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THE SITUATION ROOM

Duke Rape Case Prosecutor to Resign; Interview With John Edwards; Four of Five Computers Back on Line on Space Station

Aired June 15, 2007 - 17:00   ET

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


WOLF BLITZER, HOST: And to our viewers, you're in THE SITUATION ROOM.
Happening now, looting and gloating in Gaza. Hamas gunmen ransack the symbols of Palestinian -- the Palestinian Authority, toppled in bloody fighting.

Are these Islamic militants fighting a proxy war for Iran?

Can the U.S. and Israel do anything about it?

Taking aim at the military for failures in Iraq.

Are Congressional Democrats substituting harsh words for strong action?

We'll speak about it with Democratic presidential candidate, John Edwards. He's standing by live.

And technical troubles in orbit -- astronauts and cosmonauts undertaking right now urgent repair jobs.

Is there a chance the Space Station could be abandoned?

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

Tension, violence, uncertainty -- those are the overwhelming realities right now in one of the most dangerous parts of the world. Along Israel's border, the masked gunmen of Hamas today tightened their control over Gaza. The pictures are simply unbelievable.

CNN's Atika Shubert begins this hour's coverage -- Atika.

ATIKA SHUBERT, CNN CORRESPONDENT: Wolf, Hamas may have taken over the Gaza Strip, but now the question is can Hamas govern?

(BEGIN VIDEO TAPE)

SHUBERT (voice-over): Hamas in charge -- photos show Hamas gunmen inside the Gaza residence of Palestinian President Mahmoud Abbas, posing at his desk, making a mock phone call, saying, according to Reuters: "Hello Condoleezza Rice. You have to deal with me now."

But perhaps this is the most poignant photo for Palestinians -- Hamas gunmen trampling on the portraits not just of President Abbas, but the late and revered Yasser Arafat, father of the Palestinian national movement.

Hamas is in charge of Gaza.

But can it govern?

Even as masked gunmen trumpeted their authority to the media, looters had taken over the streets of Gaza, stripping down the empty homes of Fatah leaders. Hamas leader in Gaza, Ismail Haniya, insists that he is still prime minister of the Palestinian government.

But Palestinian president and Fatah leader, Mahmoud Abbas, has dissolved the Hamas-led government and installed an emergency cabinet under the leadership of former finance minister, Salam Fayyad.

So who's in charge?

Depends on where you're at. In Gaza, Islamic militant group Hamas is the undisputed power. In the West Bank, the Western-backed Fatah is still in control -- the dream of the united Palestinian state torn in two.

(END VIDEO TAPE)

SHUBERT: This is not just about a fight for power, it's also about what kind of a state Palestinians want -- the Islamic militancy of Hamas in Gaza or the weak, secular authority of Fatah in the West Bank. For those who had hoped for a united Palestinian state, it is a very stark choice -- Wolf.

BLITZER: Atika Shubert watching this story unfold.

Thank you, Atika.

While Fatah has been routed in Gaza, the mainstream group once headed by Yasser Arafat still holds sway in the West Bank and has been targeting Hamas members there.

President Mahmoud Abbas and the seat of the Palestinian government are in the West Bank.

Captured by Israel in the 1967 War and separated geographically, the two Palestinian territories are now divided more deeply than ever.

More than 2.5 million Palestinians live in the West Bank, along with almost 200,000 Israeli settlers. The Palestinian population is overwhelming Muslim, with a small Christian minority. The area is a little smaller than the state of Delaware. Almost 1.5 million Palestinians live in Gaza, which is about twice the size of the District of Columbia. The population is about 99 percent Muslim. Israel withdrew its settlers and soldiers from Gaza back in 2005.

Because of the Palestinians' violence split, foreign ministers of the Arab League countries are holding an urgent closed door meeting in Egypt today, hoping cooler heads can find ways to ease this crisis. Our Aneesh Raman is joining us in Cairo -- Aneesh.

ANEESH RAMAN, CNN CORRESPONDENT: Wolf, it was all words out of an emergency session at the Arab League -- very little action. The Arab League foreign ministers called for a cease-fire between Fatah and Hamas. They also called for both sides to sit at the same table and try once again to form a unity government.

None of that, of course, will change the situation in Gaza tonight, tomorrow or in the days ahead. Instead it creates a real picture that the Middle East is a region on edge. And if these are officials in the Arab League and among the member states of Saudi Arabia, Egypt and Jordan, who are confronting a very serious question -- can any of them actually impact the situation in Gaza?

Saudi Arabia backed the unity government that has now been dissolved. Egypt sent mediators to the Palestinian areas, but it tonight returned to Cairo, failing in their attempt to bring the sides together.

It seems that neither the Arab League nor its member states can really impact the situation in the Palestinian areas. And given that that is the core issue to all of the issues in the Middle East, it does not forecast good times ahead for this region -- Wolf.

BLITZER: Aneesh Raman watching this in Cairo for us.

Gaza's meltdown has an all too familiar script -- a relatively moderate side supported by the U.S. the West, fighting a radical side backed by Iran.

CNN's Brian Todd is watching this part of the story for us -- I guess the question is this, Brian, is Iran pulling the strings in Gaza and elsewhere?

BRIAN TODD, CNN CORRESPONDENT: Well, Tehran is accused of doing that, Wolf, by U.S. and other Western officials. They believe that Iran has its hand in no fewer than four key areas of conflict.

(BEGIN VIDEO TAPE)

TODD (voice-over): Hamas captures the streets and power centers of Gaza. The group designated terrorist by the U.S. but voted political power by the Palestinians, shows its might.

DAN GILLERMAN, ISRAELI AMBASSADOR TO THE U.N.: This is Iranian work. This happened in Lebanon. It is now happening in Hamasstan, which was Gaza until yesterday.

TODD: Hamas in Gaza, Hezbollah in Lebanon, anti-American Shia militants in Iraq -- U.S. officials say Iran is supplying them all with weapons. And recently, U.S. and British officials told CNN sophisticated weapons bound for the Taliban in Afghanistan can be traced to Iran, although it's not clear if the Iranian government has its fingerprints on them.

Iran denies the accusations. But analysts and U.S. officials say Iran has strong motives for so-called proxy wars.

SEAN MCCORMACK, STATE DEPARTMENT SPOKESMAN: It's no secret that they have used other, you know, outside groups as proxies to try to extend their influence within the region.

VALI NASR, COUNCIL ON FOREIGN RELATIONS: They are trying to obviously stretch the United States as thin as possible in as many arenas as possible because that makes it much more difficult for the United States to focus on Iran, particularly militarily, when it has its hands full.

TODD: How to counter it?

Analysts point to a range of U.S. options. One is to recognize Iran as a major power in the region and talk to Tehran about issues beyond Iraq. But they say the U.S. has to talk from a position of strength, turn the tide militarily in Iraq and make one thing clear.

JAMES CARAFANO, HERITAGE FOUNDATION: Always demonstrate to the Iranians that we're going to protect our interests, if that requires striking back if they try to attack the United States or its friends or allies.

TODD: While applying that pressure, analysts say, hit Tehran where it's most vulnerable -- by tightening economic sanctions and investment.

(END VIDEO TAPE)

TODD: Analysts say Iran is already stretching its economic resources by engaging in all these proxy wars and may simply run out of gas at some point. But they warn the U.S. is in danger of doing the same -- Wolf.

BLITZER: What do the analysts and officials you're speaking with, Brian, say about this, that Iran -- largely Shia, of course -- Hamas, the Taliban, largely Sunni. There's supposedly some sort of tension.

What's going on?

TODD: Well, analysts say that one reason that Iran does this with these groups that it may not normally be allied with is just to destabilize the U.S. and its allies in the region -- make them bleed, as they say. But they also say that because Iran is a religious state, it will support any Muslim group with a religious base, like the Taliban, against an entity that's secular.

BLITZER: And that includes Hamas, as well.

TODD: Right.

BLITZER: All right, Brian, thank you very much.

Let's check in with Jack Cafferty once again.

He's got The Cafferty File -- Jack.

JACK CAFFERTY, CNN CORRESPONDENT: Wolf, FEMA wants its money back -- or some of it. "USA Today" reporting the agency overpaid victims of the 2005 Gulf Coast hurricanes by at least $485 million and now the agency is trying to reclaim that money from tens of thousands of people.

But it doesn't sound like that's going to happen any time soon.

A federal judge in New Orleans has ordered FEMA to stop trying to collect any money until it can give victims of Hurricanes Katrina and Rita better explanations of what they owe. According to the judge, FEMA was sending out notification letters with "incomprehensible hieroglyphic abbreviations." She urged the government to focus on alleviating the victims' suffering and helping those entitled to relief.

Now, it's not unusual for government agencies to try to get repayments after disasters. What's unusual here is the massive scale of what FEMA's trying to do. So far, records show that they've only recovered about $15.6 million dollars, or three cents of every dollar they say they're due.

FEMA says the alternative to overpaying would have been delaying assistance for months while they reviewed all of the requests that came in.

Meanwhile, some estimates suggest that the improper aid payments could actually total up to $1 billion.

So the question is this -- how much luck will FEMA have reclaiming at least $485 million it overpaid victims of the 2005 Gulf Coast hurricanes.

E-mail your thoughts on that to caffertyfile@cnn.com or go to cnn.com/caffertyfile.

Wolf, did they send you any money?

BLITZER: No. But, you know, $485 million, that's almost half a billion dollars.

CAFFERTY: Yes, that's -- I mean, in the grand scheme of the amount of damage that was done along the Gulf Coast, that's probably not a lot of money. But $500 million, that's still a lot of money.

BLITZER: Yes, that's money...

CAFFERTY: Yes.

BLITZER: ... you know, even among Washington standards, that's still money.

CAFFERTY: Yes.

BLITZER: Thanks very much, Jack, for that. CAFFERTY: All right.

BLITZER: By the way, if you want a sneak preview of Jack's questions plus an early read on the day's political news and what's ahead here on THE SITUATION ROOM, you can sign up for our daily e-mail alert. Just go to cnn.com/situationroom.

Still ahead...

(BEGIN VIDEO CLIP)

READE SELIGMANN: It felt almost like a sick joke, like we were being toyed with, like he was doing it, you know, maliciously, on purpose to us.

(END VIDEO CLIP)

BLITZER: The tables turn on the prosecutor in the Duke university rape case. Faced with ethics charges, the district attorney, Mike Nifong, throws in the towel.

A divided Congress and an unpopular war -- what would John Edward do about it?

My one-on-one interview with the Democratic presidential candidate. That's coming up.

And space walks and screwdrivers -- astronauts trying desperately to get the International Space Station up and running once again.

Our Miles O'Brien is watching this story.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Two hundred mikes above Earth, space shuttle astronauts appear to be fixed right now on one major problem. Another problem, though, a computer breakdown, could threaten the immediate future of the International Space Station. Our space correspondent, Miles O'Brien, is watching all of this unfold -- a lot of nervous tension right now on what's going on in the International Space Station, Miles.

What's the latest?

MILES O'BRIEN, SPACE CORRESPONDENT: Lots to keep track of, Wolf.

The latest word is those Russian computers that control so many crucial functions on the Space Station are still shut down while Russian and U.S. experts try to figure out their next step. They're quite frankly, mystified. They're stumped on what the trouble is. And they're not sure how the station will operate safely if they can't get those computers rebooted. Now, much better news for the Shuttle Atlantis, just out of surgery, if you will.

(BEGIN VIDEO TAPE)

O'BRIEN (voice-over): It was 24 hours of trouble-shooting and trouble-stitching in space. With his feet attached to the end of the shuttle robot arm, astronaut Danny Olivas made his way to the orbiter's tail and got to work on a peeled back thermal blanket.

DANNY OLIVAS: So I was going to ask you guys to keep an eye on me.

O'BRIEN: Olivas tucked in the blanket and then, using a stapler designed to close a wound on a hurt astronaut, healed the shield. NASA engineers were worried the blast furnace of reentry would char the graphite skin beneath the blankets.

The crew did not have as much luck with a huge looming problem for the Space Station. Despite hours of searching and testing, they were unable to figure out what is causing the Russian command and control computers to repeatedly crash.

The trouble began shortly after the Atlantis crew installed some new solar panels on the station. Engineers in Moscow and Houston suspected there was some trouble with the quality of the electricity those rays are generating. To test the theory, they turned on the computers without using American power, and the system still crashed.

MIKE SUFFREDINI, STATION PROGRAM MANAGER: I do not believe the power feed itself is the source of the problem. The reason why I don't believe that is, A, because we've tested the power feed on orbit with our oscilloscope scope and found it to be very stable and very clean.

O'BRIEN: The Russian computers control everything from oxygen generation to the toilet. Engineers say the crew can run most things manually and there is plenty of spare oxygen on board.

SUFFREDINI: We have plenty of gas to keep the crew on orbit for some time.

O'BRIEN: The big issue is keeping the station flying at the right angle to the sun, essential for the solar arrays to retain power and the station to remain at the right temperature. Normally, huge flywheels, called control moment gyros, or CMGs, keep the station flying straight and true. But when it needs to make a big course correction, it uses rocket thrusters, like those you see here on the shuttle. And the thrusters on the Station are controlled by those Russian computers.

SUFFREDINI: The highest priority would be maintaining attitude once the shuttle departed.

(END VIDEO TAPE)

O'BRIEN: In the midst of the space walk today, one of the astronauts disconnected one of the power lines from that new solar array that he connected earlier this week. Looking carefully at the timelines, the Russians say things started going haywire after that particular cable was connected, Wolf.

Russian engineers will try to boot up those computers once again tonight. They're hoping that maybe, maybe they have isolated the source of the trouble and the source of this meltdown -- Wolf.

BLITZER: The worst case scenario, though, Miles -- and all of us hope it doesn't come to this -- if those three Russian cosmonauts, if they have to abandon the International Space Station because the Russian computers don't work, what happens to that Space Station and what happens to the U.S. shuttle program?

O'BRIEN: Well, that's a big, long, difficult question. And there's some political component, too. If they have to abandon it, there will be a lot of pressure here in the United States politically to say maybe it's time to mothball this program.

So it's still a long way off before they would ever have to abandon ship. But that possibility has been part of the discussion, at least.

BLITZER: When you say a long way off, what, 50 days? They have supplies basically for 50 days?

O'BRIEN: Yes. A couple of months. A couple of months with supplies and hopefully they can keep the thing flying in a proper orientation. But there are so many questions about how they would run the Space Station without these computers if they can't get them back up running, we don't really know the answer.

BLITZER: Miles, thanks very much.

Miles O'Brien watching the story for us.

The drama continues.

Coming up here in THE SITUATION ROOM, the crisis in Gaza.

Could the U.S. military be called in to help?

Our senior Pentagon correspondent, Jamie McIntyre, looks at the options.

And here on the home front, is the National Guard prepared to deal with a domestic emergency?

The wars in Iraq and Afghanistan taking a toll.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Our Carol Costello is monitoring stories incoming into THE SITUATION ROOM right now -- Carol, what's the latest?

CAROL COSTELLO, CNN CORRESPONDENT: Well, let's see what North Korea, Wolf. It has issued a veiled warning to the United States that it might beef up its nuclear program. The statement came as the U.S. released millions of dollars in frozen funds to the communist country. North Korea used the banking dispute as a reason to delay nuclear disarmament. Now it's citing U.S. plans to deploy a missile defense system to Eastern Europe as perhaps another excuse for remaining nuclear.

The Air Force says it's investigating the cause of the crash of an F16 fighter jet in Iraq today. The warplane went down while supporting ground combat by coalition forces. Pentagon sources tell CNN that the pilot and the only crew member on board died in the crash. Air Force officials are characterizing it as an accident.

In news impacting the bottom line, a mixed picture today of the state of inflation. The Labor Department says retail prices rocketed .7 percent in May. But if you remove less stable food and energy prices from the equation, the core consumer price index rose a modest .1 percent, and that's slightly lower than expected, and it puts the rate of inflation within what is considered the Federal Reserve's comfort zone. So, that consumer price data putting inflation fears to a rest for now, making for a third consecutive winning day on Wall Street.

The Dow Jones Industrial Average added just under 86 points, to finish the week at 13,639.

The tech heavy Nasdaq was up 27 points, to close at 2,626.

And the S&P 500 gained another 10.

Back to you -- Wolf.

BLITZER: A good to way to end the week, especially for fathers who are getting ready for their big day on Sunday.

COSTELLO: That's true.

BLITZER: Thanks very much for that, Carol.

Coming up, the U.S. says it's looking for ways to support more modern Palestinian factions against their militant rivals.

But does the Bush administration have its hands tied?

Plus, is Iran emerging as a Middle East power?

I'll talk about that and a lot more with the former head of the Middle Eastern intelligence at the Pentagon.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now, fresh concerns that the National Guard may not be up to the job in the event of a domestic emergency. "USA Today" found that Guard units in 31 states have 60 percent or less of their authorized equipment. The review blames four years of war in Iraq and Afghanistan.

The Army plans to hire 200 more psychiatrists and counselors to meet the mental health needs of soldiers returning from war. Officials say the system is overwhelmed by the number of troops who come home with Post-Traumatic Stress Disorder and other problems.

And the House wants to delay new rules requiring passports for travelers entering the U.S. from Canada, Mexico, the Caribbean and Bermuda. The prospect created a flood of passport applications and a three month backlog.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

The sights from Gaza are chilling -- fires, looting, gunmen in the streets. At one time, a crisis like this would have sparked deafening calls for U.S. peacemaking. But this time, Washington's ability to make a difference may be rather limited.

Let's turn to our senior Pentagon correspondent, Jamie McIntyre, who is watching all of this for us -- does the U.S. right now, Jamie, based on all of the reporting you're doing, have any real options out there?

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Well, Wolf, as for something like U.S. troops taking part in a peacekeeping force or even sending ammunition to Fatah, the faction the U.S. backs, Defense Secretary Bob Gates pretty much ruled that out today.

So the question is what arrows does the U.S. have left in its quiver?

(BEGIN VIDEO TAPE)

MCINTYRE (voice-over): While the wars in Iraq and Afghanistan have pretty much exhausted the supply of U.S. ground troops, that's not really the problem. It's more that anything the U.S. does to aid the secular government of Mahmoud Abbas against the militant Islamic Hamas could be counterproductive.

FAWAZ GERGES, MIDEAST ANALYST: In fact, the more the Bush administration stays out of it, the better for regional stability and also for American vital interests in that part of the world.

MCINTYRE: So far, everything the U.S. has tried has had unintended consequences. The U.S. encouraged the Israeli withdrawal from the Gaza Strip and the subsequent Palestinian elections, never anticipating it would bring Hamas, which the U.S. considers a terrorist group, to power.

It then engineered a boycott that simply increased local support of Hamas and fueled anti-American and Israeli sentiment. Even the delivery of non-lethal aid to forces loyal to Abbas just seemed to embolden Hamas to seize Gaza.

So what can the U.S. do about the possibility of a militant Islamic semi-state on the border with Israel?

Not much. In fact, the Israelis have no good military options either.

PROF. SHELBY TELHAMI, UNIVERSITY OF MARYLAND: And if they reoccupy Gaza, they may weaken the current Hamas leadership, as they did in the past, but it doesn't resolve the problem and we're back to square one.

(END VIDEO TAPE)

MCINTYRE: At the State Department today, a spokesman acknowledged Mahmoud Abbas has pretty much lost Gaza. And the U.S. is now looking at ways to aid President Abbas' new government without doing more harm than good -- Wolf.

BLITZER: Jamie McIntyre watching this for us.

Thanks, Jamie.

There's real fear the fighting between Hamas and Fatah could spread to the West Bank and then set moderate and radical Muslims against one another across the entire region.

Joining us now, retired U.S Army Colonel Pat Lang, the former head of Middle East intelligence over at the DIA, the Defense Intelligence Agency, at the Pentagon.

Pat, thanks for coming in.

COL. PATRICK LANG, U.S. ARMY (RET.): My pleasure.

BLITZER: How worried should the -- concerned should the U.S. be that what has happened in Gaza -- Hamas taking over there, getting rid of Fatah -- could spread and then happen on the West Bank, as well?

LANG: Well, I think it's a possibility. I mean the fact of the matter is that, however, unpleasant it is to us, the Palestinian people, in elections that everybody says were pretty fair, in fact, elected these guys to run the parliamentary government. And, in fact, it's very difficult to choose other people's leaders for them, in the long run.

So I think maybe American policy has been on the wrong track in this. You know, no matter how much we might -- how much we may dislike these guys, they have offered a truce to Israel over -- for a 10 year period, and we ought to be looking at that as the best alternative of a group of bad alternatives. BLITZER: Earlier today, Saeb Erakat, a well-known Palestinian figure here on CNN, a Fatah member, suggested that outside forces were instigating this Palestinian-on-Palestinian violence. And he also said this.

Listen to this.

(BEGIN VIDEO CLIP)

SAEB ERAKAT, CHIEF PALESTINIAN NEGOTIATOR: We are determined not to allow what happened in Gaza to happen in the West Bank. And we stand tall with this.

(END VIDEO CLIP)

BLITZER: Suggesting it's part of a bigger regional problem. And a lot of experts, as you know, see the hand of Iran, maybe Syria, in a lot of this mischief.

LANG: Well, with regard to what he said about the West Bank, they were determined to not have this happen in Gaza as well. I think, you know, as you've been saying today, in fact, there's a major stress being put on the region by the fact that the Iranians are seeking to realize what they think of as their place in the sun, expanding their influence, getting recognized as being a paramount power to Islam, things like that, on the other hand.

On the other hand, the United States government has its own agenda, seeking westernization and democracy. These two things are exacerbating local conflicts of this kind in a tremendous way. And the real problem in this region is between us and the Iranians, really.

BLITZER: How much of this current explosion of violence in Iraq, in Gaza, in Lebanon, a threat potentially between Turkey and Kurdistan in the North, is a result of the U.S. invasion of Iraq, getting rid of Saddam Hussein?

LANG: Well, the specifics of the invasion of Iraq, of course, set off a maelstrom inside Iraq as we took the lid off a jar full of competing factions that was Iraq. And now they're all competing (ph). But there's this larger problem involving the whole region, involved in the fact that we have been pushing the whole region to change in directions in which are not natural to them and which various people in the area seek to manipulate and make use of in order to advance their own particular interests.

So, in general, our policy in the region is not helping the cause of people. Things are being (ph) quiet there.

BLITZER: I asked the question because a lot of analysts have suggested that the U.S. now, given the situation in Iraq, is seen as weakened. And whenever the United States in that part of the world as season as weakened, others want to take advantage of that and score their own points. LANG: I think it is true, in fact, that people see it as very unlikely that we are going to intervene on the ground anywhere in the region with ground troops because of the fact we are so absolutely committed in Iraq to the very limit of our capacity, as you've been saying. On the other hand, they also know that the United States remains vastly powerful in terms of air power, possession of a huge arsenal of nuclear weapons, things like this, and that this country is not something they can discount.

So we do have a lot of leverage in terms of that kind of implied power, plus the fact that there are a lot of things people want from us in terms of recognition and assistance in the credit markets and all kinds of things like that. We do have manipulating levers if we wish to use them.

BLITZER: If you were still at the Pentagon, what would you be advising the secretary of defense and other top officials?

LANG: Well, to the extent that Secretary Gates would let me, I would say that the Defense Department ought to say that we need to seek to engage especially the Iranians, but also a number of other groups around the area, in various things that involve our desires and their desires in such a way as reach some meeting of the minds that will bring the temperature down enough so that we can restore a status in which at least people are not shooting at each other.

BLITZER: You mean talking to Iran and Syria, among others?

LANG: Absolutely. Among others.

BLITZER: Who else?

LANG: Well, I think you need to talk to the Turks in particular as to what their intentions are with regard to our Kurdish clients. I mean, there's no doubt the Kurds are relying on us tremendously.

We've encouraged them to set up what amounts to a very autonomous state in the north. We owe them something to that regard.

There are the factions inside Iraq that involve the different Shia militia armies and parties, as well as different insurgent groups. All of these are groups are groups in which we can engage, and which we're starting to do now out in Anbar province with the tribes and some of the secular insurgents.

BLITZER: Pat Lang, thanks for coming in.

LANG: My pleasure.

BLITZER: And still ahead, the district attorney now on the defensive in the botched Duke lacrosse case.

(BEGIN VIDEO CLIP)

MIKE NIFONG, DURHAM COUNTY D.A.: I was certainly not intending or attempting to make improper statements, but I think, clearly, some of the statements that I made were improper.

(END VIDEO CLIP)

BLITZER: What happens next now that Mike Nifong says he will resign?

That's coming up.

Also, are the Democrats all talk, no action when it comes to ending the war in Iraq? I'll speak live about that and a lot more with Democratic presidential candidate John Edwards.

Stay with us. We'll be right back.

(COMMERCIAL BREAK)

BLITZER: It's been a very dramatic day at the ethics hearing for the embattled district attorney in Durham, North Carolina. The prosecutor in the Duke University lacrosse case, Mike Nifong, broke down on the stand before apologizing and then resigning his position.

Let's go back to CNN's Jason Carroll. He's following the story for us.

So what did he say? Why did he decide, Jason, to step down?

JASON CARROLL, CNN CORRESPONDENT: Well, you know, he just said he wasn't credible anymore.

You know, during the state bar hearing, it was becoming even more and more apparent that Nifong had made numerous mistakes during the course of the case. He finally had to admit that he could no longer serve as Durham's district attorney.

(BEGIN VIDEOTAPE)

NIFONG: I tried to do the right thing, and I've always been willing to take responsibility for the things that I've done.

CARROLL (voice over): An emotional end to the Duke lacrosse case. Durham's embattled district attorney Michael Nifong says he will step down.

NIFONG: It's my intention whether or not, whatever the decision, to resign as district attorney of Durham.

CARROLL: Nifong broke down on the stand during a hearing by the North Carolina State Bar on his conduct in the case.

NIFONG: My actions have caused pain to Finnertys and the Seligmanns and the Evans. I apologize.

CARROLL: Nifong is charged with making inflammatory statements about the case and admitted he made mistakes. The most serious allegation is that he did not reveal DNA test results which showed male DNA was found on the accuser, but did not match any of the 46 players.

Nifong said he was sorry that it happened.

NIFONG: I want to make it clear right now that that certainly is something that the defense attorneys were entitled to have. I mean, I don't want...

UNIDENTIFIED MALE: Would you repeat that?

NIFONG: That is certainly evidence that the defense attorneys were entitled to have. It was a finding that he made. There is no question, whether you view it as exculpatory or not, I'm not denying that they were entitled to have that out (ph).

CARROLL: Former Duke lacrosse players Collin Finnerty, Reade Seligmann and their families attended the hearing. Seligmann talked about the pain of having to tell his mother he had been falsely accused of raping a stripper hired to perform at the team's party.

READE SELIGMANN, EXONERATED LACROSSE PLAYER: I could hear her on the other end of the phone. The life was sucked right out of her. And then I tried to calm her down, and I just told her everything was going to be all right, and that we were going to prove that this didn't happen.

(END VIDEOTAPE)

CARROLL: Lots of tears at that hearing today. And that hearing is still under way, regardless at this point of Nifong's decision to step down. It seems very likely he will be punished in some way, possibly disbarred by the North Carolina State Bar -- Wolf.

BLITZER: All right. Do we have any idea when that hearing will wrap up, when these decisions will be made?

CARROLL: Expected to wrap up within -- within the next few days. Of course, no one expected this emotional testimony to come out. That sort of delayed things for some time. But we're expecting things to wrap up within the next few days -- Wolf.

BLITZER: Jason, thank you very much.

What an emotional day, a dramatic day down in North Carolina.

Still ahead, he's a top contender for the Democratic presidential nomination. Former U.S. senator John Edwards joins us with his take on Iraq, immigration, other issues facing the next commander in chief.

And later, Hamas tightens its grip on Gaza. What's next for the Middle East? Could this latest violence and the stability spread?

That's in our final our at 7:00 p.m. Eastern right here on THE SITUATION ROOM.

(COMMERCIAL BREAK)

(NEWSBREAK)

BLITZER: Senate Majority Leader Harry Reid is taking some fire from Republicans for allegedly insulting the two top U.S. military leaders at the Pentagon and in Iraq. Now he says the Democrats plan to revisit the issue of a timetable of withdrawing U.S. troops from Iraq.

All this hangs over the Democratic presidential campaign, to be sure.

Joining us now from Iowa, one of the top contenders for the Democratic presidential nomination, former senator John Edwards.

Senator, thanks very much for coming in.

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE: Thanks, Wolf.

BLITZER: Are you frustrated, are you angry that the Democrats sort of gave up, at least for now, the withdrawal issue before going ahead and refunding the troop operation in Iraq?

EDWARDS: Well, that's water under the dam now. I've been very clear, Wolf, from the beginning that I thought the Congress, the entire Congress, had a responsibility to -- and a mandate for the American people to force this president to start withdrawing troops from Iraq. And so I never believed they should submit a funding bill to the president that didn't have a timetable for withdrawal. I still believe that.

BLITZER: What do you want them to do now?

EDWARDS: Well, I think the thing to do now is to -- the next time they submit a funding bill to the president, it needs to have a timetable for withdrawal. Unfortunately, when he vetoed the last one, they capitulated and submitted a bill that didn't have a timetable, but I think there needs to be a timetable for withdrawal.

BLITZER: Do you think Harry Reid and Nancy Pelosi are up to the job as fellow Democrats?

EDWARDS: Oh, I have very high opinions of both of them, and I also think they're very good leaders and very good human beings.

You know, they have to deal with -- having been there, as you know, they have to deal with the caucuses and the various politics of the people who are members of the caucus, and they have very difficult challenges. I totally recognize that.

But I think the Congress as a whole has this responsibility, and I think America expected them to use it.

BLITZER: Because as you know, their supporters and other Democrats here in Washington are saying, you know what? It's easy for John Edwards to be taking swipes at us. He's not in the Senate anymore, he doesn't have to deal on a day-to-day basis with these legislative priorities. It's easy for him to sit on the outside and just criticize.

EDWARDS: Well, here's what I would say about that. First of all, I was in this position. We had a funding bill years ago when I was in the Congress on the war in Iraq, the now famous $87 billion vote. It was the first time that we voted to fund the war after it became clear what George Bush was doing in Iraq and the already- existing failures at that time.

And I don't remember the numbers exactly, Wolf, but I think there were maybe 12 or 14 of us who voted against it. I voted against it then.

But I think more important than that, I'm not running for Senate. I'm running for president of the United States. And I think I, and along with anyone else who's running for president, need to make it clear that we're going to lead on this issue of life and death and war. And that's what this is about.

It's about making clear where we stand, making clear what we think needs to happen, and making clear what we believe the Congress needs to do. That's what the president of the United States does.

BLITZER: Do you think the president and Senator Ted Kennedy and John McCain and others are right in their effort to try to get this immigration reform package through the Senate?

EDWARDS: Oh, I think Senator Kennedy, who I have enormous respect for, is right to try to get comprehensive immigration reform. And I think it's like -- you know, Senator Kennedy is a leader, and he's working with other members of the Senate to try to get something passed, which I totally understand. There are some things in the legislation that I agree with and there are things that I don't agree with.

BLITZER: If you were in the Senate, would you vote for it?

EDWARDS: Well, here's -- I'm not in the Senate. Here's -- I think it would depend on exactly what it looks like when it actually comes up at the end.

But the provisions for better border security, the provisions for being tougher on employers who violate the law, knowingly hiring illegal immigrants, I think those are things that ought to be addressed. I just think the path to citizenship is too difficult. It creates a second-class group of laborers in this country which I don't think is right. And I think it's also too hard to reunite families.

BLITZER: In the path for citizenship for the 12 million or so illegal immigrants, is that what you're talking about?

EDWARDS: That's what I'm talking about, yes.

BLITZER: So you would just make it a lot -- you would make it easier for them to become citizens?

EDWARDS: I would -- I would make the path simpler. The path that's in this legislation takes about 13 years. There's huge financial penalties, compared to the incomes of most of these folks, and then they have the so-called touchback provision, which means that they've got to go back to the country that they came from in order to apply.

I just think all those things in many cases will be prohibitive. I think it will keep people from doing anything.

BLITZER: You're doing well in Iowa. That's where you are right now. You're neck and neck with Senator Clinton in the various polls that we've seen in Iowa dealing with the Iowa caucuses.

Not doing so well in New Hampshire. In our most recent CNN-WMUR New Hampshire poll, you had gone from 21 percent in April down to 12 percent.

What do you think happened?

EDWARDS: Oh, I think these polls go up and down. I've been through this before. I know what happens.

Polls are going to go up and down. Even though I have a good lead in Iowa in the polls, they're going to go up and down here. That's just the nature of the way the political process works.

I mean, people are evaluating each of us, as they should, in a very serious way. And I think for -- let me speak to the New Hampshire voters. I think for New Hampshire voters, they deserve to see me -- Elizabeth will be there, too, I'm sure -- campaigning so they can ask us hard questions. I've got to spend a lot of time in New Hampshire.

The way you get votes, Wolf, in Iowa and New Hampshire is you do the work. And you have clear substantive ideas. And you answer hard questions.

I mean, that's the way you earn votes in Iowa. And it's certainly the way you earn votes in New Hampshire, too. And that's my job. It's not somebody else's job. It's not my job to convince them between now and the primary that I deserve to be their president.

BLITZER: So you're basically focusing in on Iowa, New Hampshire. I assume Nevada and South Carolina as well.

EDWARDS: That's correct.

BLITZER: Senator Edwards, thanks very much for joining us.

EDWARDS: Thank you, Wolf. Thanks again for having me.

By the way, I thought you did a very good job in the debate.

BLITZER: Thank you very much. And please pass along our best wishes to Mrs. Edwards as well.

EDWARDS: Thank you for that. BLITZER: All right.

Let's go back to Miles O'Brien. There's a breaking news development involving the space shuttle.

What's going on?

MILES O'BRIEN, CNN SPACE CORRESPONDENT: Wolf, right about the time I was talking to you, just within the past hour, the commander of the International Space Station, Fyodor Yurchikhin, appears to have completely averted this computer crisis by isolating a switch on a power supply, using some jumper cables to essentially bypass it. And suddenly, those computers have come to life on board the International Space Station.

We're talking about those critical Russian command and control computers we've been telling you all day about. Without those computers, that space station's future was very cloudy, indeed.

In the course of doing their troubleshooting, the commander of the station managed to rig up some wires which bypassed this switch which was apparently going on and off. They noticed this problem. Unclear what caused the switch to fail.

Once it was bypassed, four of the six computer on board the International Space Station came back to life. And the reason the other two have not come back on is they haven't tried to turn them on just yet.

They only need two of those computers to run the space station. Everything else is redundancy.

They're going run these machines for the remainder of the night and into the overnight hours. As the space station comes up over Russian ground stations they will further look at the data. But there's every reason to believe that this computer crisis has been solved. A little bit of Russian ingenuity, isolating a bad switch may be the solution to this problem for the space station -- Wolf.

BLITZER: Let's hope it is. That would be excellent, excellent news.

Miles, thanks very much.

We're going to have a lot more of this coming up in our 7:00 p.m. Eastern hour.

Let's take a quick break.

When we come back, Jack Cafferty and his question of the hour. How much luck will FEMA have reclaiming at least those $485 million it overpaid victims of the 2005 Gulf Coast hurricanes?

Jack with your e-mail when we come back right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's check in with Jack Cafferty once again for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: The question this hour, Wolf, is: How much luck will FEMA have reclaiming at least $485 million it says it overpaid victims of the 2005 Gulf Coast hurricanes?

Dot in Montgomery, Alabama, "Jack, considering all the suffering of New Orleans and adjacent residents while awaiting aid from anyone in government, I'd say let them keep all the money. As for FEMA's chances, I'd say about as good as the U.S. citizens' chance of receiving a refund from President Bush for the money wasted in Iraq."

Cori in Boston, "I'm one of the said recipients of that money that should be returned to FEMA. If I'm representative of these recipients, I can say that FEMA is requesting money from people who used it for legitimate purposes. In my case, rental assistance."

"I've sent numerous appeals with all of the necessary documentation, yet they're still demanding their money back. Their computerized information is inexcusably disorganized, and their operators cannot decipher the notes in my file"

Andrew in Houston, "Jack, I give the government zero chance of getting any of that money. Here in Houston, a lot of evacuees are still running around two years after coming here looking for a free handout instead of getting their lives on track. They have a strange sense of entitlement, like the money is theirs."

Gretchen in Marina, California, "The Katrina victims went through hell for five days before the Bush administration even noticed they might need help. Often it took months, even years, before some people got any help from FEMA, and I'm sure that what they got could never equal what they lost. Let them keep the money."

And Jeff writes from New Orleans, "Everything FEMA touched down here during and after Katrina turned to" -- fill in the blank. "I had an unusable FEMA trailer in my front yard for six months because nobody came to hook up the power. The after I had the trailer removed, they showed up to hook up the power. FEMA deserves what it gets."

If you didn't see your e-mail here, you can go to cnn.com/caffertyfile. We post more of them online, along with video clips of the file.

Not a lot of sympathy for FEMA from our viewers -- Wolf.

BLITZER: The tragedy though, it's our money, though, that we're talking about. It's not FEMA's money. It's taxpayer dollars.

CAFFERTY: Yes. Well -- yes, just like what they were talking about with all the money that's been sent to Iraq. I mean, the taxpayers get the short end on this stuff.

BLITZER: Jack, see you in an hour.

Let's go to Lou in New York right now.

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