sending these arms to. And as far as a no-fly zone goes, Wolf, they also have to figure out just who they'd be shooting at, because some of the rebels happen to be flying airplanes.

And so there's -- there's all kinds of things that can go wrong. I was told you have got to know who's flying the plane. Also, a no-fly zone would not apply to helicopters, for example. There are lots of helicopter in the air. And it could backfire of course if there's a mistake. So if you do it, you want to do it with NATO.

BLITZER: Because I know also that what's weighing very much on the president's mind right now, David, is that it's easier to get into a military conflict like this than it is to get out. And he points out and we have learned from Iraq and Afghanistan, Afghanistan 10 years later, we're still stuck there spending, what, $2 billion a week.

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: That's true. That's true.

But if you're looking for reasons you don't want to go in, all sorts of things that could go wrong, all these little hobgoblins, you're going to find them and you're going to persuade yourself.

And I think the important thing of what's going on right now , Wolf, is that in the Situation Room there at the White House and in the counsels with the president, it's clear that a consensus has developed that is basically, let's go slow. Let's only go in if we have to. Let's be very prudent.

And even though Jay Carney, this new press secretary, said they're proceeding with great haste, that is not the appearance on the outside, of course.

BLITZER: Because the danger, the delicate tightrope they're walking is, they want to scare Gadhafi, but, at the same time, they don't necessarily want to take the actual action. They want to send a message, Gadhafi, you're in trouble, you better get out of there, but at the same time, they don't necessarily want to back it up with deeds.

BORGER: Sure. Right.

And the whole mantra has been -- and they look to Egypt kind of as example here, although Egypt is very, very different from Libya -- but you say, we don't want this to be perceived as being a U.S.-inspired revolution.

And the president in particular and everybody around him, they're very, very well aware of that, that they cannot -- this cannot be seen as something that the rebels are doing because they're backed by the United States, and would backfire against them. (CROSSTALK)

GERGEN: That's true. But in most administrations, once the president is committed to an outcome, then you begin to look for ways to reach that outcome.

BORGER: But they are.

(CROSSTALK)

GERGEN: And they said they were committed to getting him out of there. And since they said that, the momentum has shifted back to Gadhafi. It's no longer in the hands of the rebels. It's now more of a standoff.

And they have got -- at some point, the pressure is building out. But it's interesting. Some of the Arab voices now are starting to say, we would like to see you take more effective action.

I think if they really wanted to get this -- to go in, I think they could stir up an international coalition. They could get the Arabs to call for it. They could get the rebels...

BORGER: I think they're trying to do it. Right?

GERGEN: They haven't gotten very far.

BORGER: You know what goes on behind the scenes.

(CROSSTALK)

BORGER: It's very difficult.

GERGEN: Well, I know what goes on behind the scenes is often not what you see on the surface.

BORGER: Right.

BLITZER: Here's what is the most frustrating thing to a lot of senior administration officials. The intelligence on what's actually happening on the ground right now, who a lot of these folks are is not necessarily what it should be. The president asks questions. The president asks questions. They want answers.

And it sort of gets frustrating when you don't have the answers. You have been in the White House. You know what it's like when there's a limited amount of intelligence.

(CROSSTALK)

BORGER: I have tried to ask, who are you talking to? What kind of people are you talking to? And the answer that I received from a senior administration official was, well, we can't talk about sources, obviously, because we will get them in trouble and we don't want to do that. But suffice it to say, we do believe we have some sources. I was told, for example, that they believe that the number of planes being flown by Gadhafi's forces has decreased recently, although they say it could increase again. We just don't know. But it's clear that they have got some way to monitor that.

GERGEN: Yes, but they don't have the -- I think it goes all the way back -- remember when the CIA director came out and said we have information that Mubarak may leave tonight? It turned out he was quoting press reports.

BLITZER: That was Leon Panetta.

GERGEN: Yes. It was very unfortunate. But I do think it underscores the fact he doesn't have a lot of assets on -- human intelligence.

BLITZER: All the...

(CROSSTALK)

BLITZER: ... diplomats, they got out of Dodge. They left, for understandable reasons.

(CROSSTALK)

BORGER: And can we not forget the mistake that Gadhafi is shall we say not a rational man? And that's hard to predict.

GERGEN: But each day that goes by, there are more people being slaughtered and by a regime that the president said must go, and it has not gun.

BLITZER: David, thanks very much.

Gloria, thanks to you as well.

GERGEN: Thank you.

BLITZER: Americans are already feeling shockwaves from the unrest in Libya in the form of higher gas prices. They're soaring right now. And there's real concern about what it will mean for the fragile U.S. economic recovery.

And one congressman's plan to investigate radicalization among Muslim Americans sparking a huge controversy.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I think that Peter King, I don't think he's a bad human being, but I think he's grossly misinformed.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: Jack Cafferty is here. He has "The Cafferty File" -- Jack. JACK CAFFERTY, CNN ANCHOR: Wolf, today is the 158th day the federal government has operated without a budget. The clock's ticking on that two-week extension Congress approved last week which kept the government from effectively shutting its doors for business this morning.

Here's sort of where we stand. Republicans want to cut spending by about $61 billion. That was what the House of Representatives agreed on a couple weeks ago in their bill. The Democratic majority in the Senate only wants to cut $10.5 billion. Hello? We're looking at a projected deficit of $1.65 trillion this year alone, and these clowns are talking about chump change.

Not to suggest that our congresspeople lack guts, but last Friday Republican Senators Jim DeMint and Tom Coburn introduced a bill that would cut about $400 million a year from the budget by stripping all federal funding for the Corporation for Public Broadcasting. They want to kill Big Bird and Elmo, not a word about touching entitlement programs, Social Security, Medicare, corporate subsidies, the defense budget, but children's programming apparently is on the table.

In this week's "TIME" magazine cover story, Fareed Zakaria wonders if America's best days are behind her. He points to how the U.S. is now comparing with other wealthy countries when it comes to things like student test scores -- miserably -- graduation rates, life expectancy, crime, and of course national debt. We're falling way behind on all fronts.

Zakaria says -- quote -- "The larger discussion in Washington is about everything except what's important" -- unquote, like killing funding for "Sesame Street."

Here's the question: Is the federal government broken beyond repair?

I sort of think it is.

Go to CNN.com/caffertyfile. Post a comment on my blog -- Wolf.

BLITZER: Fareed wrote a strong article in "TIME" magazine, very...

CAFFERTY: Great piece.

BLITZER: And he had a great documentary, great one-hour special on CNN last night as well.

CAFFERTY: Yes.

BLITZER: Thanks very much, Jack, for that.

(NEWS BREAK)

BLITZER: Some call it blood money. Some of the world's biggest pop stars are left red-faced that they pocketed millions of dollars for performing for Moammar Gadhafi's family. You're going to find out what Mariah Carey and others are now doing to try to make amends.

(COMMERCIAL BREAK)

BLITZER: Upheaval in North Africa and the Middle East may seem a world away to so many millions of Americans, but we're all feeling its impact right now in the form of higher gas prices.

CNN's Lisa Sylvester is back with more on this part of this story.

Prices are going up across the country.

LISA SYLVESTER, CNN CORRESPONDENT: They are, in fact.

And, Wolf, we have a map that we can share with everyone. This map is from GasBuddy.com. It shows where the highest gas prices are. The areas that you see in red, California, Alaska, Hawaii, those are the areas that are above $3.70 a gallon.

Most of the country, though, is in the yellow range. That's about $3 to $3.50. But what you're not seeing is a lot of places in green, where gas is below $3.30. And these high prices are now impacting a lot of small businesses.

(BEGIN VIDEOTAPE)

SYLVESTER (voice-over): Caruso flowers has been in business for four generations in Washington, D.C. They have been able to be weather the ups and downs in gas prices, but it's hard when prices jump 19 cents per gallon in just one week.

PHIL CARUSO, CARUSO FLORIST: Gas prices are going very. They're going sky-high. Last month, our gas price alone were close to $8,400 just for -- for gas. And that doesn't count everything else that you do in this business.

SYLVESTER: That's up $2500 a month. Phil Caruso doesn't intend to raise his customers' prices, but that's not the same for other businesses. Food prices are up, airline fares up. And it's costing all of us a lot more to fill up at the pump. Speculation that unrest in Libya may spread is drumming up fear, pushing up the price of oil.

FADEL GHEIT, OIL AND GAS ANALYST: Right now, the market is concluding that the turmoil in the Middle East is far from over; it's going to spread. The question is not if it will spread. The question is, you know, how big it's going to be and what the impact will be.

SYLVESTER: The Obama administration is under pressure from some congressional lawmakers to tap into the country's Strategic Petroleum Reserve, an emergency stockpile of 727 million barrels of oil. Tapping into the reserve is one option under review by the White House, but not the only.

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: We are in discussions with oil-producing countries, as well as the IEA, about the various options that are available in the global system to deal with a major disruption should that occur.

SYLVESTER: But gas prices are rising so steeply for small businesses that the gas pinch is beginning to feel more like a punch.

(END VIDEOTAPE)

SYLVESTER: And Phil Caruso's business has been around for a while. During the 1970s oil crisis, they resorted to delivering flowers by bicycle. And, Wolf, he is seriously thinking of doing that same thing. So they might have to pull out those bicycles again, Wolf.

BLITZER: Cheaper to do it.

(LAUGHTER)

(CROSSTALK)

BLITZER: Takes a little longer, but cheaper.

Thanks very much, Lisa, for that.

There's a growing humanitarian crisis , as thousands and thousands of people try to flee Libya's civil war. We're taking you live to the border with Tunisia. It's a scene of incredible suffering.

Also, the cash connection between Gadhafi and some of the biggest names in music, including Beyonce. She and other stars are now doing some damage control.

And Australian and U.S. leaders divided over a down-under delicacy -- President Obama now speaking out about it.

(COMMERCIAL BREAK)

BLITZER: The civil war in Libya has sparked a huge refugee crisis, but it's not just Libyans trying to flee the violence shattering the country.

CNN's Ivan Watson is over at the Libya/Tunisian border. He's got more.

Ivan, what are you seeing as you're watching it today?

IVAN WATSON, CNN CORRESPONDENT: Well, Wolf, more than 200,000 people have fled Libya since this crisis began, more than 100,000 across the border here into Tunisia.

And what has been very strange about this refugee crisis is that most of the people we're seeing fleeing are not Libyans. They're mostly foreign men. Why? Because roughly one in eight people in Libya at the time this crisis erupted were foreign migrant workers, people from all over the world going to Libya to try to eke out a living.

And many of these people coming across the border coming across saying that they hadn't had a chance to eat in days, that they had been robbed by Libyan soldiers and Libyan police while coming across the border. Some of them not even having their passports when they came across, coming across hungry and afraid and being helped by Tunisians, who immediately offered them food and water. Take a listen to what some of them have had to say to us at the border.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: I still very hungry.

WATSON: Why?

UNIDENTIFIED MALE: I never eat anything.

WATSON: No food for four days?

UNIDENTIFIED MALE: No food.

WATSON: No food?

UNIDENTIFIED MALE: Never sleeping. You see my face. I so very tired.

UNIDENTIFIED MALE: People are so very tired. Afraid to come out. You can help them to bring them out. They're afraid because of the Libyans.

WATSON: What are the Libyans doing?

UNIDENTIFIED MALE: Attacking them. Attacking.

WATSON: Attacking who?

UNIDENTIFIED MALE: The foreigners.

WATSON: All foreigners?

UNIDENTIFIED MALE: Yes.

WATSON: Yes?

UNIDENTIFIED MALE: Entirely West African.

WATSON: Why? Why are they attacking West Africans?

UNIDENTIFIED MALE: About the man, the leader. Brought some...

UNIDENTIFIED MALE: They're human. We should do this. I'm student. I should do this.

WATSON: Yes.

UNIDENTIFIED MALE: I even go to the study. I'm here for helping people, just for helping people.

(END VIDEO CLIP)

WATSON: And Wolf, you're hearing there from one Nigerian man telling a story. We're starting to hear from sub-Saharan Africans coming out of Libya that they are being subject to attacks and discrimination by some Libyans who are suspicious that they could be some of the alleged mercenaries that Moammar Gadhafi has hired to conduct his campaign against the opposition in Libya, very worried about reprisal attacks being carried out, even if they had nothing to do with these alleged mercenaries -- Wolf.

BLITZER: Once these refugees make it to Tunisia, the other side of the Libyan border, is there enough food and water and medical equipment there to help them?

WATSON: We've seen that effort improve dramatically over the last week with United Nations stepping in, making a tent city, a transit camp, Wolf, with -- with thousands of tents that can house up to 15,000 people, and many of these people will be waiting there as their governments or aid organizations try to fly them out.

Over the weekend we saw the U.S. military joining this international effort, providing a number of flights through military cargo planes, repatriating Egyptians, for instance, back to Cairo.

There have been more than 50,000 Egyptians, we've heard, that have been repatriated throughout this crisis. But we've now seen an estimated 15,000 Bangladeshis trapped along the border, and there have been calls for assistance to help those people get back home. Bangladesh doesn't seem to have the resources or aircraft to try to move those people back home, Wolf. And that's a major concern for the United Nations right now.

BLITZER: It certainly is. Thanks very much, Ivan. Ivan Watson reporting.

The Libya turmoil certainly has been hugely embarrassing for some of the biggest pop stars in the world. Nelly Furtado, Mariah Carey, Beyonce, Usher all pocketed huge amounts of money from Gadhafi's clan to perform. But now they're donating, at least some of them, donating those millions of dollars.

Our entertainment correspondent, Kareen Wynter, is following developments.

KAREEN WYNTER, CNN CORRESPONDENT: Well, Wolf, let's face it. Many of these performers, they pull in big bucks from these private parties, but the controversy surrounding the latest Gadhafi links, well, it's changing the way some artists do business.

(BEGIN VIDEOTAPE)

WYNTER (voice-over): Beyonce, Mariah Carey, Nelly Furtado. A-list artists who are now coming clean about their paid private performances for embattled Libyan leader Moammar Gadhafi's family.

LYNDSEY PARKER, MANAGING EDITOR, YAHOO! MUSIC: If you're performing for blood money, for dictators, it's not going to be good for your public image.

WYNTER: Yahoo! Music managing editor Lyndsey Parker says these off- stage shows can generate millions of dollar each year for music megastars, much more than tours and declining record sales. PARKER: This is show business, and it is a business, and money talks. The music industry is in trouble right now. Greed plays a part.

PETER KATSIS, VP OF MUSIC, PROSPECT PARK ENTERTAINMENT: You can sometimes make as much as you can in a week on tour by doing one show. The general range is probably 750 to $2 million.

WYNTER: Top entertainment manager Peter Katsis, whose clients include Backstreet Boys, Korn, and Jane's Addiction, says many acts are now taking a hard look at the P.R. price of some private parties. The recent embarrassing headlines of artists like Beyonce who have been linked to Gadhafi has sent red flags all across the industry.

KATSIS: People are going to ask more questions in that regard, for who's going to be there and what the gig is actually for.

The attraction is there. The phone will ring. Your agent will call, and the temptation is there to just take the check. And that's the problem.

WYNTER: Beyonce reportedly banked a cool million for singing at a Gadhafi gala in St. Bart's in 2009. Beyonce donated all her fees from the event. R&B singer Usher, who got paid to attend Gadhafi's show with Beyonce, said he's giving away his cash to charity. Furtado tweeted she, too, is giving away the goods, the one million she pocketed from a Gadhafi show in 2007.

(on camera) Some managers actually say that sends the wrong message: that for many artists, these type of private gigs, it's their bread and butter. So where do you walk the line?

KATSIS: Each artist has his own conscience to think about. And you know, depending on -- and need to figure out what they stand behind themselves. You get a lot of requests that are actually possibly quite shady.

WYNTER (voice-over): Still, many industry insiders say at the end of the day, these performances pay big-time. So many deals, even shady ones, will continue to fly under the radar.

PARKER: Look at the price tag. They say, "You want to pay us $2 million and you're going to fly to us out to St. Bart's? Sure, where I do I sign?"

(END VIDEOTAPE)

WYNTER: And Wolf, that's really the issue here. Passing on a lucrative deal, I mean, who wants to turn down money like that? Right? I guess you have to look at it from a business versus ethical standpoint -- Wolf.

BLITZER: And you've got to wonder. I mean, a lot of these artists, and you've been speaking with them, Kareen, they've got to wonder about their own image out there if they go ahead and accept money from a dictator or a thug...

WYNTER: Absolutely.

BLITZER: ... or a killer or someone like that. They're worried about their image down the road.

WYNTER: They really are. And that's why you're seeing the artists like Beyonce, megastars coming clean, saying, "You know what? We did it, but we donated it."

But it also raises that issue: how many of the performances that are, quote, "shady" are these artists, not necessarily Beyonce but other artists out there, Wolf, have engaged in in the past, have you know, contributed to that are -- that's under the radar that we perhaps don't know about today but could surface tomorrow, Wolf.

BLITZER: With the handheld mobile devices that will surface right away if they think they can get away with it. They're not going to get away with it for very long. Kareen, thanks very much. Good report.

The Obama administration is reaching out to Muslim Americans right now as anxiety builds over controversial Muslim radicalization hearings that some are calling a witch hunt.

And food for thought: Australia's prime minister thinks it's tasty. But find out what President Obama really doesn't want for breakfast ever.

(COMMERCIAL BREAK)

BLITZER: CNN can now confirm that President Obama will nominate Gary Locke, the commerce secretary, to be the next U.S. ambassador to China. Locke is a Chinese American. He's a former governor. He's going to be, assuming he gets confirmed by the U.S. Senate, heading to Beijing. He'll be replacing Jon Huntsman, the former governor of Utah, as the U.S. ambassador to China.

I believe this is the first time a Chinese American will represent the United States in China as the top U.S. diplomat. We'll have more on the story later.

Other stories we're following. Muslim Americans protesting a House hearing planned for later this week on radicalization in their community. They say they're being unfairly singled out, but the lawmaker behind it all sees -- sees the hearing very differently.

CNN's Mary Snow is following the controversy for us.

All right, Mary. What's this controversy all about?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, that lawmaker you just referenced is Congressman Peter King, the chairman of the homeland security committee. He says these hearings are necessary, but many Muslim Americans call them a witch hunt.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: The roots of violent extremism.

SNOW (voice-over): In a sign of the anxiety among Muslim Americans, hundreds demonstrated in Times Square Sunday. People of all faiths protested Congressman Peter King's hearings on the radicalization of Muslim Americans. They fear the hearings will stoke Islamophobia.

Meanwhile in Virginia, without mentioning the hearings, the president's deputy national security adviser spoke at a mosque.

DENIS MCDONOUGH, DEPUTY NATIONAL SECURITY ADVISOR: The bottom line is this. When it comes to preventing violent extremism and terrorism in the United States, Muslim Americans are not part of the problem. You're part of the solution.

SNOW: It comes as King, a New York Republican and chairman of the homeland security committee, gets ready to begin hearings that have sparked controversy since he announced them.

REP. PETER KING (R), NEW YORK: I've said time and time again, the overwhelming majority of Muslims are outstanding Americans. But at this stage in our history, there is an effort to radicalize -- to radicalize elements within the Muslim community.

SNOW: Many Muslim Americans liken king's hearing to a witch hunt. They strongly deny King's claims that Muslim-American community leaders are not cooperating enough with law enforcement, and that includes one of the only two Muslims in Congress who is also worked in the anti-terrorism unit in Indiana's Department of Homeland Security.

REP. ANDRE CARSON (D), INDIANA: From my own personal experience, I can say definitively that this is simply untrue. I think that Peter King, I don't think he's a bad human being, but I think he's grossly misinformed.

SNOW: A study done by the Triangle Center on Terrorism and Homeland Security, done at the University of North Carolina, found that of Muslim-American terrorism plots that were disrupted, 48 of 128 cases involved tips from the Muslim-American community.

The other Muslim congressman, Democrat Keith Ellison of Minnesota, and others are calling on King to broaden the hearings to include all forms of extremism, not single out Muslims. But when we met with King last month, he dismissed that.

KING: If you're investigating everyone, you're investigating no one. We -- as a leader, as the chairman of the committee, it's my goal to find out what the real threats are and examine them, not throw everybody into the bag so we can say everyone's guilty, everyone's responsible.

(END VIDEOTAPE)

SNOW: And Congressman King added people can judge after the hearings whether or not they were fair, adding that he believes they will be. But dozens of organizations aren't waiting until then. They say these hearings will be divisive, and they called on him to broaden their scope -- Wolf.

BLITZER: We'll cover the hearings, obviously. Mary, thanks very much.

A classroom of students, two world leaders and a big divide over an Australian point of pride.

(COMMERCIAL BREAK)

BLITZER: President Obama and the Australian prime minister, Julia Gillard, gave students at Wakefield High School in Arlington, Virginia, just outside Washington the surprise of their lives when they showed up unexpectedly.

(BEGIN VIDEOTAPE)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: She brought me an Australian football. She was kicking it in my office. I almost broke a bust of Lincoln. It was really -- that's not true, guys. I was just making that up.

JULIA GILLARD, AUSTRALIAN PRIME MINISTER: Handballing it in the office.

OBAMA: I don't want a diplomatic incident.

GILLARD: We were handballing it. So has anybody got a question about Australia? Yes. Uh-oh.

UNIDENTIFIED FEMALE: My family and I have been wondering this for a little while. What is Vegemite?

GILLARD: Right. This is also a little bit of a division between the president and I. I love Vegemite. And...

OBAMA: It's horrible.

GILLARD: It's actually a by-product of making beer, apparently, that's how the story goes. It's a yeast paste. I'm making it sound really good, aren't I? It's black, and it's quite salty.

The beginners' error with Vegemite is to put too much on your piece of bread or piece of toast. You don't put it on like jam or anything like that. You've got to do it very lightly, spread it very thinly, and it's good.

OBAMA: So it's like a quasi vegetable by-product paste that you smear on your toast. For breakfast. Sounds good, doesn't it?

GILLARD: We'll get some sent over and you can have a try. It's addictive. Once you've had some when you were small, you will crave it when you're an adult.

OBAMA: All right. Fair enough.

(END VIDEOTAPE) BLITZER: You smear it or do you shmear it? What's the correct word? Shmear, smear? We'll discuss.

President Obama and the prime minister, by the way, also sang happy birthday to the teacher at that school. Happy birthday, teacher.

"The Cafferty File" is coming up next.

Then, a new twist for Charlie Sheen.

(COMMERCIAL BREAK)

BLITZER: Let's get right back to Jack. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: The question this hour: "Is the federal government broken beyond repair?"

Kathleen in South Carolina: "It's broken, because we've allowed the radical elements on both sides to push their agendas rather than the country's agenda. Nothing will improve until all states come up with nonpartisan groups to decide balanced voting districts instead of safe ones. By forcing the radicals to compete on a level playing field in open primaries, most of them will lose, and maybe then we can get back to rational adult government. If not, we're toast."

Laura in California: "We have let our differences drive us too far apart. Everyone needs to come to the table and compromise. Term limits would help a lot of this. Politicians fear to stand by their principles and those of their constituents on account of an outspoken minority. Just look at how much got done during the lame duck session."

Jerry writes, "If the current politicians in power keep focusing on the next election in 2012, more son matters of indisputable importance, then not only they, but the nation will be broken beyond repair. A collapse, although probably not imminent, does not seem beyond possibility."

David in North Carolina: "As Thomas Jefferson said, when the poor figure out they can loot the treasury if they elect the right politicians, America is done. Looks like we're there."

Ronnie writes, "I really hope the federal government isn't broken beyond repair. I have two grandkids who will bear the brunt of it if it is. When did 'compromise' become a dirty word? I always thought politics was the art of the possible. Yet what I see today is disgusting. With both parties trying to out-demonize the other, I wonder if it's hopeless."

Ken in Atlantic City writes, "The government's monetarily broke and internally broken beyond repair. The worst thing is the president and Congress have no interest in fixing the problem. Nobody is willing to cut defense, end the two wars, cut corporate subsidies, nationalize the oil supply, or raise the top tax rates." And Jason writes this: "Yes. And I no longer care about the next election, Jack. I care more about the next revolution, American revolution. It's time."

If you want to read more on the subject, you'll find it on my blog: CNN.com/CaffertyFile.

BLITZER: Will do, Jack. Thanks very much.

Charlie Sheen's troubled TV career takes another twist today. We're going to tell you what new Hollywood bombshell dropped.

(COMMERCIAL BREAK)

BLITZER: "Two and a Half Men" minus one. Charlie Sheen has been fired. Warner Brothers Television terminated Sheen's contract with the sitcom hit today. CNN's Jeanne Moos has more now on the Sheen saga and the backlash.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): It's the Sheening of America.

CHARLIE SHEEN, ACTOR: Welcome to Sheen's Corner.

MOOS: He's on every corner.

BILL HADER, CAST MEMBER, NBC'S "SATURDAY NIGHT LIVE": Live from New York, it's Saturday night.

MOOS: Sirius Radio devoted an entire channel to him for a day.

ANNOUNCER: Tiger Blood Radio.

MOOS: Spike TV will feature Sheen's greatest antics in Taiwanese animation. He's even alienated witches for misusing the word "warlock."

UNIDENTIFIED MALE: We bind you.

UNIDENTIFIED FEMALE: We bind you.

MOOS: So a couple of witches in Massachusetts performed a magical intervention.

UNIDENTIFIED FEMALE: We need to come and cleanse your house.

MOOS: But Sheen's very own Web casts are what tipped the scale.

SHEEN: The tag line is "torpedoes of truth."

MOOS (on camera): Well, how's this for a torpedo of truth? It seems the shine has come off Charlie Sheen.

(voice-over) In one Web cast he showed off a tattoo on his wrist of his slogan "winning," and said hi to his kids.

SHEEN: Daddy loves you. And if you're watching, tell Mom to leave the room. It's on.

MOOS: One of his goddesses perched on his lap. Sheen was literally playing with fire as viewers wait for him to combust.

SHEEN: It's kind of an eerie image. I'm burning my own face, but I can't feel the (EXPLETIVE DELETED) heat.

MOOS: As one poster on TMZ put it, "Parents, make your kids watch this. If that doesn't scare them away from drugs, nothing will."

(on camera) You know the joke has become a little too sick when a comedian refuses to tell any more jokes about Charlie Sheen.

(voice-over) Craig Ferguson spoke of how the English insane asylum named Bedlam provided entertainment back in the 18th Century.

CRAIG FERGUSON, TALK SHOW HOST: They would pay a penny, and they would look through the peepholes of the cells, and they would look at the lunatics. And looking at the Charlie Sheen thing unfold, and I'm thinking oh, man.

MOOS: But Ferguson wasn't kidding. No more Charlie Sheen jokes.

Sheen himself has become a verb. The creators of "South Park" used it to describe the state they got themselves in when they once dressed in drag for the Oscars.

UNIDENTIFIED MALE: We were just Sheening our heads off.

MOOS: From our couches, we judge who does the best Sheen. Is it "SNL"?

HADER: Sorry, middle America. Losers, winning, bye-bye.

MOOS: Or Jimmy Fallon?

JIMMY FALLON, TALK SHOW HOST: Winning, Adonis DNA. I'm a bitching rock star, blood of a tiger. I'm like Zeus in a Speedo.

MOOS: But something stinks when we don't know if it's OK to laugh and winning is a losing proposition.

FRED ARMISEN, CAST MEMBER, NBC'S "SATURDAY NIGHT LIVE": Winning!

HADER: Winning.

MILEY CYRUS, SINGER/ACTRESS: Winning.

HADER: Winning.

MOOS: Jeanne Moos, CNN...

SHEEN: Winning, winning, winning! UNIDENTIFIED MALE: Winning, winning, winning!

UNIDENTIFIED MALE: Winning, winning, winning!

SHEEN: ... New York.

(END VIDEOTAPE)

BLITZER: Thanks, Jeanne.

Thanks very much for watching. I'm Wolf Blitzer in THE SITUATION ROOM.

"JOHN KING USA" starts right now.