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THE SITUATION ROOM

Al Qaeda's Number 2 Releases New Videotape; Watching Chavez: Fighting Words, Power Play; Oil Addiction: Kicking the Habit; Possible Smear Campaign Against Senator Obama

Aired January 22, 2007 - 17:00   ET

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


WOLF BLITZER, HOST: And to our viewers, you're in THE SITUATION ROOM, where new pictures and information are arriving all the time. Standing by, CNN reporters across the United States and around the world to bring you today's top stories.
Happening now, it's 1:00 a.m. in Iraq, where hundreds are killed or wounded and bombs ripped through crowded markets again. And the shock waves are still reverberating from a daring Trojan horse attack by insurgents who -- get this -- they dressed like American troops to go in and kill American troops. We're going to stand by for details.

Is America ready for a woman president?

Hillary Rodham Clinton is ready to find out. It's 5:00 p.m. here in Washington, where we have brand new poll numbers on the White House wannabes.

And as allegations swirl about Senator Barack Obama's education abroad, it's 5:00 a.m. in Indonesia, where we actually went to check out the facts, as a serious news organization should do, to debunk the rumors. We have a CNN exclusive that you will want to see this hour.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

At least 100 dead and 200 more wounded. That's the toll from massacres today in two Iraqi markets. Most of the casualties coming in a twin bombing in Baghdad. Another bomber struck in Baquba.

The targets of the slaughter?

Civilians. And after an extraordinarily deadly weekend for U.S. troops, there are new details on the daring raid in which insurgents used disguise and deception to penetrate what was supposed to be a secure compound and kill Americans.

CNN's Arwa Damon is in Baghdad. Tom Foreman is standing by.

But let's begin our coverage this hour with our senior medical correspondent, Jamie McIntyre -- Jamie.

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Wolf, it's the oldest trick in the book -- get by security by looking like you're important and in a hurry. And that's apparently what Iraqi insurgents did.

(BEGIN VIDEO TAPE)

MCINTYRE (voice-over): In Karbala, a destroyed American Humvee is hauled away a part of an intense investigation into a Saturday attack that set a new high for audacity.

Apparently, all it took to fool Iraqi troops manning a key checkpoint was some American-looking SUVs, some American-style uniforms and some American-sounding English.

Flashing fake I.D.s, the convoy, carrying about 30 gunmen, was able to pass through a series of Iraqi checkpoints and get right to a building where about a dozen U.S. troops were reviewing security plans for an upcoming religious pilgrimage to the city.

According to the U.S. military, what's called a provisional joint coordination center, a place where the U.S. routinely meets with local Iraqi forces, was hit with grenades and small arms fire. Five U.S. soldiers were killed, three more wounded.

The U.S. said the attack was aimed at both coalition and Iraqi forces, but Iraqi officials said it appeared only Americans were targeted and the gunmen seemed to know where the Americans would be.

In fact, a local police spokesman told CNN the Iraqi police didn't interfere because "they assumed it was American on American violence and wanted to stay out of it."

The U.S. troops did return fire and when five of the suspect vehicles were later located, to the north, in Babil Province, two wounded gunmen were captured, according to Iraq police.

UNIDENTIFIED MALE: What I see is a continuation of the enemy's ability to adapt and find weakness and exploit those weaknesses without a moral floor.

(END VIDEO TAPE)

MCINTYRE: The U.S. military says its investigation is still underway. It's looking both at checkpoint procedures and the performance of Iraqi security forces.

But one conclusion that doesn't require a formal investigation is that insurgents are getting very adept at exploiting Iraqi security to -- weaknesses in Iraqi security -- to deadly effect -- Wolf.

BLITZER: Because I've been told, Jamie, by U.S. military personnel now for several weeks that even as the U.S. and its Iraqi allies improve on some of their techniques, the other side is improving, as well.

MCINTYRE: They've said all along that they're dealing with a thinking enemy. And this enemy has shown a continuing capacity to be able to come up with new techniques to try to inflict casualties on the U.S. and Iraqi forces. BLITZER: Jamie at the Pentagon.

A tightly guarded compound, as Jamie just pointed out, surrounded by several checkpoints.

Let's get a closer look now at just what the attackers had to go through to pull this raid off.

Tom Foreman is here in THE SITUATION ROOM -- Tom.

TOM FOREMAN, CNN CORRESPONDENT: Let's get a sense of where this actually happened.

Here's Iraq over here. If we move into the region, similar sized cities over here and here. Baghdad is up there. That's the big one.

Down here, Karbala is about a half million people, a little more than that, 600,000, something like that. This is a city, as we look on the map over here -- that is up on the wall -- is full of many Shiite followers. This was a stronghold of the Shia in Iraq during Saddam Hussein's time.

It was greatly distrusted by the Sunnis. They, in fact, attacked Shia here several times because this is such a holy city, an important city to the Shia.

These, in fact, are two of the shrines that are the middle of this big pilgrimage coming up, which is what these military people were planning for when this attack came.

We don't know exactly where the checkpoints were here, but we do know that they cleared three of them in this area. We don't know if the attackers were Sunni or Shia. But three of them to get in and make this attack.

Afterward, we also know this. Of these seven vehicles they brought in, some of them were found in this province, as you see. If you head up north there -- and it was north of town that they found them, right in that edge of green over there. They found some of them there and two of the attackers.

What does that tell us?

Well, maybe nothing. But take a look at this. I will look at the region right here, in the general area that we're talking about, this is where those provinces are and the dividing line roughly between where the Shia and the Sunni are operating in this area can be found right along in this area.

So roughly to this side is Shia and to this side is Sunni.

So we have no idea which side was attacking this very holy city for the Shia before this big festival comes up or how they coordinated this. But we do know this is where it happened and this is where some of the attackers were found afterward, up in that region. BLITZER: What a mess. What a mess, indeed. But they are getting better and better, these insurgents, with their capabilities, as we have clearly seen over this weekend.

Thanks very much for that, Tom.

Scores of civilians were also slaughtered today, slaughtered when bombers hit Baghdad and Baquba. The targets were crowded open air markets.

CNN's Arwa Damon is in the Iraqi capital -- Arwa.

ARWA DAMON, CNN INTERNATIONAL CORRESPONDENT: Wolf, violence across Iraq claimed over 100 innocent civilian lives and wounded over double that number. The deadliest bombing happening in the capital, Baghdad.

(BEGIN VIDEO TAPE)

DAMON (voice-over): Familiar sights and sounds in the Iraqi capital -- explosions, sirens, mayhem. Insurgents striking once again, in the heart of Baghdad. This time, hitting one of the city's main marketplaces for the third time in as many months, an area mainly frequented by Baghdad's impoverished Shia population, leaving scores dead and wounded.

Two mid-day car bombs exploding seconds apart, tearing into the secondhand clothing section of the market. The dead and wounded rushed to hospitals already stretched to the limit.

Here at Al-Kindi Hospital, frantic efforts to save lives. It's the same hospital where just days ago, medics battled to treat the casualties from twin bombings at a university that killed at least 70 students and employees, and wounded over 160.

(END VIDEO TAPE)

DAMON: Just hours later, in the northern province of Diyala, another bombing in another marketplace. That attack killing at least two dozen Iraqis and wounding scores more -- Wolf.

BLITZER: Arwa Damon in Baghdad.

And this comes over the weekend. A U.S. Army Black Hawk helicopter apparently shot down by a shoulder-fired missile. That's the preliminary result of an investigation. Twelve American soldiers on board. The sophisticated capability of these insurgents clearly underscored once again. These Black Hawk helicopters flying over Iraq, a large number of them.

If the insurgents have this kind of capability right now, a very, very worrisome development for U.S. military personnel. I flew around in one of those when I was in Iraq a year-and-a-half or so ago and I can testify that it's a dangerous situation to begin with, but it's certainly, certainly something that is worrisome right now. Jack Cafferty joining us from New York -- it looks, Jack, like every time the U.S. and the Iraqi soldiers who are working with the U.S. improve on their capabilities, the other side, you know what?

They adjust, as well.

JACK CAFFERTY, CNN CORRESPONDENT: Yes, it's a -- it's kind of scary. We had these -- the insurgents getting past military checkpoints. Now they're able to shoot Black Hawk helicopters out of the sky. One wonders where it's all going to end.

Senator Clinton, launching her presidential exploratory committee, has people wondering what impact her husband -- that would be the former president, Bill Clinton -- will have on the race. Now, a lot of people don't think Senator Clinton can relate to voters in the same way that her husband did.

One former White House staffer says the former president will be a big help to the senator. Chris Lehane says: "He'll double the amount of attention the campaign can get and take the spotlight away from the other candidates."

A recent "USA Today"/Gallup poll shows some major reasons why Democrats -- Democrats say they will not support Hillary Clinton in the primaries. Ten percent say it's because they don't want to see another Clinton in the White House. Twenty-nine percent say they don't think she can win the presidential race. Twenty-six percent don't agree with her on the issues. Sixteen percent don't think she can win the nomination. And 11 percent say they just don't like her.

So the question is this -- will Senator Hillary Clinton's husband be an asset or a liability in a run for the White House?

E-mail your thoughts to caffertyfile@cnn.com or go to cnn.com/caffertyfile -- Wolf.

BLITZER: Jack, see you in a few minutes.

Thank you.

Still ahead, they've turned Iraq into a living hell.

Are insurgents there now planning attacks here inside the United States?

We're going to have details of a disturbing new report.

Also, potentially damaging rumors swirling about Senator Barack Obama's early education as he eyes the White House. We've debunked them. We're going to show you the truth behind these allegations. This is an exclusive report. We've done serious journalism, gone to Jakarta in Indonesia to check out these rumors.

And is the country ready for a woman president?

Find out what people are saying and why gender may not be Hillary Clinton's only challenge to overcoming her presidential bid.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Welcome back.

The roster of White House hopefuls growing significantly over the weekend. And we have some brand new poll numbers just out showing who voters say they're likely to support.

The CNN/Opinion Research Corporation survey finds that among registered Democrats, registered Democrats, Senator Hillary Clinton leads with 34 percent. She just announced Saturday she's forming an exploratory committee.

Senator Barack Obama is second with 18 percent, followed by former senator and vice presidential nominee, John Edwards.

On the Republican side, former New York Mayor Rudi Giuliani leads the pack among registered Republicans with 32 percent, followed by Senator John McCain, with 26 percent. Former House Speaker Newt Gingrich has 9 percent. He has not announced that he's running. He has not thrown his hat into the ring yet. He says he'll make a decision later in the year.

The likely Clinton candidacy has many people, though, wondering if the country is actually ready for a woman president.

CNN's Mary Snow has been looking into that question.

She's joining us now live from New York -- Mary.

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, with Senator Clinton leading in the polls, some say it's a sign America is ready. But they also say women candidates still face more scrutiny than their male counterparts.

(BEGIN VIDEO TAPE)

SNOW (voice-over): Senator Hillary Clinton hopes to make history.

But is America ready for a female commander-in-chief?

The White House answered that question today.

TONY SNOW, WHITE HOUSE PRESS SECRETARY: I was asked a question, do we think a woman could be elected president?

The answer is yes.

SNOW: Sixty percent of people surveyed in the CNN/Opinion Research Corporation poll said America is ready for a woman president. This New York Democratic leader supporting Hillary Clinton isn't sure. HERMAN "DENNY" FARRELL, JR. FORMER NEW YORK STATE DEMOCRATIC PARTY CHAIR: Her biggest challenge, of course, is to get past the issue of being a woman. I mean no one is going to say it, and maybe I shouldn't even be saying it now.

SNOW: Political analysts say Senator Clinton also faces an image challenge.

DEBBIE WALSH, CENTER FOR AMERICAN WOMEN & POLITICS: She doesn't connect to me. She's not warm. She's, you know, she's not -- she's not like me. And I think she's trying to, you know, sit down, reach out and talk directly to the American public.

SNOW: Past attempts to do that have hurt her. Flash back to the 1992 campaign and these famous words uttered on "60 Minutes" when her husband faced questions of infidelity.

(BEGIN VIDEO CLIP FROM "60 MINUTES," COURTESY CBS)

CLINTON: You know, I'm not sitting here, some little woman standing by my man like Tammy Wynette. I'm sitting here because I love him.

(END VIDEO CLIP)

SNOW: Years later, as first lady, after the Monica Lewinsky scandal broke, she did stay with President Clinton.

How much will that factor in?

Experts say that depends on how well she connects with voters, both on her stand on current issues, as well as her image.

(END VIDEO TAPE)

SNOW: And in that effort to connect with voters, tonight, Senator Clinton will face the first in a series of video Web chats -- Wolf.

BLITZER: All right, we'll watch that, together with you.

We'll have much more coming up in our 7:00 p.m. Eastern hour.

We want to thank Mary Snow for that.

Mary is part of the best political team on television.

Also want our viewers to know that tomorrow night we're going to have special coverage of the president's State of the Union Address. Our coverage begins 7:00 p.m. Eastern, right here in THE SITUATION ROOM.

Paula Zahn and I will be co-anchoring our coverage from 7:00 to 9:00 and the speech begins at 9:00 p.m. Eastern. And this important programming note, as well, for our viewers. The next day, Wednesday, I'll have an exclusive sit-down interview with the vice president of the United States, Dick Cheney. That interview will air Wednesday right here in THE SITUATION ROOM.

She's in and she's in it to win -- Democratic presidential hopeful Hillary Rodham Clinton first told the world using the World Wide Web.

But can she manage finally to engage the public online?

Our Internet reporter, Abbi Tatton, has a closer look at Senator Clinton's freshly launched Web site -- Abbi, what do you see?

ABBI TATTON, CNN CORRESPONDENT: Wolf, in addition to the announcement over the weekend, there are -- the site is notable for the opportunities to interact at the newly revamped hillaryclinton.com, an opportunity to submit a first guest blog post on a new -- blog site for Hillary Clinton. And staffers are now going through thousands of entries.

And just in the last few minutes, the site has been opened up, inviting people to submit their questions online, questions that will be, that the senator will be fielding in the 7:00 hour online in a series of Web casts. There will be three going on this week.

In addition to all of that, there has been blogger outreach from the Clinton camp. Clinton Internet director, Peter Dow, he was brought on board last summer to be a liaison with the blogosphere. Dow tells us that over the weekend, he reached out to hundreds of blogs.

Now, when it comes to the anti-war Net roots, Hillary Clinton is no front runner, in part due to her position on Iraq. This continued blogger outreach, along with the multiple opportunities to participate, the message is clear, online from Hillary Clinton, let the conversation begin -- Wolf.

BLITZER: All right, good report.

Thank you, Abbi, for that.

Coming up, we'll have more on Hillary Clinton. Jack Cafferty wants to know will her husband be an asset or a liability in a run for the White House?

Jack will be back later this hour with The Cafferty File.

Plus, a CNN exclusive -- we sent one of our correspondents to Indonesia, to Jakarta, to debunk a possible smear campaign against Senator Barack Obama. We're going to show you what we found on the scene.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's check back with Carol Costello.

She's monitoring developments, feeds coming in, checking in with all of our reporters to see what's going on.

She's got some other important stories making news right now j hi, Carol.

CAROL COSTELLO, CNN CORRESPONDENT: Hi, Wolf.

Hello to all of you.

We have an update for you on the case of Maher Arar. He's a Canadian citizen on the U.S. terror watch list. In 2002, he was taken into custody at Kennedy Airport in New York by U.S. officials and sent to Syria for interrogation, where he says he was tortured. Now the Justice and Homeland Security Departments say they've re-examined Arar's case and intend to keep him on the terror watch list.

The Justice Department is criticizing the FBI for its handling of the Mark Foley case. An internal report says the Bureau should have moved to protect White House pages when it first learned of the former congressman's explicit Internet messages last July. The report doesn't find any misconduct by the FBI, but it does fault the Bureau for making inaccurate statements about why it didn't launch an investigation. There is no comment from the FBI, at least not yet.

Jury selection in the trial of Louis "Scooter" Libby now in its final stages. The former top aide to Vice President Cheney is charged with perjury and obstruction of justice in the investigation of the Valeria Plame scandal, in which the name of the former undercover CIA officer was leaked to the news media. Opening statements in Libby's trial are expected to start tomorrow.

And long lines ahead of new passport requirements. Starting tomorrow, people traveling by air between the United States and Mexico and Canada will be required to have a passport. And that had Mexican citizens lining up at their country's consulate in San Francisco before dawn today, with similar scenes at the Mexican and Canadian consulates around the country.

That's a look at the headlines right now -- Wolf.

BLITZER: A very busy time at passport offices across the country, in Canada and Mexico, and elsewhere, as well.

Carol will be back shortly.

Coming up, al Qaeda allies in Iraq possibly eyeing America as their next together. Our justice correspondent, Kelli Arena, is investigating some disturbing reports. She'll share with us what she's learning.

And the Venezuelan president, Hugo Chavez, taunting the secretary of state, Condoleezza Rice. We'll have details of the latest verbal volleys he's firing at the U.S.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK) BLITZER: To our viewers, you're in THE SITUATION ROOM, where new pictures and information are arriving all the time. Happening now, a deadly new wave of violence in Iraq. Insurgent attacks killing at least 100 people in Baghdad and Baquba and leaving 200 people injured. Among the targets, a secondhand clothing market in the capital hit by near simultaneous car bombs. Witnesses describing a horrible scene of "body parts everywhere."

U.S. forces suffering, too, in the spiraling violence. Insurgents dressed as American troops launching a brazen Trojan horse attack in Karbala, killing five U.S. soldiers. Twelve American troops killed in the crash of a Black Hawk helicopter over the weekend, as well. An Islamist group now claiming on the Internet it brought the chopper down. No confirmation of that, although U.S. officials do suspect that Black Hawk helicopter was shot down by a shoulder-fired missile.

And we have a CNN exclusive coming up. We went to Indonesia, to Jakarta, to report on potentially damaging rumors about Senator Barack Obama and his early education. We're going to show you what we found. We have details of what could be a smear campaign against the popular Democrat who's eyeing the White House. You're going to want to see this. This is here only on CNN.

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

There are some fresh reports that al Qaeda's allies in Iraq, who have taken a very heavy toll among U.S. troops, have also looked at ways to try to strike right here inside the United States and have considered the use of student visas to try to gain entry into this country.

Let's turn to our justice correspondent, Kelli Arena.

she's been investigating these reports -- Kelli, what are you picking up?

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Well, Wolf, here's the deal.

About six months ago U.S. forces found documents in Iraq indicating that Al Qaeda In Iraq was planning to attack on U.S. soil. Now, the threat was laid out by Lieutenant General Michael Maples, who heads up the Defense Intelligence Agency. He gave testimony before the Senate Intelligence Committee.

Officials say that both documents suggested using student visas, as you said, as a way to get terrorists inside the United States.

Now, intelligence officials describe this plot as more aspirational and operational, one in its very early stages. They say there was no target mentioned, no specifics on what kind of attack would be staged. And the FBI even says, for the record, that it has no indication of a specific threat at this time.

So, Wolf, what's the bottom line here? The bottom line is that this shows that as busy as al Qaeda and insurgents are in Iraq, they are still thinking about attacking on U.S. soil. Some officials say eventually talk turns into action, we have to be on guard, especially when it comes to a terror group like al Qaeda.

BLITZER: Kelli Arena reporting for us.

Kelli, thanks.

And we have this story just coming into THE SITUATION ROOM, as well.

President Bush's plan for a troop increase in Iraq has now drawn a taunting response from al Qaeda's second in command. Ayman al- Zawahiri daring the president of the United States to send the entire American Army into Iraq.

Listen to this clip.

(BEGIN VIDEO CLIP)

AYMAN AL-ZAWAHIRI, AL QAEDA (through translator): Security is a shared destiny. If we are secure, you might be secure. And if we are safe, you might be safe. And if we are struck and killed, you'll definitely, with God's permission, be struck and killed. This is the correct equation.

(END VIDEO CLIP)

BLITZER: Ayman al-Zawahiri on the Web just a few minutes ago.

Let's get some more on this story from our senior international correspondent, Nic Robertson. He's joining us in London.

Give us some background. What's going on, Nic?

NIC ROBERTSON, CNN SR. INTERNATIONAL CORRESPONDENT: Well, Wolf, in may ways this is vintage Ayman al-Zawahiri. We've heard this argument before, that if "we're attacked, then we're going to attack you."

He also again goes back to one of his pet themes. And that is criticizing President Bush in Iraq, saying, why send 20,000 troops? Why not send another 50,000 or 100,000? He said they'll be defeated anyway.

He also calls for the release of Sheik Abdul Rahman, the blind Egyptian cleric who's been in prison since 1995 for inspiring the 1993 attack on the World Trade Center.

These are all old themes. Again, Ayman al-Zawahiri trying to make himself relevant, perhaps, releasing this message just two weeks after President Bush did lay out this new plan for Iraq.

BLITZER: Is there a sense that, if you read closely what he's saying, the way he appears right now, that he now sees what's happening in Iraq as a prelude to what could happen elsewhere? Because I'm referring specifically to this report that Kelli Arena just noted, that perhaps there's some preliminary concern, and maybe more aspirational than intentional right now, that they could be attempting to look for targets right here in the United States?

ROBERTSON: There's no doubt that the best analysts will tell you that al Qaeda's prized goal would be to attack inside the United States in any way they can, and using visas would be -- student visas -- would be one way to get in and achieve that. The message here, again, it is what we've heard from Ayman al-Zawahiri.

And he calls it, the correct equation, he is talking about an equation of violence, an equation of force. "If we're struck, then we're going to strike you." So the implicit threat there is, if we're struck in our lands, we'll strike you in your lands.

BLITZER: Nic Robertson in London for us.

We'll continue to monitor this development, together with you, Nic. Thank you.

And amidst all of this, amidst all of this, there's a new skirmish unfolding in the war of words between Venezuela and the United States and a powerplay by the president, Hugo Chavez.

Let's turn to our State Department correspondent, Zain Verjee -- Zain.

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Wolf, Venezuela's president is at it again. This time he's going off to Condoleezza Rice.

(BEGIN VIDEOTAPE)

VERJEE (voice over): Hurling insults. The target this time, the U.S. secretary of state. In his weekly radio address, Hugo Chavez belittles Condoleezza Rice...

HUGO CHAVEZ, VENEZUELAN PRESIDENT: Condoleezza, how are you?

VERJEE: ... saying, "Hi, Condoleezza. How are you? You've forgotten me, missy."

Last year, Chavez called President Bush "the devil" in his speech at the United Nations. Now he's just been re-elected and wants special authority that will let him rule by decree.

The State Department said decrees are a bit odd to have in a democratic system. Chavez is blasting back.

"Go to hell, gringos! Go home! Go home. We're free here." Adding that Venezuela has a right to do what it wants.

(END VIDEOTAPE)

VERJEE: Regional experts say Chavez' consolidation of power is basically disturbing. They say he seems bolder after his election victory and poses a real challenge for anyone who cares about democracy -- Wolf.

BLITZER: What's the State Department reaction, Zain?

VERJEE: They're saying today that Chavez isn't really doing himself or Venezuela any favors. They say he's basically hurting himself and they're just not going to go ahead and directly respond to some of the comments that he's made.

BLITZER: Zain reporting for us. Zain's our State Department correspondent.

And still to come, our exclusive report on Senator Barack Obama's early education. We actually sent a correspondent to Jakarta, Indonesia, to take a look at these rumors that may be part of a smear campaign against the popular Democrat as he eyes -- as he eyes the White House. You're going to want to see our special report.

Plus, President Bush, poised to announce a major new energy policy. That, at least according to some of his aides. What will it take to end America's addiction to oil?

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Welcome back.

President Bush is expected to talk about energy and energy security in tomorrow night's State of the Union Address. The president's been talking for decades about ending -- at least the country's been talking for a decade about ending the country's oil addiction. So far, as all of us know, it's proven a lot easier said than actually done.

Let's turn to our CNN special correspondent, Frank Sesno.

You've been looking at this problem a long time and you've got some thoughts.

FRANK SESNO, CNN SPECIAL CORRESPONDENT: Yes, let's play "what if" for a minute, Wolf, shall we?

What if the Congress and the president actually got serious about energy? What if they put America's interests in front of the special interests? What if the State of the Union actually mattered?

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: The president of the United States.

SESNO (voice over): Make it less ritual and more real, starting with a genuine call to arms on an issue we can actually do something about -- to reduce America's addiction to oil and reduce the cloud of unsavory suppliers. They could do it if they wanted to. They know the drill. This is just one recent blueprint from a group of business leaders and retired military men. What's needed? Everything -- tough love, higher fuel efficiency standards for cars and light trucks, tax laws that really encourage new technologies, like this one. Did you know that under current law, tax credits for hybrids disappear once a company sells 60,000 of them?

A real push on conservation and alternative fuels through incentives, and mandates, and more exploration. Yes, new drilling in oil-rich offshore waters and in Alaska.

Is there a chance they have the courage and imagination to connect these dots? Maybe, but probably not. Congress is divided. Mr. Bush is politically weakened.

But what if starting with tomorrow's State of the Union they called for sacrifice and compromise? What if America connected energy to national security and climate change, and actually took the lead?

(END VIDEOTAPE)

SESNO: What if?

Well, here's what the White House says. The president will connect climate change and energy. He won't go for mandatory carbon dioxide caps to curb greenhouse gases, as several in the executive world, business world, are saying. But they do think it's an opportunity for the president and Democratic Congress to actually get something done.

We'll see.

BLITZER: You've studied this for a long time, Frank.

SESNO: Yes.

BLITZER: Has the landscape, though, really changed right now, the political landscape?

SESNO: I think the landscape has changed.

First of all, the Democratic Congress, the president need one. Secondly, it's the business world. This is where the pressure's coming from.

Just today, 10 CEOs, gigantic corporations, saying we need mandatory caps on these carbon dioxide emissions, because until you deal with that, we can't make the multibillion-dollar investments in new nuclear plants, new wind turbines, that kind of thing, that we're going to need to move forward.

BLITZER: We've been hearing this, though, at least since the '70s. I interviewed Jimmy Carter other day.

SESNO: Yes.

BLITZER: He made a push for this when he was president in the late '70s. And really not much has happened.

SESNO: Round and round and round we go. That's why we play the "what if" game.

I think, though, that you connect al Qaeda, terrorism, national security, these unsavory characters. You just had Hugo Chavez on the air. And people start to put the dots together. That's what they're counting on for political support.

BLITZER: All right. Frank, good work. Thank you very much.

SESNO: Sure.

BLITZER: Carol Costello is monitoring the wires, she's keeping track of all the video feeds coming in to THE SITUATION ROOM from around the world.

(NEWSBREAK)

BLITZER: And still to come, the list of White House wannabes getting longer and longer. Is it enough to fill a phonebook yet? Not necessarily yet. But Jeanne Moos standing by to take a close look at the candidates and their exploratory committees. You're going to see that in our 7:00 p.m. Eastern hour right here in THE SITUATION ROOM.

And just ahead, an important story, the education of Senator Barack Obama. As rumors swirl, we're actually on the scene doing serious journalism in Indonesia. We're finding out the facts. You'll see an exclusive report of what's going on.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: Remember, we're going have the first, the first of the major presidential debates coming up in early April. In New Hampshire, Democratic and Republican candidates will gather separately on April 4th and April 5th. We'll be having that in conjunction with our partners in these first two presidential debates, WMUR TV and the "New Hampshire Union-Leader."

Stay tuned for that in early April.

Stay tuned in the meantime to Lou Dobbs. He's coming up right at the top of the hour.

Lou, what have you got?

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Well, Wolf, the way people are jumping in to this presidential race, you may have a very long program over that period.

Thank you, Wolf.

Coming up at 6:00, we'll be reporting on the rising outrage over state laws favoring illegal aliens over American citizens. We'll have that special report.

And President Bush trying to win the support of working men and women. When he delivers his State the Union Address tomorrow, will the president actually reverse course and help middle class Americans struggling to survive? We'll have that story.

And Venezuela's president, Hugo Chavez, telling the United States to "go to hell" as he rushes to create a one-party state. He's doing pretty well so far at that. We'll have that report.

And we'll have the latest on efforts to win justice for two former Border Patrol agents sent to prison for shooting a Mexican drug smuggler given immunity by the U.S. Justice Department to testify against those agents.

We hope you'll join us at 6:00 p.m. Eastern, at the top of the hour, right here on CNN.

Wolf, back to you.

BLITZER: All right, Lou. We'll be watching. Thank you for that.

As he gets closer to an all-out White House bid, Senator Barack Obama's candidacy has already come under an all-out attack, an allegation that as a young boy in Indonesia he was educated in a madrassa, a Muslim religious school, that often educates extremists.

Howard Kurtz of CNN's "RELIABLE SOURCES" took a closer look at the rumor and the uproar, and our John Vause is actually on the scene in Indonesia with a firsthand investigation of the facts.

Let's begin our coverage with Howard -- Howard.

HOWARD KURTZ, HOST, "RELIABLE SOURCES": Wolf, the first media controversy of the 2008 presidential campaign has erupted and is raising questions about journalistic behavior.

(BEGIN VIDEOTAPE)

SEN. BARACK OBAMA (D), ILLINOIS: As many of you know...

KURTZ (voice over): From the moment Barack Obama began talking about running for president, he's drawn an increasingly loud drumbeat of positive coverage.

UNIDENTIFIED FEMALE: Barack Obama, the rising rock star.

BILL PRESS, RADIO TALK SHOW HOST: It's about Barack Obama, the rock star.

TONY HARRIS, CNN ANCHOR: His rock star popularity...

SEAN HANNITY, FOX NEWS: Barack Obama treated like a rock star.

UNIDENTIFIED MALE: Huge crowds, literally. They would make a rock star envious. KURTZ: But in recent days the Illinois senator has had to cope with a rumor pushed by a little-known conservative magazine and amplified by an echo chamber on the right. And the unsubstantiated article tries to blame the whole thing on Hillary Clinton.

"Insight" magazine, which is owned by the conservative "Washington Times," says Obama went to a madrassa, the type of Muslim religious school often associated with teaching the most fundamentalist form of Islam. The article also accused him of supposedly hiding that he was raised as Muslim.

An Obama spokesman calls the story, based entirely on unnamed sources, trash and completely false.

Obama has already revealed in his two autobiographies that he spent two years at a predominantly Muslim school. This, by the way, when he was just 6 years old. The senator today is a Christian who belongs to a Chicago church.

"Insight" also claims the madrassa allegation has been spread by researchers "connected to Senator Clinton." Again, without a single named source or document. A Clinton spokesman calls the piece an obvious right-wing hit job.

The allegations got a big boost from Rupert Murdoch's media empire, with "The New York Post" running this headline: "'Osama' Mud Flies at Obama." And Murdoch's FOX News Channel touted the claims on two programs.

JOHN GIBSON, FOX NEWS: The gloves are off. Hillary Clinton reported to be already digging up the dirt on Barack Obama. The New York senator has reportedly outed Obama's madrassa past.

KURTZ: But as we now know, there is no madrassa past. Obama spokesman Robert Gibbs (ph), who called FOX's broadcasting of the madrassa tale "appallingly irresponsible," says she didn't think much of a clarification carried this morning on the program "FOX and Friends."

FOX News executive Bill Shein says some of the network's hosts were simply expressing their opinions and repeatedly cited "Insight" as the source of the allegations. Some conservatives say Obama should expect his personal life to come under journalistic scrutiny.

JONAH GOLDBERG, EDITOR, "NATIONAL REVIEW ONLINE": I think the background on Obama, when all he's running on is his background, is fair game. If this thing is a lie or a smear, then it needs to be denounced and pelted from the public sphere for being an unfair and untrue allegation.

(END VIDEOTAPE)

KURTZ: This, unfortunately, is how the media food chain works. A bogus charge appears in some magazine or on some Web site and works its way up to bigger news outlets, all based on little or no evidence. What makes the madrassa story unusual is that the false allegations are about a candidate's elementary school nearly 40 years ago, and the attempt to blame this rumor mongering on the rival campaign of Hillary Clinton -- Wolf.

BLITZER: Howard Kurtz reporting for us.

Howie, thanks.

And CNN did what any serious news organization is supposed to do in this kind of a situation. We actually conducted an exclusive firsthand investigation inside Indonesia to check out the school that Barack Obama attended as a little 6-year-old by.

We sent our correspondent John Vause to Jakarta -- John.

JOHN VAUSE, CNN CORRESPONDENT: Wolf, I came here to Barack Obama's elementary school in Jakarta looking for what some have been calling an Islamic madrassa like those that teach violence and hate in Pakistan and Afghanistan. Well, Wolf, I've been to madrassas in Pakistan, and this school is nothing like that.

(BEGIN VIDEOTAPE)

VAUSE (voice over): In the quadrangle of this elementary school, boys and girls age from 6 to 12 neatly dressed in uniform, playing together, just as a young Barack Obama would have done almost 40 years ago. Here they're taught science and math and practice traditional Indonesian dance.

Besuki) elementary follows a national curricula, just like it did in the '60s and '70s. Take a close look at Obama's teachers, women and men all in Western-style dress.

There are religion classes once a week. Most of the 450 students are Muslim and are taught about Islam. The handful of Christians learn that Jesus is the son of God.

The deputy headmaster tells me he's unaware that his school has been labeled an Islamic madrassa by some in the United States and bristles at the thought. "This is a public school. We don't focus on religion," he told me. "In our daily lives we try to respect religion, but we don't give preference to one or the other."

Bandung Winadijanto attended Besuki with Obama. Back then was known as Barry. They were in Boy Scouts together. And he says in all these years, not a lot has changed at his old elementary.

BANDUNG WINADIJANTO, BESUKI ALUMNI: No, it's not an Islamic school. It is common -- I mean, it's general, because there's also a lot of Christian students, Buddhism students, also (INAUDIBLE) students.

(END VIDEOTAPE)

VAUSE: And Wolf, in almost every way this school is typical of all state-run schools in Indonesia, except this is probably one of the wealthiest neighborhoods in Jakarta. The U.S. ambassador lives just up the road, and this school is probably better off than most -- Wolf.

BLITZER: All right. John Vause in Jakarta for us. An excellent, excellent report. Glad we could bring that to our viewers.

This programming note for our viewers. Tomorrow night we'll have special coverage looking ahead to the president's State of the Union Address. We'll begin our coverage, Paula Zahn and I, at 7:00 p.m. Eastern right here in THE SITUATION ROOM.

Then, on Wednesday, my exclusive television interview with the vice president of the United States, Dick Cheney. I'll be speaking with the vice president about Iraq, Iran, the State of the Union and a lot more. That will air Wednesday, the day after the State of the Union, right here in THE SITUATION ROOM.

Up next, Jack Cafferty wants to know, will Senator Hillary Rodham Clinton's husband be an asset or a liability in a run for the White House? Jack, with "The Cafferty File", when we come back.

(COMMERCIAL BREAK)

BLITZER: Here's a look at some of the "Hot Shots" coming in from our friend at The Associated Press.

In the United Kingdom, men carry packs of diapers that washed ashore from a ship that ran aground about a mile out to sea.

Mike Tyson talks to one of his lawyers in court. He pleaded not guilt toy drug charges.

In Indiana, a snowman celebrates the Indiana Colts' win over the New England Patriots.

And in the Netherlands, take a look at this. A Chihuahua drinks a new non-alcoholic beer designed for dogs.

Some of today's "Hot Shots," pictures often worth a thousand words.

Let's go to Jack in New York for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Glad we got those in.

The question this hour is, will Senator Clinton's husband, the former president, be an asset or a liability in her run for the White House?

Christopher in Toronto writes, "Bill's support could only help. The last time his effectiveness was called into question was in 2000, when Al Gore opted to go it alone. And we all know how that turned out. If Bill's relegated to the wings this time, Hillary doesn't have a shot."

Prince in Massachusetts, "Bill Clinton will have absolutely no positive affect on Hillary's bid. Those who he'll draw to Hillary are those who would have voted for her anyway. Millions of others will be turned away because of all of his baggage."

Dick in Omaha, Nebraska, "Bill would be an asset. Hillary would be a big liability."

Mark in Oklahoma City, "Nixon was treated like a leper after Watergate. But for some reason, Bill Clinton's treated like a rock star, even though he was impeached for lying under oath. In a sane world, he would be a liability, but I'm sad to say a lot of people would like to see him back in office."

Nikki writes from Clearwater, Florida, "There is nothing like experience, Jack. As the old saying goes, two heads are better than one. Of course he'll be an asset, just like Hillary was to him when he was president. After all, she is and always has been one of America's best lawyers."

And Marilyn in Athens, Tennessee, "This country is wanting change, and I'm sure Bill can raise a lot of money. But why would this country want 24 years of Bush and Clinton rule?"

If you didn't see your e-mail here, you can go to cnn.com/caffertyfile and read more of these online -- Wolf.

BLITZER: One thing is clearly certain, that the two of them, Bill and Hillary Clinton, they're going to be able to raise a ton -- a ton of cash.

CAFFERTY: Well, they said -- didn't she announce intentions to go outside the matching funding law so that she's not restricted?

BLITZER: Yes. Yes.

CAFFERTY: Somebody said she might be able to raise half a billion dollars. This thing is getting out of hand. Isn't it?

BLITZER: That's a lot of money.

CAFFERTY: Yes, it is.

BLITZER: And it's only just starting, Jack. See you in an hour right here in THE SITUATION ROOM.

Remember, we're here weekday afternoons, 4:00 to 6:00 p.m. Eastern, back at 7:00 p.m. Eastern.

Until then, thanks for watching.

Let's go to "LOU DOBBS TONIGHT." Lou is in New York.

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