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Inside the Terror Attack; India Ties Terror Plot To Pakistan; General Jones As National Security Adviser; Making "Team of Rivals" Work

Aired December 1, 2008 - 17:00   ET

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


WOLF BLITZER, CNN ANCHOR: And to our viewers, you're in THE SITUATION ROOM.
Happening now, new clues and a key suspect in the terror assault on India's largest city. Officials now pointing the finger at elements in Pakistan. An American survivor takes us inside those 60 hours of slaughter. Stand by.

Barack Obama taps a team of rivals to defend America and to make this country's case around the world. Behind the big names, a retired U.S. four star general, who will try to keep them all on the same page as the new national security adviser. We have an exclusive interview.

And why did Hillary Clinton agree to become secretary of State? Can her husband resist getting involved? I'll ask the Democratic strategist, James Carville. He's standing by live.

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

We're getting new information right now about the bloody terrorist assault on Mumbai, India's financial capital. Indian police now say 179 people were killed during those three days of carnage. There were 10 targets, including two luxury hotels, a cafe and a Jewish community center. And police say there's one surviving suspect in custody -- this young man, photographed during the attack on Mumbai's train station. Authorities say nine other attackers were killed.

CNN's Brian Todd has been looking into all of this for us -- Brian, tell us what you're learning.

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, we're learning that in the first moments of terror in Mumbai, for Americans who survived the terrorist onslaught, this is -- the survivors are saying that often in those first moments, what made the difference between life and death was sometimes the victim's instincts, or, in some cases, pure luck.

(BEGIN VIDEOTAPE)

TODD (voice-over): A moment with her husband that Andi Varagona may have thought she'd never have. Now recovering in a Mumbai hospital from leg and arm wounds, Varagona described the scene in a restaurant at the Oberoi Hotel when gunmen blasted their way in. How did she get out alive? (BEGIN VIDEO CLIP)

ANDI VARAGONA, MUMBAI ATTACK VICTIM: I was playing dead, basically. My friend next to me was panicking. And I put my hand on the back of his neck and just saying shhhh. And then I felt a bullet penetrate his head and he just went limp and he was bleeding all over me.

TODD: That friend was identified as Alan Scherr, one of the Americans killed in the attack. Andi Varagona, who also goes by the name Rudrani Devi, runs this natural medicine clinic in Nashville, Tennessee. She was with Scherr and his daughter Naomi, along with their friend from Tennessee, Linda Ragsdale, and other members of an American meditation group.

Linda Ragsdale told "The Washington Post" she pulled 13-year-old Naomi Scherr under the table but could not save her. "I was taking in the enormity of the moment, thinking that this energetic child, who I had been playing with in the pool the night before and had made a pact to do somersaults with, was dead -- shot.

Ragsdale's husband Ben told CNN that his wife also played dead, but saw the face of one gunman as he approached the table.

BEN RAGSDALE, HUSBAND OF VICTIM: Not knowing that, I guess, they were alive or dead, he decided to shoot into the pile of them. And that's when she was hit.

TODD: Their son describes Linda Ragsdale's injury and a near miraculous outcome.

NIK SHANAHAN, SON OF MUMBAI VICTIM: She was only shot once in the back. Nothing vital was hit. She's not paralyzed or anything. It went straight in and out.

TODD: Ben Ragsdale says the hotel staff saved the lives of his wife and others -- leading them into the kitchen as grenades were going off, then outside, where they flagged taxis to take them to hospitals.

(END VIDEOTAPE)

TODD: Now, both women are now in intensive care at a Mumbai hospital, but their husbands say they're in good spirits and could return home within a few days -- Wolf.

BLITZER: What about any post-traumatic stress? I assume there's concern about that.

TODD: Absolutely. And Linda Ragsdale's husband tells us she's doing fairly well on that score but is very jumpy. Recently, when someone dropped something in the hallway outside their hotel -- their hospital room, he said she nearly jumped out of bed. So they're going to have to be working through those issues when she gets home.

BLITZER: Brian Todd, thank you. I want to go to Mumbai right now. Nic Robertson is joining us on the phone -- Nic, I know you've been in touch with authorities on this investigation. It's in a relatively early stage. But what do we know right now?

NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Wolf, there's more evidence that appears to be pointing toward Pakistan. Today, we learned from investigators that the e-mail that was sent as a claim of responsibility from the Deccan Mujahedeen was actually created on a Russian server using voice recognition software. That voice recognition software was converted into text. And Indian experts say that text shows that it was written using the -- using a Pakistani dialect. And the reference to Deccan Mujahedeen was, they say, a very clear Pakistani reference to an area in the south of India that Indians would just call the south.

So this, they say, is more evidence they say pointing toward Pakistan's responsibility and role in this so far. They called in Pakistan -- India's foreign minister today called in Pakistan's top diplomat to tell him of the involvement that they see -- that the Indian government sees -- coming from Pakistan.

And into all of this today, Wolf, the FBI came to get their assessment of the evidence. They were seen at a Taj Mahal Hotel, looking -- looking around the building, looking at the evidence that's being shown to them by the Indian police here -- Wolf.

BLITZER: Well, when you say Pakistan, Nic, I want to be precise.

Are they -- are the Indians accusing the Pakistani government of this kind of involvement or just terrorists based in Pakistan?

ROBERTSON: Well, what they have told the Pakistan's top diplomat here is that it is elements within Pakistan. They're not accusing the Pakistani government. There's been no evidence put forward by the police that would link Pakistan in any official capacity. But they are pointing their finger at a Pakistani terror group that operates in Pakistan -- a group that was outlawed by the Pakistani government six years ago. But the Indian government is saying that Pakistan has a responsibility to deal with them. And that's what they'll be looking to them to do, take that kind of action in the future -- Wolf.

BLITZER: Nic Robertson continuing to dig in Mumbai for us. Thank you.

Barack Obama today named a national security team of rivals, as it's called, that includes Hillary Clinton as the secretary of State; the holdover, Robert Gates, as the Defense secretary; Janet Napolitano, the Arizona governor, as the new Homeland Security secretary.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: I assembled this team because I am a strong believer in strong personalities and strong opinions. I think that's how the best decisions are made. One of the dangers in the White House, based on my reading of history, is that you get wrapped up in group think and everybody agrees with everything and there's no discussion and there are no dissenting views.

(END VIDEO CLIP)

BLITZER: The president-elect also asking a former NATO commander to keep these personalities on track. He's naming the retired four star Marine Corps general, James Jones, as his national security adviser.

Our senior Pentagon correspondent, Jamie McIntyre, knows Jones rather well. I understand you had an exclusive interview with him today, Jamie. Tell us what happened.

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Well, you know, Wolf, throughout his long military career, General Jones has considered himself to be apolitical. But I did have a chance to talk to him by phone today.. And he clearly felt that this invitation to be Barack Obama's national security adviser was a call to duty he could not refuse.

(BEGIN VIDEOTAPE)

MCINTYRE (voice-over): Just over a year ago, under questioning from Barack Obama's future Republican rival, retired Marine General Jim Jones seemed clearly uncomfortable with an Obama-style Iraq withdrawal plan.

GEN. JAMES JONES (RET.), NATIONAL SECURITY ADVISER-DELEGATE: I think deadlines can work against us. And I think a deadline of this magnitude would be against our national interests.

MCINTYRE: But in an exclusive interview -- his first since being named Obama's national security adviser -- Jones tells CNN a lot has changed in the past 14 months.

JONES: The new (INAUDIBLE) agreements give us a pathway to -- to work in. So I don't know of anything that would put us at odds. I think quite the contrary.

MCINTYRE: Jones has always been a clear-eyed military commander. During his final inspection tour of Afghanistan in 2006, he warned of NATO's weakening resolve, and last year, recommended a pullback of U.S. forces in Iraq that mirrors the plan adopted by the Iraqi parliament.

Jones was never an enthusiastic supporter of the Iraq invasion. He warned fellow Marine Peter Pace privately it could be a debacle and advised Pace, as Joint Chiefs chairman, not to be a parrot on the shoulder of the Defense secretary, according to Bob Woodward's book, "State of Denial."

(on camera): Woodward also wrote that you -- that you consi -- that you thought to yourself, maybe you should resign in protest. Is that true? JONES: We all have bad days. I mean there hasn't been a day in the Marine Corps -- I remember my first thought of resignation was in Vietnam. And I said why am I doing this? You know, you have bad days.

MCINTYRE (voice-over): But Jones tells CNN he's eager to serve again, as the man in charge of making sure two strong players, Hillary Clinton and Robert Gates, stay on the same page as their boss, Barack Obama.

JONES: He's looking for teamwork. He's looking for a consensus of opinions, but also diversity if it's necessary. And at the end of the day, with major issues, he'll make the decision and everybody will salute smartly and carry it out.

(END VIDEO)

MCINTYRE: As a former basketball player in college, General Jones is, by far, the tallest member of Obama's national security team. But his low key style means he may not be the standout. He is, however, known for consensus building. That could be a very handy trait in this cabinet -- Wolf.

BLITZER: He's 6'5," is that right?

MCINTYRE: I think that's right.

BLITZER: Because, you know, you...

MCINTYRE: He's taller than me.

BLITZER: I saw him towering over you in that clip. But, Jamie, thanks very much -- Jamie McIntyre. He's not a short guy, but James Jones is taller and he's also a retired four star U.S. Marine general. That says something.

Jack Cafferty is joining with us "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: He's taller than you, too.

BLITZER: A lot taller than me.

(LAUGHTER)

BLITZER: And you, too, Jack.

CAFFERTY: Not a lot taller. I'm 6'3". Not a lot taller than me.

BLITZER: Yes, well, he's 6'5".

CAFFERTY: But he's a lot taller than you.

BLITZER: Yes. That's right. He is.

CAFFERTY: Yes.

BLITZER: OK. CAFFERTY: All right.

More than 2,000 convicts want President Bush to either pardon them for commute their sentences before he leaves office next month. These include junk bond king Michael Milken, media mogul Conrad Black, American-born Taliban soldier John Walker Lindh. They've all applied to the Justice Department for this free pass of forgiveness.

Last week, President Bush issued 14 pardons, commuted two prison sentences -- mostly for so-called small time criminals. During his eight years in office, Bush has granted a total of 171 pardons and has commuted eight sentences.

A president has complete freedom to pardon anybody he wishes and he doesn't have to justify his decisions or explain himself to anybody.

For example, President Bush could excuse people who have not yet been charged with any crimes in order to protect them in the future -- people like, oh, say former Attorney General Alberto Gonzales or even baseball pitcher Roger Clemens.

The White House declined to comment about any future pardons. But some people close to the president say that they doubt that he would take such action. He did, however, commute Lewis "Scooter" Libby's prison sentence. Libby was the only the administration official convicted in connection with the Valerie Plame CIA leak scandal. So far, President Bush has granted fewer than half the pardons that Bill Clinton and Ronald Reagan granted, but he's still got, about, what, seven weeks to go before he's out of office. So there will be more to come, no doubt.

Here's the question: Are presidential pardons a good idea?

Go to CNN.com/caffertyfile and you can post a comment on my blog -- Wolf.

BLITZER: Jack Cafferty, 6'3" and still growing, probably, a little bit, too, no?

CAFFERTY: Shrinking now.

(LAUGHTER)

BLITZER: All right, Jack. Thanks very much.

Hillary Clinton -- she's at the center of Barack Obama's all star national security lineup. But why did she agree to work for her one- time rival? I'll speak live with long time Clinton friend, James Carville. He's here in THE SITUATION ROOM.

Also, growing buzz about Bill Clinton taking his wife's Senate seat. Who thinks that's a good idea and why?

Plus, active duty U.S. military personnel assigned to homeland security for the first time -- up to 20,000 of them. Now critics are sounding some alarms.

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

(COMMERCIAL BREAK)

BLITZER: Let's get back to one of our top stories right now. There are new leads in the terror assault on India's largest city. Could the slaughter in Mumbai put India and Pakistan, once again, on the brink?

Sajjan Gohel, the director of international security at the Asia- Pacific Foundation, he's joining us from London. You know a lot about what's going on over there, Sajjan. So tell us who you think, at least based on the preliminary indications we're getting, may have been responsible for this massacre.

SAJJAN GOHEL, ASIA-PACIFIC FOUNDATION: Well, Wolf, the group that's being accused of having concerned out these attacks by the Indian authorities is the Lashkar-e-Taiba. Now, they're a group that is based in Pakistan. Originally, they were set up in 1987 to try and wrestle Kashmir away from India.

They changed their ideology. They became much more affiliated with the Al Qaeda school of thinking. They even helped provide sanctuary to fleeing members of Al Qaeda and the Taliban following Operation Enduring Freedom in Afghanistan.

Members of the organization have even been found in Iraq fighting with insurgents. And some have been convicted of membership of the organization in the U.K. and even in the United States. If people remember...

BLITZER: So you see...

GOHEL: The Virginia jihad (INAUDIBLE).

BLITZER: You see Al Qaeda's fingerprints in this operation, is that right?

GOHEL: Well, not necessarily Al Qaeda central. Perhaps, bin Laden and Ayman Al-Zawahiri didn't give the green light for the attack, but certainly their ideology and their doctrine motivated these individuals.

If you look at fact that they tried to create economic, political and social consequences; they went after Westerners; they tried to go after transportation hubs; and going after the tourist industry. These are often the type of tactics that Al Qaeda-affiliated groups want to try and go for.

BLITZER: The Indians are saying, what, there are about 10 terrorists who killed all these people -- went after these 10 separate targets inside Mumbai. A lot of people are really skeptical that 10 people could have done all of this. What do you think?

GOHEL: Well, if you look at the reconnaissance, the planning, the logistics, the fact they moved with stealth as soon as they arrived in Mumbai, I think it suggests that there were many more individuals involved on the periphery that helped set up the cell, provided them not just with, necessarily, guides of the locations, but also vehicles.

And that is what's so worrying, is that there could be individuals that are embedded into the civilian fabric of Mumbai society that are waiting for the opportunity to plan, perhaps, new terrorist attacks. It's only -- the Indian authorities are going to have to keep a strong vigil as to what could happen, because it doesn't like the chapter on this particular event is actually closed.

BLITZER: There are credible reports out there, as you know, Sajjan, that the Indians were warned, maybe as much as a year ago, that a sea-borne attack in Mumbai, going after hotels, specifically, the Taj Mahal Hotel, that could be in the works right now. And there were warnings, but security seems to have been almost nonexistent.

GOHEL: From what I understand, Wolf, is that there were three bits of intelligence. In September, the CIA actually intercepted chatter suggesting that hotels in Mumbai could be targeted and they passed that on to their Indian counterparts.

Equally, the Indian intelligence apparatus also picked up chatter suggesting that terrorists could come in by boat from Pakistan to plan an attack against hotels like the Taj. And also, people were arrested in a town called Rampur in Uttar Pradesh. And they claim that there was a plot to target hotels.

Now, the Taj raised its security from September toward the beginning of November for two months. And then a week before the attack, they reduced it, because they said it was becoming too costly to keep up that level of security. Now, even if the security was more intensified, these terrorists looked very determined to carry it out. And it would have been difficult to try and stop them, based on the sheer brutality in which they enacted their plot.

BLITZER: How worried should the world be right now that these two nuclear powers, India and Pakistan, may be, perhaps, even mis -- involved in a miscalculation, but ratcheting up the tensions between these two long-time rivals?

GOHEL: This is a very important question. The last time a situation like this developed was in December, 2001, when the Indian parliament was attacked, again by the Lashkar-e-Taiba. And that brought India and Pakistan very close to war.

But there's some differences. At that time, in 2001, the Indian government believed that the military regime of General Pervez Musharraf was behind that attack. This time, they're not formally accusing the Pakistani government, but elements within it.

And this is going to be the key challenge for the United States, because there's a lot of pressure on India's politicians to get tangible results -- to do something with substance. The U.S. will probably put pressure on Pakistan to perhaps hand over 22 terrorists that the Indians want, to formally dismantle the Lashkar-e-Taiba, which has not actually been effectively done, or -- and perhaps also threaten economic sanctions, because, unfortunately, it seems that diplomacy hasn't actually had a successful result. There's going to have to be much more aggressive dialogue.

BLITZER: Sajjan Gohel. Sajjan, thank you very much for joining us from London.

GOHEL: Thank you.

BLITZER: He knows a lot about this stuff.

It's a surprise end to a bitter rivalry -- so why did Hillary Clinton give up her Senate seat to the become Barack Obama's secretary of State? The Clinton friend and ally, James Carville -- he's standing by live. We'll discuss that. Leslie Sanchez is here, as well.

Plus, pirates targeting a luxury cruise ship with hundreds of passengers on board -- how did this real life drama at sea end? Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Deborah Feyerick is monitoring some other important stories incoming into THE SITUATION ROOM right now -- Deb, what's going on?

DEBORAH FEYERICK, CNN CORRESPONDENT: Well, Wolf, the federal government is reviewing applications from hundreds of banks seeking rescue funding. That's the word from Treasury Secretary Henry Paulson. He announced today the government is actively developing new programs to stabilize the nation's unsettled financial system. Despite his comments, the Dow plunged nearly 680 points today, falling to 8149. Earlier in the day, the National Bureau of Economic Research said the U.S. is officially in a recession.

More than a thousand people who were on board a luxury cruise ship are safe after an encounter with pirates. The ship's owner, Oceana, says the Nautica outran pirates this weekend off the coast of Yemen. The Nautica was in an area patrolled by anti-piracy task forces when two small votes appeared to try to intercept it. As the cruise ship sped away, eight rifle shots were fired from one of the boats. No one was injured and the ship was not damaged.

Venice, Italy is known as the City of Water. But now there's way too much of it. The city is experiencing its worst flooding in more than 20 years. Residents and tourists are having to wade through water that's knee high. Much of downtown Venice is flooded, including the city's historic St. Mark's Square. Alarms went off this morning to alert citizens.

And Senator Edward Kennedy is being honored at Harvard University. The Massachusetts Democrat is receiving an honorary degree from his alma mater for a lifetime of public service. Vice President- Elect Joe Biden, Senator John Kerry and cellist Yo-Yo Ma are among those on hand. The 76-year-old Kennedy recently returned to the Senate six months after being diagnosed with a malignant brain tumor -- Wolf.

BLITZER: Congratulations to Senator Kennedy that for that well- deserved honor from Harvard.

FEYERICK: Absolutely.

BLITZER: Help wanted -- but yes-men need not apply.

(BEGIN VIDEO CLIP)

OBAMA: I'm going to be welcoming a vigorous debate inside the White House. But understand, I will be setting policy as president.

(END VIDEO CLIP)

BLITZER: And with the lineup he selected, vigorous debate is assured. But can Barack Obama make his team of rivals work?

Also, President Bush now says he was unprepared for war. What did he mean?

Our political contributors, James Carville and Leslie Sanchez -- they're both standing by live here to discuss.

And thousands of U.S. troops deployed right here at home -- details of a controversial plan for homeland security.

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

(COMMERCIAL BREAK)

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

Happening now, they're strong-willed leaders with big personalities and now all answer to the same boss -- Barack Obama -- including his once bitter rival, Hillary Clinton. How can the president-elect make this so-called team of rivals work? Stand by.

Also, armed federal troops on the streets of American cities -- as many as 20,000 of them. We have details of a controversial new plan for homeland security.

And a board of economists confirming what millions of Americans have been experiencing for months -- the United States' economy is officially in recession. The National Bureau of Economic Research now says it began last December -- making it already one of the longest since the Great Depression.

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

Hillary Clinton at the center of an all star lineup -- but Barack Obama's high profile picks for key positions in his administration have some wondering if this so-called team of rivals can produce results. Our senior political analyst, Bill Schneider, is standing by live -- Bill, this approach, is it workable, the approach that the president-elect has put forward?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Wolf, it's risky and it requires a strong leader.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Hillary Clinton, Bill Richardson, Tom Daschle, Paul Volcker -- all figures with deep Washington experience, big egos and their own agendas. Some were Obama's rivals. Many are veterans of the Clinton era. One is a holdover from the Bush administration.

OBAMA: I did not ask for assurances from these individuals that they would agree with me at all times.

SCHNEIDER: Can this team of rivals approach work?

Abraham Lincoln tried it. Lincoln was a great president, but he had to deal with cabinet crises, disloyalties and resignations which, historians say, threatened the war effort.

Can the people Obama is hiring work as a team? Ronald Reagan's team shared a conservative vision. Obama insists his vision is not ideological.

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: What the American people want more than anything is just common sense smarted government. They don't want ideology.

SCHNEIDER: Ideology divides the country: Red versus blue America. Obama is talking about a consensus for change that unites the country.

OBAMA: People don't want to continue an argument about big government or small government. They want smart government and effective government.

SCHNEIDER: So he's appointing people who are smart and effective. But if so many of his appointees are tried to the past, where will the vision for change come from?

OBAMA: Understand where the vision for change comes from first and foremost. It comes from me.

SCHNEIDER: Obama's political movement unlike Ronald Reagan's is not ideological. It's personal.

OBAMA: I'm going to be welcoming a vigorous debate inside the white house. But understand I will be setting policy as president. I will be responsible for the vision that this team carries out.

(END VIDEOTAPE) SCHNEIDER: A team of rivals requires a strong and self-confident president. Like Abraham Lincoln and Franklin Roosevelt both of whom made it work. In short, you need a great president which is what Barack Obama is signaling he intends to be.

BLITZER: Thank you for that, Bill Schneider, our senior political analyst.

Let's bring in two of our CNN political contributors right now. Joining us, the Democratic strategist James Carville. There he is, and the Republican strategist Leslie Sanchez.

James, you know the Clintons about as well as anyone. This is a question I've been getting asked all the time. Why do you think she decided to accept this position?

JAMES CARVILLE, DEMOCRATIC STRATEGIST: Well, I think the short answer is that she was asked. And I think that Senator Clinton had a very great career the head of the United States senate. I think she was very comfortable there. But if you look around the world and the president asks her to do this and you know, given the circumstances, a lot of people, the vice president really wanted her to do this, and I think it's very important that some sort of knowledge of foreign affairs is returned to the state department.

They wanted to have a strong secretary of state. That says a lot about them and the kind of country that they want to lead. I think that once they asked her and she had the challenge, I think she probably felt like she should do this for her country.

BLITZER: Leslie, you're laughing.

LESLIE SANCHEZ, REPUBLICAN STRATEGIST: No, no, I mean the truth be told, I think it's an excellent opportunity for her. I think a lot of people feel she has more than qualified to do this role and do it effectively. She's a very tough politician. It also closes some of the divisive rifts in the Democratic Party. You have still those dueling camps and I think there's people that wanted to see Hillary Clinton get a very plum position.

BLITZER: And she's going to become the secretary of state assuming she's confirmed and there's no indication she won't be. Go ahead James.

CARVILLE: I think most people in the Democratic Party are delighted that the president-elect picked Senator Clinton to be secretary of state. I think most people in the Democratic Party as most people in America are pretty impressed with these appointments so far.

SANCHEZ: You know, the one appointment that's going to get some pushback is probably homeland security with Governor Napolitano with the respect a lot of people were hoping it was somebody maybe that had military experience to bridge all those intelligence agencies together and now new that you department of homeland security is a mammoth job. It's not that she is not capable. It's just the experience level. BLITZER: Remember at the same time, Leslie, much of what homeland security is about, dealing with the aftermath of disasters like hurricanes, Katrina, treks, she's a governor of a border state.

SANCHEZ: But Wolf that's one portion. I also have people say she's somebody who comes from a border state and immigration issue. There's compromise ports of entry, air, land, sea and northern border. There's a lot more depth to that position if you talk to anybody. I was talking to a lot of folks when that first started, department of homeland security. There's a lot there.

CARVILLE: There is one of the most talented; I don't know exactly, one of the most popular governors in the United States. If anything, when she was picked at homeland security director, I was sort of hoping Governor Napolitano would be get the very senior position in the government and I'm delighted she took it and going to be very surprised if her confirmation vote is anything short of overwhelming. She's a remarkable.

SANCHEZ: Let's be very clear. I think people are going to be cautiously optimistic if they were looking for different types of qualifications and credentials and now it's something to be seen.

BLITZER: Remember the first homeland security secretary was also a former governor, Tom Ridge of Pennsylvania. So governors are pretty well positioned to deal with this kind of stuff.

SANCHEZ: He had tremendous military experience.

BLITZER: But military, there's a difference between military and homeland security.

SANCHEZ: Absolutely.

BLITZER: There's a pentagon that deals with military.

SANCHEZ: But you can't act as if one doesn't have anything to do with the other.

BLITZER: I'm not saying it does or doesn't. Remember what he homeland security's really responsible for dealing with the homeland security and the aftermath of manmade or natural disasters.

SANCHEZ: I think we can continue to debate that point, Wolf. I'm saying that people are going to be watching this particular appointment with great interest.

BLITZER: All right. Fair enough. Let's move on. James, let's talk a little bit about Bill Clinton and listen to what Hillary Clinton said right in the height of her presidential campaign. Listen to this.

(BEGIN VIDEO CLIP)

SEN. HILLARY CLINTON (D-NY), FORMER PRESIDENTIAL CANDIDATE: When I become president, Bill Clinton, my dear husband, will be one of the people who will be sent around the world as a robing ambassador to make it very clear to the rest of the world that we're back to a policy of reaching out and working and trying to make friends and allies.

(END VIDEO CLIP)

BLITZER: All right. So what role will the former president have with his wife now, James, as the secretary of state?

CARVILLE: Well, one hopes whoever the secretary of state would have been that they would have, and I think that the president-elect will too, would have relied on the counsel of President Clinton. You know, when he was president of the United States, we were widely admired and respected and in many of the parts of the world actually loved. It's one thing that we know about Senator Clinton is she's her own person, if you will. You know, any doubt that she's going to -- she'll have enough to deal with trying to reassert some primacy at the State Department in foreign affairs.

I think her husband will be helpful. He was very, very helpful in this whole process of the "vetting," which he went out of his way to do everything that the administration asked. I wouldn't be surprised if, and I know that Vice President-elect Biden will be very involved and has great respect for former President Clinton. I wouldn't be surprised if he isn't given some assignment in places around the world. I think people will be very excited about that.

BLITZER: What's going to be more interesting, Leslie, all presidents and secretaries of state ask former presidents from time to time to do certain things, go on some missions. It's going to be fascinating to see what, if anything, they ask the current president, George W. Bush to do in the come years.

SANCHEZ: Well, that's very true. I think you've seen with a lot of hurricane relief efforts or other type of relief efforts, the presidents have raised tremendous amount of money. Globally, not just for the interests of the United States. I think one of the concerns with Bill Clinton that has always been the case, he was called slick Willie in Arkansas for a reason. I think he's been vetted and put forward everything that he needs to with respect to assuring Hillary Clinton can sail through the confirmation process. The issue of him staking money for his foundation and those relationships moving forward, that is the part people are most concerned about.

BLITZER: James?

CARVILLE: Some people, you know, you just never are going to please. They've disclosed everything in the world. He's the most vetted human being in the history of the earth. You know, there's some people that are just, I don't know what their problem with President Clinton was the peace or prosperity. They'll get over it sooner or later.

BLITZER: President Bush in an interview with ABC News is now saying he was unprepared for war. Listen to what he said and I'll read it to you. He said, "I think I was unprepared for war. In other words, I didn't campaign and say please vote for me, I'll be able to handle an attack. In other words, I didn't anticipate war. Presidents, one of the things about the modern presidency is that the unexpected will happen." For this president, it's pretty rare to hear him be as candid as he is in this sort of exit interview with ABC News.

SANCHEZ: Wolf, that's exactly correct. I think the one thing that was probably the most telling his biggest regret is he had incorrect information related to Saddam Hussein and weapons of mass destruction. And they had built this on faulty intelligence. That was probably the most telling. A lot of people wanted to hear him say that and he did. To say he was not prepared to the extent of anticipating a 9/11 or that there was going to be this extreme jihadist movement against our culture and the western world was something the globe didn't anticipate. So with respect to that, I think we have to be careful how we read into it.

BLITZER: How do you read it, James?

CARVILLE: First of all, he shouldn't have started the war in Iraq and a lot of people in intelligence community had warned him that there was a good chance, two stories in "The Washington Post" before the war they didn't have it. They looked for the so-called chemical weapons and didn't find them. Secondly, if you were unprepared, again, it would have been beneficial who have not started one. With respect to terrorism, people knew that they were a threat.

All summer before 9/11, there were people warning the white house, George Tenant and Cofer Black went into Condi Rice's office in august and said look, there's something going on. I give the president some credit for being, I give the president some credit for at least being candid. I think being reflective is sort of a good thing at the end of a term.

SANCHEZ: I think he's talking more about his campaign in 2000. Maybe we're reading that wrong. 2000, an election he barely won and he wasn't out there warmongering and talking to that extent and I think people looked at the fact that there were not attacks other than first one with the world trade center thinking that wasn't part of an orchestrated effort. That's what he's alluding to.

BLITZER: Leslie and James, we're going to leave it right there. As usual, a good discussion.

Combat troops on U.S. streets. U.S. military takes on a controversial new mission. We have details.

And could New York's next senator also be named Clinton? Why a push to send the former president to the U.S. capitol may not be as strange as it sounds.

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

(COMMERCIAL BREAK)

BLITZER: A controversial new mission could put U.S. combat troops on the streets right here at home. Let's bring in our CNN homeland security correspondent Jeanne Meserve. Jeanne, explain to our viewers what this is all about.

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: Wolf, using active duty military for a domestic mission is an idea that some embrace and others absolutely hate.

(BEGIN VIDEOTAPE)

MESERVE: When Hurricane Katrina tore New Orleans apart, the U.S. military came in to help put together. When the Olympics were held in Salt Lake City, the military helped secure them. But now for the first time, active duty combat troops are being assigned to a homeland security mission, 4700 of them. A response force has been trained to deal with a large scale natural disaster or a chemical, biological, radiological, nuclear or high yield explosive attack.

GEN. GENE RENUART, COMMANDING OFFICER, NORTHCOM: We saw in Mumbai a demonstration that terrorist organizations will try to affect the governmental capabilities of countries. We have to know we are a target of some of these organizations and have to be prepared to respond should that be necessary. That is the right thing to do for the country and for our citizens.

MESERVE: Critics say it is a bad idea.

GENE HEALY, CATO INSTITUTE: It's a basic principle of American law that standing armies, standing armies should not be used to keep the peace at home. The military should be a last resort and not a first responder.

MESERVE: The military says the new force will not be used for law enforcement or crowd control and will only have a small element to provide security for its own forces. Troops back from Iraq will make up the first rapid reaction force. National Guard and reserve forces will form two others bringing the total to about 15,000. They will be able to identify and handle hazardous materials do, decontamination, medical care, evacuation and provide logistical support.

(END VIDEOTAPE)

MESERVE: Critics say the military is already stretched too thin and fear this new mission will impact readiness for fighting. D.O.D. says it can handle the additional duties adding the response to an event has to be quick and sustained and the only institution capable of providing that is the military. Wolf?

BLITZER: Jeanne Meserve, thank you.

The U.S. military, by the way, already hard pressed fighting wars on two fronts. There are currently about 146,000 U.S. troops in Iraq and there are another 32,000 troops in Afghanistan. 18,000 of these are under American command while 14,000 are serving under NATO.

Could Hillary Clinton be replaced by her own husband? Why some suggest sending the former president to the U.S. senate is a good idea.

And a team of rivals to keep America safe and make the country's case around the world. You're going to hear the president-elect's name, president-elect name his national security team. We have excerpts in detail coming up from his news conference earlier today.

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

(COMMERCIAL BREAK)

BLITZER: Here's a thought, Senator Bill Clinton. Some see the former president as the perfect replacement for his wife when she gives up her seat to become the next secretary of state.

CNN's Samantha Hayes is working this story for us. It seems far- fetched, Samantha, but how likely is it?

SAMANTHA HAYES, CNN CORRESPONDENT: Well, Wolf, it is a possibility but whether it's likely or not, there's a lot of hurdles for former President Bill Clinton. But we're talking about Hillary Clinton. Eight years as a senator from New York. She's going from congress to the incoming administration. But now the scramble begins to replace her on Capitol Hill.

(BEGIN VIDEOTAPE)

CLINTON: Leaving the senate is very difficult for me.

HAYES (voice-over): And just as difficult, choosing a successor to Senator Hillary Clinton who President-Elect Barack Obama nominated today to serve as his secretary of state. That tough task falls to David Patterson, New York's Democratic governor. Who whomever he picks would serve two years before the next election. Patterson has a strong bench to choose from. There would be a number of possible contenders, including more than eight members of New York's delegation in congress, the state's attorney general, Carolyn Kennedy, and her cousin, Robert Kennedy Jr. But some are suggesting that the former president replace his wife. An op-ed last week in the "Washington Post" journalist and author Carl Meyer and his wife said send Bill Clinton to the senate. If it happened, Clinton would become only the second former president to go from the white house to Capitol Hill.

PAUL STEINHAUSER, CNN DEPUTY POLITICAL DIRECTOR: President John Quincy Adams lost his reelection bid in 1828, but he returned to Washington two years later after winning an election as a congressman from his home state of Massachusetts.

HAYES: Clinton would bring gravitas and sure knows his way around Washington. But Democratic strategist Paul Begala who worked for Clinton doesn't think the former president would want to go from leader of the free world to the junior senator from New York.

PAUL BEGALA, DEMOCRATIC STRATEGIST: I don't think I can see Bill Clinton in there. If you ask him, Wolf, he'd say, someone has to earn a living in this family.

(END VIDEOTAPE)

HAYES: What does Bill Clinton have to say about all this? We reached out for a comment, and they're deferring to New York Governor Patterson when it comes to Senator Clinton's seat.

BLITZER: This has been such a wild year. Who knows what could happen. We'll watch together with you, Sam. Thanks very much.

Let's get back to Jack Cafferty. What do you think about that idea, Jack?

CAFFERTY: They just -- they just don't end, do they? They just don't -- they never end, the Clintons. They're always around.

The question this hour is: Are presidential pardons a good idea?

Jeremy says: "If used as they were intended, a check against potential injustices committed by an imperfect judiciary then yes, they're a good idea. But if they're used as they have been for the last few decades, a way to give your friends a get out of jail free card, they're terrible idea."

Brian writes: "Pardons for their place, but there should be more checks and balances for them so they can't be abused. When you effectively have a criminal enterprise running the white house, they can be a huge problem. Perhaps one limit could be that you can't pardon yourself or anyone who has ever worked under you."

Annie writes from Georgia: "Absolutely not. Especially before the indictments come down, which may be the case this go-around. Since I'm still hopeful Bush faces charges, they should not be able to pardon themselves."

Pat in New York writes: "No pardons. You've done the crime, now do the time."

Michael says: "It makes a mockery of the judicial system. Why waste taxpayers' money trying any friend of the president? Did anybody think Scooter Libby would serve time? Presidential pardons should be stopped."

Terry: "Presidential pardon, sure. But congress should have veto power."

And Julie writes from Michigan: "I keep waiting for W. to pardon O.J. Simpson. Why not one more monumental screw-up as he leaves office to sum up his entire presidency?"

If you didn't see your e-mail here, you can go to my blog at CNN.com/CaffertyFile. Look hundreds of others -- Wolf?

BLITZER: Jack Cafferty, thank you.

Barack Obama unveils his all-star national security team including his one-time rival, Hillary Clinton. You're going to hear in depth what both of them are saying about this new and historic alliance.

Plus, the investigation into the Mumbai massacre. We're going there live. We have new developments.

Stand by. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: It's official. The United States is in a recession. That's certainly a headline. We all knew that, but guess what. They now say it's been going on for a year. Let's get Lou Dobbs into this discussion.

Lou, it's -- I guess it's no surprise we're in a recession, but now the government says it's official going back to last December when it started.

LOU DOBBS, CNN ANCHOR: That's a surprise, going all the way back to December. The National Economic Research Bureau, the agency with the panel of economists who make these official determinations of what is recession, probably surprised a few people by going back that far. It's no surprise to millions and millions of Americans, some of whom unfortunately lost their jobs, that we've been through a slowing economy and a very tough time with unemployment now at 6.5 percent. There's no question that we have -- we've entered a real tough economic period for just about everybody.

BLITZER: And a huge drop in the market, once again, today. This has been a wild last -- last week it was good and then today it collapses.

DOBBS: Yeah. It collapses because, frankly, there's no basis for the market, at least in my opinion, Wolf, being here. What is aggravating and irritating to me, reasonable people holding forth as if it's time to go in and buy stocks. You know, I mean, this is not a time to buy stocks. If you're going to be Warren Buffett like, do what Warren Buffett does. Save your money, get in position, and be solid before you think about investing here. This is not a time to be underrating the weakness of this economy or the ability of corporate America to deal with these head winds and the contraction of this economy. And it's a great time to be awfully careful with your money.

BLITZER: Lou is going to have a lot more good advice coming up at the top of the next hour, one hour from now. Lou, thank you very much. We'll see you later.

And to our viewers, you're in THE SITUATION ROOM.

Happening now, Barack Obama's new team of national security heavyweights. How Hillary Clinton and company will juggle huge responsibilities and competing egos. This hour, we're going to be hearing from the president-elect at length. Stand by.

Plus, the Obama/Clinton relationship then and now. How well will she take a back seat to her former rival? The best political team on television is standing by. And an orphan child's heartbreak. A nuclear-armed nation now at odds. New global threats and survivor stories. Remarkable, moving stories after the India terror attacks.

We want to welcome our viewers in the United States and around the world.

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