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President Obama's Vietnam?; White House vs. Wall Street

Aired October 19, 2009 - 18:00   ET


WOLF BLITZER, CNN ANCHOR: And happening now, the best political team on television on these stories.

President Obama's Vietnam, that's how many Americans now see the war in Afghanistan. The president's decision about sending more troops keeps getting more complicated. Stand by.

The White House vs. Wall Street, round two. Is the Obama administration stuck in campaign attack mode?

And the alleged hoax was on all of us. Do the news media and law enforcement officials share some of the blame for the balloon boy drama?

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

This hour, new hope that the stalemate over Afghanistan's disputed elections will end soon. And that could influence whether President Obama sends in more U.S. troops. A U.N. commission investigating fraud today invalidated ballots from more than 200 polling stations. And an independent group now says President Hamid Karzai does not have enough votes to avoid a runoff.

Secretary of State Hillary Clinton says she expects Karzai to make an announcement about that as soon as tomorrow.


HILLARY RODHAM CLINTON, U.S. SECRETARY OF STATE: The ECC, the Elections Complaint Commission, has made its findings known. And we're looking to hear from President Karzai tomorrow, Kabul time. But we have continued to urge that everyone follow the constitution and the legal process, which is important for the people of Afghanistan and their leaders to exemplify a commitment to the orderly running of elections going forward.


BLITZER: All right, let's bring in our White House correspondent, Dan Lothian, who's watching this for us.

How does all this play into the president's decision-making right now, Dan?

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, clearly, as Secretary Clinton pointed out, this is certainly something that the administration is considering. And the administration is really trying to make the point here that the strategy in Afghanistan going forward is much more complicated, Wolf, than just whether or not to send in additional troops. There's a political situation. There's getting credible Afghan leadership on the ground in Afghanistan. And it's presenting its own challenges.


LOTHIAN (voice-over): The White House has maintained that a new strategy for Afghanistan is coming in a number of weeks, but could the disputed elections and President Hamid Karzai's apparent reluctance to accept a U.N.-led audit delay the next critical step?

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I don't want to get ahead of the process, in terms of important decisions that Afghan leaders are going to have to make over the next several days about how to step forward.

LOTHIAN: Senator John Kerry, who chairs the Foreign Relations Committee, has been playing a key role on the ground in Afghanistan.

SEN. JOHN KERRY (D), MASSACHUSETTS: I believe that, before the president commits additional troops, we need to know that we are proceeding forward in Afghanistan with a government in a constructive way that offers us the best hope of success.

LOTHIAN: During his weekend visit, a senior Democratic official says Senator Kerry had frequent conversations with both the White House and the State Department. While it's an independent trip, it's supported by the White House, and according to one senior administration official, it has been very helpful.

Meanwhile, the finger-pointing continues. On "STATE OF THE UNION WITH JOHN KING," White House Chief of Staff Rahm Emanuel was critical of President Bush's administration planning of the war in Afghanistan.


RAHM EMANUEL, WHITE HOUSE CHIEF OF STAFF: And the president is asking the questions that have never been asked on the civilian side, the political side, the military side, and the strategic side.


LOTHIAN: But President Bush's former top adviser, Karl Rove, fired back on FOX News.


KARL ROVE, FORMER SENIOR ADVISER TO PRESIDENT BUSH: Mr. Emanuel left the impression that they were the first people to ask tough questions. That's simply not true. A strategic review was begun in 2008 by the Bush administration.



LOTHIAN: Meanwhile, President Obama continues his review as to whether or not to send in additional troops. And he will have a sixth meeting with his war council here at the White House this week -- Wolf.

BLITZER: This week. Do we know which day yet, Dan?

LOTHIAN: We don't know the day, We don't know the time yet. But in addition to the meeting this week, we're told that it's not out of the question yet that there will be an additional meeting. So that would bring it to seven meetings so far and the president, to our knowledge, has not made up his mind.

BLITZER: All right, working hard on the subject. Thanks very much for that, Dan.

New evidence that Americans, meanwhile, are souring on the war in Afghanistan and the prospect of sending in thousands of additional troops.

Let's go to our senior political correspondent, Candy Crowley. She's going over brand-new poll numbers.

Candy, what are we learning?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Well, you know, Wolf, the White House says the president will not make any decisions about Afghanistan according to public opinion polls. But if he did, the answer would be pretty clear because Americans think they have some of the answers to the questions the president and his advisers are asking themselves.


RAHM EMANUEL, WHITE HOUSE CHIEF OF STAFF: We have had five meetings. There's another set of meetings this week and the following week.

CROWLEY (voice-over): The president may be undecided on Afghanistan, and his advisers seem divided, but Americans are decidedly not, with the latest polls showing just 39 percent of Americans favor sending more U.S. troops to Afghanistan; 59 percent are opposed.

In general, the latest CNN/Opinion Research Corporation poll shows an America broadly skeptical that Afghanistan can pull itself together under a stable government and fearful of Vietnam syndrome, vaguely defined as fear of an unending, unwinnable war -- 52 percent think Afghanistan has turned into another Vietnam -- 46 percent disagree with that, in the latter category, Senator John Kerry, a decorated war veteran who became known for his opposition to the Vietnam War upon his return home.

Afghanistan, Kerry says emphatically, is not Vietnam. SEN. JOHN KERRY (D), MASSACHUSETTS: We are here in Afghanistan because people attacked us here in the most significant attack against the United States since Pearl Harbor. We are here because there are still people at large who are plotting against the United States of America. And we are here because the stability of this region is of critical strategic interest to the United States.

CROWLEY: And that's one of the curious twists of the poll, because most Americans agree with the senator -- 60 percent say it's necessary to keep troops in Afghanistan to prevent terrorism in the U.S. But at the same time, 57 percent of Americans say they oppose the war.

CNN pollster Keating Holland thinks, in part, some Americans no longer believe terrorism should be fought at any cost.

KEATING HOLLAND, CNN POLLING DIRECTOR: Americans don't feel the same personal jeopardy when it comes to terrorism that they felt in 2001 and 2002. Others may simply see the benefit of preventing a terrorist attack somewhere in the United States being outweighed by the costs associated with a long ongoing war that involves a lot of troops and a lot of money.

CROWLEY: It's not known when and what the president will decide about Afghanistan, but it's pretty clear that, should he send more troops, he will have a big sales job ahead of him with the American people.


CROWLEY: That job will be particularly difficult among older Americans. When it comes to equating Afghanistan with Vietnam, the sentiment was strongest among seniors, one of the most reliable midterm voting blocs -- Wolf.

BLITZER: Because the older Americans remember Vietnam very vividly.

CROWLEY: They do, indeed.

BLITZER: Thanks, Candy, very much.

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

JACK CAFFERTY, CNN ANCHOR: When it comes to health care reform, it could pay for workers to lose weight, stop smoking or lower their cholesterol.

"The Washington Post" reports that bills in the Senate include so-called wellness incentives which may more than double the maximum penalties employers can charge workers who fail medical evaluations. This follows a trend among some companies that offer lower premiums to employees who don't smoke, complete health assessments or meet goals for blood pressure, body mass or cholesterol.

Supporters say incentives like these can make people make healthier lifestyle choices. But critics say it discriminates against preexisting conditions. They say it could make health coverage too expensive for those more at risk for things like diabetes, heart disease or stroke.

Skyrocketing health care costs have left some wondering whether health insurance ought to be more like car insurance. The good drivers get a discount. The reckless ones pay more. Meanwhile, it is open enrollment time at offices everywhere, including right here at CNN. And reports employees will soon face shockingly higher health costs.

Companies are increasing everything from deductibles to co- payments and employee out-of-pocket maximums. Many employers are also moving from a co-pay, meaning a flat fee of somewhere between $10 and $35 for a doctor's visit, for example, to a co-insurance model, where employees will pay a percentage of the total medical expense.

Companies are also offering fewer health plans, which may mean that some people will be forced to switch doctors. It's getting ugly out there. Here's the question. Should healthy employees have lower insurance premiums? Go to Post a comment on my blog -- Wolf.

BLITZER: Not only getting ugly out there, Jack; it's getting complicated out there.

CAFFERTY: Well, that, too.


BLITZER: Sort of need a Ph.D. to figure out which plan you should use.

CAFFERTY: This is terrible to tell you this, but I actually have somebody going to attend one of these class sessions that the company's giving on open enrollment.


CAFFERTY: So, they -- and then they can come back and tell me what I'm supposed to do, because I can't handle it.

BLITZER: It's good to have people, Jack.

CAFFERTY: It is good to have people.


BLITZER: Yes. When your people find out, would they let me know, too?

CAFFERTY: I will have your people -- my people tell your people. And then you will be in the loop.


BLITZER: Appreciate it, Jack. Thanks very much.



BLITZER: Was the war in Afghanistan simply going adrift over the past eight years? The White House now says, yes, and essentially says it's as if serious U.S. engagement in Afghanistan is only starting right now.

Ben Stein and Arianna Huffington, they are here together with the best political team on television. Get ready.

Clash of the titans. The most powerful institution in America is blasting the powerful financial institution. In the battle between the White House and Wall Street, guess what? You're caught in the middle.

And there is now even more help for people trying to buy and sell homes. We will explain what's going on right here in THE SITUATION ROOM.


BLITZER: One of the biggest and toughest decisions of the Obama presidency doesn't seem to be getting any easier right now.

Let's talk about the war in Afghanistan and the possible introduction of thousands of additional U.S. troops. Let's bring in the best political team on television. We're joined by our senior political analyst, Gloria Borger, our CNN correspondent Joe Johns, "Fortune" magazine columnist Ben Stein -- he's a former Nixon administration speechwriter, for those of you who remember that White House -- and Arianna Huffington, editor in chief of

I'm going to play a little clip to start this off, Rahm Emanuel speaking to our John King yesterday on "STATE OF THE UNION," explaining why the Obama administration is so deeply engrossed in Afghanistan strategy right now.


RAHM EMANUEL, WHITE HOUSE CHIEF OF STAFF: It's clear that basically we had a war for eight years that was going on that's adrift, that we're beginning at scratch and just from the starting point after eight years. And there's not a security force, an army, the type of services that are important for the Afghans to become a true partner.


BLITZER: Ben Stein, is that a fair assessment of the eight years of the Bush administration?

BEN STEIN, FORMER NIXON SPEECHWRITER: I'm afraid to say it is. I hate to say it is because I love Bush and I love Karl Rove who replied to that on an earlier part of your show.

But I think the war was very much adrift. The Bush administration was concentrating on Iraq, where they did fairly well. This was -- there was never anywhere near an adequate force in Afghanistan. And, by the way, what the heck would we have done if the Russians had started giving the Taliban Stinger anti-aircraft missiles, think about that sometime, the way we did to the Russians?

But we cannot afford to lose this war. That's the problem. It's been handled badly. It's a nightmare. Everything's upside down. But if we lose, we have a belt of Taliban coming very close to the capital of Pakistan.

BLITZER: Well, let me bring Arianna in on that specific point.

Can the U.S. afford to lose in Afghanistan, Arianna, right now?

ARIANNA HUFFINGTON, CO-FOUNDER, HUFFINGTONPOST.COM: Well, Wolf, it depends on how we define victory and how we define defeat.

I'm very glad to see that Ben admitted that we were adrift for eight years. I'm very glad to see that the administration is actually developing a strategy, rather than simply sending troops and escalating. And I'm also very glad to see that there's been a definite shift in what the administration is saying.

Over the weekend in Rahm Emanuel's very significant interview with John King, he said not only what you just showed, but also the fact that we cannot really make a decision without knowing that we have a credible partner in Afghanistan. And while the election is still not settled, while there is pressure on Karzai to either agree to a runoff or to some kind of coalition government, clearly, no decision should or it looks like is going to be made.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, but I think, again, Arianna, the administration is clearly well aware of that. They have a problem here, because, in the end, they could be propping up a pretty rotten government over there. But it's the only government they have got.

And given that their mission, as stated, is to keep al Qaeda from attacking the United States and they believe that being in Afghanistan is an important part of that, they're going to have to figure out a way to deal with him, right?

JOE JOHNS, CNN SENIOR CORRESPONDENT: But you also have to ask the question what...

HUFFINGTON: But, Gloria, you know...

BLITZER: Go ahead, Arianna. Go ahead.

HUFFINGTON: ... we have been told that there are only 100 al Qaeda left in Afghanistan. The majority have moved to a new neighborhood in Pakistan. So, let's be very clear. What exactly are we fighting for? Are we fighting for our own national security? This is clearly no longer the case. We are fighting primarily, it seems now, to save face, to protect women. This is another new argument that keeps appearing again and again. But it's no longer clear what is in our own national security interests.

BLITZER: But that issue -- I want Joe Johns to come in -- but, Arianna, the notion of saving women in Afghanistan, you remember what it was like under Taliban rule and the plight of women in Afghanistan. Isn't that an important interest that the whole world should have, to make sure that women aren't abused the way they were before?

HUFFINGTON: Well, it is an important issue, but we are finding out more and more about the abuse of women right now under the Karzai government.

We have a lot of the same laws that have been instituted since last summer, since last July, specifically, that let men make decisions for women, don't let them work, deprive them of food if they don't get the sex they want, all the same problems that we're dealing with.


JOHNS: Yes. You talk about sort of the lofty political goals, but the fact of the matter is, there's a political reality. A lot of people right now talk about a runoff in Afghanistan.

There are many, many people in this city and elsewhere who question whether you won't get the same result if you have a runoff. How are they going to fix all the problems that occurred in that last election in order to have a new election and avoid the same thing from happening again?

BORGER: Whoever's in charge, you have to make sure that they're performing. If we're going to send more troops over there, if we're going to prop up their troops, if we're going to train Afghan troops, we have to make sure that the government can actually do the job and keep the corruption out.

STEIN: Well, I would say what we have to do is make sure that there's not a belt of countries, Iran, Afghanistan, Pakistan, all controlled by Muslim extremists who hate the United States and who will have access to nuclear weapons.

It was bad enough when the Taliban and al Qaeda worked out the September 11 attacks. What if they had nuclear weapons, which they're going to have, if we don't stop it?

BLITZER: All right. That's a nightmare situation.

STEIN: Nightmare.

BLITZER: And if the situation turns bad in Iraq, you could Iraq to that list as well. STEIN: Absolutely. And it is turning bad.

BLITZER: All right. Guys, stand by. We're going to continue our conversation.

A former U.S. government scientist arrested on espionage charges accused of trying to pass secret information to someone he thought was an Israeli agent. Jeanne Meserve working the story.

President Obama sits down in a school cafeteria with third- and fourth-graders and congratulates them on their hard work.

Plus, the Beverly Hills doctor who gave fertility treatments to the so-called octomom is kicked out of a professional organization.

Stick around. You're in THE SITUATION ROOM.


BLITZER: To our breaking news this hour, a former U.S. government scientist arrested today on espionage charges, he's accused of trying to deliver secret information to someone he thought was an Israeli agent.

Let's get some details from our homeland security correspondent, Jeanne Meserve.

Jeanne, what are you learning?

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: Well, his name is Stewart David Nozette. He's 52 years old, MIT-educated. he had top-secret clearances because he had worked for a number of government agencies, including Lawrence Livermore National Laboratories, NASA. He also did some work for DARPA, the Defense Advanced Research Projects Agency.

And it is not clear from the court documents exactly what drew suspicion to him. But according to the criminal complaint filed here in Washington, for 10 years, while he was doing some government work, he also had a contract to provide some technical data to an aerospace company which was wholly owned by the government of Israel. The complaint then says that in January of this year, he flew to another country, an unnamed country, and had with him two thumb drives, but when he came back, he didn't have them.

It was shortly after that, that this sting was set up where an FBI agent posed as a Mossad agent, asked him to provide him with some technical information, and he did that. He provided information about satellite and weapons systems, even nuclear weapons. But of course it wasn't really going to Israel. It was going to someone who was posing as a Mossad agent -- Wolf.

BLITZER: And the complaint specifically says -- the complaint doesn't allege that the government of Israel or anyone acting on its behalf committed any offense under U.S. laws in this case. What are they trying to say here, Jeanne? MESERVE: Well, they are saying that it is this individual that they're interested in. He's accused of attempted espionage. He's going to have his first court appearance here in Washington tomorrow. It is possible we will learn some more details of this case during that court appearance -- Wolf.

BLITZER: Thanks very much for that, Jeanne Meserve.

The Obama administration is lashing out at corporate greed again. What's driving this new round of the White House vs. Wall Street?

And it's almost Halloween, but is it Groundhog Day for a White House that never really stopped campaigning? The best political team on television will be right back.


BLITZER: The most powerful political institution in America is blasting the powerful financial institution in America. And guess who's caught in the middle? You.

Right now, the White House is taking Wall Street to task, essentially saying financial firms appear to be ungrateful after getting your taxpayer money to avoid collapse.

Let's bring in our national political correspondent, Jessica Yellin, who has got some details for us.

Jessica, what's up?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Wolf, populism is back in fashion again over the White House. You could hear it on the Sunday shows. And expect to hear a lot more of it in the weeks ahead, as the White House ramps up its verbal assaults on Wall Street, preparing for the next big political fight, their campaign to pass financial reform.


YELLIN (voice-over): The numbers are growing, on Wall Street, where profits are up, and on the unemployment line, where claims are rising. Nine-point-eight percent of Americans are looking for work, 17 percent if you include the underemployed and those who have given up the search.

The president's men say they are outraged the finance world is so out of touch.


EMANUEL: And I think the American people have a right to be frustrated and angry.


(BEGIN VIDEO CLIP, "THIS WEEK WITH GEORGE STEPHANOPOULOS") DAVID AXELROD, SENIOR WHITE HOUSE ADVISER: They have responsibilities. They ought to meet those responsibilities.


YELLIN: It's round two of the White House vs. Wall Street. Round one was the AIG bonus scandal.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I mean, how do they justify this outrage?

YELLIN: Back then, it was public anger, but, privately, the administration pressured Congress not to pass laws that would limit bonuses. Instead, the president appointed a compensation czar, who has limited power and can't do anything to banks that paid back their bailout billions, like Goldman Sachs, which set aside $16.7 billion for bonuses this year, or J.P. Morgan Chase, $8.9 billion.

Clearly, the administration's campaign to shame Wall Street didn't do the trick.

NEIL WEINBERG, EXECUTIVE EDITOR, "FORBES": Shame doesn't seem to work on Wall Street. Wall Street's language is money.

YELLIN: So, now the White House is turning up the rage, focusing on another number, $224 million. That's the amount spent by the financial services industry on lobbying the first six months of this year, just as Congress prepares to vote on the president's new financial reforms.


RAHM EMANUEL, WHITE HOUSE CHIEF OF STAFF: They're now back trying to fight our consumer offices and the type of protections that will prevent another type of situation where the economy is taken over the cliff by the actions taken on Wall Street and the financial market. And that -- and that is what's frustrating people.


YELLIN: What to watch next -- will the White House back up that rhetoric with a commitment to strong reform?

WEINBERG: Wall Street will continue to make as much money as they possibly can and be shameless about it unless there are rules, regulations and laws that limit their ability to do so.


YELLIN: And, Wolf, this fight is just getting started. In the House of Representatives, they're taking their first votes on these reform issues this month. But this fight is expected to continue well into next year. Don't expect a final bill on financial reform until 2010 -- Wolf.

BLITZER: Jessica Yellin working that story. Let's talk about it with the best political team on television.

Is the White House on permanent campaign mode right now?

We're back with Gloria Borger, Joe Johns, Ben Stein and Arianna Huffington.

Let me start with Joe this time.

You've been around Washington for a long time.

Is the White House entering that permanent campaign mode right now?

JOHNS: I think they've always been in it, if you really look at them. I mean, this situation with the Wall Street people is the same situation we saw just a few months ago. They cut it off, some say, because they were undermining confidence in the economy at the time when they needed confidence in the economy.

Now, they can return to that familiar theme. And a lot of the people you see them going after are people they've always had a fight with.

So, yes, probably the administration is (INAUDIBLE).

BLITZER: Because, Ben, they like going after Wall Street right now and those big...


BLITZER: ...those big bonuses, the health insurance industry here in Washington, Fox News.

BEN STEIN, ECONOMIST, "NEW YORK TIMES" COLUMNIST: The Health Insurance Industry are beggars compared to Wall Street. Wall Street pay is so out of line, so insane, it's absolutely over the top in every way. To hear Rahm Emanuel, though, who got paid something like $7 million for 18 or 20 months' work Lazard Brothers, complaining about it is pretty funny.

Larry Summers, probably the best economist in America, got about $5 million from a private equity firm for a very small amount of work.

Look, Wall Street owns this country. I mean, I hate to say it as a Republican, they own this country. Get used to it. And there should be a campaign against them.

BLITZER: Let me bring Arianna into this discussion, because she's itching to weigh in.

Go ahead, Arianna.

ARIANNA HUFFINGTON, EDITOR-IN-CHIEF, HUFFINGTONPOST.COM: Well, Wolf, you know, I love what's happening right now, because it proves once again that this anger at Wall Street is not about left versus right. Here's Ben Stein saying that Wall Street owns this country.

And there are people across the political spectrum who feel that what's happening right now, this disconnect between the Wall Street economy doing so well and the real economy doing so badly, with almost double digit unemployment and massive foreclosures, is really a massive problem that everybody is going to pay a price in 2010 at the ballot box.

But the Democrats are the incumbents. And clearly, they're beginning to see, as Stu Rothenberg wrote about in "Roll Call" today, that they are in real trouble, not just in Republican leaning districts, but in districts where African-Americans and young people who elected Barack Obama are basically abandoning the party. The disillusionment is spreading.

But here's my concern.

Why are they sounding as though they are merely campaigning?

They are in power. There is so much they could do. I couldn't believe when David Axelrod said yesterday that we only have moral suasion.


HUFFINGTON: How could he say that?

There are billions of government guarantees at the moment, that Goldman Sachs and Citi and Bank of America are benefiting from. They can clearly say that these we lend, unless they actually start lending to the American people, unless they end those bonuses and unless they stop fighting real derivatives and consumer reforms.

BORGER: Well, I think they're trying to do some kind of consumer reform. You know, the -- the problem, Arianna, is -- and I think you'd agree with this -- is that you can only do so much at once. Right now, they've clearly got the moral high ground. It's easy for them, as you know, to take on the insurance industry, to take on Wall Street. That's good for them politically.

But in order to get this -- this reform passed, as Jessica Yellin was pointing out, take -- takes a bunch of time. You know, you don't just snap your fingers and have something happen overnight.

I think if you ask them in the White House, they'd like it to happen overnight. But it's -- you know, sometimes it's a little bit more difficult than that when you've got to pass health care reform first.

STEIN: Well, there could -- look, Congress could pass a maximum wage. There is such a thing as a minimum wage.


STEIN: There could be a maximum wage.

BLITZER: Do you really want that?

STEIN: Absolutely. I mean I...

BORGER: What would it be?

STEIN: I don't know. But the idea -- but I'll tell you what, I'm a stockholder of Goldman Sachs. I have a lot of my retirement in Goldman Sachs. They pay their officers far more than they pay all of us hundreds of thousands of stockholders. The company is run -- is owned by us stockholders. We take all the risks. All the money goes to the insiders.

BLITZER: Because, Arianna, you know this, I'm sure. Goldman Sachs repaid the federal government for the bailout money -- the direct TARP money that they took in. But they got billions through AIG...


BLITZER: ...the insurance company that came to AIG from the federal government. And that money wound up going to...


BLITZER: Goldman Sachs, which I understand they have not given back to American taxpayers.

JOHNS: Not at all.

HUFFINGTON: No. And they have gotten 100 cents to the dollar, Wolf. There was no negotiation. It was unprecedented what they got as a counter party to AIG. And they are still getting guarantees from FDIC, from the Fed.

And, also, of course, there's the ultimate guarantee, that we know that the government would never let Goldman Sachs or Citi or Bank of America, no matter how risky their investments are, to fail. The whole too big to fail problem remains.

So that's why I'm saying that, contrary to what Gloria said, I'm afraid, there is so much the government can do right now. This administration can actually lay a line in the sand and say, this is what needs to happen. Otherwise, we are pulling the rug in terms of our continuing support of Wall Street.

BORGER: But where Republicans are, Arianna, you would think that this -- this would be something -- Ben Stein's talking about it...

STEIN: It should -- it should be...

BORGER: ...that Republicans and Democrats ought to do together.

Easy, right?

STEIN: It should be a Republican issue, because it's an issue about the savers and small businessmen and investors of America who are being ripped off by their employees, namely the officers of the investment banks.

BLITZER: Well, let me just bring Joe in.

Why is it taking so long for Congress and the administration to change the rules of the game, because, you know, they promised they would -- and so many of the experts, the economic analysts out there, say there's no change at all since the disaster of a year ago.

JOHNS: Lobbying. That's it. Millions and millions of dollars poured into this system, even though some of these entities were encouraged not to lobby, given the fact that they were getting this money.

So there's a lot of money floating around out there. And when you think about it, in the long run, that's at least part of the reason why we have such polarization. There are some people who give and some people who don't.

BLITZER: All right, guys, don't go away. We...


BLITZER: Ben Stein, stick around.


BLITZER: We've got more to discuss, including a Colorado couple accused of using the news media in a hoax involving a runaway balloon and a Colorado sheriff admitting he may have used the news media, as well, to expose that couple. The best political team on television is getting ready to sort it all out.


BLITZER: Let's move a little bit away from politics to the week's other big story, that startling statement by the county sheriff in Colorado on Sunday that the gripping story of a runaway balloon and the missing 6-year-old boy was all simply a hoax -- a hoax that was at least partially revealed in an interview I conducted last Thursday night when I filled in for "LARRY KING LIVE".

I asked if that 6-year-old, Falcon, had heard the parents calling out, "Falcon, Falcon, are you around?" And I asked the father to relay the question to the little boy.


R. HEENE: He's asking, Falcon, did you hear us calling your name at any time?

F. HEENE: Uh-huh.

R. HEENE: You did?

M. HEENE: You did?

R. HEENE: Well, why didn't you come out?

F. HEENE: You had said that we did this for the show.


BLITZER: Take a look at everybody's faces as he said that. The county sheriff, Jim Alderden, said that was what he called an "aha moment" that made him suspicious of the Heene family. Now, the sheriff also said this about how he handled the press.


SHERIFF JIM ALDERDEN, LARIMER COUNTY, COLORADO: It's not a criminal offense to -- to, perhaps, lie to them to get them in here or establish a relationship to get them in here. I -- I personally have to say, I feel very bad. And I think we came up and bumped up against the line of misleading the media. And, boy, that is something I really take to heart that we don't do. And I hope I didn't cross that line. I -- I certainly know I bumped up against it.


BLITZER: Arianna, anything wrong with misleading the news media, and, in effect, the public, in order to entice the parents to cooperate and get them to sort of spill the beans?

HUFFINGTON: You know what, Wolf, I think there is just about everything wrong with the way this story was handled. I think the only legitimate response was Falcon vomiting on national television. My feelings...


HUFFINGTON: My feelings exactly.

But for me, the hardest thing about that is that there was so much emoting over Falcon, even after he was found safe, that it made me wonder about the contradiction in our media coverage.

When you consider that at the moment there are 1.5 million children, many Falcon's age, who are homeless, many of them at risk, what does it need -- what do we really need do?

Do we need to put them all in a giant balloon or pretend we are putting them in a giant balloon in order to get a fraction of the coverage that Falcon did?

There is something in the way we cover these little stories, whether it's Falcon or Elian Gonzalez.

Do you remember Elian Gonzalez?

BLITZER: Of course.

HUFFINGTON: You know, being washed up on our shores and getting three "Time Magazine" covers, etc, etc. There is some huge disproportionality in the way we express our concern and caring for a future -- and especially if they are caught in strange contraptions, balloons or inner tubes especially, compared to the hundreds of thousands of children at risk in this country.

STEIN: Well, what about the people being killed in Iraq and Afghanistan?

We don't know the names of any of these people. You just hear on the radio...

HUFFINGTON: But I'm talking about children.

STEIN: ...eight souls.

HUFFINGTON: I'm talking about children...

STEIN: All right. You know something, those people...

HUFFINGTON: ...specifically.

STEIN: You know something, Arianna, those people are someone's child, too. And when they get killed, their parents are pretty damned upset about it. We don't even know their names. They just say eight people killed today, five people killed today. We don't even know their names.

Why don't they get some attention?

They're soldiers...


BLITZER: But what are you saying -- Ben, are you saying we shouldn't...

HUFFINGTON: You and I agree.

BLITZER: Hold on a second, Arianna.

Are you saying we shouldn't be covering -- when we see this little flying saucer flying around the country for three hours or two hours and the police say there could be a 6-year-old little boy inside, that's not a story?

STEIN: It's a story, but it's nowhere near the kind of story that the media has made it into. It's nowhere near that kind of story. The real story is people who put their lives on the line for this country. And that story is being completely ignored.

BLITZER: You've covered these types of stories over the years, although I must say I don't remember a flying saucer...

JOHNS: That's right.

BLITZER: ...which we believe the little 6-year-old boy was...


BLITZER: Was the sheriff OK in trying to mislead the news media in order to win over the cooperation of the parents?

JOHNS: I don't think so. I mean from a -- as a journalist, from my standpoint, I always want people to be straight with me and honest with me. On the other hand, we know that we get used all the time. People try to use us all the time. You know, we got kind of used by that -- that flying saucer picture.

BLITZER: By the family right.

JOHNS: Well, yes. It was a powerful picture. And it wasn't until you got close that you could see that this thing was very flimsy, the Sean Callebs report.

The bottom line, you know, information self-corrects. We cover the story, we stay with it, eventually, we do get to the truth, sometimes not at the very beginning.

BORGER: So, you know, we got duped twice, right?

By the -- by the father and then by the police. And obviously, it's this amazing story of, potentially, a little child floating around at 500 miles an hour.

STEIN: Though we now can stop covering it and start the people who are being killed...

BORGER: Well...

STEIN: ...fighting for us in the wars.

BORGER: Well, I think (INAUDIBLE)...

BLITZER: Well, I think you and Arianna, Bern, agree. Arianna, you agree with Ben that we should be spending a lot more time on other stories, not necessarily on this one, Arianna?

HUFFINGTON: Yes, that's the point, Wolf. Because even after we knew that the little boy was safe, we kept covering the story wall to wall.


HUFFINGTON: I'm not suggesting -- I'm not suggesting not meaning the story. On the Huffington Post, obviously, we followed this story.

But it's the wall to wall coverage. It's the fact that this balloon was shown again and again long after we knew there was nobody in it.

In fact, this is not the "balloon boy," this is the "attic boy."

And as a result, you know, there is an opportunity cost. There is oxygen that's not being used to actually cover stories that are significant, whether they are the stories that Ben wants to cover of the soldiers in Iraq, other stories of the hundreds of thousands of homeless at risk children in this country.

BLITZER: On -- on that note of agreement, I'll have all of you guys back.

But we've got to leave it there right now.

Thanks very much.

President Obama takes a field trip today, sharing lunch with the students of a Maryland school and congratulating them on some exceptional work. We're going to tell you what they have accomplished.


BLITZER: Betty Nguyen is monitoring some other important stories incoming into THE SITUATION ROOM right now -- Betty, what's going on?

NGUYEN: Hey there, Wolf.

Well, President Obama goes to school. Yes, he made an unannounced visit to Viers Mill Elementary in Silver Spring, Maryland today. And Mr. Obama met with third and fourth graders at lunch to congratulate them and their teachers for their hard work. The school gets federal poverty aid and has been praised for closing the achievement gap between minority and other students. What a surprise for those kiddos.

Well, President Obama says that the U.S. Is shifting its policy on Sudan. The softened policy will offer incentives if Sudan's government prove that it's taking steps to end rampant suffering and seek internal peace. The president says the sanctions and internal pressure will increase if nothing changes. Sudan's president has been charged with crimes against humanity. The U.N. says 300,000 people have died since 2003 because of violence in the Darfur region.

And do you remember the Beverly hills physician who provided so- called octo mom, Nadya Suleman, with fertility treatments?

Well, he has been thrown out of a professional organization. Dr. Michael Kamrava was expelled last month from the Society for Reproductive Medicine. A Society spokesman says Kamrava repeatedly violated the group's standards. Suleman gave birth to octuplets back in January and many of us remember that well.

And she was a single mom and already had six young children which she conceived through in vitro fertilization.

So more on the octo-mom story -- Wolf.

BLITZER: Yes. I'm sure we'll hear more about it down the road, as well.

NGUYEN: Yes. BLITZER: Thanks very much, Betty.

The Obama administration is announcing a new program to assist homebuyers and sellers. The program will boost the ability of local housing finance agencies to keep mortgage rates low and assure an expanded supply of credit for low and middle income homebuyers. The administration says it's expected to provide hundreds of thousands of affordable mortgages and assist in the creation and repair of a similar number of rental properties.

Let's check in with Lou to see what's coming up at the top of the hour -- Lou, what are you working on?

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Wolf, thank you very much.

Tonight, we're working on another delay and another excuse -- President Obama's new war plan for Afghanistan will have to wait. The disputed election in Afghanistan is being used as an excuse for that delay. But many Americans have their minds made up -- in fact, most. A new poll shows the majority of Americans oppose that war and now say Afghanistan will become Barack Obama's Vietnam.

And the Navy's controversial new recruiting pitch -- promoting itself as a global force for good" -- an international call to service. Questions tonight about who the Navy is here to protect -- Americans or the world?

And the Pennsylvania firefighter suspended for refusing to take down his American flag now allowed back on the job and the flag stays. He says it was all a matter of pride.

But why was the flag challenged in the first place?

We'll have that story.

Join us for all of that, all the day's news and more right here at the top of the hour -- Wolf, back to you.

BLITZER: All right, Lou.

See you then.

Thank you.

Let's go right back to Jack.

He's got The Cafferty File -- Jack.

CAFFERTY: The question this hour is should healthy employees pay lower insurance premiums?

Pardon me.

Dee writes from Georgia: "Exactly how would the healthy employees be determined? Wouldn't those guys who ran the Detroit Marathon and dropped dead perhaps have been classified as the healthy group?

What about healthy employees who do hazardous things, like drinking and driving or using drugs?

How could that be determined?

And how about those who might not drink and drive, but who sit home every night and down a 12 pack of beer?"

Terry writes: "It's a slippery slope that could then lead insurance companies to charge people more who have genetic predispositions to certain diseases. The point of insurance is to pool the risk. It's not right for an insurance company to penalize you for the very reason you bought their product to begin with -- car insurance or health insurance."

Christopher says: "If I may be blunt, Mr. Cafferty, it seems like there are people telling others what to do. The day someone tells an impoverished woman with four children to stop having babies and being a burden on the Wolf system, I'll start taking care of my weight. Stay out of people's businesses and tend to your own life."

David in Virginia says: "Absolutely not. Everyone, including young people, should be required to pay a basic premium for health care in order to make sure that there's enough care for everyone. It should be the same amount for everybody. If we start charging more for this and less for that, we're going to be in a bigger mess than we already are at the moment."

Patty says: "This sounds like an easy way to discriminate when hiring someone. Is the applicant overweight, does he limp? Maybe he just wears eyeglasses. It sounds to me like another reason we need not only a public option, but single payer non-discriminating health care."

And Jim writes out of my concern for lack of ability to deal with certain administrative functions here at the place that I work. He says: "Jack, I design health plans for companies like CNN. And believe me, it's very simple to figure out the best health plan choices at open enrollment. If you have questions, just let me know."

I'll be in touch, Jim.

If you didn't see your e-mail here, you can go to my blog at -- Wolf, I will see you tomorrow.

BLITZER: And you'll pass on that information from Jim to me, right.

CAFFERTY: As soon as I get it, yes, from somebody who's going to get it for me.

BLITZER: Thanks very much.


BLITZER: See you tomorrow, Jack.


BLITZER: Police say it was a hoax, but plenty of people are having fun with the balloon boy, including CNN's Jeanne Moos. Ds and a smidge.


BLITZER: Well, they -- the police say the balloon boy saga has been exposed for the publicity stunt that it supposedly was.

CNN's Jeanne Moos has her top 10 Oscar worthy moments of this most unusual hoax.


JEANNE MOOS, CNN CORRESPONDENT: (voice-over): A kid who looked like the cat that swallowed the canary adrift in a balloon resembling an unidentified flying chef's hat. (MUSIC)

MOOS: Yes, well, now that the story's popped...


MOOS:'s time to hand out the coveted Silver Saucers.

(on camera): The Silver Saucer award for most awkward moment goes to the parents reacting to their son.

(voice-over): They seemed speechless when he told Wolf Blitzer.


F. HEENE: We did this for a show.

R. HEENE: Man.



MOOS (on camera): For best Philadelphia, public display of affection, we award the Silver Saucer to the dad.


R. HEENE: We're just so glad he's here, you know?



R. HEENE: I'm really sorry I yelled at him.


MOOS: Mom had a supporting role with comforting rubbing. We award the Silver Saucer for the most heartfelt tears to the mother, during that 911 call...


UNIDENTIFIED FEMALE: It's a flying saucer?

M. HEENE: Yes, you've got to get my son.


MOOS: The Silver Saucer for worst acting goes to mom and dad during their reality show "Wife Swap."


M. HEENE: No, I'm talking from my heart.

UNIDENTIFIED MALE: You're not my wife, you're a man's nightmare.


MOOS: The Silver Saucer award for not acting, but acting out, goes to young Falcon. Before the family's interview with, Wolf Blitzer. Wolf introduced himself.


R. HEENE: Say hi to Wolf.

There's Wolf.


BLITZER: Hi, guys.

F. HEENE: Who the hell is Wolf?


MOOS: During the interview, Falcon made faces, took his dad's phone and slapped his brother. But the kids also get the Silver Saucer for best hygiene when sneezing.


MOOS (on camera): The Silver Saucer award for best balloon cameo goes to "Saturday Night Live."


UNIDENTIFIED MALE: And bye balloon.

UNIDENTIFIED MALE: Balloon. Balloon.





MOOS: But the Silver Saucer for most genuine moment goes to Falcon's brothers for their reaction when he threw up on national TV.


MOOS: Dad looks like he almost lost it.

(on camera): At least with the Silver Saucer award, you can eat it after receiving it.

(voice-over): Just don't make yourself sick.


F. HEENE: Oh, I feel like I'm going to vomit.


MOOS: Jeanne Moos, CNN...

(on camera): There's not enough room in there for a kid.

(voice-over): ...New York.



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