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Hillary Faces Confirmation Hearing; Hurdles to Closing Guantanamo?

Aired January 13, 2009 - 18:00   ET

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


WOLF BLITZER, CNN ANCHOR: And let's begin with the breaking news about the man Barack Obama has entrusted to take on America's most critical challenge right now, fixing the economy.
We're learning now new details about the treasury secretary nominee, Timothy Geithner, that he failed to pay thousands of dollars in taxes over a three or four-year period.

Let's bring in our senior White House correspondent, Ed Henry.

Ed, I guess the bottom-line question, is this going to sink his nomination?

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: That is the concern.

But I can tell you, initially, the Obama camp is insisting that they're not worried long term, that they think this was a common mistake. But there is enough worry that it's interesting. In the last few moments, they're sort of circling the wagons a little bit. The Senate Democratic leader, Harry Reid, put out a statement defending Tim Geithner, saying, look, I don't think this is fatal, essentially. It is a common mistake.

What I think they have to be concerned about is that the top two lawmakers on the Senate Finance Committee, which handles this nomination, put out statements today basically saying, this is a serious matter. The top Democrat, Max Baucus, says he doesn't think it's fatal. But the top Republican, Chuck Grassley, said he's not so sure yet.

And the problem there is, you don't want any uncertainty at all with such a big nomination, Wolf.

BLITZER: Ed, I want to take a little closer look right now at this tax issue. Geithner worked over at the International Monetary Fund here in Washington from 2001 to 2003.

The IRS considered him to be self-employed, but he failed to pay all the appropriate taxes. Geithner has since paid back about $42,000 in late taxes and interest. The Obama camp did learn about all of this last fall.

Here's the question, Ed. We're learning, in addition to this, about another slip-up by Geithner involving his housekeeper.

HENRY: That's right. Basically, a housekeeper that they had about three years ago, her employment authorization form basically expired about three months before her work with the family was done.

But, again, they're stressing it was sort of almost like a paperwork mistake, number one, and that, number two, she was married to a U.S. citizen and got a green card shortly thereafter. So, like the tax issue, they're trying to say, look, it was a mistake, but he came clean on the matter, and they want to get it out there so that it is dealt with before these confirmation hearings.

But, again, any uncertainty at all is something that you don't want. It's a political headache, especially when it's such a big job. Treasury secretary, that is the point person for this financial crisis. Any question about whether he paid all of his taxes, when he's going to be overseeing, among other things, the IRS, is obviously an embarrassing matter -- Wolf.

BLITZER: All right, thanks, Ed. We are going to have more on this coming up later in our roundtable.

Meanwhile, the highest-profile choice for the Obama Cabinet in the hot seat today here in Washington. That would be the secretary of state nominee, Hillary Clinton, the confirmation hearing before the Senate Foreign Relations Committee an early test of what it will be like to have the former first lady, the U.S. senator from New York, as America's top diplomat.

Let's go to our CNN foreign affairs correspondent, Jill Dougherty. She covered these hearings all day.

And she's saying she wants to revitalize the State Department, compared to some of the other agencies in the U.S. government, Jill.

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Definitely. She's on the war path on that, Wolf. And, you know, you're talking about the hot seat. It wasn't much of a hot seat. It was actually a nice, warm, welcoming seat for the most part, especially on foreign policy.

(BEGIN VIDEOTAPE)

DOUGHERTY (voice-over): Well-briefed and confident, Hillary Clinton arrived for her hearing saying, diplomacy is back.

SEN. HILLARY RODHAM CLINTON (D-NY), SECRETARY OF STATE NOMINEE: I assure you that, if I am confirmed, the State Department will be firing on all cylinders.

DOUGHERTY: No fireworks, though, as the United States' future top diplomat fielded friendly questions from her fellow senators.

SEN. JOHN KERRY (D), MASSACHUSETTS: Do you plan personally to engage in personal diplomacy with Iranian officials at a high level in the near term?

CLINTON: We are not taking any option off the table at all. But we will pursue a -- a new, perhaps different, approach that will become a cornerstone of what the Obama administration believes is an attitude toward engagement that might bear fruit.

DOUGHERTY: On Gaza, no giving up on peace, but no negotiations with Hamas, unless it recognizes Israel and renounces violence. Clinton said the U.S. will apply pressure wherever it may be needed, but using what she calls smart power.

CLINTON: We will lead with diplomacy, because that's the smart approach. But we also know that military force will sometimes be necessary, and we will rely on it to protect our people and our interests when and where needed, as a last resort.

DOUGHERTY: As secretary of state, Hillary Clinton wants to take back responsibilities that, under the Bush administration, were taken over by the Defense Department, things like nation-building. To do that, she wants more resources and funding for the State Department.

CLINTON: But, really, it's all hands on deck. We have a lot of work to, in my view, kind of repair damage and get out there and -- and present America as we know we are.

(END VIDEOTAPE)

DOUGHERTY: So, the only really rough spot, if there was one, was not about Hillary Clinton herself, but about her husband and his global charitable fund.

The ranking Republican, Dick Lugar, says that that fund creates the possibility of a perception problem internationally. And his suggestion is to stop taking new international donations.

But Hillary Clinton is saying she's not going to go that far, that she thinks that agreement that was worked out between the Obama team and the foundation is really the way to go. She said it's the best deal you're going to get.

BLITZER: Jill Dougherty up on the Hill for us -- thank you, Jill.

Meanwhile, Senate panels also were holding confirmation hearings today for four other nominees for top jobs in the incoming Obama administration.

Under consideration for the budget director, Peter Orszag, the former head of the Congressional Budget Office. For education, Secretary Arne Duncan, the head of the Chicago Public Schools. For energy secretary, the physicist Steven Chu. And for the secretary of housing and urban development, Shaun Donovan, a New York City housing official, lots of confirmation hearings -- many, many more to come.

Let's go to Jack Cafferty. He's got "The Cafferty File."

Those senators, they are going to be busy confirming all these men and women.

JACK CAFFERTY, CNN ANCHOR: The other confirmation they might have to do is Sanjay Gupta. Have we heard any more talk about the talk that he may become the nation's next surgeon general?

(CROSSTALK)

BLITZER: I have not heard. But I will check.

CAFFERTY: Get right on that, will you?

BLITZER: Yes.

(LAUGHTER)

CAFFERTY: OK.

BLITZER: I have people.

CAFFERTY: Yes, I got people, yes. All right.

Reality sinking in for president-elect Obama, as he comes to terms with the fact that all of his campaign promises cannot be accomplished right away and some of them perhaps not at all. It's a matter of priorities, political maneuvering -- political maneuvering, priorities and money. The economic crisis is so serious, that raising taxes on the wealthy, giving homeowners a 10 percent tax credit, and not running up debt for future generations are all things that are going to have to wait, at least for now.

Obama is expected to be the president of change. But, at the moment, things need fixing. On the campaign trail, Barack Obama said fixing the economy would be a priority. Since then, the priority has gone from on the list somewhere to priority one, the situation going from bad to worse.

The president-elect is desperately trying to get support now for an emergency stimulus package, even before he's sworn in. President- elect Obama's made it clear, everyone must step up to the plate. He's asked all of us Americans to -- quote -- "embrace a new spirit of service, a new spirit of sacrifice."

So, here's the question: President-elect Obama has called on us to make sacrifices for our country. What are you willing to do?

Go to CNN.com/caffertyfile and post a comment on my blog.

I was reading a few e-mails that came in even before the show started, and some of them come from beleaguered members of the middle class, who make the point, hey, we have done quite a bit already.

BLITZER: Yes. But they're going to be asked for more.

CAFFERTY: Probably.

BLITZER: OK, Jack, thank you.

Barack Obama and Democrats, it appears they have some trust issues.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Well, it's not just to have someone that you trust. We have to have specific criteria as to what is going to be happening.

(END VIDEO CLIP)

BLITZER: Some Democrats are warning president-elect Obama. So, he's making a major threat. At least right now, it's a major threat. I don't remember a time it's ever been dove before a president has been sworn in.

And the president-elect wants to shut down Guantanamo Bay, at least the detention facility there, not necessarily the entire U.S. Naval base. But could terrorists be set free, only to kill again?

And he's accused of one of the biggest money scams ever. Did Bernard Madoff have help?

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: He is the big fish, but there may be other whales out there.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: Exactly a week before Democrats reclaim the White House, Barack Obama finds himself in a high-stakes fight -- get this -- with some fellow Democrats over federal bailout money, the president-elect making an urgent personal appeal to members of Congress today and unleashing an actual presidential veto threat.

What is going on?

Let's bring in our senior political correspondent, Candy Crowley.

It's a tug of war, and it seems to be getting a little bit worse.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Absolutely.

And what remains to be seen, exactly who's going to win this tug of war and who is serious, Barack Obama or the Senate Democrats, in their totally opposite views of what should happen to the remaining money in an emergency fund for financial institutions. What is absolutely clear is this has not been a smooth ride for Barack Obama.

(BEGIN VIDEOTAPE)

CROWLEY (voice-over): A veto threat before taking office. History continues to be made, as president-elect Barack Obama warned members of his own party he will veto an attempt to block his access to the remaining $350 billion in an emergency bailout fund. He is pushing back in the face of some pretty vocal, significant objections. SEN. BEN NELSON (D), NEBRASKA: People back home generally didn't want the first go-around. And I'm not going to jump out and -- in front of a train on the second one.

CROWLEY: The incoming president drew the veto card in what is described as a spirited discussion at the regular party luncheon with Senate Democrats. Furious with the way the Bush administration kept them out of the loop on how the first $350 billion was spent, Democrats are unwilling to write another blank check, no matter who wants it.

SEN. DEBBIE STABENOW (D), MICHIGAN: Well, it's not enough just to have someone that you trust. We have to have specific criteria as to what is going to be happening. Will there be accountability, transparency? We can't even get answers.

CROWLEY: If, in the first couple days of the Obama era, he vetoed a bill sent by the Senate-controlled Congress, it would be pretty ugly and interpreted as a major setback for a new president, which is why most objections begin with, "I would like to be supportive, but..."

SEN. RON WYDEN (D), OREGON: But you have to examine this new piece of legislation through the filter of some very unfortunate history with respect to the original program.

CROWLEY: Despite the bruising once-over his request is getting, ultimately, the Obama team believes the Senate will not block his access to the money, which is how the top Democratic in the Senate sees it, too.

SEN. HARRY REID (D-NV), MAJORITY LEADER: I think we will get the necessary votes, yes. I feel very confident about that.

(END VIDEOTAPE)

CROWLEY: In the end, Obama and his team are making a number of promises in order to get this emergency money. They're saying it will be transparent, where they are sending it, and he will use part of it, in fact, to help in the housing crisis.

BLITZER: Let's give some context to what's going on.

During the George W. Bush transition to the presidency, days before his inauguration back in 2001, do you remember any Republicans raising questions about his promises?

(LAUGHTER)

CROWLEY: I don't remember any Republicans raising questions for the first four years, actually.

It was very -- And someone said, look, Democrats are a little different than Republicans. Republicans do tend to salute. But I think you hit on part of the problem with Democrats. And that is, they believe, in that first term, George Bush came in and said, my way or the highway, rolled over them. And they want to make sure the same thing doesn't happen as their fellow Democrat takes the White House.

BLITZER: And Barack Obama is going to be paying the price for that.

All right, Candy, thanks very much.

He's accused of one of the biggest financial scams ever, maybe the biggest in the history of the world. But, right now, his only confinement is his multimillion-dollar New York City luxury penthouse. The government's battle to put Bernard Madoff in jail is intensifying right now.

Tomorrow, a federal judge is set to hear arguments aimed at stopping Bernard Madoff from remaining out on bail.

Our senior correspondent, Allan Chernoff, has been digging into this Madoff case since it broke.

Allan, what's the latest?

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Wolf, if the government appeal fails tomorrow, Bernard Madoff's effort to reach a plea deal could allow him to drag out the legal process and avoid prison for a very long time.

(BEGIN VIDEOTAPE)

CHERNOFF (voice-over): Prosecutors are doing everything they can to get Bernard Madoff out of his penthouse apartment and into jail. But, unless a federal judge revokes Madoff's $10 million bail, securities attorneys say it's possible the man who allegedly took billions from wealthy investors will remain out of prison for months and months because of what could be a protracted legal process.

BRAD SIMON, FORMER FEDERAL PROSECUTOR: It could take years, which means Bernie Madoff is sitting home, not going to jail.

CHERNOFF: In a court filing, the lead prosecutor says: "Counsel for the defendant and representatives of the United States Attorney's Office have had discussions with respect to a possible disposition of the defendant's case. And the parties plan to continue those discussions."

Translation?

MARVIN PICKHOLZ, FORMER SEC OFFICIAL: They're trying to figure out if there's a plea bargain that they can come to.

CHERNOFF: The criminal complaints says, Madoff admitted to FBI agents he ran an investment fraud. Normally, in plea negotiations, prosecutors try to get a defendant to give up the big fish. In this case, though, that would be Madoff.

PICKHOLZ: He is the big fish, but there may be other whales out there.

CHERNOFF: A plea deal would likely require Madoff to help the government unravel the alleged investment scam.

SIMON: And they're under enormous pressure to bring in other bodies. It is inconceivable that Madoff could have acted alone. And, so, therefore, only Madoff can help them figure out what happened here.

CHERNOFF: Former prosecutors say that could involve months of back-and-forth between Madoff and the government, perhaps even longer. And, typically, a cooperating witness is not sentenced until those he fingers are prosecuted.

(END VIDEOTAPE)

CHERNOFF: Madoff is 70 years old. Right now, he faces just one count of securities fraud, which carries a maximum penalty of 20 years in prison. It's possible the government will eventually bring more charges that could increase the potential sentence. Lawyers we spoke with say Madoff's best bet to stay out of prison is to cooperate with the government and stretch that process out -- Wolf.

BLITZER: And, as you say, all indications are, he is cooperating, he's telling them what they want to know?

CHERNOFF: Well, we do know that the process of plea negotiations has begun. But, aside from the initial meeting at his apartment, where he met with two FBI agents, and, according to the criminal complaint, admitted he was running a fraud, aside from that, we do not know for a fact that he has really started talking beyond that with the feds.

BLITZER: Thanks very much, Allan.

Allan is working this story.

Barack Obama is making a point of reaching out to the GOP. But one powerful Democrat argues that the president-elect is simply wrong and says he should be fighting the Republicans instead.

And Hillary Clinton should sail through the Senate. But will foreign governments' donations to her husband's foundation, will that cloud her tenure as secretary of state?

Plus, he plays hoops every chance he gets. Will Barack Obama build a full-sized basketball court over at the White House? We have information for you right here in THE SITUATION ROOM.

Nice shot.

(COMMERCIAL BREAK)

BLITZER: The Presidential Medal of Freedom is America's top civilian honor. Today, President Bush awarded it to three people. The former British Prime Minister Tony Blair is one of them. Colombia's president and the former prime minister of Australia also received the distinguished award.

During a special White House ceremony, the president called all three men true friends of the United States.

And I sat down with Tony Blair just before the ceremony, and he talked about what this honor means for him.

(BEGIN VIDEO CLIP)

TONY BLAIR, FORMER BRITISH PRIME MINISTER: I came into power in 1997 expecting to focus on a very much domestic-oriented agenda and found myself with events, not least September 11, focusing very much on a foreign policy agenda. That's the way it is. But I see this really as - for me it's about people who worked with me and their sacrifice and their commitment.

(END VIDEO CLIP)

BLITZER: Barack Obama wants to close the Guantanamo Bay prison camp as soon as possible. But where will those terror suspects go?

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We are just looking for a willing recipient of them, a willing government to take them on.

(END VIDEO CLIP)

BLITZER: Just ahead, the huge hurdles before the prison camp at Guantanamo Bay can go away.

And also this, honest mistake or damaging embarrassment? Is Timothy Geithner's nomination to become the treasury secretary in serious trouble right now? The best political team on television taking a look at the revelations and the fallout.

And Hillary Clinton stands by her man in her confirmation hearing.

(BEGIN VIDEO CLIP)

CLINTON: It is not unique, however, for spouses of government officials to work, and there are very well-established rules.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

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

Happening now: Hillary Clinton used to be a lightning rod for criticism, but, ahead, the smart power play and the reason her biggest rivals say they have changed their minds.

Plus, Barack Obama promised to shut down the prison camp at Guantanamo Bay. Fewer than two dozen suspected terrorists there have been charged formally. But see what some detainees are doing after their release. We have new information. And accusations that one of Barack Obama's Cabinet picks failed to pay some of his taxes, will this be a problem for the treasury secretary nominee?

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

Hillary Clinton was back on Capitol Hill today. This time, she was answering questions from her Senate colleagues. The nominee for secretary of state had an easy time in her confirmation hearing, despite some GOP concerns about foreign donations to her husband's foundation.

Let's go live to CNN's national political correspondent, Jessica Yellin.

How big of a problem, Jessica, will these donations actually turn out to be?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Not big enough to derail her, Wolf.

For the most part, in fact, this hearing was a lovefest, with the exception of Louisiana Senator David Vitter, who did take a big swing on the donation issue, but he missed.

(BEGIN VIDEOTAPE)

YELLIN (voice-over): Louisiana Senator David Vitter was stymied as he tried to go after Senator Hillary Clinton and her husband's foundation.

CLINTON: I want to speak for a minute, if I can, about the work that is done, because I think it's important...

SEN. DAVID VITTER (R), LOUISIANA: Mr. Chairman, I have no objection listening to this, but I would like it not to come out of my time, because I would like to pursue these questions.

KERRY: Well, I guess, I mean, it's fair to say that, if you ask a question, you deserve an answer. And the answer traditionally comes out of the time of the senator.

YELLIN: He wanted her to release more details about her husband's donors. She gently accused him of bias.

CLINTON: It is not unique, however, for spouses of government officials to work. And there are very well established rules.

YELLIN: Senator Clinton calmly re-buffed other Republican suggestions that the Clinton Foundation stop accepting foreign contributions. And it's clear this issue will not be a deal killer. Note how eager the Republicans were to offer praise.

UNIDENTIFIED MALE: And Senator Clinton, President-Elect Obama has boldly chosen the epitome of a big leaguer.

UNIDENTIFIED MALE: I'm always glad to see when one of our own does well and has a real job.

YELLIN: It was mostly smooth sailing for the senator.

Remember her campaign season comments about the new boss?

CLINTON: I will bring a lifetime of experience and Senator Obama will bring a speech that he gave in 2002.

YELLIN: No one brought that up. Instead, between all the talk of Iran, North Korea, climate change and Gaza, lots of jokes about the egos in this room. Four members of this committee have run for president -- a fact senator and former presidential candidate John Kerry could not let go.

CLINTON: Well, Mr. President -- the president-elect...

KERRY: I'll take that.

CLINTON: Chairman. Yes. Who's -- it was a Freudian slip. The president-elect...

KERRY: We're both subject to those.

CLINTON: Yes, indeed.

KERRY: I want you to know.

CLINTON: On this subject especially.

YELLIN: And Senator Barbara Boxer put a point on it.

SEN. BARBARA BOXER (D), CALIFORNIA: You are working with your toughest rival. And you've set your ego aside for world peace, world stability and for the good of the country.

(END VIDEOTAPE)

YELLIN: She set her ego aside for world peace, Wolf. There were some very entertaining moments, indeed, in the hearing. On the substance, a transition official says that the Clintons have gone above and beyond standard ethics rules with their agreement to release the names of the Clinton Foundation's donors. And don't expect them to change anything in that original agreement -- Wolf.

BLITZER: Jessica, thanks very much for that.

As the new chairman of the Senate Foreign Relations Committee, John Kerry may have been having some political flashbacks. The Massachusetts Democrat first was thrust into the spotlight back in 1971, when he testified before that panel as a Vietnam War veteran who had turned against the war.

(BEGIN VIDEO CLIP FROM APRIL 1971)

JOHN KERRY, VIETNAM VETERAN: Men who have been taught to deal and to trade in violence, and who were given the chance to die for the biggest nothing in history; men who have returned with a sense of anger and a sense of betrayal, which no one has yet grasped.

(END VIDEO CLIP)

BLITZER: One of President-Elect Obama's top priorities is the closure of the detention facility for terror suspects at Guantanamo Bay in Cuba. But shutting it down may not necessarily be all that easy.

Let's go to our Pentagon correspondent, Barbara Starr -- Barbara, what exactly are the hurdles to closing this prison at the naval facility at Guantanamo Bay?

BARBARA STARR, PENTAGON CORRESPONDENT: Well, Wolf, today we learned even as protesters were approaching President-Elect Obama's transition headquarters, protesting against Guantanamo Bay, there are a number of legal and security challenges to shutting it down.

(BEGIN VIDEOTAPE)

STARR (voice-over): Last year, Abdullah Salih al-Ajmi blew himself up in a suicide attack in Iraq. He had been released from the U.S. military prison at Guantanamo Bay, supposedly no longer a threat -- just one of the more than 60 of the estimated 520 detainees that the Pentagon says have been released and are suspected or have returned to the battlefield.

It's just one of the complications in President-Elect Barack Obama's pledge to shut down GITMO -- a pledge he reiterated in an interview with ABC.

(BEGIN VIDEO CLIP FROM "THIS WEEK," COURTESY ABC)

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: It's going to take some time. And, you know, our legal teams are working in consultation with our national security apparatus, as we speak, to help design exactly what we need to do.

(END VIDEO CLIP)

STARR: There are four challenges for the new administration.

CHARLES STIMSON, HERITAGE FOUNDATION: Legal, logistical, political and diplomatic. And they're going to have to work on all four of those at the same time to get it done right.

STARR: There are about 250 detainees remaining at GITMO. Twenty- two have been charged, including Khalid Sheikh Mohammed and Ramzi Binalshibh, two of the 9/11 coconspirators. More still may be charged, but the U.S. hopes to send most of the other detainees back to their home countries.

GEOFF MORRELL, PENTAGON PRESS SECRETARY: We are just looking for a willing recipient of them -- a willing government to take them on.

STARR: Human rights advocates say the jail must be shut down, coercive interrogation stopped and more legal rights given to detainees. Putting them, for the first time, into the federal court system could be a crucial step.

JENNIFER DASKAL, HUMAN RIGHTS WATCH: And it turns them into common criminals who are put away, who will be behind bars for the rest of their lives.

(END VIDEOTAPE)

STARR: Two locations in the United States that are being talked about -- Fort Leavenworth, Kansas and the Navy brig at Charleston, South Carolina.

Now, lawmakers have already spoken up. They don't want the detainees there. Finding a place to put them, Wolf, is going to be challenge number one -- Wolf.

BLITZER: A lot easier said than done, I guess.

All right. Thanks, very much, Barbara, for that.

A top Congressional Democrat questions whether the president- elect can work with Republicans and warns he may be better off if he fights the Republicans instead.

Plus, Hillary Clinton grilled on her husband's charity in her confirmation hearings -- why one senator said it could be a temptation foreign governments.

(COMMERCIAL BREAK)

SEN. RICHARD LUGAR (R-IA), FOREIGN RELATIONS COMMITTEE: But the Clinton Foundation exists as a temptation for any foreign entity or government that believes it could curry favor through a donation. It also sets up potential perception problems with any action taken by the secretary of State in relation to foreign givers or their countries.

(END VIDEO CLIP)

BLITZER: That's Republican Senator Richard Lugar of Indiana expressing concern over Bill Clinton's charitable foundation and possible conflicts of interest for his wife as secretary of State.

Let's talk about this and more with our senior political analyst, Gloria Borger; our CNN political contributor, Steve Hayes, of "The Weekly Standard;" and Clarence Page of the "Chicago Tribune."

Are we talking about a big deal or a little deal here?

Certainly there's no real threat to her confirmation.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: No. It's an expected deal. I mean we knew that these questions were going to be raised, because they should be raised. People want to make sure that there's no conflict of interest here, that some country can't assume that it's buying, essentially, the secretary of State by giving to her husband's foundation. When you talk to the Clinton folks, they will say this is a non- profit. Neither Clintons have any financial interest in the Clinton Foundation and that there is this memorandum of understanding that all donations will be revealed annually. Some folks want it to be monthly. Some folks want contributions to be revealed as they occur. That may be something that has to be talked about.

BLITZER: And, Steve, during the actual policy discussions, she seemed to suggest the Obama administration's general strategy around the world will be pretty different than the Bush administration's.

Listen to this.

(BEGIN VIDEO CLIP)

CLINTON: We will lead with diplomacy, because that's the smart approach. But we also know that military force will sometimes be necessary. And we will rely on it to protect our people and our interests when and where needed as a last resort.

(END VIDEO CLIP)

BLITZER: All right. She was sort of suggesting the unilateralism, as it's called, of the Bush administration, will be replaced by what she called smart diplomacy.

STEPHEN HAYES, SENIOR WRITER AT "THE WEEKLY STANDARD": And I mean smart diplomacy, of course, is a term of art. But there was a not so subtle hint there that what the Bush administration has practiced is dumb diplomacy. And I think there's a risk in setting yourself up as the smart kids in the class all the time.

And I also think that it's unlikely that we're going to see such an abrupt and dramatic change, as people have suggested. I think we're much more likely to see more continuity between the Bush second term and the Obama first term.

Do you think?

CLARENCE PAGE, "CHICAGO TRIBUNE": I think there's a lot of truth to that. Obama, despite attacks upon him for being a liberal, a Marxist, a one worlder and all the other am extremist claptrap, he actually has a record of moderation. So does Hillary Clinton. Hillary Clinton is pretty hawkish, actually. And the fact that he chose her to be secretary of State indicates he doesn't plan to give a lot of quarter to hostile forces.

BLITZER: But she did make it clear today in those hearings -- and there were several hours of those hearings -- that she would reach out, as secretary of State, to some of the hostile nations, including Iran, and try to elevate the diplomatic dialog.

BORGER: She did. But she also said, at the same time, that all options are on the table, which means that while she would reach out, she's not taking anything off the table. And it's very clear that while she and Obama disagreed, we all remember, during the primaries about with whom you speak, with whom you can negotiate...

HAYES: Right.

BORGER: ...that that has now become broadened and they agree that you need to try everything.

BLITZER: But that -- that phrase all options are on the table -- look, when I interviewed Barack Obama during the campaign several times, he always -- whenever I asked about Iran...

BORGER: Right.

BLITZER: ...he would always say that. So that's just something they always say, isn't it?

HAYES: Yes, I think it is. And if you look back and you look at what Hillary Clinton was saying during the primaries and what Barack Obama was saying during the primaries, there was certainly some -- some tension there. But I think, if you look at what the Bush administration has been doing, we've been engaging Iran. The United States has been engaging Iran. Now, maybe not at the levels that Barack Obama intends to. But the United States has been engaging North Korea at pretty high levels.

Barack Obama has said he's not going to engage Hamas, which is a line the Bush administration has drawn.

I think we've seen -- we're likely to see a lot more of this condemnation.

BORGER: The second term.

BLITZER: Let's move on to the Timothy Geithner confirmation as Treasury secretary.

Do you think what we reported at the top of this hour -- the breaking news involving he failed to pay some back -- some taxes when he worked at the International Monetary Fund and he wasn't fully up to speed on the documentation of an immigrant who was working for him as a housekeeper -- is this going to derail his confirmation?

PAGE: I was kind of reminded of -- about Wesley Snipes and Willy Nelson and others who had troubles with tax laws. And they said, well, another guy was handling this for me.

Geithner is a fellow who is being appointed to this position because the financial system needs confidence. That's our big international crisis right now. And it's damaging -- I mean, the guy is a genius. Nobody questions that. But it is rather damaging when, for the average person to think, gee, he couldn't keep track of withholding?

I mean it's a basic thing everybody knows about with employees.

BLITZER: And, you know, John King made an interesting point earlier in THE SITUATION ROOM, our chief national correspondent. He pointed out will women members of Congress react differently -- going back to 16 years ago when Zoe Baird and Kimba Wood, they were -- their nominations were derailed, as you remember, because of some problems with housekeepers.

BORGER: Right. Except I would argue on the housekeeper front, this is not Zoe Baird and Kimba Wood. He paid his taxes. He looked -- she had authorization to work in this country. There's a three month period for which she worked for him which she didn't have authorization before she left. That was the problem. That I would not describe as a huge mistake.

I think the more problematic area is the question of not paying your Social Security and Medicare taxes. He was an employee of the International Monetary Fund. They don't withhold, as our employers withhold from us. And so he -- he had an issue there. And I think there -- there is a question of, gee, hmm, this guy's going to be in charge and we're in trouble right now?

HAYES: Yes...

BORGER: We're in a crisis. And so it gives people an opportunity to raise that question.

HAYES: And certainly the Republicans intend to make hay of the fact that Treasury oversees IRS, of course, and to say we're putting him in charge a guy who, you know, didn't know these basics.

BLITZER: All right, guys.

We'll continue this conversation.

Thanks very much.

Lou Dobbs is getting ready for his show that begins right at the top of the hour -- Lou, what are you working on?

LOU DOBBS, CNN ANCHOR: Wolf, thank you.

We'll have complete coverage tonight of those surprising new questions about the president-elect's nominee to be the Treasury secretary, Tim Geithner -- his taxes, his housekeeper.

Also, the president-elect's first veto threat. That's right, he's already threatening Congress with a veto. Three of my favorite talk show hosts give us their assessment.

And a story you'll see only on "LOU DOBBS TONIGHT" -- charges that this company's biggest health insurance companies are ripping off more than 100 million Americans.

Are you one of them?

We'll have the story.

And tonight, last year was one of the coldest years in American history. Is it evidence of global warming nearing its peak?

We may be headed toward a new ice age -- or are we, as "An Inconvenient Truth" suggested, heading for more global warming?

We'll be talking about all of that with three of the world's leading authorities on climate change and physics.

Join us for that at the top of the hour and a great deal more, all the day's news -- Wolf, back to you.

BLITZER: Thank you very much, Lou.

We'll get to you at the top of the hour.

Barack Obama making history in more ways than one.

(BEGIN VIDEO CLIP)

OBAMA: Although I will say that I think we are putting together the best basketball playing cabinet in American history.

(END VIDEO CLIP)

BLITZER: All right. But here's the question -- where will the president-elect and his pal shoot hoops?

We're exploring the options at the White House.

And gushing praise, slapping backs, passing notes and more -- Hillary Clinton's confirmation hearing. And our Jeanne Moos takes a "Moost Unusual" look. I think you're going to want to see this.

Stick around.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Now, we all know he's bringing change to Washington, but will Barack Obama also bring a full-sized basketball court to the White House?

CNN's Elaine Quijano is here in THE SITUATION ROOM.

All right, good question.

What do we know -- Elaine?

ELAINE QUIJANO, CNN CORRESPONDENT: Well, you know, all presidents, Wolf, have their pursuits. And William Taft, for instance -- who you see here -- enjoyed golfing, like many presidents. President Bush is known for riding hard on his mountain bike. President-Elect Obama, as we all know, enjoys basketball.

But where to play regularly? That is open question.

(BEGIN VIDEOTAPE)

QUIJANO (voice-over): He may have that laid back aloha vibe...

OBAMA: You know, he's tough.

QUIJANO: ...but on the basketball court, President-Elect Barack Obama makes clear he is in charge and out to win.

SEN. BOB CASEY (D), PENNSYLVANIA: Well, it's a quiet intensity.

QUIJANO: Pennsylvania Senator Bob Casey knows. On election day, he played hoops with Barack Obama just hours before Obama was elected.

CASEY: When he plays, he plays very seriously. He -- he has a sense of command about the way he plays. And he always picks a good team.

QUIJANO: In fact, the president-elect has joked about his incoming administration's basketball prowess.

OBAMA: Well, I will say that I think we are putting together the best basketball playing cabinet in American history.

QUIJANO: But if he wants to play pick-up games at the White House, some renovations could be in order.

OBAMA: We are going to take the bowling alley out of the White House.

(APPLAUSE)

OBAMA: We are going to be putting in a basketball court.

QUIJANO: Sixteen hundred Pennsylvania Avenue does have an outdoor basketball court. It's a short walk from the Oval Office, but it's not even half regulation size.

The White House does reflect past presidential pursuits -- a tennis court where President George H.W. Bush played doubles with tennis pro Pete Sampras is nestled under tall trees on the South Lawn. A bowling alley built during President Nixon's tenure sits under the North Portico. And on the South Lawn, there's a running track built during President Clinton's administration.

While it's not clear yet whether the Obama era will mean a regulation-sized White House basketball court, Senator Casey says if he scores another invitation to play, wherever it is, he'll be there.

CASEY: But I still want to play with a president, not just a candidate or a president-elect. If I am called, I will serve.

(END VIDEOTAPE) QUIJANO: Now, there used to be a heated indoor pool at the White House. It was built in 1933 for President Franklin Delano Roosevelt, who suffered from polio. Years later, it was covered up, though, and the White House Press Corps was moved into that space. Then in 1975, an outdoor pool was built for President Gerald Ford, whom you see swimming there. It is tucked away, Wolf, surrounded by tall trees and hedges behind the Oval Office.

BLITZER: I've seen it. When I was a White House correspondent, I actually played tennis a couple of times...

QUIJANO: Oh, did you?

BLITZER: ...on the White House tennis court. It was a lot of fun, very exciting. I did not play well, though.

QUIJANO: Did you win?

BLITZER: No.

QUIJANO: Oh.

BLITZER: Elaine Quijano, thanks very much.

QUIJANO: Sure.

BLITZER: Jack Cafferty is joining us once again for The Cafferty File.

I don't know if he ever played tennis at the White House. Maybe he did.

CAFFERTY: No -- or anywhere else.

I used to play...

(LAUGHTER)

CAFFERTY: I used to play a little golf, but that was a few years ago.

The question this hour is, President-Elect Obama has called on all of to us make sacrifices for our country.

What are you willing to do?

Teri in Florida writes: "I've been cutting the grass of the homes around me that are in foreclosure. I admit it helps my property values, too. I've also picked up garbage in the streets. I've donated more to the local food bank. When Obama was running for office, he said he can't do it alone and we all must change. I'm sort of waiting now to see what he has in mind."

Rex in Portland, Oregon: "I'm willing to supervise, criticize and analyze to the extent of severe sacrifice, just like everyone else." Kathy in Chicago: "I'm already bailing out the banks, Wall Street and the auto industry. I pay my bills on time. I haven't defaulted on my mortgage. I haven't lived off my credit cards and I don't go on extravagant vacations. I've sacrificed all my life, all for nothing. Doing the right thing gets you nowhere. You screw up, the government bails you out. You do the right things, the government screws you over. I'm not asking the government to do anything for me, so the government shouldn't be asking anything of me. I am tapped out."

Paulette in Pennsylvania: "I'm willing to conserve energy, water and go more green. I'm also willing to donate to charities that directly help the people in need. I'm willing to volunteer at shelters and food kitchens. And I'm willing to forgo some luxuries for myself in order to be able to help my recently unemployed son and his family."

Shelly in New York: "I think a lot of us have done enough. I think it's time the government gets its act together."

Matt writes: "Most every American has lost significantly over the last eight years. So to complain of nothing more to give is selfish and counter-productive. A responsible American consumer spending intelligently, managing debt -- the first step toward returning to economic solvency. I'm thus prioritizing my spending and lifestyle choices accordingly."

And sully in Forest Park, Georgia says: "I'm going to buy a new American gun."

If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile and look for yours there, among hundreds of others.

How did you come to play tennis at the White House?

BLITZER: I was invited by the late Treasury secretary, Lloyd Bentsen, on one occasion...

CAFFERTY: Wow!

BLITZER: And then Alan Greenspan, the Federal Reserve chairman, I played tennis with him. We were actually playing doubles. And it was a lot of fun.

CAFFERTY: I can imagine it would be. That's a -- that's a high- powered group.

BLITZER: Yes. It was a lot of fun.

All right. Thanks very much for that.

If I'm invited to play tennis again, I will. Not well, but I'll try.

CAFFERTY: There he goes, begging for an invitation.

BLITZER: Thank you.

Note passing and buzz phrases -- the kind of behavior you'd see in a high school classroom.

But a confirmation hearing?

CNN's Jeanne Moss has a "Moost Unusual" look at what happened on Capitol Hill.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): It was the one-two Clinton punch.

First, came Chelsea, then came Hillary, hugging and patting her way past Senate colleagues, ready to be coronated Barack Obama's secretary of State -- that joke from back whether they were rivals now true.

(BEGIN VIDEO CLIP, COURTESY IOWA PUBLIC TELEVISION)

OBAMA: Hillary, I'm looking forward to you advising me, as well.

(LAUGHTER)

(END VIDEO CLIP)

MOOS: Well, now she's looking forward to it, as well.

Her fellow Democrats gushed.

SEN. CHARLES SCHUMER (D), NEW YORK: And I know that you will be a brilliant secretary of State.

MOOS: Even Republicans gushed.

LUGAR: The epitome of a big leaguer.

MOOS: And Hillary gushed back.

CLINTON: I respect you so much, Senator.

MOOS: She got credit from Democratic Senator Barbara Boxer for her willingness to serve under a former rival.

BOXER: You've set your ego aside for world peace.

MOOS: Contrast that love fest with the grilling that Senator Boxer gave Condoleezza Rice four years ago.

(BEGIN VIDEO CLIP FROM JANUARY 18, 2005)

BOXER: Your loyalty to the mission you were given to sell this war overwhelmed your respect for the troops.

CONDOLEEZZA RICE, SECRETARY OF STATE: And I have never, ever lost respect for the truth.

(END VIDEO CLIP)

MOOS: Four years and a new nominee later, there's a new buzz phrase.

UNIDENTIFIED MALE: Smart power.

UNIDENTIFIED MALE: This smart power.

CLINTON: Your reference to smart power.

MOOS: Smart power is a policy that combines hard power -- meaning military might -- and soft power, meaning trade diplomacy.

UNIDENTIFIED MALE: I guess the phrase of the week is smart power.

MOOS (on camera): Compliments weren't the only thing exchanged at the hearing. Check out the exchange of notes.

(voice-over): While other senators spoke, Hillary was passing messages to her staff.

SEN. CHRIS DODD (D), CONNECTICUT: And yet, obviously, it's a matter of deep concern to this committee.

MOOS: And a few minutes later, she'd get a note back.

UNIDENTIFIED MALE: And the foremost criteria for selecting a national security cabinet official...

MOOS: The last time we enjoyed watching note passing this much was when President Bush got nabbed at the U.N. passing a note saying: "I think I need bathroom break. Is this possible?"

Unfortunately, we couldn't read Hillary's.

SCHUMER: But Hillary didn't just meet with world leaders.

MOOS: Oh, she knows it's there. But you have to be subtle. You wouldn't want to get caught, like the senator who was doing a crossword at a Supreme Court confirmation hearing.

And though we can't confirm the contents of the Hillary notes, we can confirm she knows how to pass a note...

UNIDENTIFIED MALE: We appreciate the very gracious comments you have made.

MOOS: ...with a "who me?" smile.

Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

BLITZER: Leave it to Jeanne Moos. Thank you, Jeanne.

Are you going to call it, perhaps, Obamabilia?

Piles of it all ready for the inaugural crowd -- the pictures tell the story, just ahead in our Hot Shots.

(COMMERCIAL BREAK)

BLITZER: A quick look at some "Hot Shots."

In Nicaragua, a riot police officer fires teargas during a protest.

In Costa Rica, a woman left homeless from last week's earthquake stands with her baby in a temporary camp.

In Washington, stacks of Obama inaugural t-shirts sit on a shelf.

And in San Diego, a polar bear dives for a fish at Sea World.

That's it for me.

Let's go to Lou in New York -- Lou.