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President: Extraordinary Action Needed; Report: Bailed-Out Bank Buys Jet; President Obama Pushing Green

Aired January 26, 2009 - 17:00   ET

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


WOLF BLITZER, CNN ANCHOR: Citigroup reportedly buys a luxury corporate jet just weeks after taking billions of dollars in government bailout money. Watchdog groups are outraged and now the company is responding. Stand by.

And the first lady, Michelle Obama, cries foul. She says new dolls that may be modeled after her daughters are: "inappropriate."

Did a toy maker cross the line?

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

An employment bloodbath seemingly without end is taking huge new tolls on American workplaces, with some 68,000 new jobs cut just announced today -- job cuts announced today.

President Obama starts his first full week on the job saying the disturbing news underscores the urgent necessity of a $825 billion recovery package, which Congress takes up tomorrow.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Before I begin today's announcement, I want to say a few words about the deepening economic crisis that we've inherited and the need for urgent action. Over the last few days, we've learned that Microsoft, Intel, United Airlines, Home Depot, Sprint Nextel and Caterpillar are each cutting thousands of jobs. These are not just numbers on a page. As with the millions of jobs lost in 2008, these are working men and women whose families have been disrupted and whose dreams have been put on hold.

We owe it to each of them and to every single American to act with a sense of urgency and common purpose. We can't afford distractions and we cannot afford delays.

And that is why I look forward to signing an American Recovery and Reinvestment Plan that will put millions of Americans to work and lay the foundation for stable growth that our economy needs and that our people demand. These are extraordinary times and it calls for swift and extraordinary action.

(END VIDEO CLIP)

BLITZER: The president underscoring the urgency of what's going on right now -- this dire, dire economic situation.

Let's bring in our senior White House correspondent, Ed Henry, and our chief business correspondent, Ali Velshi -- Ed, first, to you.

He's got an enormous challenge this week. He wants to get this legislation passed in the house and in the Senate.

What are they saying at the White House?

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Well, what they're saying is that this is essentially, as you noted, the bleakest day for the economy since Barack Obama took the presidency, with those tens of thousands of jobs cut. And that's why he's really trying to take advantage of it, in a way, to say, look, you know, this is a dire situation. You can't hold back on this $825 billion economic stimulus package.

And there are two big broad messages this White House is trying to send out.

Number one, even though it's just a few days into his presidency, he's trying to send the signal he's a bold leader, that he's trying to jump on these problems -- whether it's the energy reform, whether it's the economy -- that he's all over it.

And, secondly, they want to show that he's going to change the tone and have bipartisanship on this vote.

But right now there are a lot of Republicans, like John McCain, coming out in the last couple of days, saying they can't vote for this stimulus package. They think there's too much waste in and it and there's not enough tax cuts.

And so that's a big reason why Barack Obama is going up to Capitol Hill tomorrow, for the first time as president. He's not meeting with Democrats. He's meeting with the House Republicans and then the Senate Republicans, because he realizes he has a lot of work to do.

The Democrats say they think they have the votes to get his stimulus plan passed. But they don't want this to be a squeaker. They want this to be big and bold. They want wide margins so they can show that in mid-February, when they hope that it gets to his desk, that this didn't get through in a squeaker -- that it got through with a lot of bipartisanship.

Right now, that bipartisanship is not there. He has a lot of work to do -- Wolf.

BLITZER: And he's going to try tomorrow.

As you say, an extraordinary meeting with Senate and House Republicans.

Ali Velshi -- let's bring in Ali for this discussion -- a lot of Republicans, Ali, are saying you know what -- a lot of the money in this $825 billion proposed package is not going to necessarily stimulate the economy. It's sort of old-fashioned -- money just going to various interest groups out there.

What do you think?

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Yes, I think the president is going to have to make a very good case that this money is going to actually go -- at least that part which is designed to create jobs -- is going to create jobs, is going to go to create jobs. He's talking about three to four million jobs being created.

Here's the interesting thing, Wolf. We have lost, in 2008, some 2.6 million jobs. We're now down about 180,000 jobs in January alone. We haven't got the official numbers, but it might be another half a million or so.

Let's take a look at what the stimulus -- or the recovery plan, as proposed by the administration, looks like.

And you can see there, the creation of 678,000 construction jobs, 408,000 manufacturing jobs, 604,000 retail jobs. And you can imagine, Wolf, that's dependent on Americans actually spending money. Education and health, 240,000 jobs; leisure and hospitality, almost 500,000 jobs. And almost a quarter million government jobs.

They've actually put numbers to the kind of money that will be spent.

Again, a lot of people want to take time to make sure this stimulus package does the right thing. But, Wolf, we've got about 68,000 people today for whom time is running out. That was the number of announced layoffs today. That's one of the biggest numbers we've ever seen in a single day.

That's worldwide. But many, many of those jobs will be here in the United States. So jobs is going to be -- of issue number one, which is the economy, Wolf -- jobs is issue number one within that category.

BLITZER: You know, I listen very carefully -- as all of us do, Ali, to what the president says. And he says this $825 billion package will either create or save three to four million jobs.

VELSHI: Right.

BLITZER: Now those are -- those important words -- "create or save."

VELSHI: Right.

BLITZER: Explain what he means here.

VELSHI: Well, in a healthy economy, you're supposed to gain at least a million -- a hundred thousand jobs a month -- so in a year, about 1.2 million jobs, just to keep pace with the growth of the working age population. So in other words, when we're down 2.6 million for 2008, you add another million to that, we're down over three million jobs.

And what he's saying is you won't necessarily see new jobs created. You won't necessarily add those up. But we're going to stop what they predict to be the bleeding of jobs.

And the Obama administration's predictions are that the unemployment rate will go from 7.2 percent to well above 8 percent and it will carry on for months. We will see job losses.

So it won't mean that you end the job -- the year with three or four million jobs more -- or two years. It means you won't have lost as many and you'll have gained some.

BLITZER: And in some states, it's already over 10 percent, unemployment, Ali.

VELSHI: That's right.

BLITZER: Thanks very much.

Ali Velshi is our senior business correspondent.

Let's check back with Jack Cafferty for "The Cafferty File."

What an economic crisis this country -- indeed, most of the world, Jack, is going through right now.

JACK CAFFERTY, CNN ANCHOR: Indeed.

The $825 billion stimulus package that President Obama wants on his desk by mid-February is supposed to begin to turn the economy around. The president talked about transparency. He even announced that there will be a Web site that will give an accounting so people can see how the money is being spent. And he also vowed there will be no pork in this bill.

Now over the weekend, lawmakers were out on their soapboxes. Democrats were selling the plan. Republicans were pointing out problems with the plan.

On ABC, the House speaker, Nancy Pelosi, defended hundreds of millions of dollars in the stimulus package earmarked for contraception. She said family planning reduces costs and explained that the stimulus plan includes assistance to states and part of that includes children's health and education. That includes contraception, which Pelosi said will "reduce costs to the states and to the federal government."

What exactly did she mean?

Are the millions of dollars for contraception supposed to stop people from having babies?

That's starting to sound a little like Chairman Mao.

Asked if she had any apologies for what some saw as controversial remarks, Madam Speaker answered: "No apologies."

So here's the question -- is Nancy Pelosi right when she says adding birth control to the stimulus package will help the economy?

You can go to CNN.com/caffertyfile and post a comment on my blog.

BLITZER: Jack Cafferty, thank you.

A troubled bank takes billions and billions of dollars in government bailout money.

So why is it buying a $45 million luxury jet?

It sounds outrageous. We're sorting it all out. That's coming up.

And new dolls named Sasha and Malia -- but the toy company says they're not -- repeat, not modeled after the president's daughters. The first lady, who, Michelle Obama is speaking out. She's not pleased.

And the governor says lawmakers are out to get him. And he warns others could be next.

(BEGIN VIDEO CLIP)

GOV. ROD BLAGOJEVICH (D), ILLINOIS: Governor Paterson and Governor Schwarzenegger and governors all around America, including Governor Palin, could be susceptible to legislatures.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: A major U.S. bank is bailed out by federal -- the federal government, American taxpayers. And now there's word it's actually going forward with the purchase of a $45 million luxury jet.

Let's go to New York.

CNN's Mary Show is working this story -- it's one of those kinds of stories, Mary, that causes outrage out there among some struggling taxpayers.

MARY SNOW, CNN CORRESPONDENT: It certainly is, Wolf. And Citigroup itself is not commenting on this report of a specific jet purchase. But it is, indeed, raising eyebrows.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Its estimated price tag -- 45 million. This luxury jet -- seen here on the Web site of its maker, Dassault Aviation -- seats 12. The company says there are only 21 of these planes operating throughout the world. "The New York Post" reports Citigroup is buying one, despite the fact it's so financially strapped and has accepted $45 billion in federal bailout money.

The aircraft is called the Falcon 7X and the Dassault Web site describes it this way.

(BEGIN AUDIO CLIP)

UNIDENTIFIED MALE: Nothing can touch the incredible Falcon 7X for smooth flying.

(END VIDEO CLIP)

SNOW: Citigroup declined a request for an interview, but did give us this statement, saying: "For security reasons, we cannot comment on information about our aircraft. Policies governing the use of our aircraft are strict and rigorously enforced and restrict the use to a limited number of executives. Executives are encouraged to fly commercial whenever possible to reduce expenses. Over the past eight years and to support this objective, Citi has reduced its number of aircraft by two-thirds."

Aircraft maker Dassault also declined comment.

"The Post" reports Citigroup ordered the jet two years ago, when it had a lot more cash.

One company that advises corporations on aircraft, but does not advise Citigroup, says breaking the contract could cost Dassault a lot of money and penalties.

KEVIN O'LEARY, PRESIDENT, JET ADVISORS: I would think that it would be almost foolish to walk away and pay all those penalties and not take delivery of the airplane.

SNOW: But one taxpayer watchdog group calls the situation outrageous.

RYAN ALEXANDER, PRESIDENT, TAXPAYERS FOR COMMON SENSE: And it's probably not the taxpayers that would be upset with this. I'm sure other shareholders would think this isn't the best way to spend their assets right now either.

SNOW: One political science professor who's been tracking the billions the government has been giving banks says this speaks to a much bigger problem with the bailout plan itself.

SARAH BINDER, BROOKINGS INSTITUTION: It raises hackles. It's emblematic of a program that's gone awry. That is the problem. And it's a program that really has to be fixed. And that's the challenge for the new administration.

(END VIDEOTAPE)

SNOW: And as for the new administration, during today's White House briefing, press Secretary Robert Gibbs was asked if the Obama administration will have a policy on companies getting billions of federal money. Gibbs said the president said during the transition period that he didn't believe the auto companies made the best use of money when they used private jets -- Wolf.

BLITZER: All right, Mary.

Thanks very much.

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

Meanwhile, the impeachment trial of the Illinois governor, Rod Blagojevich, is now underway without Blagojevich. He's accused of trying to sell Barack Obama's Senate seat. But he says the trial rules are fixed against him. So, instead, he's making the rounds of the news media and he's taking his case directly -- he says -- to the American people.

Remember, he's still facing criminal charges.

(BEGIN VIDEO CLIP)

BLAGOJEVICH: If the senators in Illinois and the lawmakers in Illinois can do that to a sitting governor...

(CROSSTALK)

BLAGOJEVICH: Imagine what they can do...

(CROSSTALK)

BLAGOJEVICH: ...imagine what they can do to average ordinary citizens. And if they establish a precedent like that in Illinois, then Governor Paterson and Governor Schwarzenegger and governors all around America, including Governor Palin, could be susceptible to legislatures who want to remove governors without giving them a chance to prove their innocence.

I'm here in New York because I can't get a fair hearing in Illinois -- in the state senate in Illinois. They've decided with rules that are fixed, that don't allow me, as a governor, the right to be able to bring in witnesses in to prove that I've done nothing wrong.

I want to call witnesses like the president's chief of staff, Rahm Emanuel, who said recently on "Face the Nation" that his conversations with me were appropriate and there was nothing inappropriate about what we talked about. I want to bring in Congressman Jesse Jackson, Jr. U.S. senators. I want to bring in Valerie Jarrett, a top staffer for President Obama -- all of whom, who were part of this whole story.

They won't allow me to bring these witnesses in, who will prove -- help prove my innocence. They've decided to remove a governor elected twice by the people without giving that governor the most basic fundamental rights that all of us citizens are entitled to -- the right to be able to confront witnesses, challenge false accusations and prove that you didn't do wrong things that they said you did.

And so they trumped this all up, because they've already made a decision. And it's based on politics and, unfortunately, a desire upon the part of the legislature to raise taxes in Illinois, because I have fought for people and have prevented tax increases; because I've found ways to give all of our kids health care; all of our senior citizens free public transportation; because I found ways around the legislature, to give all 261,000 uninsured women in Illinois access to breast and cervical cancer screenings, mammograms and pap smears that will save their lives.

And so they're trumping up some of these rules , which prevent me, as a governor, from being able to simply bring witnesses in to show I didn't do what they said. I can't get a fair hearing there.

So I want the American people to know what's happening in Illinois.

(CROSSTALK)

BLAGOJEVICH: I know the fix is in and I'll soon join, unfortunately, the legions of others who are losing their jobs in our country.

(END VIDEO CLIP)

BLITZER: And this important note -- Governor Blagojevich will be joining "LARRY KING LIVE" tonight. He'll also be taking viewer phone calls. "LARRY KING LIVE" airs tonight, 9:00 p.m. Eastern, 6:00 Pacific, only on CNN.

The impeachment trial is underway while the governor takes his case directly to the people. So what happens next is up to the Illinois state senate. The lawmakers are expected to spend more than a week on the proceedings. Forty votes are needed to remove him from office out of 59 state senators. If that happens, Blagojevich will be replaced immediately by the Illinois lieutenant governor, Pat Quinn. He's also a Democrat. And the senate can consider a second vote that would bar Blagojevich from public office in Illinois for life.

President Obama pushing green -- he's taking some sweeping steps on climate change and energy independence. But some fear they could make an ailing industry even sicker.

Plus, John McCain -- he's speaking out right now against the president's recovery plan. Details of this new disagreement. Obama versus McCain -- what's going on -- right here the SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's check back with Zain Verjee.

She's monitoring some other important stories incoming into THE SITUATION ROOM right now.

What's the latest -- Zain?

ZAIN VERJEE, CNN CORRESPONDENT: Wolf, a former janitor pleads guilty of trying to sell hardware from a nuclear weapons plant. Sixty- seven-year-old Roy Lynn Oakley today agreed to a plea deal with the federal government. Prosecutors say that he tried to profit from uranium enrichment equipment that he snuck out of a former nuclear facility in Oakridge, Tennessee.

(BEGIN VIDEO CLIP)

WILLIAM MACKIE, ASSISTANT U.S. ATTORNEY: He was attempting to sell it to the French government. And the FBI set up -- it essentially was a sting operation -- and acted as a foreign agent and set up a deal with Mr. Oakley.

(END VIDEO CLIP)

VERJEE: Oakley's plea deal carries a six year prison sentence.

Get flammables off the porch and turn on the porch lights at night -- that warning from city officials who declared a state of emergency in Coatesville, Pennsylvania in the wake of a string of suspected arson fires. The latest was a seven alarm blaze that roared through a block of row houses in the Philadelphia suburb Saturday. Fifteen homes were damaged and several dozen people are homeless.

And, Wolf, a rare sight for people in Indonesia today -- an almost total eclipse of the sun.

Isn't that beautiful?

People gathered to watch as the moon passed between the sun and the earth. It cast a shadow on about 92 percent of the sun. The sight is called an annular eclipse because it doesn't black out the sun completely. You can just see the rim of it. The last total solar eclipse was August 1st last year.

And a freak auto accident lands a man and his car on the roof of a church in Germany. Take a look. Police in Saxony say the 23-year-old driver was seriously injured when his car left the road, flew through a guardrail and onto an embankment -- and, Wolf, the embankment acted as a ramp and it launched the car onto the roof of the church that you see right there -- Wolf.

BLITZER: The autobahn, Zain -- you know, those drivers on the autobahn, they drive fast.

VERJEE: They do. They do. Very fast.

BLITZER: It's very dangerous.

VERJEE: Yes.

BLITZER: All right. Thanks very much, Zain.

Stand by.

President Obama set himself apart from his predecessor in one more way today. By signing executive orders, he's making it clear that protecting the climate is now a major priority. And Mr. Obama took it one step further -- by linking the economy to our planet's future. (BEGIN VIDEO CLIP)

OBAMA: We will make it clear to the world that America is ready to lead. To protect our climate and our collective security, we must call together a truly global coalition. I've made it clear we will we'll act. But so, too, must the world. That's how we will deny leverage dictators and dollars to terrorists. And that's how we will ensure that nations like China and India are doing their part, just as we are now willing to do ours.

It's time for America to lead, because this moment of peril will be turned into one of progress. If we take action, we can create new industries and revive old ones. We can open new factories and power new farms. We can lower costs and revive our economy.

We can do that and we must do that. There's much work to be done. And there is much further for us to go.

But I want to be clear from the beginning of this administration that we have made our choice. America will not be held hostage to dwindle resources, hostile regimes and a warming planet.

We will not be put off from action because action is hard. Now is the time to make the tough choices. Now is the time to meet the challenge, at this crossroads of history, by choosing a future that is safer for our country, prosperous for our planet and sustainable.

Those are my priorities. And they're reflected in the executive orders that I'm about to sign.

(END VIDEO CLIP)

BLITZER: President Obama speaking earlier.

Coming up, by the way, we're going to play extensive comments that he made on his new energy plan in our next hour, here in the SITUATION ROOM. Stand by for that.

Well, over these past several days, we've been taking a look at Team Obama on a whole range of issues, trying to get a closer understanding of what he wants to do in various departments.

Our Elaine Quijano is standing by.

She's taking a closer look at the he EPA -- the Environmental Protection Agency.

What's going on on that front -- Elaine?

ELAINE QUIJANO, CNN CORRESPONDENT: Well, Wolf, Lisa Jackson was sworn in just this morning as EPA administrator. This afternoon, she held a meet and greet photo-op with employees. Her message -- that the EPA needs to redouble its efforts in protecting people on the environment.

Her agency is going to be in charge of re-examining whether California and other states could set tougher auto emissions standards than federal ones. Now, already, Jackson is trying to signal a shift at the EPA. In a memo to employees, Jackson said that science must be the backbone for EPA programs.

That's a not so veiled swipe at the Bush administration, which critics had accused of political interference in scientific decisions.

Of course, Wolf, the Bush administration has denied those accusations -- Wolf.

BLITZER: Elaine, thanks very much.

We're going to continue our focus on Team Obama, obviously, in the coming days, weeks and months.

Remember that spirit of cooperation between President Obama and his former rival?

Well, John McCain is back with a fighting spirit, at least on one important issue. That would be the $825 billion plan that the president is proposing to try to stimulate the economy. Stand by. We'll assess.

And is the president's Kenyan aunt in the country legally?

The deportation order CNN uncovered from four years ago.

And the first daughters are becoming household names, to be sure.

So why exactly is a doll maker banking on that?

Should they be doing what they're doing?

Stick around. You're the SITUATION ROOM.

(COMMERCIAL BREAK)

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

Happening now, President Obama lays out his plan to curb emissions, clean the air and help the economy.

Can the auto industry survive this latest pressure to reform and perform or can it survive without it?

Vice President Joe Biden moves to solidify his place in the Obama administration.

Will the often outspoken Biden be comfortable in his new role as quiet confidant?

And what price inspiration -- former Presidents Clinton and Bush 41 -- they put in a high profile big ticket appearance at a national convention of auto dealers. We're there.

I'm Wolf Blitzer. You're the SITUATION ROOM.

So what about John McCain?

How is he doing as far as Barack Obama's plan to try to stimulate the economy is concerned?

Guess what, he's not on board.

Brianna Keilar is looking at this story for us -- Brianna, you're up on the Hill.

John McCain -- he's been very cooperative on other issues, but when it comes to this big one, what's his position?

BRIANNA KEILAR, CNN CORRESPONDENT: Well, he's being vocal. He's been outspoken and he's not on board, Wolf. Republicans will have President Obama's ear when he comes to Capitol Hill tomorrow to meet with them and only them. He's not meeting with Democrats. But the opposition from President Obama's campaign rival is an indication that it's going to be a tough sell to Republicans.

(BEGIN VIDEOTAPE)

KEILAR: The campaign may be over, but the disagreement about how to save the U.S. economy is not. Lying low since Election Day, Senator John McCain has re-emerged. One of his first orders of business, blasting President Obama's $825 billion economic plan, saying it's filled with spending that won't stimulate the economy.

SEN. JOHN MCCAIN (R), ARIZONA: It's just the old spending practices of liberal Democrats. So I hope we'll be able to sit down and negotiate. But right now I could not vote for the stimulus package as it's been presented.

KEILAR: Like other Republicans, McCain wants more tax cuts for individuals businesses. His criticism is resonating with GOP senators including Susan Collins of Maine who has not decided how she'll vote on the plan.

SEN. SUSAN COLLINS (R), MAINE: Senator McCain's comments have a great deal of weight with the other members of our caucus.

KEILAR: As Mr. Obama heads to Capitol Hill tomorrow to meet with Republicans in the House and Senate, it's moderates like Collins who are key to the bipartisan support Obama says he wants.

COLLINS: I have been impressed by the outreach by the vice president and the economic advisors to the president. But unfortunately, a lot of the input does seem to be reflected in the package that the president has presented.

(END VIDEOTAPE)

KEILAR: And senior Republican house aides say they're getting no indication from the Obama administration or congressional Democrats about what changes if any they will add to win over some very resistant Republicans in the House. And the clock is ticking, the vote goes to the House tomorrow and there's a vote set for Wednesday.

BLITZER: We'll watch it together with you. The stakes clearly are enormous. Brianna, thank you.

Joining us now are CNN political contributors, the Huffington Post editor at large, Hilary Rosen and Republican strategist Leslie Sanchez.

Do you get a sense as some do, Hilary, that there are good cops, bad cops, a routine going on among some Republicans?

HILARY ROSEN, HUFFINGTONPOST.COM: I think it's funny that Senator Rollins said that the caucus is going to listen to what Senator McCain thinks. He's always been seen as sort of an outcast. So the fact that they're looking for cover because they know that President Obama has a lot of political capital, that people want him to succeed and they want Republicans and Democrats to vote for these early bills.

BLITZER: I don't know if he's an outcast, but he's certainly been a renegade on affidavit of these issues.

LESLIE SANCHEZ, REPUBLICAN STRATEGIST: He certainly can bring people together and he has a record of doing so. Republican I think overall, they just want to be cautious. There's 250 billion, they could see that would stimulate the economy, but aside from that, we're not really sure. People are very concerned about wasting taxpayer dollars and so I think it's time to have a measured approach.

BLITZER: Wouldn't it be a good idea, you worked on the hill, $825 billion, line by line, isn't that the Congress's responsibility, instead of just sort of voting yay or nay for the package. Saying we like this, we don't like this, and do it in a thoughtful manner.

ROSEN: They're doing that right now, and that's why the speaker made sure that the bill was released several days in advance.

BLITZER: Can they really do that in two or three days?

ROSEN: It can be public, people can have comments. The Republicans are unhappy because they wanted biggest tax cuts and the Democrats have legitimately said the tax cuts are not going to get us the kind of immediate stimulus effect that we're looking for with this legislation. If Republicans want to be focusing on tax cuts, do that later. But that's not the point of this bill.

SANCHEZ: I think that's a fundamental part. Republicans are arguing that tax cuts can continue, for example capital gains, the corporate tax rate, cut that, what is there to get Wall Street excited, to get the banks to starred lending money, to get the economy running again.

ROSEN: There's already a science program that the administration has corresponded from the Bush administration to get Wall Street and get the banks excited. This is about getting infrastructure moving and getting state and local governments and people working. I think that the Democrats are going to, if they end up passing this alone, Republicans are going to be sorry.

SANCHEZ: I think a last part on that is there's an election two years from now, but people are going to be getting their unemployment checks two weeks from now. It's important to get Republicans to understand that. We all want to find their best bill.

ROSEN: This is still a Republican mess that President Obama is cleaning up. And if they're not part of the solution, they're part of the problem.

SANCHEZ: There's enough mud on both the Republican and Democrats. That's not the economic problems that we have seen.

ROSEN: There is general sense in the country that we're cleaning up from Bush's economy here.

BLITZER: The argument is, and you know this, I want to move on. Where was the oversight, where was the regulatory role that perhaps the congressman squeezed the administration.

Let's talk about this issue, there's a story in Politico.com saying this, "Obama is moving to create perhaps the most powerful staff in modern history, a sort of west wing on steroids that places no less than half a dozen of the top initiatives into the hands of advisors outside the cabinet." Does Politico have a point, west wing on steroids?

ROSEN: I love that image in some ways. The lessons that the Obama administration are starting to implement now are things that it has taken previous presidents several years to understand. Which is when you have an initiative that you want to get moving quickly, that you need to be negotiating with Congress for, it's sometimes unwieldy to do that through the federal agencies and having a coordinator at the white house is an effective thing to do, the fact that President Obama is doing that at the outset is a good thing.

SANCHEZ: I think you're absolutely right. I'll agree, there's lessons learned, working with Congress in the best way they can. He has such tremendous support right now, we have to allow him some flexibility to exercise that power.

BLITZER: Why am I not surprised with Rahm Emanuel as white house chief, the west wing is on steroids. All right, guys. Thanks very much.

Dolls that may be modeled after the first daughters, Sasha and Malia Obama.

UNIDENTIFIED FEMALE: They should not be sold and feel like that they can be bought. This is not healthy for them psychologically.

BLITZER: And now their mother, the first lady Michelle Obama is speaking out. We're going to tell you what's going on. Plus, she was discovered to have been living in the United States illegally, now there are new developments in the case of President Obama's Kenyan aunt, a twist in her immigration case.

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Banking on the popular of the president's daughters, a toy company is putting out two new dolls with names you're sure to recognize but the dolls aren't being well received by the first family. CNN's Alina Cho is following this story for us.

Alina?

ALINA CHO, CNN CORRESPONDENT: Hey Wolf. The first daughters of course are so famous, you already know them by their first names, and you're about to get to know them even better. These new dolls are actually named Malia and Sasha. Coincidence, maybe not.

(BEGIN VIDEOTAPE)

CHO (voice-over): Meet marvelous Malia and Sweet Sasha. Names sound familiar? They're the latest dolls by toy company Ty, Inc. and they're a passing resemblance to first daughters Malia and Sasha Obama.

ALLAN LICHTMAN, PRESIDENTIAL HISTORIAN, AMERICAN They are really cute, really wonderful and, you know, by virtue of being so wonderful, they're marketable.

CHO: But does that make it right? The first lady doesn't think so. Through her spokeswoman, Michelle Obama tells CNN, we believe it is inappropriate to use young, private citizens for marketing purposes.

CHARLES FIGLEY, CLINICAL PSYCHOLOGIST, TULANE UNIV.: This is sickening and horrible thing. As a country, we're all prepared for a terrorist attack. Well, this in many ways is a great attack.

CHO: Others argue why not, everything the Obama girls touch turns to gold.

LICHTMAN: There isn't really much of anything that the Obamas can do about it. The president is not going to go sue private companies.

CHO: If history is any guide, children in the white house, especially the young ones are generally off limits. In the Obama white house, the first couple makes it clear they want their daughters to live as normally as possible. These dolls some say leave the first daughters exposed.

DR. JUDY KURIANSKY, CLINICAL PSYCHIATRIST: They should not be sold and feel like that they can be bought. This is not healthy for them psychologically. CHO: Ty Inc. tells CNN information about the development of its products is proprietary. A Ty executive adds, "We did not make the dolls to physically resemble either of the Obama girls."

LICHTMAN: In this culture people are going to try to take advantage of the Obama image and even Obama's wonderful two little girls.

CHO: They're not the first. In the 60s, Caroline Kennedy had a doll too. Some say from a marketing standpoint, it's a genius idea.

LICHTMAN: We live in the land of the free and the home of the dollar. Barack Obama is kind of a unique figure. He's a political leader, he's a rock star, he's an icon.

(END VIDEOTAPE)

CHO: Now so are the daughters. Now according to psychologists, the problem is having a doll that's just like you, leaves you the child exposed. They say it can make children narcissistic, or very shy, both ways to protect themselves from the fact that everybody has a little piece of them. Ty Inc. says it's just a coincidence that the dolls are made Malia and Sasha. A spokesman says they were beautiful names and worked well with the dolls we were making. Wolf?

BLITZER: Alina, thanks very much.

Let's go to our Jeanne Meserve, our homeland security correspondent. She's been working to get new information about Barack Obama's aunt from Kenya who's been in the country for four years?

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: That's right, Wolf, CNN has learned that President Obama's Kenyan aunt is in the United States legally, at least for the time being.

(BEGIN VIDEOTAPE)

MESERVE (voice-over): It was the London Times that found her in late October living in a Boston public housing project. In short order, it was learned she was in the United States illegally. She had been ordered deported four years earlier after an asylum request was denied. The very day her illegal status was reported, a government e- mail directed immigration field personnel to require fugitive arrests for any potential for negative media or congressional interests to a top official in Washington for review. An immigration and customs enforcement spokeswoman denies the directive was triggered by reports about Obama's aunt. She said it ensured communication and coordination on sensitive indications at election time. The directive was listed in late November after the election.

(END VIDEOTAPE)

MESERVE: Meanwhile Obama's aunt's case has been reopened and a stay has been put on the order to remove her and she's scheduled to have a new hearing November 1. They will not state a position, will not intervene and he does not have contact with his aunt. So her lawyer tells us she was in Washington for the inauguration and attended a ball to celebrate.

BLITZER: Jeanne Meserve with that report.

In down times, you cut back on spending, right? Well, maybe not if you're an auto dealer, shelling out some major dollars for some famous space so as not to boost sales, but spirits.

And birth control to stimulate the economy? Jack Cafferty is asking what you think of your tax dollars paying for contraception. He has your e-mail right here THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The embattled Illinois Governor Rod Blagojevich is said he considered a number of people including Oprah Winfrey for the Senate seat he eventually gave to Roland Burris. Listen to what he told the women of "The View" earlier today.

(BEGIN VIDEO CLIP)

BLAGOJEVICH: It is true that among the many potential candidates for the Senate seat, we discussed Oprah and my thought, it was an idea that a friend brought to me. My thought was an African-American woman who probably by herself has more influence than 100 senators, she was instrumental in electing Barack Obama as president. She does good things for people. The question was whether there was any chance at all she would be willing to do it. And if so, how do you reach out to her. Would she take the call from the governor of Illinois because Oprah is Oprah and I'm just the governor of Illinois.

(END VIDEO CLIP)

BLITZER: And Oprah a short time later on the Gayle King Show on XM Radio said, thanks but no thanks.

OPRAH WINFREY, TALK SHOW HOST: If I had been watching as I watch from the treadmill, I would have probably fallen off the treadmill.

GAYLE KING, XM RADIO: I know. That was so shocking.

WINFREY: I'm pretty amused by the whole thing.

BLITZER: You can hear more from the Illinois governor coming up here in THE SITUATION ROOM. Don't forget tonight, 9:00 p.m. eastern, he will be Larry King's guest on "LARRY KING LIVE".

At a time when car sales are tanking, it's easy to see why the mood among auto dealers is gloomy but they are spending major dollars to boost their spirits, calling on a couple former presidents in the process. CNN's Sean Callebs is following the story for us from New Orleans -- Sean?

SEAN CALLEBS, CNN CORRESPONDENT: Officials here at the annual car dealers' convention in New Orleans don't like Barack Obama's idea to give states more authority in controlling fuel emissions standards. They believe it will cost jobs in an industry that has simply been battered by a souring economy. Indeed, the entire tone of this year's convention very somber, very sobering. Gone are the evening lavish parties. However, the organization did come up with a lot of money for two high-powered speakers.

(BEGIN VIDEOTAPE)

CALLEBS (voice-over): There's a lot of standing and talking but not much else.

BRADY SCHMIDT, PRES. NATIONAL BUSINESS BROKERS: It's definitely been slower. The foot traffic is down from last year maybe by about 40 percent, 40 percent to 50 percent, I would say.

CALLEBS: This company shelled out about $500,000 for the annual National Automobile Dealers Association convention, and say they will do about 30 percent of the business they did last year. It's no huge surprise. The big three went hat in hand to Congress to stay afloat at least through March, and about 900 of the nation's 20,000 dealerships closed this past year. A gloomy backdrop to what's supposed to be a high energy event.

UNIDENTIFIED MALE: It's tough on them. I think, I don't know if we have seen the bottom yet.

CALLEBS: Auto industry CEOs faced furious public criticism when they flew corporation jets to D.C. to ask for bailout funding. Here, the auto dealers are paying for big name speakers, including former Presidents George Bush and Bill Clinton. The organization won't tell us how much, but the two can command $150,000 a speech. No apologies. The head of the dealers association says it's money well spent.

ANNETTE SYKOLA, PRES., NATL. AUTOMOBILE DEALERS ASN.: For our dealers, our vendors, our manufacturers, it's a way to come together, a way to help inspire them. I think having the presidents come, the messages they can give to the auto industry I think are very important at this time.

CALLEBS: Any inspiration is important right now, according to some here. They argue the CEOs of the big three may have actually dragged the market down even more for dealers.

SCHMIDT: Because you're a consumer, you want to go out and buy a car from a company that says it may not be in business in four or five months, I think that was a little bit of collateral damage from the hearing.

(END VIDEOTAPE)

CALLEBS: The two presidents are wrapping up their remarks this hour and let's hope they're inspirational. People we talked to here fully believe that some 2,000 dealerships could go under in 2009.

BLITZER: Sean Callebs, we'll stand by for more once you get it. Thank you.

Let's go to Jack Cafferty right now for "The Cafferty File" -- Jack?

CAFFERTY: The question this hour is: Is Nancy Pelosi right when she says adding contraception to the stimulus package will help stimulate the economy?

Marie in Salt Lake City, "Having birth control either covered by Medicaid or by one's health insurance will save our nation millions if not billions. But it's not enough to hand out birth control pills, et cetera. We need to educate women, especially the poor under educated women in our cities and rural areas. If poor women would use birth control responsibly, we would cut the cost of welfare moms and for pro life folks, the number of abortions as well. Pelosi's right."

Pete in New York says: "Yes, the values of a rich white San Franciscan. Perhaps Nancy was looking across to Oakland and its poor people and she became uneasy. I hate to say it but this could fall into the category of racist comments if we could get her to describe the kind of person who's going to receive the condoms. What would the reaction be if somebody in the GOP said we needed to stop the poor from breeding so we could save money? This is a Democratic leader, not some flaky back bencher. What an embarrassment to the country."

Don in Canada says: "She's right Jack. If we had enough sense to plan our families we wouldn't have so many mouths to feed, jobs to fill or kids to educate. It's these same no to birth control crusaders that are the first to criticize poor welfare families."

H.D. in Phoenix, "You must be joking. With all the hard challenges this country is facing, this is the best she can come up with to help stimulate the economy. The People's Socialist Republic of California needs to put a muzzle on that woman."

Melanie in Iowa says, "She knows what she's talking about. As many of us remember during the barrage of presidential commercials, many people with financial woes give up medicine first. Helping provide birth control is a cost saver to the government in the long run."

Mary in California, "Pelosi needs to mind her own business and stay out of Americans personal lives. Not only is it pork, but it is socialism."

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

BLITZER: Thanks, Jack. We'll get back to you shortly.

President Obama's stimulus plan confusing, to say the least. Even some insiders and experts are struggling to get their hands around it. But we're going to lay out the basics for you the best we can, the things you need to know.

Plus, the vice president, Joe Biden, is touting his influence on President Obama but what is his real role in the new white house? And do his off-the-cuff marks jeopardize it? We're taking a closer look. (COMMERCIAL BREAK)

BLITZER: Some members of Congress have an idea to bail out the country's economy. They want to require the money to be spent on American-made products. Let's go to Lou Dobbs. He's keeping a special eye on this issue. What do you think, Lou?

LOU DOBBS, CNN ANCHOR: I think it's a great idea, but we've got such a complicated economy right now, it's hard to say what is made in America, the content, for example, of the three automakers are not divulged that is U.S.-made content but it's a terrific idea. What no one is talking about in this stimulus package, not the Obama administration nor his critics, is the fact that this country has to learn how to make things again. We have to correct our trade relationships and imbalances and we have really got to be producing goods and services that the rest of the world wants, because no amount of stimulus will correct our economy until that begins to happen.

BLITZER: What if American manufacturers aren't competitive with those let's say in china or elsewhere and the American consumer could get it cheaper by importing that stuff?

DOBBS: I think that's exactly right. But the question here is the effect is are you going to put American labor into direct competition with the cheapest labor in the world, which is what's been going on with a vengeance for ten years. The result has been devastating. We destroyed quality American jobs, we destroyed our middle class, we are trying to, at least, with these practices, trade practices and business practices. It's got to end. We've got to get realistic about the value that we create by manufacturing in this country and producing for our domestic market.

BLITZER: Lou will have a lot more coming up on this at the top of the next hour, one hour from now. Thanks, Lou.

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

Happening now, tens of thousands of American jobs wiped out in a single day. This hour, is President Obama doing enough to try to jump start the economy? The best political team on television is standing by. And the Obama white house sees green. The president's new moves promoting fuel efficiency and a healthier planet.