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THE SITUATION ROOM

NASA Using Similar Batteries as Dreamliner; Mona Lisa Goes to Moon; Fate of Americans Held Hostage; High Cost of Armstrong's Lies; Jets Scramble in Hijack Alert

Aired January 18, 2013 - 17:00   ET

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


WOLF BLITZER, CNN ANCHOR: And you're in THE SITUATION ROOM. Happening now, hundreds of hostages are freed in Algeria, but what about the Americans?

The U.S. is talking tough and taking action. We have new information coming in.

Lance Armstrong admits he was a bully, but he kept repeating a big lie. Why his confession may leave him open to some very big lawsuits right now.

And we all remember when Obama adviser, David Axelrod, shaved his mustache. This hour, live, right here in THE SITUATION ROOM, Alex Castellanos follows his lead, losing the 'stache for a very good cause.

We want to welcome our viewers in the United States and around the world. We're live here on the National Mall in Washington, DC, where, in three days, President Obama will take the oath of office in a public ceremony in front of hundreds of thousands of people.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM. Three days into a bloody ordeal clouded by chaos, we're beginning to learn dramatic new details about the fate of Americans taken hostage in Algeria. Algeria State News Agency says hundreds of hostages have been freed, including about 100 foreigners. Many are still unaccounted for and a dozen are reported dead following an Algerian military operation.

The leader of the kidnappers has offered to release Americans in a prisoner swap. The State Department says no deal.

Let's go live to our Pentagon correspondent, Barbara Starr -- Barbara, what are you learning about the U.S. involvement in all of this right now?

BARBARA STARR, CNN CORRESPONDENT: Well, this situation remains violent and unstable three days into it, Wolf.

What we have learned is a U.S. Air Force C-130 landed in Algeria late -- earlier today and has left on board several wounded hostages who got out of the facility. Reports are, we are hearing from a U.S. Defense official, no Americans on that flight. But they were able to get some of the wounded out.

These MedEvac flights are very typical, sadly, a lot of experience from Afghanistan and Iraq. I have been on board them. They will be able to provide trauma, medical care for these people, should they have gunshot wounds, stab wounds, burns, any types of injuries, get them back to Europe, get them treatment, get them on their way home to their families.

Earlier today, the British prime minister, David Cameron, warned his country more bad news to come. He expects, for British citizens involved in all of this, hinting broadly that there may be more fatalities amongst British citizens.

A lot of frustration amongst various countries about the Algerian military operation, because it is so violent, because it has come so quickly, as the takeover happened. But the Algerians making it very clear they will continue. They want to do everything they can to retake this facility and basically boot al Qaeda out of there -- Wolf.

BLITZER: Barbara, the Defense secretary, Leon Panetta, made some pretty tough statements today.

I want you to listen to what he said.

(BEGIN VIDEO CLIP)

LEON PANETTA, DEFENSE SECRETARY: Terrorists should be on notice that they will find no sanctuary, no refuge, not in Algeria, not in North Africa, not anywhere. Those who would wantonly attack our country and our people will have no place to hide.

(END VIDEO CLIP)

BLITZER: Having said that, Barbara, what the Defense secretary just said, easier said, I must say, than done. This is by no means an easy operation for the U.S. military.

STARR: Well, that's absolutely right, Wolf. Everyone is talking now about al Qaeda's new refuge across Northern Africa.

But how is the U.S. military, how is the Obama administration, in this coming up four years, going to go after this new al Qaeda refuge?

These are very remote areas. The U.S. military has very few forces in the region. And, look, they are going to need permission of countries to go in there, if they are going to go into these places.

Algeria has made it clear it doesn't want outside help, Tunisia, Egypt. And just think about Libya. This is a country now which is basi -- basically has no coherent national military force, a lot of militias running many parts of Libya. So to go after al Qaeda, it's a nice set of words, but it's a promise that may be very hard to live up to -- Wolf.

BLITZER: It certainly will be.

Barbara, thank you.

An American worker at the Algerian gas facility tells CNN he escaped on the first day of the siege by Islamic terrorists. Mark Cobb, who's believed to be a resident of Texas, told CNN in a message that he's safe after escaping with some Algerian staffers. According to his LinkedIn page, Cobb is the general manager of a BP joint venture in Algeria.

Other news right now, it was a blunt and chilling confession to the world -- Lance Armstrong admitting unequivocally to Oprah Winfrey that he repeatedly took performance-enhancing drugs after more than a decade of fierce denials.

(BEGIN VIDEO CLIP, COURTESY OWN: OPRAH WINFREY'S NETWORK)

OPRAH WINFREY, HOST: Yes, or no, did you ever take banned substances to enhance your cycling performance?

LANCE ARMSTRONG: Yes.

WINFREY: Yes, or no, was one of those banned substances EPO?

ARMSTRONG: Yes.

WINFREY: Did you ever blood dope or use blood transfusions to enhance your cycling performance?

ARMSTRONG: Yes.

WINFREY: Did you ever use any other banned substances, like testosterone, cortisone or human growth hormone?

ARMSTRONG: Yes.

WINFREY: Yes, or no, in all seven of your Tour de France victories, did you ever take banned substances or blood dope?

ARMSTRONG: Yes.

WINFREY: In your opinion, was it humanly possible to win the Tour de France without doping seven times in a row?

ARMSTRONG: Not in my opinion.

(END VIDEO CLIP)

BLITZER: Armstrong says he was a bully, describing how he treated those who tried to expose him, people he now acknowledges were, in fact, telling the truth about him.

These lies could end up costing Lance Armstrong tens of millions of dollars from those he sued in the past, all the way up to his primary sponsor. That would be the United States Postal Service right here in Washington.

Our own Lisa Sylvester is adding up all of the numbers for us. She's joining us with the details.

What are you learning -- Lisa?

LISA SYLVESTER, CNN CORRESPONDENT: You know, Wolf, Lance Armstrong carried on this lie for more than a decade. And now there are really two groups of people who could come after him for money. Those who paid him large sums, his sponsors. There was an insurance company that paid out large winning bonuses after his supposed Tour de France wins. And then there are the people who he viciously attacked, trying to cover up his actions, who are now likely to sue him.

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP, COURTESY OWN: OPRAH WINFREY'S NETWORK)

WINFREY: It did not even feel wrong?

ARMSTRONG: Nope. Scary.

WINFREY: Did you feel bad about it?

ARMSTRONG: No. Even scarier.

WINFREY: Did you feel in any way that you were cheating?

ARMSTRONG: No. The scariest.

SYLVESTER (voice-over): There are many words that come to mind watching Lance Armstrong's confession -- tragic, betrayal, liar, disgraced. And add one more, expensive.

His Oprah tell-all opens up the floodgates for potential lawsuits.

(BEGIN VIDEO CLIP, COURTESY OWN: OPRAH WINFREY'S NETWORK)

ARMSTRONG: One big lie that I repeated a lot of times.

(END VIDEO CLIP)

SYLVESTER: More than a decade of deceit that now has to be cleaned up.

First, his chief sponsor, the U.S. Postal Service. According to documents obtained by the CNN, the USPS sponsorship of Lance Armstrong ran from 1996 until 2004. During that time, the agency shelled out more than $30 million. He's in talks to return some of that money.

But there's also a whistleblower filed by Armstrong's former teammate, Floyd Landis, who accused Armstrong of violating his sponsorship with USPS.

PAUL BUTLER, GEORGETOWN UNIVERSITY LAW PROFESSOR: And not only can the Postal Service ask for the $30 million they were paid, it could ask for $90 million, because in these cases, whistleblower cases, there's trouble damages. Now, they don't have to be awarded, but sometimes they are. That's why lawyers and plaintiffs love these cases, because it's a huge pay day if you persuade the judge.

SYLVESTER: Also in the cue, the British newspaper "The Sunday Times." It's suing Armstrong for $1.5 million, money paid out in legal costs after he sued the paper; the Dallas insurance company, SCA, is seeking to recoup at least $12 million it paid to Armstrong in winning bonuses and legal fees; and potential libel lawsuits against Lance Armstrong. The cyclist, by his own admission, attacked those who questioned him, including the wife of a former teammate and his former personal assistant.

(BEGIN VIDEO CLIP, COURTESY OWN: OPRAH WINFREY'S NETWORK)

ARMSTRONG: Yes. Yes. I was a bully.

WINFREY: Tell me how you were a bully.

ARMSTRONG: I was a bully in the sense that -- just that I tried to control the narrative.

(END VIDEO CLIP)

SYLVESTER: In 2005, "Sports Illustrated" ranked him as the eighth highest endorsement earner, pulling in some $17 million that year alone. His net worth now is reportedly about $100 million.

But last year, Armstrong supporters Nike and Anheuser-Busch dropped him, and his current financial prospects, not good, says sponsorship expert, Jim Andrews.

JIM ANDREWS, SENIOR V.P./EDITORIAL DIRECTOR, IEG: The future marketability of Lance Armstrong is pretty much at zero at this point. There's really no reason for a mainstream brand, like the companies that sponsored him before, to really want to attach themselves to him at this point.

So I think that that's a nonstarter.

SYLVESTER: Armstrong's confession may be good for the soul, but it will be terribly hard on his wallet.

(BEGIN VIDEO CLIP, COURTESY OWN: OPRAH WINFREY'S NETWORK)

WINFREY: So what was going on?

(END VIDEO CLIP)

(END VIDEO TAPE)

SYLVESTER: And, of course, the second half of that interview airs tonight on Oprah's network, 9:00 p.m. Eastern, 8:00 p.m. Central. And we are all just trying to find out the questions, why did he do it, and, Wolf, why did he do it for so long -- Wolf.

BLITZER: Lots of questions still have to be answered, even though he answered some of them last night.

Thank you, Lisa, for that.

Much more news coming up, including fighter jets that are scrambled in response to a possible hijacking. But the object of the alert slept through it all. Stand by.

And remember when the presidential adviser, David Axelrod, shaved his mustache of decades?

Just ahead, CNN contributor Alex Castellanos, he will do the same thing for a very good cause. And that will be live right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Some very tense moments in the sky, as an alert is triggered concerning an airliner bound from Hawaii to Seattle.

CNN's Sandra Endo is piecing it all together for us -- Sandy, what happened?

SANDRA ENDO, CNN CORRESPONDENT: Wolf, military jets responded to a possible hijacker on board a flight last night. But instead of pursing the supposed hijacker, now officials are turning the investigation toward someone else.

(BEGIN VIDEOTAPE)

ENDO (voice-over): Two F-15 fighter jets scrambled to escort a passenger plane with a possible threat on board Thursday evening. But travelers didn't even notice their in-flight company.

WOODY GARDINER, PASSENGER: Nothing was unusual, nothing out of the ordinary.

SANDRA ENDO, CNN CORRESPONDENT (voice-over): As Alaska Air Flight 819 took from off from Kona to Seattle, someone called the FBI saying a passenger onboard was a hijacker. Federal agents say the caller was detailed enough to deem the threat credible. One woman on the flight described what happened?

VICTORIA SOUTHLAND, PASSENGER: The flight crew was calm and attentative and never showed a sign of anything wrong at all.

UNIDENTIFIED MALE: Good evening tower to Alaska 819.

UNIDENTIFIED MALE: Clear to land.

ENDO: The plane landed safely in Seattle where federal agents were waiting at the gate. Alaska Airlines says the passenger wasn't behaving oddly and slept most of the flight.

SOUTHLAND: The only thing I saw was when the police came on the airplane and asked the lady next to him to get up and they took him outside.

UNIDENTIFIED MALE: There really wasn't a whole lot that happened. It was pretty quick.

ENDO: Agents say the passenger was shocked to find out about the hijacking allegation and was cleared and released. The initial call turned out to be a hoax. Authorities are now trying to track down the caller.

(END VIDEOTAPE)

ENDO (on-camera): The FBI says it gets all sorts of calls but credible threats like this one, which mentions specifics, are fairly rare and keep in mind, it's a federal offense to call in a fake threat -- Wolf.

BLITZER: Sandy Endo, thanks very much for that update.

NASA will use the same battery technology as the recently grounded Boeing 787 Dreamliner. Lisa Sylvester is monitoring that and some of the other top stories in the SITUATION ROOM right now. Lisa, what do you have?

LISA SYLVESTER, CNN CORRESPONDENT: Wolf, a NASA spokesman confirms to CNN the lithium ion batteries with, quote, "the same guts as those in the Boeing 787 Dreamliners" will power the International Space Station, but he says the design is different and that NASA has rigorously tested them.

The Dreamliners have been grounded due to fire risks related to battery failures. NASA will start using the batteries in 2017.

And we're closer to learning why an Illinois man suspiciously died one day after collecting more than $400,000 from the lottery. A medical examiner says his body has been successfully exhumed for analysis. His death was first ruled to be from natural causes, but his blood work was retested after receiving a call from an unnamed relative and examiners found cyanide in his blood. And we'll know the autopsy results within the next few weeks.

And, we are pretty sure Leonardo Da Vinci would like this headline. Mona Lisa has successfully traveled to the moon. NASA says the image of his iconic painting traveled almost 240,000 miles by laser beam to a satellite orbiting the moon. It marks the first time anyone has achieved one-way laser communication at planetary distances that could eventually change space communication as we know it. So, that's pretty cool stuff. Mona Lisa certainly getting around, Wolf.

BLITZER: Mona Lisa on the moon. All right. Very cool, indeed. Thank you.

We're here in Washington, D.C. We're on the national mall. The inauguration preparations are in full swing. Will the president say something Monday to ease some of the political bitterness around the nation? David Axelrod and Alex Castellanos, they're both standing by live. They will join me on the national mall and that is next.

(COMMERCIAL BREAK) BLITZER: We're only three days from the president's second term inauguration. We just got this, the official invitation that's sent to the V.I.P.s. We got some pictures and then I think we'll show it to you, eventually. You're looking at live pictures from the U.S. Capitol.

In the meantime, let's discuss what's going on with two guests, the former Obama senior adviser, David Axelrod. He's the director of the University of Chicago Institute of Politics along with our CNN contributor, the Republican strategist, Alex Castellanos. We've got a big surprise for Alex coming on. Something, you will appreciate. We will get to that in a little bit, but we're here on the National Mall.

ALEX CASTELLANOS, CNN POLITICAL CONTRIBUTOR: Yes.

BLITZER: Very -- for hundreds and thousands of folks are going to be here over the next few days. What do you want to hear from the president when he delivers the big speech at noon on Monday?

DAVID AXELROD, FORMER OBAMA CAMPAIGN SENIOR ADVISER: I think the president is well aware that this is a national right. This isn't a celebration for one party or another. There's something sacred as Americans about this ceremony where every year we swear in a president, and it's a celebration of our democracy.

And so, I think he'll be talking about principles and values that unite us. He'll certainly be talking about the path forward but not, I don't think, in specific ways. I don't expect him to stand up here and give a list of details when he has a state of the union speech in 10 (ph) weeks.

BLITZER: This won't be a political speech. It will be a policy speech. It will be a much broader speech -- the history of the most.

AXELROD: That's what I expect.

BLITZER: Looking ahead, what do you want to hear, because it is an opportunity for the president to say something, to reach out and try to push the country together a little bit.

CASTELLANOS: It is. And you know, that's been sorely lacking, frankly, on both sides. And I think this is an opportunity for Republicans to put the politics aside for a day and embrace something a little larger and that is the things we do share as a country. The peaceful transition of power but more than that, we have different means of trying to get to a stronger, better, more prosperous country, but we all want the same things.

And at least maybe one day a year, one day every four years we should remember that. And I think Republicans would -- it would be a smart political thing for Republicans to embrace it that way.

BLITZER: You know, the republicans today -- at least the House Republican leadership, they came up with a little olive branch, a three-month extension raising the nation's debt ceiling without really a whole lot of pre preconditions or anything, getting a budget through, if you will, a positive statement coming from the White House.

The press secretary, Jay Carney, saying we are encouraged that there are signs that Congressional Republicans may back off their insistence on holding our economy hostage to attract drastic cuts in Medicare, education, and programs middle class families depend on.

But it was relatively positive, the response, from the White House. Pretty negative response from Nancy Pelosi, the Democratic leader in the House. This proposal, she says, does not relieve the uncertainty faced by small businesses, the markets, the middle class. This is a gimmick unworthy of the challenges we face and the national debate we should be having.

The message from the American people is clear, no games, no default. Is there a lack of coordination in the response between Pelosi and the White House?

AXELROD: Well, look, I think both points are true. One is its positive that the Republicans and the Congress are backing off of that threat. It's also true that we can't go in three-month increments having a debate about whether we're going to pay our bills and whether we're going to jeopardize the full faith and credit of the United States of America.

We need to work this through, find a long-term solution for this, and bring some certainty to the economy.

CASTELLANOS: I'm not sure I'd say it's an entirely positive statement from the White House saying that, gee, Republicans need to stop holding a gun to Americans' head. That's great news --

(CROSSTALK)

CASTELLANOS: But -- and when -- of course that's not what's happening. We've spent the money and this is one of a few check mechanisms we have to control spending. But -- so it's still a fairly partisan assault, but what you're seeing Republicans in the house do, Wolf, is retreat. You know, you don't attack in politics from a position of weakness. You're attack a position of strength.

And right now, the party is in disarray. We don't have the political strength and the support of the country. The party is going to have to change and move forward. Before it can do that, hey, sometimes when you're losing, you retreat and live to fight another day.

AXELROD: And I think the polling that we've seen in the last few days, Wolf, support what Alex just said. The Republican Party brand is very, very beaten up. And I think part of the reason is this kind of brinksmanship. So, perhaps, they're spending some time with that data as well.

BLITZER: They're meeting at a retreat right now. They're doing some soul searching. Alex -- have you heard anything what's going on over there among those Republicans?

CASTELLANOS: I don't think it was the best idea ever to have the outreach to minorities meeting in the plantation --

(LAUGHTER)

CASTELLANOS: That may not have gone over well. But, you know, when you hit bottom, there's nowhere to go but up. And I think what you're seeing a lot of Republicans -- you know, this country is built on the principles of liberty and freedom and all of us having the opportunity to lead our own lives, not to be told what to do by Washington.

And so, Republican principles are ever fresh. How do we communicate them to a new generation of voters? How do we communicate them in the communications age, not the industrial age? How do we move forward and talk about growing this economy up bottom up instead of -- naturally -- instead of politically and artificially from Washington?

That's what republicans are talking about. I think you're going to see a very different generation of Republican in two years.

BLITZER: All right. Stand -- quickly?

AXELROD: I just was going to say, I was wondering when they had that seminar for -- I had a talk to women whether they talked about not having Washington make decisions for them. That would be a step forward for the Republican Party.

CASTELLANOS: It's something they need to talk about and I think they had that one in the ward cleaver room.

(LAUGHTER)

BLITZER: Guys, stand by for a moment. A moment a lot of you have been waiting for, Alex CASTELLANOS, he is getting ready to do what David Axelrod did a little while ago. Give up -- take a look at that mustache. You're looking at it right now.

(LAUGHTER)

BLITZER: But pretty soon, that mustache that he's had for, what, 41 years, 41 years, that beautiful mustache is about to go but for a very good cause. Stand by.

(COMMERCIAL BREAK)

WOLF BLITZER, HOST: A close shave for Alex Castellanos only minutes away.

Kate is here to explain what we are about to see.

KATE BOLDUAN, CNN CORRESPONDENT: This is a moment I have been waiting for a very long time.

Our loved CNN political contributor is about to lose his mustache live in THE SITUATION ROOM. And he's doing it for a very, very good cause.

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP FROM "MORNING JOE," DECEMBER 7, 2012, COURTESY MSNBC)

BOLDUAN: While that mustache goes away, I'm not sure we want to see the progress.

DAVID AXELROD, CAMPAIGN ADVISER, PRESIDENT OBAMA: No -- no shrieking.

BOLDUAN (voice-over): It started with a man on the other end of the political spectrum, David Axelrod, the top adviser who has twice helped President Obama win the White House. Last November, he vowed to shave off the mustache he's had for 40 years if donors would contribute a million dollars to the charity co-founded by his wife, Susan, CURE -- Citizens United for Research in Epilepsy.

The Axelrods' daughter, Lauren, suffered her first epileptic seizure as a baby. And by the time she was a teenager, she had as many as 25 seizures a day.

Medicines, diets, even surgery, provided no relief. But in the year 2000, a new drug finally brought Lauren's epilepsy under control.

Still, the Axelrods do everything they can to raise money for research. David's Slash the 'Stache fundraiser was a success, bringing in a million dollars for a CURE.

UNIDENTIFIED MALE: Are your friends at the White House watching, David?

AXELROD: Yes, laughing, I'm sure.

UNIDENTIFIED MALE: Laughing.

UNIDENTIFIED FEMALE: Yes.

BOLDUAN: That same afternoon in THE SITUATION ROOM, Alex Castellanos put his whiskers on the line.

ALEX CASTELLANOS, REPUBLICAN CONSULTANT, CNN POLITICAL CONTRIBUTOR: We're going to try to raise some more money for CURE. It's such a wonderful charity, that if we can raise another 500 contributions between now and the beginning of the year, will I do this?

Should I do this?

AXELROD: Right here in THE SITUATION ROOM.

CASTELLANOS: Should I do this?

AXELROD: Yes, sir.

CASTELLANOS: We're going to come back here in THE SITUATION ROOM?

AXELROD: It's too late now, man. We're -- we're jumped...

CASTELLANOS: In the spirit, we're going to show that bipartisanship does live in Washington still...

WOLF BLITZER, HOST: Wow!

CASTELLANOS: -- and that we'll get rid of this mustache, too.

AXELROD: There will be a situation right here in THE SITUATION ROOM.

BOLDUAN: David and Alec exceeded their goal -- 524 donors gave more than $115,000 to the fight against epilepsy.

And now Alex Castellanos is about to say good-bye to his long time facial fixture.

BLITZER: How long have you had your mustache, Alex?

CASTELLANOS: Oh, let's see, I was about two or three years old.

(LAUGHTER)

CASTELLANOS: Wolf, it's a Cuban thing.

BLITZER: I know you're -- you've got that Cuban heritage in you.

CASTELLANOS: Yes.

BLITZER: That's -- that's a big deal...

CASTELLANOS: Yes.

BLITZER: -- to shave that mustache.

CASTELLANOS: -- this -- this is worse than taking away your cigars, if you're a Cuban.

BLITZER: Yes.

(END VIDEO TAPE)

BLITZER: Alex is here, Kate.

BOLDUAN: Here we go.

BLITZER: David is here. Our grooming...

AXELROD: Here to witness, yes.

BLITZER: -- our grooming expert, PRZ, is here. The mustache is still there. I see it right there.

BOLDUAN: Yes, Alex...

BLITZER: It's about to go.

CASTELLANOS: I'm feeling weaker.

BOLDUAN: Do you have any final words?

CASTELLANOS: I have only one 'stache to give (INAUDIBLE). (LAUGHTER)

CASTELLANOS: -- a cause. No, it -- it truly is to be able to do, when you see what folks have done have been, David, his family and so many folks like that. I'm happy to do it.

I can't believe CNN would engage in this anti-Cuban discrimination by taking off my mustache...

BOLDUAN: Thanks, Alex.

CASTELLANOS: -- but...

For an excellent cause.

BOLDUAN: All right.

CASTELLANOS: -- I'm happy to do it.

BLITZER: David, do you have any advice?

AXELROD: You know, just close your eyes. It will be over in no time. And you'll wake up tomorrow, you won't know what happened. But -- but eventually, it will feel good.

BOLDUAN: All right. Our grooming expert, PRZ, is here.

PRZ...

CASTELLANOS: No.

BOLDUAN: -- take it away.

UNIDENTIFIED MALE: Thank you so much.

BLITZER: Let's see what you can do.

UNIDENTIFIED MALE: Oh, ho.

UNIDENTIFIED MALE: All right. Go ahead and close your eyes.

BOLDUAN: All right...

UNIDENTIFIED MALE: This will be painless.

BOLDUAN: David, what was going through your mind at this very moment?

AXELROD: Well, I asked for drugs at the last minute. So I wasn't really -- it was a -- you -- you have to understand, I had mine for 40 years. I know what he's going through.

BOLDUAN: Yes.

AXELROD: I was up the whole night before. I didn't know what life would be like, you know, but...

CASTELLANOS: Help me, David.

AXELROD: But it turns out -- it turns out it's OK.

BOLDUAN: Alex, I spoke with your daughter before. She said she's more excited than she is nervous. And she's just nervous that you're going to be really pale under there.

(CROSSTALK)

CASTELLANOS: Well, my wife has just informed me that she's been waiting to see me without a mustache since we've been married...

BOLDUAN: David, didn't your wife...

CASTELLANOS: -- which, to me, indicates...

(CROSSTALK)

CASTELLANOS: -- some level of dissatisfaction.

BLITZER: There's something...

AXELROD: Something is -- I think I see a Young Americans for Freedom tattoo under that thing.

(LAUGHTER)

AXELROD: Is that -- is that true?

CASTELLANOS: Reagan for president.

BOLDUAN: David, didn't your wife say the same thing when she saw you without a mustache?

AXELROD: We got 10 steps away from the shaving and she said, "I always hated that thing anyway." I said, we've been married 33 years, you waited until now to tell me?

So...

CASTELLANOS: Our gender has no shot when women that have kind of patience...

(CROSSTALK)

UNIDENTIFIED MALE: All right. I'm just going to steam up your face a little bit, just to loosen up your beard.

BLITZER: PRZ, tell -- tell us what you're doing.

UNIDENTIFIED MALE: So what I'm doing right now is I'm putting some steam on Alex's face just to loosen up the hairs there...

AXELROD: I've...

UNIDENTIFIED MALE: -- because he hasn't shaved that area in quite a while.

AXELROD: I've steamed up Alex many times.

UNIDENTIFIED MALE: (INAUDIBLE) steamed him up (INAUDIBLE). And so now what I'm going to do is I'm going to apply a product called Easy Shave on his face and...

BLITZER: And what does that do?

UNIDENTIFIED MALE: And Easy Shave is a clear product that's translucent and it's, especially for weather like this, and since we're shaving outside in this cold weather...

BOLDUAN: On TV.

UNIDENTIFIED MALE: -- it's going to...

CASTELLANOS: That's not good?

UNIDENTIFIED MALE: It is good. It is good. So what it's going to do, is you'll see, it's going to to on very -- I'm going to put this on and it's going to go on very clearly. And...

BOLDUAN: Here we go.

AXELROD: All I can tell you, brother, is my guy hacked me when he did it. You've -- you've got a really sensitive...

BOLDUAN: That's right, David.

UNIDENTIFIED MALE: So now we're putting this on...

UNIDENTIFIED MALE: CNN spared no expense.

UNIDENTIFIED MALE: (INAUDIBLE) in a second we'll -- and then we're going to start shaving away.

BOLDUAN: All right. Take a deep breath, David.

UNIDENTIFIED MALE: The beauty of this stuff is that, you know...

CASTELLANOS: I'm getting weaker.

UNIDENTIFIED MALE: Oh, it's not so bad.

BOLDUAN: He was fainting as if he was...

UNIDENTIFIED MALE: He's looking pallid. I...

UNIDENTIFIED MALE: So...

BOLDUAN: He was trying to -- I think he was trying to fake the flu a couple of minutes ago.

UNIDENTIFIED MALE: So this is a translucent product. And what it's doing right now, it's lifting up the hairs. And it's going to make my life a lot easier when I...

BOLDUAN: All right, PRZ.

UNIDENTIFIED MALE: How about his life?

(CROSSTALK)

UNIDENTIFIED MALE: You think you can close your mouth?

BOLDUAN: All right, no talking.

(CROSSTALK)

UNIDENTIFIED MALE: Go like this for me.

CASTELLANOS: One last thing. David's...

(CROSSTALK)

CASTELLANOS: -- David's boss already took my shirt, now David's taking my mustache.

UNIDENTIFIED MALE: Go ahead and go like this for me. Perfect.

BOLDUAN: Very tough. Alex Castellanos not being able to talk right now.

(LAUGHTER)

BLITZER: Very smooth. Very smooth.

BOLDUAN: Very smooth. Very good. A lot of pressure on you, PRZ.

UNIDENTIFIED MALE: Oh, I know. A little bit. Not at all. But the product...

BLITZER: It brings back memories for you, David, huh?

AXELROD: It does. This is...

(CROSSTALK)

AXELROD: -- this is about the point where the guy (INAUDIBLE)...

BLITZER: But, David, your mustache is gone forever?

BOLDUAN: I was actually surprised.

AXELROD: Well, after Susan said...

BOLDUAN: -- I was wondering if you were going to keep it.

AXELROD: -- what she said, I...

BLITZER: Yes.

AXELROD: -- well, what am I going to do?

She's got to look at me more than I -- I do, so.

BOLDUAN: Susan's got a lot of control. Very good, Susan. Susan is here, as well, David Axelrod's wife, who is a co-founder of the CURE.

BLITZER: Very nice.

AXELROD: I must say, mine came off easier, though. It's -- his...

BOLDUAN: It was ready to go.

AXELROD: It is. It's a Cuban mustache.

BLITZER: You only had yours for 30 years, right?

AXELROD: Forty.

BOLDUAN: Forty years.

AXELROD: No, I was right up there.

BOLDUAN: Here we go.

AXELROD: I was right up there.

BOLDUAN: The suspense is killing me. Bipartisan at its best.

(LAUGHTER)

BLITZER: He's going to look very handsome (INAUDIBLE).

BOLDUAN: David, remind our viewers what this money goes for...

AXELROD: Well, what the money...

BOLDUAN: -- that was raised for the Slash the 'Stache.

AXELROD: -- the money Alex raised by doing this is going to -- it's going to fund research, and cutting edge research. We -- we fund grants all over the world, new ideas, new approaches that might spare the kind of problems that my daughter has gone through. Fifty thousand people a year lose their lives.

BOLDUAN: Fifty thousand people?

AXELROD: A year.

(CROSSTALK)

AXELROD: So this is a serious, serious problem. And we need answers. And -- and this -- just the money that Alex raised will keep a researcher going for a year. And that's really significant, because we never know which of these grants is going to be the one that's going to make the difference.

BOLDUAN: Exactly.

BLITZER: Tell our viewers, if they want to help, what they can do.

AXELROD: Well, they can -- I think slashthestache.com is still active, or they could go to cureepilepsy.org online and...

BOLDUAN: Yes.

AXELROD: -- and contribute. And virtually all of our money, very low operational costs, goes to the research, so...

BOLDUAN: I think I see a finished product on the gentleman.

UNIDENTIFIED MALE: Wow!

UNIDENTIFIED MALE: Yes, so now...

BLITZER: We're beginning to see something.

UNIDENTIFIED MALE: So now what we're going to do, Wolf, is we're going to put a product -- put a product on called The Happy Ending.

BLITZER: Yes.

UNIDENTIFIED MALE: Because we believe...

(LAUGHTER)

UNIDENTIFIED MALE: -- we believe every shave -- we believe every shave deserves a happy ending.

BOLDUAN: This shave took a very dangerous turn, I believe, everyone.

(CROSSTALK)

UNIDENTIFIED MALE: And you'll see...

CASTELLANOS: I haven't had one of those in 41 years, either.

BOLDUAN: You keep your mouth shut. You just stay there.

All right.

BLITZER: Very smooth.

BOLDUAN: I see -- (INAUDIBLE) -- Wolf is ready to sit in the chair.

BLITZER: No. No.

(CROSSTALK)

AXELROD: We'll just go after mustaches, with "Sully" Sullenberger's next.

BLITZER: Yes.

BOLDUAN: Exactly.

(CROSSTALK)

AXELROD: Maybe Holder. We can get Eric Holder in here.

BOLDUAN: And he has quite a 'stache. All right.

BLITZER: More Happy Ending over there?

Is that...

UNIDENTIFIED MALE: Yes, a little bit there.

BOLDUAN: Wolf...

(CROSSTALK)

AXELROD: This is becoming a delirious (INAUDIBLE).

BOLDUAN: I know. Exactly. All right, PRZ, let's see the finished product.

(CROSSTALK)

UNIDENTIFIED MALE: I see it.

BOLDUAN: Ladies and gentlemen, Alex Castellanos.

BLITZER: A big round of applause.

(APPLAUSE) CASTELLANOS: What does it look like?

BOLDUAN: Take a look at the monitor, Alex.

BLITZER: Take a look. You see it right there.

CASTELLANOS: Who's that?

UNIDENTIFIED MALE: Excellent.

BOLDUAN: Beautiful. Absolutely beautiful.

What do you think, Cat?

UNIDENTIFIED FEMALE: It's a little strange (INAUDIBLE).

BOLDUAN: She says it's a little strange, it's going to take me a while to get used to it.

BLITZER: Let me take a...

BOLDUAN: Take a close look, Wolf.

BLITZER: I'll take a closer look. Whoa.

CASTELLANOS: I've got to find out whether what a kiss feels like. No, Wolf.

BLITZER: What do you guys think back there?

(APPLAUSE)

BLITZER: They like it back there?

BOLDUAN: What do you think?

(APPLAUSE)

BOLDUAN: They love it.

CASTELLANOS: Right...

BOLDUAN: They love it.

CASTELLANOS: We're right in the shadow of the Capitol, too. A major historical event.

BLITZER: Yes.

CASTELLANOS: Go to slashthestache.com.

BLITZER: It's a good cause.

(CROSSTALK)

CASTELLANOS: Thank you.

BLITZER: Alex Castellanos, thanks very much for doing this.

BOLDUAN: Thank you, guys.

BLITZER: David Axelrod...

CASTELLANOS: Thank you, guys.

BLITZER: -- it was your idea, right?

AXELROD: I know. I got him into this mess.

BLITZER: We've got a bipartisan...

(CROSSTALK)

BLITZER: -- we've got a bipartisan cause.

AXELROD: He's a good man.

(CROSSTALK)

BLITZER: Thank you very much.

(CROSSTALK)

BOLDUAN: You both look very handsome.

CASTELLANOS: Thank you.

BOLDUAN: Good job, guys.

BLITZER: Good work.

BOLDUAN: Good work.

BLITZER: Good work all around.

(LAUGHTER)

All right. We'll talk a quick break. More from the National Mall right after this.

(COMMERCIAL BREAK)

BLITZER: We're back here on the National Mall getting ready for the inauguration, the second inauguration for the president of the United States. It's a beautiful, beautiful evening here in the nation's capital. Maybe a little more beautiful because Alex Castellanos is still here without his mustache.

You look very handsome, I got to tell you.

CASTELLANOS: I feel I'm sitting here completely naked.

(LAUGHTER)

BLITZER: What do you think, David Axelrod?

AXELROD: I just -- I don't want to go there.

(LAUGHTER)

I think he looks great and beyond looking great he is a great guy.

BLITZER: We've got have a special guest who's calling in. A former governor of the United States, governor of Florida, Governor Jeb Bush is calling us in.

Hey, Governor, what do you think about the new and improved Alex Castellanos?

JEB BUSH, FORMER FLORIDA GOVERNOR: You know, if he could paints his hair and he loses a little weight, he could go on television.

(LAUGHTER)

BLITZER: You think -- what do you think? Have you -- I've never seen him without the mustache.

BUSH: He looks great.

BLITZER: What do you think? BUSH: The whole office here down in Miami is saying, this guy is good looking. His smile looks a lot better, that's for sure. I think -- I think this is going to help sustain his television career for sure.

(LAUGHTER)

CASTELLANOS: Governor, I know you always hoped there was some way for -- to improve me.

AXELROD: I must say, the governor helped -- he contributed to -- he advanced the cause, both of Alex --

(CROSSTALK)

BLITZER: For CURE.

AXELROD: We're really grateful to him for that as well.

CASTELLANOS: I appreciate it. There are things that Republicans and Democrats can agree on even today. And Jeb -- Governor, that was so nice of you to do.

BUSH: David, congratulations on your --

(CROSSTALK)

BLITZER: What do you think of the opportunity --

BUSH: Excuse me?

BLITZER: I was going to say, Governor, you see David Axelrod and Alex, they're sitting here together. Is there hope for a little political cooperation down the road?

BUSH: I think there's -- it's inevitable. We're (INAUDIBLE) right now where it doesn't appear like it'll ever come back but there's enough -- there's enough in our history to suggest that it will.

And David, congratulations on a great campaign.

AXELROD: Thanks.

BUSH: There's a pause in the action right now. This is the time to celebrate our democracy and celebrate the president's re-election. We'll be back at you some time soon but I think now is the time to take a little time off and be grateful that we're Americans.

AXELROD: I know -- I know you will. I also know there are some issues on which we all ought to be able to work together again. One of the things that I appreciate about you is that you've been willing to do that and say that. It's important for the country.

BUSH: Absolutely.

BLITZER: I think it's important for all of us to see this kind of little goodwill, even if it's brief, especially around an historic moment like this right now.

Any final words you want to offer Alex, Governor, before I let you go?

BUSH: Well, I guess I'd only say that I had a huge mustache, Castellanos sized mustache until I was 26 because I wanted to be -- look old and then I cut it off because I already was older looking and now Alex will get a new lease on life. I think it's -- and, David, you look pretty good there, too. I think -- I think you guys are going to enjoy it.

AXELROD: I appreciate that.

CASTELLANOS: So that's the key to success, huh? I got it.

BLITZER: Yes. You feel stronger, too, without that mustache?

CASTELLANOS: Not just yet. I'm a little wobbly.

(LAUGHTER)

Just a little shakely (ph) cold up here now.

BLITZER: Hey, Governor Bush, thanks very much for calling in for an excellent cause.

BUSH: Thank you.

BLITZER: We'll all try to cure epilepsy if we can.

David, thanks very much for the idea.

AXELROD: Thanks, Governor. Thanks, Wolf. Thank you.

BLITZER: Alex, thank you.

AXELROD: Thank you again, Alex.

BLITZER: All right. We've got more news coming up here in THE SITUATION ROOM. Many of the nation's mayors, they have very, very strong feelings on a lot of issues, including gun control.

Up next, the mayor of Los Angeles, Antonio Villaraigosa, he's here on the National Mall with us. He has some feelings on how he thinks we can move this country forward. Stand by.

(COMMERCIAL BREAK)

BLITZER: The Obama administration's push for tough gun control laws has found a mostly receptive audience in the U.S. Conference of Mayors, which actually played a key role in trying to help shape the new proposals. The Vice President Joe Biden told hundreds of mayors yesterday that they know, as well as anyone, the impact of gun violence and that they've had to attend way too many funerals.

Joining us now is the mayor of Los Angeles, Antonio Villaraigosa. The president of the U.S. Conference of Mayors. MAYOR ANTONIO VILLARAIGOSA (D), LOS ANGELES: Well, the ex-president.

BLITZER: Ex-president. You were the former president. You've made some specific proposals to the vice president of this task force. Any proposal you made that didn't make the cut?

VILLARAIGOSA: Well, first of all, let me just say something that the vice -- repeat what the vice president said. We actually have to attend funerals. We actually have to talk to families who have lost a father, a mother, a brother. That's the difference between mayors and members of Congress. This isn't ideological or abstract for us. This is real.

We lose tens of thousands of people, primarily young people, primarily people of color, every year to gun violence. And we've got to do something about it. We don't have to do something that violates the Second Amendment. But we have to do things that are safe, that are responsible, that are practical and that move the country forward. And that's what the mayors are advocating.

BLITZER: So was there something that you wanted the vice president to include in these proposals that didn't make it?

VILLARAIGOSA: What I'll say is this. I think some states will go further. California will, as an example.

BLITZER: Give me a specific example.

VILLARAIGOSA: Ammunition. Ammunition.

BLITZER: Yes. The number of rounds in the clip?

VILLARAIGOSA: Yes -- well, no. They talked about high-capacity magazines as well.

BLITZER: They want 10?

VILLARAIGOSA: Yes. And I think we could go to seven. But 10 is a good place to start. In California, we're actually having conversations about making it -- having background checks to be able to buy ammunition because a lot of the people that have these guns who we haven't been able to locate actually are buying ammunition. And we should be able to track that.

BLITZER: What about gun buybacks? Because there's proposals in a lot of cities maybe a city could go out there and buy some of these guns, get less guns on the street, less opportunity for gangs, for example, to get guns.

VILLARAIGOSA: We've advocated gun buybacks. In fact, I did one the day after Christmas. Got about 2,000 guns. We've -- 10,000 guns over and assault weapons. Even a grenade launcher. Every time we do this, yes, that's an area that we can work on.

Universal background checks, that's something we absolutely have to do. Forty percent of all sales of guns are done between private dealers that don't require a background check. More coordination between states, cities and the federal government, very, very important.

Really having strong databases for the mentally ill, very, very important. And doing something to address gun trafficking and what they call the straw purchasers. This is someone like you and I who could qualify to buy a gun, then buys that gun and sells it to someone who can't.

BLITZER: These gang guys, whether in L.A. or Chicago or New York -- any place, do they make -- where do they get these guns?

VILLARAIGOSA: Well, they get them at gun shows, they get them from private sellers, they steal them. That's why safe storage and trigger locks are important. They get them because we have big loopholes in our laws and we have a federal government that's been missing in action when it comes to safe, responsible gun legislation.

And I want to say something about the Second Amendment and these assault weapons. You know, when we passed the second amendment a couple hundred years ago, there weren't assault weapons back then. The notion that we're violating the Second Amendment by banning assault weapons and high magazine clips just doesn't pass the smell test or the history test.

And by the way, you know, if you're a sports enthusiast and a hunter and you need a high capacity assault weapon to shoot a deer, you're in the wrong sport.

BLITZER: Very quickly, on immigration reform, which is another subject close to your heart. You've been talking a lot about it this week. You saw Marco Rubio, the senator from Florida's proposals, are you on board with him? Is there any major difference you have with him?

VILLARAIGOSA: Well, he's making progress. And I salute him for that. He's got the courage to taken on his own caucus and say, we need comprehensive immigration reform. We need a pathway for citizenship. There's probably a difference of opinion on how long it takes to earn that legalized pathway to citizenship. But it's a great start.

And I'm looking forward to a partner, Senator McCain, Lin Graham and now Marco Rubio joining the very important debate and the conversation about how we fix this broken immigration system.

BLITZER: You're going to have an alliance with Lindsey Graham and with Senator McCain. Senator Rubio, you might get some comprehensive immigration reform.

(LAUGHTER)

VILLARAIGOSA: I hope so.

BLITZER: We'll see if you can do. And, Mayor, thanks very much for coming in.

VILLARAIGOSA: Thank you.

BLITZER: You're going to have a busy few days. It's been an exciting few days.

VILLARAIGOSA: Yes, it will.

BLITZER: Tasteless or tribute? Up next, we have some information on the growing controversy behind the very unlikely pairing of fashion models with the Superstorm Sandy first responders.

(COMMERCIAL BREAK)

BLITZER: Take a look at this, a special edition of our inauguration preparation "Hot Shots" as we look at a live picture of the U.S. capitol.

In Maryland, the Air Force Band plays during a rehearsal at Joint Base Andrews. On the National Mall, two policewomen patrol the area on horses. In Washington, volunteers take part in an inauguration parade practice. Also here in Washington, blankets are available for staffers working outside of CNN's inauguration site to help keep themselves warm.

"Hot Shots," pictures coming in from around the nation's capital.

When you think about honoring the heroes of Superstorm Sandy, this provocative "Vogue" magazine spread may not necessarily be what comes to mind.

Mary Snow is joining us now with details on the controversy it's generating.

Mary, what's going on?

MARY SNOW, CNN CORRESPONDENT: Hey there, Wolf. Well, you know, this is meant as a tribute. "Vogue's" featured photos with first responders, Con-Ed workers and hospital staff is gaining attention. The question being raised, is it just edgy or offensive?

(BEGIN VIDEOTAPE)

SNOW (voice-over): Couture meets crisis. "Vogue" magazine is gaining attention for its photo spread celebrating first responders in the wake of Superstorm Sandy.

Famed photographer Annie Leibovitz shot the pictures in December, more than a month after Sandy hit. But some online critics question the mix of sex appeal on Sandy and whether "Vogue" went too far. On the magazine's Facebook page, one woman writes, "What is there to celebrate when people are still suffering? Looks like Leibovitz never let a crisis go to waste."

New Yorkers we asked had mixed opinions.

JOYCE MESNIK, VOGUE SUBSCRIBER: I felt it was a little exploited. I didn't particularly like the idea. I mean, I figure these are very dedicated people. And I don't see the purpose of the models being there, just kind of downplayed it to me for what these men have done. So I wasn't happy with it.

SHAWN BLOOM, NEW YORKER: I actually thought it was cool. You know, I never look at fashion stuff at all. And I'm not a fashion guy. But I think it's nice if people can take a bad situation and make something positive from it, if it is just models standing with the first responders.

SNOW: "Vogue" in a statement said, "We chose to celebrate the hard work of the teams who responded to the crisis in a way appropriate to the context of a fashion magazine.

(On camera): And "Vogue "points out it wasn't on the sidelines after Sandy hit. With the American fashion industry based here in New York, "Vogue" says it worked with designers in raising $1.7 million for victims' recovery efforts.

(Voice-over): There have been no complaints from the people photographed with the models. The fire department, for one, says "Vogue" put a spotlight on the great work of its members.

(END VIDEOTAPE)