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GOP Won't Defend 'You Lie' Outburst; Staten Island School Bus Crash; Dems Falling in Line on Health Reform

Aired September 10, 2009 - 16:00   ET


WOLF BLITZER, HOST, THE SITUATION ROOM: Happening now, President Obama wants your attention. He's seizing on any momentum after a major health care speech and not backing down from responding to people he says engage in false claims and name calling.

He shouted at the president, "You lie!" That Republican congressman is apologizing, but some Republicans say he does have a legitimate point to make.

And sex, guys and videotape. A pro-family values politician is caught on tape bragging about racy sexual exploits. He's resigned in disgrace, but the way he explains his sex talk may shock you.

I'm Wolf Blitzer in CNN's command center for breaking news, politics, and extraordinary reports from around the world.


President Obama says the nation is now the closest it's ever been to seeing health care reform. So he's wasting no time.

The day after his mayor speech before a joint session of Congress, the president is back in his pitch. Today's audience, a group of nurses strongly supportive of the president's plans. The president also met with his cabinet over at the White House. On the issue of health reform, the president stressed the need to work together and work against the bitter back and forth.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Our goals are generally the same, whether we're Democrats or Republicans. And, in fact, most Americans don't even think about those labels all that much.

They are turned off when they see people using wild accusations, false claims, name calling, sharply ideological approaches to solving problems. They want pragmatism. They want people to stay focused on the job. And I hope that some of the fever breaks a little bit.


BLITZER: That harsh political fever was not broken last night when the president spoke to the lawmakers. Surely, you know by now about that unusual outburst from a Republican lawmaker accusing the president of lying. Today, that congressman, even his fellow Republicans, have something to say about that.

Let's turn to your congressional correspondent, Brianna Keilar. She's up on Capitol Hill watching the fallout.

And the fallout, Brianna, has been significant.

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: It has, Wolf. You know, a lot of the talk here on Capitol Hill today was about whether President Obama was able to achieve what he wanted with this speech, whether he was able to push Democrats to move forward on health care reform. But that outburst, it was the water cooler moment that made a little known Republican now infamous.


KEILAR (voice-over): Amid a scrum of cameras and reporters, South Carolina Congressman Joe Wilson tried to explain himself today.

REP. JOE WILSON (R), SOUTH CAROLINA: It was spontaneous. It was when he stated, as he did, about not covering illegal aliens.

KEILAR: When President Obama told Congress Wednesday night that a Democratic health care overhaul will not cover illegal immigrants, Wilson shouted from his seat, accusing the president of lying.

OBAMA: The reforms I'm proposing would not apply to those who are here illegally.

WILSON: You lie!


OBAMA: That's not true.

KEILAR: The unusual outburst drew boos from Democrats and the glare to end all glares from Speaker Nancy Pelosi.

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: It was stunning to hear such a statement made on the floor of the House when the president of the United States is speaking.

KEILAR: Wilson quickly apologized and Republicans refused to defend him. But many, including California's Dan Lungren, say they understand why he is upset.

REP. DAN LUNGREN (R), CALIFORNIA: I would expect more civility on the floor, but I understood his frustration. Republicans offered an amendment specifically to disallow illegal aliens from benefiting from any public plan or federal subsidization of health care. That was defeated on a party line vote.

KEILAR: Minority Leader John Boehner also pointed to a study by the nonpartisan Congressional Research Service.

REP. JOHN BOEHNER (R), MINORITY LEADER: The facts are CRS says there's nothing in this bill that will prevent these people from getting this type of insurance.


KEILAR: That study found illegal immigrants may be able to purchase either private insurance or a new government-run insurance plan if there is one under the House Democrats' health care overhaul plan. But unlike American citizens or legal U.S. residents, the study found that illegal immigrants would not be able to get government assistance to help pay for that insurance -- Wolf.

BLITZER: Brianna Keilar is up on Capitol Hill.

Meanwhile, President Obama is saying what he thinks of the congressman's apology. Let's go right to our White House correspondent, Suzanne Malveaux.

He was asked and he answered, Suzanne.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, he was meeting with his cabinet. There was a group of reporters that were there. They were being ushered out of the room when our own Elaine Quijano, she stood back and asked the president that question, whether or not he accepted the apology of the congressman.

He obviously, Wolf, wanted to address this issue if, for the very least, to put it behind and move to forward on his main agenda. That is, of course, health care reform.


MALVEAUX (voice-over): President Obama accepted Congressman Joe Wilson's apology.

OBAMA: I'm a big believer that we all make mistakes. He apologized quickly and without equivocation. And I'm appreciative of that.

MALVEAUX: Mr. Obama never directly talked to Wilson, but rather received the apology through his chief of staff. The fallout from the tense moment gave the president the opportunity to present himself as above the fray.

OBAMA: We have to get to the point where we can have a conversation about big, important issues that matter to the American people without vitriol, without name calling, without the assumption of the worst in other people's motives. We are all Americans. We all want to do best for our country.

WILSON: You lie!


MALVEAUX: The congressman's outburst came after a month of emotional town hall meetings surrounding health care reform.

OBAMA: The time for bickering is over. MALVEAUX: The president's speech was supposed to lower the temperature, but some Republicans said it only stoked their anger.

SEN. JON KYL (R), ARIZONA: I have never heard a more partisan speech by a president in that House chamber. The terminology he used like "partisan spectacle," "unyielding ideological, bogus claims spread by those whose only agenda is to kill reform at any cost"...

MALVEAUX: Mr. Obama also said the media just can't resist controversy.

OBAMA: The media can always be helpful by not giving all the attention to the loudest or shrillest voices and try to stay a little more focused on the issues at hand.

MALVEAUX: The issue at hand, health care reform.

OBAMA: But we have talked this issue to death year after year, decade after decade. And the time for talk is winding down. The time for bickering has passed.


MALVEAUX: And Wolf, the talk continues here at the White House. At this very hour, the president is hosting a group of about 15 or so centrist/moderate Democrats to talk about the health care proposal and see where they can meet with common ground. He is also on Saturday going to be traveling to Minneapolis, holding a town rally, a rally, if you will, to take his case directly to the American people -- Wolf.

BLITZER: I know you're going to try to catch up with some of those centrist Democrats after the meeting. Let us know, Suzanne, what, if anything, emerged from that session.

MALVEAUX: Absolutely.

BLITZER: Thank you very much.

Let's bring in Jack Cafferty right now. He's got "The Cafferty File."

JACK CAFFERTY, CNN ANCHOR: Got a little more on this.

That Republican congressman from South Carolina made a complete fool of himself during that presidential address to a joint session of Congress last night. And in the process, he confirmed what a lot of the American public simply cannot stand about politicians. But he also had a point.

South Carolina's Joe Wilson shouted, "You lie!" at the president after Mr. Obama denied that the proposed health care legislation would mean free health coverage for illegal aliens. The fact of the matter is, they get free health care now by just walking into any hospital emergency room, no questions asked, and nothing in the proposed health care reform legislation would change that.

Nevertheless, it was pretty low. Even with our reduced expectations of our lawmakers.

Wilson stunned the room. Everybody except the president. Republicans just froze.

House Speaker Pelosi frowned. Vice President Biden shook his head. President Obama just looked toward the outburst and he said, "That's not true," and continued right on. Mr. Cool.

There's been a steady and very noticeable decline in civil discourse in this country over the last few years. The whole month of August that we just got through filled with scenes of angry Americans yelling at each other at town hall meetings over the subject of health care reform. And when a member of Congress yells at the president of the United States, calling him a liar in the middle of an address to a joint session of Congress, it doesn't get much lamer than that.

How did we get to the point where the highest office in the land is treated with such utter disrespect?

Here's the question. Should Congressman Wilson face punishment for yelling, "You lie!" at President Obama during last night's address to the Congress?

Go to Post a comment on my blog.

You know, we run footage of those foreign governmental bodies where they fight with each other, throw chairs and furniture. We sit and laugh about it. We're getting there.

BLITZER: Well, still, we haven't seen any fistfights, as we've seen in...

CAFFERTY: Haven't seen anything like this in all the years I've been doing this.

BLITZER: No, I haven't either.

CAFFERTY: Unbelievable.

BLITZER: Not before a joint session of Congress.

CAFFERTY: I mean, that's always a very formal kind of -- you know, everybody's on their best behavior.

BLITZER: Right. Well, there's some recommendations for a formal resolution of censure to be passed by the House. I don't know if that's going to happen.

CAFFERTY: Well, the Democrats may do that. They have the votes, I suppose, if they wanted to.

BLITZER: They certainly do, if they want to do that.

OK, Jack. Thank you.

CAFFERTY: Sure. BLITZER: Some of his fellow Democrats say President Obama has some convincing to do. Amid the divide over health care reform in the president's own party, it appears the speech last night softened some very hard lines.

"First of all, this conversation never took place." That's an exact quotation from Bernard Madoff. Unflattering new tapes revealing the extent to which Madoff went to keep his scam secret. Wait until you hear the rest of what he had to say.

And amid calls for him to resign as governor of South Carolina, Mark Sanford is now out with new comments.


BLITZER: A very disturbing story just coming in to THE SITUATION ROOM right now.

Let's go to CNN's Fredricka Whitfield with details.

What's happening, Fred?

FREDRICKA WHITFIELD, CNN ANCHOR: Well, Wolf, we're talking about a car accident involving a school bus full of children and an SUV taking place on Staten Island. We have some images to show you.

We understand that the SUV and the school bus crashed into one another, actually careened through a fence and ended up in someone's yard. You're looking right there at a good number of the 25 children and two adults. They were actually treated for their injuries on the scene. However, one adult was actually taken to a hospital.

Unclear exactly why this accident took place, but you're seeing right there first responders on the scene, trying to do the best they can to make sure that all those who were shaken up by this pretty frightening accident involving a school bus and an SUV, that everyone is being tended to -- Wolf.

BLITZER: All right. We'll get some more information. Thank you, Fred.

President Obama asserting his authority in the health care reform debate with his speech to Congress last night. Republicans may not be lining up behind him, but what about members of his own party?

Our senior congressional correspondent, Dana Bash, is joining us now with more.

Dana, what are you hearing on this, the day after?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: What we're seeing and hearing, Wolf, is that at least some of the Democrats whose differences have slowed the president's health care plan are starting to slowly climb out of their trenches.

(BEGIN VIDEOTAPE) BASH (voice-over): If the president's speech was meant to bridge the health care divide in his own party, listen in. It may have had an effect.

REP. JIM MCGOVERN (D), MASSACHUSETTS: All the stars are aligned. I mean, if we can't do this now, then when the hell are we going to be able to do it? I want to help this president make history.

BASH: Massachusetts Congressman Jim McGovern describes himself this way...

MCGOVERN: I'm a proud liberal Democrat.

BASH: He strongly supports a government-run health care option, but says the president's address helped convince him to be willing to compromise.

MCGOVERN: We need meaningful health care reform. And it may not be everything I want. I mean, I'm a single payer person. But at the end of the day, if it moves the ball forward, then I think it's going to be worth supporting.

BASH: To be sure, some liberal Democrats are still firmly entrenched.

REP. LYNN WOOLSEY (D), CALIFORNIA: We don't have health care reform unless we have a public option.

BASH: But the House Speaker even softened her stance. This often repeated line in the sand...

PELOSI: There's no way I can pass a bill in the House of Representatives without a public option.

BASH: ... now noticeably absent.

PELOSI: This is about a goal. It's not about provisions. As long as our goal of affordability and accessibility and quality, then we'll go forward with that bill.

BASH: That's a telltale sign that liberal Democrats are now more accepting of this reality -- any health care bill must be conservative enough to pass the much more moderate Senate. In fact, Pelosi even signaled the House now will not act until it's clear what the Senate Finance Committee will produce.

Their proposal now has no public option. And on other issues, the Democratic chairman boasted the president's new plan tracks with theirs.

SEN. MAX BAUCUS (D), FINANCE COMMITTEE CHAIRMAN: Very close to being in sync here, and that's confidence building (ph).


BASH: Now, talk to just about any leadership source in the House or the Senate, and they will tell you that the president's health care plan depends on a ver powerful, pretty large group of centrist Democrats in the Senate. And 15 of those senators, Wolf, just boarded a bus from here at the Senate steps, and they are headed to the White House right now to meet with the president -- Wolf.

BLITZER: All right, Dana. Thank you.

We're going to watch that story over at the White House, see what happens. Suzanne Malveaux will be joining us later.

Meanwhile, the fate of the health care reform package could also ultimately come down to two, Maine's two senators, both moderate Republicans, Olympia Snowe and Susan Collins.

Our chief national correspondent and the anchor of CNN's "STATE OF THE UNION," John King, is in Portland, Maine, right now.

John, these two women, they potentially could hold the fate of health care reform in their hands.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Wolf, they certainly could hold in their hands the question of whether any Republicans will come on board. So that's why we wanted to come to Maine the morning after the president's speech.

We stopped by Senator Olympia Snowe's office, listening to some of the phone calls coming in. And it was a mix. This is a pretty independent state. A lot of mavericks here.

Some were saying, how were you going to pay for it? Other people were saying, I want you to fight for the public option. So, that is the advice Senator Snowe is getting from her constituents.

This is state that has more uncommitted voters, undeclared voters, Independents, if you will, than Democrats or Republicans. So, it's very interesting to watch, Wolf, because that is where the president has suffered the most, among Independents so far in the health care fight.

So, we wanted to come here and get a flavor for it. Talking to a number of people.

Some small businessmen say they're worried about the cost. Others say they want something done.

We did our diner segment this week with people who support the president's plan. Again, some questions about, how are you going to pay for it? But broadly supportive.

The most interesting dynamic is here's a state where Barack Obama wins by double digits. The very same year, Republican Senator Susan Collins is reelected by double digits. And so you ask, what do the people of Maine want?

And I spent some time with the former independent governor, Angus King, today, and he said, look, Olympia Snowe and Susan Collins are virtually untouchable. If they want to support the president's plan, they will have the support of the people in Maine. And if they say in the end they can't do it, that will be fine with the people of Maine, too -- Wolf.

BLITZER: And they're the great hopes of the White House, these two moderate Republicans. And maybe one or two others. And that would be a huge deal for the president, if he could get a few Republicans on board.

John, you had a moment today with a lobster in Maine. We've got a picture.

I want to show our viewers John King with a good friend over there.

What happened?

KING: Well, I want everyone to tune in on Sunday. I'm doing a little math here. This is some interesting math.

I'm working on the lobster docks in Portland. You can tune in on Sunday to see the method to my madness or the madness to my method. But that was one of the stops.

We stopped with a small businessman who sells fish and lobsters here, and he's concerned about the costs. And one of the things that we went out to the dock -- to use the lobsters for a demonstration -- as part of a piece for Sunday. But it is a critical part of the economy here, Wolf, as you know, the lobster industry, fishing industry.

And we stopped at one small business and the man says he pays $300 a month for each of his employees to have health care. He's a Republican.

He would like some help from the federal government, but as very typical in our travels not only here in Maine, but across the country, he said, sure, I'd like some help. Sure, if this would actually lower my costs and protect me, I'd be all for it. But I'm very skeptical that the government can get big things right. I think we have too big of a deficit right now.

So, that was a conservative voice here in a state where, more often than not, you find more independent-minded voters. And I can tell you, on the morning after the president's speech, Wolf, here, he seems to have done a fairly good job convincing the people of Maine to at least support him going forward to try to get it done this year.

BLITZER: We'll tune in Sunday morning, 9:00 a.m., "STATE OF THE UNION," and see what happened to that lobster. It looked like a two pounder, three pounder. What was it, John?

KING: That was about a two-and-a-half pounder. And we saw some three-and-a-half, four-pounders too, Wolf. They've got some beauties here.

BLITZER: Yes, they certainly do. All of us who have been to Maine appreciate that.

John King, thanks very much.

Growing calls for South Carolina's embattled governor to resign, but will lawmakers take matters into their own hands and impeach him? Mark Sanford, he's speaking out again.

Plus, new details of the man accused of hijacking a plane and why he wanted to meet with Mexico's president.



BLITZER: A congressman apologizes for calling the president a liar, but what about the issue he's raising, health insurance for illegal immigrants? The president says that won't happen, but what if immigration reform passes?

I'll speak with the Health and Human Services secretary, Kathleen Sebelius.

An unflattering new tapes reveal the extent to which Bernard Madoff went to keep his scam secret.


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

Happening now, talking to the Taliban. Should negotiations with militants be part of the new U.S. strategy in Afghanistan? And what about more U.S. troops?

CNN's Fareed Zakaria, he'll be joining us to take a look at various options.

Also, he accuses President Obama of using a letter from the late Ted Kennedy as a political tool. We're talking about the Republican Party chairman, Michael Steele. He's here with his review of the president's speech before Congress.

And he's a now an ex-lawmaker embroiled in a sex scandal, and he's trying to explain his very graphic remarks that were caught on tape and cost him his job.

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

Outburst made, apology accepted. Now that a Republican congressman has apologized to the president for calling him a liar, some people are looking into the issue the congressman is raising.

Let's talk about that and more with the health and human services secretary, Kathleen Sebelius.

Madam Secretary, thanks very much for coming in.


BLITZER: All right.

The president flatly said last night -- and this is what caused the stir out there -- he says, none of the -- the proposals he's putting forward would help those who are here in the United States illegally. Is that right?

SEBELIUS: That's correct.

He made it clear that the bill specifically bars anyone who is in the country illegally from accessing the health insurance system.

BLITZER: But the president also says that, maybe later this year, early next year, he wants the Congress to enact comprehensive immigration reform, which would find a way to allow millions of illegal immigrants to have legal residence in the United States.

Would they then be eligible for all of these benefits that -- that are now being considered?

SEBELIUS: Well, Wolf, I don't pretend to know what may end up in a comprehensive immigration bill.

I think the president has long figured that we need a comprehensive solution to fix the situation where people are in this country illegally. And we need Congress to roll up their sleeves and address it.

What they may decide to do with any number of situations, I don't know. But it's very clear that the health reform bill pending in Congress, the bills that the House wrote, the bill that is out that the Senate wrote specifically ban anyone in the country illegally from becoming part of that insurance system.

BLITZER: Because John Boehner, the Republican leader in the House of Representatives, today, he said you had a chance -- Democrats, we're talking about -- to underline that point during the committee process in the House, but you didn't do it, which raises these questions. Listen -- listen to Boehner.


REP. JOHN BOEHNER (R-OH), HOUSE MINORITY LEADER: There were two opportunities in committee for House Democrats to make clear that illegal immigrants would not be covered by putting in requirements to -- to show citizenship. Both of those amendments were, in fact, rejected.


BLITZER: Was that appropriate, to reject those amendments?

SEBELIUS: I just think it's very disingenuous of the minority leader in the House, who has not been a part of this conversation from day one, who backed away from the table, to suggest that the language that is in a bill which is very specific and very clear isn't sufficient.

Read the bill. It clearly bans those in the country illegally from accessing the system. I guess you could say it four or five more times. But, unfortunately, in spite of over 100 Republican amendments that were part of the House process accepted in the bill, not a single Republican voted for the bill out of committee.

So, I would suggest the minority leader needs to come to the table with suggestions that he thinks would be helpful, and then participate in a process.

BLITZER: The new department -- I guess we could call it the department of public option that is being considered out there, a new government agency, in effect, to have a new health insurance company competing with the private insurance agencies, how big of a bureaucracy, how big of an operation would this be? How many employees, new government workers, would be required to work for this public option agency?

SEBELIUS: Well, again, Wolf, the specifics of what the House and Senate will end up with aren't clear.

What is clear is that in a new marketplace which would be available to those Americans without insurance coverage right now at all or those Americans who have -- or the so-called underinsured, who have limited coverage, they need affordable coverage, so a new marketplace that will be primarily private plans offering a series of benefits, and, as a competitive ingredient, you would have a public option.

BLITZER: But, Madam Secretary, have you not looked at what this new government agency would entail, how many workers, how many people would have to be employed in order to get it off the ground?

SEBELIUS: We haven't begun to do that analysis, because, as you know, there's a version in the House. There's a different version in the Senate Health Committee. The Finance Committee is describing even a -- a third version.

Once we get to a bill and have some language, I think we will start in this agency to flesh that out. But suffice it to say that, whatever it is, we currently have major government programs run by the Department of Health and Human Services, Medicare, Medicaid. We have our friends at the Defense Department who run a major nationwide health service, the Veterans Administration.

So, there are lots of networks to tap into. There's lots of experience already here running a major health insurance program for Americans. And...

BLITZER: But it would be -- presumably, if it's going to compete with Blue Cross and Blue Shield, or UnitedHealthcare, or Kaiser, or some of these other big private insurance companies, this would be a big bureaucracy, requires thousands, if not tens of thousands, of employees? SEBELIUS: Well, I think what you see in -- in the government programs that are currently operational -- and 43 million Americans have Medicare -- another 39 million are in the Medicaid system that is a partnership with state and federal government -- that the overhead cost incurred by the government is far less than the administrative costs, the number of employees, the number of bureaucrats from private insurance companies.

So, my guess is, we can do a more efficient plan from the get-go. And that's one of the reasons that the costs may be well lower and more competitive.

BLITZER: I'm -- I'm going to show you some pictures of the president last night when he walked into the chamber of the House of Representatives. He was enthusiastically received. You can see he's shaking hands with a lot of the members, kissing some of the other members.

And I wondered, because some people were raising this, at a time of concern of the H1N1 swine flu, is -- is this what we want to see, this kind of activity going on?


SEBELIUS: Well, we hope that, if members of Congress were sick, that they stayed home. Maybe that was the case. That's what we're urging people to do.

I think, eventually, if H1N1 begins to spread more widely, we may encourage people to do the flu bump, you know, elbow one another, instead of shaking hands or -- or kissing.

At this point, I think the most effective strategy is stay home if you're sick. Don't kiss anyone, but, hopefully, stay away from other folks, because...

BLITZER: I like -- I like that flu bump. We got a picture of...



BLITZER: ... you doing that -- that elbow -- that elbow bump over there...

SEBELIUS: That's right.

BLITZER: ... so you don't actually touch each other or shake hands at a time of...

SEBELIUS: That's true.

BLITZER: There is a pandemic out there right now. We're all concerned.

Anything else you want to tell us right now about the H1N1 that we need to know?

SEBELIUS: Well, today, I participated in a seasonal flu seminar, driving the message that, right now, seasonal flu vaccine is available. I'm actually going to get my shot tomorrow from the Medical Reserve Corps.

But we sure want older Americans, Americans with underlying health conditions, health care workers, to get their seasonal flu shot right now. We are still...

BLITZER: When is the H1N1 vaccine going to be ready?

SEBELIUS: Well, we think we're still very much on target for mid-October. And, as you know, the clinical trials are under way now.

But having people step up and get seasonal flu shots will keep them that much safer. And then we -- we will begin to get information out about the vaccine sites and where people will be able by mid- October to get the H1N1 vaccine.

BLITZER: If I were there, I would give you the elbow bump right now, instead of shaking your hand, because it's...



BLITZER: ... very nice.

Thanks very much, Madam Secretary.

SEBELIUS: Nice to talk to you.

BLITZER: Good luck with all of these issues.

SEBELIUS: Thank you.

BLITZER: Expert advice on how to dodge government regulators from the man who ran the largest Ponzi scam in history, Bernard Madoff. He didn't know the conversation was actually being recorded.

And it's hot, dirty, and extremely dangerous -- it's also home for dozens of U.S. Marines on front lines in Afghanistan. We go up close at Patrol Base Jaker.

Plus, two deadly police shootings in both day, both victims unarmed -- now there are some serious questions about police policy in one major American city.


BLITZER: Caught on tape, Bernard Madoff, one of the biggest swindlers of all time, advising colleagues how to fool government watchdogs.

Our senior correspondent, Allan Chernoff, is here with more on this story.

We're getting an inside peek on his strategy.

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: No question about it. Bernard Madoff tried to make sure that the regulators would never know what he was up to, never learn of his scam. He's on audiotape advising executives of an investment firm that sent money his way how to deal with the SEC.



BERNARD MADOFF, CONVICTED FELON: First of all, this conversation never took place.


CHERNOFF (voice-over): That's how Bernard Madoff begins his phone call with two executives of Fairfield Greenwich, an investment firm that raised hundreds of millions of dollars and sent it to Madoff to invest.

On tape, Madoff is advising two executives of the firm how to deal with attorneys from the Securities and Exchange Commission.


MADOFF: You don't want them to think you're concerned about anything. With them, you should be -- you're best off you just be casual.


CHERNOFF: Madoff tells the feeder fund executives to steer SEC attorneys away from any indication that Madoff was connected to their firm.


MADOFF: You know, you don't have to be too brilliant with these guys.

The best thing to do is to not get involved with, as you said, written instructions, if possible, because any time you say you have something in writing, they ask for it.


CHERNOFF: The SEC was fooled time and again. It looked at Madoff's books five times and failed to discover that he really wasn't investing his clients' money, just running a giant Ponzi scheme,shuffling clients' money and taking plenty for himself.

UNIDENTIFIED MALE: The SEC never conducted a competent and thorough examination or investigation of Madoff for operating a Ponzi scheme.

CHERNOFF: Former SEC Chairman Arthur Levitt tells CNN the commission's enforcement ability has been damaged in recent years by careless leadership.

UNIDENTIFIED MALE: Clearly the people doing the inspections were inadequate, were underfunded.

CHERNOFF: Madoff is now serving a 150-year prison sentence. He swindled thousands of investors out of billions of dollars. He fooled regulators, and even as he was telling Fairfield Greenwich executives how to deceive the SEC, he was trying to deceive them as well.

During much of phone conversation, Madoff brags about his supposed investment strategy.


MADOFF: The skill of Madoff is knowing when to get into the market and get out of the market. That's the role we play. I mean, that's the why -- why -- reason you choose us.



CHERNOFF: Which, of course, was all a lie.

Fairfield Greenwich this week agreed to pay $8 million to settle civil fraud charges with the Massachusetts secretary of state, whose office supplied the Madoff tape.

The SEC, meanwhile, is shaking up its enforcement division, upgrading its computer systems, so they all have access to the same information. And it's revamping handling of complaints and tips -- Wolf.

BLITZER: Lessons learned, we hope.

CHERNOFF: Many lessons to be learned here.

BLITZER: Thank you very much, Allan, for that.

It's the claim that prompted an outrageous outburst during President Obama's speech last night, but the question remains, would health care reform cover illegal immigrants? We have two congressmen, one Democrat, one Republican. They're ready to go toe to toe.

Plus, a young man badly beaten, was it because he's white and his girlfriend is black? Allegations of a hate crime and a double standard.


BLITZER: Let's get to our "Strategy Session."

Joining us now, Democratic Congressman Xavier Becerra of California, Republican Congressman Brian Bilbray, also of California.

Let's talk, Congressmen, about immigration and health -- health care reform.

First of all, Congressman Bilbray, do you believe the president when he says nothing in his proposed health care reform legislation would benefit illegal immigrants in the United States?

REP. BRIAN BILBRAY (R), CALIFORNIA: Well, the Congressional Research Service just said that the president misspoke, that it specifically says foreign nationals, legal and illegal, can have access to the exchange, which is the backbone of the proposal.

And if this was -- if they wanted to guarantee that illegals did not participate, why not allow the E-Verifying, the verification of legal status before somebody gets into the program? I think that somebody's got to take the time to read the Congressional Research Service's report, which specifically says there is nothing that keeps illegals from participating in the program.

BLITZER: Well, that's the House version. That is not necessarily going to be the final version.

But, go ahead, Congressman Becerra. What do you say? Because congressman was flat out yesterday when he said that there will be no -- none of these proposals will apply to those who are in the United States illegally.

REP. XAVIER BECERRA (D), CALIFORNIA: Wolf, I know Brian has a very smart mind and understands the language in the bill.

I know he knows that the explicit language which says that no benefits will go to undocumented immigrants makes it very clear. I also know he knows that the CRS report that he mentioned specifically said that they don't qualify for any benefits.

What it does say is that, like today, any undocumented could go to an insurance company and apply for benefits. They could apply for benefits. They would have to pay for the entire cost of those insurance benefits on their own. There would be no taxpayer subsidy.

So, Brian knows it. He's very much aware of it. But, like that August recess, there are resistors and deniers who just won't move on. And we have to move on. And the president tried to make that clear.

BLITZER: All right, go ahead and respond, Congressman Bilbray.

BILBRAY: Well, I don't know -- I mean, look, I think, when you get down to it, the congressman knows, not just once, but twice, the Democrats eliminated a requirement that you have to show that you were legally present before you got the benefits.

And everyone knows that you can make a law and say -- say all you want about, oh, no one can have access.

BECERRA: Not true, Brian. BILBRAY: But if you don't check, if you don't have verification, everyone knows it's open for fraud and abuse.

We have over $600 million of health care costs just in my county in one year. That's the kind of abuse that you can see if you don't require checking. So, why was the Democrats denying the requirement to check that people were legally present to give enforceability, not just once, but twice?

BLITZER: All right.

What's the answer to that, Congressman Becerra?

BECERRA: Wolf, again, I think Brian's smart enough to know the answer there.

We have enforcement mechanisms in place required by law for the all the different federal programs that someone might apply for these benefits from. And, as a result, those things apply. Those particular verification methods already apply.

Let's say we add a new crime to the crimes of felony. We don't along with that legislation that makes something a new felony also say, and, by the way, this is the process to prosecute somebody for that crime of a felony, because we have in the books, in law, what it means to be prosecuted for a crime of felony.

Another point. Brian, when you voted for the Medicare Part D prescription drug bill for Medicare's seniors to get prescription drugs, you didn't vote for a verification system in that Republican- sponsored bill that was signed by President Bush.


BECERRA: Why? Because there was already a provision in place that called for verification...

BLITZER: All right.

BECERRA: ... of Medicare, as for Medicaid, as for every other government benefit.

BLITZER: Go ahead, Congressman.


BECERRA: And that's why you don't have to repeat that.


BILBRAY: First of all, I didn't vote for that bill. I wasn't here then.

But -- but this verification issue is why the president this month set a policy that all federal contractors need to verify now before they hire someone. This is -- everyone knows that this is the gold standard. If you really want to stop and assure people that -- that illegals are not going to get benefits, you have to have an enforcement clause.

BLITZER: But, Congressman -- Congressman...

BILBRAY: And there -- this one, even the president is supporting when it comes to employers. He should support it also with these benefits.

BLITZER: So -- well, Congressman Bilbray, your Republican colleague from South Carolina Joe Wilson, when he said "You lie," when he called the president a liar on the House floor on the specific issue of illegal immigrants getting access, getting benefits from these proposals, was he right?

BILBRAY: I think the fact is that he was wrong to scream it out. Everybody knows that.

But I think that you made the point, Wolf. I think the president was talking about a bill that he hopes to come out of the Senate, because he definitely wasn't talking about the bill that was brought up by the House by the two committees. I don't think he was -- the president was talking about a bill that, not only once, but twice, denied the enforceability to make sure that illegals are off.

By the statement he made so clear and so strong, I'm sure that he's not aware that the Democrats in the House specifically blocked an enforcement clause that he supports...

BECERRA: Brian, that's not true. That's not true.

BILBRAY: ... and is implementing this year -- I mean, this month.

BLITZER: All right.

I will give you the last word. Go ahead, Congressman Becerra.

BECERRA: Wolf, again.

Come on, Brian. Let's -- it's time to let go of the fiction. August is done. The -- the fairy tales are over with. We need to pass legislation for the American public. And the American public has to hear facts. The facts are that no one has said no to verification. There is verification in place so that any public program that any undocumented would try to get access to, he would be -- he would be denied because there's a verification system in place.

You don't have to repeat it every time in law.

BILBRAY: No, there isn't.

BECERRA: Absolutely, there is, Brian.

BILBRAY: It was removed twice from this bill.

BECERRA: And, if you have us back on, Wolf, I will bring you the citations.

BLITZER: All right. We will continue this discussion in the days ahead. I don't think this subject is going away.

Congressman Bilbray, Congressman Becerra...

BILBRAY: Wolf, I appreciate it. But, if it was the bill, they would have left it in.

BLITZER: All right, well, we will see what happens.


BLITZER: There's still a long way to go before final language emerges from the House and the Senate.

Guys, thanks very much.

BECERRA: Thanks, Wolf.

BILBRAY: Thanks...


BLITZER: An extraordinary feud between the top two candidates in Afghanistan's contested presidential election. I will speak with one of them, the opposition candidate, Dr. Abdullah Abdullah. He's making some very serious allegations against President Hamid Karzai's government.

Plus, Republican Party Chairman Michael Steele, he is here to explain why he's accusing President Obama of using what he calls a political tool last night.


BLITZER: On our "Political Ticker": The governor of South Carolina is defiant. He's refusing to resign after admitting lies and an extramarital affair. Now the governor, Mark Sanford, says he will fight the early release of a state ethics commission report to state legislators.

Listen to the governor.


GOV. MARK SANFORD (R), SOUTH CAROLINA: We have a real problem if members of the General Assembly are going and trying to influence and truncate an ethics committee process, so that they can get the intended result that they want, and then use that for impeachment.


BLITZER: The report probes the governor's travels. The governor says a full investigation should be completed first before a report comes out. The governor denies ever using state, private and commercial aircraft improperly.

Remember, for the latest political news any time, you can always check out

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

JACK CAFFERTY, CNN ANCHOR: I will be speaking about Mr. Sanford a little later in the broadcast.

BLITZER: I know you will. I know you will. You have spoken about him before.

CAFFERTY: And we're going to speak about him again.

But, later, right now, the question is, should Congressman Wilson face punishment for yelling "You lie" to President Obama during last night's address to Congress?

Cheryl writes from Bluffton, South Carolina: "He should and he will, Jack. We in South Carolina are going to elect Rob Miller to replace him in Congress. No further punishment's needed aside, from the crippling embarrassment this accomplished GOP liar is facing after his childish outburst."

Jim says: "I think he should be censured by the House for his disgraceful conduct. If things like this are allowed to stand unpunished, the respect for our presidential office will continue to deteriorate and our meetings such as the one last night will turn into shouting matches, much like the parliament in England. Shame on Wilson."

Robin writes: "The utter disrespect Joe Wilson showed to the president was despicable. As a classroom teacher, if a student had called me a liar while I was addressing my class, he or she would have been thrown out, not to return until accompanied by a parent. Yes, Joe Wilson should be held accountable for his behavior. There was no excuse for it."

Eileen in Summit, New York: "Although I agree the outburst was not appropriate to the situation, why, may I ask, is there such controversy about Congressman Wilson, when we have a tax cheat as head of the House Ways and Means Committee?"

I think she's referring to Charlie Rangel.

"Are a few spoken words more significant than the actions of someone who so blatantly breaks the law?"

Rodney writes: "Jack, by nature, I'm a pretty cheap guy. But Joe Wilson ticked me off so much last night, I couldn't wait to boot up my computer, log on to Rob Miller's Web site and send him 100 bucks. We cannot reelect people like this anymore."

And Denny in Tacoma, Washington, writes, "Being a Republican is punishment enough."

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

Mark Sanford still ahead in "The Cafferty File" -- Mr. Blitzer, back over to you.

BLITZER: All right. Jack, we will be watching.

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

Happening now: Republican leaders are still ripping the president's speech on health care reform, even his reading of a poignant letter from the late Senator Ted Kennedy. It's being called a tool. I will speak about that with the Republican Party chairman, Michael Steele. He's standing by live.

His top rival accuses the Afghan president, Hamid Karzai, of massive election fraud, and suggests his government is tied to the opium trade. I will speak with the opposition candidate, Dr. Abdullah Abdullah, in Kabul.

And he spoke about sex, spankings and skimpy underwear, but the microphone was on in the California state capitol. And, suddenly, this family values lawmaker is an ex-lawmaker.

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