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Obama: No More Blank Checks for Government Contractors; Pet Projects Survive; Foreclosure Prevention

Aired March 4, 2009 - 15:59   ET


WOLF BLITZER, CNN ANCHOR: Happening now, President Obama declares no more blank checks for government contractors. He's promising to save taxpayers tens of billions of dollars, and he hopes to get something out of it as well.

Plus, a new lifeline for struggling homeowners is available right now. Stand by to find out if you're eligible for help and why some Americans are suspicious.

And Rush Limbaugh challenges President Obama to a debate. I'll ask James Carville about the conservative radio talk show host's verbal war with the Democrats.

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

Another big push today by President Obama to be seen as the commander in chief of fiscal responsibility. He's targeting the way federal contracts are awarded in hopes of slashing wasteful spending. Who can forget some infamous past examples like the Pentagon's $640 toilet seat?

Let's go to our White House Correspondent Dan Lothian. He's got the latest for us on this story -- Dan.


Well, you know, the president says that too many dollars are being wasted on government contracts. He pointed to a government report last year that showed almost $300 billion that was spent on military defense projects. Today, the president promised an overhaul for a process that he says is unacceptable.


LOTHIAN (voice-over): Trying to boost America's confidence in Washington, President Obama vows to slash government waste and save taxpayers up to $40 billion each year.

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES: We are spending money on things that we don't need, and we are paying more than we need to pay. And that's completely unacceptable.

LOTHIAN: The president pointed to federal contract ins Iraq, buildings that weren't completed, services never performed, and even companies that "skimmed off the top." Mr. Obama also took a swipe at the Bush years, saying that government contracts had doubled over the last eight year to more than a half-trillion dollars, often with no accountability.

OBAMA: It's time for this waste and inefficiency to end.

LOTHIAN: Pushing for new guidelines, the president is calling for an end to outsourcing services that could be performed in house, no more unnecessary no-bid contracts, and he wants more oversight to boost accountability.

The White House trotted out the heads of Homeland Security and Agriculture to show how they're already on the hunt for waste.

TOM VILSACK, AGRICULTURE SECRETARY: We have identified a number, the most recent of which was a $400,000 consulting contract which career employees felt was inappropriate. That contract has been canceled.

LOTHIAN: But some watchdog groups, while applauding this effort, say other administrations have tried this and failed when they ran into government bureaucracy.

TOM SCHATZ, CITIZENS AGAINST GOVERNMENT WASTE: The systems that are spread throughout various agencies make it very difficult even for well-intentioned bureaucrats to move ahead quickly and get things done efficiently.

LOTHIAN: And with all this talk about cutting government waste, some critics are asking why the administration isn't fighting to clean up the omnibus spending bill now before Congress. It's loaded with $8 billion in earmarks.

Spokesman Robert Gibbs says the president is concerned, but he called that last year's business.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: The president believes that we can work with Congress to reduce wasteful spending in the future.


LOTHIAN: While it's technically last year's business, the president could still intervene, but the White House is signaling that he won't -- Wolf.

BLITZER: But he's promising down the road that he will. Not this time, but the next time. We'll see what happens, Dan. Thanks very much.

And as Dan just mentioned, leading voices of reform are livid about the spending bill making its way through Congress right now. It's still packed with lots of pet projects. The Senate voted overwhelmingly yesterday to keep thousands of add-ons or earmarks in a $410 billion spending bill.


SEN. RUSS FEINGOLD (D), WISCONSIN: The amount of cash that I'm hearing in support of earmarks is something I would think would be reserved for getting Osama bin Laden or the genocide in Darfur. There's almost a teary-eyed defense, which is a further sign to me that there's something rotten here, that it's out of control, and that they're feeling the pressure.

SEN. JOHN MCCAIN (R), ARIZONA: We had seven Republicans vote against trying to eliminate in a move back to last year's spending levels. This is a bipartisan disease.


BLITZER: All right. Let's bring in our Senior Political Analyst Gloria Borger.

McCain, Feingold, they're back together after sort of an absence for at least a few years. But now they're back.

GLORIA BORGER, CNN SR. POLITICAL ANALYST: They are, particularly John McCain is back.

I mean, look, he's in his element when you're talking about fiscal discipline, pork barrel spending, earmarks. You see that he's opposed to the president on this budget bill that Dan just spoke about. He's been opposed to the stimulus package. He led the fight against the stimulus package. He's opposed to the new budget because he says it's got too much spending it.

But on the other hand, he's with the president on Iraq. He's with him on Afghanistan. He believes he's got credibility on national security and fiscal policy and he's going to use it. So he's having a lot of fun out there.

BLITZER: And he was there with the president today over at the White House when the president declared war on these contractors'...

BORGER: Waste, fraud and abuse.

BLITZER: ... procurement. And he and Carl Levin, the liberal Democratic chairman of the Armed Services Committee -- McCain's the ranking Republican, the minority member -- they're working together on this as well.

BORGER: Right. I mean, you know, he's opposed to waste, fraud and abuse, and he believes that the American public is with him on that. And he believes that he's the de facto leader of the Republican Party when it comes to those issues. You know, there's been a lot of talk about who's the leader of the Republican Party these days, but on these issues John McCain thinks he's the leader.

BLITZER: So he sees himself, despite losing as the presidential candidate, he still sees himself reemerged and, in effect, as the leader of the Republicans? Is that what you're...


BORGER: Well, I think he believes that he's got the most credibility on these issues. When it comes to these issues, the American public believes he's got credibility, and that he's not going to shy away from leading both on foreign policy and on fiscal policy from the floor of the Senate.

BLITZER: It's the new old McCain coming back.

BORGER: He's back.

BLITZER: McCain/Feingold, McCain/Levin, it will be McCain/Kennedy on comprehensive immigration reform. We'll see what...

BORGER: And it could be Obama working with John McCain on something like climate change.

BLITZER: Or Iraq and Afghanistan.

BORGER: Where he could oppose some of his own Republicans on issues like climate, immigration.

BLITZER: A whole new world. Or a whole old world.

BORGER: Back to the...

BLITZER: All right. Thanks very much.

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

JACK CAFFERTY, CNN ANCHOR: One big happy family.

BLITZER: Yes. They're going to sing "Kumbaya."


As the stock market continues to drop, although it didn't today, President Obama is running out of people to blame, according to an editorial in this morning's "Wall Street Journal." Before the president took office in early January, the stock market was above 9,000, its highest level since last fall. But in the last two months, it has dropped 25 percent to its lowest levels since 1997. It did close today with a gain of 150 points.

The Journal suggests Mr. Obama's policies are slowing, if not stopping, what would be a normal economic recovery. Quoting here from the editorial, "From punishing business to squandering scarce national public resources, team Obama's creating more uncertainty and less confidence."

The editorial takes issue with the way much of the administration's stimulus spending went to social programs rather than public works, how the Treasury has been managing or not managing the bank bailout plan, and how tax cuts were devoted to income maintenance rather than giving incentives to work or invest. The Journal also points out that the market took a dive after the president announced his budget. The paper called the budget a declaration of hostility towards capitalists across the economy. "The Wall Street Journal" editorial suggesting Democrats benefit from blaming all bad economic news on President Bush. There's a new poll out that shows that Americans kind of go along with that thinking.

The NBC News/"Wall Street Journal" poll shows 84 percent of those surveyed say this is an economy Mr. Obama inherited, and two-thirds of those people think he has at least a full year before he becomes responsible for the economic situation. By the way, the poll also shows the president's favorability rating at an all-time high and the Republicans' favorability rating at an all-time low.

Here's the question: Should President Obama be blamed for the continuing decline of the stock market?

Go to and post a comment on my blog -- Wolf.

BLITZER: Hey, Jack, I want to shift subjects right now because I want to alert our viewers out there, and especially your fans, there's a new book coming out within the next few days, "Now or Never: Getting Down to the Business of Saving Our American Dream," by our own Jack Cafferty.

Tell us -- give us a little headline. What's this book about?

CAFFERTY: Well, if you remember back to "It's Getting Ugly Out There," we talked about the idea that we were approaching some very hard times in this country if things didn't change. And it seems to me like those hard times are here. And I think the campaign and election last November bear out the idea that the country is aware of just how much at risk the American dream is these days.

And our last, best hope may be this young fellow from Illinois, this Barack Obama, who comes with an education and the determination and some leadership and oratory skills that we haven't seen in the White House maybe since Ronald Reagan. He's the guy we're pinning it all on, and if he can't get it done, I hesitate to say this, we could be headed into a place we have never been before in our 200-plus-year history. I hope it doesn't happen.

We look at the campaign, Obama's remarkable rise to power. There's some stuff in there about my dysfunctional family life, which you may or may not be able to relate to.

You, Wolf, will not be able to relate to it, but perhaps other people will.

So, you know, I think it's a good read. I hope the public agrees. You can get it on Amazon. I think it officially comes out on March the 23rd. I'll be doing a little thing on Larry King's show. I'll be on "The Daily Show." And I'll be bouncing around doing some publicity for it.

BLITZER: And most important, you'll be in THE SITUATION ROOM, of course. Look, "It's Getting Ugly Out There" became a "New York Times" bestseller. "Now or Never" will be a "New York Times" bestseller as well, Jack.

Congratulations. We're looking forward to reading it.

CAFFERTY: Thank you very much, Wolf. I hope it does well. And thanks for your support.

BLITZER: All right. We'll see you in a few moments.

Jack Cafferty has got a hot new book. Get excited.

If you're at risk of losing your home in a foreclosure, this could be a big day for you. Stand by for details on new help that's now available.

Plus, Rush Limbaugh has said he wants President Obama to fail. Now he wants the commander in chief to do something else -- debate him. James Carville, he's standing by live this hour. We'll talk about that in our "Strategy Session."

And one of the most powerful White House insiders you've never heard of. Meet a health care reformer whose political career was launched by cupcakes.

Stick around. You're in THE SITUATION ROOM.


BLITZER: The government's $75 billion foreclosure prevention program is open for business. Here's what lenders might do and how you might benefit.

Working with the government, lenders could modify loans for up to four million struggling borrowers. You could see an interest rate as low at 2 percent to reduce your mortgage payment to no more than 31 percent of your monthly income.

If a rate reduction doesn't do that, your loan could actually be extended up to 40 years. Lenders may also refinance loans for up to five million homeowners. That would help homeowners with little or no equity.

Lots of opportunities for help right now.

Meanwhile, there's lots of reaction to what this plan is all about. Our Senior Political Analyst Bill Schneider is standing by.

Bill, what's the public's view of the Obama administration's new mortgage assistance plan?


(BEGIN VIDEOTAPE) SCHNEIDER (voice-over): The Obama administration has announced a $75 billion mortgage assistance plan for struggling homeowners.

TIMOTHY GEITHNER, TREASURY SECRETARY: We took the important step of releasing the details of our loan modification plan and Treasury guidelines for servicers.

SCHNEIDER: The public's initial response? Supportive.

But the program gets much more support from renters, who are more likely to be lower income and Democrats, than it does from homeowners, who support it by a slight majority. Why? Listen to the critics.

REP. JOHN BOEHNER (R), MINORITY LEADER: They even want to pay your irresponsible neighbors' mortgage off for them.

SCHNEIDER: Sixty-four percent of Americans feel the plan is not fair to mortgage holders who make payments on time. The government says the plan will help not just homeowners who can't make their mortgage payments, but also homeowners who are making their payments, but seeing their home values collapse. It will help them refinance.

What about homeowners who are not in trouble? What will they get for their tax money?

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: By preventing foreclosures that they can, that that will help everybody and help everyone's home values, and that's good for everybody, including the people who are complaining that they want their own bailout.

SCHNEIDER: The Treasury Department says, "The average homeowner could see his or her home values stabilize against declines in price by as much $6,000. Does the public buy that? Yes, by a small majority. The prevailing view among 39 percent is that the plan is not fair, but they still support it because they believe it's necessary.


SCHNEIDER: So two-thirds of Americans say the plan is not fair, but two-thirds of Americans still support it. The public is willing to go along with the plan, but they reserve the right to complain -- Wolf.

BLITZER: They want to see how it plays out.

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

Meanwhile, over roughly the past year and a half, as the Dow Jones stock market index has fallen, your level of confidence in the overall state of the economy has also been going down. And that's prompted many of you to spend less.

How might that change?

Let's go to CNN's Mary Snow. She's looking at this story for us in New York.

Mary, what did you find out

MARY SNOW, CNN CORRESPONDENT: You know, Wolf, we went to Wall Street. And as one trader put it, the lack of trust in the economy is almost similar to the loss of trust in a marriage. It takes a long time to repair. And the uncertainty about the future is being reflected in 12-year-low stock levels.


SNOW (voice-over): Even on a day when stocks rebounded following big losses, few on Wall Street have confidence the gains will last.

(on camera): How bad is the fear factor?

TED WEISBERG, SEAPORT SECURITIES: I think it's pretty bad. I mean, certainly, the lack of confidence is pervasive, and it's a big -- clearly a big, big problem for the stock market.

SNOW (voice-over): As Wall Street sends anxious signals about the future, in Washington there are efforts under way to address those fears. Even British Prime Minister Gordon Brown spoke of the American psyche in hard times while addressing Congress.

GORDON BROWN, BRITISH PRIME MINISTER: But what mattered more was this endearing truth that you, the American people, at your core, were, as you remain, every bit as optimistic as your Roosevelts, your Reagans and your Obamas.

SNOW: Tuesday, President Obama addressed the market hitting 12- year lows.

OBAMA: What you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it.

SNOW: While the administration has been offering a steady stream of boosts to the economy, including today's $75 billion plan to help homeowners, it's done little to soothe the anxiety. Those who watch the market say on top of the bad economic news, the fear compounds the problem.

MARIA FIORINI RAMIREZ, ECONOMIST: Well, I think that we are caught in quite a cycle. I think it's sort of, you know, spiraling down the last two years.

SNOW: To break that cycle, traders here say they're looking to Washington.

ALAN VALDES, HILLIARD LYONS: For now, we have to get more directional finding, more of a laser idea of where we're going from the administration, from Tim Geithner, from Larry Summers, which we haven't gotten yet.

(END VIDEOTAPE) SNOW: Now, some of those traders we talked to say there's really no telling, nobody knows when this cycle of fear will break. They say it's fundamental that it does. And what they also say is that what is needed right now is a fundamental change in the way things are done -- Wolf.

BLITZER: Mary Snow, thanks very much.

It's the first project to start with money from the new economic stimulus package, but is it a waste? Critics are calling it the new bridge to nowhere.

And an 8-year-old boy is at the center of an international custody battle. It's so high profile, Secretary of State Hillary Clinton is using her tremendous clout and influence to try to resolve it.

We'll tell you the latest, right here on THE SITUATION ROOM.



BLITZER: Critics of the president's economic stimulus package are pointing to a bridge project in Missouri and complaining it's out in nowhere. We're investigating.

Plus, Democrats fighting Democrats over pet projects in a spending bill now before Congress. Will President Obama pay a price? I'll talk about that with a leading Democratic reformer, Senator Russ Feingold. He's standing by live.


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

Happening now, once secret memos from the Bush administration now out in the open. Wait until you hear what's in them and how they pit national security against civil liberties. Stand by.

A major bank that's taken bailout money now in focus for firing a high-flying power broker. You're going to hear the allegations and the huge mess it's causing.

And going, going, but not gone so fast. There's an auction for some of Gandhi's personal possessions, but some in India are simply outraged.

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

All that coming up, but let's go right to Capitol Hill right now. Senator Russ Feingold, Democrat of Wisconsin, is standing by. He's got a lot on his mind.

Senator, thanks very much for coming in.

FEINGOLD: Good to be on the show, Wolf.

BLITZER: We saw you and Senator McCain together, Feingold/McCain, McCain/Feingold, reunited again. This time, you're talking about a line item veto that the president would be able to use to eliminate sort of the pork, the earmarks, as they're called.

What's going on right now? Because the U.S. Supreme Court ruled that line item veto unconstitutional years ago.

FEINGOLD: And don't forget Congressman Paul Ryan also of Janesville, Wisconsin, like me, he joined with me on this. The three of us believe that we can pass a form of line item veto that will not have the problems that the Supreme Court identified. And the reason is, is that the bill we put forward would say when the president identifies things he wants to cut from a bill of earmarks, both the House and the Senate would have to pass a bill saying yes, we want to do that, and then the president would have to sign it.

So it would actually be passed by Congress, signed by the president, and that gets around, I think, the problem that the Supreme Court had with the earlier line item veto that John McCain led on and that I supported. So that's something that Congressman Ryan and McCain and I have worked together to resolve the issue.

BLITZER: And this would eliminate -- give the president an opportunity to veto parts of a spending bill without necessarily vetoing the whole thing.

Is President Obama on board with you?

FEINGOLD: We had two excellent indications from the president's press secretary on this.

First of all, he said he wanted to give something like this a test drive when he was asked about it the other day, Mr. Gibbs did. And today, I understand he said if this thing comes to his desk, he's going to sign it. I'd like to see the president openly advocate for it, because he needs the ability to be able to put some pressure on members of Congress to stop putting these huge numbers of earmarks in these bills.

There's 8,500 or 9,000 earmarks in this omnibus bill alone, some $7 billion worth. And I think the president would be very grateful to have this power, and I'm hoping for his help on this issue.

BLITZER: As you know, a lot of members of Congress, senators and members of the House, they love this kind of earmark spending because it directs money to specific projects that they strongly support. Steny Hoyer, the number two Democrat in the House, told "The Washington Times," "I don't think the White House has the ability to tell us what to do. I hope all of you got that down."

Why shouldn't an equal branch of government, like the Congress, be able to direct spending, as opposed to some anonymous bureaucrat in the executive branch of government? FEINGOLD: Well, the Congress can direct spending. They just have to go through the appropriate legislative process, which is to authorize spending, to appropriate it, to not have something that is just thrown in at the last minute.

That is the monkey business we have to get rid of. Congress can do whatever it wants, in terms of approving spending. But it should authorize it first. And that is the reason why you have earmark reform, because earmarks get around the process where Congress actually does its job of truly reviewing a piece of legislation.

And, by the way, this bill that we're proposing here is completely consistent with everything the president said as a candidate and now. He was one of the senators that helped us do earmark reform. He was one of the key guys who said, look, we should identify these projects, which we did last year. In other words, they're tied to a person's name now.

BLITZER: But you know -- you know...

FEINGOLD: And he was already very successful in making sure the stimulus package had no earmarks on it as it's defined. So, it's very consistent with the president's philosophy to continue down this road.

BLITZER: But he is going to sign this spending bill into law. And he says, maybe down the road, they will be able to change the rules of the game. You want him to veto this $400 billion bill, because of all these earmarks; is that right?

FEINGOLD: First of all, I don't think we should pass it this way.

My second choice would be to have the president veto it and say clean it up and do it over. If that doesn't happen, I think what he should do -- and I have given this -- with all respect, this advice -- he should lay down a policy, and say, OK, we had to do this. This was stuff from last year. But we -- from now on, don't send me appropriations bills with earmarks, or I will send it back to you.

I would love to see him say that. And he could really turn this whole issue around that he's been really a great leader on, both as a candidate. And now, as president, he's already caused the largest bill in American history to be earmark-free. That was his leadership. And all I'm asking is that he continues it.

BLITZER: As you know, the president, either late this year or early next year, is going to start drawing down troop levels in Iraq, going down to between 35,000 and 50,000 troops at the end of August of next year.

Is that what you brought into when you were supporting the president as far as Iraq is concerned?

FEINGOLD: Well, it's a real big change, obviously, from the previous administration. This president has specifically endorsed a set timetable, exactly what I was the first senator to propose years ago. It's not the fastest timetable you can imagine, but it certainly is a timetable.

I do not agree, however, necessarily with keeping 50,000 troops there. I think it's just too many. I think less would be enough for the real purposes that we need, which is force protection and counterterrorism. I don't buy into this idea that we should keep 50,000 Americans over there training Iraqi troops.

I think that's unfortunate. But, overall, this is a major change in policy that the president said he would do. And I'm pleased that much of it is positive.

BLITZER: As far as Afghanistan is concerned, they're moving an additional 17,000 troops into Afghanistan, even before they have had a formal review of the strategy. You want the strategy review first and then make a decision about troop levels, but they have gone in the opposite direction.

FEINGOLD: I can't say it any better. I think it's unfortunate, given the fact that this review is under way, which will be undertaken by some distinguished people that the president have brought together, that we have got Mr. Holbrooke in the region looking around. General Petraeus is doing a review with some 300 people of his view on this.

These viewpoints should be brought together and brought to the president before we send in 17,000 more troops. I have asked many questions about this of many experts, former generals, former admirals. And all of them give me a different answer as to what the purpose of these troops are.

And nobody's really considering adequately the problem that this does enhance the feeling in Afghanistan that we may be occupying that country for too long. There's not a clear analysis of what happens in terms of pushing the Taliban into Pakistan, which may actually cause things to get worse in a place that's even more dangerous. So, it's fraught with problems. And I think the review should go before -- before we send all the troops over there.

BLITZER: What about this move by some of your colleagues in the Senate and the House to have what they call a truth and reconciliation commission, if you will, to review controversial decisions by the Bush administration, especially the Justice Department, on enhanced interrogation techniques, rendition, stuff like that?

The president was sort of lukewarm about all of this. Listen to what he said just recently.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: So, I will take a look at Senator Leahy's proposal. But my general orientation is to say, let's get it right moving forward.

(END VIDEO CLIP) BLITZER: I guess he wants to look forward, rather than look back.

Are you among those who want to look back?

FEINGOLD: Oh, we do have to principally look ahead, but I think Chairman Leahy has figured out a great idea here.

Instead of getting bogged down in all kinds of hearings that will last forever, what he says is, let's have a truth commission that can tell the story. And I think it's a great idea. I think it's exactly the kind of middle road at this point that allows for potential prosecutions, if necessary, does not bog us down and get us away from our main task, but does provide some accountability.

And I had the pleasure of testifying on behalf of Senator Leahy's truth commission today. I think it's an excellent idea.

BLITZER: We will leave it on that note.

Senator, thanks very much for coming in.

FEINGOLD: Thanks, Wolf.

BLITZER: Senator Russ Feingold of Wisconsin.

Get ready for a shocker: A train crashes into a truck, and it's all caught on videotape. Wait until you see how it turns out.

And find out if Switzerland's biggest bank is spilling the beans on American clients, hiding their assets, allegedly, from the U.S. government.

And from congressman to ice cream scooper -- we're catching up with Gary Condit, whose life was turned upside down when an intern named Chandra Levy was killed.


BLITZER: All right, let's meet another new face, a new power player in the White House, this one juggling the very health of the nation with her own wedding plans.

Our national political correspondent, Jessica Yellin, is here with more on this insider.

What's going on?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Wolf, tomorrow, the president holds a huge national televised summit about health care reform. It's supposed to start the national debate. And the person he turned to run it all is Melody Barnes. She's in charge of domestic policy in the White House. And that's not all she has on her plate.

(BEGIN VIDEOTAPE) BLITZER (voice-over): Melody Barnes may be one of the most powerful inside players you haven't heard of. Her job this week? Get the country so excited about health care reform, Congress is forced to act.

MELODY BARNES, WHITE HOUSE DOMESTIC POLICY ADVISER: This has to happen. If we are going to fix our economic circumstances, health care reform has to be addressed.

YELLIN: It's a tall order. Anti-reform forces are gathering for a fight. But Barnes, the White House domestic policy director, is adamant.

BARNES: Our top priority is to get it done and to make sure that it happens this year.

YELLIN: A lot of that pressure will rest on her shoulders, which means lots of West Wing meetings plotting strategy.

BARNES: You notice it goes through Saturday and Sunday.

YELLIN: Barnes starts her day doing what she says the White House chief of staff does: yoga.

BARNES: Yoga is very, very important, keeps me centered. I know yoga is also something that Rahm practices.

YELLIN: She's not your average policy wonk. She jumped into politics in an unusual way.

BARNES: Selling cupcakes when I was 8 for George McGovern.

YELLIN: "Washingtonian" magazine named one of the city's best dressed. And, last year, she was the voice of a liberal satellite radio show.


BARNES: Join me to discuss those issues and more on "The Progressive Beat."


YELLIN: Barnes has also been a senior aide to two liberal powerhouses, Senator Ted Kennedy and Obama transition chief John Podesta.

JOHN PODESTA, CO-CHAIRMAN, OBAMA TRANSITION TEAM: I think you will see her out up on Capitol Hill, speaking to the public, traveling the country.

YELLIN: As an African-American woman working in a White House where male aides hold a great deal of power, so far, she says she and her female colleagues have not had a problem being heard.

BARNES: But the president sends the signal. YELLIN: She has one other challenge to navigate. In the middle of it all, she's planning a June wedding. So, when does she find the time?

BARNES: Very, very late at night.



YELLIN: So, how is Barnes' job different from what the health care czar or the head of HHS will do?

Well, unlike them, she doesn't just work on health care. She also coordinates policy throughout the administration on issues like education and immigration. Wolf, it's up to her to make sure that the entire administration is consistent in its position on all these issues.

BLITZER: Here's what she needs the most. You know what she needs the most? A wedding planner.


BLITZER: She's a very busy lady.


YELLIN: I will tell her.


BLITZER: I have some recommendations for her.

All right, thanks very much.

Democrats would gladly like more bashing between Republicans and Rush Limbaugh, but one Republican leader says it's all a political plot. I will ask James Carville about the conservative radio talk show host's verbal war with Democrats.

And a high-powered stockbroker is fired for something some Americans do. That would be lie on their resume. Now bailout recipient Citigroup is in the middle of a huge mess.

Stick around. You're in THE SITUATION ROOM.


BLITZER: Joining us now in our "Strategy Session," the Democratic strategist and CNN contributor James Carville, and the Republican strategist, the former presidential assistant to President Bush Ron Christie.

Guys, thanks very much for coming in. I have got to get your reaction, James, to a story that appeared on "Politico" today, a story entitled "Rush Job: Inside Dems' Limbaugh Plan."

Among things, they say this: "By February, Carville and Begala were pounding on Limbaugh frequently in their appearances on CNN. Neither Democrat would say so, but a third source said the two also began pushing the idea of targeting Rush Limbaugh in their daily phone conversations with Rahm Emanuel, the White House chief of staff."

Is this all a conspiracy, James, you, Paul, Rahm Emanuel, to create this whole Rush Limbaugh situation?


JAMES CARVILLE, CNN POLITICAL ANALYST: Well, I think that -- that, honestly, I want to -- I don't want to take credit away from the great Rush Limbaugh, who did it on January the 16th, when he said he wanted the president's policies to fail.

And that's what started the whole thing. So, I don't -- don't give Paul and I or Rahm credit, where it's really due to the great Rush Limbaugh. He's the one that really started all this.

So, my hat is off to you, Rush.

BLITZER: Because they're also saying that, way back during the campaign in October, you and -- you, among others, were putting Rush Limbaugh in polling questions to try to test if this would be a good strategy, to pit the Democrats against him, if you will.

CARVILLE: Well, I have been -- we have been putting -- Democracy Corps, I'm one of the founders, along with Stan Greenberg.

BLITZER: You and Stan Greenberg.


CARVILLE: We have been putting Rush -- right. We have been putting Rush Limbaugh in our polls for a long time. And he's been unpopular in every one.

In fact, we're in the field now in a poll with Rush Limbaugh in it. And we will be releasing those results. I don't know what they are. Maybe he's gotten more popular.

But we will find out. You know, I don't know if it's a plot or conspiracy or what, but we poll all the time. And none of this would have happened without -- without Rush being the one that started it by saying that he wanted the president's policies to fail.

BLITZER: And he took it a step further today, Ron. I will play a little clip of what he said on his radio show. Listen to this, a challenge to the president.

(BEGIN VIDEO CLIP, "THE RUSH LIMBAUGH SHOW") RUSH LIMBAUGH, RADIO TALK SHOW HOST: But I have an idea. If these guys are so impressed with themselves, and if they are so sure of their correctness, why doesn't President Obama come on my show?

I am offering President Obama to come on this program without staffers, without a teleprompter, without note cards, to debate me on the issues.


BLITZER: I suspect he's not going to accept that challenge, but what do you think, Ron?



But I think the Democrats have walked into a land mine with this. I think that they thought, oh, it polls well to talk bad against Rush Limbaugh. Let's say that Rush Limbaugh's the head of the Republican Party.

Well, now Rush has played their card and played their game, and said, OK, President Obama, if you're going to look at me as a leader and you think that I'm running the party, why don't we have a substantive discussion about the issues?

And now you find the White House press secretary, Robert Gibbs, saying, oh, Rush Limbaugh this and that.

Wolf, these are very serious times. And the Democrats control the White House and the Congress. I think that they would be well- advised to talk less about Rush Limbaugh and talk more about our issues the confront America, particularly our bad economy right now.

BLITZER: You know, James, I will play a little clip of what the White House press secretary, Robert Gibbs, said yesterday on this very point that Ron just made. Listen to this.


ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I was a little surprised at the speed in which Mr. Steele, the head of the RNC, apologized to the head of the Republican Party.


BLITZER: Referring to Michael Steele, the chairman of the Republican Party...


BLITZER: ... who had to apologize to Rush Limbaugh for some comments he made right here on CNN. CARVILLE: Yes, he apologized, as did Phil Gingrey. Look, we didn't make Rush the head of the Republican Party. It's the Republicans who have.

If you look at that CPAC, or C-SPAN, or whatever that thing is they had, he...


CARVILLE: Rush was the leader of that deal. They were groveling all over him.

We didn't -- the chairman of the RNC, the man, like, made a fool of himself, saying, gee, when I looked at the videotape, I didn't realize what I was saying. I'm so sorry, Rush.

And all that Mr. Gibbs is doing is pointing out a fact, that Rush is the leader of the opposition party. That's what Paul and I are doing, and that is what Rahm is doing.

BLITZER: Is that a fact, Ron?

CARVILLE: I don't see anything wrong with that.

CHRISTIE: No. No, of course it's not a fact, Wolf. He's a conservative voice. He's a conservative leader.

Michael Steele was the elected chairman of the RNC. Let's talk about elected leaders who are heads of the Republican Party or in positions of influence, not radio show talk show hosts who are very conservative and very powerful, but he's not an elected politician. He's not a political leader.


CARVILLE: Again, if you were to look at that C-SPAN -- no, I'm sorry -- at CPAC...


BLITZER: CPAC, the Conservative Political Action Conference.

CARVILLE: Right. Right.

If you -- if you looked at that -- and that's the heart of conservatism, let me tell you. -- that's Ann Coulter. That's -- that's Rush Limbaugh. That's the very essence of American conservatism there.

They don't care about Michael Steele. They care about Rush Limbaugh. And -- and -- and -- and the -- and you -- you look at Steele, Rush is not groveling to Steele. Rush told Steele to go mind his own business. Steele came back and groveled to Rush. I mean, it's -- it's all playing out -- and Ron knows this -- right in front of us.

BLITZER: I want to move on, but one quick follow-up to you, Ron.

James, the other day, said here in THE SITUATION ROOM, as far as Michael Steele's concerned, it's over, he's finished, because of this battle he -- he -- he claims he lost with Rush Limbaugh.

Is it over, effectively, for Michael Steele?


With all due respect to my friend Mr. Carville, of course it's not over. I mean, Michael Steele is just settling in. It's his first month on his job. His job is to go out and galvanize the Republican Party, to get new candidates. His tenure is starting, not ending.

BLITZER: All right, let me move on to what Tavis Smiley, the PBS host, said on "LARRY KING LIVE" last night, as far as holding President Obama accountable.

James, listen to Tavis Smiley.


TAVIS SMILEY, HOST, "THE TAVIS SMILEY SHOW": Why not start the process with him of holding him and all leaders accountable from day one?

We kept hearing, "I will be ready on day one," when accountability starts on day one. This is not about Barack Obama exclusively. It's about all of our leaders being held accountable to keep and honor those promises that they made.


BLITZER: He doesn't want any honeymoon. He wants business to start right away.

What do you think, James?

CARVILLE: Well, that's fair.

I think, on our network, any number of people -- Campbell Brown would say we need to hold them all accountable. And Tavis has got a news program. There's nothing wrong with that.

And there's nothing -- and, again, and he said hold all -- all politicians accountable. I don't think anyone would expect someone to -- and I think he's a man of integrity. I don't think anyone would expect anything less.

BLITZER: I think you're right.

What do you think, Ron?

CHRISTIE: I think, way to go, Tavis Smiley.

I mean, the lovefest the media has given the president thus far, I think, has really overlooked some critical issues. We have seen the stock market that, on January 2, had a value of over 9000, and has tumbled several hundred points.

The media needs to hold the president accountable. The president's policies right now are having an impact on the economy, same with the leaders in Congress. Let's hold them accountable. Let's see. If their policies are successful, let's applaud them. If they're not, let's find a different way.

Go, Tavis Smiley.

BLITZER: At what point -- at what point, James, does the -- the bad economic situation really become President Obama's problem, and he no longer can say, I inherited this mess from President Bush, which he did do, obviously?

CARVILLE: I think he's been in office a little over three weeks.


CARVILLE: It's kind of hard -- I guess people can blame him for everything, but I think, if you look at what they have done, what they have accomplished in a very short period of time, it's pretty amazing.

And the stock market traditionally has done a thousand times better under Democrats than Republicans. Everybody knows -- everybody knows that. And, you know, you can't -- you can't look at what -- what -- at that and draw any conclusion from it.

But, at a point, sure, people are going to hold him accountable. I think he understands that. Everybody understands that. Tavis Smiley understands that. People on this network understand that. There's nothing wrong with that.

BLITZER: We all understand that.

All right, guys, thanks very much.

CHRISTIE: Thanks, Wolf.

CARVILLE: Thank you.

BLITZER: President Obama is bracing for disaster with his latest high-level nomination. It's on our "Political Ticker." Stand by.

And, later, once secret memos about the war on terror now released -- what we're learning about the Bush administration's tactics and whether a truth commission investigation may be warranted.

And when a train and a truck collide, the stunning video and the even more astounding story of what happened, that's coming up.


BLITZER: Bracing for disaster on our "Political Ticker." President Obama plans to nominate Florida's emergency management director as the new head of FEMA. That would be Craig Fugate. Mr. Obama says Fugate has what it takes to help the federal government improve its response to disasters and other emergencies. Fugate also expected to join the homeland security secretary, Janet Napolitano, at an event in New Orleans tomorrow.

The former eBay CEO Meg Whitman is dipping into her personal fortune again to fund her dream of becoming California's governor. The Republican reportedly has donated $1 million to her 2010 exploratory committee, on top of the $150,000 she gave from last month. Whitman's net worth was once reported to be more than a billion dollars.

Senator Ted Kennedy can add three letters to the end of his name, KBE, knight of the British Empire. The British prime minister,Gordon Brown, announced today before the Congress that Kennedy was awarded an honorary knighthood for his contributions to peace in Northern Ireland, as well as his work on health care in the United States.

Kennedy, who is suffering from a brain tumor, did not attend the speech, but received a standing ovation. He said in a written statement that he's deeply grateful for the honor.

Remember, for all the latest political news anytime, you can always check out

Let's go back to Jack. He has "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Wolf, the question this hour is, should President Obama be blamed for the continuing fall of the stock market?

Jason writes from Hawaii: "That's what the mighty powers of industry want everyone to believe. The powerful, who the puppet Republicans pander to, don't want any of Obama's social agenda to succeed. So, they manipulate the markets to make it appear Obama is the reason the economy is failing. The rich and the powerful, who profited immensely on the deregulation and lack of enforcement of fiscal laws, are to blame for the stock market failing."

Pat writes: "He's no more responsible for its fall than you are. AIG, Merrill, Bank of America, et al, got fat for decades feeding at the trough. What President Obama is left with is the hog odor problem that remains. It stinks."

Alex in Seattle says: "Yes, because the market needs certainty. President Obama is going to change many of the rules that affect the market and reverse many pro-business policies of the Bush administration. Corporations can't count on business as usual, and the uncertainty is hurting the market. The president needs to get his policies in place ASAP in order to stabilize the market."

Michael writes: "As a retired stock broker, let me share a lifetime observation: When the market is breaking records, brokerage firms hiring hundreds of new brokers and taking risks and spending money like there is no tomorrow, get ready for the fall. When the market is so low, it is hard to believe, brokerage firms laying off brokers and adhering to spartan budgets, prepare for prosperity. President Obama's programs are responsible, responsible for a new era of prosperity, with a twist. We are all going to get a share."

Ryan in Illinois writes: "Should President Obama be blamed for the continuing fall of the stock market? What, is Rush Limbaugh subbing for you today, Jack?"

And James in Michigan says: "I forgot where I live. That's Obama's fault, too."

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

BLITZER: Jack, if you take a look at what is going on right now, as far as the president of the United States is concerned, he's got a huge mess on his hands.

CAFFERTY: Huge mess, but he has the confidence of the American public -- his -- his popularity numbers, favorability numbers never been higher than they are right now.

And I think everybody understands that this mess we're in wasn't created in the last six weeks that Barack Obama has been in office. It took lots longer than that. And they're going to give him some time to see he if can work us -- work us out of it.

BLITZER: Jack, thanks very much. And we will come back to you shortly.