Return to Transcripts main page


Transition Surprise; Obama's Choice Questioned; $50 Billion Scheme

Aired December 17, 2008 - 16:00   ET


WOLF BLITZER, CNN ANCHOR: Happening now, it may be a first in the history of presidential transitions. High-level talks at the White House featuring some big-name power players. Wait until you hear who's directly involved.
Plus, he can run but he can't hide. The Illinois governor faces the growing threat of impeachment and says he is dieing to talk about the corruption charges against him.

And the Bushes may be leaving the White House, but political dynasties are alive and well right here in the United States. Caroline Kennedy may be the next to pick up the torch.

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

The Bush and Obama teams are taking the White House transition to an extraordinary new level. The president-elect's incoming chief of staff getting personal briefings from two very influential figures who have served in two of the most controversial administrations in modern history. That would be Dick Cheney and Donald Rumsfeld.

Let's go straight to our Senior White House Correspondent Ed Henry. He's been looking at this story for us.

Ed, it's a fascinating development. We haven't seen anything like this in a while, if ever.

ED HENRY, CNN SR. WHITE HOUSE CORRESPONDENT: Wolf, it really is remarkable. And we've got some exclusive information that this contact has now included Rahm Emanuel secretly meeting in recent days with Dick Cheney and Donald Rumsfeld, among others, and now it may even mean all five living presidents getting together for a dramatic meeting next month.


HENRY (voice-over): CNN has learned cooperation between President-elect Barack Obama and President Bush has grown so deep, the two men have privately agreed to try and come together again shortly before the inauguration next month. But this time they're expected to be joined by the three living former presidents for an historic White House meeting. Two sources familiar with the plan say the five commanders in chief will trade advice with Obama but also help back up the current president's effort to make sure the first handoff after 9/11 goes smoothly. GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The struggle against terror will be a generational conflict, one that will continue long beyond my presidency.

CNN has also learned Obama's incoming chief of staff, Rahm Emanuel, quietly had breakfast at the White House this month with 13 of his Democratic and Republican predecessors. The meeting was called by current chief of staff Josh Bolten to give Emanuel bipartisanen counsel. The high-powered group included Vice President Cheney and former Defense Secretary Donald Rumsfeld, who each served as White House chief of staff to Gerald Ford.

Sources familiar with the meeting said Rumsfeld told Emanuel, "Don't think you're indispensable. And since it's a backbreaking job, identify your successor earlier."

Rumsfeld's successor as chief of staff was Cheney. The sources said Cheney joked to Emanuel, "The best thing you can do is keep the vice president under control."

But there's no joking about the specific contingency plans the Bush administration has prepared to help the incoming president deal with a potential national security crisis. Confirming a story first reported by "The New York Times," transition officials say the White House has put together specific plans on how to deal with anything ranging from a terror strike on U.S. assets overseas to a nuclear blowup in North Korea.

BUSH: As my administration leaves office next month, we will leave behind the institutions and tools our country needs to prevail in the long struggle ahead.


HENRY: Now, all of this cooperation stems from a fear inside the Bush White House that terrorists could try to take advantage of this transition to launch a spectacular attack. And the current chief of staff, Josh Bolten, has been determined for months now to make sure everybody is on the same page.

And I can tell you, Wolf, Democrats in the Obama transition are telling me they think Josh Bolten has lived up to his word, more so, even, and has really been cooperative and making sure that the Obama people, even though they're in the other party, are ready for this historic transition.

BLITZER: You really hear very positive things from both sides of this transition.

HENRY: Absolutely.

BLITZER: It's pretty remarkable what's going on.

Ed, good work. Thank you.

President-elect Obama formally tapped two more members of his cabinet today. He nominated the former Iowa governor Tom Vilsack as agriculture secretary and the Colorado senator Ken Salazar as interior secretary. The choice of Salazar, by the way, is raising some eyebrows right away.

Let's go to our National Political Correspondent Jessie Yellin. She's in Chicago. She's covering this transition to power.

Jessica, if Salazar is confirmed, he'll certainly have a lot on his plate.

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: He sure will, Wolf. This department is so troubled, it's been the subject of multiple internal investigations into alleged corruption and political maneuvering. And now Barack Obama says he wants to clean the place up, but not everyone is happy with the man he's chosen to do it.


YELLIN (voice-over): Ken Salazar, the one-time farmer-turned- senator, came dressed for his new role as defender of the environment.

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: I want a more proactive Interior Department. There have been too many problems and too much -- too much emphasis on big-time lobbyists in Washington, and not enough emphasis on what's good for the American people.

YELLIN: His central goal? To make America green.

SEN. KEN SALAZAR (D-CO), INTERIOR SECRETARY NOMINEE: I will do all I can to help reduce America's dependence on foreign oil.

YELLIN: But some environmentalists think he's too friendly to energy interests. Salazar has backed offshore oil drilling, supported tax breaks for big oil, and has a mixed record on increasing fuel efficiency standards.

JEFF RUCH, PUBLIC EMPLOYEES FOR ENVIRONMENTAL RESPONSIBILITY: He's been for weakening the Endangered Species Act. He's been against mining reform. And there are a lot of areas where it's unclear where he stands in terms of things like protecting scientists from having their work rewritten by political advisors.

YELLIN: He's even winning the praise of the oil industry. The American Petroleum Institute says Salazar "... recognizes the importance of oil and natural gas to America's economy," but other activists say he's a centrist and a pragmatist who will balance environmental protection with the nation's energy needs, including this influential supporter...

ROBERT REDFORD, ACTOR/ENVIRONMENTALIST: Salazar represent a good balance because he has already rejected attempts to drill on the rocky -- on the Colorado Plateau. So I think he's already sent signals about how he feels about this.

He also comes from it, legitimately being from a ranching family, generations of ranchers. He understands agriculture. He understands the value of land.

I don't think they farmed oil rigs. So, I'm pretty encouraged by Salazar. It may be controversial in some places, but not for me. I think very highly of him.


YELLIN: And Wolf, a bit of trivia. Ken Salazar's family first moved to Colorado 400 years ago before the state joined the union -- Wolf.

BLITZER: That's an interesting piece of trivia indeed.

All right, Jessica. Thank you.

With today's nominations, the president-elect has announced his choices for almost all of the cabinet level jobs in his administration. Right now, there are two important posts left to fill. That would be transportation secretary and labor secretary. Also got to fill that national intelligence director's job as well.

Let's go back to Jack Cafferty right now. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Former House Speaker Newt Gingrich wrote a letter to the chairman of the Republican National Committee voicing his disapproval of a three-minute video the Republicans put together aimed at linking President-elect Barack Obama to the allegedly corrupt governor Rod Blagojevich. Gingrich wants the video pulled. He says this is the kind of attack ad that voters rejected in 2006 and again just a couple of months ago.

He calls the ad a destructive distraction. And instead, Gingrich suggests the RNC focus on helping Obama successfully meet the serious challenges that face the nation.

Now there's an idea -- bipartisan cooperation.

Gingrich says the Republican Party should offer better solutions instead of just being against Obama.

Senator John McCain also called for this ad to be pulled during an interview. He said his party should instead focus on the financial crisis.

Most Americans might agree. According to a Gallup poll, Republicans in Congress are getting lower approval ratings than President Bush. Only one in four approve of the job Republicans are doing in Congress, and that's the worst rating they've had since Gallup started keeping track of this stuff in 1999.

So here's the question: What should Republicans be doing to help President-elect Obama?

Go to Post a comment on my blog -- Wolf.

BLITZER: Interesting letter that Gingrich wrote, indeed. You know?

CAFFERTY: He's made more sense since he's been out of Congress than he did when he was in it.

BLITZER: Yes. Well, you know, he's sort of falling into the same place now where Colin Powell, who is a Republican, has been saying cool it to fellow Republicans. And, you know, we'll see what happens.

CAFFERTY: Well, it's an indication I think that maybe the party got a little carried away and moved a little farther to the right and caved in a little bit to the religious extremists. Voices like Powell and Gingrich, even, a voice of moderation in this.

BLITZER: Yes. John McCain since the election has been saying some similar stuff as well.


BLITZER: All right, Jack. Thank you.

There are important developments happening right now in the effort to try to kick the Illinois governor out of office. And we actually heard from him today.


GOV. ROD BLAGOJEVICH (D), ILLINOIS: You know, I can't wait to begin to tell my side of the story and to address you guys and, most importantly, the people of Illinois. That's who I'm dying to talk to.


BLITZER: So will the governor, Rod Blagojevich, make good on his promise to eventually tell all about the corruption charges against him? We'll have the latest. That's coming up next.

And some investors who say they were scammed by a Wall Street icon don't just blame Bernard Madoff, they blame the U.S. government as well.

And why the CEO of Ford does not want his two U.S. competitors to go belly up.

Lots of news happening today, right here in THE SITUATION ROOM.


BLITZER: A key U.S. lawmaker says Congress will investigate the alleged $50 billion Ponzi scheme run by the Wall Street icon Bernard Madoff. The chairman of the House Financial Services Committee says he'll launch the inquiry early next month. The Securities and Exchange Commission also is investigating what appears to be one of the biggest financial frauds ever, if not the biggest one on Wall Street ever.

Let's go to our Senior Correspondent Allan Chernoff. He's been covering this story for us.

These investors, they're talking about how much they were misled by Madoff, but there's a lot of blame to be thrown around here.

ALLAN CHERNOFF, CNN SR. CORRESPONDENT: Most definitely. In fact, a lot of these investors felt lucky to have money with Bernie Madoff. Now they're absolutely furious not only with Madoff, but also with the Securities and Exchange Commission.


CHERNOFF (voice-over): Bob Chu (ph) of Montrose, Colorado, had his entire retirement nest egg invested with Bernard Madoff, $1.2 million, which he fears is all gone.

UNIDENTIFIED MALE: It's kind of like -- it's a financial murder. And the feeling that you get is that you're hopeless. Your life is forever changed, and you just don't even know where to start to pick up the pieces.

CHERNOFF: Chu (ph) and other Madoff investors laid part of the blame on the Securities and Exchange Commission, which failed to uncover fraud at Madoff's firm.

UNIDENTIFIED MALE: I hold the U.S. government accountable for what happened.

CHERNOFF: Even the chairman of the SEC, Christopher Cox, says his own commission failed.

CHRISTOPHER COX, SEC CHAIRMAN: I was very concerned to learn this week that credible allegations about Mr. Madoff had been made over nearly a decade, and yet never referred to the commission for action.

CHERNOFF: Cox says there's no evidence of wrongdoing yet by SEC staff, but he's asked his SEC inspector general David Kotz to investigate. Cox tells CNN among the issues he'll examine is the relationship between Eric Swanson, a former SEC inspector, and Bernard Madoff's niece, who Swanson married last year. A spokesman for Mr. Swanson says he did not participate in any examination of Madoff investment securities while involved with Madoff's niece.

UNIDENTIFIED MALE: The SEC is supposed to be the tough cop on Wall Street. They look more like a lapdog here that was deferring to a prominent figure, not investigating him carefully, and that fits charges that others have made before.

CHERNOFF: Madoff arrived at his Manhattan apartment this afternoon, where he'll be under home detention.

QUESTION: How do you feel?

CHERNOFF: With electronic monitoring, he's currently out on $10 million bail.


CHERNOFF: Madoff faces a single charge of securities fraud which carries a maximum sentence of 20 years in prison. His lead attorney, Ira Sorkin, says, "This is a tragedy. We are cooperating fully with the government investigation to minimize losses." -- Wolf.

BLITZER: All right. We're going to have more on this story coming up. Allan, thank you.

President-elect Obama is venting his frustration today about the Illinois corruption scandal. He was asked why he hasn't released the results of an internal investigation into whether anyone on his staff talked to Governor Rod Blagojevich. Obama still can't escape questions about allegations that the governor tried to sell his former Senate seat.


OBAMA: It's a little bit frustrating. You know, there's been a lot of speculation in the press that I would love to correct immediately. We are abiding by the request of the U.S. attorney's office, but it's not going to be that long. By next week, you guys will have the answers to all your questions.


BLITZER: In Chicago today, a rare sighting of the embattled governor as state lawmakers push to impeach him.

Let's go to Chicago. CNN's Susan Roesgen is working the story for us.

A late ruling, meanwhile, Susan, from the Illinois Supreme Court involving the governor. What happened?

SUSAN ROESGEN, CNN CORRESPONDENT: The Supreme Court here, Wolf, says that it will not hear the case of whether or not the governor is fit, is able to continue to lead this state. Without any comment, the state Supreme Court simply refuses to hear it, and the state attorney general says she's disappointed.

So now the ball is back in the governor's court. And as for the governor, I guess when the going gets tough, the tough go jogging.


ROESGEN (voice-over): This is the most we've seen of Illinois Governor Rod Blagojevich since before his arrest last week on federal corruption charges. Smiling and chipper, the governor said he was dieing to talk.

BLAGOJEVICH: I can't wait to begin to tell my side of the story and to address you guys and, most importantly, the people of Illinois. That's who I'm dieing to talk to.

ROESGEN: What the governor wants to tell and when he'll tell it, he wouldn't say. But for a guy who's facing federal charges that could mean years in prison, he was remarkably upbeat, even if he did not jog all the way to Springfield, Illinois, where the state legislature is talking about impeachment.

UNIDENTIFIED MALE: All evidence will be made part of the record.

ROESGEN: State representatives are reviewing their legal options to see if there's enough evidence to start this unprecedented attempt to get the governor out of office.

Meanwhile, the U.S. Senate seat left vacant by President-elect Obama is still up for grabs. Illinois Congressman Jesse Jackson Jr. wanted the seat, and he's not charged with any wrongdoing. But is he one of the candidates listed in the federal probe. And Jackson's office admits that he has helped the feds check up on Blagojevich in the past.

Still, Jackson was furious to learn that CNN called him an informant, and his office released a statement saying, "It is absolutely inaccurate to describe the congressman as an informant."

For Illinois voters fed up with the whole thing, the governor's actions speak louder than words.

UNIDENTIFIED MALE: The state's going to hell. And he shouldn't be jogging. He should be working and addressing the issues.

UNIDENTIFIED FEMALE: Well, in a way, I'm not surprised because I consider him immoral. Not even immoral, amoral. So I really hope he's impeached and is out of office.

UNIDENTIFIED MALE: He's on the run.

ROESGEN: And soon, he may be running out of options.


ROESGEN: And Wolf, although the governor himself was not in Springfield for that impeachment hearing, his lawyer was there, and he says the wiretaps don't show anything, Wolf. He says that whoever wrote up the feds' case didn't even listen to the wiretaps. And in his words, it's just a bunch of people jabbering.

So there's going to be a fight over this, for sure.

BLITZER: Yes, I can see. Well, get ready, Susan. We're going to count on you covering the story for us. Susan Roesgen in Chicago.

The British prime minister makes a surprise trip to Iraq and announces something that's a bit of a surprise as well. Might the U.S. follow Britain's lead?

And there are no queens or kings in the U.S. government, but you might say there is political royalty. What do you think about American political dynasties?

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



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

Happening now, the federal government seizes a New York skyscraper, claiming its owners are funneling money to support Iran's nuclear program. We'll have a live report.

The Taliban-American, born in the United States, captured in Afghanistan, now behind bars in the United States. His parents are asking President Bush to set him free. We're going to tell you why.

And an Iraqi journalist's parting shot to President Bush touching a nerve across Iraq and much of the Arab world. Protesters demanding his release. We'll have a report from the Baghdad.

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

Caroline Kennedy is doing something she hasn't yet done, publicly confirming she wants to be the next senator from New York.


CAROLINE KENNEDY, DAUGHTER OF JOHN F. KENNEDY: I've told Governor Paterson that I would be honored to be considered for the position of United States senator. I wanted to come upstate and meet with Mayor Driscoll and others to tell them about my experience and also to learn more about how Washington could help these communities. And there's a lot of good people, candidates that the governor's considering. He's laid out a process, and I'm proud to be in that process.


BLITZER: Caroline Kennedy is surely a member of a well-known political dynasty. So what's the impact of having a name like "Kennedy" or another from some famous families?

Our Senior Political Analyst Bill Schneider is joining us now. Bill, as we look at this, this notion of a political dynasty sort of somehow being un-American, but what do we think about all of this?

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Well, you mean un- American like the Kennedys and the Bushes and the Clintons? Not really.


SCHNEIDER (voice-over): The United States is not supposed to have dynasties, but we've got the Clintons, husband and wife; the Jacksons, father and son; the Bushes, father and son and maybe brother.

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Have you told Jeb to run for the U.S. Senate in Florida?

BUSH: Yes.

SCHNEIDER: And the Kennedys.

STEPHEN HESS, BROOKINGS INSTITUTION: Ted Kennedy wasn't even of age to be in the Senate when his brother was president, gave up his Senate seat and put in a friend to hold the seat until Ted Kennedy became 30.

SCHNEIDER: The governor of Delaware last named a placeholder to take Joe Biden's Senate seat until 2010, when Biden's son will be back from Iraq and able to run.

Stephen Hess has written about America's political dynasties.

HESS: It may be that it has been so incredibly expensive to run for Congress, particularly for the Senate, that it sure helps to have a brand name.

SCHNEIDER: In a democracy, name recognition is crucial. People don't vote for someone they have never heard of.

There are many ways to get name recognition. You can spend a lot of money on ads. You can be a celebrity. Or you can have a famous name. But your name will only get you so far.

HESS: After one step up the political ladder, you're pretty much on your own.

SCHNEIDER: As a potential senator from New York, Caroline Kennedy is getting some of the same criticism Hillary Clinton got when she first ran in 2000.


JOY BEHAR, CO-HOS "THE VIEW": Who knows. Maybe she would be good. I mean, I don't think she's qualified, though I have said it before. I said Sarah Palin wasn't qualified. And I don't think she is.


SCHNEIDER: Hillary Clinton has worked hard to prove herself. If she gets the Senate appointment, Caroline Kennedy will have to prove herself, too.


SCHNEIDER: Now, when Governor Frank Murkowski appointed his daughter, Lisa, to take his old Senate seat in 2002, many Alaska voters were outraged, and they passed an initiative to change the method of filling vacancies.

And what did they do then? They elected Lisa Murkowski to a full term. The voters turned against her father. Governor Murkowski was defeated for reelection by a candidate named Sarah Palin -- Wolf.

BLITZER: Interesting stuff. As usual, Bill Schneider finds that stuff for us.

Thank you.

Meanwhile, there are those who are strongly suggesting that Caroline Kennedy should earn such a prize spot in the United States Senate, not simply have it handed to her because of her famous family name.


BLITZER: And joining us now from New York is Republican Congressman Peter King. He's thinking -- he's thinking about running for the U.S. Senate in 2010.

Congressman, thanks very much for joining us.

REP. PETER KING (R-NY), HOMELAND SECURITY COMMITTEE RANKING MEMBER: Wolf, you're very welcome. Great to be with you.

BLITZER: Caroline Kennedy, the daughter of the last president, John F. Kennedy, she has said now publicly today, for the first time, up in Syracuse, that she is interested, she would very much like to be Hillary Clinton's successor in the U.S. Senate. Here's the question to you.

Do you believe she's qualified to be the United States senator from New York?

KING: Wolf, there's no evidence that she's qualified. And I'm not saying you have to be a politician, or to have held office to be a United States senator. But, you have to be somewhere in the public arena, whether it's business or labor, or civil rights or fighting for a particular cause, or, the Military.

The fact is, she has a well-known name. Her face has been in a lot of magazines. But, very limited involvement in the public sphere. I mean, she's not be in the arena. She has led, I believe, a life which is separate from what most New Yorkers do.

I don't know if she's ever had to worry about mortgage payments or worry about working her way through school. Or, any of those things that day-to-day New Yorkers are going to face with the economic crisis we have. I'm not aware of anything she's ever said about the Islamic terrorist war against us, what we have to do to defend ourselves, what we should do on foreign policy.

These are all key issues. And that takes more than just having a famous name.

BLITZER: So, you think you could beat her if she does get this appointment by the governor, in 2010?

KING: Wolf, I do. I believe if I can get together enough money and commitments over the next several months, I will certainly run and I wouldn't run if I didn't think I could win.

And I think it can be done by basically -- I would contrast my record. I have -- not just the fact that I have been in politics, or in Congress. But, I have a proven record of fighting for New York. I grew up in Queens, a working class neighborhood. Went to high school and college in Brooklyn. Worked my way through college by working over at the freight yards on 10th Avenue. I saved enough money to go to law school, lived in the same house on Long Island for almost 40 years, raised two kids, put them through school.

So, I understand what people have gone through and are going through in New York. And also, I have a proven record of delivering for New York on issues like Homeland Security and transportation. So, yes. I think people will identify with me as being much more similar to them, than someone who has again, lived her life either on Park Avenue or Hyannis Port.

BLITZER: Although, at the same time, it's been a while, I believe, since there has been a Republican who's been elected to the United States Senate from New York.

KING: Yes. The last one was Al D'Amato. And he was elected three times. Notice, no doubt the Republican Party has been in bad shape in new York. It's been a tough state for Republicans.

But, even during the last election though, up until the economic meltdown on September 15th, John McCain, who spent virtually no time in New York had polled within five points of Senator Obama in a number of polls.

Now, I realize that polls can fluctuate, but I think that there is a 10-15 percent of the people who are pragmatic, who are moderate to conservative. We used to call them Reagan Democrats. And I think they would be -- you know, I would have a great opportunity to get their votes. You know, they realize that my father was a city cop.

I know what it's like to grow up in New York. I know what it's like to be a New Yorker. And real New York. Not the society world of these -- you know, the Upper East Side of Manhattan.

BLITZER: I want to switch gears and talk about this Bernard Madoff scandal, this alleged $50 billion Ponzi scheme. You're on the Financial Services Committee in the U.S. House of Representatives. Yesterday, Chris Cox, the Chairman of the SEC, the Securities and Exchange Commission basically acknowledged, you know what, they did get information that there was something wrong going on. But, they didn't follow up appropriately.

How could this happen, Congressman, because we're talking about billions and billions of dollars.

KING: And many of those people, by the way, live in my district. I was at two different Christmas holiday parties over the weekend, where someone was actually pointing out to me people in the rooms and telling me, this person lost $5 million, this person lost $10 million. This has had a devastating effect, also on charities, on peoples' life savings.

There's obviously to me, no excuse, based on what we know now and what the SEC knew and what they should have done. So, I have demanded a full Congressional investigation. I understand Spencer Bachus, who is the ranking Republican on the Financial Services Committee has asked Barney Frank to hold a hearing.

I joined in that -- and not just a hearing, a series of hearings and a full investigation into how this was allowed to happen, because, apparently, the first warning signals go back as far as 1999, during the Clinton administration and I guess continued during the current administration. And this isn't just you know, some rich people who lost some money in investments. We're talking about people who have been wiped out. We're talking about families.

I have been getting calls from senior citizens in my district, who have lost everything. This is a real tragedy.

BLITZER: I take it you're just as surprised as everybody else?

KING: I'm surprised and I'm also very angry. I mean, this is what -- the regulator should have been watching this. I don't profess to be an expert in the type of funds that Madoff was running. But, now it appears that they were tipoffs, there were signals. And that's what the regulators are supposed to be watching.

And when you see, again -- the extent of this. If the $50 billion is true, this is one individual causing more detestation than all of Enron. So, this is -- I'm wondering now, if Madoff did this, how many others are out there?


KING: How many other -- and the fact that I'm asking that question and you're asking that question means this is a cloud over the whole investment community. And that's the worst thing we need, the last thing we need, as we're trying to come out of this economic downturn.

BLITZER: We're going to need some major congressional oversight to get to the bottom of this.

Hey Congressman, thanks very much for joining us.

KING: Wolf, thank you.


BLITZER: He runs the one American car company that says it might be OK financially. But the CEO of Ford is still pleading his case for other carmakers. Why does he care so much? You're going to hear what he told our own Ali Velshi in Detroit today.

And something is still missing from Barack Obama's future Cabinet. One key part of the country is being left out. We're going to explain what's going on in our "Strategy Session." Plus, pirates committing new crimes on the high seas, and the U.S. backs a bold new plan right now to try to stop them. Could American troops be used?

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


BLITZER: Literally, at any time right now, the ailing auto industry could be given a financial lifeline. The Bush administration is weighing options for how to help two of the Big Three automakers. But will help arrive in time? The car companies say they could soon be running out of cash, possibly costing millions of American jobs.

Our chief business correspondent, Ali Velshi, has more -- Ali.

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Wolf, Americans have learned more about the auto industry in the last several weeks than they have probably wanted to. But one thing we have learned is that Ford is relatively healthier than Chrysler and General Motors.

Still, even if this bailout package didn't go through, and -- and it were to affect one of Ford's competitors more than Ford, that's actually a problem for this company, because of the broad supplier network that all three Detroit automakers share. In fact, they share it with other automakers as well.

Today, I sat down with Ford's CEO Alan Mulally.


VELSHI: One would think that, if one of your competitors fails, or two of your competitors fail, that would put you in a remarkable competitive position. Explain to me why you don't think that is the case, why you don't want Chrysler and General Motors, or either one of them, to disappear.

ALAN MULALLY, CEO, FORD MOTOR COMPANY: It does sound funny, as a -- as a competitor, I'm sure, but the -- but the most important thing is that the automobile industry, as we have talked about, just touches all the tentacles of all of the industries throughout the United States, and especially all the suppliers.

And about 70 percent of the dollar value for every automobile...


VELSHI: Wolf, Mulally says that Ford is in good shape to try and recover if the economy stays on track, doesn't worsen more than their projections indicate it will.

In fact, 2009 is likely to be -- to trend as a better year, in terms of car sales, than 2008 did, even though they probably won't sell as many cars. The issue here is, will things get worse before they get better? And, if they do, that's going to throw everybody's plans off -- Wolf. BLITZER: All right, Ali -- Ali Velshi in Detroit for us.

Automakers collapsing -- automakers collapsing would certainly send more Americans reeling and potentially adding to the current job crisis. So, how are cash-strapped states across the country helping families who are hurt by unemployment?

Let's go to New York. Mary Snow is looking into this story for us -- Mary.

MARY SNOW, CNN CORRESPONDENT: And, Wolf, you know, more evidence of that crisis coming out just today. The latest monthly jobless numbers out of Michigan show it now has the highest unemployment rate in the nation.

And it is having a cascading effect on states and employers.


SNOW (voice-over): As jobs disappear at rates not seen in decades, and unemployment lines grow, there is less money to go around. Now states are running out of funds to pay jobless benefits.

JEANNE MEJEUR, RESEARCH MANAGER, NATIONAL CONFERENCE OF STATE LEGISLATURES: This is the perfect storm: higher claims and less money.

SNOW: Michigan, home to the struggling auto industry, is essentially broke when it comes to its fund to pay unemployment checks. Its jobless rate is 9.6 percent, well above the national average. Michigan is now borrowing from the federal government to pay out its unemployment benefits.

Indiana is in the same boat. And the National Association of State Workforce Agencies says the list of states with unemployment trust funds about to become insolvent is growing quickly.

INGRID EVANS, UNEMPLOYMENT INSURANCE DIRECTOR, NATIONAL ASSOCIATION OF STATE WORKFORCE AGENCIES: Right now, there's approximately 30 states that have trust funds that are in jeopardy of being completely empty, for the most part.

SNOW: And that is expected to happen within six months, even less time for New York and Ohio.

One economist says, while this isn't unusual in a recession, states will have to replace those funds through:

DAVID WYSS, CHIEF ECONOMIST, STANDARD & POOR'S: Higher tax rates. You have got to have higher tax rates. Those payroll taxes are going to be going up.

SNOW: It's already happening in Michigan. Starting in January, payroll taxes are going up for thousands of businesses. It amounts to roughly $67 per worker. One policy analyst says, it's one option to raise more revenue. And, while it's a tough environment to hike taxes, it's seen as a better choice than the alternative.

MEJEUR: They could consider cutting benefits or restricting eligibility in some way. But that's a harsh choice when things are so tough.


SNOW: Now, both Ohio and New York are among the next states expected to be forced to have to borrow federal money for jobless benefits. Both say their state funds are expected to run out within a few weeks -- Wolf.

BLITZER: Mary, thank you.

Might your state, by the way, do what New York's governor has proposed? It's being called a doomsday budget. Taxes on beer and wine could more than double. Gasoline, cable and satellite TV taxes would also rise. And New York's car owners would see 16 fee increases.

The governor proposes an 18 percent tax every time you buy a Coke, Pepsi or other sugary soft drink, a 4 percent tax on movies and entertainment events, and what's being called an iPod tax, a 4 percent tax every time you download music or movies.

Wow -- lots of stuff going on.

One major thing is missing from Barack Obama's Cabinet picks. Is it intentional or accidental? You're going to find out what's missing and why it might matter.

And Obama picks yet another former rival for his team. Will they all be able to get along? It's part of our "Strategy Session," and it's coming up next.


BLITZER: Barack Obama has almost finished appointing his Cabinet nominees, but is he leaving out an important part of the population? Jamal Simmons and Bay Buchanan, they are standing by for our "Strategy Session" -- next.


BLITZER: President-elect Barack Obama nominating yet another past political opponent to his Cabinet. This time, the former Iowa Governor Tom Vilsack gets the nod for agriculture secretary. Obama's so-called team of rivals tops today's "Strategy Session."

Joining us, Democratic strategist Jamal Simmons and Republican strategist Bay Buchanan. She's a CNN contributor.

What do you think? All these guys, and gal, who were running against him for the Democratic presidential nomination, Vilsack, Hillary Clinton, Bill Richardson, Joe Biden, he's now brought them in -- into his tent.

JAMAL SIMMONS, ADVISER, DEMOCRATIC NATIONAL COMMITTEE: This is good. This is a party coming together. Barack Obama doesn't hold hard feelings.

And these are some of the best people in the party to do the jobs they have been selected for. The one thing that is true about this Cabinet is, every one of these names that's come up, whether you're on the right or the left, you sort of look at it, and you go, OK, I get it. This person makes sense.

And I think that's what we have found today as well.

BLITZER: Smart strategy on his part?

BAY BUCHANAN, CNN POLITICAL CONTRIBUTOR: No, I think it makes for a very boring Cabinet.

You want there is people like Arne Duncan. I think you got -- that is somebody who is knew. He doesn't -- he's not beholden to anyone. He's never been elected, so he doesn't owe anybody anything.

BLITZER: He's the -- he's the new education...

BUCHANAN: He's the new education...

BLITZER: ... secretary nominee.

BUCHANAN: And -- and he's very bright, and he's competent. And he could come in really introduce a bold agenda, something fresh for this town.

These other people have been elected. Wolf, we know where they stand. We know exactly where their positions are on the policies. And there's nothing fresh and new. And he said he was going to give us change. And there's no change in elected officials holding top offices.

BLITZER: Well, you know, Ken Salazar is pretty new. I mean, so, bringing Ken Salazar also...

BLITZER: The senator from Colorado, who's going to be the interior secretary.

SIMMONS: That's right.

Ken Salazar comes into this administration. He is somebody who's new. He's a fresh face on the national scene. He's elected in Colorado, but, for most people in the country, he's not something they're super-familiar with.

BLITZER: Treasury secretary designate, Tim Geithner...

BUCHANAN: Exactly. BLITZER: ... he is a new face, relatively speaking. A lot of people have heard of him.


BUCHANAN: They never heard of him, but he's obviously extremely competent. And people on Wall Street, people who are concerned felt very, very reassured.

And so I think he, again, will be very much interested in solving the problem, in throwing everything at it that he can, and not feel...

BLITZER: So, she likes that type, like a Steven Chu, who's going to be the energy secretary, a scientist, a Nobel Prize winner, who -- who's going to bring some new negotiate, some -- some new blood into what she says are boring politicians.

SIMMONS: That's right. You have got the EPA director as well in Linda (sic) Jackson. There are all sorts of new people being brought into this administration, as well as the White House.

BLITZER: All right. So, that's...

BUCHANAN: Well, you know, when you look back at one of the other times, Jack Kennedy, who Obama's been compared to, all those people that came in -- you know, I certainly wasn't a Democrat, but you knew they were competent and bright and fresh, and they were going to throw all kinds of different ideas on the table.

And I'm disappointed that Barack Obama has fallen back into the old habit...


BLITZER: We have gotten a lot of e-mails from Democrats in the South, saying, where is a Southerner in this new Cabinet?


BLITZER: They don't see anybody from the South.

SIMMONS: Well, you know, people in Texas may not agree, but Ron Kirk is a name we're starting to hear a lot. Some people will say...


BLITZER: The former mayor of Dallas.

SIMMONS: The former mayor of Dallas.


BLITZER: What is he in line -- what is he in line for?

(CROSSTALK) SIMMONS: ... Texas is not a -- is not a -- is not Southern state, but Texas, most people consider it to be pretty Southern -- Southwestern, at least.

He's in line to be either U.S. trade representative or transportation secretary. So, that's a name that we're starting to hear who may be coming to Washington.


BLITZER: Is that a problem, that he really hasn't brought anybody in from the South yet?


BUCHANAN: I think he would be wise to do so, because it's going to be talked about, and then people in the South will be offended somewhat. Some will.

But, in fairness to him, he has really considered some. I understand Roy Barnes, I believe, former governor of Georgia, was considered for Education.

But -- but I will tell you what I'm -- I think his concern should be. The -- the Southern Democrat tend to more conservative, Blue Dog conservative -- Blue Dog Democrats, and they are not represented. And they are very much a formidable force within the Democratic Party today. And I think he -- would be a mistake for him not to bring...

BLITZER: The Blue Dog Democrats, or the new Democrats.

What do you think?

SIMMONS: Well, I don't know. Ken Salazar, again, is actually a fairly moderate guy who is from Colorado.

And if you at where Barack Obama won, places like Colorado and Nevada and some of the Western states, he's probably going to bring more people in from there.

The one thing I did hear today, I was talking to some friends up in the Senate, the majority leader's office, and they just don't want any more senators to be chosen. So...


BLITZER: And let's not forget Bill Richardson. He supports gun owners and all of that.

SIMMONS: That's right.

BLITZER: So, he will bring a different voice to this Cabinet as well.


BLITZER: Guys, thanks very much.

And he's slated to be the commerce secretary.

We're just learning about some famous faces who will be taking part in the Obama presidential inauguration. Stand by. We're about to name names.

And chaos and new anger in Iraq surrounding the man who threw his shoes at President Bush -- will he face trial or will he be set free?

And the feds seize part of a New York skyscraper. It's allegedly part of an elaborate scheme to funnel millions to Iran's nuclear program. We have all the details coming up.


BLITZER: New details about the Obama inauguration festivities here in Washington have just been released. Let's share with you some of the highlights.

Prominent Pastor Rick Warren of California's Saddleback Church, he will lead the opening prayer. The legendary singer Aretha Franklin will perform. And renowned violinist Itzhak Perlman and the cellist Yo-Yo Ma, they will be among the music performers. And the composer and arranger John Williams will be there.

And we learned that Justice John Paul Stevens will administer the oath of office to vice president-elect Joe Biden. Based on tradition, we knew that the chief justice, John Roberts, would give the oath to the president-elect -- the details coming in about January 20.

Let's go back to Jack for "The Cafferty File" -- Jack.

CAFFERTY: The question this hour is: What should Republicans be doing to help president-elect Barack Obama?

Newt Gingrich chastised them in a note to the Republican National Committee over a -- a three-minute video they put together trying to tie Obama to Blagojevich in -- in Illinois.

Tom writes -- from Texas writes: "Rejoin the 21st century, already in progress. They have collectively been on hold since January 20, 2001."

Judy in Arizona: "I don't think they have the slightest interest in helping Obama or our country. That is why they lost the last election."

Andy in Virginia: "The kindest gift would be to keep their mouths shut for the first year. Let the president-elect start his programs. And, unless their is a critical point of disagreement, keep the politicking in the back room and off the airwaves."

John in Colorado says: "The GOP should listen to John McCain. Pull the plug on petty politics, at least until the country gets back on its feet, a very refreshing concept, but I doubt it will ever happen. The RNC is buried too deep in the manure to change their ways."

Rose in Arizona: "I think they should do what they were elected to do. The voters of their states trust that they will serve their country well. I believe that they may not agree with all the proposals that Obama makes, but, if they don't like something and they plan to vote against it, they ought to have a better option to offer. There are a number of Republican senators that have a lot to offer."

J.R. writes: "It's simple. They should fire Hannity and Limbaugh as their party leaders and start thinking for themselves. The rest of us do."

And Gene says: "They should be very quiet and allow the adults put the pieces back together again."

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

BLITZER: Thanks, Jack.

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

Happening now: angry and defiant. The attorney for the Illinois governor lets loose on state lawmakers weighing impeachment charges against Rod Blagojevich, calling their hearings -- and I'm quoting now -- "illegal."

Also, a New York City office building allegedly linked to weapons of mass destruction, the government moves to seize it, citing ties to Iran's nuclear program.

And charities financially crushed in what may be one of the biggest pyramid schemes in history -- the fallout now hitting the most vulnerable.

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

A 36-story New York City office building allegedly linked to weapons of mass destruction, now the feds are -- feds are moving to seize parts of the building's ownership, alleging a connection to Iran.