Part II: War And Peace

Saddam watches as Northern Iraq is run from a U.S. military command center inside one of his palaces.

But Maj. Gen. David Petraeus is in charge now: "Northern Iraq is really seen as what the rest of the country could be."

And Petraeus isn't waiting for any slow-moving bureaucrats to help win over the people. When Iraqi cops didn't have vehicles, he bought 40 patrol cars. When farmers fought over crops, he ordered a 50/50 split.

He decided to reopen the Syrian border for trade. And when he tells you why, remember he's a combat commander: "We were about to dump huge amounts of dollars on the market in Mosul by the paying of salaries that had not been paid for some government officials and government workers. And this great increase in the amount of dollars chasing those goods, the logical result would be inflation."

This is pretty basic economics, says Petraeus, who admits that he once taught economics at West Point. He's a paratrooper with a Princeton PhD.

"I know that most of the people I talk to around here say we're doing something beneficial. And I'll tell you we disagree with folks around here regularly," says Buche. "The beauty of it is, I think, we can disagree as friends. We're headed to the same spot on the ground; we may disagree on the route to get there."

But just because it's beneficial doesn't mean the Iraqis like it. Few benefited more than the pump-station manager, but when we asked what he thought of the U.S. Army, he said: "I like to be friends, Iraqi peoples and United States peoples, so we like the Army leave and we'll be friends forever."

Pelley shared this opinion, that the Iraqis want their country back, with Bremer.

"Of course they do. Look, we're an occupying power," says Bremer. "I don't like to be an occupier. Most Americans don't. It's an ugly work. Of course, they want their country back, and they deserve to have it back and they will have it back. And we will work as hard as we can to give it back to them as quickly as we can. But we're going to do it, consistent with our responsibilities. We're not going to cut and run."

Ambassador Bremer runs Iraq from the Baghdad palace that used to be Saddam's White House. Outside, Saddam's still on a pedestal, several of them, but inside, the Americans and British are supervising nearly everything in the country. Legions of Americans have turned the marble halls into mess halls.

Bremer showed 60 Minutes II the throne room, something Iraqis hadn't seen until Saddam left the chair. "When the Iraqis came into this building, they burst into tears because they looked at this," says Bremer. "They'd been starved, they'd been tortured, they had no health care, their schools were lousy. None of this was visible to them. They couldn't see how the regime was wasting their money and they came and burst into tears."

To save Iraq, Bremer said that he needed two things from the American people - patience and money. The occupation has cost about $1 billion a week so far. Now, the Bush Administration wants $72 billion more, mostly for Iraq security and reconstruction.

Does Bremer expect the Iraqi people to pay the U.S. back?

"No," he says. "These are grants. These are not planned as loans."

So the American taxpayer is going to foot this bill?

"That's right, and I'll tell you, I think the American taxpayer when he or she thinks about it, will be willing to do that," says Bremer. "This is a great and noble task we've undertaken here. It's on the order of what we did in Europe after the Second World War. In fact, it has really been compared to the Marshall Plan."

The Marshall Plan cost $100 billion in present-day dollars, but Bremer says that rebuilding Iraq will be more expensive because "it was flattened by 25-30 years of complete mismanagement."

So why is that our problem now?

"We are responsible now to see to it that the great victory, the great military victory, is consolidated," says Bremer. "We cannot walk away from it and we won't."

Bremer says Iraq has to write a constitution and hold national elections. He says there's a 50/50 chance they can do that in 18 months.

Correspondent Scott Pelley walked with the GIs in a part of Baghdad the Army calls Zone 17. It's a five-square-mile neighborhood of shops, hospitals and homes where machine gunfire echoes off the walls.

There was word of a firefight while we were with the patrol. The men of the 124th Infantry, Florida National Guard, tracked the sound through the Byzantine alleys of Baghdad. Sometimes, the neighbors help, sometimes not.

The gunfire could be a gang, or it could be the enemy. Moving down the alley, the sound echoes and the walls seem to close in. Heads pop over the roofs. The patrol is in a box and they feel like targets.

Eric Lundbloom is a national guardsman. Back home, he's a student, and he'll be missing nearly two years of college. "The vibe we get around here is that most people like us. I'd say 90 percent of the people here are happy," says Lundbloom.

"I've heard stories from people come up to me and thanked us for being here because their brother was killed by Saddam or their father was killed by Saddam and they really seem ecstatic that we're here. But you got that other 10 percent that are trying to kill us."

The gunfire faded. They never found it, and it's part of the random chaos that has made reasonable Iraqis bitter about U.S. occupation. In Zone 17, home to Baghdad's biggest hospital, victims of street crimes stream into the ER. There used to be 20 gunshot deaths a month in the entire city of Baghdad. Now, there are 500 a month.

"'Til now, I love the American people," says Sami Salman, a doctor in the hospital. His daughter, Marwa, is a dentist and they say they hated Saddam, but at least they knew what to expect.

"It's not safe for me to walk outside my home," adds daughter Marwa. "If I would ever think to go out in my car, the chances of me getting raped killed and the car stolen are much greater than the chances of me getting home safe."

"We feel that Americans are not the better alternative to Saddam. You are trying to convince us," says Salman. "You are trying to convince your people that we are the better alternative. You are not."

In fact, Salman says instead of one Saddam, there are now many in his place: "There is the Saddam now of the gangs that are free to do what they want: killing, looting, raping, kidnapping, destroying. There are probably three or four Saddams that we are left with: the right extremists, the left extremists, the extremist fundamentalists. They are not better than Saddam. They are worse than Saddam, and now the Iraqis, lucky they are, they got rid of one tyranny. They are now ended with five or six tyrannies."

"I think there's a small percentage of people here who don't want us here, but I think by in large, most of the people here, as you'll see on this patrol, are welcoming of our presence," says Rieckhoff.

But by the next day, kids trailed his patrol down the block. Rieckhoff's men fixed up a stadium that was once an Iraqi army shooting range, and the community relations is paying off. The neighbors are now telling his patrols about hidden weapons and guerillas.

Rieckhoff was president of his class at Amherst College, went to Wall Street, and joined the National Guard for a challenge. He says he found it: "I don't think the American public understands that there's much more going on here besides IED attacks. Those are horrible and we all mourn the loss of life. But every day there's an incredible amount of stuff going that doesn't get reported because it's not sensational. The fact that school supplies are delivered or there are hospitals open - that stuff is incredibly important for every member of this local community."

What does Rieckhoff now think of the war?

"I think we've made incredible strides. This is the hard part. This is the road nobody has gone down before and the U.S. is breaking some new ground here," says Rieckhoff. "It's going to be a difficult struggle. Germany wasn't repaired in four months. Japan wasn't repaired in four months. It's gonna take time to reestablish this entire government, this entire country. But i think it has enormous potential. And i think the sky's the limit for the people of Iraq."

Even those who despise the occupation wouldn't think of divorcing America just now.

"I'm a doctor, so I always think in a medical term. And it's like a surgeon opening your own or your father's tummy and he says, 'What do you feel if I quit and I leave now while I'm going to have my lunch break,'" says Salman.

"Finish what you have done first, for God's sake. You can't leave him now in the theater, half dead and half alive. And that's what the Iraqi nation is, half dead and half alive. You have created chaos. Please bring back order, but then please go out."