Return to Transcripts main page


Michelle Obama's Listening Tour; Interview With Barack Obama

Aired February 3, 2009 - 18:00   ET


LOU DOBBS, HOST, "LOU DOBBS TONIGHT": The Senate has already put aside $9 billion to extend, as you suggest, broadband.

The Congressional Budget Office says that would take the government just seven years to spend that money. So, it's not really going to create many jobs and it's not going to stimulate our economy. Other than that, it's a pretty good deal.

We will be examining that and Lou's line-item veto tonight at 7:00 p.m. Eastern right here on CNN on "LOU DOBBS TONIGHT." We hope you will let your elected officials know how you feel all about that. And please join us -- Wolf, back to you.

WOLF BLITZER, CNN ANCHOR: We will see you in one hour, Lou. Thank you.

And, to our viewers, you are in THE SITUATION ROOM.

Happening now, breaking news: President Obama openly admits a big mistake and the thing that keeps him up at night. Stand by to hear for the first time a new CNN interview with the president in the Oval Office.

Plus, the stunning end to Tom Daschle's hopes of becoming health secretary -- this hour, how the Obama team's vetting process went terribly wrong again.

And Michelle Obama's listening tour -- the first lady starts making the rounds here in Washington and figuring out her job description -- all of that and the best political team on television.

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You are in THE SITUATION ROOM.

President Obama is not mincing any words about the nomination that just exploded in his face. He is telling CNN's Anderson Cooper that he screwed up the vetting of Tom Daschle. You are going to get a first listen to that interview in just a moment.

But first Tom Daschle's surprising withdrawal from consideration to become the secretary of health and human services.

Let's go to our White House correspondent Dan Lothian to tell us what happened -- Dan.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, that's right, Wolf. This was not a good day for the White House. The president really wanted to be focusing on that stimulus and also on his pick for Commerce. Instead, the White House was dealing with a political headache as two of his nominees pulled back because of their problems with taxes.


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 -- quote -- "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 -- quote -- "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.

UNIDENTIFIED MALE: 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, 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 wants won more than $800,000 in the lottery...


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, Mr. Gregg's was Obama's second choice for Commerce. Bill Richardson dropped out last month, after a federal investigation into a company that had done business with the state.

But now, Wolf, there are all kinds of questions about the vetting process, although Robert Gibbs at the press briefing today said that the president has full confidence in how his nominees have been vetted. But as we will hear coming up on this interview with Anderson Cooper, the president really taking all the blame, taking the responsibility for the vetting process -- Wolf.

BLITZER: All right, Dan, thank you.

And, as you say, President Obama using some pretty frank language, talking about the economy and also about the stunning setback for his administration.

He sat down with CNN's Anderson Cooper one on one in the Oval Office.


ANDERSON COOPER, HOST, "ANDERSON COOPER 360": Explain what happened today, Tom Daschle. You've let one of the most important domestic issues, which is health care, get caught up in what looks to many Americans like politics as usual.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Well, I think what happened was, was that Tom made an assessment that, having made a mistake on his taxes, that he took responsibility for, and indicated was a mistake, made the assessment that he was going to be too much of a distraction in trying to lead what is going to be a very heavy lift, trying to deliver health care.


COOPER: Do you feel you messed up in letting it get this far?

OBAMA: Yes. I think I made a mistake. And I told Tom that. I take responsibility for the appointees and...

COOPER: What was your mistake? Letting it get this far? You should have pulled it earlier?

OBAMA: Well, I think my mistake is not in selecting Tom originally, because I think nobody was better equipped to deal both with the substance and policy of health care -- he understands it as well as anybody -- but also the politics, which is going to be required to actually get it done.

But I think that, look, ultimately, I campaigned on changing Washington and bottom-up politics. And I don't want to send a message to the American people that there are two sets of standards, one for powerful people, and one for ordinary folks who are working every day and paying their taxes.

COOPER: Do you feel you have lost some of that moral high ground which you set for yourself on day one with the ethics reform?

OBAMA: Well, I -- you know, I think this was a mistake. I think I screwed up. And, you know, I take responsibility for it. And we're going to make sure we fix it, so it doesn't happen again.

COOPER: Let's talk about the economy, the stimulus. Every day, you get an economic briefing, along with an intelligence briefing. Which, to you, is -- is more sobering, the economic news you get or the national intelligence?

OBAMA: Well, look, the national security briefing is always sobering, because my most important job is obviously keeping the American people safe. And we have to remain vigilant. The threats are still out there.

But I will tell you, in terms of what is alarming right now, is how fast the economy has been deteriorating. I think, even two or three months ago, you -- most economists would not have predicted us being in as bad of a situation as we are in right now. And...

COOPER: It keeps a lot of Americans right now up at night.

OBAMA: Absolutely.

COOPER: Does it keep you up at night?

OBAMA: It keeps me up at night, and it gets me up...

COOPER: Literally?

OBAMA: Literally, because -- because we have got a range of different problems, and there is no silver bullet. We're just going to have to work our way through the problem.

So, number one, we have got to have a recovery package that puts people back to work and ensures that states that are dealing with rising unemployment can deal with unemployment insurance, can provide health care for people who have lost their jobs. So, that's one set of problems.

Then, you have got a banking system that has undergone close to a meltdown. And we have got to figure out, how do we intelligently get credit flowing again, so that small businesses and large businesses can hire people and keep their doors open and sell their products?

And, you know, part of the problem, unfortunately, is, is that the first round of TARP, I think, drew a lot of scorn. You know, we learned -- you know, we have now learned that, you know, people are still getting huge bonuses, despite the fact that they're getting taxpayer money, which I think infuriates the public.

So, we also have to set in place some rules of the road. And, tomorrow, I'm going to be talking about executive compensation and changes we're going to be making there.

Even after we get that done, we still have to get a financial regulatory system in place that assures this crisis never happens again. And we have got to do this in the context of a world economy that is declining, because, in some ways, the Europeans are actually doing at least as badly as we are.

You have even seen China, which has been growing in leaps and bounds over the last two decades, starting to decline. So, trying to do all those things on parallel tracks, at a time when people are scared -- and legitimately so -- I think, is going to be a -- a big challenge.

I think we're up to the challenge. But it's going to take some time. And I think the American people recognize that.

COOPER: On executive compensation, Paul Krugman suggested in "The Time" on Sunday that your tough talk may be just for show. What can you really do?

OBAMA: Well, I think -- you know, we will talk about it tomorrow, but we're going to be laying down some very clear conditions in terms of where...

COOPER: Do you support Claire McCaskill's idea of capping...

OBAMA: Well, I -- I -- again, I don't want to completely preempt my announcement tomorrow.

COOPER: You could here.


OBAMA: But the -- but I think there are ways -- there are mechanisms in place to make sure that institutions that are taking taxpayer money are not using that money for excessive executive compensation.


BLITZER: Coming up: The president draws a line on what he is determined to keep in his economic plan, and he has a rather blunt assessment of what's at stake in his presidency -- more of Anderson Cooper's Oval Office interview coming up here in THE SITUATION ROOM.

And, later tonight, on "A.C. 360," the full interview, President Barack Obama speaking to Anderson Cooper, that's at 10:00 p.m. Eastern.

New embarrassments for the Obama administration, tax problems sinking key nominations, but who is really to blame? What's going on, the president's picks or the way they were picked?

Plus, Tom Daschle sees his nomination driven into a ditch, but he didn't always need a driver. He used to drive himself around. We have the video. And Tehran celebrates a satellite launch, but it has caused grave concern for the Obama administration.

Lots going on, very busy -- right here in THE SITUATION ROOM.


BLITZER: Much more of Anderson Cooper's interview with President Obama late this afternoon coming up this hour right here in THE SITUATION ROOM. Stand by for that.

But let's get back to the breaking news: Tom Daschle's stunning withdrawal of his nomination to become the secretary of health and human services. It is but the latest in a series of a mistakes, blunders in the Obama Cabinet selection process. And many are wondering how a vetting system that was supposed to set a new gold standard became already so tarnished.

Let's bring in our national correspondent Jessica Yellin.

You have been looking into this question. A lot of people are. What's the answer?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Well, Wolf, I have talked to a number of experienced vetters here in Washington, D.C. And they explained there two steps to the vetting process, first, identifying possible problems, but then deciding how damaging those problems could be.

And the folks I talked to say, look, this process worked as best it could.


YELLIN (voice-over): They say bad news comes in threes. President Obama must be hoping that's true. He has had one...

GOV. BILL RICHARDSON (D), NEW MEXICO: Mr. President-elect, this is a great honor.

YELLIN: ... two...

TOM DASCHLE (D), FORMER SENATE MINORITY LEADER: It is a great honor to be nominated.

YELLIN: ... three nominees withdraw because of legal or tax problems. The White House spokesman insists, their vetting process worked.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: The president has confidence in the system.

YELLIN: So, then how did these nominees with flaws serious enough to withdraw make it so far?

UNIDENTIFIED FEMALE: The vetting process does not create -- a successful vet does not create perfect nominees. It just identifies the problems.

YELLIN: Teams of lawyers read every public document on the nominee, tax forms, court cases. But documents don't reveal everything. A good vet depends on a nominee being very revealing.

Recall that 63-question ethics form asking for everything, from embarrassing e-mails and diary entries, to the financial history. Well, in the case of Daschle, it was up to him to reveal the issue of his car taxes.

UNIDENTIFIED FEMALE: There was not a record that he did not pay taxes on the car and drive because there was no record of the car and driver.

YELLIN: Senator Daschle brought it to the Obama team's attention after he was nominated.

In the case of New Mexico Governor Bill Richardson, vetters were apparently caught off guard when it became public that the governor and his office were being investigated by federal prosecutors.

RICHARDSON: I made the decision to withdraw.

YELLIN: Experienced vetters say Obama administration's legal team would have no way to know this except from the nominee himself.

But it's a different story with Nancy Killefer, the woman who dropped out today. One source tells CNN Killefer did reveal her tax issues to the Obama vetters. The transition team decided those issues were not politically damaging and would not derail her nomination.

But in the current political atmosphere, that's no longer true.


YELLIN: So, again, a vetting process is first only as good as the nominee is honest. And it's also subject to political judgment.

But then a lot of this also comes down, Wolf, to the political climate at the moment. For example, maybe Daschle would have survived if Killefer hadn't dropped out today, or maybe neither of them would have had a problem if Tim Geithner had not had tax issues to begin with.

BLITZER: Yes, but for the chief performance officer of the United States, which was what she was supposed to get, to have a tax issue, that was obviously embarrassing.

YELLIN: So was it for Geithner, though, and so was it for Daschle. The question is, why was she the one to drop out first? Some say her tax issues were smaller. It was because all three of them were happening at the same time. It compounded the political damage.

BLITZER: Geithner got through the process, though, in the end.

YELLIN: He did.

BLITZER: All right, thanks very much for that, Jessica.

While Tom Daschle's tax problems stem from a luxury car and a driver, an old campaign ad on YouTube shows a very different side of Tom Daschle.

Let's go to our Internet reporter, Abbi Tatton.

Abbi, this is all, this ad especially, a bit ironic.


And by late morning today, the issue of the car and driver and Senator Daschle was becoming a bit of a joke on YouTube because of this ad that was posted late last night, a 1986 campaign ad that at the time portrayed Senator Daschle as an ordinary guy. Have a look.


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: A long way from the luxury car and drive that has been at the center of the story.

That ad from 1986 posted last night on YouTube by a political science professor, John Pitney, who said he had it on an old VHS tape and he thought it was amusing and ironic. Certainly, a lot of people agreed. As the day went on, thousands and thousands of more people were clicking on this -- Wolf.

BLITZER: And I'm sure more will take a look at it right now.

All right, Abbi, thank you.

In the Oval Office today, President Obama facing some tough questions about his push to get his economic rescue plan approved by Congress.


COOPER: Did the Republicans beat you on selling this? On selling the message? Did you lose the message?


BLITZER: All right, stand by. You are going to hear more of Anderson Cooper's one-on-one interview with President Obama. That's coming up.

Plus, Michelle Obama's first moves as first lady, early clues about the role she is carving out for herself right now.

And Iran launches a satellite amid new fears about its threats to the United States.

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


BLITZER: The Anderson Cooper interview with President Obama coming up.

But I want to go to the Pentagon right now.

Our Pentagon correspondent, Barbara Starr, is working a story, a very disturbing story, involving Iran.

What is going on with this launch apparently of a satellite?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, Wolf, it is yet another very unsettling development from the regime in Tehran.


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

HILLARY RODHAM CLINTON, U.S. 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 elicit 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.

CHARLES VICK, GLOBALSECURITY.ORG: 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, SECRETARY OF DEFENSE: 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 the Obama White House, Wolf, has to decide whether they can still reach out to Iran -- Wolf.

BLITZER: Good question. All right, thanks very much, Barbara, for that.

There are still many unanswered questions about how and when a missile shields 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.

The president says he knows his presidency is directly tied to the fate of the economy.


OBAMA: I'm going to be judged on, have we pulled ourselves out of recession?


BLITZER: Stand by for more of Anderson Cooper's new interview with President Obama. That's coming up next.

Plus, a new voice of spending restraint tapped for the Obama economic team. The best political team on television considers how loudly Judd Gregg will be heard.

And are Senate Republicans making the economic rescue package better or worse?


SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: 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.



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

Happening now: one-on-one with the president, what Mr. Obama says will be the measure of the success and the criticism he says he welcomes -- more of Anderson Cooper's Oval Office interview less than a minute away. And the job sinkhole got deeper today. Five companies announced more than 8,000 job cuts, financial services, retail and factories taking a major hit -- despite the news, the Dow closing up 141 points.

And a demand on the pope from Germany's Chancellor Angela Merkel says the pope -- wants the pope to make it clear there are no denials of the Holocaust. Merkel's comments coming after the Vatican recently rehabilitated a bishop who denied the Nazis intentionally gassed millions of Jews.

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

President Obama speaking bluntly about the economy and drawing a line in the sand on his recovery plan.

More now of Anderson Cooper's one-on-one interview in the Oval Office.


COOPER: On the stimulus plan for you, what is non-negotiable with -- with Republicans?

OBAMA: The unemployment insurance, health care for people who have lost their jobs, you know, providing some relief to the states on those fronts, and providing families relief, that's very important.

Infrastructure investments that lay the groundwork for long-term economic growth, I think, is critical. You know, so, for example, when we say we're going to weatherize two million homes, that's not just make-work. First of all, you can employ people weatherizing those homes. We are also then saving families, individual families, on their energy bills. But the third thing is, it's making this country less dependent on foreign oil.

So, the same is true for health I.T. The same is true when it comes to education. We want to train thousands of teachers in math and science, and invest in science and technology research. All those things will make us more competitive over the long term.

What I do think is negotiable is some programs that I think are good, good policy, but may not really stimulate the economy right now.


COOPER: But how did they even get into the -- the bill in the first place?

OBAMA: Well, Anderson...

COOPER: I mean, why did they get this far?

OBAMA: ... you know, there are 535 members of Congress who have their own opinions about...

(LAUGHTER) COOPER: Do you think some of the House Democrats went too far?

OBAMA: You know, I think that, if you look at -- first of all, I think, to -- in fairness to the House Democrats -- and this hasn't been talked about enough -- if you tally up all the programs that have been criticized on "A.C. 360" or anywhere else, that amounts to less than 1 percent of the total package.

So, they actually were remarkably disciplined, considering the size of this package. We have -- they left out, at my request, all earmarks, so there aren't private pet projects. And, by the way, many of the critics of -- of the current package can't say that about any of the budgets that they passed over the previous six or eight years.

COOPER: But this is what American people are hearing about, whether rightly or wrongly.

OBAMA: Right.

COOPER: And, I mean, did the Republicans beat you on -- on selling this -- on selling the message?

OBAMA: Well...

COOPER: Did you lose the message?

OBAMA: Well, no. No, I don't think we've lost the message. That's why I'm here with you. Everybody is going to be watching. They talked to you today.

But I think that the American people understand something has to be done. They want to make sure that we're serious about it and that we're not using this to promote politics as usual. And that's what I'm insisting on.

You asked earlier do I lose sleep?

Look, the only measure of my success as president -- when people look back five years from now or nine years from now -- is going to be did I get this economy fixed?

I have no interest in promoting a package that doesn't work because I'm not going to be judged on whether or not I got a pet project here or there.

I'm going to be judged on have we pulled ourselves out of a recession?

I think that the members of Congress understand that, as well. I don't question the sincerity of some Republican critics, who may think that they can do better on this. And I'm happy to negotiate with them. If they've got better ideas, I'm happy to do it.


BLITZER: All right. Much more of the interview coming up later tonight on "ANDERSON COOPER 360" -- the full interview, in fact. You'll see it at 10:00 p.m. Eastern.

Among some of the other issues Anderson asked, the search for a puppy in the White House; also, the president's battle with cigarettes. "A.C. 360" -- the full interview in the Oval Office with President Obama. That's coming up later tonight.

I want to go back up to the Hill right now and get some more on this stimulus package that's now making its way through the U.S. Senate.

Our Congressional correspondent, Brianna Keilar, is getting some new information.

What is the latest -- Brianna?

BRIANNA KEILAR, CNN CORRESPONDENT: Wolf, a key vote today. And the outcome a sign that Republicans do have some influence on what's in this bill.


KEILAR (voice-over): The first vote in the Senate to change the economic stimulus plan -- a Democratic proposal to add $25 billion for highways, mass transit and water and sewer systems.

SEN. PAT MURRAY (D), WASHINGTON: It would give all of our states and our communities the equivalent of two years of federal highway contributions at once, enabling them to support 362,000 construction jobs alone.

KEILAR: The add-on would have pushed the stimulus price tag past $900 billion. And it failed, as Senate Republican leaders skewered the Democratic plan, saying it includes too much wasteful spending.

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: 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 out at the problem.

KEILAR: Republican leaders want more tax cuts for businesses and individuals and they want incentives for homebuyers, including mortgage rates as low as 4 percent.

But an ad hoc group of 10 Republicans, including John McCain, is pushing a different plan to put more money -- almost $90 billion -- into infrastructure projects.

SEN. JOHN MCCAIN (R), ARIZONA: We can either fight the Democrat proposals, which would increase the deficit incredibly and mortgage our children's futures and not beneficially stimulate our economy, which we will do, in many respects. But we have to have a proposal of our own.


KEILAR: And yet another proposal that's getting a whole lot of attention is a bipartisan effort by Nebraska Democrat Ben Nelson and Maine Republican Susan Collins to scour this bill of spending that they think won't create jobs. In fact, a meeting just broke up moments ago between about a dozen Democrats and Nelson -- Democrats, Wolf, who are talking about pulling spending out of their own party's bill.

BLITZER: All right, Brianna.

Thanks very much.

Brianna with the latest from the Hill.

President Obama taking the blame for the failed nomination of Tom Daschle as Health secretary. The commander-in-chief says he screwed up.

Also, the president's tapped a fiscal conservative for Commerce secretary.

What will it mean to have Judd Gregg on his team?

The best political team on television is standing by.

Also, new information on the first lady, Michelle Obama. That's coming up, as well.


BLITZER: Let's talk about President Obama's interview with Anderson Cooper in the Oval Office. You just saw it here in THE SITUATION ROOM.

Joining us now, our senior political analyst, Gloria Borger; Brian Debose of "The Washington Times;" and CNN's chief national correspondent, John King.

All right, Gloria, he was pretty candid, the president. He said, "I screwed up," referring to the Tom Daschle nomination.

GLORIA BORGER, SENIOR POLITICAL ANALYST: It's clear that he believes he didn't screw up in nominating Tom Daschle to become HHS secretary. But I think what he was saying is that his vetters, perhaps, did not know everything they should have known, although, in order to have a successful vet, you have to be -- get all the information from the nominee himself.

And I think there's sort of a question about what they knew and when they knew it.

It's very clear, though, that both Obama and Daschle are very sad about this development, because they're very close. And Daschle really wanted to be HHS secretary and see health care through.

BLITZER: He wrote a book about it. But he was one of early supporters...

BRIAN DEBOSE, "WASHINGTON TIMES": That's right. BLITZER: ...among major political figures, of the president of the United States in his bid to get the Democratic nomination.

DEBOSE: That's right. One -- almost the earliest supporter. I think in early 2007, he supported him and offered him staff.

But I mean, it's not a question of what they knew and when they knew it. They knew about this in June. Daschle let them know about this in December.

I think Obama, at that time, should have just pulled back from this and just said, you know, we -- we can't have this causing the distraction, particularly with what they knew about Timothy Geithner at that time, as well.

So I sort of think he screwed up just letting all of these people with these tax problems continue on.

BLITZER: Because he's got such huge problems right now getting this economic stimulus package through Congress. This is a headache he certainly doesn't need, for people to be asking him questions about the vetting process.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: And it's an early embarrassment. And you will watch these things, Wolf, because presidents are judged by what they do out of the box. Just yesterday, he said, "Absolutely," when asked if he stood by Tom Daschle. Today he says he screwed up.

What is unclear is what exactly does he think he screwed up -- in the sense that, as Brian noted, they knew about this for some time -- at least the last two months. They've known about these tax problems. They had the Geithner nomination. They had the woman this morning who pulled out.

And at what point did they think they could get this through?

And did they underestimated the political firestorm. They thought they were so strong that people would not stand up and fight them. But this is central to his whole campaign promise -- to change the way Washington works.

BLITZER: You know, because I...

BORGER: You know...

BLITZER: This is the fourth problem that's came up in terms of the vetting process. We've got a picture of Bill Richardson, the governor of New Mexico. He didn't even go forward because he -- he pulled his nomination very quickly. Tom Daschle. We were also talking about Nancy Killefer, who was going to be the chief performance officer for the governor -- for the federal government, a new job. She pulled her name off the list today because of some tax issues. And Timothy Geithner, who was confirmed, albeit after some embarrassment.

BORGER: You know, early on in a presidency, as John was saying, perception is really what matters. That's why, out of the box, President Obama proposed all of these executive orders -- number one of which is changing the ethics lobbying laws in Washington.

So this is really a perception problem for them and also shows, I think, that the White House staff is a little green and may have made a political calculation that just didn't fly.

BLITZER: Let's talk about the Commerce secretary nominee, the -- I guess now former Senator, Judd Gregg of -- he's still a senator until he's confirmed.

KING: Right.

DEBOSE: Right.

BLITZER: If he's not confirmed, he'll go back to the Senate.

Here's a little exchange that the president and the senator had today. And the issue is being a fiscal conservative, as the senator is.


B. 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.

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


BLITZER: All right, it was a surprise that he went to Judd Gregg, at least until a few days ago, when his name surfaced.

DEBOSE: Yes, I think it was a surprise that he went to Judd Gregg. But I think this is an excellent choice. Judd Gregg -- I covered the federal budget in 2005 and 2006 and 2007. Ever since then -- and during that time -- every day you get an e-mail from Judd Gregg's office...

BORGER: Right.

DEBOSE: ...talking about fiscal conservatism, talking about entitlement spending and just the massive numbers of hearings he's had over -- over that period, including when he was the budget -- the Senate Budget Committee chairman.

BLITZER: Does it make some of the liberal Democrats, though, a bit uneasy -- John.

KING: Judd Gregg has very good relations in the Senate. Outside, in the special interest group world of liberal Democrats, yes. They will be going back and saying whoa about some of these positions.

But he could be, to Obama -- President Obama -- what Senator Daschle was supposed to be in health care -- the inside guy who cuts the hard deals.

When they get the Social Security, when they get to Medicare and Medicaid and they're asking politicians in both parties to make very tough choices, if Judd Gregg is up there with the Republicans saying, look, you would have done this for President Bush, you need to do it for President Obama, it will help him sell bipartisanship.

BORGER: He's a reality check, really...


BORGER: many ways, for the Republican Party.

And Obama will be able to go to him and say OK, what are the Republicans going to say about this?

What's the reaction going to be?


BLITZER: And to his credit...


BLITZER: And to his credit, he said he would have a bipartisan cabinet, he would have Republicans. He has Ray LaHood, the Transportation secretary; Robert Gates, the Defense secretary; and now Judd Gregg will be the Commerce...

DEBOSE: And there's no one...

BLITZER: ...secretary.

DEBOSE: There's no one better on entitlement spending. And knowing him and having an understanding of how to reform entitlement spending than Judd Gregg.

BLITZER: And he's -- and, you know, he managed to do it and still have a Republican senator in -- in New Hampshire.


KING: Here cut that deal with his Democratic governor, Bonnie Newman. His former chief of staff will get that Senate seat. But that will be a spectacular race two years from now. New Hampshire has been trending Democratic. It's known as a quirky, independent state.

I grew up next door. Wolf, you've been there many times in presidential campaigns. That will be one of the many very fun and very competitive races in the midterms.

BLITZER: And the Democrats are probably really happy, because if it's an open seat, as it will be in 2010...


BLITZER: opposed to Judd Gregg running for reelection, they think they have a much better chance...

BORGER: Sure...

BLITZER: ...of capturing New Hampshire.

BORGER: They might have been happier if a Democratic governor had appointed a Democrat right now.


BORGER: But Barack Obama wasn't going to get Judd Gregg that way. So it has to stay Republican for a while.

BLITZER: Any other problems that any of you see down the road in terms of some of those cabinet nominees not yet -- having some problems because, you know...

BORGER: Don't trust us. We thought Daschle was going to get confirmed easily so...

KING: Right.

DEBOSE: And I thought, actually, that Lynn would actually not get confirmed.

BLITZER: The deputy secretary of Defense nominee.

DEBOSE: And it looks like he's...


DEBOSE: And it looks like he's on his way to getting confirmed.

BLITZER: Because he was a lobbyist and...

DEBOSE: That's correct.

BLITZER: ...the president said we don't want lobbyists. And now he's got a major lobbyist from a defense industry who's nominated to become the deputy secretary of Defense.

KING: This has emboldened the Republicans. Let's assume there are no other problems out there for the personnel. But there are several people in big jobs who have yet to have their hearings.

This has emboldened the Republicans that if they see something like this, they can stand up and challenge this president. Because it was his promise. Barack Obama set the bar up here. He's the one who said I will be the most ethical administration ever. He put the bar up there. And Republicans feel emboldened by the Daschle situation, so that if there is another one down the road, they will swing. BLITZER: We'll see what happens with the economic stimulus plan in the Senate.

BORGER: Right.

BLITZER: Because that's going to come up for a vote in the coming days.

Guys, thanks very much.

Well, let's check in with Lou to see what's coming up right at the top of the hour.

What are you working on -- Lou?


Tonight, we'll have much more on the abrupt withdrawal of two nominees by President Obama -- Tom Daschle at Health and Human Services and President Obama's admission that he screwed up today in the way he handled the controversy. Daschle is simply the latest in a series of ethically challenged nominees.

Whatever happened to change you can believe in?

We'll be talking about that and reporting on that.

Also tonight, new outrage over greed and excess in the nation's banks -- this time at Wells Fargo, a bank that has received $25 billion of taxpayer bailout. We'll tell you how Wells Fargo is spending a lot of that money on a series of lavish things while ignoring the needs of some desperate homeowners.

Also, corporate America steps up its fear-mongering, trying to block a "buy American" provision in the so-called economic stimulus package. The U.S. Chamber of Commerce opposing "made in the U.S." Provisions. Two Congressmen who are refusing to be intimidated by corporate elites will be here.

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

BLITZER: All right, Lou.

See you in a few moments.

Thank you.

The answer to a mystery slowly revealed -- what kind of first lady will Michelle Obama be and what we've learned so far. Plus, her second public appearance -- and this one a surprise.

And Jeanne Moos has a Moost Unusual look at Michael Phelps.

(COMMERCIAL BREAK) BLITZER: Some children at a charter school here in Washington, D.C. got the surprise of their young lives today when the president and the first lady paid a surprise visit.

This is how it started.


B. OBAMA: Hello, everybody.


B. OBAMA: All right. Thank you for having us here.

Does everybody know who this is?


B. OBAMA: Who is this?



UNIDENTIFIED CHILDREN: Our new first lady.

B. OBAMA: First lady?


B. OBAMA: All right.




BLITZER: It's only the second time we've seen the first lady speaking publicly outside the White House. And we're slowly getting an idea of what kind of first lady she will be.

Here's CNN's Erica Hill.


ERICA HILL, CNN CORRESPONDENT (voice-over): Michelle Obama is slowly coming out as first lady. At one of her first public speaking events since the inauguration, she made it clear -- this meet and greet at the Department of Education is just the beginning.

M. OBAMA: I'm going to spend the next several weeks or months, however long it takes, going from agency to agency just to say hello -- to learn, to listen, to take information back where possible. But, truthfully, my task here is to say thank you and roll up your sleeves, because we have a lot of work to do.

HILL: But the big question still unanswered two weeks in is how that work involves Mrs. Obama.


M. OBAMA: What can I do that is useful in -- with this role?



M. OBAMA: I spent a lot of time focusing on working -- the challenges of work/family balance with women and families.

HILL: Her office tells CNN working parents will be one of three main projects for the first lady, along with helping military families and boosting volunteerism -- though they're not offering any specifics.

Fitting, perhaps, for the woman who has often reminded the company family is her top priority.

M. OBAMA: Io joke that my first job is going to be mother-in- chief.

HILL: Originally, the president's wife was more of as hostess -- overseeing state dinners and White House tours.

M. OBAMA: Walk around, touch some stuff.


M. OBAMA: Just don't break anything.

HILL: But that role has evolved and the public has come to expect more.

ROBERT THOMPSON, SYRACUSE UNIVERSITY: Being first lady in the United States of America in the 21st century has got to be one of the most frustrating jobs to hold, because, for one thing, it isn't even a job. For another thing, it has no job description. But for a third thing, you are constantly being evaluated as to how well you're doing.

HILL: Hillary Clinton's efforts to shape health care policy at her office in the West Wing didn't win her glowing reviews.

For her part, Mrs. Obama has said she is taking some cues from Laura Bush. But there's no doubt she'll be walking a fine line.

THOMPSON: She can very, very credibly now approach a number of issues -- anything having to do with family, in many ways; women, with regards to work and family. She is a living embodiment of many of the issues that have still yet to be worked out.

HILL: Experience she'll need to handle all of those expectations. Erica Hill, CNN, New York.


BLITZER: He's spent much of his life in the spotlight. This time, Michael Phelps got caught on camera doing something he probably wishes he hadn't done. But some are actually praising him for it.

CNN's Jeanne Moos thinks that's Moost Unusual.

And a girl in a children's hospital tries on Miss America's crown -- just one of our hour's Hot Shots -- pictures worth a thousand words.


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

In Pennsylvania, the Pittsburgh Steelers cheer with the crowd at the parade celebrating their sixth Super Bowl championship.


In Florida, a girl tries on Miss America's crown during a visit to a children's hospital.

In England, a man leaves a supermarket in the middle of a snowstorm -- London's largest in 18 years.

And in Israel, look at this -- two lion cubs get ready for vaccination at the zoo.

This hour's Hot Shots -- pictures worth a thousand words.

A seemingly superhuman sports figure caught on camera doing something illegal. And now not only is swimmer Michael Phelps drawing criticism, but he's also drawing praise.

CNN's Jeanne Moss has a Moost Unusual look at the photo fallout.


JEANNE MOOS, CNN CORRESPONDENT (voice-over): People are always taking pictures of Michael Phelps. But he really caused a splash being photographed smoking a bong in the time it takes to exhale, Phelps was being parodied toking during a medal ceremony.


MOOS: And the iconic Wheaties box was transformed into a Weedies t-shirt. There was late night applause at the mere mention of the deed.


CONAN O'BRIEN, HOST: a party taking a huge hit from a bong.



MOOS (on camera): The bong incident seems to have brought the potheads out of the woodwork -- particularly on the Web. People seem to be high on Phelps.


UNIDENTIFIED MALE: Was he still a hero?

Yes. He's even more of a hero.

UNIDENTIFIED MALE: So I found out that Michael Phelps smokes pot, which is awesome.

UNIDENTIFIED MALE: It's even cooler that he can blaze and then do all that.

UNIDENTIFIED MALE: It's just cool to know that Superman can get high.


MOOS: Yes, well, it's cool to know Superman may also get charged for pot possession by the county sheriff where the photo was taken.


SHERIFF LEON LOTT, RICHLAND COUNTY, SOUTH CAROLINA: You know, I just don't think you can have something like this done and publicize and say I'm sorry and then we're supposed to forget about it. He broke the law.


MOOS: Or, as one YouTuber put it...


UNIDENTIFIED FEMALE: You have to pay the piper.


MOOS: Or at least pay for the pipe. On Facebook, fans established an "I don't care that Michael Phelps smoked a bong" page. Blogger Andrew Sullivan linked to "The Stoned Olympics" by comedian Eddie Lizard.


EDDIE LIZARD, COMEDIAN: They start off in Athens, where a joint is lit.


LIZARD: And then they run the three feet to the next athlete.


MOOS: Meanwhile, on "The View," Whoopi Goldberg made a confession.


WHOOPI GOLDBERG, CO-HOST: You know, I have smoked weed. I'm sorry.


GOLDBERG: I'm sorry, I have smoked -- yes.




MOOS: And Ashton Kutcher was Twittering that though he hadn't smoked in quite some time: "I bet Phelps could smoke a whole bowl in one breath. Swimmer's lungs."

Some on the Web were...


MOOS: That Phelps apologized.


UNIDENTIFIED MALE: All sorts of people are incredibly successful and have been known to smoke dope. Deal with it.


MOOS: In Japan, they're dealing with it all right -- a sumo wrestler was arrested for pot possession. He's the little guy slapping the bigger one.


UNIDENTIFIED MALE: Wow! wow! wow! wow!


MOOS: The pot arrest led to the sumo's dismissal.

Don't try slapping around this guy.


UNIDENTIFIED FEMALE: Leave Michael Phelps alone.

UNIDENTIFIED MALE: Leave him alone.

UNIDENTIFIED MALE: Leave Michael Phelps alone.


MOOS: Leave him alone with his air freshener.


MOOS: Jeanne Moos, CNN, New York.


BLITZER: Leave it to Jeanne Moos.

As I say, you can always see her right here in THE SITUATION ROOM weekdays. We're on from 4:00 to 7:00 p.m. Eastern.

And remember, Saturdays -- a sixth day of THE SITUATION ROOM, 6:00 p.m. Eastern every Saturday, only here on CNN.

We'd also like to you check out our political podcast. To get the best political team to go, you can subscribe at if you want that.

Tomorrow here in THE SITUATION ROOM, the mayor of Los Angeles, Antonio Villaraigosa, will be among my guests. He's coming to town to talk about the economic stimulus package.

Until then, thanks very much for joining us.

I'm Wolf Blitzer in THE SITUATION ROOM.

Up next, "LOU DOBBS TONIGHT" -- Lou.