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Obama Focuses on Economy; Pastor Warren Defends Inauguration Role

Aired December 22, 2008 - 18:00   ET


SUZANNE MALVEAUX, CNN ANCHOR: Well, four million jobs at risk -- Barack Obama spends some of his holiday confronting dire new warnings about America's future.
Plus, Pastor Rick Warren defends his inauguration role and his views on homosexuality -- why Warren says his remarks may actually shock you.

And crash survivors tell horror stories as investigators begin the hunt for clues inside the wreckage in Denver -- new information this hour about what went wrong, all that and the best political team on television.

We welcome our viewers in the United States and around the world. Wolf Blitzer is off today. I'm Suzanne Malveaux. And you're in THE SITUATION ROOM.

Well, in sunny Hawaii right now, Barack Obama is trying to ward off more economic gloom and doom. The president-elect and his transition team are really confronting worst-case scenarios. So, what could become reality after he takes office less than a month from now?

Well, our senior White House correspondent, Ed Henry, is with Obama in Hawaii.

Ed, I honestly thought I had that gig, Honolulu, all wrapped up. I see we're sharing it now.


HENRY: But you're not vacationing. I know you're not vacationing. You're at the beach. And neither is Barack Obama. So, tell us what he is up to.

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: It's interesting, Suzanne. Obviously, they call it a working vacation, because while he is getting some rest and relaxation, he's also working on some major issues right now. And we're told that, behind closed doors, in recent days, the president-elect got some very sobering briefings from his advisers, saying, this recession could be a lot worse than expected.

So, he's now ramping up plans for his economic rescue recovery plan.

(BEGIN VIDEOTAPE) HENRY (voice-over): Some rare time out on the golf course for president-elect Barack Obama, as he begins almost two weeks of relaxation in Hawaii. But there's little rest for his transition team. They have been ordered to craft an even bolder stimulus plan to, in the words of vice president-elect Joe Biden, prevent the economy from absolutely tanking.

SEN. JOSEPH BIDEN (D-DE), VICE PRESIDENT-ELECT: We believe we can do that by investing in, as I said new, technologies, by investing in infrastructure, building roads and bridges, all things, by the way, that add to the productivity of the country, that keep American businesses in America, that -- that -- that generate high-paying jobs that can't be exported.

HENRY: So, transition aides have been huddling with Democratic leaders in Congress to craft a recovery plan of up to $775 billion and try and jolt the economy.

Republicans are wary about the price tag, especially on top of Friday's rescue of automakers.

REP. ERIC CANTOR (R), VIRGINIA: I think most American taxpayers now are sort of scratching their head, wondering when all this bailout stuff is going to end, and probably thinking, you know, when is my bailout coming?

HENRY: Now CNN has confirmed the commercial real estate industry, representing shopping centers, hotels and office buildings, is also seeking a bailout to stave off foreclosures and bankruptcies.

In a letter to Treasury Secretary Henry Paulson, industry leaders say they need billions of dollars in government-backed loans to deal with panic from crushing debt, adding, ominously, "Jobs, small businesses, retirement savings, and local government tax revenues are all at stake."

Team Obama is not commenting on whether the incoming president is in favor of yet another bailout, but they are saying a massive stimulus plan is desperately needed early next year.

REP. BARNEY FRANK (D), MASSACHUSETTS: If we don't do this, it will cost us even more. This economy is now in the worse shape since the Great Depression. And if we don't respond in a very firm way, it gets worse and worse.


HENRY: And CNN has learned that, tomorrow, vice president-elect Joe Biden will convene a meeting of the transition team's top economic advisers in Washington to start grappling even more with this whole financial crisis.

What's interesting is that Biden has sort of been in the shadows in recent weeks, hasn't been speaking out a lot. A lot of people are wondering what his role will be. It's starting to be clear that one of his first priorities is going to be helping to sell this economic package on Capitol Hill -- Suzanne.

MALVEAUX: OK, Ed Henry, thank you so much.

Obama's plan to inject up to $775 billion into the economy is really a hefty chunk of taxpayer cash, even in these days of multibillion-dollar bailouts.

Now, let's compare this. Way of comparison, you have got to check out these inflation-adjusted figures. The U.S. government has spent $597 billion on the Iraq war over the past five years. Now, it spent 300 -- rather, $237 billion to develop the space program and land a man on the moon. And the U.S. spent the equivalent of $217 billion of today's dollars to buy the French territory of Louisiana. That was back in 1803.

Also regarding the issue of families being put out of their homes in the mortgage mess, there is one major newspaper that is laying part the blame at the White House door. But the Bush administration, they are beating back this criticism.

Our CNN White House correspondent Elaine Quijano has more -- Elaine.


ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Suzanne, in the waning days of the Bush presidency, the White House is pushing back hard against a "New York Times" article questioning President Bush's housing policies and his response to the housing crisis.

(voice-over): The headline on the front-page story read, "The Reckoning: White House Philosophy Stoked Mortgage Bonfire," the premise, that the Bush administration helped fuel the mortgage meltdown with a hands-off approach to regulation..

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Right here, in America, if you are owning your own home, you're realizing the American dream.

QUIJANO: ... and an overzealous push for homeownership, especially for minorities.

The White House fired back.

TONY FRATTO, WHITE HOUSE DEPUTY PRESS SECRETARY: That's about as myopic as you can get and unsophisticated as you can get a -- an understanding of the housing crisis and the financial crisis.

QUIJANO: In a written statement Sunday, Press Secretary Dana Perino blasted "The New York Times," saying its story 'relies on hindsight with blinders on and one eye closed."

BUSH: Our entire economy is in danger.

QUIJANO: Perino charged "The Times" ignored the president's prime-time explanation in September of the reasons for the housing and financial crisis. And, she argued, the president's calls to reform mortgage giants Fannie Mae and Freddie Mac went unheeded.

FRATTO: We have acted very aggressively. And we're proud of the work that we have done and the creativity here and at the Treasury Department, and the actions that the -- the Fed has taken to deal with an -- an unprecedented crisis.

QUIJANO (on camera): The forceful rebuttal comes with 29 days left in the Bush presidency, at a time when the financial fallout from the housing crisis is heating the broader economy, with no clear end in sight -- Suzanne.


MALVEAUX: Thanks, Elaine -- Elaine Quijano at the White House.

The big financial mess -- rather, big financial firms have a big secret. Taxpayers gave them billions of dollars to stay afloat, but the banks, they are not going to say what they're doing with your money.

CNN's Mary Snow has been looking into this.

And, Mary, what are we learning about this?

MARY SNOW, CNN CORRESPONDENT: Suzanne, ask banks exactly how they're using the $350 billion in federal bailout money, and they're short on specifics.


SNOW (voice-over): With investors on edge, Bank of America is among banks trying to seek customers and soothe nerves with ads like these. But what banks aren't so public about is what they're doing with the billions in federal bailout money they have received, money they were given, so they could start lending again.

We contacted the banks who were given the biggest amounts, Citigroup, J.P. Morgan Chase, Wells Fargo, and Bank of America.

Bank of America received $15 billion as part of the Troubled Assets Relief Program, or TARP. Where did it go? A spokesman sent us a statement saying, "We're using the TARP funds to build our capital and make every good loan that we can." The bank says it anticipates releasing more information in its fourth-quarter earnings report.

Sarah Binder of the Brookings Institution has been monitoring the bailout money.

SARAH BINDER BROOKINGS INSTITUTION: What the banks have said largely is that: We are using the money to stimulate the economy, to get the economy moving.

That's far, far too general to know what precisely these banks are using with the -- doing with the money.

SNOW: Citigroup, J.P. Morgan Chase and Wells Fargo each received $25 billion, the largest sum. Wells Fargo says it can't provide any details until it releases its fourth-quarter statement, though it says it intends to use the funds to help customers avoid foreclosure.

Citigroup says it is using TARP money to help expand the flow of credit and form the special committee to oversee the TARP money. J.P. Morgan Chase points out that it recently bought more than $1 billion in Illinois bonds and plans to lend $5 billion to nonprofit and health care companies.

The Associated Press surveyed 21 banks and reports few specifics. A Republican member of the House Financial Services Committee who opposed the bailout, don't be shocked.

REP. THADDEUS MCCOTTER (R), MICHIGAN: Unfortunately, a lot of people were disgusted, but not surprised. One of the fundamental problems with the Wall Street bailout was the people who had caused the problem were never called in front of Congress to explain what they had done, what needed to be done.


SNOW: Now, Congress did not put conditions on the bailout money, and the Government Accountability Office, for one, is calling for more accountability and transparency.

Critics say now is the time for Congress to act and demand conditions since the second round of bailout money is yet to be distributed -- Suzanne.


We know that the Obama administration also asking for more accountability and transparency. We will see if that actually -- actually happens. Thanks again, Mary.

SNOW: Sure.

MALVEAUX: Dick Cheney and Joe Biden engage in a war of words, after Biden called Cheney the most dangerous vice president in history. Wait until you hear what they're saying about each other now.

Some women say Barack Obama is taking shocking steps backwards when it comes to women's progress and that women do not matter to Obama.

And it's your money. How many of you think taxpayer dollars should be loaned to automakers? Well, find out ahead.


MALVEAUX: Barack Obama's presidential transition is being judged in large part by the biggest decisions that he has made to date. That is his Cabinet choices. And as the scrutiny continues, even some of his strongest supporters are not satisfied.

Here's our national political correspondent, Jessica Yellin -- Jessica.


JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Suzanne, Barack Obama's Cabinet is now all but complete, but not everyone is happy. A key part of his base feels left out.

(voice-over): What includes five women, four African-Americans, three Latinos, two Asians, two Republicans, and a Nobel Prize winner? Barack Obama's Cabinet. The president-elect is taking the big-tent approach to governing. He wanted a Cabinet that stretches the tent wide.

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: I think people will feel that we followed through on our commitment to make sure that this is not only an administration that is diverse ethnically, but it's also diverse politically, and it's diverse in terms of people's life experience.

YELLIN: Well, it might be diverse, but not everyone is happy. Some women's groups are disappointed. Among Obama's strongest backers during the election, now they say they don't have enough seats at the table. That's because, of Obama's 20 announced Cabinet-level posts, just five went to women.

KIM GANDY, PRESIDENT, NATIONAL ORGANIZATION FOR WOMEN: When you're looking at a Cabinet, and you have such a small number of women in the room when the big decisions are being made, there need to be a lot more women's voices in this administration.

YELLIN: Bill Clinton and George Bush each had a comparable number of women in their first Cabinets. Women's groups say they hoped they would make progress by now.

In fact, some are so angry that The New Agenda accuses Obama of taking "shocking steps backward" and says, "This constituency does not matter to the president-elect."

Obama says he's picking people for their skills, not pandering to special interests.

ANNE KORNBLUT, "THE WASHINGTON POST": In this case, we have seen Obama emphasize credentials. I think they obviously knew they would get a lot of bang for their buck, so to speak, in appointing Clinton, but, at the end of the day, the numbers aren't really any more impressive than any previous president.

YELLIN: In the election, women put Obama over the top. Add to this disappointed constituency a number of others. Many of Obama's gay and lesbian supporters are irate over the Rick Warren controversy. And some progressives are disappointed he's tapped moderates for key positions.

So, the question is, has Obama made the tent too big? Does he risk alienating his core supporters before he's even taken office?

This supporter says, no way.

DONNA BRAZILE, CNN POLITICAL ANALYST: He has a team of heavyweights, a team of rivals who will help him set a new course and a new tone here in the nation's capital.

YELLIN (on camera): Privately, Barack Obama's team says, wait and see. They feel it's too early to start criticizing Obama's picks, before they have even had a chance to be sworn in -- Suzanne.


MALVEAUX: OK. Thank you, Jessica.

Vice president-elect Joe Biden says he expects all the members of Barack Obama's inner circle will work well together, including those who were rivals during the primary season.

Biden talked to CNN's Larry King. And he addressed concerns about possible conflicts within the Cabinet.


LARRY KING, CNN ANCHOR: You have, on your team, an impressive team -- I think even rivals would admit that -- but you have four presidential rivals Obama has. He has you, Hillary Clinton, Richardson, and Tom Vilsack. That sounds like Lincoln.


KING: Is that going to work?


BIDEN: Well, it will work, because, if you take a look again, you know, if you -- I know you have read the "Team of Rivals," Doris Kearns Goodwin book.


KING: Yes. Great book.

BIDEN: You know -- you know, the difference between Seward and Lincoln were profound. The difference between Hillary Clinton, Joe Biden and -- and Barack Obama, to take three, were not profound differences.

We all were on the same basic page, with -- with difference -- different points of you emphasis, and the arguments among us all was about leadership. And that's been settled. That's been undisputedly settled. The leader is Barack Obama.

So, I don't think you're going to find it as difficult to -- I don't think you will find any difficulty in us all signing on to the objectives of the Obama/Biden administration.

(END VIDEO CLIP) MALVEAUX: You can see the full Biden interview tonight on "LARRY KING LIVE." That's at 9:00 Eastern -- right here on CNN.

Meanwhile, talk about rival opinions over important issues. That is exactly what is happening with many of you, as you consider whether or not your taxpayer dollars should be used to bail out American automakers.

Well, CNN senior political analyst Bill Schneider is joining me now.

And, Bill, tell us about the public support of the auto industry. Do they support this move? Do they not? Are they kind of lukewarm about it? What is your take?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, they do support the rescue plan, but it doesn't have anything to do with confidence really in the automobile industry.


SCHNEIDER (voice-over): Does the American public support $13 billion in government loans to major auto companies? They do, 63 percent. President Bush proposed the loans last week after a rescue plan failed to make it through Congress.

BUSH: So today I'm announcing that the federal government will grant loans to auto companies under conditions similar to those Congress considered last week.

SCHNEIDER: But Republicans are divided over the rescue plan. Democrats strongly favor it.

What's driving public support? Not sympathy for the auto companies or the union. Most Americans have a negative opinion of auto executives and union leaders, though not of autoworkers.

BUSH: If a company fails to come up with a viable plan by March 31st, it will be required to repay its federal loans.

SCHNEIDER: Do people believe that will happen? They're skeptical. Only 28 percent think the auto companies will be able to pay back all or most of the money. And if the auto companies ask for more money next year, 70 percent say let them go bankrupt.

If confidence in the auto companies is so low, why does the public support the rescue plan? One word: fear.

OBAMA: I would like to say a few words about the necessary steps taken today to help avoid a collapse of our auto industry that would have had devastating consequences for our economy and our workers.

SCHNEIDER: Two-thirds of the public believes that if U.S. auto companies go into bankruptcy, it would cause a crisis or major problems for the nation's economy. But do people think it would harm them personally? Eighty-two percent say no. (END VIDEOTAPE)

SCHNEIDER: You know, several major airlines have gone bankrupt, but travelers continue to fly them. Now, would Americans buy cars from automobile companies that have gone bankrupt? Nearly two-thirds say, no, they wouldn't -- Suzanne.

MALVEAUX: OK. Thank you, Bill.

We have an update on the frightening plane incident in Colorado. That's about the plane's pilot.

Also, a popular pastor says he -- quote -- "loves gays and straights." But will Rick Warren's words soothe the anger that some gay activists feel over him praying at Barack Obama's inauguration?

And you know him as Governor Schwarzenegger, but he may have his eye on a bigger job.



MALVEAUX: New information is coming in about the plane crash in Denver this weekend and the nightmare passengers endured and survived -- new evidence that there's no love lost between the current and future vice presidents. The best political team on television takes on Cheney vs. Biden.

And Pastor Rick Warren defends his role in the Obama inauguration in a way he describes as shocking.


PASTOR RICK WARREN, AUTHOR, "THE PURPOSE DRIVEN LIFE": Now, this one will shock you. I happen to love Democrats and Republicans.


WARREN: And, for the media's purpose, I happen to love gays and straights.





Happening now: takeoff aborted -- new information on that fiery passenger plane crash in Denver. Are investigators any closer to knowing what happened?

A war of words. Dick Cheney and Joe Biden take shots at each other over the role of the vice president. What they're saying about the vice presidency and power in the White House.

Plus, with his state running out of money, Arnold Schwarzenegger is thinking about running elsewhere, if he could -- all of this, plus the best political team on television.

Wolf Blitzer is off today. I'm Suzanne Malveaux, and you're in THE SITUATION ROOM.

We just got new word from transportation safety officials about the weekend crash of a Continental jet on takeoff from Denver.

Our CNN's Susan Roesgen, she is in Denver. We have some new information about that accident.

And, Susan, what do we know at this time?

SUSAN ROESGEN, CNN CORRESPONDENT: Well, earlier, Suzanne, we heard that National Transportation Safety Board investigators had not yet interviewed the pilot. And now we know why.

CNN has learned that the pilot is among the injured. He's a male pilot in the hospital in serious condition. And what he knows may be able to help investigators find out what happened.


ROESGEN (voice-over): For the first time, reporters were allowed to get close to the burned out plane, while investigators in Washington listened to the cockpit voice recorder.


ROBERT SUMWALT, NTSB: We should have some overall characterization of what was said in that cockpit. I think we will not have exact phrases and all. But I think we can be able to characterize for you, in general terms, what may have been said in the cockpit of that airplane.


ROESGEN: The Boeing 737 was just starting down the runway for take-off Saturday night. The deep skid marks show what happened next. The plane veered off the runway, tearing across a ravine and losing all of the wheels before it stopped belly down in the snow.

Firefighters say they crawled through the cabin searching for victims, but in fact, everyone had already gotten out on their own. Nearly 40 people were hurt. And now we know that one of those injured was the pilot.


SUMWALT: We do want that information as quickly as possible. But we want to make sure that he is -- he or she is mentally ready to be -- to be interviewed -- and physically ready, as well.


ROESGEN: Investigators won't say yet what might have caused the accident. Instead, they will continue to collect what they call perishable evidence -- parts and pieces that will lose their meaning once the plane is moved.


SUMWALT: Our goal is to be very methodical, to do it right. Once the airplane is moved, we can't go back and say, well, how was this switch set or something. So we want to make sure that we carefully document things.

ROESGEN: So for now, planes continue to fly in and out of Denver International Airport from all runways except one -- where Continental Flight 1404 remains a reminder of what could have been a disaster.


ROESGEN: And one more thing that the investigators are looking into, Suzanne, is the report by a couple of passengers -- at least a couple -- that there had been an announcement made on the intercom in the gate area before they got on the plane that the flight would be delayed because there was some sort of engine problem. And then later, they said that they heard one of these people in that gate area saying that no, the plane was all right. They could get on and would be an on-time departure.

So investigators are looking into that, too -- was there some kind of mechanical problem with this plane before it ever took off?

MALVEAUX: And perhaps that's something the pilot will be able to answer when he's in better condition.

Thank you so much, Susan.

Back here in Washington, Vice President Dick Cheney is headed out the door. Vice President-Elect Joe Biden is on his way in. But push is already coming to shove with these two a month before the inauguration.

Our CNN's Brian Todd joining us now -- Brian, they're both talking tough here. This is not the two that got along at the residence just a month ago.


This has become a real bare knuckle, verbal brawl between two of the biggest power brokers in Washington. Dick Cheney mincing no words when talking about whether Joe Biden is up to the task of filling his shoes.


TODD (voice-over): How much things have changed since that first meeting after the election. Dick Cheney levels a broadside against Joe Biden on the issue of whether Biden will have as influential a role in the West Wing as did he.


DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: If he wants to diminish the office of vice president, that's obviously his call. I think that President-Elect Obama will decide what he wants in a vice president. And apparently, from the way they're talking about it, he does not expect him to have as -- as consequential a role as I've had during my time.


TODD: A spokesman for the next V.P. fires back: "What the American people want from a vice president is not boasting about how much power they have. Only Vice President Cheney would think that putting the vice presidency in its proper Constitutional role diminishes the office."

Joe Biden tells CNN he will have the new president's ear.


BIDEN: My role as vice president is unlike some of the others. I've asked for no specific portfolio -- that is, I take care of the environment or one particular area -- and that I be essentially his counselor-in-chief.


TODD: One historian says it's not really up to the vice president to decide what his role will be.

STEPHEN WAYNE, GEORGETOWN UNIVERSITY: Very much, in his first year, the president said Dick Cheney has a lot of power. That's what I want. I'm delegating a lot to him. I don't think Barack Obama is going to delegate that much to Joe Biden.

TODD: Biden also criticizes Dick Cheney's views on how to keep America safe.


BIDEN: The advice that he has given to President Bush has been not healthy for our foreign policy, not healthy for our national security and it has not been consistent with our Constitution, in my view.



CHENEY: I think the fact that we were able to protect the nation against further attacks from Al Qaeda for seven-and-a-half years is a remarkable achievement. To do that, we had to adopt some unpopular policies that have been widely criticized by our critics.

TODD: No apologies from Cheney for his style, either.


UNIDENTIFIED MALE: Did you really are tell Senator Leahy (OBSCENE WORD OMITTED) yourself?

CHENEY: I did.

UNIDENTIFIED MALE: Any qualms or second thoughts or embarrassment?

CHENEY: No, I thought he merited it at the time. And we've since, I think, patched over that wound and we're civil to one another now.


TODD: Now, when asked what advice he would give his successor, who once called him the most dangerous vice president in American history, Dick Cheney said simply that Joe Biden hasn't asked him for any advice -- Suzanne.

MALVEAUX: That's not surprising.

OK. Brian Todd, thank you so much.

President-Elect Obama and top aides came up through the Illinois political system.

Is there another shoe that's about to drop in this scandal swirling around the Illinois governor?

Why the public is already getting uneasy.

And Arnold Schwarzenegger says he's looking for his next big goal.

Is there a way for him to run for president?

The best political team on television is standing by.


MALVEAUX: Another page in the Illinois corruption scandal comes tomorrow, when the Obama team will report on its contacts with the Illinois governor. And our latest poll shows the public is already a bit uneasy about all of this.

Well, joining me now, Karen Tumulty of "Time" magazine; CNN political contributor Stephen Hayes of "The Weekly Standard;" and BET Anchor Jeff Johnson.

Tomorrow is going to be a big day for the Obama team. Obviously, they are releasing this internal report -- this review. But let's take a -- let's think about this here. It's not based on the transcripts from the FBI tapes. It really is just simply questions that are being asked -- whether or not you had any contact with the governor or his top aides. There's no sworn testimony.

How seriously should we take this report?

How much weight should be put on this, Karen?

KAREN TUMULTY, "TIME" MAGAZINE: You know, I think that we've already heard probably the most important statement that we're going to hear. And that's off the tapes, where we have Governor Blagojevich saying that Barack Obama was offering him nothing but appreciation. That is a 24 carat gold quote, as one defense attorney in Washington was telling me last week.

So I think that probably, what -- however this narrative goes, I think it will be, probably, pretty solid.

MALVEAUX: So, Steven, is this simply an empty gesture?

STEPHEN HAYES, SENIOR WRITER AT "THE WEEKLY STANDARD": I'm not sure it's an empty gesture. I think it probably is helpful in terms of advancing the story and helping the Obama team get this out and get beyond it -- if that's, in fact, what they can do.

The real question, I think, comes, you know, later, when we start to see more of the transcripts, when we see more of Patrick Fitzgerald's tapes. And then, of course, you know, we're all going to take these transcripts and hold them up and compare notes -- were they saying this?

You know, were they right?

You know, that kind of a comparison.

MALVEAUX: What are you going to be looking for, Jeff, tomorrow when you look at that report?

JEFF JOHNSON, BET ANCHOR: Not much. I think that this is -- again, I agree. I mean it's the Obamas' ability to restate their own position. I mean, Fitzgerald is really the key piece. That's what everybody is waiting for. That's going to be the real teeth. This is really, I think, position -- political positioning and press positioning for the Obama team tomorrow.

MALVEAUX: I want you guys to take a look here. This is the latest CNN/Opinion Research Corporation poll that was released earlier today about viewers -- what you've read, what you've seen about this controversy, whether or not they believe that there's any contact between the Illinois governor and top aides to Barack Obama and his team.

How did they view this?

So, 12 percent think that something illegal actually happened, 36 percent say something unethical, and then you have 43 percent that says well, they don't believe that anything was wrong.

Now, despite Obama's -- his message to clean up Washington, his platform of reform, does it concern you -- should it concern him that so many people are really still doubtful about the government's behavior and, perhaps, even his own administration's behavior going in, Karen?

TUMULTY: Well, obviously, the dangerous number there is the number for unethical. But, you know, the question is going to be whether people see this as something unethical on Barack Obama's part or something unethical on Rod Blagojevich's part.

And I think, again, judging from what we've already heard from Patrick Fitzgerald, it's much more likely to be the latter.

JOHNSON: Yes. I think this is more about how people feel about Illinois politics right now and that it's really guilty until proven innocent. And I think there are people that are shell-shocked about what has happened. They're not sure who they can trust. They want to wait and see what's come out. But until that happens, they're just not sure and they're not willing to clear anyone yet.

MALVEAUX: Is he tainted?

Is Obama and his team tainted because of the association with Illinois politics...

JOHNSON: Well, I mean, you know...

MALVEAUX: ...Chicago politics?

That's where he grew up and earned his political stripes, if you will.

JOHNSON: Yes. Well, what we know of these discussions -- and we may learn a lot more or we may learn a lot more that's damaging to Barack Obama. But what we know of them so far, I mean there really isn't much there that would suggest that they be damaging.

I mean, if Rahm Emanuel had phone conversations with the governor or with the governor's chief of staff...


JOHNSON: ...I mean that would be perfectly logical. I would be shocked if that didn't happen.

I think the real risk here is this guilt by association or, as you say, the taint. And, you know, for somebody who ran on changing Washington -- on reforming Washington -- could that be a problem -- a perception problem?

MALVEAUX: Any of you -- in terms of how does he shut it down -- what does the Obama team need to do after tomorrow to say hey, you know, this should go away, let's focus on some real issues?

TUMULTY: Well, it's not going to go away because this is an investigation. And there was some reason that Patrick Fitzgerald asked the Obama team to hold off on releasing this until tomorrow. So I think that we may have a few more shoes that drop in this. And while they may not involve Obama directly, we're going to hear more about this.

MALVEAUX: OK. A lot of excitement over Governor Schwarzenegger's statement on "60 Minutes" last night.

I want you to take a quick listen to this.


SCOTT PELLEY, CBS CORRESPONDENT: You're a man of no small ambition.

If the Constitution was changed, you'd like to be president, wouldn't you?

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: Oh, absolutely. I think that I am always a person that looks for the next big goal. And I love challenges.


MALVEAUX: OK. A real big challenge there.


MALVEAUX: I mean, considering he wasn't born in the United States, so it's not even constitutional for him to run for president.

JOHNSON: Well...

MALVEAUX: What does this say about the GOP, the political party, that people are already salivating over something that perhaps won't even happen?

JOHNSON: Well, I mean people are -- people are grasping at straws within the GOP. But I don't think that this is a discussion that we shouldn't be having. I mean it's a discussion that's been had over and over again, but one that America really needs to take seriously.

I mean we are a country much more diverse than our founding fathers ever thought of. Now, this can't be couched within Arnold Schwarzenegger's ability to be president. This has to be couched in 20 years from now, in a much more diverse America, do non-native born citizens -- citizens of the United States, who have served America, who have worked in America, who have paid taxes in America, who have been in lower offices in America, should they have the ability to run?

That's how we need to be having this conversation.

MALVEAUX: I actually need to leave the last word for Jeff there. We've got to go.

But thank you so much, all of you -- Karen, Stephen and Jeff.

"LOU DOBBS TONIGHT" is coming up at the top of the hour. Lisa Sylvester is filling in for Lou -- Lisa, what are you working on?


Coming up at 7:00 Eastern, Vice-President Elect Joe Biden says he'll make sure working men and women are "no longer being left behind."

Can a middle class czar actually make a difference? We'll have complete coverage.

Also, the nation's banks want more of your money, but don't want to tell you how it's being spent. And another bailout -- this time for illegal aliens.

Please join us at the top of the hour for all of that and more, from an Independent perspective -- Suzanne, back to you.

MALVEAUX: All right, Lisa. It sounds like a great show. Thanks again.

And he's been picked for a role at the inauguration, despite controversial views on homosexuality. Now Pastor Rick Warren speaks out and his latest comments -- well, they may shock you.

Plus, history will be made in Washington next month, but the inauguration and all that surrounds it may leave the city in the hole.

And now there's something else you can listen to on your way to work. And this download is endorsed by the Vatican.


MALVEAUX: Zain Verjee is monitoring the stories incoming into THE SITUATION ROOM right now -- Zain, what are you watching?

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Suzanne, President Bush had an MRI to find out what may be behind pain in his left shoulder. The president had the exam today while at Walter Reed Army Medical Center visiting wounded troops. Mr. Bush hasn't been held back by the shoulder and his doctors say they expect an official cause by the end of the day.

A dozen homes and hundreds of acres are drowned in muddy water after a dam at a Tennessee power plant burst. The 40-acre retention pond held ash from the coal burning plant outside Knoxville. No one was seriously injured and investigators are trying to determine if heavy rain and freezing temperatures are to blame.

Utah is the nation's fastest growing state -- knocking Nevada from the top spot. The Census Bureau estimates Utah's population climbed by 2.5 percent from 2007 to 2008. Nevada, which fell to eighth, was among the four fastest growing states for the last 23 years. Only Michigan and Rhode Island lost population in the last year. And there's now some religious inspiration in your iTunes store. An Italian priest came up with the idea to make the Catholic "Book of Daily Prayers" available as a download. During their free trial period, the prayers were downloaded about 10,000 times. And that was in Italy. The official version can now be heard in five different languages.


VERJEE: Suzanne.

MALVEAUX: Got to put that down on the list between Beyonce and "Earth, Wind and Fire."



Thanks, Zain.


MALVEAUX: Some gay activists are angry with Barack Obama because of one famous pastor's speaking slot at the inauguration.

But will any of the anger subside now that the pastor in question is sending out a message of acceptance to those who are angry?

Our CNN's Ted Rowlands is in Los Angeles.

And Pastor Rick Warren, he spoke about this recently.

What did he have to say?

TED ROWLANDS, CNN CORRESPONDENT: Well, Suzanne, he did speak about it a bit. He hasn't said anything since this controversy started. But over the weekend, Saturday night, he was at an event here in Southern California. And he did address the controversy in his opening statements.


ROWLANDS (voice-over): Critics of Reverend Rick Warren claim he's homophobic and he should not have been chosen to take part in the presidential inauguration ceremony.

When Warren took the stage at a weekend event, the first thing he did was defend himself.

WARREN: This one will shock you. I happen to love Democrats and Republicans.


WARREN: And, for the media's purpose, I happen to love gays and straights. (APPLAUSE)

WARREN: Also at the event, lesbian singer/songwriter Melissa Etheridge. She said this after meeting Rick Warren.

MELISSA ETHERIDGE, SINGER/SONGWRITER: Our country is changing. And we can no longer be divided the way we have been before, into us and them. We are part of a bigger picture of America. And America is moving forward. And Pastor Warren is part of that.

ROWLANDS: That's essentially what president-elect Obama said last week, when he addressed his choice of Warren.

OBAMA: During the course of the entire inaugural festivities, there are going to be a wide range of viewpoints that are presented. And that's how it should be, because that's what America is about.

ROWLANDS: Congressman Barney Frank, who is gay, disagrees with the president-elect.

FRANK: If he was inviting the Reverend Warren to participate in a forum and to make a speech, that would be a good thing. We should have these. But being singled out to give the prayer at the inauguration is a high honor.

CARY DAVIDSON, PRESIDENT, EQUALITY FOR CALIFORNIA: His comments, though, about gay people are just so hurtful.

ROWLANDS: Cary Davidson, president of Equality For California, says the gay and lesbian community felt blindsided by the choice after supporting Obama overwhelmingly.

DAVIDSON: The notion that one of the first actions that he takes is to have someone like Reverend Warren appear at his inauguration just makes us feel like second class citizens.


ROWLANDS: And the executive director of Equality for California is turning down an invitation to go to the inauguration because, he says, Pastor Warren is involved and has too prominent a role -- Suzanne.

MALVEAUX: OK. Thank you, Ted.

The Obama inauguration may be more than Washington, D.C. can handle -- at least financially. Still ahead, the huge price of hosting history.

And holiday "Hot Shots" to warm a cold winter night.


MALVEAUX: Here's a look at this hour's "Hot Shots."

These are -- in Iraq -- British soldiers decorating a Christmas tree.

In Vermont, a horse braves the elements after a second snowstorm pounds the region.

In India, people warm themselves near a bonfire on a foggy morning.

And in Israel, squirrel monkeys play with a dreidel as Hanukkah gets underway.

That's this hour's "Hot Shots" -- pictures worth a thousand words.

More than a dozen honorary co-chairs of the Obama inauguration were named today. They include the three living former presidents, Jimmy Carter, George Herbert Walker Bush and Bill Clinton. Also on the list, Congresswoman Tammy Baldwin of the Wisconsin, the first open lesbian member of the House of Representatives, and former secretary of State and retired general, Colin Powell.

Playing host to history -- well, that comes with a huge price tag. When Barack Obama takes the oath of office before millions in Washington next month, city officials are worried that they're going to get stuck with the check.

Here's CNN's Kate Bolduan.


KATE BOLDUAN, CNN CORRESPONDENT (voice-over): Washington, D.C. -- a city that knows inauguration. But District officials say past experience will likely pale in comparison to the historic swearing in one month from now.

ELEANOR HOLMES NORTON (D), D.C. DELEGATE: Even though we're very practiced at inaugurations and large events, this is one that will rewrite the book on inaugurations.

BOLDUAN: The city is preparing for two-and-a-half million people to descend upon the nation's capital to witness the start of the Obama presidency -- great news for local restaurants and retail. Hotels are already near capacity.

ADRIAN FENTY (D), MAYOR-WASHINGTON, D.C.: There's some way this is a somewhat of a stimulus package for the city, if you will.

BOLDUAN: But with the good comes the bad -- the price tag. Officials are complaining Congress allotted only $15 million to help the city pay for all major events for the entire year. Congresswoman Eleanor Holmes Norton says they'll need double that amount.

HOLMES NORTON: Witness what the Congress did for the Republican and Democratic national conventions -- $50 million to each of the jurisdictions to handle what were approximately 50,000 people each.

BOLDUAN: While city officials are coordinating with federal agencies, much of the on the ground security and traffic control will fall on the District -- a city that's financially strapped, just recently announcing $130 million in budget cuts.

FENTY: Our police force is about 4,100, which is a lot. And we're going to double that police force. And most of them are going to be working huge overtime shifts.

BOLDUAN: No matter the price, D.C.'s mayor says they'll be ready.

FENTY: And whatever steps have to be taken to make sure that the police resources, the fire resources, transportation resources, etc. are available, we will make sure it happens.

BOLDUAN: In the past, part of the National Mall was used as a staging ground for the parade. This time, the entire Mall -- running about two miles -- will be opened to accommodate the huge crowd. But that demands extra help from first responders to cleanup -- further proof hosting history comes at a price.

Kate Bolduan, CNN, Washington.




Lisa Sylvester is in for Lou -- Lisa, have a great show.