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Blagojevich Controversy Escalates; Auto Bailout in Danger?

Aired December 10, 2008 - 18:00   ET

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


WOLF BLITZER, CNN ANCHOR: And, to our viewers, you're in THE SITUATION ROOM.
Happening now, breaking news: A U.S. congressman says he never offered to pay for Barack Obama's old Senate seat, a really emotional response from Democrat Jesse Jackson Jr. in connection with a staggering corruption case.

The president-elect is taking a tougher stand against the Illinois governor and charges that he put Obama's former Senate seat on the auction block. Did he go far enough? The best political team on television is standing by.

And we are only hours away from another big Cabinet announcement. New information this hour on Barack Obama's choices and the openings left to fill.

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

(BEGIN VIDEO CLIP)

REP. JESSE JACKSON JR. (D), ILLINOIS: I met with Governor Blagojevich for the first time in four years on Tuesday. I presented my record, my qualifications and my vision.

The media saw me enter the governor's office. And after a 90-day meeting about my record, my qualifications, the media saw me exit Governor Blagojevich's office.

(END VIDEO CLIP)

BLITZER: Congressman Jesse Jackson Jr. explaining what he did to try to get an appointment to the United States and what he did not do. Jackson denying he told the Illinois governor or anyone else for that matter that he was willing to quote pay to play.

But there is new information about Jesse Jackson Jr.'s link to this corruption case.

And Brian Todd has been reviewing what is going on.

Brian, what do we know?

BRIAN TODD, CNN CORRESPONDENT: Wolf, federal officials, CNN sources and Congressman Jackson himself all say there is no evidence he did anything wrong in this case, but we have confirmed that Congressman Jackson is a key figure in this complaint against the Illinois governor.

(BEGIN VIDEOTAPE)

TODD (voice-over): Of all the possible candidates, prosecutors say there may have been one who Rod Blagojevich thought he could cut a deal with for Barack Obama's open Senate seat. It is candidate five, cited in the federal complaint against Blagojevich.

The document says the Democratic governor thought he could get something tangible up front from candidate five. Now a law enforcement official connected to the Blagojevich investigation tells CNN candidate five is Democratic Congressman Jesse Jackson Jr. Jackson's attorney says he assumes Jackson is candidate fife. Jackson did not address that himself, but told reporters.

JACKSON: I spoke to the U.S. attorney's office on Tuesday. They shared with me that I am not -- I am not a target of this investigation. I look forward to cooperating with the hardworking men and women of the United States Attorney's Office and the Justice Department.

TODD: Our law enforcement source says there is no evidence that Jackson or anyone connected with him ever approached the governor in any improper way, despite this quote from the complaint, which says Blagojevich described an earlier approach by an associate of candidate five as follows: "We were approached pay-to-play, that, you know, he would raise me $500 grand. An emissary came."

Jackson responds:

JACKSON: I did not initiate or authorize anyone, at any time, to promise anything to Governor Blagojevich on my behalf.

I never sent a message or an emissary to the governor to make an offer, to plead my case, or to propose a deal about a U.S. Senate seat, period.

TODD: CNN's law enforcement source says no conversations with Jackson were ever picked up on bugs or wiretaps in the Blagojevich case, and there is no evidence that Jackson was aware of anything improper.

Observers say Jackson is not known to be close with the governor.

CHRIS FUSCO, "CHICAGO SUN-TIMES": Their relationship has not been good. There is not a lot of personal contact there. The personal contact happened at that meeting a few days back.

(END VIDEOTAPE)

TODD: Now, that is a reference to a meeting this past Monday that Jackson says he had with Governor Blagojevich about that open Senate seat. But he says until they spoke about the post two days ago, he had not met with Rod Blagojevich in four years -- Wolf.

BLITZER: All right. Brian, stand by. We are also between be speaking with our legal analyst, Jeff Toobin. We're going to get more on this story, a lot more.

But there's another very important story we are following right here in Washington with huge ramifications. A plan to bail out America's auto industry right now seems to be in deep trouble once again.

We have just learned today that the White House and the Democratic-controlled Congress had reached an agreement, but now Republicans are weighing in and many of them say no.

Let's go to our congressional correspondent Dana Bash. She has got the latest for us.

Looked like there was going to be a deal, but maybe not so quickly. Dana, what do we know?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: What we know is that after days and days of Bush aides and congressional Democrats working on a deal, when they finally produced it earlier today, it landed with a thud inside the Senate Republican conference and basically even Republican senators who say that they really want this, they tell us that they simply think that the votes are not there in the Senate to pass it.

(BEGIN VIDEOTAPE)

BASH (voice-over): Within minutes of the House Democratic decision to move forward on agreement with the White House to bail out auto companies, word from Senate Republicans they may kill it.

SEN. JIM DEMINT (R), SOUTH CAROLINA: Americans are not stupid. They will know that this bailout is only a temporary solution.

BASH: White House Chief of Staff Josh Bolten and Vice President Dick Cheney rushed to Capitol Hill to try to sell the deal for Detroit to their fellow Senate Republicans. Several GOP senators described the closed-door meeting as intense. No sale yet.

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: I haven't made a final decision that I have announced myself.

BASH: Many Republicans in this still evenly divided Senate complain that the $14 billion bailout that Bush officials negotiated with congressional Democrats fails to guarantee that struggling auto companies must revamp to become competitive.

SEN. DAVID VITTER (R), LOUISIANA: Isn't that, to use a common phrase, just ass-backwards? Fifteen billion dollars, and then later, after that's out the door, we will see a detailed restructuring plan?

BASH: Under the bill filed in the House, a so-called car czar would bring together auto companies, unions and other parts of the industry to come up with long-term restructuring plans by March 31. SEN. DEBBIE STABENOW (D), MICHIGAN: This is about the underpinnings of our economy, and, fundamentally, whether we are going to compete with every other country.

BASH: In attempt to lure Republicans, the czar was given the power to force carmakers into bankruptcy if they don't revamp to become viable.

Still, several Republicans say, their biggest problem with the bailout is that the czar lacks enough power to mandate long-term change in Detroit.

SEN. JOHN ENSIGN (R), NEVADA: How does anybody expect some car czar or some politician to be able to make the decisions that are right from a business standpoint for these car companies?

(END VIDEOTAPE)

BASH: Now, the House is planning on voting this evening, probably in about two hours.

And, meanwhile, a Senate Democratic leadership aide tells us that they are furiously trying to come up with a process behind the scenes so that they can address some of the Republicans' concerns, at least enough to get those 60 votes that they would need ultimately to pass it in the Senate. But again, right now, Wolf, in talking to the Republican senators today, looks very tough to do that -- Wolf.

BLITZER: And it all means Dana Bash is going to be working late on Capitol Hill once again tonight. All right, Dana, thanks very much.

Let's check back with Jack. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Indeed.

And here's more good news. The newspaper industry could in this country be at a breaking point. The Tribune Company filed for Chapter 11 this week. "The Wall Street Journal" reports that the New York Times Company, which publishes 19 newspapers, is negotiating with its lenders to borrow less money next year because of falling ad revenues.

Newspaper publishers say there has been a 15 percent across-the- board drop in advertising sales throughout the industry this year, and the outlook for next year isn't any better. Papers were already struggling to compete with cable TV and the Internet. And now the economic downturn, the recession, is spelling even more trouble for them.

Last year, Tribune, which owns television stations and newspapers, went private and was bought out for $8.2 billion, but apparently it was not enough to save them. "The New York Times" has been cutting costs by consolidating, closing printing plants. McClatchy Company, which owns 30 newspapers, cut 2,550 jobs this year and took other steps to cut $200 million off its expenses, but that still may not be enough.

So, here is the question.

What does it mean that so many newspapers are going under? Go to CNN.com/caffertyfile and post a comment on my blog -- Wolf.

BLITZER: As an old newspaper guy, myself, Jack, it pains me every time a newspaper goes down, but, unfortunately, that seems to be the trend right now.

CAFFERTY: Well, and it is historically the seat of the best journalism that is practiced in this country, with all due respect to our folks on the Internet and us people in television. We don't do as thorough a job as the newspapers are set up to do on things like investigative reporting. So if we lose a bunch of these big papers, the civilization, the society will suffer, I think.

BLITZER: Yes, I think you are right.

(CROSSTALK)

CAFFERTY: Yes.

BLITZER: Yes, we all suffer as a result. All right, Jack, thank you.

Saddened one day, seemingly outraged today, Barack Obama has stronger thoughts on the scandal-ridden Illinois governor. But there are some questions about what Obama is not saying.

And the president-elect is apparently about to name names for his Cabinet. You are going to find out who is in, who is out.

And a new rare document from the nation's first president.

(COMMERCIAL BREAK)

BLITZER: Barack Obama's taking a stronger stand today about the future of the Illinois governor and the corruption case against him. Obama's initial response yesterday to the charges against Rod Blagojevich prompted some to ask, where is the outrage?

We go to CNN's Jessica Yellin. She is covering this transition in Chicago. He put more distance today between himself and the governor, didn't he, Jessica?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: He did, Wolf. And there have been calls for Barack Obama to say even more about this story. In fact, his statements so far leave many questions unanswered.

(BEGIN VIDEOTAPE)

YELLIN (voice-over): Barack Obama is stepping up the pressure on Governor Blagojevich to resign through an aide, telling CNN, he believes, "Under the current circumstances, it is difficult for the governor effectively do his job and serve the people of Illinois." That statement comes amid questions about what Barack Obama is not saying regarding the charges against the governor.

Yesterday, the president-elect was careful about the words he chose.

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: So we were not -- I was not aware of what was happening.

YELLIN: Not we, but I, leaving open the possibility that one or more of his aides did have contact with the governor's office. And according to the complaint, Blagojevich wanted to talk to at least one of Obama's aides. The governor is quoted saying on November 13th that he'd like to call one of the president-elect's advisers and ask him, Can you guys help raise $10 million or $15 million?

It's not clear whether that call ever happened. And the prosecutor went out of his way to make it clear Obama is not in his crosshairs.

PATRICK FITZGERALD, U.S. ATTORNEY: The complaint makes no allegations about the president-elect whatsoever.

YELLIN: But there's the perception issue. The man who promised to run the most candid White House in history is saying...

OBAMA: As this is an ongoing investigation involving the governor, I don't think it will be appropriate for me to comment on the issue at this time.

YELLIN: Sound familiar?

SCOTT MCCLELLAN, FMR. WHITE HOUSE PRESS SECRETARY: But our policy has been that this is an ongoing investigation. We're not going to comment on it.

YELLIN: It begs many questions.

JOHN DICKERSON, CHIEF POLITICAL CORRESPONDENT, "SLATE": How did the campaign talk to Governor Blagojevich? What did Senator Obama know about his friend and her chances? Why did she abruptly, Valerie Jarrett, take herself out of the running? There are a series of questions here that just haven't been answered.

(END VIDEOTAPE)

YELLIN: And, Wolf, Barack Obama's campaign, or transition, I should say, has announced that he will be holding a news conference tomorrow, so you can expect him to get those questions and more when he meets reporters -- Wolf.

BLITZER: Yes, there's no doubt about that.

All right, Jessica, thanks very much.

Let's talk a little bit more about this scandal that is hanging over the Illinois governor.

Joining us, our senior legal analyst, Jeff Toobin.

Jeff, what do you think, first of all, politically and legally, the way Barack Obama is responding to all of this?

JEFFREY TOOBIN, CNN SENIOR ANALYST: Well, certainly, legally, it is criminal defense 101, it is entirely appropriate to let the process play out.

Frankly, politically, I don't think it is perhaps as big a problem as other people do. The only real evidence out there in the case, which is the complaint, Blagojevich does nothing but complain that Obama and his people are being unresponsive. It is true that there are lots of questions that it would be interesting to ask the president and his people, but whether those questions are really relevant to any possible wrongdoing, there really doesn't seem to be any evidence of wrongdoing so far.

BLITZER: At the top of the hour, we heard Jesse Jackson Jr., the congressman, the Democratic congressman of Chicago, flatly reject any notion he did anything wrong at all. He has been identified as candidate five for this U.S. Senate seat to replace Barack Obama. How is he handling it politically and legally?

TOOBIN: See, I think he is in a different situation.

Certainly, legally, he is following the correct strategy, because he is clearly a witness at least in this case, and any criminal defense lawyer would say don't speak until you know as many facts as you possibly can.

His problem is, unlike Barack Obama, he is running for something now. He is running for the Senate. He has got to convince whoever it is who is going to be picking the occupant of this Senate seat, maybe Patrick Quinn, the lieutenant governor, that he is the right person for the job.

It is very tough to do that when you are acting like a criminal defendant and saying, I can't take any questions on this. I think, politically, Jesse Jackson has got a big problem.

BLITZER: And you know how this works. You're a former U.S. attorney.

I suspect the big fish, the governor, is what the U.S. attorney is going after. He is going to try to get some of his aides, including some who were named in that document yesterday, to cooperate and build a case. Presumably, it could lead elsewhere.

TOOBIN: Boy, the phone lines are probably burning up between the lawyer for the chief of staff, John Harris, who was the other defendant in this case.

Patrick Fitzgerald could not care less, I assure you, about what happens with the chief of staff. This is all about the governor. So, any deal he can cut, any witness he can find who will give truthful testimony about the governor, Fitzgerald and his team will be very, very anxious to hear.

BLITZER: And this is only just beginning. All right. We will watch it every step with you, Jeff. Thank you.

TOOBIN: OK, Wolf.

BLITZER: John McCain made Joe the plumber a political star, but Joe doesn't sound very grateful right now. You are going to hear what he is saying about Senator McCain. It is not pretty.

And Barack Obama has been mocked for his middle name, but he says he won't be shying away from using Hussein on Inauguration Day.

And a remarkable new glimpse into White House history, as Barack Obama prepares to write a new chapter.

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

(COMMERCIAL BREAK)

(NEWS BREAK)

BLITZER: Today, a rare look at some historic papers that highlight a shameful part of America history, documents about the slaves who helped build the White House right here in Washington. It's an interesting twist to the celebration of the first African- American president of the United States.

Our Samantha Hayes has been looking into these documents.

It shows how the White House was built.

SAMANTHA HAYES, CNN CORRESPONDENT: That's right, Wolf. This is something that the National Archives did for the news media today, because there has been so much intense interest after Barack Obama's election. So, it really was a closer look at those who built the White House brick by brick who never had a chance to experience freedom.

(BEGIN VIDEOTAPE)

HAYES (voice-over): They are fragile pieces of paper that show whose hands built the president's house, at the bottom, their first names only.

REGINALD WASHINGTON, NATIONAL ARCHIVES: Here, these people endured slavery, endured working essentially for free.

HAYES: Reginald Washington is an expert in African-American records, and can immediately identify slaves on this accounting document, essentially a 200-year-old pay stub.

WASHINGTON: You can see that the slaves are being paid a lesser amount, at five shillings, four shillings, and again four shillings. HAYES: A third the pay of other workers, and that money went to their owners.

Author Jesse Holland notes in his book that the man in charge of building the president's house owned slaves.

JESSE HOLLAND, AUTHOR, "BLACK MEN BUILT THE CAPITOL": James Hoban, the man who designed and was the architect for the construction of the White House, he brought up some of his own personal slaves from South Carolina to work on these projects. And since he was in charge of construction in the White House, he paid himself for the use of his slaves in the construction of the White House and the Capitol.

HAYES: A story not often told about the nation's history, but of particular significance now.

WASHINGTON: And now there's an African-American poised to become the president of the United States. This is somewhat like poetic justice in a way.

(END VIDEOTAPE)

HAYES: Well, those old documents have been shown before in 2001, and they may go on display again. It is something that the Archives will consider, depending on public interest.

Obviously, the White House looked a lot different then than it does now, so we will want to show you -- I think we have -- yes, this is very interesting. Of course, this is what it looked like in 1792, which is when some of the documents I was just talking about were made.

Now, later on, in 1824, the South Portico was constructed, in 1830, the North Portico, 1902, the West Wing that we're familiar with. A few years later, the Oval Office was constructed. And, in 1942, the East Wing.

So, Wolf, that is the White House that we know.

BLITZER: Yes, the White House we love. I spent seven years of my life covering the White House.

HAYES: And you know it well.

BLITZER: It was a thrill every single day when I walked through that northwest gate to cover that story. It was a great, great building and a lot of history.

Thanks for bringing it to us, Samantha.

HAYES: Sure.

BLITZER: The Illinois governor is in plenty of hot water, but did his wife help push him in? The governor's spouse caught on tape and she is being likened to Lady Macbeth. Plus, critics have tried to use Barack Obama's middle name against him, but his full name will be front and center on the biggest day of his life. That would be Inauguration Day coming up.

And Joe the plumber now says he is appalled by the man who helped shoot him to political fame. His eye-popping new remarks about John McCain -- coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now: It was the focus of some of the negative attacks during the presidential campaign, but president-elect Barack Obama is not shying away from his middle name. He says he will follow tradition and use it when he takes the oath of office on January 20.

Caught on tape swearing and a lot more. We are examining the alleged role of the Illinois governor Rod Blagojevich's wife in the corruption scandal that threatens to bring him down.

And Jesse Jackson Jr. speaks out, his emotional response to being caught up in the allegations the governor tried to sell Barack Obama's old Senate seat.

All of this coming up, plus the best political team on television.

I'm Wolf Blitzer. You are here in THE SITUATION ROOM.

Apparently, it will all soon be official. The former Senate majority leader, Tom Daschle, will be named Barack Obama's pick for secretary of health and human services -- that coming in from a Democratic source, who says it will happen tomorrow in Chicago. We have previously reported Daschle was the top contender for that job.

Meanwhile, Democratic sources also telling CNN Obama is likely to name Dr. Steven Chu as the new energy secretary. Chu won the Nobel Prize in physics back in 1997. He is highly respected in energy circles.

Barack Obama will not only be the country's first African- American president. He will also be the first with a Muslim middle name, one from which he says he won't be shying away.

Our CNN State Department correspondent, Zain Verjee, explains why -- Zain.

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Wolf, the president-elect wants to rebuild bridges with the Muslim world.

(BEGIN VIDEOTAPE)

VERJEE (voice-over): Barack Hussein Obama will use his full name when he takes the oath of office on January 20th. The president-elect told "The Chicago Tribune" newspaper: "I think that the tradition is they use all three names and I will follow tradition," he said. "I'm not trying to make a statement one way or another. I'll do what everybody else does."

His middle name, Hussein, a focus during the campaign.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I can't trust Obama.

SEN. JOHN MCCAIN (R), ARIZONA: I've got...

UNIDENTIFIED FEMALE: I have read about him and he's not -- he's not -- he's a -- he's an Arab.

MCCAIN: No, ma'am. No, ma'am.

(END VIDEO CLIP)

VERJEE: Former secretary of State Colin Powell objected, saying Obama is not a Muslim and so what if he was.

COLIN POWELL, FORMER U.S. SECRETARY OF STATE: And then to sort of throw in this little Muslim connection -- you know, he's a Muslim and I guess a terrorist. And it was -- it was taking root. That kind of negativity troubled me.

VERJEE: Obama himself joked about it.

(BEGIN VIDEO CLIP)

OBAMA: And I got my middle name from somebody who obviously didn't think I would ever run for president.

(END VIDEO CLIP)

VERJEE: Obama's father was a Muslim and that's where he got the name.

IMAN FEISAL ABDUL RAUF, FOUNDER, CORDOBA INSTITUTE: The son of a Muslim. And all -- the whole narrative of Obama put together is what gives us hope.

VERJEE: The president-elect is a Christian, but says he wants to reach out to the Muslim world and reboot America's image there. Analysts say the world's 1.3 billion Muslims want reassurance that the U.S.-led war on terror is not a war on Islam. Obama's victory has already has sent a message.

EDWARD DJEREJIAN, DIRECTOR, BAKER INSTITUTE: The photo of President Bush and President-Elect Obama at the White House did volumes in the broader Middle East and throughout the world to show what America is.

(END VIDEOTAPE)

VERJEE: Experts say it really boils down the one thing -- solving the Israeli/Palestinian crisis -- the core issue for the Arab and Muslim world -- Wolf.

BLITZER: Zain Verjee reporting for us.

Thank you, Zain, very much.

More now on the scandal swirling around the Illinois governor, Rod Blagojevich -- caught on tape allegedly trying to sell Barack Obama's Senate seat. The governor's wife is also heard on some of the tapes, at times unleashing profanity big time.

CNN's Susan Roesgen is in Chicago. She's over -- she's outside of the house of Governor Blagojevich.

Tell us about this part of the story, because it's fascinating -- Susan.

SUSAN ROESGEN, GULF COAST CORRESPONDENT: Well, you know, Wolf, we have actually been here outside the governor's house all day. We saw the governor waving to reporters as he went to work this morning -- still the acting governor here. But we have not seen his two young daughters nor have we seen his wife, Patricia.

But what we're learning from those federal transcripts, Wolf, of the wiretaps is that she is either fiercely loyal or a political power player behind-the-scenes. In any case, she was egging her husband on like Lady Macbeth.

(BEGIN VIDEOTAPE)

ROESGEN (voice-over): Patti Blagojevich is her husband's partner in life and politics. Her father is a powerful Chicago alderman credited with putting his unknown son-in-law right at the top of Illinois politics. And she has been under scrutiny, accused of brokering multimillion dollar real estate deals with her husband's political cronies. She's been supportive of her husband and the Feds say he was going to support her.

PATRICK J. FITZGERALD, U.S. ATTORNEY: The tapes reveal that Governor Blagojevich wanted a number of things in exchange for making an appointment to the Senate seat -- an appointment as secretary of Health and Human Services or an ambassadorship, an appointment to a private foundation, a higher paying job for his wife or campaign contributions.

ROESGEN: By all accounts, Patti Blagojevich is no shrinking violet. And on the government's tapes, investigators say she can be heard in the background forcefully expressing her opinions. The Feds say the governor demanded that "The Chicago Tribune" newspaper get rid of editorial writers who didn't like him or the "Tribune's" owner would not get state money to help in the sale of the Cubs baseball team.

In the background, investigators say the Illinois first lady is cursing: "Hold up that blanking Cubs blank blank them."

The Feds say the bottom line was money. They say the governor is heard asking his chief of staff at one point -- now his co-defendant, John Harris: "Is there a play here with these guys, with her, to work for a firm in Washington or New York at a significantly better salary than she's making now?"

FITZGERALD: He wanted to do it to see if he could help his wife work as a lobbyist. He wanted to do it to remake his image to run for office in 2016. And he wanted to do it to see if he could generate speaking fees.

ROESGEN: Over the years, a powerful couple -- now partners in political scandal.

(END VIDEOTAPE)

ROESGEN: And the house is dark tonight, Wolf. The only activity we saw in the house earlier was that the blinds came down and the curtains were drawn. So, we have not seen any of the family, just the governor this morning.

BLITZER: All right, Susie.

Thanks very much.

She's in Chicago for us.

President-Elect Barack Obama now calling on the Illinois governor to resign over these allegations of pay for play.

Should he have done it sooner and what's the impact on the president-elect?

The best political team on television will discuss.

And the fiery crash of a military jet killed his entire family in their home. Now, a grieving husband and father shares his pain.

(BEGIN VIDEO CLIP)

DONG YUN YOON, HUSBAND, FATHER OF CRASH VICTIMS

It's such a horrible thing to have happen, especially right here, you know, right our house.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP, COURTESY CBS/WORLDWIDE PANTS)

UNIDENTIFIED MALE: The speculation in the media is saying Illinois now may be the most corrupt state in the union. So it sounds like you've got some catching up to do, Alaska.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP, COURTESY NBC) UNIDENTIFIED MALE: Blagojevich says he's sorry he tried to sell the seat and extremely sorry he did it on Craigslist.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP, COURTESY ABC)

UNIDENTIFIED MALE: Think of it -- you're in Chicago. You have Barack Obama's seat for sale. Don't you go directly to Oprah?

(END VIDEO CLIP)

BLITZER: That's fodder for the late night comedians, to be sure. But the corruption allegations against Illinois governor, Rod Blagojevich, are no laughing matter for him, for Illinois, for the country or, for that matter, for Barack Obama, who's now calling on the governor to resign for allegedly trying to sell Obama's Senate seat.

Let's talk about that and more with our CNN political contributor, Steve Hayes, of "The Weekly Standard;" CNN's Jessica Yellin -- she's in Chicago; and Dana Milbank of "The Washington Post," another CNN contributor.

First to Chicago -- Jessica, it took a day for him to formally call on the governor to resign.

What are they saying -- the Obama team -- about what some are calling a delay?

YELLIN: Well, they think that they were clear about this yesterday and that we didn't press hard enough.

I think this is a bit of a problem, Wolf, for Barack Obama. This guy promised to run the most transparent administration in history, to be a new kind of candid president. And what we've heard from him so far is the same line we've heard out of the past two administrations whenever they got even close to a scandal -- which is I'm not going to talk about an ongoing investigation.

So even though there's no allegation of wrongdoing, he is not starting off on the foot he promised he'd start off on, which is more transparency and more candor than we've seen before.

BLITZER: He's going to be making some cabinet announcements tomorrow, Steve and presumably he'll answer reporters' questions then.

Why do you think he be saying?

Obviously, you know, he's got a political problem, potentially, but there are some legal issues, as well.

STEPHEN HAYES, SENIOR WRITER AT "THE WEEKLY STANDARD": Well, I agree with Jessica. I mean, I think the potential issue for him is this contradiction between the way that he ran as a reformer and as somebody who has promised to be so transparent and somebody now who's not maybe answering all the questions that reporters have.

I guess you need to throw in one huge, huge caveat and that is to say, you know, the possibility that some people on Obama's staff or on the transition may have been working with Patrick Fitzgerald. It's not evident yet from the complaint, but, you know, we know that Patrick Fitzgerald did that when he investigated "Scooter" Libby and Richard Armitage, for instance, who was the source of the leak in that matter that was being investigated had long -- before anybody knew what had happened -- been cooperating with Patrick Fitzgerald. So that's always a possibility.

BLITZER: And I want to be precise, Dana. There's no allegations -- there's no evidence whatsoever that Barack Obama or anybody in the transition did anything wrong. And yesterday, Patrick Fitzgerald, the U.S. attorney, said Barack Obama is not a target and they're not making any suggestion he did anything at all wrong.

DANA MILBANK, CNN CONTRIBUTOR "WASHINGTON POST": That's right. And I'm not sure you can really fault him for not initially jumping out and saying the guy should resign. It seems the magnitude -- the charges were so breathtaking, people sort of took that as a no- brainer. I mean the question is should the guy have to go through mortification of the flesh and wear a hair shirt or something like that, not whether he should actually resign.

But as Jessica was pointing out earlier, the larger question of transparency is going to be an issue here. And since Obama himself isn't intimately involved in this, it looks as if he's sort of hiding behind the legalese of well, there's an ongoing investigation, which is something we've spent the last 12 years or so dealing with.

BLITZER: Jessica, it looks, though, like Congressman Jesse Jackson, Jr. , Democrat of Chicago, does have a political problem. Maybe he even has a legal problem.

I want to play for you this little clip of what he said at his news conference on Capitol Hill a couple of hours ago.

(BEGIN VIDEO CLIP)

REP. JESSE JACKSON (D), ILLINOIS: I thought, mistakenly, I had a chance and I was being considered because I had earned it. Clearly, I was badly mistaken. I did not know that the process had been corrupted.

(END VIDEO CLIP)

BLITZER: All right.

What do you think of this part of the story, Jessica?

Because it gets a little complicated. He was identified as "Candidate 5" in that lengthy document the U.S. attorney released yesterday.

YELLIN: And he admits to meeting with Blagojevich to talk about taking this job for a whole 90 minutes.

Look, I think that it was not the way that you want to enter the Senate. It does not look good for him. And it really does handicap him in ever getting that Senate seat.

But in the press conference, at one point, he started to almost choke up and talk about his sister being proud of him. It was a little bit too much of a theatrical Hallmark moment.

But at the same time, Jesse Jackson, Jr. is a very skilled politician and a very able guy. And I do think this will be a speed bump in his larger career, unless there's some illegality. But it might be an ultimate roadblock for him getting into the Senate -- at least for now.

BLITZER: What did you think, Steve?

YELLIN: It's not ideal for him.

BLITZER: You watched the news conference.

HAYES: I did. I mean, for me, there was one huge question that went unanswered in the news conference and that is in this 90 minute meeting that he held with the governor, what did the governor say to him. I mean Jesse Jackson, Jr. said well, I made my case and it was based on substance and whatnot.

But, you know, it looks, from the complaint, that there were emissaries were going back and forth and there was some discussion, at least, of a pay to play. It would be interesting to know -- and maybe he's shared this with investigators with whom he met on Tuesday -- whether the governor was actually as bold and brazen in person as he had been on these phone calls.

BLITZER: He says, you know, he wants to fully cooperate with the U.S. attorney and the FBI. Dana, he says he did nothing wrong, he's got nothing to hide. But at the same time, his lawyer told him don't answer reporters' questions, which always raises, I guess, some flags among -- at least among reporters.

MILBANK: Well, particularly after you call a news conference. I was actually in the room there. And that was a very tense moment, as questions were shouted after him about what his intentions are. It was a weird moment, also, in that he seemed to be campaigning for the Senate seat -- sort of assuming that this will go to some sort of a special election. He was laying out his credentials on education and energy and his -- how he's only missed two votes in his career in the House.

So he's trying to turn a very, very bad moment in his career into sort of using the spotlight to his advantage. It's a very difficult thing to pull off.

BLITZER: And both Jesse Jackson, Jr. and his lawyer insist that they've been told he is not a target of this investigation, which is a legal term. All right, guys, thanks very much.

We'll continue this conversation.

Biting the hand that put him in the spotlight -- "Joe the Plumber" says he's now appalled by something that John McCain did and it nearly made him turn on the former Republican presidential candidate.

And newspapers going under at an alarming rate right now.

So what does that mean?

Jack Cafferty has your answers to this hour's question, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Lou Dobbs is getting ready for his show that begins right at the top of the hour and he's standing by live with a little preview.

What are you working on -- Lou?

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": That's right, Wolf.

Coming up tonight, disgraced Illinois Governor Rod Blagojevich refuses to step down. President-Elect Barack Obama calling for his resignation.

Just how close was Obama's relationship with the disgraced governor?

We'll have complete coverage. Also tonight, 41 days remain for President Bush. And he's not done yet. We'll be telling you tonight about the president pushing through new executive orders to make it easy for -- easier for foreign workers to take over American jobs. We wouldn't want this president to disappoint anyone in his last few days.

And a disturbing new report showing more than half the troubled mortgages in the country were refinanced this year and defaulted after six months. Once again, America's middle class -- well, waging war against them hasn't ended.

And a Congressional panel says that the federal bailout will do nothing for people who are losing their homes. The head of that oversight panel, Elizabeth Warren, joins me here tonight -- and four of the country's top political analysts, as well.

Please be with us at the top of the hour here on CNN for all of that, all the day's news and more, from an Independent perspective -- Wolf, back to you.

BLITZER: We'll be watching, Lou.

Thank you.

Two California senators are now calling for a full scale investigation into all U.S. military F-18 fighter jets in hopes of preventing another crash like the one that killed four people, including two young children, in San Diego.

Let's go to San Diego.

CNN's Ted Rowlands has been watching this really tragic story unfold.

And we heard from the father of these kids. And it's really, really sad.

TED ROWLANDS, CNN CORRESPONDENT: Absolutely, Wolf.

Dong Yoon lost his entire family. He spoke about it publicly. And what he said has affected people from around the world.

(BEGIN VIDEOTAPE)

YOON: Such a horrible thing to happen, especially right here. I believe my wife and two babies and mother-in-law are in heaven with God.

ROWLANDS (voice-over): As military jets ironically flew overhead, forcing him to pause, Dong Yoon talked about the pilot that ejected safely from the jet that killed his family.

YOON: I heard the pilot is safe. Please pray for him not to suffer from this accident. I don't blame him. I don't have any hard feelings. I know he did everything he could.

ROWLANDS: People around the world were watching Dong Yoon as he asked people to pray for the pilot. Church Reverend Daniel Shin says he was surprised by what Yoon said.

REV. DANIEL SHIN, YOON FAMILY PASTOR: Sometimes hardships bring out the best part out of you. And he was a soft-spoken man. I didn't know he had this kind of resolve in him.

ROWLANDS: Dong Yoon came to the United States in 1989. He became a U.S. citizen and works at a Korean convenience store. That's where he was when his family was killed.

YOON: You know, my wife -- it was God's blessing that I met her about four years ago. And we got married. And she's just such a lovely wife and mother who always loves me. You know, I -- I just miss her so much. I had two daughters. The first one is Grace. She's only 15 months old. And I have a second one, Rachel. She was just born October 17th. That's just a little over a month. I can't -- you know, I can't believe that they're not here right now.

(END VIDEOTAPE)

ROWLANDS: And a lot of people from around the world, Wolf, have actually contacted Yoon offering support. The Marine Corps is also offering short-term support. Emergency funds have been freed up to tend to any financial needs in the short-term. And, of course, they'll be in contact with him as this process continues.

The investigation also continues, as well, here in San Diego -- Wolf.

BLITZER: What a heartbreaking story that is. So sad, Ted.

Thank you very much.

Let's go to Jack Cafferty.

He's got "The Cafferty File" -- Jack.

CAFFERTY: The question this hour is: What does it mean that so many newspapers in this country are going under?

Tom writes from Maine: "It means that democracy is at risk. A citizenry that forms its opinions on the basis of sensationalized misinformation from demagogues on talk radio and faux news is not serving its nation. An informed citizenry has to participate if democracy is to work. Without newspapers with traditional Fourth Estate standards, America is history." Judy writes from California: "Because like the car industry, the newspapers refuse to keep up with the times. The Internet has replaced them with information at our fingertips. What have these guys been doing all these years? Why haven't they kept up? This seems like the natural order of things -- when something better comes along and you don't get your butt in gear and get competitive, then you're going to go down."

Willow writes from Iowa: "I get all the information I want on the Internet. I go to CNN.com then head over to the BBC. My local newspapers are online. I have ABC, MSNBC, "Countdown" with Olbermann. I can read any newspaper from any city online. I enjoy going to political blogs. I read The Huffington Post political. I have not bought a newspaper in about 10 years."

Bryan writes from Colorado Springs: "Under the thinking of our current government, I would say it's because they haven't received a bailout package from Congress and we have not yet appointed a newspaper czar."

And Terry in North Carolina: "Jack, you and Wolf and CNN are putting them out of business. You're a lot more interesting than the newspapers."

If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile and look for yours there, among hundreds of others. He's an interesting fellow, Mr. Blitzer.

BLITZER: Yes. All right, thanks very much, Jack. It's sad to see those newspapers going down, though.

All right. In today's Political Ticker, the man known as "Joe the Plumber" says he was appalled by John McCain's reasons for supporting the $700 billion bank bailout. Samuel Wurzelbacher tells conservative radio talk show host Glenn Beck he asked McCain why he voted for the bailout and he was stunned by some of the answers. He says they nearly caused him to abandon the GOP presidential candidate.

She's a little robotic, but the man behind her says she's the perfect woman.

Jeanne Moss has that next.

(COMMERCIAL BREAK)

BLITZER: Cutting edge science or just plain creepy -- our Jeanne Moos tells us about a man's "Moost Unusual" companion.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): They make a cute couple. She's the type who turns heads.

LE TRUNG, AIKO'S CREATOR: Aiko, give me your left arm.

AIKO: No problem.

MOOS: So what if she emits a slight mechanical noise?

At least she can do math equations.

TRUNG: Aiko, process math.

AIKO: The answer is 0.1746.

MOOS: Even decapitated, she can identify objects.

TRUNG: Aiko, what is this?

AIKO: It looks like a sandwich.

MOOS: She can tell the difference between cola...

AIKO: It looks like Coke.

MOOS: ...and water.

AIKO: It looks like water.

MOOS: Now if only she could make her owner some money. Le Trung may be unemployed, but he's not unattached.

TRUNG: If you touch the wrong place, she doesn't like it.

MOOS: In fact, you may get slapped.

TRUNG: (INAUDIBLE) heart away.

MOOS: This is no sex toy. Despite her name, Aiko -- Ai means love and ko means child. (on camera): Love child?

Well, no wonder people think something's up.

(voice-over): Le Trung began work on Aiko a little over a year ago, thinking he could build a robot that could serve the elderly. Almost $25,000 later...

AIKO: Ouch. That really hurts. Stop it.

MOOS: She can feel the pinch and so can he. He's asking for donations on his Web site, where science meets beauty.

(on camera): How do you dress her?

TRUNG: My mother's used clothes that doesn't fit her anymore.

MOOS: Your mother's used clothes?

(voice-over): Aiko has appeared at the nearby Ontario, Canada Science Center. But when he took her to a local park, someone accused him of acting like God -- creating something so human.

(on camera): You're kidding?

I can't believe an old lady would throw a rock at her.

TRUNG: The problem is there's too much Hollywood movies. We think of Terminator.

MOOS (voice-over): Actually, we thought of Austin Powers' fembots -- the ones that couldn't resist him.

(VIDEO CLIP)

MOOS: Le has programmed Aiko to be the opposite of a sex pot fembot...

AIKO: Please stop touching my breast. You pervert.

MOOS: There's nothing perverted about her reading material.

TRUNG: Aiko, process reading.

AIKO: Systems biology and research requires...

MOOS (on camera): If you held up "The New York Times," she could read it?

TRUNG: Oh, yes.

MOOS (voice-over): Though her pronunciation isn't perfect.

AIKO: It looks like a hambagger.

MOOS: Bagger, burger, what do you expect? (VIDEO CLIP)

TRUNG: Lick my foot.

AIKO: No. I will not lick your foot. I am not your personal slave.

MOOS: Make your own hambagger.

Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

BLITZER: Hambagger.

All right, thank you, Jeanne.

You may have noticed, by the way, the CNN logo at the bottom of your screen. Right now it's green.

Why the color change?

The network is gearing up for a new "Planet In Peril" special tomorrow night, right here on CNN, 9:00 p.m. Eastern. You're going to want to see it tomorrow night, "Planet In Peril".

I'm Wolf Blitzer in THE SITUATION ROOM.

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