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THE SITUATION ROOM

Interview With California Senator Dianne Feinstein; New Developments in CIA Scandal; Shirtless FBI Agent The Whistleblower?; President Obama's Cabinet Shakeup; Cutting A Deal To Avoid The Fiscal Cliff; The Downfall Of Powerful Men; Fiscal Cliff Fast Approaching

Aired November 13, 2012 - 16:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


WOLF BLITZER, CNN ANCHOR: Happening now: another top commander ensnared in the widening scandal swirling around General David Petraeus.

General George -- John Allen, I should say -- John Allen is now the subject of a Pentagon investigation. It centers around hundreds, possibly thousands of e-mails sent to this woman. Details of where she fits into an increasingly tangled web of relationships.

And I will talk about all of this with the chair of the Senate Intelligence Committee. Dianne Feinstein says it is like something off the front page of a tabloid magazine and she is demanding answers.

I'm Wolf Blitzer and you're in THE SITUATION ROOM.

We begin with stunning new twists in the scandal that has already brought down the head of the CIA, General David Petraeus. And now another U.S. general is caught in the same tangled web. John Allen, the top U.S. commander in Afghanistan, is being investigated by the Pentagon for allegedly sending inappropriate e-mails to a married woman, the same woman whose complaint of threatening e-mails from General Petraeus' lover cracked the scandal wide open.

Our Pentagon correspondent, Barbara Starr, is trying to sort all of this out for us.

Barbara, it is rather complicated. What's the latest you're getting?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, it is still the same fundamental question for the last 24 hours, Wolf. Why is John Allen being investigated and how on earth did he get caught up in this?

(BEGIN VIDEOTAPE)

STARR (voice-over): Marine Corps General John Allen denies an extramarital affair with Jill Kelley, the Florida socialite whose concern over threatening e-mails led to an investigation that revealed an affair between CIA Director David Petraeus and his biographer, Paula Broadwell.

A Pentagon official told reporters Allen, who commands the war in Afghanistan, is adamant he did nothing wrong. A senior official close to Allen tells CNN of Kelley: "There is no affair. She's a bored socialite." A U.S. official says there appears to be nothing criminal involved. But Allen is now under investigation for what is being called inappropriately flirtatious e-mails to Kelley.

GEORGE LITTLE, PENTAGON SPOKESMAN: The secretary directed that the matter be referred to inspector general of the Department of Defense.

STARR: The FBI found up to 35,000 pages of documents, some of them e- mails between Allen and Kelley, some dating back two years during their investigation. According to a senior official close to Allen, one message the Afghan commander sent warned Kelley she had been threatened. The official says Allen had received an anonymous message now believed to be from Broadwell.

The Pentagon was called in because Allen is subject to military law. But why did this only come out now in public view?

JONATHAN TURLEY, CONSTITUTIONAL ATTORNEY, GEORGE WASHINGTON UNIVERSITY: We have a large amount of alleged material that went between these individuals, as much as 30,000 pages. It's not clear whether this was viewed as a relatively minor question or whether it was not apparent until the very end that the general was involved.

STARR: Allen was to appear Thursday for Senate hearing to become the military head of NATO. Now that is on hold.

MICHAEL O'HANLON, SENIOR FELLOW IN FOREIGN POLICY STUDIES, BROOKINGS INSTITUTION: We need to be careful not to have this cloud of scandal start to color the image of General Allen because the minute that happens, it may be almost too late to sustain his leadership.

(END VIDEOTAPE)

STARR: OK, Wolf, so everybody is talking about 30,000 pages of documents and e-mails. It sounds like an extraordinary number. But behind the scenes, officials are telling us be cautious. Some of this may be copies, it may be blast e-mails to one of General Allen's e- mail lists, some of it may be on his business computer, his military computer, some may be on his private computer.

We just don't know yet the full scope of all of this. So far, the White House is still expressing confidence in him as commander of the war in Afghanistan, Wolf.

BLITZER: In the war in Afghanistan, but they put on hold at least for now his confirmation hearings to be the chief -- the head of NATO, if you will, the supreme allied commander for Europe. Those confirmation hearings at least for now are on a hold and they're trying to accelerate the confirmation hearings of the general slated to take over for him in Afghanistan.

STARR: That's exactly right. Allen was only 48 hours away from Thursday a Hill hearing to become the new military chief of NATO. The hearing for his successor to command the war in Afghanistan will go on.

Now the question really is this. Will General Allen either have a problem here, further investigation, will he get cleared of this in time to perhaps still be able to effectively take over at NATO? We don't know the answer yet.

BLITZER: Barbara Starr, thank you.

Another new development, meanwhile, an FBI search at the home of the woman Petraeus had an affair with, Paula Broadwell.

CNN intelligence correspondent Suzanne Kelly is working this part of the story for us.

Suzanne, you have learned new details about the search. What have agents found?

SUZANNE KELLY, CNN INTELLIGENCE CORRESPONDENT: That's right, Wolf.

We know that FBI agents were at Broadwell's home in Charlotte, North Carolina, last night. Agents spent about five hours conducting a search, and took documents and computers from her house. We're told by a U.S. official that agents are looking further into what classified material she has.

The official described this search as sort of tying up loose ends really. An earlier search of Broadwell's computer though did turn up classified material and according to that same official, Broadwell and Petraeus both told investigators that the material didn't come from him. You can bet that those agents are now trying to track down the source of that classified information, Wolf. There's still no word on whether there could be any charges brought against her, but we're told that she has now hired an attorney here in Washington, and I have reached out several times to him today. Haven't heard back yet.

BLITZER: What do we know about the FBI agent who sent Kelley shirtless pictures of himself?

KELLY: A U.S. official confirms the agent in question did send shirtless photos of himself to Kelley, which opens up a host of questions. But they also said that that happened before this case ever began.

We already know that this was the agent Kelley took her original concerns to when she received the e-mails that she felt were threatening. The official we spoke with tells us this agent never worked the case, but instead he passed on the information Kelley gave him on to special agents in another department, the cyber unit. And then it was that department that took up the investigation that eventually led to the affair between Broadwell and General Petraeus -- Wolf.

BLITZER: It's this agent also who has not been identified, Suzanne, who allegedly went to this Republican member of Congress from Washington state, Dave Reichert, and told about this whole investigation. Reichert then went to the House minority leader -- the majority leader, I should say, Eric Cantor, who in turn went to the Justice Department and FBI and as a result all of this exploded.

Here's the question. By releasing this sensitive information to this member of Congress, did he break the law? Is he under investigation now for potentially criminal activity, this FBI agent?

KELLY: I am sure now, Wolf, they will be looking at whistle-blower laws to see whether he was or not. Once again, he wasn't actually in the chain of command. He wasn't one of the special agents who was investigating the case, but he did have details because of his relationship with Jill Kelley. That's where the scrutiny is going to be right now to determine whether or not any laws were broken.

BLITZER: We will soon find out. Thanks very much, Suzanne.

Our chief political analyst, Gloria Borger, has also been digging deeper into this.

You have been doing some reporting on some of the e-mails. What are you finding out?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: What I'm learning, Wolf, is that these e-mails to Jill Kelley from Paula Broadwell were very accusatory in nature, saying that Jill Kelley had effectively behaved inappropriately with some generals at MacDill Air Force Base, where she worked or helped.

And according to one source who is familiar with the e-mails, they detailed what this source calls, and I want to read this to you, the comings and going of the generals and Ms. Kelley. Now, generals is a plural there. So, maybe, Wolf, it was a bunch of social events. Who knows.

But what raised eyebrows for investigators -- you see it there -- what raised eyebrows for investigators was that Paula Broadwell whom they later discovered was sending these e-mails, actually seemed to know the details of the generals' schedule, including General Petraeus's schedule, and much of that is not open to the public.

That's when they started thinking if the sender of this e-mail has access to his private schedule, what else does this e-mailer have access to? And that raised all kinds of national security alarms.

BLITZER: As you know, there's deep irritation up on Capitol Hill, in the House and in the Senate, the respective Intelligence Committee chairs, for example, that they weren't notified about this, and that irritation seems to be escalating.

BORGER: Yes, it is escalating, and one of the reasons is, Wolf, that the National Security Act itself, if you read it, as I have, and others have, and lawyers have, is very ambiguous on this question.

It would have been a lot easier if, for example, the FBI had discovered a national security breach. Then the protocol is very clear, you take it up the ladder. But if it is just a criminal investigation and it is closing and you don't think there's national security implications, there's a great deal of sensitivity at the FBI. What do they do?

They figure over there that no matter what they do, they're going to get blamed, because if they don't tell Congress, they're going to hear this, that they should have been informed. And if they do tell the Congress, they risk the story getting out when perhaps it is a closed matter.

I think another question a lot of people are raising is whether the FBI should have investigated this matter at all. Were these harassing enough e-mails to warrant investigation or did it just happen because Jill Kelley happens to be friends with an FBI agent who put it in front of someone?

BLITZER: And all of this is a huge nightmare for the president at an awful time. He has got a major transition on national security. He's going to lose his secretary of state, secretary of defense. He's now lost the CIA director, might lose the attorney general.

He has a lot of things on his mind right now. This is the last thing he needs, to have to deal with two generals who have been investigated.

BORGER: Right. The point about this though from the White House point of view is that nobody can blame the president for any of this, and that in fact General Petraeus was as close to a consensus candidate as you get for a job, and he definitely was.

But it does place the president in an odd position because he has all of these moving chess pieces. He has to figure out where they go very quickly, he has got to do a lot of personal vetting, a lot of political vetting, and also I would argue a lot of team building as he gets this foreign policy team together for a second term, not to mention the fact that he would rather be focusing right now on the fiscal cliff.

BLITZER: And he is having a news conference tomorrow at 1:30 p.m. Eastern from the White House. He is going to be bombarded with questions on this. Not exactly the way he wanted to start off that news conference, I am sure. Thanks very much, Gloria.

BORGER: Sure.

BLITZER: She's the Florida woman described by one source as bored, a bored, rich socialite. Now Jill Kelley is caught up in this widening scandal. I will ask the head of the Intelligence Committee, Dianne Feinstein, what she knows about this woman. My interview with Senator Feinstein, that is next.

(BEGIN VIDEO CLIP)

SEN. DIANNE FEINSTEIN (D), CALIFORNIA: Her name has come into question. Let me put it that way.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: A crucial deadline looming here in Washington.

Jack Cafferty is following that in "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN: Wolf, picture the United States in that convertible at the end of the movie "Thelma and Louise" as it goes to the cliff and to demise of the car's occupants. A bit melodramatic, I grant you that, but the fiscal cliff is fast approaching. And if Congress doesn't take action before the end of the year, which is entirely possible, we're going to go right over the edge.

It's called a cliff for a reason. If nothing happens, massive taxes and spending decreases will kick in. The fiscal cliff includes those automatic across-the-board spending cuts to the Pentagon and other domestic program.

And once again, as the clock ticks down, there seems to be little common ground between the Democrats and Republicans in Congress. The Democrats want to raise taxes. Republicans want changes to entitlement programs and they want to do away with automatic spending cuts. We've seen this movie before.

House Speaker John Boehner says 2013 should be the year that he says we begin to solve our debt through tax and entitlement reform. Don't hold your breath. For starters, there's not that much time left for this lame duck session of Congress. After all, they have to get their Thanksgiving and Christmas vacations in, right? And the Democrats might want to wait until January when they'll have a larger majority in the Senate.

Then there's always the possibility that Congress settles on a smaller deal, a temporary one. Kick the can down the road again.

But if nothing is done, taxes will go up for every single American, and we'll be looking right square at another recession next year. None of this will be easy on Americans' pocketbooks. So that's the question. How will the fiscal cliff affect the way you handle your money?

Go to CNN.com/CaffertyFile. You can post a comment on my blog, or go to my post on THE SITUATION ROOM's Facebook Page -- Wolf.

BLITZER: Love that analogy to "Thelma and Louise". Jack, thank you.

Let's get back to our top story right now -- the growing scandal between two top generals and two married women. One powerful Democratic lawmaker describes it as something right out of a tabloid.

(BEGIN VIDEOTAPE)

BLITZER: And joining us now from Capitol Hill, Senator Dianne Feinstein of California. She's the chair of the Senate Intelligence Committee. Senator, thanks very much for joining us.

SEN. DIANNE FEINSTEIN (D), CALIFORNIA: You're welcome, Wolf.

BLITZER: We've spoken on many occasions. I am tempted to throw my hands in the air and simply ask you, what is going on right now? We're waking up every morning to these new revelations. I have been around Washington a long time, you have as well. They're pretty shocking.

Just give us your immediate gut. What is going on?

FEINSTEIN: Well, my immediate gut is like this is "The National Enquirer". I mean, every day, there is something new, and that really does not affect what we're doing. It may add to it somewhat, but what the intelligence committee will begin tomorrow is an inquiry into the Benghazi episode. And we will have Mr. Morell, Mr. Olsen of the Counterterrorism Center, as well as the number two of the FBI, Sean Joyce.

And in that way, we will be able to cover that. It's also my intention -- this has not yet been announced -- to talk with General Petraeus, Director Petraeus. This ties into his trip that he made just before all of this broke to some Middle Eastern countries, including Libya. This afternoon, I'll be meeting with the ranking member, our vice chairman, Saxby Chambliss. We will go over the plan for this. We will both meet with Mr. Morell, and then we will proceed.

BLITZER: Mike Morell is now the acting director of the CIA. Do you have indications from General Petraeus, even though he has resigned, he will come forward and testify about the Benghazi affair before your committee?

FEINSTEIN: Well, I believe he will. I think he's a responsible person, and I believe he will come.

And so we are going to try to set that up today because his view as someone who was actually there -- now, this is according to Mr. Woodward -- who was actually in Benghazi, who actually spoke to people who went through the incident, I think that's important for us to hear.

BLITZER: He was there.

So let's talk a little bit now about -- I guess the only way to describe these scandals that are going on, there's a scandal involving General Petraeus, now General Allen, the leader of the U.S. military in Afghanistan, the NATO commander there, he's involved apparently as well.

What can you tell us about, first of all, General Allen's role in what's going on right now?

FEINSTEIN: Well, this is all news to me, too. In the very late spring of this year, the four corners of our two committees, House and Senate, the leadership, met with General Allen in Kabul. We were very impressed with him. He gave a historic narrative of the area which was impressive. He talked about his mission, how it was going, and I think the four of us came away with a sense that he is, in fact, a fine commander.

I don't know exactly what the situation is here. We will look at it, we will ask for a report, we will gather the materials, we will ask to see classified documents that may have been on Ms. Broadwell's -- that's another -- Ms. Broadwell's computer.

I spoke to the attorney general about that last night. He agreed to present this to the intelligence committee. So we will have those, which is important to our mission because our mission is to see, was intelligence what it should have been? Should we have known this was a terrorist attack, much quicker than 10 days after the attack?

And my answer to that, just on my review of facts, is, yes, absolutely. So we want to hear testimony on that.

If we have had an intelligence deficit, one thing or another, our oversight responsibilities call us to take actions in intelligence authorization bills or elsewhere to see that this area of the world is beefed up intelligence-wise. This can't be allowed to happen again.

BLITZER: Have you been briefed on the nature of the relationship between General Allen and this woman in Tampa, Jill Kelley? Apparently, there were thousands of pages of documents that were e- mailed from General Allen to this woman that we don't know much about. As chair of the Intelligence Committee, what have you been told?

FEINSTEIN: I have not been told very much, that's for sure, and I'll be asking a lot of questions. I know that -- her name has come into question, let me put it that way. I have no factual information whatsoever. People have mentioned that to me in the course of a conversation. That's all.

BLITZER: Do you have any reason to believe classified information was sent from General Allen to this woman, Jill Kelley?

FEINSTEIN: Well, I'll tell you this -- knowing a little bit about General Allen, I would be doubtful it had been, just as I would be doubtful it had been from General Petraeus. And essentially, I believe it has been confirmed that no classified information was given by Director Petraeus to Paula Broadwell. I would expect to find the same thing with respect to General Allen. I would be very shocked and surprised if that was not the case.

BLITZER: Which raises this question, Senator, why did the FBI go back to Paula Broadwell's home yesterday, last night, spend five hours there, and take out box after box after box of documents, computer equipment, and other material?

FEINSTEIN: Well, that would indicate to me they're still looking for something. I don't happen to know what that something is. BLITZER: Do you have any reason to believe she still had security clearances? I know when she was active duty in the U.S. Army, she says -- she says publicly she had what's called not only top secret but SCI, Secure Compartmented Information, clearances. Do you have any reason to believe she still had those clearances?

FEINSTEIN: I do not.

BLITZER: And if, in fact, she did get classified information from General Petraeus, that would be violation of the law, I assume?

FEINSTEIN: Well, I'm not going to go there because I don't know that to be the case. Look, this is a man of substantial integrity and credibility, and I think the last thing he would do would be that.

(END VIDEOTAPE)

BLITZER: So why wasn't President Obama informed of all of this sooner. That and more with my interview with the chair of the Senate Intelligence Committee, Dianne Feinstein. That's next.

(COMMERCIAL BREAK)

BLITZER: More now on my interview with the chair of the Senate Intelligence Committee. I asked Senator Dianne Feinstein why top lawmakers, let alone the president of the United States, weren't told of General Petraeus' scandal sooner.

(BEGIN VIDEOTAPE)

BLITZER: You know what? It's shocking to me that you and Mike Rogers, the chairman of the House Intelligence Committee, that both you and your staffs learned about all of this when you got inquiries from the news media. And I say to myself, what is going on here, Senator? And I'm pretty surprised by that as well. I assume you're shocked by that.

FEINSTEIN: Well, I'm shocked by it because the process and the procedure has been to brief the four corners of the committee, both House and Senate, with respect to covert operations taking place. They don't share it with the whole committee, but they do share that data with the four of us, and that has never been violated. So there's no reason not to have trust here.

And it's rather shocking to find out candidly that we weren't briefed and that we find out from the press in the way in which we did with no heads up, with no opportunity to ask questions or put together any information. So we have been coming from behind on this. That's true for the House committee. It's true for our committee.

BLITZER: I don't know what's more shocking, that you weren't briefed, that Representative Rogers wasn't briefed, or the president of the United States wasn't even told about what's going on apparently until the very end. Why would they keep him in the dark?

FEINSTEIN: Well, I don't know. I have many questions about the nature of the FBI investigation, how it was instituted. And we'll be asking those questions.

BLITZER: Do you know anything about this FBI agent in Tampa who was apparently involved as a friend of Jill Kelley, this other woman in Tampa, in raising questions about the nature of some of the e-mails from Paula Broadwell to Jill Kelley that the FBI later discovered?

FEINSTEIN: I obviously do know things that I've picked up. I'm not going to discuss them here. I'll discuss them in a classified setting.

BLITZER: Is it your understanding that this FBI agent, and obviously you can't release classified information, was the source of the -- the whistleblower source who called this Republican congressman from Washington state to alert him to what was going on, who in turn told Eric Cantor, the House Majority Leader about what was going on, who in turn went to the Justice Department and the FBI and I suspect as a result of that inquiry, this whole thing exploded.

FEINSTEIN: Well, that's your assessment. At this stage, I'm not going to disagree with it.

BLITZER: Because that seems to be everyone was trying to keep it quiet until all of a sudden Eric Cantor got involved and raised the issue near the end of October, just before the election.

Apparently this disgruntled FBI whistleblower was unhappy they would end it without charges filed, without national security violations alleged, and as a result this has come to where it is right now.

But that's just my gut instinct, knowing what I know, but you're telling me you don't necessarily disagree with me.

FEINSTEIN: Well, look, I'm trying to be helpful in getting a cyber security bill through. I happen to believe our cyber intrusion is tremendous and that the FBI needs all -- has to do all it can to stop cyber intrusions in this country.

We are trying to pass a bill. It is going to come up again. To me, that's the huge issue in which the FBI should be involved. As I understand it, Mrs. Kelley happened to know an FBI agent and that's how she started or the FBI agent started this investigation.

There are thousands of these out there. Why this one was selected, I have no idea. There are a lot of questions, Wolf, that have to be answered and how the investigation was conducted, its secrecy.

I understand protecting people. I don't understand doing it all under a cloud of secrecy, even people with responsibilities are not even notified so they can ask questions about its propriety.

BLITZER: Two final questions and then I'll let you go, Senator, politics, is politics involved in all of this based on what you've heard and seen?

FEINSTEIN: I haven't seen any of it so far.

BLITZER: No politics involved.

FEINSTEIN: No, I haven't seen it. I haven't seen it.

BLITZER: Any connection to the Benghazi killings involved and resignation of General Petraeus and now what's come up with General Allen, do you see any connection at all between Benghazi and these affairs, if you will?

FEINSTEIN: I've seen no connection whatsoever.

BLITZER: But you're going to be investigating and your committee is going ahead with formal inquiries?

FEINSTEIN: That's why candidly we know that General Petraeus was at Benghazi, according to Bob Woodward. We know according to Bob Woodward that he talked to certain people.

I want to see if that's true or not. There's only one way to ascertain that, and that is to talk directly with Director Petraeus and do it in a classified setting with the committee present.

BLITZER: Senator Feinstein, good luck with your hearings. Good luck with what's going on, as I say. You know, I started this interview by throwing my hands up in the air saying what is going on, and I suspect there's a lot still that remains to be discovered.

FEINSTEIN: Thank you, Wolf. Thank you very much.

BLITZER: Still pretty shocking by the way that Bob Woodward knew that General Petraeus had gone to Libya, but the chair of the Senate Intelligence Committee, Dianne Feinstein says she wasn't told, only learned about it from Bob Woodward.

Bob Woodward, by the way, is going to be here our guest in THE SITUATION ROOM on Friday. So with so much anger on Capitol Hill boiling over, with Benghazi, now this growing scandal involving two U.S. generals, will the White House be able to find enough support when it comes to approving President Obama's second term secretaries?

There's a cabinet shakeup in the works right now. Much more on this coming up in our "Strategy Session."

(COMMERCIAL BREAK)

BLITZER: Let's get right to our "Strategy Session." Joining us, the Democratic pollster for President Obama's campaign, Cornell Belcher and the CNN contributor, David Frum, he is the contributing editor of "The Daily Beast" and "Newsweek," former Bush White House speech writer, and the author of the brand new e-book, "Why Romney Lost."

There you see it up on the screen. Right now, it is doing very, very well, highly recommended. You know, there's a cabinet shakeup in the works as in every second term, beginning of every second term.

Hillary Clinton is going someplace else, Leon Panetta moving on, the Treasury Secretary, Timothy Geithner, there's going to be -- I think 55 Democrats, two independents, both of them, Bernie Sanders and Angus King of Maine I think will go along with the Democratic caucus.

Is that enough to make sure, let's say, Susan Rice is nominated by the president, the U.N. ambassador to be secretary of state, is that enough to make sure she's confirmed?

DAVID FRUM, CNN CONTRIBUTOR: I would be very surprised if the president did go ahead and nominate Susan Rice because although she probably would be confirmed, the hearings would be a misery.

The hearings would be a place where we would see again and again that she was the mouthpiece for a false story about what happened in Benghazi. Does the administration want to be held hostage to Susan Rice's overstatements of the case on TV multiple, multiple times?

BLITZER: I don't know if you have inside information, everything I hear is the president wants her to be the next secretary of state.

CORNELL BELCHER, DEMOCRAT POLLSTER, OBAMA CAMPAIGN: Well, I don't have inside information, but Susan Rice would be a strong nominee. She will be excellent for this job.

And if Republicans want to go down the road of Benghazi making it a political issue, I think we saw it play out in the campaign, not much success for them. It would be a strategic error to play politics with this issue and try to block Susan Rice with it.

BLITZER: What about John Kerry, now being rumored to be in line to replace Panetta over at the Defense Department. Already some Republicans out there recalling the swift boat activity, saying this is the guy who threw away his medals after he came home from Vietnam. He is in no position to be defense secretary of the United States.

FRUM: Well, senators look out for each other. And I think it will only be strategically possible to have one target, and Susan Rice is the natural target because the question is not just this question of was it or was it not terrorism.

The administration put out a story about the role of the video that looks like it was covering itself after the fact, a story probably knew wasn't true or good reason to know it was not true. Susan Rice was the mouthpiece for that. That will be litigated over and over again. Don't want a second distraction --

BLITZER: I heard, Cornell, is that he really wanted to be secretary of state, not necessarily secretary of defense, but the president is really determined to make Susan Rice the secretary of state, there's a fallback position, if you will.

BELCHER: Well, I think the senator -- again, a solid nominee. Look, the swift boat stuff aside, I mean, quite frankly here is a guy who didn't have to go over and fight for his country, but he in fact strapped on a gun, went over and fought for his country. Listen, there's something very noble about that.

BLITZER: Let's talk about the fiscal cliff that all of us are worried about coming up the end of the year. There's a suggestion, play a sound bite from Jay Carney, the White House press secretary.

He was asked is the president stuck to that $250,000 limit or is he willing to go up a little higher, half a million. Tim Cain, the newly elected senator from Virginia said maybe the limit should be a half million.

Senator Schumer of New York said maybe the limit should be a million, no tax increase for people earning under a million dollars. He was asked about that. Jay Carney, I'll play the clip.

(BEGIN VIDEO CLIP)

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: I think I've given you pretty good parameters on the president's thinking going into the process that he himself said begins with the proposal, specific proposal he has before Congress. A plan that achieves balance and that allows us to continue to invest in important areas of the economy. But he has not wedded to every detail of that plan.

(END VIDEO CLIP)

BLITZER: Does that say to you he's not wedded to that $250,000 threshold?

BELCHER: Well, here's the thing. The president was never the problem in this. The president was always willing to compromise. It was Republicans led by quite frankly Mitch McConnell who said his number one job was to see the president get defeated who blocked everything the president wanted.

So the president was never the problem on the compromise. Now what you see in the exit polling, clearly, Wolf, is that the American people say we want this sort of raised revenues and want the tax breaks for the rich people to go away.

The question is, are the Republicans in the Senate and the Republicans in Congress going to listen to what the American people said and go along with it?

BLITZER: So does that meanest not wedded to the $250,000?

BELCHER: I will take what Carney said. The president -- the president has always been open to some compromise.

BLITZER: He went out of his way the other day to say I am not saying all my ideas have to be accepted, I am open to compromise. I am open to new ideas. I want to make sure this gets done.

FRUM: But you have to understand what the president is doing and this is not civics 101. He has a tough mine to plan. His goal is to break Republicans on the tax pledge.

The way he will do that is he says I am going to load you up an offer so appealing to so many of your constituents, it will be extremely difficult to say no. All you have to do is break your line on the taxes. That's it. BLITZER: Break the Norquist pledge.

FRUM: You break the Grover Norquist pledge. You want this much? That's not enough? How about this much, how about we take it to a million. All I ask of you is to break --

BLITZER: Why is that so important?

FRUM: Once you have broken it, you smash the Republican coalition. He is trying to break the spine of the Republican Party by forcing Republicans to choose.

BLITZER: Pretty sophisticated strategy.

BELCHER: Well --

FRUM: It is pretty brutal and basic. He says I want you to choose between the people who care more about capital gains and income tax rates. I want you to choose between spending cuts and I am going to make the choice as agonizing as possible by making the choice as rich as possible.

BELCHER: David, isn't it also part of the coming civil war that's going to happen with the Republican Party? Between these grass roots sort of Tea Partyism and sort of the establishment guys that want to move away and moderate? The idea that there can be no compromise on taxes is an extreme position. At some point it has to come to a head.

FRUM: All the difference in the world. I think Republicans -- I wrote a book about it, need to change their view. All the difference in the world saying for yourself change the view, and doing it in response to your own imperatives and being forced to do so by a president following that adage, you get more with a kind word and gun than a kind word alone.

BLITZER: He has already Bill Kristol of the "Weekly Standard" on board, saying this is not an issue the Republicans need to die on, whether millionaires should pay a little more.

BELCHER: And the majority of voters too, Wolf.

BLITZER: Yes, according to exit polls, Cornell was right on that one as well. Guys, let's continue this conversation. Thank you very much.

Powerful men going astray, General David Petraeus is the latest in a long line. Why one expert says there may be more to come and why men are more likely to cheat in this day and age.

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BLITZER: Before last Friday, David Petraeus was known mainly as an outstanding former four-star general who led U.S. troops in Iraq and Afghanistan. But now he is a man who resigned after cheating on his wife, joining the ranks of many men that have fallen from grace.

Lisa Sylvester is here. She is working the story for us. Unfortunately, Lisa, we have seen this story unfold many times.

LISA SYLVESTER, CNN CORRESPONDENT: Yes, that's right. There are certain character traits that powerful men often have charisma, leadership skills, decisiveness, and risk taking. But experts say the same elements of their personality may also lead them astray.

(BEGIN VIDEOTAPE)

BILL CLINTON, FORMER U.S. PRESIDENT: I did not have sexual relations with that woman.

ELIOT SPITZER, FORMER NEW YORK GOVERNOR: I have acted in a way that violates my obligations to my family and that violates my or any sense of right and wrong.

BLITZER: You didn't send that photo to that woman in Washington State?

ANTHONY WEINER, FORMER NEW YORK CONGRESSMAN: I did not send it to that woman.

SYLVESTER (voice-over): They have power, fame and have betrayed their families, men who have marred their stellar careers and have suffered the consequences.

Former General David Petraeus, the head of the CIA, is the latest to get caught, stepping down after admitting to an affair. But why in the world do men with so much to lose risk it all? Helen Fisher is author of the book "The Anatomy of Love, A Natural History of Mating Marriage and Why We Stray."

HELEN FISHER, AUTHOR: They are very high testosterone. Anybody who really fights for rank as these men have going to be high on testosterone and so that's going to trigger the sex drive.

Also they are away from home a lot, have a lot of opportunities, and a lot of women really like a high ranking man. If they aren't looking for somebody, they are likely to find a woman who really is interested in somebody like them.

SYLVESTER: In civilian life, an affair can cost your marriage or maybe your job. In the military, adulterers can also be prosecuted. David Petraeus insists the affair started only after he left the military, but his admission has been stunning.

GENERAL JAMES "SPIDER" MARKS, U.S. ARMY (RETIRED): We have an expression in the military, which is if it feels good, don't do it. He failed that test in spades. It is a matter of narcissism. It's a matter of huberous. It's a matter of access.

SYLVESTER: Military life can be hard on families when you mix in long separations and deployments like Petraeus had. Jacey Eckhart is a Navy spouse and writes about military family issues.

(on camera): Some people are saying that if it can happen to this couple who have been married for 38 years -- young couple. This was couple, you know, who have been together for their entire adult life, it means that others might be susceptible.

JACEY ECKHART, SPOUSE EDITOR, MILITARY.COM: I don't know of a military couple who did not have the conversation this weekend that was please, please, please don't let this happen to us, promise me this won't happen to us, or this better not ever happen to us.

SYLVESTER (voice-over): Petraeus has been a lesson that even those that climb to the very top can fall from grace.

(END VIDEOTAPE)

SYLVESTER: And among military families, the sentiment is just sadness that General Petraeus had built up this incredible reputation only to watch it all collapse in front of him -- Wolf.

BLITZER: Every tragedy almost.

SYLVESTER: It is really sad. I mean, because this is the thing that many Americans are actually going to remember him for, not for all of his good work that he did before this -- Wolf.

BLITZER: Very sad indeed. Thanks very much, Lisa, for that report.

We're also learning new information about the other top general caught up in this Petraeus scandal, who he was trading e-mails with, what they were saying, much more coming up at the top of the hour.

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BLITZER: Here is a look at this hour's "Hot Shots." Look at this, in Scotland, soldiers take part in a homecoming parade. In India, they light oil lamps at the Golden Temple.

In Somalia, a top United Nations official greets Somali police officers on a one day trip to the country. Here in the United States, a man stands in front of a poster for the new James Bond movie, "Skyfall." Good movie. "Hot Shots," pictures coming in from around the world.

Jack is back with the "Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Are you in that new Bond movie?

BLITZER: Yes, I am briefly. I do have a little cameo role in a James Bond movie, can you believe that?

CAFFERTY: That's kind of cool. Did you get to run around with any of the Bond girls?

BLITZER: I would like to, I don't think they would run around with me. I would like to -- Daniel Craig, James Bond, and Wolf Blitzer.

CAFFERTY: Well, that's not bad. I read where it grossed a bucket of money. Apparently, it is a pretty hot film. Check it out.

BLITZER: I don't know about the bucket of money. CAFFERTY: Well, but I mean, having you there will enhance the take at the Box Office.

BLITZER: I assume it will.

CAFFERTY: Your millions of fans will be lining up to see you.

BLITZER: Yes.

CAFFERTY: The question this hour, how will the fiscal cliff affect the way you handle your money? Bob in Ohio writes, "Like most Americans, I have been living on the cliff since the start of the Bush era in 2000. So this step a little closer to the edge will go almost unnoticed."

Al writes, "What money? Many Americans haven't yet recovered from 2008 and face the issue of trying to replace lost savings. A more sympathetic question would have been how will the fiscal cliff affect your ability to replace the assets you lost in 2008?"

Kenneth in California, "It won't affect my handling of my money. I am a working guy. I've always saved and bought with cash, except for the mortgage on the house."

Dave in Florida writes, "It won't affect me, I have no money left to handle, but I have an absolute faith in Congress's ability to kick the can right over the cliff, so bring it on."

Jim in Illinois says, "Whatever happens, I'll be sending more to our socialist government so they can redistribute to the slackers."

Steve says, "When one knows that there's a cliff ahead, you begin pumping the brakes will before you near the edge. I started pumping the brakes on personal spending months ago once I realized Congress is more interested in their agenda than in the welfare and financial health of my country."

If you want to read more about this subject, go to the blog, cnn.com/caffertyfile or through our post on THE SITUATION ROOM's Facebook page -- Wolf.

BLITZER: We'll do. Jack, thank you.

Up next, we have new information about General John Allen's relationship with that woman in Tampa who sparked the investigation.

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