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Stocks Fall Short of All-Time High; Pope Benedict XVI Steps Down; "I Am No Longer the Pope"; Dennis Rodman's Diplomatic Score; White House to Support CT: Overturn Gay Marriage Ban; "Serious Criminals Are Being Released"; What's Going Wrong In Iraq; Taxpayers On The Hook For Luxury Travel?

Aired February 28, 2013 - 16:00   ET


WOLF BLITZER, CNN ANCHOR: Happening now, they are just about to ring a bell on a rollercoaster day, almost history-making day on Wall Street. Stay right there. We're going to see how close the Dow industrials come to their all-time high.

Also, what's wrong with this picture up on Capitol Hill? Lawmakers are getting out of town instead of working to head off the forced spending cuts that hit tomorrow.

Plus, look at this. Dennis Rodman, yes, believe it or not. Dennis Rodman scoring a diplomatic triumph.

There he is. He's sitting right next to the leader of North Korea, Kim Jong-un, courtside at a basketball game in Pyongyang.

I'm Wolf Blitzer. You're in "The Situation Room."

Right now, all eyes are on Wall Street, the New York Stock Exchange closing out a day that saw the Dow Jones industrial average making a run at breaking its all-time high.

Our chief business correspondent, Ali Velshi, is here in THE SITUATION ROOM with us today.



BLITZER: ... the numbers are going up right now, what, 14053.

VELSHI: Yes. We're just flat, basically.


VELSHI: We came within 16 points of the record that was set on October the 9th in 2007. So if we got there, you would have just made your money back after more than five years.

But let me just remind you, in a market like this, it is volatile, which means a lot of computers influence trading, so as soon as you hit that record, you will find a lot of -- you will probably go down right from there. This may take a few days, but quite incredible to think that for everything else that is going on in the economy and in Washington, this Dow is near an all-time high. We, by the way, got to a fire-year high again today.

BLITZER: So, it doesn't look like, on Wall Street at least, they're all that concerned about these forced spending cuts.

VELSHI: There are a couple of reasons for that. One is, as you know, let's say the forced spending cuts go into effect on Saturday morning.

You won't see any of the furloughs or the layoffs for another month and then that's when we have to discuss the budget. So we think, the market thinks you have the end of March, not the end of February to deal with this. Number two, this market is not really overvalued. A stock is valued based on what that company will earn. You pay a multiple of that.

It's not particularly overvalued. In a low-interest rate environment, you tend to take more risks because you can't make your money elsewhere in more secure investment. You get nothing by putting your money into a bank account, inflation would eat away at it, so you are pushed into the stock market. So there's more money in the stock market than there would be if interest rates were say 5 or 6 percent as opposed to 3 or 4 percent on mortgages.

So that's part of the reason why you're seeing this kind of pressure, upward pressure in the stock market. There are still some people who warn, be careful of a market like this. What goes up goes down. But, remember, if you're invested in bonds with interest rates where they are starting to go up, bonds are coming down.

So if you're an older, more conservative investor, you don't have choices but to start getting into the stock market and that's why you're seeing so much bubbling and so much activity.

BLITZER: And it's impressive, what, 14054, almost 55, the all-time high 14,164.


BLITZER: I remember. It was 6500.

VELSHI: Yes, unbelievable.

BLITZER: Even though it was at 14000 in 2007, the next year it was down to 6500. Just because it's doing well right now, my advice and your advice to investors out there is stay calm.

VELSHI: This is a trader's market, remember right now. It is a trader's market. Your investment behavior should not be governed by trading volatility. Right now what we're looking at is trading volatility.

BLITZER: Got really close to that all-time high. Why didn't it go over the top?

(CROSSTALK) VELSHI: Well, a couple things. There's no real catalyst to it going over the top. We just found out that economic growth at the end of 2012 was one-tenth of 1 percent positive. That's not a celebratory number.

BLITZER: Not exactly -- they need 3, 4 percent to really start creating jobs.

VELSHI: Yes. Right.

This isn't a victory dance. This has taken five years to get here. It may takes its time.

BLITZER: In the last quarter of last year, there was negative growth.

VELSHI: It was supposed to be negative, and we just got the first...


VELSHI: It went from negative one-tenth to positive one-tenth, again, .02 difference, not that big of a deal. This is not a celebratory market. It just happens to be doing this.

BLITZER: Although people have made money these last five years on Wall Street.

VELSHI: They absolutely have.

BLITZER: Ali, you will be back later. Thanks very much.

We're now just a day away from those forced spending cuts that will cut across U.S. defense and domestic programs. You might think it's finally time for Congress to get serious about doing something to avoid the potential pain out there. But guess what? You would be wrong.

Our chief congressional correspondent, Dana Bash, is up on Capitol Hill to explain what is going on.

Go ahead, Dana. Explain.

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: We can now report that those $85 billion in forced spending cuts will kick in by the end of the day tomorrow. Why?

Because Congress is the only place that has the power to stop them and they are gone.


BASH (voice-over): Lawmakers racing down the Capitol steps, bolting out of town for a long weekend. This was before noon, a full day before the hammer comes down on forced budget cuts they voted for.

(on camera): Is there a concern that you all are going to leave town while these cuts kick in and you won't even be here? REP. TIM GRIFFIN (R), ARKANSAS: The speaker and the leadership will be here and I'm a quick flight away. I go home every weekend to see my family.

BASH: You're on your way out? Are you on your way home?


BASH: So you're not going to be here in town when these cuts kick in?

HANNA: If they call me back, I will be back.

BASH: What do you think about the idea that Congress and you all won't even be here when these cuts kick in?

UNIDENTIFIED FEMALE: We have got to go to the airport.

BASH: Got to go to the airport? OK. Bye.

(voice-over): Some Republicans, whose party runs the House, were unapologetic about leaving Washington until Monday.

REP. RICHARD HUDSON (R), NORTH CAROLINA: Well, I think it's actually better when we're home working because the work we do there in my opinion is more important than the work we do here, especially if we're going to keep spending money.

REP. JIM RENACCI (R), OHIO: This was his idea, the president's idea.

BASH (on camera): But, as you well know, most Republicans voted for it.

RENACCI: Well, I voted for it, too, because I think we have to get our spending in line. So, these are the things that -- at 2 percent, most families, most businesses back home have had to do the same thing.

BASH (voice-over): Yet some lawmakers in both parties sounded as fed up as their constituents.

REP. ADAM SMITH (D), WASHINGTON: Leaving -- we could stay here, and if we were staying here and not passing a bill, that's not any better.

BASH (on camera): You're heading to your car. I assume you're going home to New York?

REP. PETER KING (R), NEW YORK: Got a lot of business -- yes, actually, listen, I think the sequester is crazy. I think the president has to show more leadership. Congress should do more. But just to sit here by myself serves no purpose.

BASH (voice-over): Most House Democrats whacked Republican leaders for going out of session.

REP. ELIOT ENGEL (D), NEW YORK: It's an absolute disgrace that we're going home. We should stay here until the sequester has ended. This is a stupid way to do it.

BASH (voice-over): But Democrats do run the Senate and their last votes this week were only a few hours later.

UNIDENTIFIED FEMALE: The motion is not agreed to.

BASH: Two proposals to alleviate the forced cuts, one Democrat and one Republican, partisan show votes. Neither passed and neither was expected to.

(on camera): Will you keep the Senate in session or will the Senate not be here just like the House won't be here the day that these cuts kick in?

SEN. HARRY REID (D-NV), MAJORITY LEADER: We're in session. We're not going anyplace. We're ready to work. But at this stage, we can't -- we don't have a partner.


BASH: Now, the Senate is technically still in session, but senators as we speak, Wolf, they are headed for the airports, most of them getting out of town. Leaders in both parties made the point that they will be here tomorrow, of course, for the meeting that they will have with the president at the White House tomorrow morning.

But I have not found a source in either party that expects them to do anything to change what is going to happen, at least starting tomorrow night. And that is, those cuts will begin to go into effect.

BLITZER: But we really, Dana, at least everything I'm hearing, Saturday, Sunday, Monday, in the immediate days after these forced budget cuts go into effect, most of Americans, almost all Americans really won't feel any direct pain.

BASH: That's exactly right. You heard Jay Carney at the White House, talk to members of Congress. They say what is going to happen is it's going to be a slow roll, that it's going to take some time for the effects of this to trickle down and get to the American public.

What we're obviously going to be watching for first are those are most obvious to most of us, like airport delays and things like that. But it could take a few weeks, even more for people to actually feel the pain from these cuts.

BLITZER: Yes, we're going to have more on the president's shifting tone on the pain. That's coming up in our next hour as well. Dana, thank you.

There are some new developments today in what many are seeing as an important sideshow to this entire spending cuts fight. We're talking about the veteran journalist Bob Woodward and his assertions made here in THE SITUATION ROOM yesterday, his exchange with a senior Obama administration official who didn't like what he was reporting.

Today, we learned that that official is Gene Sperling, the director of the National Economic Council, and we're getting some new insight into that exchange as White House officials are going out of their way to say it's all part of a big misunderstanding.

Let's bring in our chief White House correspondent, Jessica Yellin. She's been doing some digging, reporting on what's going on.

What's the latest, Jessica?


Bob Woodward and Gene Sperling, the White House economic, had a phone call first and then an e-mail exchange. Bob Woodward said he felt the exchange was threatening and the White House says that is absolutely ridiculous and in fact they say it's so ridiculous, that a former senior adviser, David Plouffe, is sort of mocking Bob Woodward.

He sent out a tweet comparing Woodward to an aging sports star. He says: "Watching Woodward the last two days is like imaging my idol, Mike Schmidt, facing live pitching again. Perfection gained once is rarely repeated." Ouch.

Here's what the drama is all about.


YELLIN (voice-over): An intimidating threat or a friendly exchange between a reporter and a White House official?

BOB WOODWARD, "THE WASHINGTON POST": They are not happy at all.

YELLIN: At issue, a spat over Bob Woodward's reporting on the president's plan to avoid the looming forced spending cuts.

WOODWARD: It was said very clearly, you will regret doing this.

BLITZER: Who sent that e-mail to you?

WOODWARD: Well, I'm not going to say.

BLITZER: Was it a senior person at the White House?

WOODWARD: A very senior person.

YELLIN: That official was Gene Sperling, director of the National Economic Council and according to the White House, his e-mail was no threat at all.

In a statement, a press official said, "The note suggested that Mr. Woodward would regret the observation he made regarding the sequester because that observation was inaccurate, nothing more."

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: Gene Sperling, in keeping with a demeanor I have been familiar with for more than 20 years was incredibly respectful. You cannot read those e-mails and come away with the impression that Gene was threatening anybody.

YELLIN: The key here, all-important context.

In the e-mail exchange obtained by Politico, Sperling writes: "I apologize for raising my voice in our conversation today. My bad. But I do truly believe you should rethink your comment about saying that the president asking for revenues is moving the goalpost. I know you may not believe this, but as a friend, I think you will regret staking out that claim."

Woodward replies: "You do not ever have to apologize to me. This is all part of a serious discussion. I, for one, welcome a little heat."

Now Woodward says it was too hot.

WOODWARD: It makes me very uncomfortable to have the White House telling reporters, you're going to regret doing something that you believe in.

YELLIN (on camera): The president says he values a free press that is not afraid to ask questions, to examine and to criticize.

Has he ever spoken to his aides about the tone he would like them to take, you all to take when talking to the press?

CARNEY: We are enormously respectful of the work that you do, that I used to do, and we also believe it's important for us to make clear when we think, as we have in the past, somebody is out there getting the facts wrong.


YELLIN: Wolf, as you well know, there are sources who bully and threaten. And sources also sometimes get animated as they try to share their perspective. And it's up to each reporter and each interaction to decide what's taking place in that individual instance, Wolf.

BLITZER: Well, certainly and I think you will agree, Jessica, based on that e-mail exchange at least, I don't know what happened in the extensive and fairly angry phone conversation that Gene Sperling and Bob Woodward had -- but on the e-mail exchange, it doesn't look like it's on the surface journalistically or whatever exchanges all that awful.

Certainly, there was no direct threat or anything like that, you will be punished or whatever. It was relatively tame and maybe this whole sidebar is being overblown.

YELLIN: Right.

It does not seem to be any -- there's no explicit threat in that e- mail. So if something happened in the conversation, we just can't know about it. We won't know. But I agree with you, and I know from working with Gene Sperling, I personally have never been bullied by him. He gets very excited and very, very talkative, sometimes more talkative than anybody really expects when you're on the phone with him. But I do not myself see the threat in the e-mails. Again, though, you can't speak for another reporter and what they might feel in their own interactions.

BLITZER: No. All of us know Gene Sperling very well. In fact, all of us know Gene Sperling Bob Woodward very well at the same time, and obviously both very honorable guys. I have worked with Gene Sperling going back to the Clinton White House when he worked there at that time and he's not the type -- he likes to talk, as you point out, but he doesn't make threats, any brutal threats, along those lines or anything like that.

Bob Woodward, one of the premier, if not the premier Washington journalist of our generation to be sure. So, obviously, they have got some work to patch up. We invited them, by the way, both to come in here to THE SITUATION ROOM and have a little peacemaking session, if we could, today.

And they declined. But there is some good news coming out of all of this. Gene Sperling will be Candy Crowley's guest this Sunday on "STATE OF THE UNION." We will all forward to that interview as well.

We will tie up all of the loose ends at the same time. Both very, very good guys, Gene Sperling and Bob Woodward, and I'm sure before too long the two of them will be having dinner at a fancy restaurant here in Washington making nice to each other.


YELLIN: Over an expensive bottle of wine, yes.

BLITZER: All right, thanks very much, Jessica Yellin, for that.

Now we turn to today's history-making events over at the Vatican, where the pope emeritus, Benedict XVI, no longer is the leader of the world's 1.2 billion Roman Catholics. His resignation the first by any pope in nearly 600 years took effect a couple hours of ago.

Our chief international correspondent, Christiane Amanpour is joining us.

Christiane, Benedict ended his reign just a couple of hours or so ago. What's it like now? What's the mood there?

CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: Well, listen, I think people are taking it in stock and just sort of moving forward.

But I must say a couple of hours ago when 2:00 p.m. Eastern, 8:00 p.m. local, the Swiss guard, the traditional guard that protects the pope walked inside, closed the doors when he was at Castel Gandolfo and then they came back here to the Vatican, you really got that sense of finality.

And I think you got the sense of emotion today on what has been a very dramatic past few weeks since he announced he would resign, when he flew in his helicopter, and landed there, and came out on the balcony at the summer residence and told people, I am no longer pope today. I am just a pilgrim.

All of a sudden, the emotion and enormity of what has happened, because it's a huge precedent-setting event, all of that sort of set in and you saw the pope look almost -- I don't know -- almost relieved when he gave his last blessing, having looked very tired early this morning in his meeting with the cardinals.

And early -- and yesterday, during his papal address, I thought he looked rather tired and frail, but unburdened, I think he is now feeling relieved.

And, of course, the next excitement will be to see who will be the next pope. I spoke to Cardinal Timothy Dolan of New York, who is considered an aforementioned by many to be a front runner. He, of course, played that down, but he did say what would be looked for in the next pope.


CARDINAL TIMOTHY DOLAN, NEW YORK: What are the natural characteristics that we're looking for? Well, you need -- you need a good pastor, OK? Somebody who is good with people, like Jesus was. You need somebody who is thoroughly versed in the tradition, in the profound theology of our Catholic wisdom. Number three, you need somebody savvy about the church universal, who kind of is aware and conscious of the diverse needs of the Catholic family. Number four, you need somebody who can get by in at least English, Italian and preferably some other languages, too. And number -- where am I?

AMANPOUR: Five, six.

DOLAN: Whatever, five -- seven sacraments, seven. Let's do that. You need somebody with some governing capacity, some managerial skills. I would presume those are the qualities we would look for.



AMANPOUR: Now, many people say that it's unlikely that there will be an American pope at this time. But on the other hand, some say you just never know and the field is wide open and the whole situation right now is so uncertain. So you don't know.

But of course the other thing I spoke to Cardinal Dolan about, like I have with Cardinal McCarrick and many other of the high ranking officials here, is that the pope has to get through all these scandals that have rocked this church and turned off so many Catholics, most particularly the priest sexual abuse scandal has to finally come to a conclusion whereby there's full accountability and transparency. And I think everybody knows going into the conclave that that is going to have to be front and center of all their calculations for the future -- Wolf. BLITZER: When you spoke to Cardinal Dolan about that, what did he say? How does he think the church needs to deal with all of these problems?

AMANPOUR: Well, I think he feels that the church has done a lot. Obviously since it first exploded this terrible scandal and these crimes, really, Wolf, against these young people that date back decades, that this explosion in the U.S. in 2002 and swept Europe in 2010.

And Pope Benedict is the first pope to have apologized, who have met with abuse victims, who have instituted a zero tolerance policy. But that needs to be fully implemented. There has to be a zero tolerance policy, not just for those who abuse but also for those who shielded the abusers for so long and who prevented those abusers from being held accountable and who farm them out to different parishes, which enable them to continue that abuse.

So, lots and lots of different Catholics are looking for that to happen and many people who are not Catholic want to see that happen in the Catholic Church, because as you well know, the pope is not just pope of 1.2 billion Catholics around the world. What he does and says and what he represents really matters even outside the Catholic faith -- Wolf.

BLITZER: It certainly does. Christiane Amanpour joining us from Rome -- thank you very, very much. History unfolding even as we speak.

Coming up here in THE SITUATION ROOM, I'm going to speak live with a sheriff who is furious with the federal government right now. He says the Obama administration, apparently in his words, has no problems releasing criminals on to the streets of his county.

Also coming up, Dennis Rodman. He's become a diplomatic MVP in North Korea. What's going on?


BLITZER: In the history of international diplomacy, these have to be some of the strangest pictures ever. Take a look at this.

North Korea's leader Kim Jong Un and Dennis Rodman, NBA Hall of Famer, sharing laughs at an exhibition basketball game in North Korea. He's the first American, according to all information we have, to meet with the new leader of North Korea.

At least today, tension over North Korea's nuclear weapons, its long- range missiles gave way to appreciation of some other kind of long- range baskets.

CNN's Mary Snow is joining us. She's got the pictures and more of what's going on.

This is a story. It's hard to believe, Mary. It's almost amazing that of all people in the United States, the first person that the North Korean leader wants to meet with is Dennis Rodman. MARY SNOW, CNN CORRESPONDENT: Yes, it almost seemed like a fake story when you first heard about it and it's hard to imagine getting more bizarre than this.

Dennis Rodman arrived earlier this week to film a documentary. Today, came a surprising bond with Kim Jong Un.


SNOW (voice-over): It's such a strange pair, a truly odd couple. Basketball star Dennis Rodman and North Korean dictator Kim Jong Un chumming it up court side in Pyongyang. He told his new buddy that he now has a friend for life. They watched the Harlem Globetrotters play basketball as part of the new show being filmed.

SHANE SMITH, FOUNDER, VICE: Our sort of tag line for the show is, it's the absurdity of the modern condition. Well, if anything shows the absurdity of the modern condition, it's this.

SNOW: Shane Smith is the show's producer. He sent Rodman and the Globetrotters to North Korea early this week for a little basketball diplomacy. It was not assure they'd have an audience with a feared leader.

They not only met with him but dined with him at his palace after the game.

Once at the palace, the theme from the show "Dallas" was said to be constantly playing in the background. The bizarre meeting comes just weeks after North Korea announced it had conducted a nuclear test and tensions with the U.S. are particularly high.

Former White House adviser and negotiator Victor Cha says, while this meeting is surprising, Kim Jong Un has done a lot of predictable things since taking over.

PROF. VICTOR CHA, CENTER FOR STRATEGIC AND INTL. STUDIES: Well, I think North Koreans try to use opportunities like this to congratulate themselves on their accomplishments, as they see them, as well as congratulate this new leadership and try to give him legitimacy on a world stage.

So, yes, it is a poke in the eye of the administration because outside the world of basketball diplomacy, things are moving in a completely different direction.

SNOW: While North Korea has no love for the U.S., they do have a soft spot for basketball, particularly the Chicago Bulls.

Former Secretary of State Madeline Albright even gave former leader Kim Jong Il a basketball signed by Michael Jordan, as part of her negotiations.

SMITH: So, if we can have open line of communication, if we can have dialogue, it's always better to talk than to fight. So, that's what we hope comes out of this. (END VIDEOTAPE)

SNOW: And from what we're hearing from the production company, the film crew is said to have invited Kim Jong Un to America, which was apparently met with laughter. And in case you were wondering in that exhibition game that was played today, it had mixed teams of both American and North Korean players. The final score was tied at 110.

And this series is part of a show that is airing on HBO next month -- Wolf.

BLITZER: I think in April, it's going to be airing. Isn't that right? In April.

SNOW: Yes, in April.

BLITZER: I was looking closely at the pictures that you got, Mary, that you sent us. I'm going to put one up on the screen.

You'll see the new leader there, and you see the guy who was highlighted sitting right behind him. I immediately spotted when I was there in Pyongyang for six days back in December of 2010, that was my interpreter, my handler, as we used to call him. A very, very nice guy in North Korea, I see he's working with Dennis Rodman, helping him appreciate a little Korean, and what's going on.

So, I spotted a few other people I knew as well. I could report that when I was there, basketball is huge. NBA basketball especially, because Kim Jong Un's dad, Kim Jong Il loved, as you point out, Michael Jordan and the Chicago Bulls. So, who knew?

SNOW: It's really amazing. Yes, who knew?

BLITZER: In our next hour, we're going to be speaking with a man who organized this trip Shane Smith, the man in your piece. We got some good questions for him as well.

All right. Stand by, Mary. Thanks very, very much.

We'll take a quick break.

There's a new decision, a major decision by the White House on the issue of gay marriage that is just coming out. Stand by. We'll share it with you when we come back.


BLITZER: The White House has just made a major decision on the very sensitive issue of gay marriage in the United States. Joe Johns is watching what's going on. Tell our viewers what happened.

JOE JOHNS, CNN CRIME AND JUSTICE CORRESPONDENT: Well, Wolf, it's been clear for some time that the Obama administration supports gay rights and generally supports gay marriage. The president said as much as recently as his inaugural speech. But now we're moving towards arguments in the United States Supreme Court next month and the Obama administration has made a decision in a brief that it is going to support gay marriage in the case of Proposition 8 and also it's making an equal protection argument.

That, of course, is a very clear sign of where the administration is going. We kind of expected this. Nonetheless, it's interesting to see that they are talking about equal protection.

The bigger question, which we haven't gotten yet and we're still waiting to see more of the brief, is whether the administration will seek some type of right for gay marriage nationwide across all the states.

That, of course, is a huge leap because 41 states in this country have laws that say marriage is defined as between a man and a woman. So we're seeing the administration moving closer and closer to defining their position before the Supreme Court for next month in arguments.

BLITZER: So we're basically now saying the Obama administration that they are weighing in on two sensitive issues involving gay marriage, to repeal what's called the defense of marriage act, that is coming before the U.S. Supreme Court and a separate proposition in California.

So what you're saying is the president, the White House, the Obama administration is saying in California there should be gay marriage, but they haven't broad denned it out to say it should be all over the country?

JOHNS: The truth is, our problem is, we don't know what the whole brief says. We only know a bit of it and you know how people leak things. We need to wait until we see what the entire brief says to see they are supporting gay marriage across all 50 states, which would be a very, very big deal.

BLITZER: Yes. It certainly would. We see how the president's position on this has evolved over these several years like so many other people around the country. Joe Johns, thanks for that news.

Up next, we're going to be joined by an Arizona sheriff who is furious right now with the Obama administration. He says criminals have been set free and the public safety in his county, he says is threatened because of what he calls a political tactic in this fight over forced spending cuts.


BLITZER: An Arizona sheriff says federal agents were paid overtime this past weekend to release several hundred criminal illegal immigrants in his county all because of the upcoming forced spending cuts. This is happening in Pinal County, which is just southeast of Phoenix and more than 150 miles from the Mexican border.

The department's web site quotes the sheriff as complaining and I'm quoting now, "President Obama would never release 500 criminal illegals to the streets of his hometown, yet he has no problem with releasing them in Arizona."

The sheriff has just what can be described as a blistering letter to the Homeland Security Secretary Janet Napolitano demanding detailed information about the identity and the criminal records of those detainees who were released.

Sheriff Babeu is joining us now live from Phoenix. Sheriff, thanks very much for coming in.

SHERIFF PAUL BABEU, PINAL COUNTY, ARIZONA: Absolutely, Wolf. Thanks for having me on.

BLITZER: The White House says this was a decision made by career professionals at ICE and really that they had no involvement in it. Napolitano supposedly had no involvement in this. Do you believe them?

BABEU: Well, no, I don't. It's the same story line we've heard with "Operation Fast and Furious," with Benghazi and now when hundreds of criminal illegals are let loose in my community, many of which were not even arrested here and then we hear these excuses and pointing the fingers, I'm tired of hearing excuses. I want answers and that's why I sent this letter to Secretary Napolitano.

BLITZER: Did they -- they didn't give you any advanced word that they were about to release -- you originally said 500, but it's a little bit less, right?

BABEU: It's over 300 and this -- I'm still being told by not only ICE agents, but by supervisors that it's higher, and this was done under the cloak of secrecy. ICE never announced this. They never called any police chief in my county or myself as a top law enforcement official.

I have a problem with that. These people are now out in the community. There was no preparation or coordination for that. We all know that the return of committing crimes is very high with any prison population and certainly with these folks because they are illegals and they have many of them felonies.

And they are not able to work here legally in most cases here in the United States. So what's their likelihood to reoffend and commit crimes against citizens in our state? It's very high. It's troubling that they would do this.

BLITZER: ICE stands for the Immigration Custom Enforcement Agency, part of the Department of Homeland Security. Their statement and I'll put it up on the screen read this. ICE has reviewed several hundred cases and placed these individuals on methods of supervision less costly than detention.

Priority for detention remains on serious criminal offenders and other individuals who pose a significant threat to public safety. What they are basically saying is that these several hundred illegal immigrant detainees really don't pose much of a threat. They didn't really commit serious crimes. What do you say to them? BABEU: It's laughable, quite honestly. We all have differences of opinion about the 11 million illegals who are here in the United States. What do we do? Do we have a path to citizenship, outright amnesty citizenship or no citizenship?

But we've all agreed up until this release that 34,000 of that 11 million that we identify as the most serious criminal offenders, that they are to be identified, imprisoned, on their way to deportation.

Even Secretary Napolitano and President Obama said these people should be deported and now we're hearing a completely different story. And to think that is somehow we can provide supervised release on people who have no incentive to report in to the authorities.

No incentive to comply with their release, they will cut their ankle bracelet because what's the worst that can happen? You're going to deport them? I mean, that's the reality of this.

BLITZER: You were going to deport them supposedly in any case. So what do you want to hear now from Janet Napolitano, the homeland security secretary?

BABEU: I want answers. And the reason I want answers is because hundreds of criminals have been released into communities I've sworn an oath to protect families. I've already asked for this information.

I want their names. I want their offenses that they are incarcerated for and their criminal history and they have told me no. And now this was a federal problem and they just shoved it right in front of me.

And they were on their way to do this with thousands and thousands until we brought them out into the light of day and held them to account and thank you for talking about this publicly and you're helping in this.

BLITZER: Sheriff Paul Babeu, thanks very much for coming in.

BABEU: Thank you, Wolf.

BLITZER: We're going to have more on the release of these illegal immigrant detainees, the politics of budget cutting that's coming up later here in THE SITUATION ROOM during our 6:00 p.m. Eastern hour.

The Arizona governor, Jan Brewer, she's got some very, very strong views of what is going on. She'll join us live during our 6:00 p.m. Eastern hour.

Iraq was supposed to be the beacon for hope, for democracy, for freedom in the entire region. That's why the U.S. went in and got rid of Saddam Hussein. Instead, some Iraqis are now comparing the current leader to Saddam Hussein and they are warning that a new civil war may not be far off.

What's going on in Iraq? Our own Fareed Zakaria is standing by.

(COMMERCIAL BREAK) BLITZER: A car bombing today in Baghdad killed at least seven people and left 23 others wounded. Certainly by no means an isolated incident, bombings and violence right now in Iraq there on the upswing. Even though next month marks ten years since the start of the war that overthrew Saddam Hussein, this situation in Iraq is more chaotic, getting worse by the day.

Fareed Zakaria, CNN's "Fareed Zakaria GPS" is joining us here in "the SITUATION ROOM" right now to talk about what is going on. Fareed, I'm going to play a clip. I spoke to Arwa Damon, our senior international correspondent yesterday.

She's just back from a month in Iraq watching what's going on and she painted a very gloomy picture 10 years after the start of the war. Listen to this clip.


ARWA DAMON, CNN SENIOR INTERNATIONAL CORRESPONDENT: We now have a nation that effectively looks more towards Iran than it does towards the west. We have a nation that is allowing weapons to cross its border, turning a blind eye effectively to the weapons moving from Iran to the Syrian battlefield.

The sectarian tensions in Iraq are threatening to boil over. The Iraqi prime minister is being compared to a Shia version of Saddam Hussein. You have a government that in its essence, in its very formation is so fundamentally flawed.


BLITZER: So the question is, Fareed, for this situation in Iraq right now, the U.S. paid such a high price in blood and treasure?

FAREED ZAKARIA, HOST, CNN'S "FAREED ZAKARIA GPS": It's a tragedy, Wolf. And it really is attributable to certain key decisions made by the Bush administration. You remember when they came into Iraq, they disbanded the army, the bureaucracy, which meant kicking all of the Sunnis out of power and they chose instead to go with a Shia strong man, (inaudible) was the second iteration of it.

And by making that decision, they were saying we're going to go with the majority. We want stability. We want to go with this. Two things, one, you've got a civil war because the Sunnis started fighting and it hasn't stopped yet. There was a car bomb today killed 22 people.

The second thing it did was you created a majority government that was a hard line Shia government aligned with Iran that is also aligned with Assad's regime in Syria. Maliki, the prime minister gave an interview today in which he sided with the Syrian president.

BLITZER: It's a pretty shocking situation that's unfolding right now because it certainly wasn't supposed to be this way. When we learned about that so-called surge that General David Petraeus, the architect -- that was supposed to turn things around and the U.S. was going to be able at some point to be able to withdraw and there would be a democratic pro-western regime in Baghdad but that has not happened.

ZAKARIA: No. The surge bought us time for an honorable exit. Petraeus himself always said the surge was a precondition for talks that created a political deal. But the problem was that Maliki has never wanted a political deal because a political deal means power sharing.

Maliki represents a kind of hard line straight of pro-Iranian Shia politics that say, why should we make a deal? We're the rulers now. The Sunni are the minority. Let them suffer the way we suffered, in their imagination, centuries. So that's the problem.

We never got a deal that brought all parties to the table and said we've got to create an Iraq that is truly incorporates these three communities. We had the chance, but the Bush administration really blew it in the first few years of the war when they decided to go down a Shia sectarian route rather than a government of national unity.

BLITZER: Let me just pick your brain on totally unrelated issue, North Korea right now, this bizarre picture of Dennis Rodman formerly of the NBA sitting courtside alongside Kim Jong-un, the new leader of North Korea, the first American to meet with the North Korean leader. You can't make this kind of stuff up, Fareed.

ZAKARIA: It is truly extraordinary. I think it does suggest something we've realized. This guy is weird. On the one hand, he's firing missiles and he's threatening war. On the other hand, he wants the CEO of Google to come in. He wants to meet Dennis Rodman.

He wants the Harlem Globetrotters to come in. Who is this guy? We have few genuine mystery men in international life these days. If it wasn't as threatening as it was, you would just have to laugh and view this has great entertainment in high politics.

BLITZER: He wouldn't meet with Bill Richardson or the leader of Google, but he is meeting with Dennis Rodman. I don't know what that says, but we're going to have more on this story coming up here in THE SITUATION ROOM. It is amazing when you think about it. Fareed, thanks very much.

ZAKARIA: Pleasure, Wolf.

BLITZER: You won't want to miss Fareed's GPS show on Sunday. Fareed will speak to Iran's ambassador to the United Nations. This is an exclusive interview Sunday morning, 10:00 a.m. Eastern, 10:00 a.m. Eastern only here on CNN.

The government bought Gulf Stream jets to use in the fight against terrorism. So why are some high-ranking administration officials using them for personal travel? That story and a lot more news coming up right after the break.


BLITZER: Attorney General Eric Holder says the coming budget cuts will make Americans less safe, but apparently he wasn't concerned about money woes when he flew on some luxury jets owned by the federal government, but bought for counterterrorism efforts.

Now a United States senator is slamming Holder and the FBI Director Robert Muller for spending more than $11 million to flying in these Gulf Stream jets. What is going on? We asked our national political correspondent Jim Acosta to investigate. What did you learn?

JIM ACOSTA, CNN NATIONAL POLITICAL CORRESPONDENT: Wolf, it's a question that's been asked repeatedly during the debate over automatic budget cuts. Why can't the cabinet secretaries cut the waste in their departments first before eliminating critical programs? That's the question being put to Attorney General Eric Holder over his use of the government's jets.


ACOSTA (voice-over): With the clock ticking down to the forced budget cuts, Attorney General Eric Holder issued a dire warning this week when he said agents at all federal law enforcement agencies would face furloughs.

ERIC HOLDER, ATTORNEY GENERAL: Under sequestration, we'll do the best that we can to minimize the harm that actually occurs as a result of the sequestration, but the reality is that there is going to be harm. There is going to be pain and the American people are going to be less safe.

ACOSTA: Iowa Republican Senator Charles Grassley immediately said he wasn't buying it.

SENATOR CHARLES GRASSLEY (R), IOWA: It's the old Washington monument mentality. If you're going to cut a dollar out of the Interior Department, you're going to shut down the Washington monument.

ACOSTA: Grassley points to this recent Government Accountability Office report, which found that attorneys general and FBI directors have been flying on pricey government aircraft for years. The report said the attorneys general and the FBI director were the primary users of Department of Justice aircraft for non-mission purposes from fiscal years 2007 through 2011 at a cost of $11.4 million.

The aircrafts like this Gulfstream are supposed to be used for counterterrorism purposes, but the report found for the four-year period, 56 percent of the flights were used by the attorney general at that time for business travel while 41 percent were for personal trips.

The report covers not just current Attorney General Eric Holder, but some of his successors, Michael Mukasey and Alberto Gonzalez from the Bush administration.

GRASSLEY: It's really worse when you have the situation that they are complaining about because of sequestration they are going to have to lay of FBI agents.

ACOSTA: Grassley knows one flight taken by Holder in November 2010 on the Gulfstream cost the government nearly $16,000, but Holder was only required by law to reimburse the government for $420. The Justice Department and the FBI say the first priority for the aircraft is always counterterrorism.

Adding in a joint statement, the report makes clear that the overwhelming majority of travel although terms non-mission travel by the report has been for official business travel. Other senators complain the Pentagon shouldn't be cutting back on critical programs when its taxpayer-funded TV channel is producing workout shows.

But Illinois Democratic Senator Dick Durbin says that's missing the point and argues the forced budget cuts by law don't give departments much discretion where to cut.

SENATOR DICK DURBIN (R), ILLINOIS: Well, I can tell you, it's never that simple and they know it. When you start moving money this late in the game, this late in the year with very few options, your hands are tied.


ACOSTA: It's mandated by law that the attorney general and FBI director take government flights with secure communications for national security reason. The critics of these flights don't argue with that. They just want the department to manage its money more effectively now more than ever -- Wolf.

BLITZER: Yes, every penny counts as they say. Thanks very much for that report.

For 500 years, the Swiss Guard has kept the pope safe from harm. That job has obviously changed a lot over the years. Coming up, CNN talks to a former Swiss Guard that tells all about the time he spent at the Vatican.