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Holes in Obama Vetting Process; GOP Blocks Add-Ons in Senate

Aired February 3, 2009 - 16:00   ET


WOLF BLITZER, CNN ANCHOR: Happening now, breaking news. A stunning setback to President Obama's plans to reform health care. Tom Daschle withdraws his nomination as the Health and Human Services director. Why a powerful Senate insider did not survive his tax troubles. This is the latest in a series of Obama nominations gone wrong.

This hour, gaping holes in a vetting process that was supposed to be very thorough.

And Iran launches a satellite, and new fears about its own missile technology. Is the Iranian president giving President Obama a reason to feel threatened?

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

This hour, the breaking news that many people did not see coming. One minute, former Senate Democratic leader Tom Daschle was fighting to save his nomination as the Health and Human Services secretary. The next, he had pulled himself out of the running. He's the second Obama nominee to withdraw over tax troubles in a single day.

Let's go to the White House. Our correspondent Dan Lothian is standing by with the latest -- Dan.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: And Wolf, you know, we got that breaking news this afternoon. Not in the typical way. Usually it's either face to face or we get some sort of e-mail.

Instead, there was a press aide who was walking from office to office handing out these statements from the president, and also from Mr. Daschle. This was not a good day for the White House.

The president really was hoping that the focus would have been on his pick for commerce secretary. Instead, he was dealing with these political headaches as two of his nominees backed out because of tax problems.


LOTHIAN (voice-over): In a stunning development, secretary of Health and Human Services nominee Tom Daschle bowed to mounting pressure over his tax problems, informing President Obama by phone that he was withdrawing because, "This work will require a leader who can operate with the full faith of Congress. Right now, I am not that leader and will not be a distraction." Mr. Obama accepted that decision with "sadness and regret," one day after saying this when he was asked if he still stood by Daschle...


LOTHIAN: But the pressure was mounting on Capitol Hill.

SEN. JOHN ENSIGN (R), NEVADA: His explanation to me seems to have some holes in it.

LOTHIAN: Before paying up, Daschle had owed more than $100,000 in back taxes. Some of that for a loaned car and driver.

Tax problems, too, but apparently to a lesser extent for Nancy Killefer. The result was the same. Killefer, Obama's pick for chief performance officer. The result, however, was the same. Killefer, who would have been charged with taking a fine tooth comb to the federal budget, also withdrew, citing unemployment tax issues.

White House Press Secretary Robert Gibbs suggested both nominees jumped but were not pushed.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I think they both recognized that you can't set an example of responsibility but accept a different standard in who serves.

LOTHIAN: This was a day where the headline the White House wanted to see was "Obama Picks Commerce Secretary." Senator Judd Gregg of New Hampshire accepts.

OBAMA: Judd and I don't agree on every issue, but we do agree on the urgent need to get American businesses and families back on their feet.

LOTHIAN: A bold choice, bringing in a fiscal conservative Republican who once won more than $800,000 in the lottery.

SEN. JUDD GREGG (R), COMMERCE SECRETARY NOMINEE: Even senators can be lucky.

LOTHIAN: And who in 1995, voted in favor of doing away with the Commerce Department, the agency he's now been nominated to lead.


LOTHIAN: Now, Gregg was Obama's second choice for commerce. You might remember Bill Richardson stepped down last month after there was a federal investigation into a company that had done business with his state.

So, Wolf, all kinds of questions about the vetting process, although Robert Gibbs, today at the briefing, said that the president has confidence in the vetting process -- Wolf.

BLITZER: Dan Lothian at the White House. And our own Anderson Cooper getting ready to go into the Oval Office any moment now to interview the president of the United States. That interview will air here in THE SITUATION ROOM first. I'm sure Anderson is going to be asking many of those questions.

Let's bring in our Chief National Correspondent John King and our Senior Political Analyst Gloria Borger. They're here in THE SITUATION ROOM as well.

A lot of us woke up this morning, saw that editorial in "The New York Times" calling on Tom Daschle to step aside, and he didn't waste any time. He listened to "The New York Times" editorial board.


GLORIA BORGER, CNN SR. POLITICAL ANALYST: Yes. I think Tom Daschle has been around Washington a long time, Wolf. And he understood when he could really get in the way of Barack Obama, not only in a perception that Barack Obama was appointing insiders who did business the same way as they have always done it, but also get in the way of Obama's agenda, which is quite ambitious.

Now, I've been told by sources inside the White House that, in fact, he was not pushed, that Daschle decided on his own that he was going to leave. I'm sure Obama didn't fight him on it, but I was told he decided on his own.

BLITZER: On his own.

John Ensign, the Republican senator from Nevada, he said this earlier in the day. Listen to this, John.


ENSIGN: I personally think that Senator Daschle, you know, was going to face some tough questions, and to stop an embarrassment from happening for this president, I think he saved the president from being embarrassed next week in a public hearing.


BLITZER: Is Ensign right?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Yes. Next week, in a public hearing, he was going to face tough questions from Democrats about his tax issues because those Democrats were going to go out and vote for him, so they wanted to first prove that they asked him tough questions about the tax issues. But then Republicans, Wolf, were going to ask him about his life since leaving the Senate.

He is not a lobbyist, but he has set up meetings with lobbyists. He has used his influence in Washington to help lobbyists get to the right people on Capitol Hill. He's worked for health care companies.

And the Republicans were going to ask him a series of questions and say, Senator, how does this match with Barack Obama's promise to change the way Washington does business? Senator, how does that match with Barack Obama's promise to not let the same old ways of Washington, the insider peddling, influence peddling, alike, how does that match? How much did you get paid for that, Senator?

So he was going to face a very tough hearing. The bigger issue here is Tom Daschle had a problem that had the potential to become President Obama's problem, to undermine his credibility of doing things new, differently and ethically in Washington.

This president, the stimulus bill being the first challenge he faces. A long list of those big challenges, Wolf, and he could not be undermined.

BLITZER: And there was a woman who was going to be the chief performance officer...


BLITZER: ... for the president of the United States. She withdrew her nomination...

BORGER: Because of tax reasons.

BLITZER: ... as well. And a couple hours later, Daschle did the same.

Some people are suggesting, you know what? There may have been one standard for women and paying taxes for a nanny and another standard for men.

BORGER: Well, some were, although Tom Daschle did also withdraw his nomination. I think if she would have been thrown under the bus and Tom Daschle had remained, I think that question would have remained.

But, look, this overall is a question of perception at the start of a presidency. Barack Obama came in. The first thing he did when he was in office was set tough new ethics rules about the revolving door between government and business.

So he wants to set that standard. He has set a very high bar.

Tom Daschle is in a very visible position. Not only at HHS, but he was going to have an office in the White House, too, in terms of health care. This would have been a large distraction.

BLITZER: I'm already getting e-mail, John, from friends and supporters of Howard Dean, the former chairman of the Democratic Party, the governor -- former governor of Vermont, himself an MD, a doctor, saying, you know what? He'd be a perfect health and human services secretary.

Is there any momentum in favor of Howard Dean?

KING: Governor Dean thought so himself before Tom Daschle was picked for the job, and he openly was campaigning for that job. There are bad relations between the Obama team and the Dean team, so I think that's unlikely. He certainly is a physician, is qualified.

Former Senator Bill Bradley's name has been kicked around in Washington, a number of other names being kicked around.

The question here is, Wolf, the reason they wanted Tom Daschle so much is because, as you know from the Clinton days, health care is hard. You have so many competing factions, so many competing interest groups, so many different views on Capitol Hill. They wanted the insider's insider to bring everybody in a room and try to reach consensus on such a difficult issue.

There are many more issues. It's one of the reasons Judd Gregg is coming into Commerce for entitlements and the like. They wanted these inside players to help get progress on the issues that have derailed other presidencies. They are losing Tom Daschle. An interesting challenge to see who is next.

BLITZER: All right, guys. Stand by, because we're going to continue this discussion.

I want to go to Capitol Hill right now. Brianna Keilar, our congressional correspondent, is standing by.

There are late-breaking developments on the economic stimulus package. What's the latest, Brianna?

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Wolf, the Senate's first attempt to make a change to the economic stimulus package, it failed today. This was a vote on adding $25 billion in infrastructure spending on things like highways, mass transit, improvements to water and sewer systems. But it would have pushed the overall price tag on the Senate bill to more than $900 billion. So this failed vote a sign that Republicans do have some power to change how this bill is structured, as Republican leaders in the Senate complain there's too much wasteful spending in it.


SEN. MITCH MCCONNELL (R), MINORITY LEADER: We need to sober up here and take a look at what we're doing. Everybody agrees that there ought to be a stimulus package. The question is, how big and what do we spend it on?

The House bill is an embarrassment. The Senate bill on the floor is not markedly better. Our goal will be to pare it down and to target it right at the problem.


KEILAR: Senator Republican leaders like top Republican Mitch McConnell believe there should be more tax cuts, that there should be a focus on help for homebuyers, and that they feel there's too much wasteful spending. But there are some Republicans who want to go farther than Republican leaders.

In particular, an ad hoc group of 10 Republican senators, including John McCain, who are talking about adding money for infrastructure. They are currently shopping around a plan to their members with a total price tag of under -- just under $500 billion. And there is still yet another alternative in the works that's getting a lot of attention.

This one being hashed out by Nebraska Democrat Bill Nelson, a moderate, as well as a moderate Republican, Susan Collins of Maine. Their plan, basically to look at the economic stimulus package and scrub it of all of the spending that they single not stimulative, that will not create jobs. And we're hearing, Wolf, that their plan could come up to the Senate floor in the form of an amendment as early as this evening.

BLITZER: All right. We'll stay on top of it. I know you will, Brianna. Thank you.

Hillary Clinton certainly breaking the mold in her job. Surprising choices for her first trip as the secretary of state.

Plus, satellite launch or saber rattling? There are new concerns right now about a potential threat from Iran and its missile technology.

And the Obama girls get a reprieve from the toy industry. We'll tell you what's happening on that front right here in THE SITUATION ROOM.


BLITZER: That's a live picture of the White House you're seeing right now. Our Anderson Cooper getting ready to go into the Oval Office, in the West Wing, to interview the president of the United States. We'll have the interview here first in THE SITUATION ROOM.

That's coming up. Stand by for that.

Other news, though, we're following right now. Disturbing word of Iran launching potentially a satellite.

Let's go to the Pentagon. Our Pentagon Correspondent Barbara Starr is working this story for us.

What do we know, Barbara?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Wolf, indeed, it was another unsettling move by the regime in Tehran.


STARR (voice-over): An Iranian satellite launch on the 30th anniversary of the Islamic Revolution. Iranian President Mahmoud Ahmadinejad congratulates the country, but the Obama administration wasn't celebrating.

HILLARY RODHAM CLINTON, SECRETARY OF STATE: We are reaching out a hand, but the fist has to unclench. STARR: The White House has signaled a willingness to reconcile with Iran, but Iran's actions may make that tough to do.

GIBBS: Efforts to develop missile delivery capability, efforts that continue on an illicit nuclear program or threats that Iran makes toward Israel and its sponsorship of terror are of acute concern.

STARR: The problem? The same missile used to launch the satellite could be used to carry nuclear warheads.

GEOFF MORRELL, PENTAGON SPOKESMAN: And that is a cause of concern to us, and I think to certainly everybody in the region, Israel and their Arab neighbors, as well as to our allies in Europe.

STARR: The U.S. has Iran's missile program under constant watch. Some of its most advanced missiles potentially could reach deep into Europe. It's that threat that has been central to the argument for a missile defense shield.

Just last week, Defense Secretary Robert Gates told the Senate he had renewed hope for cooperation with Russia on a missile defense system to deter Iran.

ROBERT GATES, DEFENSE SECRETARY: I think there are some real opportunities here. Russia is clearly not the target of our missile defense endeavors. Iran is. We have a mutual concern there.


STARR: Now, candidate Obama campaigned on the idea it was time to reengage with Iran, but President Obama will have to decide if Iran's latest activities make that possible anytime soon -- Wolf.

BLITZER: Barbara's at the Pentagon.


And there are still many unanswered questions about how and when a U.S. missile shield might be deployed to, in part, prevent a possible attack by Iran. The outgoing head of the program reported back in November that the missile shield was working in tests. President Obama said during the campaign that he supports deploying a missile defense system when the technology is workable, but Mr. Obama reportedly has not made any firm commitment to basing the system in Eastern Europe.

Let's get to Iraq right now and the capture of a woman who allegedly recruits other women to be suicide bombers.

Let's go to CNN's Arwa Damon in Baghdad -- Arwa.

ARWA DAMON, CNN CORRESPONDENT: Wolf, it's definitely not the first time that Iraqi authorities are claiming to have detained a woman linked to female suicide bombing rings. But if what they are alleging about this woman is true, it's definitely a blow to the bombing network. (BEGIN VIDEOTAPE)

DAMON (voice-over): This woman's words are chilling. "We spent two weeks talking and then I convinced her. She blew herself up at the police station," she says.

The video of her alleged confession was broadcast at a press conference. Major General Khasim Atta (ph) identified her as Sameda Jasan (ph), a recruiter of female suicide bombers for an extremist group linked to al Qaeda. Her alias, "The Mother of the Believers."

On the tape, she confesses to recruiting around 28 women. Iraqi authorities say she recruited 80, and that they are hunting down those still alive. Her capture, they say, a major blow to female suicide bombing rings.

In 2008, the number of female suicide bombers was four times higher than in the previous year, forcing the U.S. military and Iraqi security forces to cope with a phenomenon they barely understood.

MAJ. GEN. MARK HERTLING, U.S. ARMY: It seems to be more troubling the deeper we dig into this. There's a lot more to this that we don't understand than what we do understand.

DAMON: Unlike their male counterparts, who are largely driven by ideology, female suicide bombers seem to have no common motivation. Some are driven to their fatal act by family links to al Qaeda and are seeking revenge for the death of a brother or husband.

This video is of a confession by a failed female suicide bomber. She was detained in northern Iraq.

Just 17 years old, she says she wanted to become a bomber after her husband was killed by anti-al Qaeda forces. She reached out to al Qaeda with her father's consent.

Others are actively recruited. U.S. intelligence suggests that the targets are often desperate young widows. There have been indication that al Qaeda is seeking out women whose families are struggling financially, making cash promises but not paying out.

Also vulnerable, women who are deeply religious and swayed by promises of rewards in the afterlife. There's also evidence that extremists have preyed on women who are mentally disabled.


DAMON: If the Iraqi authorities have, in fact, detained "The Mother of the Believers," maybe fewer of Iraq's more desperate women will be driven to kill themselves and so many others -- Wolf.

BLITZER: Arwa, thanks very much.

Arwa Damon in Baghdad. A very disturbing story.

Politics often make for strange bedfellows, but there are many strange things surrounding the man who could help many Americans find jobs. You're going to find out what's so unusual about Senator Judd Gregg and the decision to tap him to lead the Commerce Department.

And the first lady, Michelle Obama, is determined to protect the image of the Obama daughters. And now she's just gotten something she wanted.

We'll explain that and more, right here in THE SITUATION ROOM.

Tax problems sink the nomination of the president's pick for health care reform. What might that mean for your health care? Brian Todd has some more information. I think you'll want to hear. And Hillary Clinton is making plans for her first overseas trip as secretary of state. You'll find out which countries are first in her itinerary and why they are at the top of the list. Stay with us here in THE SITUATION ROOM.


BLITZER: President Obama is getting ready to sit down with Anderson Cooper in the oval office. We'll share that interview with you first right here in THE SITUATION ROOM. Stand by for that.

Zain Verjee meanwhile is monitoring some other important stories incoming in THE SITUATION ROOM right now. What do you have Zain?

ZAIN VERJEE, CNN CORRESPONDENT: Hi Wolf. The president's daughters will no longer share names with dolls. Ty Toy Company says it's renaming the sweet Sasha and marvelous Malia dolls out of respect for the Obama family. First lady Michelle Obama has come out against the doll names calling them inappropriate. From now on, Ty Inc. says the dolls will be known as marvelous Maria and sweet Sydney.

Germany's chancellor is making a demand of the pope. Make it clear there can be no denial of the holocaust. Angela Merkel's demand comes after the Vatican recently rehabilitated a bishop who denies the Nazis intentionally gassed millions of Jews. Denying the holocaust is a crime in Germany. The Vatican says the issue is closed since Pope Benedict publicly rejected holocaust denial just last week.

The man who founded Habitat for Humanity has died. Menard Follow (ph) was a millionaire entrepreneur who gave away all his money to found a Christian house building charity. He ran Habitat for three decades before losing control of the charity in a dispute with the board. Former President Jimmy Carter, a habitat volunteer, called Follow one of the most extraordinary people he's known. Follow was 74.

Shoe-throwing carries a penalty. The student accused of hurling a shoe at the Chinese premier during a Cambridge University speech yesterday faces up to six months in prison and a $7,000 fine. The shoe missed the premier, but police say that the student is charged with a public order offense. Back in December, you'll remember Wolf, an Iraqi journalist hurled two shoes at then President Bush. Wolf.

BLITZER: He got closer than this guy in Cambridge.

VERJEE: A lot closer.

BLITZER: All right, Zain, thanks very much.

Tax problems sink the nomination of the president's pick for health care reform. What might that mean for your health care? Brian Todd has some more information I think you're going to want to hear. And Hillary Clinton is making plans for her first overseas trip as secretary of State. You're going to find out which countries are first in her itinerary and why they are at the top of the list. Stay with us here in THE SITUATION ROOM.


BLITZER: For our viewers here in THE SITUATION ROOM, happening now -- one president to another. You have a lot to learn. The Venezuelan President Hugo Chavez speaks exclusively to CNN en Espanol. Why he says President Obama may not be able to keep his promise.

Plus, cut mortgage rates and families can keep their homes, right? We're breaking down the proposed add on to the stimulus package. How much you'd save and the one big catch.

And it's probably not a matter of if, but when it will blow. We're taking you live into the danger zone of that Alaska volcano. I'm Wolf Blitzer. You are in THE SITUATION ROOM.

President Obama is again sounding the alarm about the economy and the need for some fast action. As the plan to fix it works its way through the Senate, here's what the president said today.


OBAMA: By now, our economic crisis is well known. Our economy is shrinking. Unemployment rolls are growing. Businesses and families can't get credit and small businesses can't secure the loans they need to create jobs and get their products to market. Now is the time for Washington to act with the same tense of urgency that Americans all across the country feel every single day. With the stakes this high, we cannot afford to get trapped in the same old partisan gridlock.

That's why I've worked closely with leaders of both parties on a recovery and reinvestment plan that saves or creates more than three million jobs over the next two years, cuts taxes for 95 percent of American workers and makes critical investments in our future in energy and education, health care and a 21st century infrastructure. We will act swiftly and we will act wisely. The vast majority of the investments in the plan will be made within the next 18 months, immediately creating jobs and helping states avoid painful tax hikes and cuts to essential services. And every dime of the spending will be made available to the public on so every American can see where their tax dollars are going. But as we act boldly and swiftly to shore up our financial system and revitalize our economy, we must also make sure that the underpinnings of that economy are sound, that our economic infrastructure is rebuilt to handle the traffic of the global economy, that our cutting-edge science and technology remain the envy of the world, that our policies promote the innovative and competitive nature of this economy and facilitate the incubation and commercialization of our startups and small businesses, the very engine of our creation.


BLITZER: The comments came as President Obama announced his new pick for commerce secretary. That would be the New Hampshire Republican senator, Judd Gregg. Listen to this.


OBAMA: Judd is famous -- or infamous, depending on your perspective -- on Capitol Hill for his strict fiscal discipline. It's not that he enjoys saying no -- although if it's directed at your bill you might feel that way -- is that he shares my deep-seated commitment to guaranteeing that our children inherit a future they can afford.

Now, clearly, Judd and I don't agree on every issue, most notably who should have won the election.


OBAMA: But we do agree on the urgent need to get American businesses and families back on their feet. We see eye-to-eye on conducting the nation's business in a responsible, transparent and accountable manner.

And we know the only way to solve the great challenges of our time is to put aside stale ideology and petty partisanship and embrace what works.

As one of the Republican Party's most respected voices and skillful negotiators, Judd's a master of reaching across the aisle to get things done. He'll be an outstanding addition to the depth and experience of my economic team, a trusted voice in my Cabinet, and an able and persuasive ambassador for industry who makes it known to the world that America is open for business.

"Commerce defies every wind, overrides every tempest, and invades every zone."

These are the words carved into the walls of the department that I'm so pleased Judd Gregg has agreed to lead.

And as we act boldly to defy the winds of this crisis and outride the tempest of this painful moment, I can think of no finer steward for our nation's commerce. I expect the Senate's quick confirmation of their esteemed colleague, and I look forward to working with Judd in the years ahead.


BLITZER: So, the president now has a nominee to become the commerce secretary, but he lost the nominee to become the secretary of health and human services.

Earlier today, the former Senate majority leader Tom Daschle withdrew his name because of tax issues.

Let's bring in Brian Todd, who is working this story for us, because, in addition to being the secretary of health and human services, he was going to be in charge of health care reform.

So, the question is this, Brian. Where does all this stand?

BRIAN TODD, CNN CORRESPONDENT: That's the prevailing question right now, Wolf.

As you know, the Republicans, by this morning, had started to rise up in force against Tom Daschle. But they, too, had respect for Daschle's potential ability to steer health care reform through Congress. Now two questions prevail. What's been lost, and what now?


TODD (voice-over): From the White House, a stoic response to the question, what will you do without Tom Daschle?

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I don't think the effort slows down for health care reform. And I think Senator Daschle and others would admit that the -- the effort is far bigger than any one individual.

TODD: A little less measured on Capitol Hill.

SEN. HARRY REID (D-NV), MAJORITY LEADER: Fifty million people with no health insurance, and we moved a step forward on health care for the American people.

TODD: How does the prospect of a sweeping health care overhaul look, now that Tom Daschle won't be its spearhead?

NORMAN ORNSTEIN, AMERICAN ENTERPRISE INSTITUTE: To have a delay now for several months, probably, as you get a new person coming in, who may have some different ideas, but also is going to have to be brought back up to speed on where we are and what we're doing, to bring in somebody who is not going to be a player at the table as they make serious changes in the health care process through the stimulus package means that you are narrowing that window when you can actually make things happen.

TODD: Analysts say Daschle brought three critical components to the table that will be hard to match for any one person: a comprehensive knowledge of health care policy, having written a book on it, an inside knowledge of Capitol Hill, and he would have had the president's ear, given his close relationship with Mr. Obama.

Observers also believe the symbolism of Daschle's demise is a broad political setback for the president.

MARK PRESTON, CNN POLITICAL EDITOR: I think what you are going to see from Republicans is that this is going to be another issue that has helped them unite to stand behind one another and really talk about government -- government excess, and really call Barack Obama on the carpet for his campaign promises of bringing accountability and change to Washington, D.C.


TODD: And there's the warning signal to Daschle's potential successor as HHS nominee. As Norm Ornstein told me, you probably have a lot of accomplished people in and out of Washington who look at this process and know that you will be -- quote -- "stripped naked and have a full-body cavity search before you can get such an position."

And they may think twice about doing it. Wolf, it's going to scare a lot of people away.

BLITZER: Are you hearing any names of possible replacements?

TODD: A couple of names floated out right -- right off the bat, Donna Shalala, having held this same position. She's a talented administrator, knows the Washington game. Or...

BLITZER: She served in the Clinton administration.

TODD: Exactly.

Former Senator Bill Bradley, and also Howard Dean. You have heard that name earlier today, because of his political chops and his experience as a physician. But Dean may not have the relationship with Barack Obama or his chief of staff, Rahm Emanuel, that he needs to really be -- be effective. So, he may not be the choice there.

BLITZER: All right. We will see who the president of the United States picks.

TODD: Right.

BLITZER: Brian, thank you.

Tomorrow, President Obama, Secretary of State Clinton and special Middle East envoy George Mitchell are expected to meet over at the White House to discuss Middle East strategy.

Today, Secretary Clinton made it clear it will be a top priority of this administration. She's been very busy in her new job. And she's now preparing a busy travel schedule as well.

Here's CNN's foreign affairs correspondent, Jill Dougherty -- Jill.


JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Wolf, secretaries of state traditionally make their first international trips to Europe or the Mideast. Hillary Clinton is breaking the mold with a trip to the Far East.

HILLARY RODHAM CLINTON, U.S. SECRETARY OF STATE: We need our closest allies, like Germany, to help us ensure the success and stability.

DOUGHERTY (voice-over): Secretary of State Hillary Clinton at full diplomatic throttle, back-to-back meetings with foreign ministers from Germany and Great Britain, and her special Mideast envoy, George Mitchell.

Just back from his first trip to the region, he tells Clinton it might be time for her own trip to the Mideast.

GEORGE MITCHELL, SPECIAL ENVOY FOR THE MIDDLE EAST: All of the leaders with whom I met had, in fact, already spoken to the secretary and are anxious for her to come to the region.

DOUGHERTY: But Secretary Clinton already is preparing to pack her bags for her first international trip, destination Asia.

Tensions in Asia are ratcheting up, with reports that North Korea might test-fire a long-range missile that could be capable of hitting the U.S.

ROBERT WOOD, STATE DEPARTMENT SPOKESMAN: A ballistic missile -- missile launch by North Korea would be unhelpful and, frankly, provocative.

DOUGHERTY: Secretary Clinton is expected to visit South Korea, which is taking a harder line on the north.

Also on the itinerary, Japan, a major international player with major economic difficulties, and China. Clinton says it's time to broaden the relationship with Beijing from a sole focus on economics.

CLINTON: China is critically important as an actor who will be changing the global landscape. We want a positive and cooperative relationship with China, one where we deepen and strengthen our ties on a number of issues and candidly address differences where they persist.

DOUGHERTY (on camera): The U.S. may be critical of China, but Clinton is likely to get an earful as well -- Premier Wen Jiabao blaming U.S. financial institutions for igniting the global economic meltdown -- Wolf.


BLITZER: All right, Jill, thanks very much.

Jill is over at the State Department.

George Mitchell, special envoy to the Middle East, and Robert Wood, the State Department spokesmen, among others, who are weighing in on what's going on. Secretary Clinton, by the way, will return to China, over 13 -- more than 13 years after she caused quite a bit of a stir there as the first lady.

Mrs. Clinton gave a controversial speech on women's rights that did not please the Beijing government. Listen to Hillary Clinton back in China in 1995.


CLINTON: It is time for us to say here in Beijing and for the world to hear that it is no longer acceptable to discuss women's rights as separate from human rights.

It is a violation of human rights when babies are denied food or drowned or suffocated or their spines broken simply because they are born girls.


BLITZER: That was the secretary of state when she was the first lady, back in the Clinton administration.

President Obama says his new choice for commerce secretary is famous, perhaps even infamous, over on Capitol Hill. Ahead, why Judd Gregg is such an unusual choice for this Cabinet post.

Plus, our CNN contributor Donna Brazile is giving a very public nudge to President Obama. She will tell us why. That's coming up in our "Strategy Session."

And Venezuelan President Hugo Chavez says the wool is being pulled over President Obama's eyes. It's a CNN en Espanol exclusive.

And you will see it and hear it right here in THE SITUATION ROOM.


BLITZER: We now have the videotape -- and you're going to want to see -- we're going to show in the next hour -- the president of the United States and the first lady, they made a surprise visit to a local school here in Washington, D.C., and they actually read to the kids.

They asked them questions and took questions from the kids as well. You are going to want to see this. It was pretty good. And we will share it with you. That's coming up in the next hour.

In the meantime, this man could help millions of Americans find jobs, the New Hampshire senator, Judd Gregg. President Obama wants him to be the commerce secretary. Among the unusual things about this nomination, Senator Gregg is a Republican.

Our senior political analyst, Bill Schneider, is joining us now.

What else, Bill, is most unusual about this nomination?



SCHNEIDER (voice-over): Judd Gregg for commerce secretary? Unusual, to say the least. Commerce secretaries have often been political honchos, like Robert Mosbacher, finance chairman of the first President Bush's 1988 campaign, and Bill Daley, Illinois chairman of the 1992 Clinton/Gore campaign.

Not this time. President Obama's choice for Commerce is a Republican.

SEN. JUDD GREGG (R-NH), COMMERCE SECRETARY NOMINEE: This is not a time for partisanship. This is a -- not a time when we should stand in our ideological corners and shout at each other.

SCHNEIDER: Gregg is a fiscal conservative.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Judd is famous, or infamous, depending on your perspective, on Capitol Hill for his strict fiscal discipline.

SCHNEIDER: But he has praised President Obama's economic stimulus plan.

GREGG: He made an excellent presentation, I thought, and a substantive presentation, and addressed his approach and what he was going -- what they are planning to do in a very comprehensive way and in a way that gave me a lot of confidence that they are on the right track.

SCHNEIDER: With modifications.

GREGG: Refocus it, or at least focus a larger percentage of it on the issue of housing.

SCHNEIDER: Something else unusual about Gregg's nomination: He made a deal with New Hampshire's Democratic governor to appoint a Republican successor to his Senate seat.

GREGG: I also want to thank the governor of New Hampshire for his courtesy and courage in being willing to make this possible through the agreement that we have relative to my successor in the Senate.

SCHNEIDER: And talk about unusual. Senator Gregg won the Powerball lottery back in 2005, but he promised to be conservative with his winnings.

QUESTION: What are you going to do with the money?

GREGG: Whatever my wife tells me to do with it.


(END VIDEOTAPE) SCHNEIDER: Well, back in 1995, when Republicans first gained control of Congress, Senator Gregg voted to abolish the Commerce Department. Now he's been named to take charge of it. You know, if you can't kill it, run it -- Wolf.

BLITZER: And the governor of New Hampshire just made it official. Bonnie Newman, a longtime aide to Senator Gregg....


BLITZER: ... she is a Republican, worked for President Reagan. She's going to succeed him. But she's not going to run for election in 2010, when that seat is up. So, she's going to be a -- a placeholder, if you will. But she is a Republican, so that won't affect the balance of power in the Senate.

Bill Schneider, thanks for that report.


BLITZER: The health and human services pick sees his nomination driven into a ditch. But Tom Daschle didn't always need a driver. Wait until you see how he used to drive himself around. We have the video.

And our own Donna Brazile has some advice for the president: Help people save their homes, and do it now. Donna in here to explain. So is Bill Bennett. And you will see them both in the "Strategy Session."

That's next.


BLITZER: Let's get back to one of our top stories right now: the health and human services nominee, Tom Daschle, bowing out today, citing the controversy surrounding his own tax trouble.

So, what does this mean for the president's administration?

Let's go to our "Strategy Session" right now, joining us, two CNN political contributors, the Democratic strategist Donna Brazile and the national talk -- radio talk show host Bill Bennett.

What does it mean? It is certainly an embarrassment for this new president.

DONNA BRAZILE, CNN POLITICAL ANALYST: It's also a disappointment to many of us who wanted to see Tom Daschle in that role, because he is an advocate to -- for health care for all.

It should be a wakeup call to the Obama campaign -- the Obama administration to vet these individuals properly.

Yes, I know. It's -- he's the president.


BILL BENNETT, CNN CONTRIBUTOR: Campaign mode. You won. Here, you won.


BRAZILE: I'm always -- I know -- but to vet these individuals properly.

But Tom Daschle, in his defense, came forward. He admitted he made a mistake. And I thought, today, he did a statesmanlike thing in stepping aside, to not distract from the president's agenda.

BLITZER: It is an embarrassment, though, you have to admit.

BENNETT: It's a big embarrassment. It was the right thing for him to step down, but Barack Obama, President Obama, should not have supported him, absolutely, as he said.

If there was one theme that he was hitting in the campaign, it was ethics. He talked about his ethics reform legislation, talked about lobbyists. He said, we will not do business as usual.

This was an embarrassment. You had two statements, Tom Daschle saying, "I have no excuse for this," the amount of money that was involved. And the president saying, "I absolutely stand by him," that was a mistake.

BLITZER: And, you know, the whole business about the limousine and the car, the driver, a gift from a friend, it's in marked contrast to when he ran for the Senate back in 1986.

I want to bring Abbi Tatton in. Listen to this, guys.

Abbi, show us the -- the video, because it's popping up all over YouTube right now.

ABBI TATTON, CNN INTERNET REPORTER: Wolf, this is something that was becoming a little bit of a joke on YouTube this morning, this 1986 campaign ad that promoted Senator Daschle as an ordinary guy.

Take a listen.


ANNOUNCER: Among Washington's BMWs and limos is this. Since 1971, the old Pontiac has served its owner well. Sure, it's rusted, and it burns a little oil. But, after 15 years and 238,000 miles, Tom Daschle still drives his old car to work every day.


TATTON: That's a long way from the luxury car and driver that's been at the center of this story. That was posted to YouTube last night by a political science professor called John Pitney, a conservative, he describes himself. He said he had it on an old VHS tape, and he decided that -- to upload it on to the Web.

It got e-mailed around to everyone this morning, getting thousands and thousands of hits as the day went on -- Wolf.


All right, well, that's interesting because Donna, as Abbi points out, it was only probably going to become increasingly more embarrassing for Tom Daschle and for the president.

BRAZILE: Well, Tom Daschle was willing to go before his former colleagues. He confessed. He amended his tax returns. Wolf, this was an embarrassment.

He's -- he's now going back into private life. Tom Daschle has spent 30 years trying to make this country better for all people. So, I'm going to -- I'm going to stand by him.

BLITZER: Who deserves the most blame for this embarrassment? Would it be Tom Daschle, the vetting process, the president? Where do you see the blame? Because it's been an -- it's -- the president, exactly two weeks into his administration, taking at least a modest hit.

BENNETT: I don't know where the blame is.

The embarrassment is for the -- is for the president, because of the emphasis he put on this issue. And this just shouldn't have happened. And the -- you know, Friday, they knew. This is a long time in Washington for this thing to bleed. And I don't understand why he just didn't say, we can't have -- have this.

He already has a problem with Geithner. You know, people who are called before the IRS...

BLITZER: And he was confirmed.

BENNETT: I know.

BLITZER: He's the treasury secretary.

BENNETT: I know.

But people who are going to have IRS problems are going to have the Geithner defense. They're not going to have the Geithner-Daschle defense. I don't think that should have happened either.

BLITZER: I suspect, Donna, that after the chief performance officer withdrew her name today because of a tax issue, it was only a matter of time for Tom -- Tom Daschle to do the same.


BRAZILE: You know, once again, look, President Obama made a very important announcement, Judd Gregg. And we're sitting here talking about Tom Daschle. He's gone back into private life. Now we should talk about how we're going to revise the economy.

BLITZER: Well, let's talk about an article, Donna, that you wrote today in "Roll Call," the population newspaper up on Capitol Hill.

I'm going to read a little bit from it. This is Donna Brazile.

"At some point -- and I suggest it has arrived -- the Obama administration will have to step in to help those teetering on the edge of losing their one remaining asset. This legislation should be shot through the legislative process on turbo-jet roller skates. Families need help now."

You want this administration, Donna, to take decisive action immediately on housing.

BRAZILE: Wolf, when the Congress passed the first bailout bill, the -- better known as the TARP bill, once again, homeowners were passed aside. Last week, the House passed aside.

I am -- I'm afraid that the Senate may once again put this bill on the side. It's time that we help homeowners. Foreclosure problems are getting worse and worse. Over eight million Americans may lose their homes over the next couple of years if we don't do something right now.

BLITZER: Republicans have a proposal just to...


BLITZER: ... give everyone who qualifies a 4 percent mortgage, which is pretty attractive to a lot of folks struggling right now.

BENNETT: They have got -- they have got the 4 percent proposal. They have got a set of other proposals. They are much closer to addressing the problem, I have to say -- and I think Donna would admit -- than the Senate Democrats are.

BLITZER: Are they?

BENNETT: Senate Republicans have addressed it.

BRAZILE: Well...

BENNETT: Obviously, you would want to -- you would want to change it some, but they understand this as a problem and are do something -- doing something to address it.

BRAZILE: Look, there's also -- if you own commercial property, if you own a yacht or you own some other real estate, a vacation home, you can go to the courts and have your loan modified.

But, if you are a homeowner, struggling, you can't get it done. So, this is one proposal. There's a bankruptcy bill by John Conyers and Dick Durbin. All I'm saying is, help these homeowners. BLITZER: And, if they didn't read your article in "Roll Call," they certainly heard you here in THE SITUATION ROOM.


BLITZER: Donna, thanks very much.

BRAZILE: Thank you.

BLITZER: Today -- I know you're passionate about all these issues, but you are really passionate, Bill, about an anniversary that some of us recall today.

BENNETT: You are talking about Felix Mendelssohn's birthday.

No, I -- I'm sorry.


BENNETT: I betrayed you.

The day the music died, of course, Buddy Holly, and Ritchie Valens, the Big Bopper. And who can ever forget "Oh Donna" by Ritchie Valens?

BRAZILE: Oh, he's still playing that song up in heaven.

BENNETT: For you.

BRAZILE: Absolutely.

BENNETT: You are the girl he was thinking of.


BLITZER: Donna Brazile, it's a great song. And you're a great lady.

BRAZILE: Thank you.


BLITZER: Who knew that -- I knew -- that Bill Bennett is a rock 'n' roll aficionado?

BRAZILE: He's a soul man, also.


BENNETT: Good for my image. I need the help.


BLITZER: Thanks.

Another member of team Obama on the job right now, you're going to stand by to hear about it on our "Political Ticker." The economist who predicted the current meltdown has a new warning about the year ahead. We are going to hear from the man known as Dr. Doom.

And a dark day for the dark knight -- "Batman" actor Christian Bale lashing out on tape.


CHRISTIAN BALE, ACTOR: I'm going to (EXPLETIVE DELETED) kick your (EXPLETIVE DELETED) if you don't shut up for a second, all right?

I'm going to go. Do you want me to go (EXPLETIVE DELETED) trash your lights?



BLITZER: Here's a look at some "Hot Shots" coming in from our friends over at the Associated Press, pictures likely to be in your newspapers tomorrow.

In New Delhi, the Dalai Lama leaves for the airport after spending time in a hospital for a pinched nerve in his arm.

In Afghanistan, a man arranges pieces of meat used to make a kebab.

In India, Hindu holy men hold out their hands while praying.

And, in Israel, two lion cubs get ready for vaccinations over at the zoo -- some of this hour's "Hot Shots," pictures worth 1,000 words.

On our "Political Ticker" today: Eric Holder is promising a new era over at the Justice Department, now that he's the first African- American U.S. attorney general. Holder was sworn in this morning, a day after the Senate confirmed his nomination.

Employees lined the hallways to welcome Eric Holder back. He had served as deputy attorney general during the Clinton administration. Holder inherits a department racked by controversy under President Bush, including questions about politically-motivated hirings and firings.

Over four years, she was wounded while serving -- more than four years ago -- while serving in Iraq. Tammy Duckworth, we're talking about her. Now she's been nominated by the president to become the assistant secretary of the Department of Veterans Affairs. The former helicopter pilot lost both her legs and partial use of one arm when she came under attack in Iraq. Duckworth is the veteran affairs director in President Obama's home state of Illinois. She ran unsuccessfully for Congress in 2006.

Remember, for the latest political news any time, you can always check out And, to our viewers, you're in THE SITUATION ROOM.