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President-elect Obama Seeks Distance from Blagojevich Scandal; Record Low Interest Rate; $50 Billion Scam

Aired December 16, 2008 - 16:00   ET


WOLF BLITZER, CNN ANCHOR: Happening now, Barack Obama learns a lesson about responding to scandal, even as he names his choice for education secretary. The president-elect is going to new lengths to stay away from the Illinois governor's corruption case.
Plus this -- victims of the $50 billion fraud, they're speaking out. New details about how they were allegedly duped by a powerful money manager in what is being called one of Wall Street's biggest scams ever, maybe the biggest one, period.

And President Bush opens up about what he calls one of the weirdest moments of his presidency. This hour, an exclusive interview with Mr. Bush on anger at the U.S., the auto bailout, and career advice for his own brother Jeb.

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

But we begin with the president-elect. Barack Obama today nominated an education secretary who is not afraid of embracing controversial ideas. But at the same time, Mr. Obama tried to put more distance between himself and the controversy engulfing the Illinois governor and Illinois politics in general. The corruption case against the governor still at a very sensitive moment right now. It's a very sensitive subject for the Obama transition team, as well.

Let's get the latest from our National Political Correspondent Jessica Yellin. She's covering the transition to power in a very snowy Chicago.

It's beautiful out there behind you, Jessica, but update our viewers on what's going on today.

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Wolf, Barack Obama kept a very tight control over his message today, even at one point interrupting a reporter to do it.


YELLIN (voice-over): At this Chicago school, President-elect Obama got friendly questions from one audience.

UNIDENTIFIED MALE: How will you feel when you move to the White House?

YELLIN (voice-over): But he had a rockier ride with another. He shut down a reporter who asked about contact his aides may have had with the governor's office.

BARACK OBAMA (D), PRESIDENT-ELECT: John, let me just cut you off, because I don't want you to waste your question.

YELLIN: Instead, the president-elect kept a tight focus on his agenda, naming his educator in chief, Chicago friend and basketball buddy, Arne Duncan, who once played professionally overseas.

OBAMA: I just want to dispel one rumor before I take questions. I did not select Arne because he's one of the best basketball players I know.


YELLIN: Duncan has run the Chicago school district for years, earning a reputation as a reformer and a centrist who has produced results. Scores are up, dropout rates are down.

ARNE DUNCAN, EDUCATION SECRETARY NOMINEE: It is the civil rights issue of our generation, and it is the one sure path to a more equal, fair and just society.

YELLIN: He has backed controversial policies, including paying students for good grades, closing failing schools, opening charters.

OBAMA: Let's not be clouded by ideology when it comes to figuring out what helps our kids.

YELLIN: The most controversial? He supported the creation of a gay-friendly high school. Proponents say it would have been a safe place for gay and lesbian teenagers who have experienced bullying. Duncan tells CNN, "This is a kind of innovative idea we will look at and evaluate on the national level."

One reporter asked Obama, if he thinks so highly of Duncan's accomplishments, why didn't he send his girls to public schools?

OBAMA: First of all, I think Arne, Joe, myself all agree that the Chicago public schools aren't as good as they need to be.


YELLIN: Now, Wolf, Obama was also asked whether he plans to name another Republican to be in his cabinet, and he basically said, well, stay tuned. He has yet to name four more cabinet posts. We expect him to announce Ken Salazar to be interior secretary tomorrow, so that leaves three up in the air.

And Wolf, if you have any tips on dealing with the snow, I could use them. I'm from L.A. You're from Buffalo.

BLITZER: Here is my biggest tip, go inside. Maybe go in the CNN Express behind you.

YELLIN: Thanks.

BLITZER: And get out of the snow, although it's lovely, Jessica. Thank you.

We'll have more on Barack Obama coming up.

But there was big news on the economy today. Stock prices shooting up after the Federal Reserve cut a key interest rate to its lowest level on record.

Let's go to our Chief Business Correspondent Ali Velshi. He's working this story for us.

The bottom line on the rate cut is what, Ali?

ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: Well, it's a tricky bottom line. I've been doing this for many, many years. And today we were in uncharted territory again.

The Fed has lowered its feds fund rate, which is the key rate we talk about, to between zero and a quarter of a percentage. We've never actually seen -- well, not never. We haven't seen it since the '90s. We haven't seen a range.

We expected a rate cut. Now, what the effective benefit of this is, is that it lowers the prime rate to 3.25 percent. So if you have an interest rate that's tied to prime, like your credit card or a home equity line of credit, or some loan, that rate got lowered by basically .75 percent today. But very unusual that they've allowed a range. That gives them a little wiggle room -- Wolf.

BLITZER: What else has the fed done, Ali, to try to build confidence out there? Because it's pretty shaky right now.

VELSHI: Yes. Typically, you know, I describe the Fed as being like a car that doesn't have a steering wheels and doesn't have gears. Basically, they just have brakes and gas.

They can lower interest rates -- that's the gas -- or they can raise interest rates. That's what the brakes are.

Well, they've cut interest rates, but they've actually tried a few more things obviously over the last few months. They have injected money directly into the financial system.

They've directed short-term lending to companies, companies that used to have to go through one of these investment banks and get it from other lenders. They've done that. They've bailed out financial firms and they've offered to buy them. They're actually buying repackaged mortgages directly from Fannie Mae and Freddie Mac, allowing those two companies to have more money to give to banks so that they could lend to more consumers.

So, the Fed is in uncharted territory. They're doing things they haven't done before. The immediate effect obviously hasn't been seen, Wolf, but there is some hope that all of this elixir will kick in sometime in the next few months and boost the economy.

BLITZER: All right. So briefly explain how this latest rate cut is going to affect individuals and businesses out there.

VELSHI: OK. Pretty easy to understand.

When rates are lower -- think about this in your own life -- it makes money cheaper so people borrow money. If businesses have a little more money that they're not paying in interest, they might think about expanding.

All we've talked about is businesses laying people off. So businesses will possibly expand as a result of it.

People get to pay lower rates and theoretically, Wolf, if people have lower rates, they may spend more. Again, the Fed has cut rates 10 times and we haven't actually seen it kick into consumer spending. But that's the theory behind why you cut rates -- money is cheaper, people will spend it more.

The issue here is that credit is still hard to get. Even if it's cheap, if banks don't trust that they'll get paid back, they think you might lose your job, they're not lending that money. That's the problem. So it's half of the equation. The other half is bringing trust back into the system, and that will be based on whether we think this economy is going to improve and people will stop losing their jobs and home prices will stop dropping -- Wolf.

BLITZER: And that's going to take time.

VELSHI: That will take time.

BLITZER: We'll see how much longer that will take. But we'll watch it.

Ali, thank you.

Many investors still are trying to wrap their brains around an alleged $50 billion scheme that supposedly drained money from big banks, family charities and the rich and famous. Some of those who say they were bilked by the fund manager Bernard Madoff, they are now venting their anger, as they should.

Let's go to CNN's Deb Feyerick. She has more on this alleged Ponzi scheme that continued for years and years without anyone apparently paying attention, Deb.

DEBORAH FEYERICK, CNN CORRESPONDENT: Absolutely. And that's why people are so upset by this. Jewish charities and foundations were primarily affected, but the impact is likely to be felt by people who never even knew the name Bernard Madoff -- people with disabilities, victims of domestic violence, people who really benefited from the kindness of strangers.


FEYERICK (voice-over): They have all taken a hit -- hospitals, universities and religious schools, senior centers, even human rights programs providing legal help to Guantanamo detainees. All relied on money from Jewish charities. All are now tallying their losses, figuring out how to survive the alleged Bernie Madoff Ponzi scheme.

MORT ZUCKERMAN, EDITOR-IN-CHIEF, "US NEWS & WORLD REPORT": The purpose of all of that money in this charitable fund was to do good work, not to have it siphoned away by some crook.

FEYERICK: The charity run by real estate mogul Mort Zuckerman lost $30 million, about 10 percent of its value, because of the alleged fraud. He is one of several prominent Jewish donors including filmmaker Steven Spielberg and Holocaust survivor and humanitarian Elie Wiesel, whose charities have been hurt, if not devastated, by the Madoff scandal.

(on camera): So these are the offices that you were planning on selling back here.

ROBERT CRANE, JEHT FOUNDATION. They're not going filled yet.

FEYERICK: They're not going to be filled.

CRANE: Not by us, anyway.

FEYERICK: Robert Crane of the Levy-Church JEHT Foundation in Manhattan got the devastating news the charity was done the same day investors learned they lost virtually everything.

CRANE: We spent all weekend figuring out how we could reasonably put an end to the -- cease the work of the foundation in a way that was respectful to all the people that we fund, and to the staff and to our colleagues in philanthropy.

FEYERICK: The JEHT Foundation, which operated on money supposedly invested by Madoff, was distributing $20 million to $30 million a year to more than 150 organizations dedicated to human rights. Now all of those charities will suffer, as well, charities like the Innocence Project free wrongly imprisoned individuals and groups helping Guantanamo detainees.


FEYERICK: Now, because Bernard Madoff was well known and respected in prominent Jewish communities, a number of Jewish day schools and community centers like the JCC invested with him. Yeshiva University reportedly lost more than $100 million on investments in Madoff's funds. So people really right now doing the math and trying to figure out whether they can stay afloat, how this will impact them in the long run -- Wolf.

BLITZER: I'm told the financial devastation is only just beginning to emerge because the details, a lot of them, have yet to come out.

By the way, we're going to be speaking with Mort Zuckerman, who was in your piece. He's going to be joining us later here in THE SITUATION ROOM.

Deb, thanks very much. Let's go to Jack Cafferty. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: We're now entering the second week since the Illinois Governor Rod Blagojevich was arrested by FBI agents who arrived at his home bright and early one morning and took him into custody. He was released on $4,500 bail.

Blagojevich is charged with practicing pay-for-play politics, including trying to sell President-elect Obama's Senate seat. The evidence against him includes numerous federal wiretaps of phones in both his home and his office.

Everyone from local leaders to the president-elect have called on Blagojevich to resign. But he hasn't done so, nor has he given any indication he intends to do so.

On the contrary, with an arrogance that is breathtaking, he goes to work every day as though nothing has happened. Maybe that's because pretty much nothing has happened.

An Illinois House panel met today to decide whether or not to impeach Blagojevich, but they adjourned almost as quickly as they convened. They said they're going to meet again tomorrow when the governor's lawyer can be there. Even if impeachment goes forward, it could take weeks or even months.

Yesterday, the Illinois House of Representatives delayed revoking Blagojevich's power to name a replacement for Barack Obama's Senate seat. No explanation. They just didn't do it.

Here is the question: Is Illinois moving quickly enough to deal with the Blagojevich scandal?

Go to You can post a comment on my blog -- Wolf.

BLITZER: Jack, thank you.

President Bush, meanwhile, he's opening up in these, his final days in office.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: First of all, it's got to be one of the most weird moments of my presidency. .


BLITZER: The president on a strange closing chapter of his presidency. Stand by for our exclusive interview. He sat down with Candy Crowley today at the White House.

And some Hillary Clinton fans don't want Caroline Kennedy to fill her shoes in the Senate. Does Senator Clinton, though, agree with that?

And another new twist in the Minnesota Senate recount. Will the last Senate cliffhanger of election 2008 finally be resolved?

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


BLITZER: Caroline Kennedy has at least one big supporter of her bid to become a United States senator. The Senator Majority Leader Harry Reid, he's gushing about the prospect of Caroline Kennedy's replacing Senator Hillary Clinton. Reid even says he's called New York's governor, David Paterson, on Caroline Kennedy's behalf. That's what Reid said in an interview with Nevada political analyst John Ralston (ph).

Let's go to New York. Mary Snow is working this story for us.

All right, Mary, what's the latest? Lots of interest in what's going on in New York.

MARY SNOW, CNN CORRESPONDENT: There certainly is, Wolf. And as you just pointed out, as one high-powered Democrat is speaking out, another high-powered Democrat here in New York is not talking about this process. That's Hillary Clinton. Some of Clinton's supporters though have been critical of Caroline Kennedy, and they are, in essence, getting the signal to cool it.


SNOW (voice-over): One person who isn't commenting on Caroline Kennedy's interest in becoming a U.S. senator is the woman Kennedy wants to replace, Hillary Clinton. Her spokesman says it is entirely Governor Paterson's decision, and she hasn't commented on any individual candidate.

Outside the Clinton event Monday, some supporters, though, haven't forgotten the sting of Kennedy's endorsement of Obama.

UNIDENTIFIED FEMALE: I don't think she has the experience, and I think it would be a slap in the face to Hillary to give her the job.

SNOW: A person familiar with the replacement process says supporters who made anti-Caroline Kennedy comments were immediately rebuked by the Clinton team, which included Congressman Anthony Weiner and Robert Zimmerman, a CNN contributor, DNC member and Clinton supporter.

Weiner was not available to respond, but Zimmerman says he is not speaking for Clinton when he questioned Kennedy's qualifications.

ROBERT ZIMMERMAN, CNN CONTRIBUTOR: That's her challenge, to demonstrate her qualifications, her passion, her experience that enables her to hold this particular post.

SNOW: Former New York City mayor Ed Koch, who supported Clinton, chided critics who questioned Kennedy's qualifications.

ED KOCH (D), FMR. NEW YORK MAYOR: I say it's baloney. I say she's as qualified as any of those in the Senate. I think there are a lot of qualified people in the Senate, some who are not qualified. She's as qualified as the best.

SNOW: Koch says he favors either Kennedy or State Attorney General Andrew Cuomo, who was married to Kennedy's cousin. Cuomo was asked about his potential competition.

ANDREW CUOMO, NEW YORK STATE ATTORNEY GENERAL: I have a very high opinion of Caroline Kennedy. I've known her a long time. In terms of qualifications for this position and selection for this position, that's up to the governor. It's his process, it's his determination, and I would leave it at that.


SNOW: As this process moves forward, Wolf, Kennedy has hired a political consultant who has worked for other New York politicians, including Senator Schumer, Mayor Bloomberg, even Andrew Cuomo. Now, Kennedy is also expected to visit Upstate New York in the near future, where she'll need to shore up support -- Wolf.

BLITZER: Mary, all right. Stand by. Thanks very much.

President-elect Barack Obama is not quite robbing the Senate to fill his cabinet, but his victory certainly has created four open Senate seats -- Hillary Clinton's seat, as you know, if she becomes secretary of state; Joe Biden's seat, already to be filled by Biden's former chief of staff. Their replacements will serve until a special election is held in 2010.

Meanwhile, who will replace Barack Obama? The Illinois scandal complicates that, to be sure, but Obama's replacement will serve until a general election in 2010, because that seat is up for reelection then. The same is true, by the way, for Colorado Senator Ken Salazar's replacement. Obama is expected to nominate Ken Salazar for interior secretary, perhaps this week.

That, according to transition sources. You heard Jessica Yellin report it at the top of the hour.

So many Kennedys have served in so many government posts, they've become a political dynasty.

Our Senior Political Analyst Bill Schneider is joining us now.

Bill, why would Caroline's Kennedy's appointment to the U.S. Senate be all that significant in and of itself?

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Well, because Caroline Kennedy could become the bearer of the Kennedy legacy for the next generation.


SCHNEIDER (voice-over): The Senate occupies a special place in the Kennedy legacy. It's where three Kennedy brothers first became national figures. Now JFK's daughter has expressed interest in becoming a senator, thereby fulfilling the wish her father expressed to NBC News in 1957, a few days before Caroline was born.

JOHN F. KENNEDY, FMR. PRESIDENT OF THE UNITED STATES: And I hope if I had a daughter, I might encourage her to play some part. I don't think this should be confined to men only.

SCHNEIDER: The Kennedys believe in politics as public service. Caroline Kennedy has done her share of service, defending privacy rights, raising money for New York City schools.

KERRY KENNEDY, COUSIN OF CAROLINE KENNEDY: She doesn't care about fame, she doesn't care about money, she doesn't care about power. What she really cares about is public service.

SCHNEIDER: Not ideology, not personal advancement, public service. Is that a good qualification for a senator?

MAYOR MICHAEL BLOOMBERG (I), NEW YORK: She has got as much experience as anybody else in terms of the issues that a senator deals with.

SCHNEIDER: This author sees her as a good candidate to inherit Hillary Clinton's Senate seat.

JOHN AVLON, AUTHOR, "INDEPENDENT NATION": The arguments being used against her, that she is coasting on her family name, that she's got a career in public service but not public office, are the same arguments that were used against Hillary Clinton in 2000.

SCHNEIDER: John F. Kennedy has inspired many to take up public service. His daughter has found her own source of inspiration.

CAROLINE KENNEDY: I've never had someone inspire me the way people tell me my father inspired them. But I do now -- Barack Obama.


SCHNEIDER: She was part of the Obama campaign and she wants to continue to be a part of Obama's movement.


SCHNEIDER: Caroline Kennedy sees the Obama presidency as the best way now to advance the Kennedy legacy, the ideal of politics as public service -- Wolf.

BLITZER: Interesting stuff. Bill Schneider, thanks for the history.

By the way, some have likened the Bush family to a political dynasty, as well. Should their political ties continue? Wait until you hear what President Bush is now saying about his brother Jeb potentially running for office again. A CNN exclusive interview with our own Candy Crowley and the president coming up.

And a bus crash is leaving dozens dead. You're going to find out where and what exactly happened.

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



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

Happening now, a week after his arrest on corruption charge charges, the Illinois governor is still ignoring calls for his resignation. Rod Blagojevich hiring a lawyer, while the state legislature lays groundwork right now for impeachment proceedings.

Out with the old and in with the new. Democrat Joe Biden prepares to take over as vice president from his hands-on predecessor, Dick Cheney. Will there be a significant style change by the new second in command?

And a crippling wireless frenzy, could it happen on Inauguration Day? CNN's Jeanne Meserve, she's standing by. She'll examine how Washington right now is preparing for a potential cell phone meltdown.

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

President Bush only has a few weeks left in office, but there still are several things he needs to do before he leaves. So Mr. Bush is talking about the last eight years, but also about the economy and auto bailout and other things on his agenda in the days ahead. In a CNN exclusive interview, the president even talks about his reaction to seeing two shoes being hurled at him in Baghdad.

He spoke with CNN Senior Political Correspondent Candy Crowley, who is here in THE SITUATION ROOM with us.

You go way back with the president. You covered his campaign back when he was running nine years ago, I think we can say. And today he was reflective.

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Yes, he was. In fact, we go back to his first term as governor. So it's been a while since I've interviewed him. It's been eight years, actually. It was the night of his inauguration, was the last interview.

So there was a lot of things you want to go for, and that is, is he different now? What does he -- have him reflect. But then there's the current situation.

So, the first thing, obviously, we wanted to know when we talked to the president was, are you or are you not going to bail out the auto industry?

And, in fact, the answer appears to be yes, but there are some caveats.


BUSH: Well, I have made it clear I'm concerned about two things. One, the financial markets are such that a disorganized bankruptcy could create enormous economic difficulty -- further economic difficulties -- and you know, I feel a sense of obligation to my successor to make sure there is not a, you know, a huge economic crisis.

Look, we're in a crisis now. I mean, this is -- we're in a huge recession, but I don't want to make it even worse. And -- and -- but on the other hand I'm mindful of not putting good money after bad. So we're working through options.

CROWLEY: So, it sounds like you need some assurances from the auto industry to give them...

BUSH: Well, we're just...


CROWLEY: ... some sort of assistance.

BUSH: We're just working on options. What you don't want to do is spend a lot of taxpayers' money, and have then have the same old stuff happen again and again and again.

CROWLEY: And you're -- you're now -- no, you can't get it out of the existing money, that $25 billion stash, and probably will have to take it out of elsewhere?

BUSH: We're looking at all options.


How, when -- so how soon, do you think? You close?

BUSH: We, you know, we're told that the automobiles are, you know, teetering here or teetering there and, obviously, taking in their concerns and taking in the concerns of all the stakeholders and we're trying to get this done in an expeditious way.

CROWLEY: You can't be the president that oversees the collapse of the auto industry in the U.S.?

BUSH: Well, I -- I am -- I'm -- obviously have made a decision to make sure the economy doesn't collapse. I have abandoned free- market principles to save the free-market system. And when people review what's taken place in the last six months and put it all in one -- in one, you know, in one package, they'll -- they'll realize how significantly we have moved.

And I'm so sorry we're having to do it. I'm not real happy about the fact that there have been excesses in the financial markets which are affecting hard-working people and affecting their retirement accounts.

Having said that, I'm very confident that with time, the economy will come out and grow and people's wealth will return.

CROWLEY: Let me ask you about the shoe thing in a slightly different way...


CROWLEY: ... simply because you are the symbol, really, overseas of the United States.

Was there ever a part of you that, in reflection, went, wait a second, we have poured billions of dollars, not to mention U.S. blood and treasure, into this country; how dare this guy...


CROWLEY: ... even if he's a single guy?


BUSH: No, I...


BUSH: I mean, look, first of all, I didn't have much time to reflect on anything.

I was ducking and dodging. And I -- I -- I...


BUSH: First of all, it has got to be one of the most weird moments of my presidency.

Here I am, getting ready to answer questions from a free press in a -- in a democratic Iraq, and a guy stands up and throws a shoe. And it was -- it was bizarre.

And it was an interesting way for a person to express himself. I was asked about it immediately after the incident. And I said, here is a person that obviously was longing for notoriety. And he achieved it.

But I -- no, I don't view this as -- I'm not angry with the system. I -- I believe that a free society is emerging, and a free society is necessary for our own security and peace.

CROWLEY: Do you think they ought to let him out of custody?

BUSH: I don't know what they're going to do. You know, he's -- I'm not even sure what his status is.

I -- they shouldn't overreact.

CROWLEY: The last time I interviewed was the night before -- interviewed you was the night before you were inaugurated.

As we were walking out, someone congratulated you. And you said: "I won't let you down. I won't let you down."

BUSH: Yes.

CROWLEY: Has there been a time in the past eight years when you thought, "I have let the American people down at this moment"?

BUSH: I have given it my all.

I have poured my heart and soul into the job. I have -- I understand, the institution of the president is more important than the individual. And, by recognizing that, you work to strengthen the institution.

And I'm sure people have disagreed with my decisions, but they have been made with a lot of deliberation. And they have been made with one thing in mind, what's best for the United States of America.

CROWLEY: Three yes or nos.

Have you told Jeb to run for the U.S. Senate in Florida?

BUSH: Yes.

CROWLEY: Is he going to?

BUSH: Don't know.

CROWLEY: Really don't know?

BUSH: I really don't know.


BUSH: I wish he would. He would be a great senator.

CROWLEY: Kay Bailey Hutchison vs. Rick Perry, who is your pick?

BUSH: Neutral.

CROWLEY: That's no fun.


CROWLEY: And any -- any thought that you might commute the sentence of Governor Ryan, former Governor Ryan, of Illinois?

BUSH: Won't be discussing pardons or commutations on this show, but thank you for trying to make news.

CROWLEY: I like to -- I like to ask.

BUSH: Thank you for trying to make news.

CROWLEY: But Jeb is interesting.

(CROSSTALK) BUSH: Well, I did answer Jeb.


BUSH: Because, if I said I hadn't talked to him, then you say, "Well, why don't you talk to your brother?"

So, I decided to lay it all out there for...


CROWLEY: Does your dad want him to run?

BUSH: I haven't talk to my dad about whether or not he wants Jeb to run.

I -- I -- first of all, knowing my dad, I bet he would say, "I want Jeb to do that which is best for him." And then he would go on to say, "But, if he chose to run, he would be a great United States senator."

And he would be.


CROWLEY: So, a little brotherly advice there. We will see if Jeb takes it, obviously.

You know, we sort of ran the gamut in this. We also talked about Iraq, whether he ever worried about it, that sort of thing. But he seemed relaxed, if not a little bit tired. He admitted to that, saying, you know, he just came back from Iraq and Afghanistan. So, he was...


We're going to -- in the next hour, we're going to play more of this interview, Candy. You will be back, and -- because you really pressed him on Iraq and the weapons of mass destructions and the whole nine yards, the search for al Qaeda. I want our viewers to stand by for that

But, we will have more of the interview coming up here in THE SITUATION ROOM in the next hour.

You heard the president call it one of the weirdest moments of his presidency. We now have a follow-up on the man who threw his shoes at the president in Baghdad.

Let's bring in our State Department correspondent Zain Verjee.

Zain, the incident is causing quite a stir in Iraq and elsewhere in the Arab world.

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Exactly, Wolf. In Iraq, hundreds of people took to the streets today. They were demanding the shoe-thrower's freedom. Now, he's still in Iraqi custody. And, Wolf, under Iraqi law, he could face jail time, a maximum of two years, for throwing his shoes at President Bush.

There are also conflicting reports on his condition. Some say he's been beaten. Others say he's OK.

In the interview we just heard a moment ago with Candy, President Bush saying, really, that the Iraqi authorities should not overreact. While the president wasn't hurt, Wolf, thanks to his good ducking skills, his press secretary, Dana Perino, landed a black eye.

Take a look at her face. She was hit in the face -- just below her right eye is where the bruise is -- when a Secret Service -- Service agent knocked down the boom mike. As you can see, she was back at work today and asked, how is the eye? She said it's fine, and added this:


DANA PERINO, WHITE HOUSE PRESS SECRETARY: It was just a shoe. And people express themselves in -- in lots of different ways. Obviously, he was very angry.

I can't think of -- I don't -- I can't tell you exactly what the shoe-thrower was thinking, but I can tell you what the president thought, was that he was fine. And he said immediately -- you saw his reaction was, don't worry about it. It was OK.

So, you know, we -- we hold no hard feelings about it, and we have really moved on.


VERJEE: It's an ugly bruise, Wolf, and Dana Perino is calling it a "shoe-venir" -- Wolf.

BLITZER: "Shoe-venir."

Well, I'm sure it will heal well and she will be just fine.


Quick question, before I let you go, Zain. We understand that the president of Venezuela weighed in on this today as well. What did he say?

VERJEE: Yes, he did. And, you know, he's no fan on the United States.

He called the incident funny, and he called the Iraqi journalist courageous. He also said that President Bush should really be congratulated for his great reflexes, that he managed to duck the shoes, and they didn't hit him. And Chavez did say, at least the shoes didn't hit the president. But he appeared to find it amusing. BLITZER: Hugo Chavez weighing in on this issue as well.

All right, Zain, stand by.

By the way, if you thought the 2008 election was long, nothing beats the Senate race in Minnesota. Could the seemingly endless recount finally be wrapping up?

And, in out "Strategy Session": The House speaker, Nancy Pelosi, draws a line in the sand for the incoming White House chief of staff, Congressman Rahm Emanuel.

And, later, Joe Biden as the anti-Dick Cheney -- will the next vice president be the total opposite of the current one, or will he take at least a few tips?

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


BLITZER: There's late word that Congressman Jesse Jackson Jr. may have been helping the U.S. attorney as an informant in that corruption scandal.

Stand -- stand by. We will have the latest -- right here in THE SITUATION ROOM.


BLITZER: President Bush may be on his way out, only four weeks or so to go, but he may not be the last Bush that Washington will be hearing from. The president is encouraging -- as you just saw in that exclusive interview with Candy Crowley, he's encouraging his brother Jeb, the former Florida governor, to run for the Senate. If he does run, could Jeb Bush win? And, if he wins, what might happen next?

Let's discuss this and more in our "Strategy Session."

Joining us, the Democratic strategist and CNN political contributor Donna Brazile, and Republican strategist Karen Hanretty. She served as press secretary for former Republican presidential candidate Fred Thompson.

Karen, welcome to THE SITUATION ROOM.


BLITZER: Good to have you back.

Well, what -- you -- first of all, what do you think? Do you think Jeb is going to run? Because there's a lot of -- he -- he says he's interested in Mel Martinez's seat.

HANRETTY: Right. I think odds right now are about 50/50. If he runs, I don't think you will see any Republicans challenging him in a primary. The field would be cleared for him. Certainly, he knows that. So, any, you know, indication that he gives early on that he's interested is causing a lot of waves among Republicans who would really like to run for that seat.

BLITZER: It's interesting, because, you know, President Bush's job approval numbers are not good, but Jeb Bush was a very popular governor of Florida.

DONNA BRAZILE, CNN POLITICAL ANALYST: And, if I look at it from a Republican perspective, of course, Jeb Bush would help revive the Bush name. He will rally conservatives. He will also be able to fill a -- a void in the conservative leadership circles.

So, I think he's a three-fer. He has a name that, while, across the country, is not worth much, but, in Florida, people still like him.

BLITZER: Well, then, the question would be, if he runs in 2010, and wins that U.S. Senate seat, does he automatically then become a potential Republican presidential candidate in 2012?

HANRETTY: I wouldn't -- I wouldn't go that far. I think you're right. He would be very popular in Florida. It would really, I think, reenergize a lot of conservatives.

Look, Jeb Bush is very much loved by Republicans, perhaps today more so than President Bush, not just, you know, in Florida.

BLITZER: Do the Democrats have any really good candidates right now in Florida that are gearing up to run for that Senate seat?

BRAZILE: You know, I like Kendrick Meek. There is Debbie Wasserman Schultz. There are a number of good congresspeople that could clearly run for that seat in 2010.

BLITZER: Yes, but it's not just South Florida you have to worry about when you're running for the state. You have got to worry about the central part, and the northern part, the western part. It's a big state.

BRAZILE: I'm biased. I like the southern part of Florida.

BLITZER: I like the southern part of Florida, too. I...


BRAZILE: I visited 21 times this past year.

BLITZER: It's a lovely -- it's a lovely place to visit.


BLITZER: All of Florida is a nice place to visit. But it would be a challenge for the Democrats to beat Jeb Bush in 2010.

BRAZILE: But I think the Bush brand right now is -- is -- is heavily damaged nationally. And, while they're arm-twisting him, there is no question that he could be beaten.

BLITZER: All right, let's -- let's see what happens in the next -- it's a long, long time to come.

BRAZILE: A long time.

BLITZER: Although, if you're serious about running for the Senate seat in 2010, now is the time, right?

HANRETTY: Now is the time to start raising money.



BLITZER: You have got to -- you have got to start worrying about it right now.


BLITZER: You can't waste a lot of time.

BRAZILE: I want to mention one more Republican, Adam Putnam. He's young. He's savvy. He's conservative. If Jeb decides not to run, I think Adam Putnam should be considered

BLITZER: Yes, he's a leader in the Republican -- in the Republican Caucus...


BLITZER: ... in the House of Representatives right now.

HANRETTY: And if he doesn't run, that will be a crowded field of Republicans who would like that seat.

BRAZILE: That's right.

BLITZER: He's still in his 30s, right?

BRAZILE: Absolutely. That's why I know him. I -- I like young people.

BLITZER: Yes. All right.


BLITZER: All right, let's a little bit about Rahm Emanuel, who you know very well, the congressman who is going to be the White House chief of staff under President-elect Barack Obama. And Nancy Pelosi, she seems -- at least if you read this article on, she seems to be laying down the law right now: No surprises. No going to those Blue Dog Democrats, those new Democrats. Whatever you're going to do at the White House, you come through me in the House of Representatives.


BRAZILE: First of all, I wish the story was true, because I like that kind of attitude.

But I think it's overblown a bit. They have a great relationship. Rahm and Nancy Pelosi have worked very closely together. As you well know, Wolf, they were behind the Democrats coming back in 2006. So, I think those two will be on the same page in helping President Obama gets his -- President-elect Obama get his agenda through Congress.

BLITZER: What do you think, Karen?

HANRETTY: I think two things, two important things.

First of all, congressional -- or Congress has a 19 percent approval rating right now. Barack Obama, in the last poll, has a 67 percent approval rating. I mean, the numbers are almost entirely...


BLITZER: So, he has more leverage, you're saying, than Nancy Pelosi might have?

HANRETTY: He has a lot more leverage.

Not only that. Rahm Emanuel is far more credited with helping Democrats take back Congress than Nancy Pelosi. I mean, it's really Rahm who went out there. He recruited a lot of conservative-to- moderate Democrats who ran in the South and helped Democrats regain a majority.

You know, he's the real strategist in that party. So, it will be fascinating to watch this tug of war. And I think there will be a tug of war.

BRAZILE: What I think the speaker is saying -- and, I mean, she's not -- I don't know if she's saying this, because they have a great relationship.

She's saying, look, stay in your lane. You know, the legislative branch is a co-equal branch of government. And I think what the speaker is saying -- and, again, I don't know if she's saying this -- is -- is that the Congress of the United States will assert its leadership.

Of course, they will work with the president. They may not always be on the same page, but they will listen to the same music.

BLITZER: We have got to leave it right there.

Donna, Karen, thanks for coming in.

One U.S. senator out of 100, who will fill the last spot? We are going to tell you what's happening right now in the Minnesota recount issue and which candidate has the edge.

We will be right back.


BLITZER: Minnesota is set to have the last word on the balance of power in the United States Senate. We're following new developments in the only U.S. Senate race still undecided over a month after Election Day.

Let's go to our senior congressional correspondent, Dana Bash. She's working this story for us.

It -- it could be developing even as we speak. It seems to be getting closer to some sort of resolution; is that right?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: It does seem to be getting closer.

And it could -- could -- reach a climax by the end of the week. But, you know, there are lots of things that would have to fall into place for that to happen.

But I think the best thing to do is to sort of go over for our viewers what has been going on for the past six weeks, the ins and outs of this recount. And, first, I guess we start with what happened after Election Day. Because it was so close, there was a hand recount, 2.9 million votes cast. The ballots were recounted again by hand. And that ended on December 5.

And, by this past Monday -- in fact, yesterday -- the results of that recount showed that Norm Coleman, the Republican incumbent, he was up by just 188 votes. That shows you how important this recount is, because every one of these votes clearly counts.

Now, here is what's happening as we speak, Wolf. There is a five-person canvassing board. And what they're doing today -- and this started just a couple of hours ago -- is, they are going through some of the disputed ballots in that long recount. There are about 1,400 total.

And they are doing this for all the world to see, if they want. They are doing it in a very public way. Each of these ballots -- you see some of them there on the screen -- they are going to be up for people in the public to look at, each one of them, as they meticulously go through them.

There is a hope that this could be completed in the next couple of days. But -- and there's always a but in these recounts, as you know, Wolf. (LAUGHTER)

HANRETTY: There is something else that is under dispute.

And that is, there are about 1,600 absentee ballots that were absolutely rejected. And there is a dispute about whether or not those should actually be brought back into the mix. And that's actually going through the courts right now. The state Supreme Court is dealing with that issue. So, you know, it could still be a while before we figure out what's going to happen in Minnesota.

BLITZER: So, we really don't know, Dana, when this is going to end?

BASH: Well, here is the -- the goal inside Minnesota.

The secretary of state has said that -- that they want this to be done, in fact, for the new senator from Minnesota to be certified by week's end, by Friday. But that was just a goal. And given the fact that there still are disputes, legal disputes, in particular, going on that took take much longer than through this week, it might be some time.

And, in fact, there is a possibility that we could be back here in the Capitol for the new Congress to be sworn in at the beginning of January, and it might not be clear who the senator from Minnesota is. And there are a lot of different scenarios that could happen, if that is the case -- Wolf.

BLITZER: All right, Dana.

Dana Bash is on Capitol Hill.

Abbi Tatton is here in THE SITUATION ROOM.

And -- and there's lots of information coming in online about some of the stuff that's going on in Minnesota.


These disputed ballots that the state canvassing board in Minnesota is looking at right now, trying to decide what did the voter intend when sometimes they scribbled all over the ballot, some of them that they're looking at right now.

This is what they're up against. So, this one, somebody filled it in for Norm Coleman and for Al Franken, and then put a line either through or under Al Franken's name. The Franken team challenging that, saying that that was underlined for Al Franken.

In other cases, the voter's intent couldn't be clearer, like this one. It was filled in for Al Franken, but someone has written, "It's just because he is on the Democratic ticket" -- that one challenged by the Norm Coleman campaign for marking or identifying the ballot, which isn't allowed. Then, this one that has been posted online had everyone talking, marked for Al Franken. But if you can see at the bottom there, there is a write-in for "Lizard People." What did that voter intend? Right now, the state canvassing board looking at all of these. There's a live Webcast. They have looked at more than 100 already, Wolf. but there's more than 1,000 to go.

BLITZER: All right, as Dana said, it's going to be a while before we know the outcome.

Thanks very much, Abbi.

For some people, it's one of the most important decisions the Obamas will make. Where should they get a new puppy from? Wait until you hear what the majority of Americans think.

And there are major developments out of Chicago right now -- there's word that Congressman Jesse Jackson Jr. has been helping the U.S. attorney's office as an informant for some time.

Stay with us. We will have details right here in THE SITUATION ROOM.


BLITZER: Let's check in with Jack Cafferty. He's got "The Cafferty File" -- Jack.

CAFFERTY: The question this hour: Is Illinois moving quickly enough to deal with the Rod Blagojevich scandal?

Robert writes: "Of course not. He's on tape. His own words ought to be enough cause to have the Illinois State Police bar him from entering the governor's office."

Paul in South Carolina: "There is no swift in justice anywhere in America anymore. The longer it takes, the more money the lawyers make. The victims no longer count."

Ron in San Francisco: "I'm sitting on a jury right now. Let me put it this way. You don't go slow for any reason other than to make sure you did it right. Before destroying a man, make certain, beyond any doubt, you're doing the right thing. If I were in the Illinois Assembly, I would want to go slowly for my own conscience. Imagine if you impeach him and then U.S. attorney Patrick Fitzgerald later fails to prove his case."

Tony in Michigan: "Not really, but this is how these things are done. Look at how long the Scooter Libby thing took or how the U.S. Senate did nothing after Ted Stevens was convicted. Right or wrong, this is what we get for tolerating scandals and corruption on the whole from our elected officials."

Gary in El Centro, California: "I think they did the right thing, giving him a little time to decide whether or not to resign. He's not moving, so now it's time to kick it into high gear and get him out of there."

Kevin in Chester Springs, Pennsylvania: "Is he still Governor? Yes? Then it's not quick enough."

And Tom in Boston writes, "Illinois would be moving much faster if they didn't have so much trouble pronouncing the man's name."

If you didn't see your e-mail here, you can go to my blog at Look for yours there, among hundreds of others -- Wolf.

BLITZER: Thank you, Jack.

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