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Bloodbath in Baghdad; Reaction to Obama's Cabinet Picks; Illinois Governor Declares War on Bank; Pakistan Cracks Down; Fighter Jet Crashes into Homes

Aired December 8, 2008 - 17:00   ET


WOLF BLITZER, CNN ANCHOR: And to our viewers, you're in THE SITUATION ROOM.
Happening now, a governor sides with laid off workers and declares war on a financial giant, baring a state -- barring a state, that is -- from doing business with Bank of America.

Also, some of Barack Obama's big plans meeting some political resistance right now.

Can the country afford a stimulus package, plus all those bailouts?

And a bloodbath in Baghdad killing and injuring dozens of Iraqi men, women and children. Now five American civilians are charged with manslaughter.

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

The country's economic crisis is forcing is President-Elect Barack Obama to formulate some big plans, which also come with some big price tags, including a controversial bailout of the auto industry.

Our senior political analyst, Bill Schneider, is joining us now. He's watching all of this unfold.

New government programs, Bill, facing lots of resistance, is that what's going on?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, the plan to bail out the automobile industry -- yes. The jobs plan -- no.


SCHNEIDER (voice-over): Seven hundred billion for the financial industry, a rescue plan for the auto industry, a plan to create or save 2.5 million jobs -- three hugely expensive new programs.

Is there any political resistance?

Yes, if it sounds like a bailout for big business. Many Republicans have been critical.

UNIDENTIFIED MALE: A bailout is not good economics and is not the American way.

SCHNEIDER: So have some Democrats.

REP. JACKIE SPEIER (D), CALIFORNIA: The American people right now are damn mad. They do not want us to bail out this industry.

SCHNEIDER: There's less resistance if it's a plan to save jobs.

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: Millions of people, directly or indirectly, are reliant on that industry. And so I don't think it's an option to simply allow it to collapse.

SCHNEIDER: Bailout -- no. Jobs -- yes.

The nation's mayors, meeting in Washington this week, get it.

MAYOR MANNY DIAZ, U.S. CONFERENCE OF MAYORS: We are not here for a bailout. We are here to help build out America and put Americans back to work.

SCHNEIDER: Obama's economic stimulus plan is meeting with very little resistance. It's about jobs.

OBAMA: We have a consensus -- which is pretty rare -- between conservative economists and liberal economists, that we need a big stimulus package that will jolt the economy back into shape and that is focused on the 2.5 million jobs that I intend to create.

SCHNEIDER: Can the government afford all those new jobs and rescue plans?

OBAMA: We can't worry short-term about the deficit. We've got to make sure that the economic stimulus plan is large enough to get the economy moving.


SCHNEIDER: If the key word for the public is "jobs," the key word for the new administration and Congress is restructure. To get the money, the auto industry will have to restructure. And President- Elect Obama wants new jobs that restructure the economy for long-term growth -- Wolf.

BLITZER: Bill Schneider reporting for us. Thank you.

Some of President-elect Barack Obama's cabinet choices are making contacts for their new jobs today. The attorney general nominee, Eric Holder, was on Capitol Hill today, setting the sage for his confirmation hearings. He met with the Senate Judiciary Committee chairman, Patrick Leahy.

And a source familiar with the transition says Senator Hillary Clinton was at the State Department today. And we're told Obama's choice for secretary of State will actually have dinner later tonight with the woman who now holds that job. That would be the secretary of State, Condoleezza Rice. Let's bring in our chief national correspondent, John King. He's assessing what's going on.

What do we make, John, of Barack Obama, based on the selections he's made so far?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Well, if you talk to Democrats and even most Republicans around town, they are very impressed so far. The one criticism, Wolf, has come from the left. Many liberals say Hillary Clinton voted for the Iraq War; you know, Bob Gates is George W. Bush's Defense secretary; Jim Jones, the Marine admiral who will be national security adviser, was involved in the Iraq War.

So some liberals are saying wait a minute, what about the promise to get the troops out?

But, by and large, the consensus is this is a very impressive team -- on paper. Governing is different from assembling the team. But so far so good of the reviews.

And wouldn't you like to be at the Condi Rice/Hillary Clinton dinner tonight?

Although, again, one other thing you hear within the Obama campaign is their high praise for the Bush administration at all levels. I just spoke to a very good source who said that Senator Clinton had very good meetings at the State Department with the transition team over there; that Condoleezza Rice's staff is cooperating in unprecedented ways and they expect to have a cordial dinner tonight, even though they don't have much of a relationship.

BLITZER: It's interesting that, you know, they're all praising each other left and right now. And as you say, the Republicans are being very effusive in their praise for these selections so far that Barack Obama has made. I don't expect -- at least on the ones that have been nominated so far -- huge controversy during confirmation hearings.

KING: Questions for Senator Clinton about Bill Clinton's role, what will he do because of his foundation work. Questions -- you mentioned Eric Holder up on the Hill today about the Mark Rich pardon. He'll get some tough questions about that.

But we have not heard from any of our sources that I know of -- anyone saying this one is a problem.

One other thing, Wolf, tomorrow Al Gore, the former vice president, will go out to Chicago to meet with President-Elect Obama and Vice-President Elect Joe Biden to talk about climate change, energy and how you can take that issue to create jobs -- those new kinds of jobs Bill Schneider was just talking about.

I was told by -- we're hearing from all sources he's not going into the administration. He's not going to have a job. But I'm curious about this one, because a very close friend of the vice president e-mailed me these words earlier today: "The Gore trip is for more than just a chat. He wouldn't burn that much carbon flying to Chicago just to talk."

BLITZER: Interesting.

KING: So they're about -- this source suggesting this is about something -- some role for Al Gore outside of government to help the administration make.

BLITZER: We'll see -- we'll see what he does.

And with 50 -- at least 58 Democratic senators in the new U.S. Congress, it's going to have to take a lot for some of these -- for some of these confirmation hearings to go negative -- to go against these nominees, because you've got a pretty solid Democratic base right there...

KING: Absolutely right.

BLITZER: ...and you'd have to turn off a lot of Democrats in order to defeat any of these confirmations.

Let's talk about the exciting news that we made, you and me, here on CNN earlier today. We announced there's going to be a change coming forward.

I want you to tell viewers what you're about to do starting later in January on Sunday mornings.

KING: I am going to allow to you stay out later on Saturday night with Lynn Blitzer, who deserves her husband home on the weekends a bit more. And I will pick up the Sunday portfolio. You have carried that for 11 years now. And there -- you know, I remember, I was the junior White House correspondent some time ago. I ended up becoming the senior White House correspondent. I got gray hair. Maybe I'm going to have to grow a beard now as I move into Sunday morning shows at CNN.


BLITZER: It's going to be an exciting -- an exciting opportunity, because it's not just going to be the two hours of "LATE EDITION," which we do every Sunday from 11:00 to 1:00 p.m. But you've got a more ambitious plan out there.

Explain that to our viewers.

KING: We're going to stretch out Sunday morning a little bit more to try to take advantage of the excitement we learned was in the country during the campaign, when CNN broke records in viewership.

There's a new administration coming to town. We view it as a great opportunity to use our reporters, to use our political team, to do the news maker interviews and analysis here in Washington; but, also, at this exciting time of a new administration, to hold it accountable -- to go out in the country and see if the promises are being kept; to look at Barack Obama and the new Congress -- Democrats and Republicans -- through the eyes of the people who were involved in this election.

So we believe we built a credibility with our audience during this election season and now we're going to try to have a conversation with them on Sunday mornings with some here in Washington and some getting out in the country...

BLITZER: And it will start...

KING: ...and having a little fun.

BLITZER: It will start at 9:00 a.m. Eastern and go to 1:00 p.m. Eastern.

Is there a name yet for this four -- four hour block?

KING: We're working on the name. Maybe we should have a contest.

BLITZER: Maybe. That's not a bad idea. Let's get a contest going.


BLITZER: Howie Kurtz and "RELIABLE SOURCES" will still be part of the new...

KING: Absolutely.

BLITZER: ...of the new lineup, right?

KING: Absolutely, because as you get a new administration, again, looking at our own performance -- the media's performance and the stories in the news industry, including the sad stories. The newspaper industry in such a hard time. That's a critical part of the conversation, as well, and that will continue.

BLITZER: And I'll continue doing a mere 15 hours of live television a week.

KING: A mere 15 hours of live television.

BLITZER: So that will...

KING: I suspect we'll bring you in on the weekend sometimes, too.

BLITZER: Yes, well, it's going to have to be a big story.


BLITZER: Thanks, John. Thanks very much for that. And good luck with this new gig.

John King is going to be going to work Sunday mornings, starting later in January.

An economy in crisis with thousands of American workers losing their jobs every day. Now a handful are fighting back. And they've just gained a very powerful ally -- the governor of their state -- who's taking the battle to a whole new level.

CNN's Susan Roesgen is in Chicago. She's watching the story.

And there's a lot of drama unfolding right where you are -- Susan.

SUSAN ROESGEN, GULF COAST CORRESPONDENT: There really is, Wolf. I mean, right now, it sort of looks like a backyard party. It's informal, convivial. But these people could be here for a while. This is a very serious story. Federal law requires big employers -- employers that have more than 50 employees, like this one, to give 60 days notice if there's going to be a layoff. The workers here -- some 300 workers, Wolf, did not get that notice. And they did not get 60 days severance, which federal law also requires if they don't get the notice.

So 200 union workers have decided to stay here, to stick it out, to try to force some action -- to try to get some of their money. Again, they did not get the notice. They have not had the severance. What they do have is a lot of support from political leaders like Illinois Governor Rod Blagojevich, who just don't want to see another company close.


GOV. ROD BLAGOJEVICH (D), ILLINOIS: How come it's OK for some of these banks, who have messed things up in a significant, substantial way that has trickled down to impact the lives of ordinary, average Illinoisans and ordinary average Americans who, every day, work?

It's OK for big corporations like "The Chicago Tribune" to do it and then line up so they can get ahead of other creditors, but somehow these workers always end up on the bottom.


ROESGEN: "The Chicago Tribune" possibly facing bankruptcy, they announced today.

And what you're looking at right now is a giant inflatable rat, Wolf. What the workers are saying is that the Bank of America is a rat. They blame Bank of America, the company's creditor, for cutting off the funding.

Now, Wolf, I've got to tell you, we have not seen any of the company managers here. I did find the human resources director. She said: "No comment." They wouldn't talk about anything.

But right now, there's a meeting that's just begun between Bank of America, the company's creditor, and the union and Illinois Congressman Luis Gutierrez and possibly some company managers. So if we know more -- if we get some kind of resolution to this issue here, we'll bring it to you before the end of your newscast.

BLITZER: Susan Roesgen in Chicago watching the story for us -- a drama, as I said -- unfolding.

Pakistan cracking down on militants in the wake of the Mumbai terror attacks with a dramatic raid on a training camp. We're going to talk about it. The former Defense secretary, William Cohen, he's standing by live.

And the Facebook photo that's embarrassing the Obama team and forcing one very important aide to apologize directly to Hillary Clinton. Our political contributor, James Carville, he's standing by live. He'll assess the damage, if any.

And did Sarah Palin snub the queen of talk TV? Oprah Winfrey is speaking out now about the interview she couldn't get.

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


BLITZER: Under pressure from the U.S. and India, Pakistan appears to be taking some steps to crack down on militants on its soil following the Mumbai terror attacks. Troops targeted a banned Islamic militant group on a raid on a camp in Pakistan-controlled Kashmir.

CNN's Reza Sayah has more -- Reza.

REZA SAYAH, CNN CORRESPONDENT: Wolf, late last week, U.S. Secretary of State Condoleezza Rice came here to Islamabad and put pressure on the Pakistani government to help out with the Mumbai investigation. Just a few days later, Islamabad has responded with a number of arrests.


SAYAH (voice-over): The Himalaya Mountains of Pakistan now the focus of the probe in Mumbai. Pakistani military officials say they've arrested 15 militants here. Among them, suspected members of Lashkar- e-Taiba, the banned Pakistani extremist group fighting against Indian rule in the disputed region of Kashmir.

In 2001, it was accused in the attack on the Indian parliament. In 2006, Indian officials blamed it for bombing railway stations in Mumbai. And now Indian authorities say Lashkar organized last month's massacre in Mumbai.

Pakistani officials say the arrests came during a raid in Pakistani-controlled Kashmir on the offices of Jamaat-ud-Dawah -- an Islamist charity group run by the founder of Lashkar. Jamaat has facilities throughout Pakistan. It acknowledges past ties to Lashkar, but insists they were severed in 2002, when, under pressure from Washington, Pakistan banned the group. Today, Jamaat claims to focus on social services, education and the true teachings of Islam. Last week, Jamaat took reporters on a tour of one of its facilities to counter perceptions of the group.

UNIDENTIFIED MALE: This is only an educational and residential complex. Nothing else is here. You are allowed to visit independently or follow me. It's up to you.

SAYAH: Hamid Gul is former head of the ISI -- Pakistan's top intelligence agency -- widely suspected of helping launch Lashkar to fight a proxy war against Indian forces in Kashmir. Gul, who is openly critical of the Indian government and U.S. foreign policy, says Lashkar is no longer an active militant organization.

GEN. HAMID GUL, FORMER PAKISTANI INTELLIGENCE CHIEF: There may be some individuals, but as an organization they have shifted their focus from militancy to welfare work.

SAYAH: But Indian and U.S. officials say evidence in Mumbai shows Lashkar still operates in Pakistan under the guise of a charity group and is still capable of orchestrating deadly attacks.


BLITZER: Reza Sayah reporting for us from Islamabad.

The Bush administration hopes the action by Pakistan will help ease tensions between these two nuclear neighbors. India blames Pakistan-based militants for the Mumbai attacks, which killed 164 people, including six Americans.

Let's talk about that and more with William Cohen, the former Defense secretary, head of the Cohen Group here in Washington.

How close -- you've studied this problem for a long time -- how close is India and Pakistan right now to armed conflict?

WILLIAM COHEN, FORMER SECRETARY OF DEFENSE, CHAIRMAN OF THE COHEN GROUP: I think less -- they're less close right now. I think the Indian government has exercised tremendous restraint, under the circumstances. When you see an attack launched against their cultural center, their financial center, with these two landmark hotels and all of the killing that took place and all of the wounded, I think they have exercised great restraint in saying we want Pakistan to do something here. Whether it's organized through the terror group or whether it's individuals, we want you to start cracking down and root out those terrorists.

I don't think Secretary of State Rice would be making a statement that -- holding Pakistan responsible for individuals inside of Pakistan planning this without some pretty good intelligence.

BLITZER: But you know that there's a lot of suspicion in India -- even here in the United States -- that this terrorist group, Lashkar-e-Taiba, has links to elements within Pakistani intelligence. COHEN: Those links have been existent in the past. They may still exist. This is one reason why I think the pressure is now going to be on the Pakistani government and President Zardari to take action. He's going to be in a difficult position.

There are those who still support the -- the groups and support the Taliban. And this has links to the Taliban, as well. It may have some links to Al Qaeda.

So it's going to require the Pakistani leadership to say we can't really accept this or tolerate this any longer if we're going to have peace with -- with our neighbor.

BLITZER: What advice would you have for dealing with this, which may be the most serious crisis out there right now internationally?

What advice would you've for the president-elect?

COHEN: The president-elect is to certainly keep this on the front burner, offer to help whatever he can do. I would say let the two countries try to resolve this on their own for the time being, offer whatever mediation services might be required. But I would let the two governments see if they can't start working together on this.

They were very close -- they were moving much closer in the last few weeks, until this happened -- which may be one of the reasons why the attacks were launched in the first place.

BLITZER: That's what a lot of people suspect.


BLITZER: Now, you've written -- together with Madeleine Albright -- this book -- "Preventing Genocide: A Blueprint for U.S. Policy Makers."

You were co-chair of the Genocide Prevention Task Force. Tell us why it's critically important that everyone read this book, not only the incoming administration -- incoming members of Congress?

COHEN: We talk about genocide and mass atrocities being unacceptable. This is a -- a leadership issue for this government, the new government, for every government -- to say we can't live in a world in which we tolerate the slaughtering of thousands of people. This is thing something that's a moral issue. It's also a national security issue.

To the extent that we allow these kinds of genocidal or mass assaults taking place, it can lead to failed states. Failed states breed terrorism. It can affect us down the line.

So we have a national security interest. We also have a moral leadership interest. We have to take the lead in saying this is no longer acceptable. Whatever it is, we can't be slight witnesses to allow either governments or elements within the government to simply engage in genocidal or mass assault type atrocities. BLITZER: Secretary Cohen, thanks for doing it.

COHEN: Yes. Well, this is an important book. It's an important statement. I hope the -- the new administration will look at it favorably. I believe they will. We're going to the U.N. Tomorrow to talk about it there, as well.

BLITZER: I think they will.

Thanks very much for doing it.


BLITZER: And thanks for coming in. And thanks to Madeleine Albright, as well.

Caroline Kennedy possibly filling Hillary Clinton's Senate seat. And now the idea is getting a big boost from a major political player. Stand by.

Plus, the photo that forced Barack Obama's top speechwriter to apologize publicly to Hillary Clinton -- how bad is it?

Political strategists James Carville and Kevin Madden -- they're here with their take in THE SITUATION ROOM.


ANNOUNCER: This is CNN breaking news.

BLITZER: We're following the breaking news in San Diego, where a military fighter jet crashed into a residential neighborhood during a training flight. We know the pilot ejected and is hospitalized. No word yet about any casualties on the ground.

Our Internet reporter, Abbi Tatton, has been following the situation online.

Abbi, what are you picking up?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, all these pictures from This is what it looked like to the people in the homes and the office buildings around this crash site just a couple of hours ago.

Pictures from Jeremy Gimbel. IReporters telling us that it sounded like two loud bangs and then they saw this thick plume of smoke.

If I zoom these pictures in here, you can see a tightly packed-in residential community, orange flames emerging from a couple of these buildings here.

And now pictures from Robert Mann (ph), who was actually in this neighborhood and rushed to the scene. He said rescue crews very quickly on the scene here, keeping people back away from the flames. Robert telling us that as soon as he saw the smoke, he suspected this was a crash. He said being close to a military base like this, that's what he expected.

All of these at -- Wolf.

BLITZER: Abbi, thank you.

We'll stay on top of the story for our viewers.

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, stocks are up. For a second straight trading day, the Dow rose almost 299 points today, to close at 8934. Now, during the session, the Dow topped 9000 for the first time in a month. Investors were cheered by President- Elect Barack Obama's plans to increase infrastructure spending.

Over the weekend, he outlined plans for the largest U.S. public works spending program since the creation of the interstate highway system a half century ago.

And the Supreme Court won't hear an appeal from a New Jersey man who says Barack Obama is ineligible to be president. The man claims that Obama was a British subject at birth and therefore is not a natural-born U.S. citizen. The court did not comment on its order rejecting the appeal. At least one other appeal over Obama's citizenship remains at the court. A Pennsylvania man claims that Obama was born in Kenya, not Hawaii, as Obama says.

And Wal-Mart is expected to become the second major U.S. retailer to sell Apple's iPhone. The "San Jose Mercury News" reports the iPhone will be in stock at San Francisco area stores by the last week of December. Wal-Mart would become the second independent retail chain, after Best Buy, to sell the iPhone. The phone is also sold in Apple and AT&T stores -- Wolf, you can go out and get yours now.

BLITZER: Well, you know, I like what I have right now. But we'll see what's going on down there. I'm open to change.

FEYERICK: Absolutely. As we should all be.

BLITZER: Thank you very much. Deb Feyerick will be back.

An online photo creates an uproar for the Obama team and one key aide who posed with a cardboard cutout of Hillary Clinton. We've got the picture. Our political strategists, James Carville and Kevin Madden, they're standing by live to weigh in.

And they lost big last month, but this month, Republicans are actually picking up some seats in the Congress in these special elections. Is it because Barack Obama isn't on the ballot?

Plus, a tour of the Dallas neighborhood about to become the home of the soon to be former first couple.

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


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

Happening now, an Obama aide's embarrassing photo pops up on the Internet. The president-elect's speechwriter forced to issue an apology to Hillary Clinton. We'll have more on that story.

Also, a deal to bail out the auto industry could be struck at any moment. What can the big three expect from taxpayers? We're standing by for a news conference. The House speaker, Nancy Pelosi, will have information.

And tourists caught up in riots in Greece right now -- we're going to Athens. Plus, we have new pictures of the violence from our own viewers.

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

The Internet helped Barack Obama win the White House. Now it's coming back to bite his team in an embarrassing way.

CNN's Samantha Hayes has been looking into the story for us -- all right, Sam, what's going on?

SAMANTHA HAYES, CNN CORRESPONDENT: Wolf, it is a bit embarrassing for the Obama camp because it involves their newly appointed director of speech writing, and Senator Hillary Clinton.


HAYES (voice-over): The new president is known for his inspirational prose.

OBAMA: Because of what we did on this day in this election at this defining moment change has come to America.

HAYES: Not so well-known, his 27-year-old speech writer Jon Favreau, if ever there was a job where one should be heard and not seen, this would be it. But on Facebook, look who's face popped up, Favreau grow groping a cardboard cutouts of Obama's former rival Hillary Clinton.

DANA MILBANK, WASHINGTON POST: He's -- has a very advanced position for somebody of his age. After all, he's a few years out of college and was doing at a social event what people at that age are occasionally somewhat older tend to do.

HAYES: It might just be that the age-old problem of immaturity can't be solved by new technology. Andrew Rasiej studies its influence in politics.

ANDREW RASIEJ, PERSONAL DEMOCRACY FORUM: I'm sure after this particular incident, there will be more sensitivity what people post on their MySpace spaces or what kind of e-mails they may send.

HAYES: Membership on social web sites was a disclosure requirement, number 58 in the lengthy vetting questionnaire. Favreau has already been formerly named to the new administration.

RASIEJ: With every new advance of technology, there needs to be understanding of what its implications are and what it means.

HAYES: A Clinton spokesperson says the Senator accepts Favreau's apology but the issue isn't over for one women's right's group. The New Agenda is encouraging its members to contact the transitional team and says "this type of behavior at very least needs to be denounced by Obama."


HAYES: And the Obama transition tells CNN Favreau is not available for comment. As far as they are concerned, he has apologized, she has accepted and the issue is over.

BLITZER: All right. Thanks very much. Fascinating how people have to really be careful nowadays. Thanks, Sam, for coming in.

Let's talk about what's going on with our CNN political contributor and Democratic strategist James Carville and Republican strategist Kevin Madden.

James, it's fascinating see how stuff like that can get blown up. But I guess it's a sign of the times.

JAMES CARVILLE, DEMOCRATIC STRATEGIST: I don't know whether it's a piece of cardboard, stupid. That's all it is. This new agenda crowd need to get a new agenda, a new agenda of women that are losing their jobs, a new agenda of battered women and women that are victims of sex discrimination and not this kind of silliness. This guy was having a good time. He did absolutely nothing wrong. I think this is wrong a lot. People look at this and say is this really what we're talking about? I think he's a very talented young man, and he was doing something that 27-year-olds, I hope when I'm 67 I'm doing that. He was enjoying himself having a good time. He hurt no one. I don't think he did anything inappropriate.


KEVIN MADDEN, REPUBLICAN STRATEGIST: Look, most importantly, it's a tough reminder that in an information age like we have right now where information is so mobile, with the click of a mouse, you know an image or a statement by a campaign staffer can embarrass the candidate. And that's something that everybody has to be very vigilant about. You know, the simple facts, if I went out right now and got caught jaywalking they would probably say Kevin Madden former Romney spokesman caught jaywalking. It's incumbent upon staffers to be reminded of that, and boy, I'm just glad we didn't have the digital photography out when the Romney campaign ended. There would probably be a lot worse photos.

BLITZER: Or when James was at LSU. Right, James?

CARVILLE: Exactly. No telling what would -- it won't have been a piece of cardboard. I promise you that. But I mean, to go back to -- what it is, how does a guy having a good time at a party, that doesn't have anything to do with the president-elect on Mr. Favreau's talents as a speech writer or his future. I just think that god, with all of the people that put this stuff up on Facebook or YouTube or whatever it is, these are really sick people that go around and do this and put this stuff up. They need to go check themselves into some kind of psychiatric help.

MADDEN: Jon Favreau's a very talented guy. We ought to move on.

BLITZER: So let's move on right now.

CARVILLE: He's apologized for absolutely nothing for fondling a piece of cardboard. I don't know why you have to apologize for that.

BLITZER: He's got a point. James, let's talk about New York state for a moment. Hillary Clinton is going to be leaving her senate slot. Governor David Paterson has to name someone to replace her. Lots of buzz about Caroline Kennedy. What do you think about that?

CARVILLE: This is -- the New York senate seat is really something. You're talking about Jacob Javits, Robert Kennedy, Daniel Patrick Moynihan, Hillary Clinton, all of the truly great Senator Schumer obviously.

I can certainly see that, but there are a lot of people, I've been in Congress for a long time. The governor has a very tough decision to make here. The party would love Caroline Kennedy. Obviously the iconic family of the Democratic Party but I suspect that people like Nita Lowey and some of these other people are saying look, don't forget about me. So it's going to be an interesting choice there. We've got a lot of choices for New York Democrats. I think there's a lot governor Patterson is getting a lot of lobbying there.

BLITZER: Nita Lowey, by the way, has taken her name off the list the last I heard. Just because Caroline's last name is Kennedy, Kevin, should she necessarily get that slot?

MADDEN: Well, you know, I think the most important thing for New York politics is that you have a candidate that can balance and appeal both down state and upstate. There aren't very much Congressional Democrats that are being considered that can do that. I think what the Democrat party is going to look for is somebody with that status like a Kennedy who's going to be so well-known. Upstate New York, isn't going to have problems building a vast organization behind that big name and behind that celebrity status. I think some of these other candidates from upstate New York that may not have the name I.D. they need down state would have a tough time against a Republican. Someone like Peter King who has a very strong base down state and appeals to the constituencies in Albany counties and Westchester would be tough to beat by these lesser known Congressmen and Congress women.

CARVILLE: Senator Clinton's last name certainly didn't hurt her. Caroline Kennedy, I think Robert Kennedy, served in that seat. She's a very thoughtful woman.

BLITZER: No, she's got a lot of credentials and there's no doubt she would be a very formidable opponent to any of those Republicans down the road in 2010 or 2012. There's no doubt about that. She was an early supporter, as we know for Barack Obama and helped in the vetting of his vice presidential candidate, Joe Biden.

Let's talk about this Congressional race that happened over the weekend where you are in Louisiana. James, the long-time Democrat William Jefferson all of us remember he had about 90,000 plus in his freezer. He was indicted. He got re-elected two years ago but you know what? A Vietnamese American, a moderate Republican beat him this time. It was pretty dramatic and pretty surprising given the makeup of that Congressional district.

CARVILLE: Actually I met the new Congressman today at lunch. It was. But there's one you know, the person that had the most influence in this election was Gustav.

BLITZER: Hurricane.

CARVILLE: Remember, had it not been for hurricane Gustav, this would have taken place on Election Day and I think most observers would have said maybe Jefferson would have won. This was an extraordinary win. He may be a one-term Congressman I think is definitely going to be the case. At a point, there was a lot of dissatisfaction with Congressman and Jefferson and people were pretty upset about what happened. He really won't have run the primary had the field been reconfigured differently. At any rate, congratulations. I met this young man today. He seems like an outstanding young fellow.

BLITZER: His name is Cao. We showed a picture of him with his family. It's interesting the first Vietnamese Congressman is coming from Louisiana. He's a Republican. I think the first Indian American governor is from Louisiana, Bobby Jindal. And you know, a lot of people probably are surprised that Louisiana James, his home state is producing these Republicans with these very distinct boundaries, Kevin.

MADDEN: I think that Joseph Cao and Bobby Jindal are signs of a new beginning for the Republican party. They run because they ran on ideas and reform. And the Republican has always flourished when we've put forth solution oriented policies on the issues that people care about, health care reform, education reform, making sure we keep the lower burden of taxes so working Americans can put more in their pocket. When we do that and run as the party of reform and ideas, we win. This win in Louisiana is indicative of good things to come. I don't think it's everything. As my father always used to say, the journey of a thousand miles begins with the first step. We have some building blocks here for the road forward.

BLITZER: Somebody else very famous said that, as well. Kevin, you used to be the press secretary for Mitt Romney. Now there are reports he's beginning the process of paving the way for another run for the White House in 2012. What can you tell our viewers about this?

MADDEN: We've still got about two weeks left, two or three weeks left in 2008. I think it's entirely too early to speculate about 2012. Governor Romney, every conversation I've had with him, he's been focused on rebuilding the party. That's going to be a long process and a process that involves other individuals outside of Governor Romney. I think any talk of 2012 premature. The focus is on rebuilding the party.

BLITZER: He sounds like a pretty good press secretary for Mitt Romney.

CARVILLE: Not me. I'm always focused on the next election. I'm focused before this one's over and ready to get back into the political season. I think governor Romney is quite focused on 2012. It's probably a little bit early to announce.

BLITZER: A lot of people are already thinking. All right. We'll leave it right there. James Carville, Kevin Madden, good discussion.

Cars and shops torched. Tourists holed up in hotels. We're going to have the latest on riots that are sweeping Greece right now.

Who's snubbing whom? Oprah Winfrey says she's getting the cold shoulder from Sarah Palin. What's going on between the talk ho host and the former vice presidential candidate?

Stick around. You're in THE SITUATION ROOM.


BLITZER: A court hearing has just ended for five American men now charged in a blood bath that left dozens of Iraqi men, women and children dead or injured. The accused are all former employees of the private security contractor Blackwater and they're all facing manslaughter charges.

Let's go to our justice correspondent Kelli Arena. She's working the story for us. Kelli, what happened in court?

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Well, Wolf, the judge decided to release the defendants on their own recognizance and judging by the appearance of their lawyers outside that courtroom, they are planning an aggressive counterattack.


ARENA (voice-over): Seeing the government describe -- the scene they described is horrific.

JEFFREY TAYLOR, U.S. ATTORNEY: None of the victims of this shooting was armed. None of them was an insurgent. Many were shot while inside civilian vehicles that were attempting to flee from the convoy. ARENA: When the shooting ended, at least 14 Iraqis were dead, 20 wounded. Now five former Blackwater security guards are facing possible 30-year minimum sentences for man slaughter and weapons violations. A sixth guard cut a deal with prosecutors and turned on his former colleagues.

UNIDENTIFIED MALE: We take no pleasure in charging individuals whose job it was to protect the men and women of our country. But when individuals are alleged to have violated the law while carrying out those duties, we are duty bound to hold them accountable.

ARENA: Defense lawyers say their clients were acting in self- defense after being ambushed in a war zone. And that the case is politically motivated to appease the Iraqi government.

DAVID SCHERTLER, DEFENSE ATTORNEY: We're going to fight these allegations and we'll take it to court.

ARENA: The charges were brought under an act covering defense department contractors, but because the Blackwater guards were under contract with the state department, defense attorneys say the law does not apply.

SCOTT SILLIMAN, DUKE UNIVERSITY LAW SCHOOL: It's a novel issue. This is the first case. And we don't know how that court's going to decide.

ARENA: All five men surrendered in Utah where one of the defendants lives. Their lawyers want the case moved there where legal experts say they would find a more (INAUDIBLE)


ARENA: Blackwater the company was not charged and in a statement it was extremely disappointed that one of them pleaded guilty. Wolf?

BLITZER: Thanks, Kelli, for that.

Blackwater was founded back in 1997. The company says its mission is to support training needs for the U.S. military and law enforcement as well as providing security guards and peace keepers. Blackwater also trains dogs to detect drugs and explosives. Its training facilities are so well equipped the U.S. military sometimes uses them. Blackwater even has its ownership which it says is available to help protect client vessels from pirates off Somalia.

Tourists are being warned as Greece is gripped by a third day of riots. It began after Athens police shot and killed a teenager. Violent protests have spread to cities across Greece and the island of Crete and Corfu. Our Phil Black is in Athens with the latest -- Phil?

PHIL BLACK, CNN CORRESPONDENT: Wolf, this is the third night of violence on the streets of Athens. We just set the scene for you. On one side, the smaller persistent group of rioters. Here the riot police protecting the country's parliament building. These various sides have been running battles through the day and some have been pretty intense and the violence and destruction wreaked upon the city is extraordinary. We've seen cars burnt out, whole buildings have gone up. It doesn't look like the anger over the death of this 15- year-old boy is going to die down just yet.

We can see the police moving across again. They have consistently been using tear gas to force back these groups. And it generally, would but they keep coming back again. Just here are some of the city's main international hotels. Governments around the world including the United States have told citizens not to come here if they can help it. It doesn't help the people here already. The feeling here on the ground is that this violence isn't going to end tonight such is the anger. It could still have some days in it yet -- Wolf?

BLITZER: Phil Black will stay on top of the story for you.

Viewers caught in the middle of the riots, by the way, have been sending us video and photos of this violence. Our internet reporter Abbi Tatton has been monitoring our I-reports coming in from Greece. Some of them are pretty dramatic.

TATTON: Wolf, especially a bunch from a group of American students studying abroad right now in Greece the second city. This picture is from Robert Mari, this happening right there on his doorstep in the apartment at the university. Robert describing how there's been a standoff, protesters holed up inside the university lobbing stones, Molotov cocktails at times at police waiting nearby.

And a video from one of his friends Konstantine Kourdis who is at the University of Connecticut. This one is videotaping the police response. That cloud hovering at the end of the street you see in so many of the pictures, tear gas which Konstantine says is affecting everybody that passes by, not necessarily the protesters.

Craig Wherlock lives in the city. He captured these pictures and telling me it's like living in a war zone right now. Armed police taking and retaking strategic points. The smell of burning plastic in the streets an at all times. There are periods of calm, but they're hearing of more protests and strikes to come.

BLITZER: I bet a lot of American parents are worried about their kids who are students in Greece right now. We'll watch and bring more to our viewers, Abbi, thank you.

As his term comes to an end, President Bush is getting ready to move to a new house.

UNIDENTIFIED MALE: No matter where he goes, he is not going to be met with adoring crowds. There are going to be just as many people sticking their fingers out the window at him.

BLITZER: From the White House to a more modest house. You're going to meet the new neighbors of the soon-to-be ex-president.

And Oprah Winfrey versus Sarah Palin. Who is giving and getting the cold shoulder? Stay with us. You're in THE SITUATION ROOM.


BLITZER: Governor Sarah Palin has been speaking a lot since the election, but not to Oprah Winfrey. So here's the question. Who's snubbing whom? Kareen Wynter is joining us now from Los Angeles working the story.

Kareen, what are you hearing?

KAREEN WYNTER, CNN ENTERTAINMENT CORRESPONDENT: Well, Wolf, Oprah Winfrey, she may have been named the most powerful woman in Hollywood, but she still wasn't able to get a sit-down with Sarah Palin. And, Wolf, here's what she told the "E!" network about that.


UNIDENTIFIED MALE: You invited her on the show. Why didn't she come on the show?

OPRAH WINFREY, TALK SHOW HOST: Well, listen, I certainly don't propose to be one who can speak for her. I had said -- first of all, I never snubbed her. Let's just clear that up. There was never any conversation about having her on prior to the election because I always knew I wasn't going to do anybody. After the election, I said I would talk to anybody who wants to come and talk. So I extended the invitation. And her answer was, Matt Lauer, Larry King and Wolf Blitzer. So I wasn't a part of the answer. That's really OK. You know, that's -- you know, we all ask for interviews that you don't get. But I hear she has a book coming out. Maybe she'll talk to me then.


WYNTER: Palin's spokesman released a statement today saying that she turned down invitations to appear with Letterman, Leno, Stephanopolus and Jon Stewart and Wolf also added we're up to about 250 requests for interviews and appearances and so on. It's worldwide. There's still a tremendous amount of interest. It's nothing personal about Oprah. It's just that she turned down the vast majority of these requests. A future appearance wasn't ruled out. Wolf?

BLITZER: The Oprah plans for the inauguration, it's a pretty dramatic development what she's decided to do. She's been a huge, huge supporter of Barack Obama.

WYNTER: Absolutely. And, Wolf, she's going to be heading to D.C. along with so many other people in January. She not only plans on going to the inauguration ceremony, but she's actually going to move. That's right, move her show to D.C. to shoot at least two episodes during the big week. She did tell the Associated Press that she won't be taking a cabinet post with the Obama administration. She says she never considered taking on a role here and that even if she wanted to, she has contractual obligations that would prevent it. BLITZER: We'd love her to join us here in THE SITUATION ROOM while she's in Washington. That would be nice. All right, Kareen. Thanks very much for that.

A deal on a bailout for the auto industry now believed to be very close.

Plus, Condoleezza Rice and Hillary Clinton having dinner tonight here in Washington according to our CNN sources.

Plus, my latest interview with the secretary of state. She reevaluates -- evaluates, I should say, her replacement and talks about what Barack Obama means for her.


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

Happening now, a new plan to bail out to U.S. carmakers under review at the White House. A deal with Congress could come at any time. And the big three could get billions in loans in a matter of days.

Plus, repairing cities and creating jobs fast. Mayors tell Congress it's a win-win situation, but they need big bucks to do it.

And dinner and diplomacy. Hillary Clinton and Condoleezza Rice breaking bread tonight. My interview with the outgoing secretary of state and what she thinks of her likely successor. All that and the best political team on television.

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

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