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THE SITUATION ROOM

Henry describes the controversy over President Bush's decision to commute Lewis "Scooter" Libby's prison sentence. Newton reports the latest developments on the investigation into the terror attacks in Great Britain and Scotland

Aired July 3, 2007 - 16:00   ET

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


SUZANNE MALVEAUX, HOST: Happening now, a full pardon still in play. The president won't rule out doing more to help "Scooter" Libby, even after commuting his sentence. I'll ask Democratic Party Chairman Howard Dean about Mr. Bush's options and the outrage on the left.
Plus, doctors under the microscope in the U.K. terror probe. New details on the arrests, the searches and the possible suspects' motives.

And primary concerns about Iraq. Some New Hampshire voters share their anxiety about the war and how it may influence their presidential choices.

Wolf Blitzer is off today.

I'm Suzanne Malveaux and you're in THE SITUATION ROOM.

President Bush already had opened the floodgates of Democratic anger by commuting Lewis "Scooter" Libby's sentence and now he is refusing to shut the door on the possibility of a full-fledged pardon. Eagerly sought by some conservatives.

This much seems clear -- Libby's conviction to lying to investigators in the CIA leak case will be a political lightning rod for some time to come.

We begin with our White House correspondent, Ed Henry -- Ed, obviously, the fireworks over there at the White House briefing -- we saw you well at work here. A lot of unanswered questions still.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: You're right, Suzanne.

The questions were fast and furious for Tony Snow, who faced a lot of skepticism as he tried to claim that the president had not handed "Scooter" Libby a political favor.

(BEGIN VIDEO TAPE)

HENRY: (voice-over): The president handed out Purple Hearts to wounded soldiers at Walter Reed Army Medical Center one day after commuting the prison sentence of Lewis "Scooter" Libby, who helped leak the identity of former CIA operative Valerie Wilson, whose husband publicly questioned the White House's case for the Iraq War.

GEORGE BUSH, PRESIDENT OF THE UNITED STATES: I took this decision very seriously on Mr. Libby.

HENRY: Mr. Bush left the door wide open to a full pardon.

BUSH: As to the future, I'm, you know -- rule nothing in and nothing out.

HENRY: The president said the jury verdict that Libby lied to the FBI should stand, along with the $250,000 fine and two years of probation.

BUSH: But I felt like the 30-month sentencing was severe and made a judgment -- a considered judgment that I believe is the right decision to make in this case. And I stand by it.

HENRY: Spokesman Tony Snow struggled to answer a barrage of questions, such as whether Vice President Cheney went to bat for his former chief of staff.

(on camera): Did the vice president weigh in?

TONY SNOW, WHITE HOUSE PRESS SECRETARY: My guess is that -- I don't have direct knowledge, Ed. But, on the other hand, the president did consult with most senior officials.

HENRY: (voice-over): Why did the president ignore his own Justice Department's regular procedure?

(on camera): Normally somebody at least serves a day in jail, a week in jail --

SNOW: Because the president thought the jail time, in fact, was inappropriate and therefore he decided to proceed --

HENRY: (INAUDIBLE) the jail time was excessive -- the sentence was excessive --

SNOW: Right. It was excessive.

HENRY: (INAUDIBLE) it was inappropriate.

SNOW: Well --

HENRY: (INAUDIBLE).

SNOW: -- he said it was excessive and he thought that any jail time was excessive.

HENRY: (voice-over): Or why Karl Rove has not been fired, even though he played a role in the leak.

QUESTION: Do you stand by your pledge to fire anyone found to have done so?

BUSH: Yes --

QUESTION: Finally -- BUSH: -- and that's up to the U.S. attorney to find the facts.

(END VIDEO TAPE)

HENRY: Now, Tony Snow told me that the White House will not make detailed comments about Karl Rove's role until the entire process is over. Of course, that flies in the face of the fact that yesterday the president made detailed comments -- a two page, single space, printed statement about this case when he commuted the sentence -- Suzanne.

MALVEAUX: Ed, it will be very interesting to see if Tony Snow comes back with any of the answers of all those questions you asked him earlier today. So we'll check and see.

HENRY: Thanks, Suzanne.

MALVEAUX: OK.

Thanks, Ed.

Mr. Bush has commuted three other sentences during his presidency -- Gerald Dean Gordon (ph) of Nevada, Bobby McBerry (ph) of North Carolina and Phillip Anthony Emmert (ph) of Iowa. All three were doing time on drug-related charges. They all had served most of their sentences when the president granted the commutations.

New developments in the U.K. terror investigation. U.S. officials tell CNN that the men allegedly behind the car bombs in London and Glasgow have connections to Al Qaeda in Iraq. Eight people have been taken into custody in the terror probe, many of them foreign born doctors.

Our senior international security correspondent, Paula Newton, has more from London -- Paula, what can you tell us?

PAULA NEWTON, INTERNATIONAL SECURITY CORRESPONDENT: Suzanne, a fast-paced investigation, more arrests. But authorities here are saying they believe that the core of this group is in custody.

(BEGIN VIDEO TAPE)

NEWTON: (voice-over): On their mission to seek and destroy car bombs, authorities take no chances -- another controlled explosion on a car believed to be linked to this investigation. Searches continue at more than 20 locations throughout Britain and another doctor is under arrest -- this time, thousands of miles away, in Brisbane, Australia.

UNIDENTIFIED MALE: The man has been taken into custody and questioning is underway.

NEWTON: British media reports have identified the latest suspect as Dr. Mohammad Haneef, who had been working in Britain until last fall. The investigation has now turned to a network of foreign doctors that authorities believe were plotting to attack Britain. Doctor Mohammed Asha trained in Jordan. Dr. Bilal Abdulla, pictured here after the Glasgow attack, studied in Iraq. Two other doctors from Saudi Arabia are in custody, according to British media reports, and two more from India, including Dr. Mohammad Haneef.

All have worked as licensed doctors in Britain. And friends and family of some, like those of Dr. Asha, say, they just don't fit the terror profile.

UNIDENTIFIED FEMALE: He had liberal type of thinking. He was a good Muslim, but never a terrorist or such -- involved in such activities.

NEWTON: But for Al Qaeda, they would be to die for recruits.

UNIDENTIFIED MALE: Al Qaeda has always looked for people with particular qualities that will help them in their operations. That may be Western languages. That may be Western passports, indeed.

Doctors obviously often speak very good English. They can travel widely. They do avoid suspicion.

NEWTON: Above suspicion and known as clean skinned -- no criminal record, no indication they could commit atrocities -- the kind of foot soldiers that intelligence reports say Abu Musab al-Zarqawi, the notorious leader of Al Qaeda In Iraq, had been hunting for in his quest to enlist cell leaders.

UNIDENTIFIED MALE: It is true that Zarqawi, before going into Iraq, tried to establish a sort of network in Europe. It is also true that since the invasion of Iraq, there has been -- there has been a sort of supply network that has been established in Europe.

NEWTON: Zarqawi was killed last year. But as recently as this spring, the Joint Terrorism Analysis Center, or JTAC, at Britain's domestic spy agency, MI5, had an intelligence report warning Al Qaeda leaders in Iraq were planning large scale attacks in Britain and in Europe to "shake the Roman throne" -- a reference to Christianity.

Intelligence officials say they wouldn't be surprised to learn Zarqawi could have a hold on accomplished physicians.

UNIDENTIFIED MALE: It's the ideology which they're influenced by. And they believe that that justifies everything. So, you know, the end justifies the means. And their Hippocratic oath which they would have taken as doctors is totally overwritten by their belief in their mission to conduct global Jihad.

(END VIDEO TAPE)

NEWTON: Despite all the intelligence reports, Suzanne, certainly a plot, orchestrated and conceived by Al Qaeda, recruiting doctors, it just wasn't anything that was ever explored in great detail -- Suzanne.

MALVEAUX: Paula Newton, thank you so much. We're also learning new information from sources close to the investigation that two of those suspects were medical students of Saudi origin.

Thanks again, Paula.

And here in the U.S. the Transportation Security Administration is stepping up security for the Fourth of July holiday.

Let's bring in our homeland security correspondent, Jeanne Meserve -- Jeanne, what are they doing in the next couple of days?

JEANNE MESERVE, HOMELAND SECURITY CORRESPONDENT: Well, Suzanne, because of the large numbers of people likely to be traveling to Fourth of July celebrations on mass transit, the Transportation Security Administration is deploying what it cause VIPER teams on systems coast to coast -- in New York, Washington, Boston, Chicago, Los Angeles, Philadelphia, Houston and San Francisco. They are also deploying to some airports in some of those cities.

The teams consistent of canine explosive detection units, air marshals, transportation inspectors and specialists in behavior analysis. They work with local and transit police to hopefully detect and deter any threats -- Suzanne.

MALVEAUX: And does this mean that officials actually have information about a specific threat over the holidays?

MESERVE: Suzanne, U.S. officials continue to say they know of they know of no specific credible threat against the U.S. but they always worry about big gatherings and they are mindful of the recent attempted attacks in the U.K. They continue to monitor that investigation, looking for threads in the U.S. but at this point, they still characterize it as an overseas investigation -- Suzanne.

MALVEAUX: All right, Jeanne, have a great holiday.

MESERVE: Thanks.

MALVEAUX: And Jack Cafferty is off today.

But coming up, Democrats on the attack over "Scooter" Libby's get out of jail free card. Party Chairman Howard Dean joins us with his reaction and how this may impact the presidential race.

And, how does the Libby case compare to other cases where presidential pals got a break from the commander-in-chief?

Also ahead, "Scooter" Libby's jet out of jail free card. Party Chairman Howard Dean joins us with his reaction and how this may impact the presidential race.

And, how does the Libby case compare to other cases where presidential pals got a break from the commander-in-chief?

Also ahead Republicans Mitt Romney and Rudy Giuliani release their new fundraising numbers.

Are they only making matters worse for John McCain's cash poor campaign?

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

MALVEAUX: Top Democrats aren't mincing any words in their criticism of President Bush for commuting the sentence of Lewis "Scooter" Libby. And now that Mr. Bush is not ruling out an eventual pardon, the cries of outrage may only get louder.

We're joined now by Democratic National Committee Chairman Howard Dean.

Welcome to the show.

I want to start off by playing a bit from Romney to give you a sense of what he thinks is kind of the hypocrisy coming from the Democrats' reaction.

HOWARD DEAN, DEMOCRATIC NATIONAL COMMITTEE CHAIRMAN: Um-hmm.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: Wasn't it Bill Clinton that was handing out pardons like lollipops at the -- at the end of his administration?

(APPLAUSE)

ROMNEY: And isn't there some -- some recognition that perhaps you might look a little silly if you didn't have anything to say, when he was handing out pardon after pardon after pardon for political purposes only?

(END VIDEO CLIP)

MALVEAUX: A lot of Republicans are saying this really smacks of a double standard here, that we are not hearing the kind of criticism coming from Democrats regarding Clinton that now we are hearing when it comes to Bush and Libby.

DEAN: That's actually not true. If you look -- go back and look at 2001, I did criticize President Clinton.

But this is a different matter. This is -- this -- this Republican Party doesn't believe that equal justice under the law as a basic standard. I thought the interesting thing about Mitt Romney and every single other Republican politician running for president, they're all in favor of a pardon. Every single Democrat says equal justice under the law -- what's good for the ordinary Americans who lie to prosecutors and who obstruct justice is the same thing that ought to be good for members of the Bush administration.

That's the fundamental difference. We believe in equal justice under the law. We believe in getting out of Iraq.

Every single Republican president running for president believes in staying in Iraq and evidently supports this pardon. They are wrong. The American people, by huge numbers, think the president did the wrong thing by commuting "Scooter" Libby's sentence and they think they're doing the wrong thing by staying in Iraq. And I do not see how any of these guys are going to get themselves elected president of the United States by supporting things that the American people really disagree with.

MALVEAUX: Which one of those pardons did you object to with President Clinton, that you considered wrong, as well?

DEAN: The one I said -- the one I criticized at the time was the Marc Rich pardon. But I also criticized the first President Bush's Caspar Weinberger pardon.

Look, pardons for people that are based on justice are perfectly acceptable. But pardons for people out of political convenience -- this is a good way to shut "Scooter" Libby up. Now he doesn't have to testify about some of the other misdeeds that went on in Vice President Dick Cheney's office and possibly President Bush's office.

MALVEAUX: What --

DEAN: This is a political pardon and political pardons are never good things.

MALVEAUX: Well, the Democrats are already furious with the president.

Why not?

The thinking here is what does the president have to lose?

Is this going to -- do you think -- affect the Republican candidates for president for 2008?

DEAN: Of course it's going to affect the Republican presidents for -- they all of course, it will.

They all supported the pardon. And it's completely out of step.

Look, the ordinary person somewhere in America who maybe whose kid did something dumb, like the kid in Georgia, who's serving 10 years for a sexual indiscretion, that kid's serving 10 years. Nobody is there standing up for him.

How come somebody is going to stand up for a guy who lied to and obstructed justice and was condemned?

We know we spent about $2 million or $3 million getting a conviction here. The president throws it all out.

Whatever happened to respect for law and order that the Republicans used to talk about all the time? This is wrong. The Republican candidates are wrong on this. They're wrong on Iraq. And I don't think they're going to have much chance convincing the American people that they're the ones that ought to be running the country.

MALVEAUX: Let's talk about Hillary Clinton.

We're seeing what is being dubbed as "the Bill and Hillary Show" in Iowa, campaigning together. There are some who are suggesting it's not necessarily a good idea to see him on stage with her, perhaps upstaging, but, also, perhaps, invoking those memories of infidelity and impeachment.

You had an experience with just a moment the what's called "The Howard" "The Dean Scream," that that really set the campaign in that direction.

Do you think people are going to just simply dismiss these kind of memories and the --

DEAN: First of all, we had already lost the campaign when the famous scream speech came about. So I had already lost in Iowa.

You know, this is all inside the beltway bath blather. You've got some fantastic candidates. This is the strongest field we've had in my memory. And, you know, however they want to campaign is their business. I don't advise them what to do, nor do I comment. I'll leave that stuff up to you.

I think they're doing great. I'm delighted by our field. I'm delighted how well they're all doing. I'm delegated by the vast amounts of money that the Democrats are raising compared to the Republicans, although, frankly, I'd prefer public financing of the campaigns for everybody.

MALVEAUX: You did very well when it came to raising money through the Internet, a lot of contributions.

What kind of advice would you give to Barack Obama, who seems to be getting the kinds of numbers and the kinds of funds that you had and that his campaign ultimately will make good use of that, that that will --

DEAN: Well, if I were going to give anybody advice, it certainly wouldn't be in public. I would just say this. Look, these candidates are raising money, especially in small donations. That's really critical for the party. The campaign -- the good that our campaign did for the party and for the country was to raise huge amounts of money in very small donations and lots and lots and lots of people. And those people stayed in the political process.

If you want America to be a strong democracy, you've got to get as many people involved in politics as possible. And I think that's what our candidates are doing. And I'm just thrilled.

MALVEAUX: Well, thank you very much. A thrilled Howard Dean with us here in THE SITUATION ROOM.

Thanks again.

DEAN: Suzanne, thanks you so much for having me on.

MALVEAUX: Have a good holiday.

DEAN: Thank you.

MALVEAUX: And still ahead, Mitt Romney on the rise.

Is he becoming the Republican presidential candidate to beat?

Paul Begala and Terry Jeffrey are standing by for our Strategy Session.

And Republican Senator Arlen Specter seems poised to take on the Bush White House again. We'll tell you what's gotten him riled up this time.

(COMMERCIAL BREAK)

MALVEAUX: Carol Costello is off today.

T.J. Holmes is monitoring the wires and keeping an eye on the video feeds from around the world.

He joins us now with a closer look at the other incoming stories that are making news.

What are you looking at -- T.J.?

T.J. HOLMES, CNN CORRESPONDENT: Hey, there.

Well, I'm looking at some bad news, actually, up first here.

An already hard hit home sales market is likely to see even more declines in the coming months. That is according to the National Association of Realtors. In its latest index of pending home sales, well, they all sank for the month of May. Not since just after the 9/11 attacks has its reading been so low. One expert says it's harder for many to get loans due to problems with those subprime mortgage and that many buyers aren't very confident in the real estate market.

Over to Iraq now, the Iraqi cabinet approves a plan to distribute the country's vast oil wealth. Iraq's major ethnic and religious factions would benefit. Iraqi officials say parliament must debate that plan. Fairly distributing Iraq's oil wealth is seen as necessary for economic and political stability, but it's been a tough road getting legislation passed.

Also, getting rid of more of their own nuclear weapons and hoping to prevent the spread of others -- that's what the U.S. and Russia are now pledging. A day after President Bush met with Russian President Vladimir Putin, the two nations say they hope to reduce their stockpiles of long range nuclear weapons to what they call "the lowest possible level." A joint statement also says they hope to stop others from developing nuclear weapons technology.

Also here, doctors in Denver are reclassifying their diagnosis of Andrew Speaker. He's the man who set off that flurry of concern after he flew overseas and back with a dangerous drug-resistant form of tuberculosis. Well, his doctors in Denver now say he has a more treatable form of the disease and not the highly drug-resistant form that the CDC originally diagnosed. Sources tell CNN that the CDC and the Jewish Medical Center, where Speaker is being treated, will discuss their differing diagnosis.

And tonight, Andrew Speaker and his wife will talk with CNN's Anderson Cooper. You can see that on "ANDERSON COOPER 360" tonight at 10:00 p.m. Eastern -- Suzanne, after all of that, he doesn't even have possibly what they say he had. So it will be interesting to see where the doctors don't agree.

MALVEAUX: Sure.

Well, maybe it's good news for him.

HOLMES: It's great news for everybody.

MALVEAUX: Yes.

HOLMES: But, still, we went through a lot with that story -- Suzanne.

MALVEAUX: Yes. Yes, we did. We did. There might be more to come.

HOLMES: Yes.

MALVEAUX: OK, thanks again.

HOLMES: Sure.

MALVEAUX: And up next, who is winning the Republican money race?

Mitt Romney and Rudy Giuliani release new fundraising numbers, even as John McCain's campaign reels from a cash crisis.

And New Hampshire voters weigh the candidates and their stance on the Iraq War. We'll look at the issue through the eyes of some residents of the lead-off primary state.

(COMMERCIAL BREAK)

MALVEAUX: Happening now, doing Al Qaeda's dirty work -- officials tell CNN the men who wanted to blow up sites in the U.K. have ties to Al Qaeda in Iraq. Now many officials worry that Iraq is producing a new generation of terrorists.

Dramatic rescue -- you'll see amazing video of two Army pilots rescuing two fellow troops in trouble in Iraq. The helicopter that came to the rescue seated only two, so the two others clung on the outside.

And he is National Hurricane Center director. But some are suggesting he is a whistle blower. He could lose his job for speaking out about hurricane forecasting that could affect you.

Wolf Blitzer is off today.

I'm Suzanne Malveaux and you're in THE SITUATION ROOM.

We have fresh details on where some of the Republican presidential candidates stand on fundraising. Rudy Giuliani raised $17 million in the second quarter and Mitt Romney raised $14 million. Romney's campaign says all of that money will be for the Republican primary campaign, while Giuliani's camp is not yet saying what portion will be used for the primary and what amount will be used for the general election.

Of course, all of this comes a day after we learned of frustrations in Senator John McCain's camp.

Joining me now is senior political analyst, Bill Schneider -- Bill, what do you make of all of these numbers?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, Suzanne, nothing eye-popping here like the Barack Obama and Hillary Clinton figures.

Both Romney and McCain saw their fundraising fall off from the first quarter to the second. McCain is restructuring his campaign and Romney had to lend himself $6.5 million of his own money.

Now, Giuliani is the only one of the top three Republicans whose total went up in the second quarter. He now leads the Republican field in fundraising, but he's way behind Obama and Clinton.

The top three Republicans raised a little more than $42 million in the last quarter. The top three Democrats -- more than $68 million.

McCain has spent all but $2 million, which is why he faces the biggest challenge.

(BEGIN VIDEO TAPE)

SCHNEIDER: (voice-over): The McCain campaign is in trouble.

Can it turn things around?

In 1980, after losing Iowa, Ronald Reagan roared back to victory in New Hampshire after making this comment at a debate.

RONALD REAGAN, FORMER PRESIDENT OF THE UNITED STATES: I am paying for this microphone now.

SCHNEIDER: In 2000, George W. Bush lost New Hampshire to none other than John McCain. Bush then ran a tough, some would say ruthless, campaign to rally conservatives and win South Carolina. In both cases, the establishment candidate rallied the party base to fend off on a challenge from an insurgent.

John McCain's problem is different. He really doesn't have an ideological base he can rally.

STEPHEN HESS, PRESIDENTIAL HISTORIAN, BROOKINGS INSTITUTION: The problem with John McCain is, it's hard at the moment to see his constituency, who his -- where his base is coming from.

SCHNEIDER: McCain's strategists have figured something out about 2008. The political establishment is in trouble. So, McCain is repositioning himself to run the same way he did in 2000.

JOHN WEAVER, MCCAIN POLITICAL STRATEGIST: John McCain is the Republican change candidate in a change election cycle, a volatile election cycle.

SCHNEIDER: Wait a minute. Unlike 2000, there's now a Republican in the White House. Can a Republican run as the candidate of change? McCain's strategists think so.

WEAVER: He's going to challenge our party and our country to let him end the out-of-control spending, which has shamed the Republican Party and wrecked our country's budget.

SCHNEIDER: They talk about a liberated John McCain, liberated from Washington politics.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: We let spending get out of control. We presided over the largest increase in the size of government since the Great Society, and our constituents and our Republicans became dispirited and disenchanted.

SCHNEIDER: The straight-talker is back. And he's hoping to turn into the comeback kid.

(END VIDEOTAPE)

SCHNEIDER: It could work for another reason. The Republican establishment doesn't really have a candidate to rally around. The vice president's not running. Conservatives have problems with Rudy Giuliani and Mitt Romney. Fred Thompson? We will see -- Suzanne.

MALVEAUX: Thanks, Bill -- Bill Schneider.

Scooter Libby now is on a long list of people who have been spared prison time by a president. When it comes to Libby, is President Bush doing anything at all that's different than his predecessors?

Our Brian Todd is here.

Brian, certainly, the critics are arguing that this president crossed a line.

BRIAN TODD, CNN CORRESPONDENT: That's right, Suzanne, the most common refrain being that the president has placed his political alliances above the law.

As you just mentioned, others before him have heard that same refrain, but the question that's raised now, will the president suffer similar political consequences?

(BEGIN VIDEOTAPE)

TODD (voice-over): On the campaign trail, the political blowback has already begun.

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: And this administration has no regard whatsoever for what needs to be held sacred.

TODD: But Hillary Clinton is reminded, presidential forgiveness is a political mine field.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: Wasn't it Bill Clinton that was handing out pardons like lollipops at the end of his administration?

(LAUGHTER)

(APPLAUSE)

TODD: In comparing presidential pardons and commutations, analysts say, Bill Clinton's pardon of fugitive financier Marc Rich just as Clinton left office was more offensive than President Bush letting Scooter Libby avoid jail time.

Bush had considerable pressure from conservatives to grand a full pardon to Libby, who many believe was caught up in a political witch- hunt. In that regard, Bush is compared to his father's pardon of six political allies who had been embroiled in the Iran-Contra scandal.

But, in Clinton's case:

LARRY SABATO, DIRECTOR, UNIVERSITY OF VIRGINIA CENTER FOR POLITICS: The Marc Rich pardon was perceived to be corrupt. And, in that sense, it was more egregious. It appeared to be a sneaky attempt to send a major favor to a big donor.

TODD: Other cases had a similar ring. Ronald Reagan pardoned New York Yankees owner George Steinbrenner, who had been convicted of making illegal contributions to Richard Nixon's campaign.

Others seemed less politically expedient, like when Jimmy Carter commuted the sentence of Watergate conspirator G. Gordon Liddy. Richard Nixon did the same with Teamster boss Jimmy Hoffa.

How does Nixon's own pardon compare politically with Scooter Libby? ROBERT DALLEK, PRESIDENTIAL HISTORIAN: I think that's the memory that will be most invoked and most recorded. Libby is a high-profile case. The Richard Nixon pardon was obviously the highest possible profile case. And, of course, Gerald Ford suffered serious political consequences as a result of that pardon.

(END VIDEOTAPE)

TODD: Analysts say President Bush won't suffer the direct political consequences of this commutation, aside from his approval ratings taking another hit. The brunt of his actions, they say, are more likely to be felt next year by his party's presidential nominee -- Suzanne.

MALVEAUX: And, Brian, obviously, the president's past record on commutations and pardons does play into this.

TODD: That's right. During his presidency, he's only granted four commutations now, with the Libby commutation, just over 100 pardons for President Bush. Compare that to Harry Truman, who granted nearly 2,000 pardons.

Lyndon Johnson has the postwar record for commutations. That's 226. Now, the fact that President Bush has portrayed himself as a law-and-order politician, which made him popular in Texas, makes him a lightning rod in this case -- the essential charge, he's got a double standard for his friends.

MALVEAUX: Brian Todd, thank you so much.

And coming up: President Bush is defending his decision to keep Scooter Libby out of prison, but will the decision help or hurt the GOP? That's in our "Strategy Session."

And a sometime Republican thorn in the side of the White House, Senator Arlen Specter, has a new bone to pick with President Bush.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

MALVEAUX: Another shot of criticism today for the Bush White House coming from a fellow Republican, Senator Arlen Specter. Now, this isn't the first time Specter has parted ways with the president.

Let's bring our congressional correspondent in, Andrea Koppel.

Andrea, what is Specter's case that he's making against the White House now?

ANDREA KOPPEL, CNN CONGRESSIONAL CORRESPONDENT: Well, Suzanne, Senator Arlen Specter is the first to admit that presidential signing statements are nothing new and can be perfectly legitimate. But Specter doesn't think that's always been the case with President Bush.

And, so, the Pennsylvania lawmaker, the ranking Republican on the Senate Judiciary Committee, has reintroduced legislation to try to curb the president's ability to use signing statements. That's an official document in which a president lays out his interpretation of a new law.

Now, by Specter's count, Mr. Bush has issued 149 of them to date. Compare that to President Clinton, who issued 105 during his two terms in office. In a statement, Specter said, "If the president is permitted to rewrite the bills that Congress passes, and cherry-pick which provisions he likes and does not like, he subverts the constitutional process designed by our framers."

Now, for example, Specter cites the McCain anti-torture amendment, which Congress overwhelmingly passed last year, that banned U.S. personnel from inflicting cruel, inhuman or degrading treatment on any prisoner. Specter said that, after President Bush signed that legislation into law, he also issued a signing statement, which Specter claims may still be preserving a right to inflict torture on prisoners -- Suzanne.

MALVEAUX: So, Andrea, what is the possibility that Specter's bill would pass?

KOPPEL: It's unclear. According to his office, there are no co- sponsors, which can sometimes be an ominous sign, especially considering Specter introduced a similar bill last year, and it didn't pass.

But what is different this time around is that, just last month, the nonpartisan GOVERNMENT ACCOUNTABILITY OFFICE, the GAO, published a study to see if President Bush's presidential signing statements impacted his administration's willingness to carry out the letter of the law.

Now, the GAO looked at 19 instances in which Mr. Bush had raised objections, and it concluded that, in six of those 19 cases, or just under one-third of them, they weren't carried out under the law -- Suzanne.

MALVEAUX: Thank you, Andrea Koppel.

For months, in New Hampshire, the presidential candidates have shaken hands and kissed babies, as they try to drum up support. But what do voters in that all-important state really think of the presidential pack?

Our Mary Snow is out asking some of them. She joins us from Manchester.

Mary, what are the voters telling you? Give us a sense of a temperature check.

MARY SNOW, CNN CORRESPONDENT: Well, Suzanne, you know, they're really saying that they're being courted very aggressively by candidates. They say they have met some of them face to face.

But they also are stressing that they are not going to be swayed lightly.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Independence in a state that lives by the motto "Live free or die" is not a label worn lightly.

Just ask Carol Kilminster. She's an independent voter who favors Republicans. But that didn't stop her from showing up at CNN's Democratic debate last month.

CAROL KILMINSTER, NEW HAMPSHIRE INDEPENDENT VOTER: My question is, why is it that veterans cannot receive medical services at the hospital of their choice?

SNOW: Kilminster's 24-year-old son, James, is serving in Iraq, adding urgency to the topic that dominates political discourse here. She does not believe troops should withdraw from Iraq, but she is dissatisfied with the pace at which the Iraqi military is developing.

KILMINSTER: My son went to basic training for 12 weeks and came out a soldier. And we have been there for how many years? And they're still not soldiers yet. I don't understand that.

SNOW: Kilminster considers herself on the right and shares discontent with Roger Tilton, at the other end of the political spectrum. He is a Democrat who gained attention in February when he grilled Democratic presidential hopeful Senator Hillary Clinton back at a town hall about her vote to authorize the war.

ROGER TILTON, NEW HAMPSHIRE DEMOCRATIC VOTER: My name is Roger Tilton. I'm a Democratic primary voter from Nashua.

And I want to know if, right here, right now, once and for all, without nuance, you can say that that war authorization vote was mistake.

CLINTON: Well, I have said -- and I will repeat it -- that, knowing what I know now, I would never have voted for it.

SNOW: Five months later, Tilton, who describes himself as leaning left, says he's not hearing the answers he's looking for from Democrats on Iraq.

TILTON: I'm not so sure that the Democrats are really appealing to the far left, because, if they were, you would see all the candidates saying they would end the war now and bring the troops home. And all the candidates are not saying that.

SNOW: Iraq is never far from political discussion in New Hampshire.

JAMES PINDELL, POLITICAL CORRESPONDENT, "THE BOSTON GLOBE": Well, it's left these voters still searching for candidates, quite frankly. At the same time, they're -- only had the same choices -- they only have the choices that are out there. And, so, they're still very much open-minded to see who is going to have the right answer. (END VIDEOTAPE)

SNOW: And voters say that, while they may support a candidate, very few of them we talked to here who say they do at this point. They also stress that that support is pretty soft, and that they're always willing to keep a door open to other candidates coming through -- Suzanne.

MALVEAUX: Thanks, Mary.

And the next presidential debate will be July 23 in Charleston, South Carolina. CNN is teaming up with YouTube. It will be the first debate where all of you can submit your questions to the candidates online.

Up next in the "Strategy Session": President Bush stands by his decision not to send Scooter Libby to jail.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: It felt like the 30-month sentencing was severe. Made a judgment, a considered judgment, that I believe is the right decision to make in this case. And I stand by it.

(END VIDEO CLIP)

MALVEAUX: But will the move help or hurt his party at the polls?

And new numbers in Rudy Giuliani and Mitt Romney's presidential campaign -- why are the GOP candidates' fund-raising numbers lagging behind their Democratic rivals? Paul Begala and Terry Jeffrey will be here in THE SITUATION ROOM to sort it all out -- next.

(COMMERCIAL BREAK)

MALVEAUX: In today's "Strategy Session": President Bush spares Lewis Scooter Libby from jail, and he is not ruling out the possibility of a full pardon.

Now, joining me, our CNN political analyst and Democratic strategist Paul Begala, and Terry Jeffrey, editor at large of "Human Events."

Nobody is happy here.

I want to start off. Here's "The Wall..."

(LAUGHTER)

PAUL BEGALA, CNN POLITICAL ANALYST: Scooter is pretty happy.

MALVEAUX: Here's "The Wall Street Journal" here. They say, "Too Tough on Libby," that the president failing -- "By failing to issue a full pardon, Mr. Bush is evading responsibility for his role his administration played in letting the Plame affair build into a fiasco and ultimately this personal tragedy."

Then, listen to this one, "New York Times"' takes -- again, not happy -- but the opposite approach. "Not Tough Enough." "Presidents have the power to grant clemency and pardons, but, in this case, Mr. Bush did not sound like a leader making tough decisions about justice. He sounded like a man worried about what a former loyalist might say when actually staring into a prison cell."

Nobody is a winner here. Does anybody come out on top?

TERRY JEFFREY, EDITOR, "HUMAN EVENTS": I think President Bush did.

I think this is a wise, courageous, and just decision by President Bush. He shares absolutely no culpability with Scooter Libby for his crime. That "Wall Street Journal" editorial is ludicrous.

I think the president, on the one hand, did not want to send a signal that perjury and obstruction of a federal investigation are not outrageous crimes. They are, especially for someone who's in a position of high public office, which Mr. Libby was.

At the same time, Suzanne, there's a question of proportionality. I think the president was correct. Thirty months in prison for what Scooter Libby did, after all the punishment he's been through, after all, standing trial, probably losing his law license -- he's going to have pay a quarter-of-a-million...

MALVEAUX: But within the federal guidelines, obviously, of the Justice Department.

JEFFREY: But it was not proportional. I think the president made a correct decision, and, at the same time, did not indicate that he thought this guy was innocent or that he thought this guy has not committed a serious crime.

MALVEAUX: Paul, does it sound like -- smack of a double standard here? I mean, President...

BEGALA: Well, of course it does.

MALVEAUX: We talked yesterday, President Clinton was impeached for lying under oath here.

BEGALA: Right, and, by the way, found not guilty.

MALVEAUX: Absolutely.

BEGALA: But, of course, there's a double standard. There's a worse double standard.

And that is, if any other ordinary citizen had committed the crimes of which Mr. Libby has been found guilty, he or she would be going to the federal penitentiary, perhaps sentenced to 30 months by a tough-on-crime judge like Judge Walton, who was put on the bench by George W. Bush, in part, I think, because he had a reputation of being tough on crime.

So, it's not -- it's a terrible, it's a ridiculous double standard. And the most interesting thing here is, I think the reason that Mr. Bush chose commutation, rather than pardon, is because pardon stops everything. It would take the Libby case out of the legal system, and it would stop him from this really despicable strategy he's had of saying, "I can't talk about it; I can't tell the truth about" his own role in smearing Joe Wilson.

(CROSSTALK)

BEGALA: Let me make my point.

By commuting him, Libby can still proceed on his appeals. And Mr. Bush and Mr. Cheney can continue to stonewall the American public about their role in smearing, lying and covering up.

MALVEAUX: Terry, jump in here.

JEFFREY: Let me address...

BEGALA: It's a despicable strategy.

JEFFREY: Let me address this question of double standard.

Bill Clinton committed perjury and obstruction of justice.

BEGALA: He was found not guilty.

JEFFREY: Wait a minute.

BEGALA: He did not commit...

JEFFREY: Federal District Judge Susan Webber Wright held him in contempt.

BEGALA: That's not perjury or obstruction, Terry.

JEFFREY: Excuse me, Paul. I let you speak.

Federal district Judge Susan Webber Wright held President Clinton in contempt of her court for perjury and obstruction of justice.

(CROSSTALK)

JEFFREY: He was disbarred for that.

(CROSSTALK)

JEFFREY: The United States House of Representatives impeached President Clinton for perjury and obstruction of justice. He was not, in fact, convicted by the United States Senate, when many Democrats' members said, this is a matter for the courts of law.

Now, if you believe that President Clinton should have gone into a court, actually have been indicted, stood trial for obstruction of justice and perjury, and then...

(CROSSTALK)

BEGALA: And he would have been found innocent, because he was innocent.

(CROSSTALK)

JEFFREY: Oh, come on.

BEGALA: Ken Starr was not sufficiently tough for you? He wasn't sufficiently obsessed for you? Please, dear, God, Terry, get over Clinton. This is about George W. Bush commuting the sentence of a man who obstructed justice to protect George W. Bush and Dick Cheney.

(CROSSTALK)

JEFFREY: No. Come on.

BEGALA: That's why he lied in that grand jury.

JEFFREY: Oh, come on. Talk about lying to the grand jury?

BEGALA: The beneficiaries of the crime were Mr. Cheney and Mr. Bush.

JEFFREY: Oh, come on.

BEGALA: Of course they are.

JEFFREY: That's ridiculous.

BEGALA: Well, who were -- for whom was Mr. Libby lying?

JEFFREY: The beneficiary of...

(CROSSTALK)

BEGALA: A smart, savvy lawyer like that, why would he do that?

JEFFREY: President Bush did not say this man did not commit a crime. He did not let him off. He merely commuted his sentence.

Bill Clinton committed perjury and obstruction of justice. He was impeached for it.

(CROSSTALK)

BEGALA: You keep saying it.

JEFFREY: And he -- oh.

BEGALA: He was found not guilty by a Republican-controlled Senate. They couldn't even get 51 votes in a Republican Senate.

(CROSSTALK) JEFFREY: Let me ask you a straightforward question. You do not believe that Bill Clinton lied under oath in his deposition in the Paula Jones case?

BEGALA: He did not commit perjury. He had civil contempt.

(CROSSTALK)

BEGALA: Civil contempt, Terry.

JEFFREY: Wait a minute. Wait a minute. Let me ask you a straightforward question.

(CROSSTALK)

MALVEAUX: I want to jump in here.

(CROSSTALK)

MALVEAUX: I want to jump in here.

(CROSSTALK)

JEFFREY: He took an oath to tell the truth, the whole truth, and nothing but the truth, so help me God.

(CROSSTALK)

BEGALA: OK.

(CROSSTALK)

JEFFREY: And you believe that he told the truth in the Paula Jones deposition?

(CROSSTALK)

MALVEAUX: Terry, Terry...

(CROSSTALK)

MALVEAUX: Paul, Paul...

BEGALA: He lied about getting a girl into bed.

JEFFREY: He committed perjury.

BEGALA: George Bush lied about a country getting into a war. And you think it's the same?

MALVEAUX: If either one of you -- if either one of you were the president today, what does he have to lose by commuting the sentence or even by pardoning him? He's got approval numbers that are below freezing here. What does he have to lose here? Isn't that the political calculus?

JEFFREY: I think the president took a hit for this.

First of all, I think Libby did damage to President Bush's administration. If Libby had not did what he did, if they handled the Valerie Plame case correctly, it would have brought less scandal to the Bush administration. He took a political hit for doing this, and he did the right thing. This was a courageous and a wise move by President Bush.

(CROSSTALK)

BEGALA: "The Washington Post" this week had a really interesting story about how Mr. Bush is handling the stress of being a failed president.

And they said one of the things he's doing is, he's thinking about history. And I think that's what's behind this. He doesn't want history to know the full extent to which Mr. Bush and Mr. Cheney and others lied to the country to get us into a war. And that's why he doesn't want Mr. Libby -- Mr. Libby, to this day, has not told the truth. He's never come clean.

(CROSSTALK)

BEGALA: Now he should come clean. Mr. Bush should come clean. Mr. Cheney should come clean.

(CROSSTALK)

JEFFREY: History will show exactly what the Senate Intelligence Committee showed.

BEGALA: The Republican-controlled whitewash...

(CROSSTALK)

JEFFREY: Senator Clinton, who is likely -- Senator Clinton, who is likely to be the Democratic nominee for president, used exactly the same intelligence, and made the same argument as President Bush when she voted to authorize the war.

(CROSSTALK)

BEGALA: It was six months later that they went into the war. And we had a lot more intelligence. We'd had weapons inspectors in there for months. They had found nothing. We had CIA reports in the newspapers saying there were no weapons.

(CROSSTALK)

JEFFREY: And, on December 7, 2003, months after the war, after we knew the weapons of mass destruction weren't there, Hillary Clinton went on "Meet the Press" and she told Tim Russert that the same intelligence was given to her husband's administration.

(CROSSTALK)

JEFFREY: It's a joke to say...

(CROSSTALK)

BEGALA: Libby gets pardoned, and we attack Bill Clinton. Now, we get lied into a war by Bush and Cheney, we attack Hillary Clinton.

JEFFREY: He didn't get a pardon. He had his sentence commuted.

BEGALA: For what is George Bush and Dick Cheney responsible, Terry? For what do you hold them morally culpable?

(CROSSTALK)

JEFFREY: Bush has no culpability...

(CROSSTALK)

BEGALA: ... above the law.

(CROSSTALK)

MALVEAUX: This looks like a partisan debate. You guys, this looks like a partisan debate.

I talked to several people who said they didn't think it was going to actually divide along those lines, that there would be people against and it for it, but it wasn't going to divide into Republican and Democrat. That doesn't seem to be true here.

BEGALA: There was a time in America when Democrats, like me -- I love Bill Clinton. I'm a diehard Clinton loyalist. AS you just saw, I'm screaming and yelling about it.

When he pardoned Marc Rich, I said it was wrong. OK, "Human Events," Terry's magazine, said the same thing. Now, they were more hysterical about it.

JEFFREY: He didn't pardon him.

MALVEAUX: OK.

BEGALA: But it was wrong to pardon Rich. It was wrong to commute Libby's sentence.

(CROSSTALK)

BEGALA: I am being consistent here. And I'm looking somewhere, like...

(CROSSTALK)

BEGALA: ... for a Republican who has the integrity to say that this commutation is wrong.

(CROSSTALK)

MALVEAUX: Terry, last word, because we have got to go.

(CROSSTALK)

JEFFREY: Paul will not even that Bill Clinton lied under oath in the Paula Jones deposition, when it's plain to any honest person he clearly did.

(CROSSTALK)

MALVEAUX: You guys, we're not -- obviously, we're not going to disagree -- we're not going to agree at this hour.

(CROSSTALK)

JEFFREY: And Judge Susan Webber Wright held him in contempt for that perjury.

(CROSSTALK)

MALVEAUX: We're going to have to wrap this up. We will do this another time, guys. We will do it another time.

Thank you so much...

BEGALA: Thanks.

MALVEAUX: ... both of you, Terry Jeffrey and Paul Begala.

Still to come: the Clintons' two-for-one road show in Iowa. How badly does she need his help? Our Candy Crowley is along for the ride.

And a rising Democratic star deals with scandal. An L.A. lawyer speaks out about the other woman.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

MALVEAUX: On our "Political Radar" this Tuesday, Senator Christopher Dodd is urging Iowa Democrats to stop listening to pundits and start considering him as a viable presidential choice. During a holiday bus tour across the lead-off caucus state, Dodd says Iowa voters don't like being told by outsiders that the race is over seven months before it happens.

Senator Sam Brownback is taking aim today at a fellow GOP presidential candidate. He is blasting Congressman Tom Tancredo for accepting donations from a founder of a Planned Parenthood chapter. Tancredo adviser Bay Buchanan says the congressman's anti-abortion credentials are, in her words, unassailable. And she's firing back at Brownback, accusing him of embracing what she calls massive amnesty for illegal aliens.

Another GOP presidential candidate is being forced to cancel his campaign events indefinitely. Former Virginia Governor Jim Gilmore had to have emergency eye surgery for a partially detached retina. His spokesman says Gilmore is chomping at the bit to get back to the campaign trail, and is not abandoning his underdog presidential bid.

And, for better or worse, lots of people here in Washington are talking about the -- Lewis Scooter Libby, and how his prison sentence was commuted by President Bush.

But do people around the country even know who Libby is?

Our Jeanne Moos asked -- Jeanne Moos -- sorry -- asked New Yorkers.

Let's take a listen.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT: Who is this guy?

UNIDENTIFIED MALE: Umm...

UNIDENTIFIED FEMALE: He's a coach of someone, right?

(LAUGHTER)

MOOS: No.

UNIDENTIFIED FEMALE: Of some team.

Oh, gosh. He's English.

MOOS: No.

UNIDENTIFIED FEMALE: He's umm...

UNIDENTIFIED MALE: Oh, that's that Skippy -- Skitter Lewer.

MOOS: His nickname that he's known by is something that you ride.

UNIDENTIFIED MALE: What's his name?

UNIDENTIFIED FEMALE: I'm so disappointed with...

(CROSSTALK)

UNIDENTIFIED MALE: Blair -- Tony -- no, not..

UNIDENTIFIED FEMALE: No. That's not Tony Blair.

UNIDENTIFIED MALE: That's not Tony Blair.

UNIDENTIFIED FEMALE: Tony Blair? No.

MOOS: No, this is not Tony Blair.

(LAUGHTER) UNIDENTIFIED MALE: Well, it's also, like, old white men. So...

(LAUGHTER)

(CROSSTALK)

MOOS: They all look the same.

UNIDENTIFIED MALE: They all kind of look the same.

UNIDENTIFIED MALE: You know him.

UNIDENTIFIED MALE: Libby.

UNIDENTIFIED MALE: Scooter -- Scooter -- Scooter...

UNIDENTIFIED MALE: Libby.

UNIDENTIFIED FEMALE: That's Scooter Libby.

MOOS: How do you feel about the president giving him...

UNIDENTIFIED FEMALE: Oh, I think it's an outrage.

UNIDENTIFIED MALE: Bush just decided to pull a Nixon on him and pardon him. Yes, gee. Yes.

MOOS: Good idea or bad idea?

UNIDENTIFIED MALE: Oh, come on. In America, nobody -- you know, money buys verdicts. You know that.

UNIDENTIFIED FEMALE: I think it's a terrible thing. I cannot believe that he did that. Absolutely upset about that, too.

UNIDENTIFIED MALE: It's that guy, Libby -- Skippy Libby -- Scooter -- Scooter -- Scooter, you know...

UNIDENTIFIED MALE: Libby.

UNIDENTIFIED MALE: Scooter Libby.

(END VIDEOTAPE)

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