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ANDERSON COOPER 360 DEGREES

Government to Blame in Madoff Case?; Jackson Jr. Government Informant?; Adam Walsh Case Closed; George W. Bush's Exit Interview

Aired December 16, 2008 - 23:00   ET

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


ANDERSON COOPER, CNN ANCHOR: We begin tonight with breaking news on what may be the biggest investment fraud in American history; the alleged $50 billion ripoff by this man, Bernard Madoff. His alleged scam has already sent shockwaves through Wall Street.
But, tonight, the SEC, the government's Wall Street watchdog, admits they were nothing more than a lapdog. SEC Chairman Christopher Cox saying his agency dropped the ball, even though whistle-blowers were warning regulators. The tip-offs go back almost 10 years.

Despite the SEC's acknowledgement, the question remains tonight, why wasn't Madoff, the man who just days ago confessed to the crime, stopped years ago?

Joe Johns is "Keeping Them Honest."

(BEGIN VIDEOTAPE)

JOE JOHNS, CNN CORRESPONDENT: He was a Wall Street genius and pioneer, who once proudly proclaimed that there was no way to cheat on the Street.

BERNARD MADOFF, ACCUSED OF $50B SCAM: By and large, you know, in today's regulatory environment, it's virtually impossible to violate rules. And this is something that the public really doesn't understand.

JOHNS: But now, Madoff himself is accused of breaking the rules, big-time. And the government never caught him until authorities say he admitted his role in an alleged fraud he estimated at an astounding $50 billion.

So where was the sheriff of Wall Street, the Securities and Exchange Commission? At first, officials said, they were on top of the case.

LINDA CHATMAN THOMSEN, SEC DIRECTOR OF ENFORCEMENT: And to bring everyone who is responsible for the conduct at the Madoff firm to justice.

JOHNS: But tonight, SEC Chairman Christopher Cox says his agency appears to have screwed up repeatedly and in a big way, saying "That credible and specific allegations regarding Madoff go all the way back to 1999. That he is gravely concerned by multiple failures of the agency and that he is launching an internal investigation." So who were the whistle blowers? Securities Executive Frank Casey, for one. Back in 2005, he and a colleague Harry Markopolos started looking at Madoff's gravity-defying investment returns and figured something was up.

FRANK CASEY, FORTUNE: And Harry said, "Frank, you know that this can't be right. It's got to be a fraud."

JOHNS: Casey says Markopolos even took it to the next level, firing off letter after letter to the SEC, all but predicting how the Madoff story would end.

CASEY: This is a Ponzi scheme. I mean, in giant letters; 36- type instead of 12-type. This is a Ponzi scheme, and he laid out 25, 28 -- if I can recall -- red flag areas that they need to investigate.

JOHNS: But Casey isn't congratulating the SEC for finally figuring things out, because they got there too late. After all, billions of dollars apparently vanished through the doors of Madoff's office.

CASEY: The SEC is going to simply come in after the fact and clean up the bodies and the blood. And not prevent the hit. It doesn't serve any purpose.

JOHNS: It's not the first time the SEC has gotten slammed for oversight in the last few years. But now, some critics are saying the case of Bernie Madoff just might turn the place inside out.

Joe Johns, CNN, Washington.

(END VIDEOTAPE)

COOPER: The FBI has set up a hot line number for victims of the Madoff scheme. The number is at the bottom of your screen right now 212-384-2359. You may not have money with Madoff, but the fact that he got away with it means that others likely have been getting away with it, as well. And they're yet to be discovered.

We're talking about "Your Money, Your Future."

Let's talk now with chief business correspondent Ali Velshi, and Andy Serwer, managing editor of "Fortune" magazine. Don't miss his in depth coverage of the scandal at fortune.com.

So Andy, what do you think of the SEC now admitting just a couple hours ago that they blew it, basically?

ANDY SERWER, "FORTUNE" MAGAZINE MANAGING EDITOR: Yes, I've never seen a mea culpa like this in my career; I've been covering Wall Street for 25 years.

COOPER: At least they admitted they blew it, which is, I mean more that most government officials did.

SERWER: They did, I mean it is systemic on the part of the SEC. I mean, there really has been a broad regulatory failure since this economic meltdown has unfolded. We've seen that in banking and derivatives and on Wall Street.

But really, the SEC is at the heart of overseeing our exchanges and securities and our markets. And they really failed generally and specifically very much as you said, repeatedly, they did not heed warnings about this guy.

COOPER: What's stunning about this to me is as a layman, I tend to believe these people who say they're business experts, who say they are hedge fund experts and SEC experts. I don't believe anybody knows anything anymore. I mean, who really knows what is going on?

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: As I was saying to Andy a little while ago, I spoke to one hedge fund manager who said he couldn't figure out what Madoff was doing. Those returns were too smooth and too consistent, one percent a month or better for years. And because he couldn't figure it out, he wouldn't invest.

But if you were up invited by Bernie Madoff to invest, you thought that was a privilege.

COOPER: Sure.

VELSHI: And by the way -- for a lot of people who don't --

COOPER: You have to have a buy-in of several million.

VELSHI: Yes, what we're finding, we're hearing from people who were victims, because they weren't direct investors with Madoff, they were investors through other people who gave Madoff that money to invest.

SERWER: That's right.

VELSHI: So I talked to somebody yesterday who lost $30,000. She had no idea she was invested -- had anything to do with Madoff. So people should call if they think there is any chance they have been defrauded. And let the SEC try and figure out what's going on.

COOPER: I want to show our viewers Madoff actually lecturing people about how safe investing was, how it's impossible to cheat anymore as investors. Take a look.

(BEGIN VIDEO CLIP)

MADOFF: It is impossible for you to go -- for a violation to go undetected; certainly not for a considerable period of time. When you look at the scope of the trading that goes on today in it Wall Street, and you look at the -- what we would consider to be the infractions, they're relatively small.

(END VIDEO CLIP)

COOPER: I think, Andy, you called this guy a financial psychopath. SERWER: He is. I mean, this is some of the most twisted stuff I have ever seen. I mean, he's distancing himself from fraud and criminal behavior by saying it's impossible. I mean, think about the psychology that's going on there. And this guy, Anderson, I mean, he cheated investors, he cheated employees, he cheated family, he cheated friends.

COOPER: Right.

SERWER: He cheated charities. I mean, he had no feelings. I mean, besides being a crook, he is a psychopath.

COOPER: But he claims he acted alone. I read today they're looking at his wife, perhaps. His sons actually turned him in. But do you think it's true --

VELSHI: He had a lot of family in senior positions in the company. As of now, there doesn't appear to be a connection but again, this thing is unfolding and every few hours we're understanding the scope of this thing and how much bigger it is. It is remarkable, the SEC and SIPC, which is the organization that sort of protects investors and these sorts of funds to some degree; both say that he had separate sets of books, this was very complicated.

So either he spent all his time doing up separate sets of books or he had help, Anderson.

COOPER: Can these people regain any of their money?

SERWER: Well, I think they may get some from SIPC, but there is also going to be -- which is the government agency that -- quasi- government agency that gives money back. But I think that there will have to -- litigation will go on for many, many years. There is money missing, and it won't be recovered.

VELSHI: This isn't like the FDIC, where you go in if a bank shuts down and 24 hours later you can claim all your money if your insured amount.

SIPC doesn't work that way. So we're going to have to figure out how bad this is, and who was actually affected. Did you have to invest directly with him? If you invested through someone else, are you protected?

COOPER: Also, some people who took their money out a couple years ago may have to give that money back.

VELSHI: That's right.

SERWER: And then there are people who pay taxes on the gains for decades.

COOPER: Right.

SERWER: I mean, it's an incredible tangled web. The lawyers will be happy, Anderson. COOPER: Unbelievable, Andy Serwer, thanks. Ali Velshi thanks.

Do you have confidence the government knows what it's doing in this financial crisis? Let us know. Join the live chat happening now at ac360.com. And also check out Randi Kaye's live web cast during the break.

Ahead tonight, more breaking news, this time out of Chicago; a stunning twist in the scandal that could cost the Illinois governor his job. Investigators say Congressman Jesse Jackson Jr. has for years given federal prosecutors information about corruption in his state.

One of his aides earlier said he was an informant. Now Jackson insists he gave information, but doesn't want to be called an informant. We're "Digging Deeper."

And the battle over Hillary Clinton's senate seat heating up. Caroline Kennedy got a major Democratic endorsement today; starting to look like a done deal. New details, tonight.

And case closed. After nearly three decades of heart break, John Walsh finally learns who killed his little boy.

(BEGIN VIDEO CLIP)

JOHN WALSH, ADAM WALSH'S FATHER: I always for years, I tried to convince myself that justice was -- justice delayed was not justice denied.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

COOPER: There's also breaking news tonight out of Chicago where investigators today reveal that this man, Congressman Jesse Jackson Jr. has been a reliable source of information about public corruption for years.

We and many others would call that being an informant and there is nothing wrong with that term. Jackson, however, disagrees. Whatever he calls it, the information he shared with the Feds allegedly involved past investigations, not the one that led to the arrest of Governor Rod Blagojevich.

Gary Tuchman joins me now.

Gary, what is going on?

GARY TUCHMAN, CNN CORRESPONDENT: Well Anderson, for at least the last decade, two sources close to Jesse Jackson Jr. tell us that he did indeed inform federal law enforcement officials about alleged corruption in his district and in his state, including corruption against the governor of Illinois who is in so much trouble right now.

But like he just said, it doesn't pertain to this current investigation. Instead it pertains to an investigation in 2002. And this is when Jesse Jackson says that the governor was running for governor for the first time, and he was approached by someone who was affiliated with the governor who asked for a $25,000 contribution for the governor's campaign.

Jesse Jackson at that point had a wife named Sandy who was possibly going to get a spot as the director of the Illinois lottery. He ended up not giving up the $25,000 contribution and his wife did not get the job.

And according to these sources close to Jesse Jackson after the governor became the governor of the state of Illinois, he met with Jackson and according to the sources he told Jackson, "You see what you could have done with that $25,000?"

Well, Jesse Jackson at that point was talking to authorities about other alleged corruption in his state and his district, but he didn't tell the authorities according to the sources, about that confrontation at that point.

It wasn't until 2006 when infamous developer Tony Rezko was on trial in Illinois and testimony came up that $25,000 donations were given to the governor. And Jesse Jackson then went to authorities and said, hey, I had this confrontation, it appears to be an alleged shakedown. And the Federal authorities were given the information back then.

But it is seemingly very unusual for a Congressman to have this kind of relationship with federal authorities. The Congressman's office says he's just being a good citizen. Either way what's curious is just last week, Congressman Jesse Jackson wanted and wants the U.S. senate seat that Barack Obama has left, he met with the governor of the state of Illinois to talk about it, and he had a very interesting conversation.

Listen to what he said to us last week after the results of this -- these arrest papers became public.

(BEGIN VIDEO CLIP)

REP. JESSE JACKSON JR., (D) ILLINOIS: I thought, mistakenly, that the process was fair, above board and on the merits. I thought, mistakenly that the governor was evaluating me and other senate hopefuls based upon our credentials and qualifications.

(END VIDEO CLIP)

TUCHMAN: Now, you might wonder why would a guy like Jesse Jackson Jr. who had this incident in 2002 involving his wife think that the process would be fair? That question hasn't been answered to us just yet.

We should tell you that the U.S. attorney's office here in the Northern district of Illinois and the justice department, regarding whether they have had information from are Jesse Jackson Jr. says we will not comment, we will not confirm, we will not deny. We asked the governor's office to give us a comment, his attorney would not return our calls, but we can tell you at this point it is a curious situation.

We also want to mention to you regarding that informant word, Anderson that you just mentioned, the Jesse Jackson camp, including Jesse Jackson himself, has told CNN he thinks that word has the wrong connotation. He says he's an informer who is a good citizen, but not an informant.

COOPER: All right. Well, we'll let viewers decide. Gary Tuchman, thanks.

Still ahead, on "360" President-elect Obama fills -- well, he tells reporters to stop asking about the Illinois Governor at a press conference today. Obama brushed their questions off. So why did he give them the Dodge? We'll look at that.

Plus, the race to fill Hillary Clinton's senate seat, is Caroline Kennedy reaching out to Clinton? And will today's big Democratic endorsement clinch the seat for Kennedy?

And almost three decades after 6-year-old Adam Walsh was murdered, the news his family was waiting for.

(COMMERCIAL BREAK)

COOPER: More now on the Illinois governor scandal. Members of an Illinois house panel met today for the first time to determine if there is a basis to impeach the Governor.

Meantime, President-elect Obama announced a new cabinet pick, his education secretary, but reporters didn't really want to talk about that, at first. They wanted to talk about the scandal. Obama skirted their questions, basically just slammed down their questions.

Jessica Yellin has the details.

(BEGIN VIDEOTAPE)

JESSICA YELLIN, CNN CORRESPONDENT: President-elect Obama began his day at this Chicago school, fielding questions from a receptive audience.

UNIDENTIFIED MALE: In 2009, you move to the White House?

SEN. BARACK OBAMA, PRESIDENT-ELECT OF THE UNITED STATES OF AMERICA: Yes, I'm going to be moving on to the White House next year.

YELLIN: If only every crowd were that easy. During the grown- up's Q and A, Obama shot down a reporter who asked about contact his aides may have had with the Governor's office.

OBAMA: John, let me just cut you out because I don't want you to waste your question.

YELLIN: Or Obama's time. The President-elect kept a tight focus on his agenda, naming new educator-in-chief, Arne Duncan, he is a regular at President-elect's pickup basketball games. Duncan once played ball professionally overseas.

OBAMA: I did not select Arne because he is one of the best basketball players I know.

YELLIN: Duncan has run Chicago's public schools for seven years, earning a reputation as a reformer and a centrist who has produced results. Scores are up. Dropout rates are down.

ARNE DUNCAN, EDUCATION SECRETARY DESIGNEE: It is the civil rights issue of our generation, and is the one sure path to more equal, fair and just society.

YELLIN: He has backed controversial policies, including paying students for good grades, closing failing schools and opening charters.

OBAMA: Let's not be clouded by ideology when it comes to figuring out what helps our kids.

YELLIN: The most controversial? He supported the creation of a gay-friendly high school. Proponents say it would have been a safe place for gay and lesbian teenagers who have experienced bullying.

But it stirred so much debate, supporters temporarily shelved plans for the school. They're vowing to push the idea again next year.

Duncan tells CNN, "This is a kind of innovative idea we will look at and evaluate on the national level."

Now if Obama thinks so highly of Duncan's accomplishments, why didn't he enroll his own daughters in Chicago's public schools?

OBAMA: Arne, Joe, myself all agree that the Chicago public schools aren't as good as they need to be.

YELLIN: Obama's education team has big plans to improve all of the nation's schools. By reforming "No Child Left Behind," recruiting new teachers and encouraging local innovations. But in these brutal economic times, the fight for federal dollars will be as fierce as ever.

YELLIN: CNN has learned that on Wednesday, President-elect Obama plans to announce Iowa Governor Tom Vilsack as his pick to run the Department of Agriculture. At the same press conference he's expected to announce his nominee to run the Department of the Interior, Colorado Senator Ken Salazar.

Jessica Yellin, CNN, Chicago.

(END VIDEOTAPE) COOPER: All right, let's "Dig Deeper." We're joined by senior political analyst and former presidential adviser, David Gergen, also Joe Johns and senior analyst, Jeffrey Toobin.

So David, is it realistic for the President-elect to think he can just stop reporters from asking questions about the Illinois governor scandal, especially when there are all these loose ends?

GERGEN: You can't stop them. I'm not sure -- where was that directed?

COOPER: I'm sorry. David. David Gergen.

GERGEN: Sorry. I'm sorry.

It's not realistic, Anderson. They're going to keep asking and he's going to keep trying to swat it away. Because he doesn't want to lose focus on his appointments and today he made a first-class appointment in Arne Duncan.

Duncan is someone who excites reformers like Michelle Rhee, the very courageous superintendent of schools in -- or chancellor of schools in Washington, D.C. but also has the confidence of teachers' unions and that's very hard to do in today's educational atmosphere. But reporters are going to keep pushing on these questions about Blagojevich, because as you said tonight in the Jesse Jackson story, this gets curiouser (ph) and curioser.

COOPER: Joe, do you think the press should just give him a pass until he releases his review next week? I mean, he said, look, I can't do it until the prosecutor says so.

JOHNS: Sure. And nobody wants to jump out there and start slamming him immediately. But I've got tell you, at the end of the day, this is a varsity media corps of the likes you have just never seen.

And people are going to hammer away at a question and an individual like Barack Obama doesn't want to ask. It's just the nature of the beast. Wherever you go, you're going to get that question after a certain point.

So, yes, there's a pass. It's only for a while. And Barack Obama realizes it's a distraction to him. It probably is frustrating him a little bit right now. But they need to just go ahead and deal with it, and get on with it.

COOPER: Jeff, let's talk about Jesse Jackson Jr. a little bit. How unusual is it for a sitting member of Congress to be giving information in a case like this? And what do you think about his reticence to be labeled as an informant? I mean, there is really nothing wrong with that term.

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: No, it's not a term of art. It can be a range of relationships with law enforcement. It could be wearing a wire -- COOPER: Right.

TOOBIN: -- which is what we think of as a real informant, or simply just answering questions of prosecutors. I think what makes the situation so unusual is how long it's gone on for. I mean, they're saying five years, they're saying maybe ten years.

You know, Illinois corruption scandals are more or less continuous. There is always somebody under investigation in Chicago. So I guess in that context, it's not all that surprising that someone who is part of the political establishment should be answering questions.

But it's odd, of course, that it's coming out now in that Jackson is trying to show that he's not a partner with Blagojevich. He is someone who has been informing on Blagojevich for years.

COOPER: What is interesting, David, that he didn't choose to say that when he gave this press conference. And I want to show our viewers -- Gary Tuchman showed -- I just want to remind our viewers of what he said during that press conference in which he kind of expressed shock, which now seems in a different light. Let's take a look.

(BEGIN VIDEO CLIP)

JACKSON JR.: I thought, mistakenly, that the process was fair, above board, and on the merits. I thought, mistakenly that the governor was evaluating me and other senate hopefuls based upon our credentials and qualifications.

(END VIDEO CLIP)

COOPER: Gergen, we now know that doesn't seem to be true. I mean, if he has been informing or giving information for years, he probably knew this guy isn't shooting straight.

GERGEN: Well, that's right out of "Alice in Wonderland."

On the face of it, it would seem to me that cooperating with the Feds over five years is a good thing. That's what a good citizen ought to do.

And think of it, had he not told the Feds and he had known a lot of corruption was underway, I think we would all be jumping really hard on him.

So on the face of it, I think, it's a good thing. But the circumstances surrounding this raise lots of questions. Why didn't he say so a few days ago? You know, what is this thing about not, you know, being reluctant. I understand there is a -- there is a certain odor attached to being called a snitch. And, you know, that may be used against him politically.

But there is something -- we don't know all of the facts here. I don't think we understand the bottom of this, Anderson. I think we're almost there, but not at the bottom. And it's just like the Madoff case that you let off with. I mean, you just have set to shake your head and say, what's in the world is going on?

TOOBIN: Well also, Jackson is not answering questions about the whole Blagojevich situation at the same time.

GERGEN: Right.

TOOBIN: So on the one hand he is saying that he is forthcoming, and has been with the government but now he is not answering questions.

COOPER: Joe, do you think it likely that he still is in the running to be a Senator from that state?

JOHNS: I've got to tell you. This is a very strange deal, like David said. And the one thing you can say is, like it or not, whether it was fair or not, Jesse Jackson has gotten slimed in this situation. And when you look at the atmospherics there in Illinois right now, anybody who's gotten slimed can't possibly think it's good for them.

So if he had good chances early on, maybe now Jesse Jackson has got to be thinking his chances of being the Senator from Illinois have been dramatically reduced.

COOPER: All right. We're going to leave it there. Joe Johns, Jeff Toobin and David Gergen thank you, as always.

Up next, Caroline Kennedy got a big boost in her quest for Hillary Clinton's senate seat today; we have the "Raw Politics" on that.

Also ahead, more than two decades after his son was murdered, the two words John Walsh has been waiting to hear: "Case Closed."

(BEGIN VIDEO CLIP)

WALSHE: The not knowing has been a torture. But that journey is over.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

COOPER: There were reports tonight that Caroline Kennedy has called Senator Hillary Clinton to discuss her desire to take over her senate seat. But neither office is talking publicly about it. What is known for sure and has people talking on Capitol Hill is the major endorsement that Kennedy got today.

Mary Snow has the Raw Politics.

(BEGIN VIDEOTAPE)

MARY SNOW, CNN CORRESPONDENT: Caroline Kennedy now has the backing of the most powerful Democrat in the Senate. Majority Leader Harry Reid says he called New York Governor David Paterson, urging him to appoint Kennedy to Hillary Clinton's soon-to-be vacant senate seat.

He made the comment in an interview on "Face-to-Face" with John Ralston.

SEN. HARRY REID, SENATE MAJORITY LEADER: We have a lot of stars from New York, Bobby Kennedy, Hillary Clinton, I mean Caroline Kennedy would be perfect.

SNOW: In New York, some Hillary Clinton's supporters aren't so enthusiastic, and still feel the sting of Kennedy's endorsement of Obama.

UNIDENTIFIED FEMALE: I don't think she has the experience and I think it would be a slap in the face to Hillary to give her the job.

SNOW: As for Senator Clinton, she is not commenting on the process. Her spokesman has said it is entirely Governor Paterson's decision and she hasn't commented on any individual candidate.

A person familiar with the replacement process says supporters who made anti-Caroline Kennedy comments were immediately rebuked by the Clinton team, which included Congressman Anthony Weiner and Robert Zimmerman, a CNN contributor, DNC member and Clinton supporter.

Weiner was not available to respond, but Zimmerman says he is not speaking for Clinton when he questioned Kennedy's qualifications.

ROBERT ZIMMERMAN, CNN CONTRIBUTOR: That's her challenge: to demonstrate her qualifications, her passion, her experience that enables her to hold this particular post.

SNOW: Former New York City Mayor, Ed Koch who supported Clinton chided critics who question Kennedy's qualifications.

ED KOCH, (D) FORMER NEW YORK MAYOR: I say it's baloney. I say she is as qualified as any of those in the Senate.

SNOW: Koch says he favors either Kennedy or state attorney general Andrew Cuomo over the roughly dozen candidates. As one political observer notes, while it's not an election, the lobbying efforts make it feel like one.

CHRIS SMITH, NEW YORK MAGAZINE: This is a very weird non- campaign campaign. Everybody says oh, it's not a campaign. But, of course, it is. There is an electorate of one, which is truly bizarre.

SNOW: And to make her case, Caroline Kennedy has hired a political consultant who has worked with other politicians, including senator Schumer and New York City Mayor Michael Bloomberg. Kennedy still hasn't made any public statements about the senate seat; she's only expressed interest through private conversations.

Mary Snow, "CNN New York."

(END VIDEOTAPE) COOPER: Is the senate seat Caroline's if she wants it? We're going to talk strategy with David Gergen, Joe Johns and Jeffrey Toobin.

Also ahead, "Crime and Punishment:" an emotional day for the parents of Adam Walsh.

(BEGIN VIDEO CLIP)

REVE WALSH, ADAM WALSH'S MOTHER: There is no words that can tell you how I feel. Listening to the words that came off of Chief Wagner's lips, just penetrate my soul.

(COMMERCIAL BREAK)

COOPER: So is Caroline Kennedy now a slam dunk for the senate? With today's big endorsement from Harry Reid and no signs of serious opposition from Hillary Clinton really what realistically could derail her momentum? We'll talk about that.

Let's talk strategy with senior political analyst and former presidential advisor David Gergen, Joe Johns, and senior analyst Jeffrey Toobin.

David, Harry Reid revealing that he wants to see Caroline Kennedy her in the senate. Hillary Clinton reportedly telling her supporters to not get in Kennedy's way. Is this thing a done deal?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: All but, Anderson.

COOPER: We're having a problem with David. Sorry, David we're having a problem with your mike. We'll get to you.

Jeff Toobin, is this a done deal?

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: I don't think so. I think it's -- as we have said earlier, it's an electorate of one. David Paterson has a lot of people who want this seat. I guess Caroline Kennedy is the easiest choice if there's one.

COOPER: He just feels the enormous pressure.

TOOBIN: Is he really?

COOPER: I don't know.

TOOBIN: What's the enormous pressure? I don't think there's --

COOPER: Harry Reid, and all these Democrats are saying --

TOOBIN: What can Harry Reid do to the governor of New York? I mean, Ted Kennedy -- I mean, I think she is -- has liabilities, as well as attributes. She is very famous, she is very likable, but her record of accomplishment is thin. And there are a lot of people who think she has not earned it, and also the Kennedy name is not the magic that it once was. Kathleen Kennedy Townsend lost the race for governor of Maryland. There has been nobody in the ballot in New York named Kennedy for decades. I don't think it's --

COOPER: David, what about that? On her record, people say she has dedicated her life to public service, and honestly and no disrespect to her, she never really held a job, and never, you know -- she has raised a lot of money for the public schools in New York and stuff, but there's a lot of people who have raised a lot of money.

GERGEN: Well, she has served in a lot of good causes. Anderson, I can well remember back in 1962, a long time ago, when Teddy Kennedy indicated an interest in running in Massachusetts and the same sort of reactions; thin record, too young, hasn't shown enough promise, and so forth and so on. And there was a rush by establishment to go the other way. He won that election, and has served with great distinction.

She has had two uncles and a father who have served with distinction in the United States Senate in years stretching back to the early 1950s, almost continuously. And I think it's worth remembering this, whoever gets the job has to run again in a very short period of time, just a couple years. So whoever gets it is going to have to stand the test of a Democratic election in a couple years. I think she is all but in right now.

COOPER: Joe, do you see any scenario under which David Paterson is not going to appoint her?

JOE JOHNS, CNN CORRESPONDENT: Well, it's got to be a good idea for him. Harry Reid is a big deal. And when you think about it, the sound bite Mary Snow piece about star power, he is looking for somebody he can sort of cultivate into star power in the senate because, I mean, look who he is losing. He is losing Barack Obama, he's losing Hillary Clinton, he's even Joe Biden.

So these are some pretty big names. And it would be nice to have somebody else out there, who is sort of a headliner for him and the United States senate; will help with fund-raising and cultivate it into whatever you want it to be. So maybe Paterson will go that way. But, I mean, who knows what this governor is going to do?

COOPER: Jeff, you're not convinced, though.

TOOBIN: I'm not. And I just -- I mean, why are we only looking at politicians for this job? Why isn't Harold Varmus, who's the head of Memorial Sloan-Kettering hospital and a Nobel Prize winner, why isn't he on the list? Why isn't Wendy Kopp, the founder of Teach for America on the list? Why is it just people in politics?

COOPER: I'm always fascinated, it's not just people in politics, it's celebrities seem to think they have a right to certain things. And I'm not putting her in this category, but Fran Dresher is saying she wants to run, and no disrespect to her. She says she has done work. I don't know much about her record in terms of politics. I was watching Elisabeth Hasselbeck on "The View" today who was outraged because she wasn't invited to the White House Christmas party. Why should she be invited to the White House Christmas party? I don't understand. Just because you're well-known why does one have -- I know I'm veering off topic, but just because people know her name, why should these people get special treatment?

TOOBIN: David Gergen is going to answer your question.

COOPER: Tell me, David.

GERGEN: They shouldn't but this not as if Caroline Kennedy is coming in from the entertainment world.

COOPER: I know she's no Elisabeth Hasselbeck.



GERGEN: Exactly. And it is -- this is a political situation. I think you have to look at the polls, too. When people were asked to look at all of the names who might run, she ran away with it in the public polls a couple of weeks ago.

Andrew Cuomo does very well. He has -- he is another -- he is a son. Do we have too much dynastic power in American politics? Yes. Bush, Clinton, all the rest of it.

But nonetheless, I do think that when you're sitting there and you've only got a two-year term and you've got somebody who conceivably might turn out to be a terrific senator and could then run in her own right in two years, I don't quite see what the public loss is.

Harold Varmus, by the way, is serving an enormously important role as a scientific advisor to Barack Obama right now.

COOPER: And she can certainly raise the money that she will need for a run in two years.

GERGEN: Yes.

TOOBIN: But so can a lot of people. And also remember, this is New York; this is such a Democratic state. Now anybody who runs is going to win. So the idea that they need someone desperately who can raise money with name recognition, any Democrat is going to win this seat.

JOHNS: Yes, it's a beautiful thought. Citizen legislator, but it just doesn't happen anymore.

COOPER: Jeff Toobin, Joe Johns, David Gergen, thank you very much.

Still ahead, new demands to free the reporter who hurled a shoe at President Bush and what the president told CNN's Candy Crowley about the attack. Plus one of the most famous cold cases ever, the murder of Adam Walsh is finally closed; something his father has been waiting for, for 27 years.

(BEGIN VIDEO CLIP)

JOHN WALSH, ADAM WALSH'S FATHER: Today this is a reaffirmation of the fact that he didn't die in vain; that beautiful little boy.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

WALSH: Not knowing is almost as bad as the murder. But today is a good day. Today is a wonderful day. We can end this chapter of our lives.

(END VIDEO CLIP)

COOPER: John Walsh reacting to today's news that after 27 years, he and his family finally know who murdered their son Adam when he was just six years old.

Now, over the years we have all gotten to know John Walsh both as an anguished father and as a crusader determined to spare other families the pain that he knew all too well. Tonight some of that pain has finally been released.

Randi Kaye has more in tonight's "Crime and Punishment" report.

(BEGIN VIDEOTAPE)

RANDI KAYE, CNN CORRESPONDENT: Two words John and Reve Walsh have been waiting 27 years to hear: "Case closed."

J. WALSH: For 27 years, we've been asking, who could take a 6- year-old boy? And murder him and decapitate him? Who? We needed to know. We needed to know. And today we know.

KAYE: Police say Ottis Toole, a drifter and convicted serial killer, abducted and murdered Adam Walsh all those years ago. He has always been the suspect. He confessed to the crime twice then recanted.

OTTIS TOOLE, CONVICTED MURDERER: That Adam Walsh case isn't true.

UNIDENTIFIED MALE: What isn't true?

TOOLE: I didn't do that case.

KAYE: Toole died more than a decade ago while serving time for an unrelated crime.

July 27, 1981, Adam disappeared from this Florida mall. Two years later, Toole told investigators he had taken him, driven to a deserted road and decapitated him. The little boy's severed head was all that was ever found.

Why wasn't Toole ever charged? Investigators had discovered blood continue stained carpet in his Cadillac, but DNA testing wasn't then what it is today and investigators couldn't prove the blood was Adam's.

And there were reports of sloppy police work. In 1994, detectives couldn't even find the carpet or the car for further testing. Plus, Toole's story kept changing.

J. WALSH: Not knowing has been a torture. But that journey is over.

KAYE: If Ottis Toole were alive today, Hollywood police chief Chad Wagner says he'd be charged with Adam's abduction and murder. When Wagner joined the department last year, he promised to review the evidence with an open mind, and concluded what so many before him never could. It was Toole.

J. WALSH: Reve and I tried very hard to make sure Adam didn't die in vain. Today this is a reaffirmation of the fact that he didn't die in vain, that beautiful little boy.

KAYE: The chief says there isn't any new evidence that convinced him Toole was the killer.

R. WALSH: Listening to the words that came off of Chief Wagner's lips just penetrate my soul.

KAYE: John Walsh had always believed Toole had murdered his son.

J. WALSH: I'm not about revenge. We never have been. I don't believe in vigilantism. I believe that Ottis Toole is probably getting what he deserves.

KAYE: For John Walsh, the loss left him spiraling into hell, but losing his son transformed his life. Today he is a crusader for missing children, the host of "America's Most Wanted" and also co- founded the National Center for Missing and Exploited Children.

J. WALSH: For all the other victims who haven't gotten justice, I say one thing. Don't give up hope. Don't give up hope.

KAYE: Hope is what you survive on when no one can tell you who killed your child.

(END VIDEOTAPE)

COOPER: Why do they now say definitely it was this guy, Toole?

KAYE: Over the years, Anderson, they have ruled out other people of interest. They looked at a man who John Walsh says was having an affair with his wife. He was staying in their house at the time. He took a polygraph test and passed it. The Walshes took polygraph tests and passed it. At one point they were even considering the serial killer Jeffrey Dahmer. He was living in the area at the time where he worked. He drove a blue van and witnesses of the abduction said they had seen a man driving a blue van. But they were able to rule all these people out and eventually always kept coming back to Ottis Toole.

COOPER: So finally some sort of end to at least one end to this chapter. Randi, thanks.

Up next, Candy Crowley's interview with President Bush and everything from the Iraq war to getting hit by a shoe.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: First of all, it's got to be one of the most weird moments of my presidency. Here I am getting ready to answer questions from a free press in a Democratic Iraq, and a guy stands up and throws a shoe.

(END VIDEO CLIP)

COOPER: And your pick for the first puppy; the results from our new poll. And Joe Biden's new puppy; a new look.

We'll be right back.

LARRY KING, HOST, "LARRY KING LIVE": We'll have the latest on the Caylee Anthony mystery as another case in the news, this one for 27 years is finally closed. The Adam Walsh murder is solved, once and for all.

Plus, Bill Ford is here to talk about the auto company that bears his family's name.

And Sarah Jessica Parker stops by. All next on "Larry King Live."

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: To have watched Barack Obama come from basic -- relative obscurity to now soon to be the president of the United States and he gives a lot of people hope and that's good for the country; genuinely good for the country.

(END VIDEO CLIP)

COOPER: Up close tonight: President Bush with only 35 days until the inauguration, the president invited our senior political correspondent, Candy Crowley, to the White House for what we're calling an exit interview.

He opened up about one of the darkest periods of his second term; 2006 when things were going badly in Iraq and he was under tremendous pressure to bring U.S. troops home. Let's listen. (BEGIN VIDEO CLIP)

BUSH: A lot of people in Washington were saying, let's get out now. And I obviously chose not to do that but that was a very difficult period.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Did you consider it ever?

BUSH: Of course, I considered all options, but -- absolutely. You know, ultimately, I had great faith in the universality of liberty. I had great faith in our military. I had faith in the Iraqis who had suffered so much. And I could not live with myself if I had chosen to just leave and leave behind the valor and the sacrifice of a lot of our young men and women. I would never have been able to face their loved ones.

CROWLEY: Some of the criticism of you is he doesn't listen to outside voices. He doesn't hear people telling him to do something different than what he wants to do. Were there people saying to you, Mr. President, you need to think about getting out right now.

BUSH: Oh, absolutely. Listen, I've heard all of the voices.

There's urban myths in Washington, D.C. And, you know, of course I listened to -- I listened to a lot of people before we went into Iraq. And I listened to a lot of people including in my own administration who said it's just not working. Let's get out. And I listened very carefully to them and obviously came to a different conclusion.

(END VIDEO CLIP)

COOPER: Well, we're following several other stories tonight. Randi Kaye joins us with the "360 Bulletin" -- Randi.

KAYE: Hi, there, Anderson.

Eight American embassies across Europe and Great Britain received white powder in the mail today. Tests run in Berlin and Bucharest on the substance came back negative. A state department spokesman said the envelope mailed to Berlin was sent from Texas.

Angry protesters in Baghdad today called for the release from jail of the Iraqi journalist who threw his shoes at President Bush. The man al Zahidi (ph) could face up to seven years in jail for the attack but many in the Arab world are cheering him as a hero.

In an effort to jump start the economy and stave off inflation, the Fed slashed the key interest rate to near zero percent today; the lowest it has ever been. The Dow rallied at the news jumped nearly 360 points today.

And news of a medical first from Cleveland where surgeons are expected to announce tomorrow that they successfully replaced 80 percent of a woman's face two weeks ago. The skin came from a woman who died a few hours earlier. Only four face transplants have ever been done in the world and this is the first time it's been performed in the United States. Details about the patient have not been released, Anderson.

COOPER: We'll try to have more on that tomorrow for our viewers.

Now it's time for our "Beat 360" winners, our daily challenge to viewers to come up with a caption better than the one we can think of for a photo we post in our blog.

Tonight's picture, President-elect Barack Obama along with Joe Biden joining Arne Duncan, the pick for education secretary today to listen to some kids at a Chicago school. Our staff winner tonight is Brooke. His caption: "Well kids, the bailout is like the tooth fairy except the money is worthless and you get to keep your teeth."

Very good. Congratulations.

And our viewer winner is Greg from Houston. His caption: "Always remember kids, study hard and never try to sell your seat."

KAYE: Very good.

COOPER: Greg, your "Beat 360" t-shirt is on the way. And you can play along tomorrow at ac360.com.

Still coming up "The Shot of the Day:" Joe Biden getting a new dog before the Obamas. Does he know what he's getting himself into? This puppy could be a handful. Wait until you see what was caught on tape.

(COMMERCIAL BREAK)

COOPER: Our time for the "Shot." America is weighing in on President-elect Obama's search for a dog. By a two-to-one margin, those asked in a new CNN opinion research corporation poll -- yes, they actually did a poll on this -- say the Obama should --

KAYE: With a margin of error.

COOPER: -- should rescue a puppy from an animal shelter instead of getting one from a breeder or from a pet store. The Bidens, however, didn't take that route as we reported on Friday. Vice President-elect Joe Biden picked out a German Shepherd puppy at a breeder's kennel in Pennsylvania.

There's no name yet for the puppy. The grand kids will get to pick it after the new year and the dog's going to be house trained before it's delivered to the Bidens in a couple of weeks --

KAYE: Yes, right.

COOPER: -- which is probably a good idea. Check out this video, though, we spotted on lively.com.

A German Shepherd going after a small dog. Take a look. Actually it's more of the small dog going after the German Shepherd.

KAYE: Now, you know Obama had said that he doesn't want to get one of these -- what do you call them -- a girlie dog, I think. It would be interesting if Biden's shepherd grown up; how he's going to do with -- the Obama's dog.

COOPER: I love that the Shepherd is just kind of like playing along with this little yappy dog. Playing along, very friendly.

KAYE: This could be what we're going to see in the White House.

COOPER: Very nice.

All right. You can see all the most recent shots in our web site, ac360.com.

That does it for "360." Thanks for watching.

"LARRY KING" starts right now.

I'll see you later tomorrow night.