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President Bush Unveils Plan for Risky Mortgage Crisis; Pressure on Senator Craig to Quit; A Powerful Exit: Senator Warner Won't Seek 6th Term

Aired August 31, 2007 - 16:00   ET

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


WOLF BLITZER, CNN ANCHOR: Happening now, President Bush takes on an issue that hits a lot of Americans, where they live. But will his new plan to deal with the major mortgage crisis make any difference?
We're going to have a reality check.

Also this hour, scandal watch. Will Senator Larry Craig resign? Will he resign today, or will the Republican try to ride out the storm over his bathroom bust? Idaho's governor is said to be making plans just in case Craig quits.

We're watching the story.

And it's D-Day for a Senate powerhouse on military matters. Republican John Warner of Virginia, says he won't -- repeat, won't -- run for a sixth term. Will his exit change the Iraq war debate that he's had a big role in shaping?

I'll ask Senator Warner about his decision.

That's coming up live, here in THE SITUATION ROOM.

I'm Wolf Blitzer. And you're in THE SITUATION ROOM.

First up this hour, the American dream of owning a home is in jeopardy for hundreds of thousands of people right now across the country. Risky subprime mortgages are said to be the cause. They are now a top target of concern of top politicians here in Washington.

Today, the president outlined his new plan to try to help subprime borrowers keep their homes. But he's also warning the federal government's role in solving this crisis is, in his word, limited.

Let's begin our coverage with our White House correspondent, Ed Henry.

(BEGIN VIDEOTAPE)

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: This mortgage crisis, as you know, has been roiling world markets, so President Bush is scrambling to show that he's dealing with it, that he's on top of it, so he laid out a several-point plan today, including plans to expand the Federal Housing Authority's ability to insure loans for people who are in trouble right now, can't make their mortgage payments. He also wants to try to reform the U.S. tax code, ease some rules that are hitting consumers hard in the United States right now. And he also is vowing to crack down on so-called predatory lending practices.

But the president made clear that he will not go so far as to endorse a bailout of the mortgage industry, saying that would only encourage more bad behavior.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: A federal bailout of lenders would only encourage a recurrence of the problem. It's not the government's job to bail out speculators or those who made the decision to buy a home they knew they could never afford. Yet, there are many American homeowners who could get through this difficult time with a little flexibility from their lenders or a little help from their government.

HENRY: But the big question is, will this plan really make a difference for consumers and for world markets? A reporter today asked White House Press Secretary Tony Snow, "Here's an easy one. Predict for us how much this will help the U.S. housing industry." He refused to bite.

So I said, "Well, tell us about whether or not this will hurt the housing industry," sort of half jokingly. Snow laughed, but said, no, it's not going to hurt the industry. But, again, would not bite on will this really help the housing industry. And I think that's instructive.

It shows that the White House is being very cautious. While they're trying to show they're doing something, they will not go out on a limb and say that this will actually help very much. And that may raise questions about whether this is more about show than substance.

(END VIDEOTAPE)

BLITZER: Ed Henry reporting for us from the White House.

The Bush administration clearly isn't making any guarantees that it can put a lid on foreclosures, the mortgage crisis, or the fallout from the financial markets.

CNN's personal finance editor, Gerri Willis, is joining us now from New York.

Bottom line, Gerri -- and you know the issues about as well as anyone -- will the president's plan help out at all?

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Well, hi there, Wolf.

The bottom line is it will help some people, but it's not going to solve the problem for everybody. Look, there are essentially three types of homeowners out there. There are people that have equity in their home, there are some that don't have equity and they are falling behind on payments, and then there are people who are way in over their heads and should never have purchased the house they did. Now, the president's plan is going to help category one and two, but not the third. If you really wanted to help the people who got in way, way over their head, you'd have to have a bailout, and that is already being suggested.

Hillary Clinton suggested a bailout. She wanted to give money to the states, as much as a billion dollars. Schumer -- Senator Schumer has suggested a bailout. He wants to give money to consumer advocacy groups.

Now, as you know, this is not the Bush administration's style. Bush's plan would help some people, average subprime borrowers, though, and they would get new mortgages, new FHA mortgages that could save them as much as 300 bucks a month, which is not nothing. That's very, very important for a lot of people.

Now, you should know that the FHA says it will help an additional 80,000 homeowners refinance through next year through this plan, but it's a drop in the bucket compared to the 2.2 million people facing foreclosure over the next year or so. And that's an estimate from the Center for Responsible Lending.

And I've got to tell you, Wolf, before I go, the FHA secure program that the president talked about starts right away. Now, for people in default who can't keep up with their payments because of their interest rate, you can call the number and get help on the FHA Web site, FHA.gov. Call and get help.

You can see the number right here, 1-800-CALL-FHA. And do it soon.

I mean, I know people out there who are really worried and concerned. But there is some help out there now for some people.

BLITZER: And because a lot of people are really worried that if their mortgage interest rates go up and the value of their house has gone down, they're going to be stuck. They're going to maybe file bankruptcy. They are going to lose their home.

These are sad scenarios that are awaiting, as you point out, tens of -- hundreds of thousands of people out there.

WILLIS: That's absolutely right. And that's what these programs are tailored to go for, help those people whose home values are going down and their payments are going up. They are stuck in the middle.

These are the very people they want to help. But I've got to tell you, at the end of the day, there may be more people out there than the government can actually help.

And, of course, next week we're going to be hearing more proposals from Congress as well. So this story is far from over.

BLITZER: You've got more coming up on "OPEN HOUSE" this weekend?

WILLIS: We do indeed, 9:30 Eastern right here on CNN. On Saturday morning, we're going to talk more about the foreclosure crisis, what you can do if you need help out there. We talk to a senator from Georgia who has fought this problem for a long, long time.

More conversations about foreclosure. I don't think it's going to be done for a long time - -Wolf.

BLITZER: "OPEN HOUSE" airs here on CNN Saturday mornings, 9:30 a.m. Eastern, replayed on Headline News Saturday and Sunday at 3:30 p.m. Eastern.

Gerri, thanks very much.

WILLIS: Thank you.

BLITZER: Let's go to Idaho now, where the pressure is mounting on Senator Larry Craig to step down. The pressure right now enormous. It's growing by the minute. Many fellow Republicans are simply eager to see Craig go, and his embarrassing arrest in the men's bathroom, that whole story simply go away.

Our congressional correspondent, Dana Bash, is joining us now from Boise with more on this story.

All the signs pointing to a speedy resignation, if you will, but he hasn't done it yet, Dana.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: He hasn't. You know, I just got off the phone with an influential Republican here in Idaho, and he said this is the loudest sound of silence ever heard in the state of Idaho.

Everybody is kind of in waiting mode, bracing for some kind of statement. And I can tell you that the local TV stations are all camped out ready to go at the very spot that Senator Craig made his statement just a couple of days ago, waiting to hear something from him, because the anticipation is that it could come, may come, as early as today. Everybody is waiting.

Now, as that is happening here, I can tell you, the pressure is mounting in an enormous way from back in Washington. I want to put a word on the screen that probably could -- may as well speak a thousand words -- "unforgivable". That is the word that the Republican leader Mitch McConnell used to describe Senator Craig's actions when speaking to his hometown paper.

He made it clear that a lot of the people in the Republican caucus, Senator Craig's colleagues back in Washington, simply want him to resign. And that is the message that the Republican National Committee is also trying to send loud and clear to -- to Senator Craig.

They actually prepared a statement. They got word that perhaps they didn't need to do that and probably shouldn't do that, because just quickly, there is a standoff going on here. And that's the dynamic here, Wolf. The national Republicans are trying to pressure Senator Craig, and they're getting word back, if you push too hard, it could backfire -- Wolf.

BLITZER: Well, there are political ramifications for a resignation. Also financial ramifications for the senator.

Talk a little bit about that, Dana.

BASH: That's right. You know, we're talking about the politics, but when a senator is thinking about resigning, you have to also think about your income. And I just want to show you a little bit about the state of Senator Craig's income.

First of all -- or his financial situation. First of all, according to the latest report, his total assets are between $365,000 and $750,000.

Now, according to that financial disclosure report, his Senate income is -- his paycheck is really his only source of income. So that would go away if he would resign. But he would get a pension, and that would be $132,160 a year, which is 80 percent of his current annual income.

Now, pleading guilty to a misdemeanor, as Senator Craig did, that does not affect his pension at all. There are new laws that are working -- that worked their way to Congress to be tougher on that. But even those laws -- those rules would not affect this, because those apply to a felony, and a felony if a senator or a member of Congress specifically does something that affects their job. This really didn't.

BLITZER: All right, we'll watch this story with you.

Dana is on the scene for us in Boise. If she gets word that he's about to make an announcement, of course, we're going to go back there right away.

When and if Larry Craig decides to step down, Idaho's Republican governor, Butch Otter, would name his replacement. That would certainly be a Republican. That person would serve until the end of Craig's term in January 2009, early January. But he or she could run for the seat outright in next year's election.

Several Republicans right now are said to be interested in Craig's seat. They include Congressman Mike Simpson, Lieutenant Governor James Risch, and former governor and the current Interior secretary, Dirk Kempthorne. Former Democratic congressman Larry LaRocco already is running, but he's considered a long shot in this predominantly Republican state of Idaho.

Let's go to Jack Cafferty. He's in New York with "The Cafferty File".

Hi, Jack.

JACK CAFFERTY, CNN ANCHOR: The vultures are already lining up on the fence posts, aren't they?

BLITZER: Yes.

CAFFERTY: Don't look for any magical solutions to Iraq's problems in these upcoming progress reports due out in a couple of weeks. A top Iraqi official says that his countrymen are still not ready to defend their country on their own. The reports to Congress are expected to point to some limited success when it comes to curbing violence, but little progress overall toward political agreements among the different tribes.

Meanwhile, one report's already out, and it paints a very bleak picture of the situation in Iraq. The Government Accountability Office, the GAO reports, concluding that Iraq has satisfied three of 18 benchmarks that were set months ago by the Congress. Three. And none of them are the high-profile benchmarks we've heard a lot about, like, for example, the national oil revenue-sharing law. Haven't even come close to that.

The State Department, the Pentagon, the White House all dispute some of these GAO findings. And the administration officials said that it was unrealistically harsh because the GAO gave pass or fail grades to the benchmarks.

Well, isn't that what a benchmark is? You either meet a benchmark or you don't.

They insist that the U.S. is making military progress and the surge is working. Maybe. But the country is going nowhere.

The government, which has been on vacation for the last month, is a joke. The Sunnis have pulled out of the parliament. They've said they have no intention of coming back. Prime Minister Nuri al-Maliki is about as effective these days as Senator Craig. Iraqi security forces, armed forces, pathetic.

Things like electricity in Iraq, in limited supply. And the civil war among the tribes continues as it has for hundreds of years.

So, the question is this: The Iraqi government warns there are no magical solutions to its problems. What's the most the upcoming reports on Iraq's progress can provide us?

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

The GAO says they've only met three of 18 benchmarks and the White House says, oh, well that's a very harsh assessment.

I don't get it.

BLITZER: It's a pretty depressing picture...

CAFFERTY: Oh, it's horrible.

BLITZER: ... no matter how you paint it. CAFFERTY: Just horrible.

BLITZER: All right. Jack, thanks very much for that.

A military veteran and an elder statesman in the U.S. Senate now calling it quits. I'll speak live with Republican Senator John Warner of Virginia. And we'll talk about what he wants to do now that he's decided he's not going to seek re-election.

Plus, he was the first African-American-elected governor in the United States. Now Doug Wilder has some powerful things to say about the Democratic presidential candidate Barack Obama and why he thinks some other black leaders are making a living, in his words, pimping their race.

And the end of an era for the Bush White House, for better or worse. Its political guru Karl Rove's last day on the job.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: President Bush stopping in over at the Pentagon today to get some input on Iraq, the war in Iraq, from the Joint Chiefs of Staff. The White House suggesting Mr. Bush is seeking unvarnished recommendations on future troop levels in Iraq. This comes just two weeks before the top U.S. commander in Iraq delivers his long-awaited progress report on the war.

Only last week, Senator John Warner of Virginia dropped a bombshell on the Iraq debate by urging the president to at least start bringing some troops by Christmas. Today, the Virginia Republican made another big announcement about his own political future after five terms in the U.S. Senate.

Let's so go to our congressional correspondent, Jessica Yellin. She's watching this story for us.

There was a lot of anticipation over what Senator Warner would do, because it could clearly affect the balance of power in the Senate, as well as the debate over the war in Iraq.

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Exactly, Wolf. And the speculation was flying up here all day. But now that we know Senator Warner has decided to retire, the new speculation is centering on just how this announcement will affect that debate on Iraq.

(BEGIN VIDEOTAPE)

YELLIN (voice over): A former marine and head of the Navy, John Warner has perhaps more than any other senator shaped his party's position on Iraq.

SEN. JOHN WARNER (R), VIRGINIA: A failed state in Iraq...

YELLIN: He went from an Iraq war supporter, authoring the resolution for use of force that empowered the president to invade Iraq, to a consistent critic. As chair of the Armed Services Committee, Senator Warner broke with President Bush after a trip to Iraq almost a year ago, giving this stinging assessment...

WARNER: It seems to me that the situation is simply drifting sidewise.

YELLIN: Those devastating words helped prompt the White House to change strategy that became the surge.

As public support for the war has plummeted, Republicans have increasingly looked to Senator Warner to guide their policy.

JOHN ULLYOT, FMR. WARNER SPOKESMAN: Senator Warner has the ability to drive other votes because of his stature on issues of national security and his being known as an honest broker and a consensus builder on many issues, most particularly on defense issues.

YELLIN: Senator Warner has since co-authored legislation setting benchmarks and requiring General Petraeus to report to Congress, as well as measure registering opposition to the surge. Then last week he called on President Bush to start bringing some troops home.

WARNER: Five thousand could begin to redeploy and be home to their families and loved ones no later than Christmas of this year.

YELLIN: The World War II veteran says he will continue to do what he can from his powerful perch.

WARNER: No one can say politics is going to dictate in one way or another how I'm going to decide and speak out in what's in the best interests of this nation. And I'm going to do that.

(END VIDEOTAPE)

YELLIN: And the big question is now, with Senator Warner's retirement plans fixed, will he decide to make the ultimate break and vote for a drawdown in Iraq? Those who know him best say, no, probably not. Only the facts on the ground would make him do that, not some sudden change of heart due to his plans to retire -- Wolf.

BLITZER: Jessica Yellin on the Hill for us.

Thanks, Jessica.

On Capitol Hill, also, Senator Warner's military credentials and knowledge are a big part of his claim to political fame. Many Americans know him for having a rather glamorous personal life that includes his marriage of nearly six years to the legendary actress Elizabeth Taylor. He was the seventh of her eight husbands.

Another glamorous woman in Warner's life, he dated newswoman, Barbara Walters, as many of our viewers will remember.

Senator Warner, by the way, will be our guest here in THE SITUATION ROOM. His decision may be making some Republican leaders downright queasy though right now. His exit could open the door for the Democrats to pick up another seat in the Senate next year. And this comes amid the prospect that another Senate Republican, as we all know, Larry Craig, is about to call it quits, we assume, over his bathroom arrest scandal.

Let's bring in our senior political correspondent, Candy Crowley. She's here in THE SITUATION ROOM.

A lot of speculation already, even before Senator Warner's announcement today, about who might emerge as the leading candidates to replace him to fight it out for that important Virginia Senate seat.

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Absolutely, and what you have already is Tom Davis, the congressman from Virginia, saying I'm in. A Republican.

BLITZER: He's the Republican.

CROWLEY: What you have on the other side is, Democrats have been working very hard even before this announcement to get Mark Warner, the former governor of Virginia, no relation to John Warner, to run. And he is a very powerful figure in Virginia politics.

I think when he left office, he had over a 60 percent approval rating. He, in fact, brought in yet another Democratic governor on his coattails in the last election. So, you know, this is definitely a real problem for Republicans, who maybe looked forward to not a totally secure seat, but they really felt, Republicans felt, that Warner could win the next election.

BLITZER: And if Mark Warner and Tom Davis are the respective candidates, that seat could really -- that fight could be intense and quite expensive, I should say, as well.

CROWLEY: Exactly. Exactly.

BLITZER: Those are both veteran politicians in the state of Virginia.

Let's turn to the Larry Craig matter right now, Candy.

Any reason that the senator is actually listening to those growing and thunderous calls for him to step down?

CROWLEY: Well, I mean, the problem is, obviously, that they have been very clear about this. As Dana mentioned, when you have the top Republican in the Senate saying, this is unforgivable, when you have the man in charge of electing Senate Republicans saying, boy, if I were him, I'd resign, you have to be hearing this. But what they want to do is give Senator Craig the time to make his own decision.

You know, they don't want to be seen at this point as piling on. I suspect that's why they drew down some of the things that they thought they two do with the RNC coming out and asking him to quit.

BLITZER: Yes, so a lot of people suggesting it's not a matter of when but -- not a matter of if, but when. And it could be very, very soon.

Thanks, Candy, very much.

Now that we finally know when Fred Thompson plans to formally jump into the presidential race, what more might we learn about his record? Is the Republican as conservative as he claims to be?

J.C. Watts and Donna Brazile, they're standing by for our "Strategy Session".

And a new development in the case of the wanted man with financial ties to Hillary Clinton and Barack Obama.

We've got new details.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(NEWSBREAK)

BLITZER: Advice for the man who could become the nation's first black president. The former Virginia governor, Doug Wilder, had some words for Barack Obama.

And Senator John Warner, he's standing by live to talk about his big decision today to retire from the Senate after five terms. I'll ask him where the Iraq war debate goes from here, without his voice in the mix.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Happening now: some stories we're working on.

The decades-long trade embargo on Cuba is taking a toll on a 107- year-old woman in Havana. She's fighting to have her frozen money unfrozen. That story is coming up.

"Forbes" magazine is out with a new list of the world's most powerful women. Hillary Clinton is 25th, by the way. We're going to tell you who is first -- that story also coming up.

And 10 years after Princess Diana's death, the world pays tribute to her, and one of her sons gives the eulogy at a memorial service. You're going to want to hear what Prince Harry had to say.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

All that coming up. But, right now, we want to speak with Senator John Warner of Virginia. He made a dramatic announcement today, a long-anticipated announcement. We didn't know if he would stay or go.

Senator Warner is joining us on the phone from Virginia, Charlottesville, outside his alma mater there at the University of Virginia.

You announced, Senator Warner, that you have decided to retire at the end of this term. Give us the brief headline. It was a difficult decision for you. Why are you leaving?

SEN. JOHN WARNER (R), VIRGINIA: Well, Wolf, it was a difficult decision.

But I wanted to wait until I made one last trip to Iraq to see the men and women of the armed forces. That's been my daily problem that I face every day, as all other Americans.

And I have got another 16 months to work with the colleagues in the Senate, and, indeed, to try and support the commander in chief, the president, who, under the Constitution formulated by the man whose statute I'm next to, Thomas Jefferson, and do my best to try and help this nation work its way through that difficult situation.

BLITZER: We know of the dramatic announcement you made last week, suggesting that the president should at least start a symbolic troop withdrawal, maybe even 5,000 troops, get them home by Christmas. It's caused some consternation, as you well know, including from your friend, your colleague in the Senate John McCain.

Listen to what he told our John King earlier in the week.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: It's a bad idea, terrible idea, and I will fight it every step of the way.

John Warner and I are very close friends, but that sends the signal to al Qaeda and the bad people in Iran, in the neighbor -- in the region that we're leaving. And that's not our position.

(END VIDEO CLIP)

BLITZER: All right, so, do you want to respond to Senator McCain?

WARNER: Yes.

I would say to you, Wolf -- and, personally, John McCain and I are two very tight, close friends, and I support him in his endeavors. But why didn't you ask a follow-up question? OK. Warner's idea doesn't work. What's your idea as to how to get the Iraqi government to stop sitting on its hands and begin to do its responsibility?

When the president, on January 10 this year, announced he's going to add more troops and surge, it was for the purpose of bringing about a security situation, which I saw with my own eyes that troops have done successfully, a security situation so the Iraqi government would get up off its hands, go to work, pass reconciliation legislation, and begin to form a unity government.

BLITZER: But do you think, Senator Warner, that, if the U.S. started to withdraw some troops as a symbol, as a message to that Iraqi government of Nouri al-Maliki, it would make a difference? Because a lot of people have simply lost confidence in that prime minister.

WARNER: That's correct. But you have got to try tough action. The president has repeatedly said we're not going to be there forever.

Put some teeth in it. Wolf, let me say this clearly. All the military witnesses before the Congress have said very quietly, very forcefully, there is not a military solution to this war. It rests in the hands of the duly elected Iraqi government to do it.

And we're taking heavy casualties, life and limb, while they're sitting there not making that government work and exercising the reins of sovereignty. And you -- if you got reconciliation moving forward, it would bring about more reduction in the violence than our brave troops are trying to achieve now.

Reconciliation can bring down to a very low level the violence in Iraq. Yes, al Qaeda remains, and our troops will always, I'm sure, be there, ready to take al Qaeda on, because they do pose a long-term threat, not only to the region, but possibly our country.

But, in the meantime, somebody better explain to the American people how we're going to get this Iraqi government to function and assume their load of responsibility, responsibility which our troops are bravely fulfilling in making the surge work. But they're not delivering.

BLITZER: Senator Warner, your Democratic colleague Hillary Clinton, the Democratic presidential front-runner, issued a very gracious statement today after your announcement.

Among other things, she said this. She said: "I will miss serving with my friend and colleague Senator John Warner. At a time when the tone in Washington is so often defined by partisanship and rancor, Senator Warner has also risen above the fray, focused on what he believed was the right course for our nation."

When I heard that, it raised this question in my mind, Senator Warner. And we have spoken often over the years. Are you leaving in part because you're sort of fed up with all the bitter partisanship that has developed here in Washington?

WARNER: No. No, Wolf, that is not it. I'm an old Harry Truman fan. If you can't take the heat, get out of the kitchen.

I can take all the heat. I'm going to be there for another 16 months, working hard. But, when you get to be 80 -- and I will be 82 when I start, if I were to win, a sixth term, and 88 to finish it -- you know, you have got to say to yourself, those are your golden years. But there's also a lot of uncertainties.

Is it fair to the people of my state who have elected me five consecutive times to say, I want another contract for six years where I can work, as I literally do, day and night for your benefit.

Now, that's what I call being fair, being realistic. I love the Senate. I know I could mount a strong campaign, and I have every reason to believe I could win. But I want to be fair to the voters of Virginia, to the United States.

When you get to be 80, 88, some senators -- and I wish them well -- are able to do it. This one, I think, probably could do it. But I have decided the better course for me is to step down graciously and thankfully to these voters.

But, in the meantime, I'm going to fight hard for the men and women of the armed forces, because I tell you, Wolf, I served twice, very modest careers. But I learned from them. I learn from them today. And we're not going to let those people down.

BLITZER: Senator Warner, let me thank you for joining us, and look forward to having you here in THE SITUATION ROOM when you get back to Washington. Thanks so much.

WARNER: Go to it, Wolf. Thanks to you. Bye-bye.

BLITZER: All right. Appreciate it.

When we come back: The so-called architect heads for the door. Political mastermind Karl Rove bids farewell to the White House. And he's not the only one. Another exit from the administration also formally announced today.

And Hillary Clinton's top-10 list, she played it for laughs on late-night TV. We will tell you some of the highlights right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: He's been President Bush's right-hand man throughout the years in the White House and even well before that. But now Karl Rove is a former adviser to Mr. Bush, at least officially.

This was Rove's last -- last day on the job, a job marked by political acclaim and stinging criticism. After years of controversy, Karl Rove showed a rarely seen ability to poke some fun at himself in public during the White House correspondents dinner earlier this year. Remember that little dance? Watch a little bit of it right now.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE (singing): This man will never stop. Look at him, jumping up and down, ready to hop. He's got so much to prove. And tell me you never saw this man move. (END VIDEO CLIP)

BLITZER: All right, there he is, Karl Rove, having a little fun with some journalists earlier in the year.

Our chief national correspondent, John King, is here with us.

Give us a thought, on this final day of Karl Rove at the House.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Well, looking at that video, Wolf, my daughter would say, daddy, he can't shake it.

BLITZER: No.

(LAUGHTER)

KING: Look, Karl has an amazing legacy. He's very controversial, as you said. But there are very few people on the planet who can say they were the architects of two successful presidential elections, including in this very polarizing, equally divided political time we find ourselves in, also the architect of the historic Republican 2002 midterm elections.

In 2006, the wheels came off the Rove plan, which was emphasize security and emphasize turning out the conservative base. And that's the debate in the party right now going into the next presidential election. Without Karl Rove, without George W. Bush, what do you do in place of it?

Most think they have to try to reach back to the middle, to independent voters, who are incredibly alienated by the war in Iraq. So, he has certainly a great legacy. But the Republican Party now has a debate whether to follow his map or try a new route.

BLITZER: And another White House official making it official today that he's leaving. That would be Tony Snow, the press secretary.

Listen to this.

(BEGIN VIDEO CLIP)

TONY SNOW, WHITE HOUSE PRESS SECRETARY: We took out a loan when I came to the White House, and that loan's now gone.

(LAUGHTER)

SNOW: So I'm going to have to pay the bills.

As far as my health, I'm doing fine. And I know a lot of folks have been thinking, "Oh, come on. It's really the cancer, isn't it?"

No, cancer has nothing to do with this decision.

(END VIDEO CLIP)

BLITZER: Tony Snow, Karl Rove -- it's going to be a new White House over there, in many respects.

KING: It is.

And history would show, though, in -- late in the seventh year of an eight-term -- second-term president, the seventh and the eighth year of the presidents, you do have a lot of staff turnover.

So, it's traditional for this to happen. The president, though, is losing two people he trusts very much in Karl Rove and Tony Snow. But Dana Perino, who has been the deputy press secretary, is well liked by the president. He's come to really like Ed Gillespie, who is the new White House counselor.

So, it's a reflection of the fact, though, that the president is less of a player in Washington as the campaign to replace him gets under way.

Just a personal note. You have to tip your hat to Tony Snow, whether you're a Democratic or a Republican, like this administration or not. He's been publicly battling this cancer. It was a big sacrifice for him financially and physically to serve.

I lost my dad to colon cancer 20 years ago. I know what it does to a big, strong person. So, I tip my hat to him very well.

BLITZER: Yes, and he's been a good friend of ours for many, many years. And we wish him only the best. We wish him and his family good luck in this next chapter.

John, thanks very much.

Up next in our "Strategy Session": Mitt Romney and his run for the White House.

(BEGIN VIDEO CLIP, AD)

NARRATOR: He's met extraordinary challenges. Mitt Romney, the energy and experience to turn around Washington.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: I'm Mitt Romney, and I approve this message.

(END VIDEO CLIP)

BLITZER: His new campaign ad depicts youth and vigor. Is it a not-so-subtle dig at his Republican competitors?

And Fred Thompson is set to make his run for the White House official next week. But what hurdles is the actor-turned-senator- turned-actor-turned-senator, all that, facing?

Donna Brazile and J.C. Watts, they're standing for our "Strategy Session."

We will be right back.

(COMMERCIAL BREAK)

BLITZER: In today's "Strategy Session": a look at the challenges Fred Thompson is likely to face when he formally enters the presidential race next week.

And Mitt Romney tries to outrun his opponents, literally, in a new ad.

Joining us today, Democratic strategist Donna Brazile and former Republican Congressman J.C. Watts.

I'm going to play a little clip, guys, of this new Mitt Romney ad. Then we will talk about the subtext.

(BEGIN VIDEO CLIP, ROMNEY CAMPAIGN AD)

NARRATOR: A state losing jobs with huge deficits, Governor Mitt Romney turned it around, cutting spending, instead of raising taxes.

At every step, he's met extraordinary challenges.

Mitt Romney, the energy and experience to turn around Washington.

ROMNEY: I'm Mitt Romney. And I approve this message.

(END VIDEO CLIP)

BLITZER: All right, that's his new ad.

When I saw it, J.C., I said to myself, you know what? He's trying to send a not-so-subtle signal that the other Republican front- runners, including Fred Thompson, who is going to make it official next week, Rudy Giuliani, John McCain, they have all had serious health problems involving cancer. He's relatively young and healthy, and he's trying to send that message out: Vote for me. I'm strong. These other guys aren't.

J.C. WATTS, CNN POLITICAL ANALYST: Well, you know, Wolf, I know I -- I have heard of, you know, guys that run marathons, people that run marathons that, you know, fall over dead. So, I hope that people -- with the extraordinary challenges that our nation is facing, I hope people, Republicans and Democrats, will look beyond the sound bites, the, you know, cute ads, and say, hey, we're going to look at those people we know that they can endure, you know, those -- not the swift, but those that can endure.

And I think, on the Republican side, that there are a couple. I think Mitt Romney is one of them. I think, on the Democrats' side, there are a couple. But I hope they will look beyond these ads.

WATTS: We have got too many serious challenges.

BLITZER: What do you think? Was he sending a message about not only his physical strength, but the -- some of the health problems of his rivals?

DONNA BRAZILE, CNN POLITICAL ANALYST: No question.

Look, he's telegenic. He knows that. He's trying to define himself early on in the contest, before some of his colleagues define him. I think he's running away from his -- his -- his record. He's -- he's more of a moderate than a conservative.

But, given the fact that he helped to put together that Olympics so long ago, this is another way to tell, remind the American people of some of the good things that he's done in his life.

BLITZER: Fred Thompson...

WATTS: His hair didn't even look bad while he was jogging.

BLITZER: And he was talking, also.

(CROSSTALK)

BLITZER: He's sprinting and he was announcing that he's responsible for that commercial.

(LAUGHTER)

BRAZILE: I need to look at his legs again, but we will do that later.

BLITZER: Let's talk about Fred Thompson. He's going to make it official next week. He's -- but he comes in at a time when people are saying, you know, he's got a lot of problems. One, he's coming in late. The other guys all have a head start. He's got some hurdles over his -- his issues. Is he really as conservative as he likes to project right now?

What do you think?

WATTS: Well, I think all the challenges that Fred's having before he -- or the challenges he had before he announced that he's going to run, I think they're being confirmed.

I mean, there was some speculation back when he started talking about it, that, well, is it too late? Has all the money dried up? He hadn't raised the money that he thought. He hadn't announced when we thought he was going to announce.

But he's going be in officially next week. And -- and he's in the race. The challenge is going to be to get -- for any Republican candidate, to get into that low 30s, mid-30s. Hillary Clinton, in every poll, she's in the mid-30s. Now, six-and-a-half Democrats are saying, we're not going to -- we don't -- she's not our choice.

Republicans, in national polls, you have nobody exceeding that 25 percent to 27 percent. So, that's the challenge for Fred.

BLITZER: What about it, Donna?

BRAZILE: He's -- he's viable nationally. Both in the CNN polls and in some of the other polls, he's number two in the race.

But, when you look at the individual state polls in Iowa and New Hampshire, he's running behind Rudy Giuliani or Mitt Romney. So, I think he has a lot of catching up to do. He has to go out there, raise money, keep his staff together.

And, you know, I have a concern that he's announcing the day after the New Hampshire debate sponsored by another network, but this is a big debate. You remember, in 1999, George Bush skipped that debate, and the New Hampshire voters never forgave him.

BLITZER: What do you think?

WATTS: Well, Fred Thompson will be -- will be very good, I suspect, in any debate that he -- that he participates in. I -- you know, I think New Hampshire -- the New Hampshire voters want you to participate. So, he may get punished for that.

But Fred's going to do OK in the debates. But -- but, again, I'm not so sure Republicans have settled on a candidate. I'm not so sure that Fred Thompson's going to have a -- a serious impact. Where's he going to get his voters from?

BLITZER: Donna, how worried should voters be about a Fred Thompson, a movie star, if you will? A lot of his supporters he's the new Ronald Reagan, and he can -- he can bring the party together and he can beat a Democrat.

How worried should the Democrats be about Fred Thompson?

BRAZILE: Not worried, not right now.

Look, in all of the polls, Hillary Clinton is beating him by 10 points and Barack Obama by five points. So, Fred Thompson should get in the race, should make his -- his message known, and try to capture the Republican voice that is so missing in this race right now.

WATTS: Well, we will see in about 30, 45 days, I believe, if Fred's going to be the consensus candidate.

And -- and if -- and, again, if he can exceed that 35 percent, 37 percent mark, I think conservatives are saying, he's going to be our person. And, so, we will see.

BRAZILE: The jury's out.

WATTS: I think that remains to be seen.

BRAZILE: I think the jury is out.

(CROSSTALK)

BLITZER: A good "Strategy Session."

Donna Brazile, J.C. Watts, thanks for coming in.

BRAZILE: Thank you.

BLITZER: Still to come, Jack Cafferty wants to know, what's the most -- the upcoming reports on Iraq, on the Iraq war, what's the most they can provide? We're going to get to your e-mail in "The Cafferty File."

And the world's most powerful women -- "Forbes" magazine is out with a list of the top 100. Unfortunately, Donna Brazile is not in the top 100 of the world's most powerful list. But we will tell you who is.

And a 107-year-old woman in Cuba wants her money back. It's been frozen in a bank in Boston ever since the U.S. imposed a trade embargo decades ago. We have got the story from Havana -- all that coming up here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Her husband made a name for himself as a presidential candidate way back when by playing his saxophone on late-night TV.

Now Hillary Clinton following in his footsteps, to a certain degree, like so many of the presidential candidates. She appeared on "The Late Show With David Letterman" last night and joked about her top-10 campaign promises.

Here's a little sample.

(BEGIN VIDEO CLIP, "THE LATE SHOW WITH DAVID LETTERMAN")

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: Number eight, you will have the option of rolling dice against the IRS for double or nothing on your tax...

(CHEERING AND APPLAUSE)

CLINTON: If you're having trouble getting a flight, and Air Force One is available, it's yours.

DAVID LETTERMAN, HOST, "THE LATE SHOW WITH DAVID LETTERMAN": Hey!

(CHEERING AND APPLAUSE)

CLINTON: My vice president will never shoot anybody in the face.

(LAUGHTER)

(CHEERING AND APPLAUSE)

CLINTON: Number three, we will finally have a president who doesn't mind pulling over and asking for directions.

(CHEERING AND APPLAUSE)

CLINTON: Am I right, ladies? (CHEERING AND APPLAUSE)

CLINTON: Number one, one more pantsuit joke, and Letterman disappears.

LETTERMAN: Yes.

(CHEERING AND APPLAUSE)

(MUSIC)

(END VIDEO CLIP)

BLITZER: Hillary Clinton playing it for laughs last night on "Letterman."

Some of us will be enjoying the long weekend, but this Labor Day is no holiday for the presidential candidates out on the campaign trail. Senator Clinton is bringing out her big gun, her husband, the former president, Bill Clinton. The two are teaming up for a fall kickoff tour in New Hampshire on Sunday, and then on to Iowa on Monday.

The rival Barack Obama will also be working this Labor Day. The senator from Illinois will be reaching out to voters in New Hampshire. John Edwards will be crisscrossing Iowa this holiday weekend. The former senator from North Carolina, he's in a dead heat with Clinton and Obama in most of the polls in the state that goes first in the primary process. That would be New Hampshire.

And John McCain hopes to jump-start his campaign this weekend. The former -- excuse me -- the current senator from Arizona, the onetime Republican presidential front-runner, will also be campaigning in Iowa. Mitt Romney, by the way, will be in New Hampshire, which follows the Iowa caucuses and holds the first primary, as I said. Romney's on top of the polls there and in Iowa.

Jack Cafferty, and I -- I assume you're going to be working on Labor Day, Jack. I -- I'm going to be working here in THE SITUATION ROOM on Monday. I don't know about you.

JACK CAFFERTY, CNN ANCHOR: Well, let me clear it up for you. I won't be here.

(LAUGHTER)

BLITZER: OK.

CAFFERTY: OK?

BLITZER: You will be watching THE SITUATION ROOM...

(CROSSTALK)

CAFFERTY: Oh, yeah, sure. Hold your breath on that. The question: The Iraqi government warns there are no magical solutions to its problems. What's the most the upcoming reports on Iraq's progress, then, can provide us?

Ron in San Francisco: "It will provide a profound grasp of the obvious and tell us that we should not waste another American life and stop throwing good money after bad. The problem with the report will be that Congress is too gutless to heed it."

J. writes: "I feel we can expect very little from the upcoming Iraq report. The situation in the region is abysmal. What I will be looking for is whether or not President Bush does as he said he would, and plans for the future based upon the assessment of those on the ground. He cannot continue to ignore just how bleak the situation has become."

John writes: "The most intelligent conclusion that could possibly be rendered would be to admit, finally, that Iraq isn't a country at all, and never has been. It was an unlikely alliance set up years ago, and should be recognized as such. The only way to go is to acknowledge this, get out, let the Kurds, Shiites and Sunnis each set up their own country and hammer out their own borders."

Glenn in Winnipeg writes: "The upcoming Iraq report will provide only one sure thing: a topic for the backseat, armchair pundits to bicker and boast about. Meanwhile, the troops are slugging away on increasingly dangerous, increasingly longer tours of duty. What they need to deliver on Iraq is one thing, and one thing only, a big, brightly-lit exit sign."

Chuck in Arkansas: "The upcoming reports don't mean anything. Bush has no intention of changing course.'

And Carl in Connecticut: "No matter how they spin these benchmarks, the best the report can do is prove that Colin Powell was exactly right to invoke the Pottery Barn rule: You broke it, you bought it, except, in this case, Bush dropped a pieced of ancient Mesopotamian pottery, and the American people are paying for it. And they will keep paying for it for a long time, no matter who wins the next election" -- Wolf.

BLITZER: Thank you, Jack, for that.

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