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Colin Powell's Instructions for Today's Youth; Madoff Behind Bars; Obama's Plans to Improve Education

Aired March 14, 2009 - 18:00   ET


WOLF BLITZER, HOST: Wall Street's biggest ever swindler now behind bars. Bernard Madoff admits he's guilty and ashamed from stealing billions from investors. But one of his angry victims tells me he wants more.

President Obama wants to reward America's best teachers and fire the worst. And he's snubbing some of his party's biggest supporters along the way. And Colin Powell as a drill sergeant for young people. The former Secretary of State is telling kids to stand tall and pull up their pants. We want to welcome our viewers in the United States and around the world. I'm wolf Blitzer. Yourself in THE SITUATION ROOM.

Bernard Madoff walked into court, he did not walk back out to the street. The man behind Wall Street's biggest swindle pleaded guilty this week, and was taken straight to jail. Madoff said he knew that day would eventually come. But for his investors, many of whom lost millions, never imagined such a day when they gave Madoff their money. Here's one of them.


Burt Ross is joining us from New York.

Mr. Ross, thanks very much for coming in.


BLITZER: A very difficult day for you, I'm sure.

First of all, you were there at the courtroom today when this unfolded, is that right?

ROSS: Absolutely correct. I'll never forget the scene.

BLITZER: All right, let's talk a little bit about -- first of all, how much money did you and your family lose?

ROSS: Five million dollars.

BLITZER: Was that all of your money or most of your money or a small part of your money?

ROSS: None of the above. I would call it a significant chunk of my net worth. And it certainly impacted our standard of living. But millions of people -- tens of millions of Americans have lost money in the stock market and it's affected their standard of living. So I'm not asking for sympathy.

BLITZER: You say five million dollars.

How many years had you be investing with Madoff?

ROSS: Oh, I started, actually, in a hedge fund, which was a feeder, it turns out, to have invested all of the money with Madoff. That was five years ago. And then I put money directly with Madoff three years ago.

BLITZER: All right. So in those years, was he giving you money or were you just giving him money?

In other words, did you collect any of the so-called profits?

ROSS: Never took money out. Always put money in.

BLITZER: Why did you give him -- what was the reason -- reasoning that you had, looking back?

Why did you assume this was going to be a good investment?

ROSS: Because the people who recommended it were very successful, sophisticated people. And I followed their advice. And obviously, in retrospect, it was wrong.

I've learned many lessons from this, one of which is if it's too good to be true, it's not true. If you don't understand something, don't invest in it. Don't simply rely on the recommendations of intelligent, sophisticated people. You have to use your own judgment and listen to your wife, because my wife told me this past June to take some of the money out and I thought she was crazy. The market was plummeting and this was the only thing that wasn't going down.

So I guess it's the lesson that Ralph Kramden learned on "The Honeymooners" -- listen to your wife.

BLITZER: Yes. It's a good lesson, usually.

The -- but you would get a statement every month and it would show that there was an increase in your net work, is that right?

ROSS: Absolutely. Every single month, year in, year out, every month we went on.

BLITZER: And so you just assumed that that was an accurate, reliable statement, when it turned out to be just one big fraud?

ROSS: It was completely a fraud. But you have to understand that this is the all time con artist. He cloaked himself with respectability. He was on the boards of various philanthropies. He was president of the former -- a former president of the Nasdaq Stock Exchange. So it was easy to believe.

BLITZER: When you saw him today in that courtroom, describe your feeling. What went through your mind?

ROSS: It was chilling. I -- it was like being in the presence of absolute evil. It's almost like the devil. I had been mayor of a town, Fort Lee, New Jersey, thirty something years ago and testified against the Mafia and sent a number of them to jail. And I never felt, in that courtroom, the sense of evil that I felt today. Today the evil was -- was palpable. It was tangible.

BLITZER: Could he have done this by himself, as he claims?

ROSS: No way in the world. And he's trying to protect people. Even today in his statement -- a meaningless statement -- he made it clear that nobody else was involved. At least that was the -- the implication.

But there's no way to pull off a scam like this without several people being involved. And I think that before time goes by, the Federal Bureau of Investigation and the United States attorney's office will find the other culprits.

And they -- they hit the ball out of the ballpark today. They really deserve credit. In three months, this man has been arrested and is now in jail, where he'll spend the rest of his life. That's an accomplishment.

BLITZER: How angry, Mr. Ross, are you at the SEC, the Securities and Exchange Commission, because they were repeatedly warned over these many, many years that something was wrong and they didn't take action?

ROSS: Well, I'm definitely upset with them. I'm also upset with the S.E. -- with the IRS, which refuses to issue any guidance to all the people who've lost money in terms of how we should file our -- our returns. But the SEC did a half-assed job. They blew it. If it hadn't been for their negligence, most of us would not have suffered the losses.

But today is a day to celebrate our judicial system. It worked. And sometimes, you know, I'm a critic when it doesn't work. But when an agency does its job, as they did today, they deserve credit.

BLITZER: Well explain -- are you going to get any of this money back -- $5 million you lost?

Is the federal government going to reimburse you? Because supposedly there was an insurance -- an insurance operation underway that the government sponsored.

ROSS: Well, it's not sponsored by the government. It's the SIPC. We may get as much as half a million dollars. This is not the government paying us. This is like the FDIC with banks. The companies on Wall Street -- securities industries pay a fee. And out of that fee comes this money.

And we are supposed to be getting checks. Every day I go to the mail to see and we still haven't gotten the checks. But that's not a bailout. That is an insurance program.

In addition, we have paid -- most of us -- taxes on income we never received. And in my case, in addition to losing $5 million, I've lost $350,000 in taxes I've paid to the State of New Jersey and to Uncle Sam over the last three years on income I thought we made. And, therefore, we expect to have that money back. That's not the public giving us money we don't deserve. It's an overpayment and we deserve a refund on it.

BLITZER: Bert Ross, good luck to you.

ROSS: Thank you.

BLITZER: Good luck to everyone who suffered as a result of this -- this scam.

I appreciate your coming in.

ROSS: Thank you, Wolf.


BLITZER: People all over the country say they are victims of Bernard Madoff's investment scheme. This map by "The Wall Street Journal" shows most of them live in New York, New Jersey, Denver, and Palm Beach, Florida. The lure, prosecutors say Madoff promised some people a 46% annual return on investments. The government says it still doesn't know precisely how much money was lost.

About $940 million have been recovered so far. That's a fraction, though, of the $50 billion Madoff claims he ripped off and the $65 billion the government says was ripped off.

Up until now, Madoff had lived a life of luxury in a $7 million Manhattan apartment. But right now, he's in a cell like this one over at the Metropolitan Correction Center in Manhattan. The warden says inmates usually wake up at 6:00 a.m., then go to breakfast and to their work assignment. They're kept busy until about 3:30 in the afternoon with a break for lunch. It's an early dinner, lights out 11:00 p.m.

President Obama admits his vision for education reform may not play well at home.


BARACK OBAMA, PRESIDENT: I know a longer school day and school years are not widely popular ideas, not with Malia and Sasha, not in my family, and probably not in yours.


BLITZER: The president's plan for improving the nation's schools also isn't sitting well with some of his party's most powerful allies. I'll ask the Education Secretary, Arne Duncan about the pushback. A veteran of Bill Clinton's war room says without the last Democratic president, there might not be an African-American in the job right now.

And a Russian general says the U.S. mission in Afghanistan is pointless. A spirited response from a top Republican on the Senate Armed Services Committee, Lindsey Graham. Stay with us. You're in THE SITUATION ROOM.



OBAMA: It's time to give all Americans a complete and competitive education from the cradle up through a career. We've accepted failure for far too long. Enough's enough. America's entire education system must once more be the envy of the world and that's exactly what we intend to do.


BLITZER: He wants schools open almost year round and wants to fire teachers who don't meet standards. President Obama this weeks unveils another ambitious and controversial blueprint. This one would overhaul the nation's educational system.


And joining us now, the Education secretary, Arne Duncan.

Mr. Secretary, thanks for coming in.

ARNE DUNCAN, EDUCATION SECRETARY: Thanks so much for having me. I appreciate the opportunity.

BLITZER: The president has drawn a line in the sand with a traditional ally of the Democrats, teacher unions, right now. They don't like several parts of what the president is proposing, do they?

DUNCAN: Well, I actually disagree. I've talked to Dennis Van Roekel, from the president of the NEA today. Randi Weingarten is actually in Angola, but we talked to her. They actually were thrilled with his speech and...

BLITZER: Thrilled about the fact that teachers could be fired for merit?

DUNCAN: I think they realize the president is not some wild ideologue, that he cares passionately about children. He wants us to get dramatically better and that we all have to work differently, so.

BLITZER: Haven't they always opposed merit pay, for example?

DUNCAN: Well, we worked in Chicago with the union, with great teachers to create a merit pay proposal. But you have to do things that make sense. You have to do it with teachers, not to teachers, which is a very important distinction.

But people know collectively that we have to get better. And I think they sense, more than anything, the president's passion and his extraordinary commitment to getting better.

BLITZER: Who determines when a teacher should be fired?

DUNCAN: I think ultimately the principal needs to.

BLITZER: The principal of the local -- of the elementary school or middle school or of the high school?


BLITZER: And the labor union should have no say in that?

DUNCAN: Well, you have different situations in different places. You have some places where there's peer review. And guess what, we have strong peer review programs. Those other teachers -- those union teachers have a very high bar. And sometimes they're much tougher than a principal on...

BLITZER: Do these teacher unions like the fact that a good teacher, an excellent teacher, would be allowed to get more money, surpassing the money, for example, of a more veteran teacher?

DUNCAN: Yes. We have to reward excellence. You have...

BLITZER: But do the unions like that?

DUNCAN: I think, again, you have variations there. And I can't speak for the unions, but you have, again, great, great teachers throughout the country who go way beyond the call of duty every single day. We can't do enough to award excellence, incent it, put a spotlight on it and let the country know how much great teaching matters. The president talks about that all the time. There's nothing more important than getting great teachers in every classroom.

BLITZER: And should the principal be responsible, primarily, for who determines a good teacher versus a bad teacher?

DUNCAN: No. I think there are different ways to do that. Again, you -- a principal can be part of that. I think we need to look at how students are performing. We need to look at student results to see who's really making a great difference in students' lives.

BLITZER: The unions traditionally -- the teachers unions didn't like charter schools because they were afraid it would take money away from regular public schools.

Are they on board with you now on the whole charter school proposal?

DUNCAN: Well, let me be clear, charter schools are our schools, they're our children, our tax dollars.

What people may forget, do you know who started talking about charter schools originally?

Albert Shanker.


DUNCAN: Charter schools...

BLITZER: He was one of the leaders of the teachers' union.

DUNCAN: He came out of the AFT.


DUNCAN: And, you know, you have great teachers who are leading -- great unions who are actually running charter schools. In New York, Randi Weingarten, the now head of the AFT nationally, had a series of charter schools that he was running.

So this is really time to get past sort of the old ideologies, the old status quo where, frankly, we weren't doing enough for children. We have to behave dramatically different. And if innovation is working, we need to do more of it.

BLITZER: I didn't hear the president say much, if anything, about vouchers if there is a crummy school and the kids there have an opportunity, let's say, to go to a good Catholic school, they would get a voucher to help pay for private school education.

Is that something the president is in favor of?

DUNCAN: Well, I can't really, you know, speak for the president on that. I will tell you what I personally believe is that we need to fix the public school system, that we should not be satisfied. Vouchers, to me, aren't the answer. We shouldn't be satisfied with getting, you know, 1 percent of kids, say, 2 percent. We need to change entire systems and get dramatically better and help 100 percent of children. And we have to have the commitment to challenge the status quo to do that so that every child has a chance to a great public education, not just a handful. That's not good enough.

BLITZER: But what if, in the short-term, there's -- that's not going to be possible.

Should the kids have a voucher?

Because there have been some experiments around the country with vouchers and many of those experiments have turned out to be pretty good.

DUNCAN: Actually, the results have been pretty mixed. And, ultimately, again, I think we have to be more ambitious than that. I -- again, I'm just speaking for myself personally, I don't think that's the answer. The answer is to really dramatically change what's going on in public education so that every child -- not just a few, not a handful, every child has a chance to get a great education.

BLITZER: The president was intriguing, also, in speaking about an all year round school system...


BLITZER: ...and longer hours to compete with kids elsewhere around the world, whether in India or China or Japan or elsewhere.

What do you believe?

Should there be school for kids all year round, no summer vacations?

DUNCAN: Well, there were a couple of huge themes in his speech. One, he talked a lot about talent and that talent matters tremendously. Getting great teachers, great principals into our schools and into the schools that have historically been under served is hugely important. So talent matters tremendously.

Secondly, guess what?

So does time. And he talked a lot about our academic calendar is based upon the agrarian economy. Most places around the country today, children are not working in the fields in the summer. And relative to other countries, we're in school 25, 30 percent less. You know, a huge (INAUDIBLE)...

BLITZER: So how long of a school year do you think would be good for public school in the United States?

DUNCAN: Well, I think we need to be much more creative in the use of time. And let me sort of walk you through, because it can be a little bit complex there.

I think our schools should be open long hours after school. They should be open until 8:00, 9:00, so it's not just the school day but...

BLITZER: For extracurricular activities.

DUNCAN: Extracurricular, drama, art, academic enrichment, sports...

BLITZER: What about -- how many months out of the year?

DUNCAN: I think our schools should be open 11 or 12 months out of the year.

And what we need to do in the summer is give poor children the chance to have all the enrichment that middle class children do. So I would love to see all of our children have a chance to go visit a college campus. I would love to see them do academic enrichment. I would love to see them do outdoors programs.

I'd love to see them develop their skills and interests. If they need more help in reading and math, get that.

So it's not just extending the traditional school day, it's really being creative in the use of time. And why this is so important is that we see all the time across the country, we see poor children who aren't lucky enough to be read to every night at home, who get to a certain point in June, they progress throughout the year and they come back in September and guess what?

They're further behind in September than when they left. It's called summer reading loss. We have to combat that and we have to give our children a chance to continue to improve and compete with the children in China, in India. They are working harder, longer hours than we are and our children are at a competitive disadvantage.

BLITZER: Nothing is more important than the education of our young kids.

Mr. Secretary, you've got a huge challenge ahead of you. Good luck.

DUNCAN: This is an historic opportunity. And we think we can dramatically improve the quality of education around the country. It is a remarkable chance to do the right thing by our children.

BLITZER: Thanks for coming in.

DUNCAN: Thanks for having me.


BLITZER: General Colin Powell has an order for your children.


COLIN POWELL: Pull your pants up. Straighten yourself out. Stand up tall. Mind your manners. Mind your teachers. And apply yourself.


BLITZER: Take note, the former Secretary of State says your children have a responsibility to ensure no child is left behind in the educational system.

And how important is it for the Treasury secretary to have your confidence? I'll ask the economist Marc Zandi what that could mean for the economy. Stay with us. You're in THE SITUATION ROOM.


(BEGIN VIDEO CLIP) OBAMA: It's time to prepare every child, everywhere in America to outcompete any worker, anywhere in the world.


BLITZER: Unveiling his education plan this week, President Obama made it clear he wants to hold teachers accountable for their work. Another advocate for education reform makes it very clear that students have to do their part.

(BEGIN VIDEOTAPE) Joining us, our special correspondent, Soledad O'Brien. Soledad, you're here in Washington. You just came back from a really powerful interview with former secretary of state Colin Powell. I want to play this little clip when he speaks about the importance of education.

COLIN POWELL, FORMER SECRETARY OF STATE: Youngsters have a responsibility, too. And that responsibility is to show up every day to school to learn. Stand up tall, mind your manners, mind your teachers, and apply yourself. Now, where do youngsters get that kind of spirit from? They get it from the home. They get it from the community. All of us have had some difficulty in life, in the early parts of life, in our educational system. I did. I had trouble in elementary school.

But the caregivers that I had, in this case my parents and aunts and uncles say we have expectations of you. Don't tell us you're not going to meet our expectations of you. We didn't come to this country as immigrants so you could put something up your nose or so you could fail to get an education or that you can shame us. So mind your manners. Mind your teachers. And go get an education. Graduate from high school. And then you're going to college, whether you like it or not. And we spent you to graduate from college and then get a job.

BLITZER: Those are pretty strong words. He almost sounds like an army drill sergeant.

SOLEDAD O'BRIEN, CNN SPECIAL CORRESPONDENT: Of course, Colin Powell, the founder of America's promise. These days he really does a lot of talking about the organization, which focuses on education. And educational disparity. So in addition to his work, you know, as sort of the post-leaving of position of secretary of state, he's also really passionate about education. Talking about the president's speech today, you look at some of the issues that the president raised. Personal responsibility that Colin Powell was talking about, clearly important. But, and there's a big but, which is inner city issues. Go hand in hand with inner city graduation rates. Blacks and Latinos 50 percent coin toss whether a kid is going to graduate or not. So something has to be done. Because I think the message is, we're all in this boat together. The inner cities can't fail and suburban America says, well, you know, not our issue.

BLITZER: As much as diplomacy has been his issue, as much as the military and national security has been his issue, I sense his real passion, though, is educating the youth. O'BRIEN: What's really interesting, I was telling him about who we're profiling in Black America 2. And the principal runs around the school, Dr. Steve Perry, minority school, dire statistics, but not his school. Dr. Perry's school has 100 percent of their kids who graduate go on to college, 100 percent. Dr. Perry is a drill sergeant. Pull up your pants, what are you doing in the hall. It's time for you to go. Colin Powell said exactly, it requires a drill sergeant. There is a metaphor for having someone who is in charge. And sometimes inner city problems, socioeconomic problems mean that the home is not what it should be.

BLITZER: And let's remind our viewers never too early to start reminding them, July 22nd, July 23rd, "Black in America" will air only here on CNN. Soledad, thanks very much.

O'BRIEN: My pleasure. Thanks, Wolf.


BLITZER: President Obama talks about how topsy turvy things are right now.

(BEGIN VIDEO CLIP) OBAMA: I think there are times where sometimes our economy gets out of balance. This is obviously one of those times.


BLITZER: But when might the recession reach the bottom and things start to get better for you? Wait until you hear what the economist Mark Zandi says.

And given the nation's intelligence failures, has U.S. intelligence really improved since 9/11? I'll ask Senator Lindsey Graham. He has some very strong views on the subject. Stay with us. You're in THE SITUATION ROOM.



OBAMA: It was not ideal to take office in the midst of the worse job and growth numbers in decades, particularly since we're still in the midst of two wars. But that's the duty I signed on for. And although my administration did not create these problems, it's not only my responsibility, but my extraordinary privilege to help solve them.


BLITZER: Fiscal conservatives have been vocally criticizing the Obama administration's economic stimulus plan as simply too big and too expensive, but now there's talk that the plan may actually not be big enough.


BLITZER: And joining us now, Mark Zandi, the economist from Mark, thanks very much for coming in.

MARK ZANDI: Thanks for having me, Wolf.

BLITZER: Last year, the former President Bush, he had an economic stimulus plan, a package that was about $150 billion. It was followed much more recently by President Obama's first economic stimulus package of nearly $800 billion. There's now talk that yet another one, a third, in effect, economic stimulus package is necessary to deal with this recession. Do you believe we need another stimulus package?

ZANDI: Yes, I think the odds are pretty high that we'll need another one. We've underestimated the severity of this economic crisis all along. And there's still a good chance that we're underestimating it now. And that the $800 billion package, while large and well designed, won't be enough.

Now, having said that, though, I do think it's important to give this package a chance to work. It's premature to conclude that it won't. So we have to wait until the summer, the fall. And at that point, we can gauge whether we need another stimulus. But I think we should all be thinking along those lines that another stimulus probably will be needed.

BLITZER: How many billions will that require?

ZANDI: Well, I would think somewhere, about half the size of the $800 billion package, all that's spent in 2010. To do that, it would probably have to be temporary tax cuts. Something like a payroll tax holiday for employees and employers. I think a lot of small business people will be running out of cash by then. And that could be very helpful. And perhaps some more tax credits to help home sales to get some of the inventory off the housing market and support house prices. So I would look for something like that. Probably in the spring/summer of 2010.

BLITZER: The chairman of the Federal Reserve, Ben Bernanke, he told Congress earlier in the week that maybe the recession will end this year, and by 2010, there will be a resumption of economic growth. And he outlined some factors, some conditions that caused him to believe that was possible. Some are thinking he's overly optimistic. What do you think?

ZANDI: I think he's optimistic. But I do think by this time next year, early 2010, the economy should be stabilizing. I think it's going to be a very tough 2009. I don't think it'll find bottom this year. But by this time next year, yeah, I think it'll stabilize. 2010 will probably be a flat year. And with some good policy making, some of it from the chairman himself at the Federal Reserve, another stimulus package, a plan to shore up the banking system, foreclosure mitigation, all those things coming together, I think by 2011, I think the economy will start to grow and grow at a place that we'll feel more comfortable with.

BLITZER: The Treasury Secretary Timothy Geithner, so far at least hasn't instilled a whole lot of confidence with Congress, the American public, or the markets for that matter. How important is it to have a Treasury Secretary who can go out there and reassure people?

ZANDI: Well, it is very important. And no, he hasn't instilled a whole lot of confidence, but I think it's important to realize the magnitude of the problem he's struggling with. I think anyone in that position would have a great deal of difficulty.

And I do think it's fair to say that the plan that he put forward for the banking system, while it's come under a lot of criticism, actually is a good plan. And I think as he fleshes it out and begins to implement it, I think investors will grow more confident and he'll grow more confident and we'll be okay. But it is important for him to get his bearings. And I'm confident that he will.

BLITZER: Senator Lindsey Graham of South Carolina says it may be necessary to nationalize, at least temporarily, some of these huge banks. He calls them zombie banks. They're too big to fail, if you will. The government should take them over, then sell them off as best as they can. Is he on track?

ZANDI: I think that's premature. I don't think we're there yet. You know, I think there may be a couple three of these very large banks that are in trouble, but we don't know that for sure.

And I think the Treasury, as part of Treasury Secretary Geithner's plan, is now going through these banks, stress testing, trying to figure out how bad off they really are. And based on that, we'll determine, I think, whether any of these institutions need to be taken over.

At this point, my guess is though that they won't have to be, that they'll need help, obviously. The taxpayers are putting money into these institutions. And that's necessary, but for the taxpayer actually to have to take complete control of these institutions I think is unlikely still at this point.

BLITZER: Mark Zandi, thanks for coming in.

ZANDI: Thank you.

BLITZER: Meanwhile, how would you grade the president on the economy and other issues? One of our CNN i-reporters, an independent voter, says he'd give the president a "D" or perhaps even an "F." here's why.


UNIDENTIFIED MALE: I would like the president to simplify whatever the government is doing into a few talking points that every American can understand. Because that's one of the things that the Republicans are so good at.


BLITZER: Are Republicans beating Democrats at helping you understand things simply? I asked Valerie Jarrett, who's a senior adviser to President Obama, and one of his closest friends.


VALERIE JARRETT, SENIOR PRESIDENTIAL ADVISER: No, I don't think so. Look, Wolf, the American people understand that our economy is in the middle of the worst downturn in the history of our country, practically, since the Depression. And we didn't get in this shape overnight. And we're not going to get out of it overnight. And I think what the American people take heart in is that knowing that they have a president who puts the economy first. He and his economic advisers are working every day to try to turn our economy around. That's why he was able to pass the stimulus package, the recovery act, a $780 billion package that's going to create 3.5 million jobs. Just last Friday, we were with the president in Columbus, Ohio. There are now 57 police officers on the street today who wouldn't have been able to be there but for this package. And so we have to take a short-term objective. And that's what the recovery bill is there for. But Wolf, we also have to take a longer term view as well.

BLITZER: Is the president taking on too much right now?

JARRETT: No, he is absolutely doing what's necessary to address the short-term needs as well as the long-term needs. They're all connected. And so it all ties back to the economy.

If you look, for example, health care. Unless we reduce our costs in the health care arena, every business will tell you that unless we reduce those costs, every person who's trying to struggle to figure out how when their income is staying the same or going down and their health costs are going up by, you know, four fold, what are they going to do? So that's tied to the economy. We have to reduce our dependence on foreign oil. That's tied to the economy.

Yesterday, the president gave a speech about education. Every one will tell you that in order to compete in a global world, we have got to have a better public education system. All of these are inextricably linked back to the economy.


BLITZER: On Monday, we're digging deeper into the economic crisis and how it's affecting you. What are you dying to ask our experts about the economy? Submit your video questions to We'll have answers for you next week.

The president is warning of a serious threat and a tough fight ahead.


OBAMA: We're still at war with terrorists in Afghanistan and Pakistan who are plotting to do us harm.


BLITZER: But a former general who spent a lot of time in Afghanistan says the fight there is pointless. I'll get Senator Lindsey Graham's take on that. He sits on the Armed Services Committee.

Plus, the man who says former President Bill Clinton set the stage for the country's first African-American president. Stay with us. You're in THE SITUATION ROOM.



OBAMA: The attacks of 9/11 signaled the new dangers of the 21st century. And today our people are still threatened by violent extremists. And we're still at war with terrorists in Afghanistan and Pakistan, who are plotting to do us harm.


BLITZER: President Obama makes it clear although there have been no terror attacks on American soil since 9/11, terrorists are still very much bent on killing Americans. I spoke with the Republican Senator Lindsey Graham of South Carolina about this pressing national security issue.


Senator, thanks very much for coming in.

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: Thank you for having me, Wolf.

BLITZER: Has U.S. intelligence improved since 9/11, based on what you know?

GRAHAM: Well, absolutely. The Terrorist Surveillance Program has allowed us to monitor the enemy's activity. We've got better cooperation with our overseas allies. We've had -- we've reorganized our intelligence community, the director of National Intelligence reports directly to the president.

Yes, we've modernized a lot. There's more to do, but it's been a bipartisan effort.

This is one area where I think Democrats and Republicans generally agree. Intelligence in this war is more essential than any other war. You have to hit them before they hit you.

BLITZER: I was intrigued by a retired Russian general's comments to the McClatchy newspapers about Afghanistan. You've been there several times, know the subject well, Senator Graham.

This Russian general, and given the history of Russia's awful history in Afghanistan, says what the U.S. is doing is following in those mistakes of Russia, the old Soviet Union. "I believe as sincerely as American officers do now that we were fighting there to help make our country safer. After the war, as a politician, I could see this war had been pointless."

Is it pointless, what the U.S. is doing in Afghanistan right now?

GRAHAM: That's a ridiculous comparison. Our soldiers are there to help the Afghan people. And the Afghan people know it.

I applaud the Obama administration for sending more troops. I've been there many times and I've talked to Afghans all over the country. They understand the difference between the Russians' intention and ours. And we want to help that country not only not be a safe haven for terrorists to attack us, but give the Afghan people something they never had before in a long time, and that's freedom and prosperity.

The Afghan people know the difference between a Russian soldier and an American soldier. And that's why we're going to win in Afghanistan.

BLITZER: Should the U.S. be reaching out to elements of the Taliban, whether in Afghanistan or Pakistan, trying to wean them over as the U.S. did with al Qaeda insurgents, or at least sympathizers, Sunnis in the Al Anbar province in Iraq?

GRAHAM: You know, in every civil war in every society that breaks apart, there has to be some reconciliation. There may be some Taliban elements that are reconcilable within Afghanistan and Pakistan -- certainly others will not be -- but, yes, that's an option on the table as long as it's not appeasing the bad guys.

What they did in the Swarth (ph) area of Pakistan, agreeing to apply Shariya law to that region, I think, is a give to the Taliban and the insurgent terrorist groups in a way that's not helpful. That's a sign of weakness, not strength.

BLITZER: I interviewed Tom Ricks of "The Washington Post." He's got a new book entitled "The Gamble" that just has come out about General Petraeus and Iraq. His earlier book "Fiasco" was on the situation in Iraq.

And he told me this -- he said this is what he sees as a potential best-case scenario outcome in Iraq. You might be shocked to hear him. Listen.


THOMAS RICKS, AUTHOR, "THE GAMBLE": It's probably not going to be a democracy. It's probably not going to be that stable. The best- case scenario was probably a strongman somewhat like Saddam Hussein.


BLITZER: Wow. I mean, that's pretty gruesome if you think about it. GRAHAM: Yes, I think he's wrong. I think he's dead wrong.

I think he's been right about the fiasco part of the early invasion and the mistakes we made, but I think he's underestimated the Iraqi people. He underestimated our ability to bring about security, which has led to political reconciliation.

No, I think he's dead wrong. And I think the elections in the fall will show that.

BLITZER: All right. Let's talk about the economy right now. Issue # 1, the economy in a crisis.

When it comes to the economic crisis, is there anything in these first 50 days of the Obama administration that the president has done that you like?

GRAHAM: Yes, I think he's done a couple of things. His budget, he puts means testing of Medicare on the table. When I reach retirement age and receive Medicare benefits, based on my income, I think I should have to pay a larger premium because I can afford to. He's put AMT tax relief into the budget. He's done some good things.

But quite frankly, the spending bill, the stimulus package was way too large. It created more government than it did jobs.

The omnibus bill before us today increases spending by eight percent, and the budget he's proposed for this nation, I think, is a radical, reckless exercise in fiscal discipline. A trillion dollars increase in taxes that doesn't go to reduce the deficit, but increases spending, and it triples the debt.

So overall, I would give him poor marks in terms of financial management. But there are some ideas, like health care reform as being a priority and Social Security solvency, I do agree with him and want to help him where I can.

BLITZER: What about nationalizing banks? You caused a stir a few weeks ago...

GRAHAM: I sure did. Didn't I?

BLITZER: ... by saying that maybe should be on the table right now. Explain what you mean.

GRAHAM: OK. Here's what I mean.

We're going to do a stress test on the major banks. And we will understand how they will be able to perform in sort of worst-case scenarios. And here are the options for the country -- continue to write checks to banks regardless of their financial situation.

I think that's a bad idea. If there is a needy bank that can be made healthy by further capitalization, more money will get them on their feet, and they've got a chance of making it, let's do it. If a bank can fail and not take on the general banking system with it, let that happen.

But there may be banks that are too big to fail or, you know, just liquidate overnight, but have no chance of making it in the long run. They're called a zombie bank. And in that situation, it would be better for the government to come in and seize the bank, not to run it long term, but basically to take the good parts of the bank, sell it off to the private sector to create a healthy bank, and better manage the toxic assets that made it a zombie to begin with.

I think that's an option that has to be on the table. Call it what you like. I think that's just a reasonable alternative that may be necessary and in limited classic cases.

BLITZER: We're out of time, but do you have a bank in mind you are referring to?

GRAHAM: Well, the stress test will tell us more.


Senator Graham, thanks very much for coming.

GRAHAM: Thank you.


BLITZER: A veteran adviser to Bill Clinton gives the former president a lot of credit for Barack Obama's election. Stand by to hear why Stanley Greenberg believes Bill Clinton made it possible for an African-American to become president.

Plus, hot shots of the week, pictures worth a thousand words. (COMMERCIAL BREAK)


OBAMA: The battlefields that we now face would be unfamiliar to Lincoln and Roosevelt. The days when president Lincoln would wander down to the war department's telegraph office to get reports from the front are long past, but the threats to our nation are real and they are direct.


BLITZER: President Obama showing once again this week he recognizes his place in political history and the contribution of the men who held the job before him.


BLITZER: Joining us now is Stan Greenberg, he's the author of a brand-new book, "Dispatch us from the War Room: In the Trenches with Five Extraordinary Leaders." Stan is a well-known strategist and political pollster.

Stan, thanks for coming in.

STAN GREENBERG: Delighted. Thank you for having me.

BLITZER: And congratulations on the book. I want to talk about the book in a moment. Let's go through some political issues right now. There was a story out there this week...


BLITZER: ...that on the morning of 9/11, back in September 2001, you were having breakfast with some reporters. And you and James Carville suggested to those reporters that you hoped President Bush would not succeed. Is that story -- and I'm sure you've seen it, that's all over the blogs right now, is that accurate?

GREENBERG: No. It's not accurate. I mean, obviously, we all remember, we all remember that moment. The -- you know, I did do a poll that, you know, that showed that George Bush had lost popularity. And a large number of people thought he was not up to the job. And I actually said that I think the American people do not want him to fail. Now James, on the other hand, didn't share that view politically. And, you know, in talking about the polling in particular. But the moment 9/11 happened, the moment the attacks happened, very explosively we said this is a moment of crisis, we're all in this together. And that's the kind of moment we're in now. And I think that's the appropriate comparison.

BLITZER: Is President Obama succeeding right now?

GREENBERG: I think he's doing remarkably well. I mean, the -- you know, what I - you know, what I -- in this book, you know, and I'm dealing with leaders who, you know, are bold leaders, they come in in tumultuous times, they have a big agenda, they almost all ultimately crash. They have to win people back.

But it's tough to succeed. And he's coming in at a time when there are tremendous pressures on him to achieve things in short order. I think, you know, all in all, I can't imagine, you know, many people would be able to step into the job at this moment and get to this moment.

And there's still a lot ahead, you know. And as I -- you know from the leaders, you know, I've worked with, you know, they all disappoint in the end. And they all have to try to win people back. But he's got high popularity and significant accomplishments and a big agenda ahead and a pretty effective White House. And so it's not a bad start.

BLITZER: Where is he most vulnerable? Where should he be most worried? Because you're a former adviser, strategist, pollster for Bill Clinton...


BLITZER: ...who was one of the best in the business. Where do you think he's vulnerable right now?

GREENBERG: Well, you know, he's -- look, he's got to succeed in governing. The - you know, it's the -- it's not so much where he can be attacked, you know, where he has, you know, a weak flank. He's - you know, the country wants to see him move forward, bring people together and move forward. Gridlock, you know, gridlock is death. I mean, the - that, you know, that's what Bill Clinton faced. And we really dropped very early and had to bring people back.

He's been able to get a, you know, a quick victory that I think impressed people, that he can get things done. So there has to be this, you know, momentum. You know, but ultimately, the problem is going to be, you know, the economy is not going to produce real changes in people's lives for a long time, even when it begins to grow. And that's where his biggest challenge will be.

You know, how can he explain to people, how can he bring people along and explain, you know, this economy? Not many leaders get it right. It's the thing on which so many leaders fail, is talking about the economy in a way that is effective for people. BLITZER: This sentence in the book, "dispatch us from the war room," jumped out at me when I read it, referring to Bill Clinton's relationship with Barack Obama and his win last November. You write this, "it is unimaginable that they will not find a way to embrace, because it is still true that Bill Clinton changed America and its politics and made possible the election of the first African-American president with his own call for hope and unity." I want you to explain to our viewers out there why you want to give Bill Clinton so much credit for Barack Obama's election?

GREENBERG: Well, I mean, what is interesting about, you know, Bill Clinton, what's interesting about many of these leaders is that they have, you know, they have a personal life mission, they have a political project, but there's things that really drive them.

What I learned in writing the book is, you know, these leaders are more complicated. And they're more interesting as people and as leaders than they are as politicians.

You know, and I've worked with, you know, Bill Clinton in campaigns and under the pressure of the White House. But when you step back and look at what he really cared about, what he really cared about in his life was overcoming the racial barriers of the south. That's what he came out of. You know, he ran on forgotten middle class, but what he really cared about is overcoming the racial barriers in the country.

If you look at his victory night speech in, you know, 1992, he ran on economy, stupid. But if you look at his victory night speech, he almost never mentions economy. What he says is what the main issue in this election was was unifying the country. And what he really cared about was diversity, America being stronger as a diverse, multicultural country. You know, and look at his last couple years in particular. Those were the kinds of issues that he, you know, stressed.

And when I finished writing the book, you know, the first draft of the book, you know, which is before this -- well before the primary had, you know, really advanced, you know, I said, he made possible either a woman elected as president, like Hillary Clinton, or an African- American like a Barack Obama. So I think it's his legacy and ultimately these two, I think, leaders will have to recognize that starting point.

BLITZER: The book is entitled "Dispatches from the War Room: In the Trenches with Five Extraordinary Leaders." Bill Clinton one of those leaders. Stan Greenberg is author. Stan, thanks very much for coming in.

GREENBERG: Terrific. Thank you for having me. Appreciate it.


BLITZER: Health care for kids, that's the cause that brought the singer/song writer Paul Simon to Washington this week. Just one of our hot shots. Pictures worth 1,000 words.


BLITZER: Here's a look at some of the hot shots from this week from our friends over at the Associated Press. In Germany, hundreds mourn after a school shooting takes the lives of 15 people.

In Washington, the singer/songwriter Paul Simon stops by to talk about health care for kids.

A two-day blizzard pounds North Dakota, but this dog doesn't seem to mind.

And in San Francisco, after 5,000 names were submitted, this 3-month- old gorilla receives the name Hasani. These are some of this week's hot shots, pictures worth a thousand words.

Thanks very much for joing us. I'm Wolf Blitzer here in THE SITUATION ROOM. Join us weekdays from 4:00 to 7:00 p.m. Eastern and every Saturday at 6:00 p.m. Eastern on CNN, and at this time every weekend on CNN International.

BLITZER: The news continues next right here on CNN.