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Obama Blasts Financial Regulators; Auto Bailout vs. Bankruptcy

Aired December 18, 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: Barack Obama complains that financial regulators fell asleep at the switch. Will his newly named team of watchdogs do a better job protecting all of our money?

Also, ahead, President Bush may be willing to let automakers go bust after all. What would an orderly bankruptcy be like?

And millions of your dollars for a water park ride and polar bears, is that any way to create new jobs in the United States? Some of America's mayors think that the answer is yes.

All that and the best political team on television.

We want to welcome our viewers in the United States and around the world.

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

A renewed promise today by president-elect Barack Obama to restore a sense of responsibility on Wall Street, and here in Washington, D.C., as well.

As America's economic troubles deepen, the president-elect named his choices to fill three key jobs as financial regulators, including Mary Schapiro to head the Securities and Exchange Commission.

Let's go to Chicago. Our national political correspondent, Jessica Yellin, is covering this transition to power.

And he is making it clear that lots of folks are responsible for this economic crisis.

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: That is right, Wolf.

Barack Obama said today that from Wall Street's watchdogs to members of Congress, there is plenty of blame to go around for our current financial crisis.

(BEGIN VIDEOTAPE)

YELLIN (voice-over): Unprecedented fraud. Crisis on Wall Street. A meltdown in the housing industry. And regulators failed to stop it all. President-elect Obama says he's outraged.

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: And that's a failure we can't afford.

YELLIN: But can he do any better?

(on camera): Do you plan to overhaul the SEC? Was Congress asleep at the switch?

OBAMA: We have been asleep at the switch, not just some of the regulatory agencies, but some of the congressional committees that might have been taking a look at this stuff. We have not been as aggressive, and we've had a White House that started with the premise that deregulation was always good.

YELLIN (voice-over): He says Wall Street executives need to clean up their act, too.

OBAMA: I think the American people right now are feeling frustrated that there's not a lot of adult supervision out there. And part of what we've tried to talk about during the course of this campaign is a restoration of a sense of responsibility.

YELLIN: The president-elect promises to release a detailed plan to overhaul the system that oversees the nation's financial institutions. He says it will be the second piece of his overall economic recovery package which will focus on creating jobs and stimulating economic growth, cleaning up regulatory agencies, and getting the nation's deficit under control. And if that's not enough to fix, he also promises to admit it when he's wrong.

OBAMA: One of the things that I hope is that the American people will find when we make a mistake, we're willing to fess up to it and change.

(END VIDEOTAPE)

YELLIN: And Wolf, Barack Obama's economic team is working on that first recovery priority, his stimulus package, right now. It is going to be unveiled in the new year -- Wolf.

BLITZER: Jessica is in Chicago. Thank you.

CNN, by the way, has learned of two more jobs the president-elect has decided to fill. A union official says Congresswoman Hilda Solis of California has been tapped as the next labor secretary. She is expected to advocate greater union influence in the workplace and more so-called green jobs. And a Democratic official confirms to CNN that the president-elect has chosen former Dallas Mayor Ron Kirk to be the next U.S. trade representative.

A new report shows more than half-a-million people filed first- time jobless claims last week. That is actually down slightly, but still at a two-decade high. The crisis in the auto industry is casting a huge cloud over the employment picture here in the United States right now, but President Bush still is mulling over various bailout options.

Let's go to CNN's Kate Bolduan. She's over at the White House working the story. What are some of those options? What are we hearing, Kate?

KATE BOLDUAN, CNN CORRESPONDENT: Well, Wolf, we're hearing that the president and the White House are considering a range of options. You will remember, this is just about one week since the Congress failed to agree on an emergency, any emergency assistance to automakers. Here at the White House, we are now getting a better idea of just what exactly options there are on the table.

(BEGIN VIDEOTAPE)

BOLDUAN (voice-over): Very close, but not there yet. The latest word from the White House on its plans to help the struggling auto industry.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Let me take a step back. I haven't made up my mind yet.

BOLDUAN: However, the White House is now saying it's not only considering dipping into the Troubled Asset Relief Program to offer auto companies a lifeline, but possibly some type of prepackaged bankruptcy for automakers.

DANA PERINO, WHITE HOUSE PRESS SECRETARY: A disorderly collapse would be something very chaotic that is a shock to the system. There's an orderly way to do bankruptcies that provides for more of a soft landing. I think that's what we would be talking about.

BOLDUAN: A slight nuance with a potentially big impact.

ANNE MATHIAS, STANFORD GROUP: I think what they're saying is we're going to take a half step. We're not going to just bail them out, but we are not going to let these companies just completely flail around, go off the cliff, shed employees willy-nilly, and just go out of existence.

BOLDUAN: While the White House continues to weigh its options, the latest numbers for unemployment claims dropped but remain near a 26-year high, just one signal the pressure to act is mounting.

BUSH: We lost 533,000 jobs last month. What would another million jobs lost do to the economy?

(END VIDEOTAPE)

BOLDUAN: Now, House Speaker Nancy Pelosi today used those jobless claim numbers in order to demand action, in a statement saying that the White House needs to act -- quote -- "to prevent the imminent solvency of the domestic auto industry."

In terms of timing, Wolf, the latest from the White House is nothing likely tonight.

BLITZER: Well, that clock is still ticking, then. All right, Kate, thank you.

Let's go to Jack. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Wolf, the parents of John Walker Lindh, the American-born Taliban fighter, held a news conference, pleading with President Bush to pardon their son before he leaves month next month.

The 27-year-old San Francisco man, you will recall, was captured in Afghanistan by Northern Alliances forces back in 2001 after he was shot and wounded during a prison uprising. He was turned over to American authorities. In 2002, Lindh was sentenced to 20 years in prison after pleading guilty to serving in the Taliban army. He is currently doing time at a federal lockup in Indiana.

His parents asked the president to show mercy for their son during the Christmas season. His father repeated what he has said before, that his son ended up in Afghanistan during a civil war while studying Islam abroad, saying he joined the Taliban with no intention of fighting against America.

While in office, 10,000 petitions have been filed requesting pardons from President Bush. Fewer than 200 have been granted thus far. Lindh's request sits in a pile along with those for former Illinois Governor George Ryan, junk bond king Mike Milken.

There is speculation that Bush may pardon former Cheney chief of staff Scooter Libby. He already commuted Libby's prison sentence. Libby was convicted in connection with the Valerie Plame CIA scandal by the same prosecutor, Patrick Fitzgerald, who is currently on the trail of Blagojevich over there in Illinois. Anyway, we digress.

The question is this: Should President Bush commute the sentence of John Walker Lindh, the so-called Taliban American? Go to CNN.com/caffertyfile and post a comment on my blog, or not -- Wolf.

BLITZER: You're going to get a lot of comments, Jack. Get ready.

All right. Bill Clinton had been keeping some secrets, but the secrets are now out. They include lots and lots of documents and a few surprises as the former president tries to help his wife become the next secretary of state.

And regarding the man accused of a potentially $50 billion scheme, did friends and family help him?

And proposals from some big-city mayors are about creating jobs, but some of those proposals are causing jokes.

(BEGIN VIDEO CLIP)

PETE SEPP, VICE PRESIDENT FOR POLICY AND COMMUNICATIONS, NATIONAL TAXPAYERS UNION: To the people supporting them, these proposals aren't a joke, but, to the taxpayers funding them, yes, it will be a joke to them. Only, they won't be laughing. (END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: In Illinois right now, state lawmakers have started hearing arguments for impeaching the governor, Rod Blagojevich, but there are questions about how far the panel will be able to delve into the hottest allegations of corruption.

Let's bring in Brian Todd. He is following this developing story for us.

Tell us about the opening testimony today, Brian.

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, the jousting began with a few minor witnesses today at these impeachment hearings, this on a day when the governor got bad news on another front having to do with his legal fees.

(BEGIN VIDEOTAPE)

TODD (voice-over): He's accused of attempting to line his pockets, but legal fees may end up emptying his pockets. Rod Blagojevich's request that the state pay for his legal defense against impeachment efforts was rejected by the Illinois attorney general.

JEFF JACOBOVITZ, DEFENSE ATTORNEY: What it could cost him is probably $5 million to $20 million in legal fees on a case like this.

TODD: Meanwhile, the panel considering impeachment heard from its first witnesses today, some of whom criticized the governor's conduct in years past.

UNIDENTIFIED MALE: Mr. Blagojevich, however, has chosen to ignore the Constitution.

TODD: But in spite of a heated exchange on procedure, there was no discussion of the explosive criminal complaint revealed last week, except when the governor's lawyer said the legislature shouldn't just take that complaint, including the alleged wiretap quotes, on face value.

ED GENSON, BLAGOJEVICH'S ATTORNEY: Until we get a chance to contest it, until we get the underlying documents, the use of this is illegal. And the use of the excerpts that were in the complaint that was read by Mr. Ellis to this committee should not have been read to this committee and cannot be considered by this committee.

TODD: Blagojevich, through his lawyer, has denied doing anything wrong and said yesterday he hoped to speak soon.

GOV. ROD BLAGOJEVICH (D), ILLINOIS: You know, I -- I can't wait to begin to -- to tell my side of the story.

TODD: But speaking publicly could carry risks of its own. JEFF JACOBOVITZ, DEFENSE ATTORNEY: He has to decide, Do have I have a political future? And, if I do not have a political future, at this point, he's better off not saying a thing.

(END VIDEOTAPE)

TODD: Now, there was anticipation that the governor might speak publicly this afternoon. That did not happen, but a spokesman would not rule out him speaking as soon as tomorrow, Wolf. Everybody waiting for him to talk publicly about this.

BLITZER: We will see what he says. The lawyers, they are always telling the clients to shut up, don't say anything, there is no gain.

TODD: That's right.

BLITZER: But, for politicians, that is not so easy.

TODD: That's right. It is going to be hard for him to keep quiet about this.

BLITZER: Brian Todd, thank you.

He is certainly not smiling for the cameras right now, but virtually the whole world wants to see the man accused of running an alleged $50 billion scheme. Bernard Madoff apparently wants to escape the spotlight in his lavish $7 million New York apartment. He is spending his first day under electronic monitoring right there.

Let's bring in our senior correspondent, Allan Chernoff. He has been working the story from day one.

Allan, investigators want to know if others helped in this alleged scheme.

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Very much so, Wolf.

Professional investors and attorneys with years of experience investigating fraud say this scandal could be far broader than it first appeared. They are wondering how Bernard Madoff could claim that he engineered the fraud entirely by himself.

(BEGIN VIDEOTAPE)

CHERNOFF (voice-over): Federal investigators trying to determine how Bernard Madoff executed his fraud are digging through the records at Madoff Securities, also seeking to learn whether others were involved.

WILLIAM GALVIN, MASSACHUSETTS SECRETARY OF THE COMMONWEALTH: It is extraordinary that you could be -- have that much money under management involved in that much money and do it as a solo act.

CHERNOFF: Massachusetts has issued a subpoena to Madoff's brother Peter, the firm's chief compliance officer, and to Cohmad Securities, a firm that shares a floor in the same office building as Madoff. Cohmad had no comment.

Clients of Madoff points to their detailed monthly statements listing extensive trading as evidence that Madoff could not have done it all himself. There were red flags. The SEC received repeated detailed warnings about Madoff from investment professional Harry Markopolos.

When Bernard Madoff finally registered as a investment adviser in 2006, he told the SEC he managed $17 billion, yet claimed no one was soliciting clients on his behalf.

ROBERT HEIM, FORMER SEC ATTORNEY: It is a misrepresentation in the registration statement, but it also should have been a red flag to the SEC and asking how could he have raised so much money without anybody referring him any clients?

BERNARD MADOFF, DEFENDANT: I am very close with the regulators, so I am not trying to say that they can't, that what they do is bad. As a matter of fact, my niece just married one.

CHERNOFF: That former SEC regulator says his romance had no impact on oversight of the Madoff firm.

Even so, Madoff, who ran one of the top trading firms on Wall Street and served on industry advisory panels, never was subject to a serious inspection.

HEIM: I think in a certain sense the SEC investigators may have gotten caught up and blinded by the fact that he was such a prominent person on Wall Street.

(END VIDEOTAPE)

CHERNOFF: Now the SEC is scrambling to compensate, but this is not an easy investigation. It could take months to fully unravel. For now, Madoff's attorney will say only this is a tragedy; we are cooperating fully with the government investigation to minimize losses -- Wolf.

BLITZER: All right., Allan, thank you. Allan is going to stay on top of this story.

Barack Obama is getting some key support the close down that controversial detention camp at Guantanamo Bay in Cuba. And it is coming from the defense secretary, Robert Gates. We are going to tell you why Gates is saying he needs to shut the prison's doors for good.

Outrageous, that is what some are calling Barack Obama's pick to deliver the invocation at the inauguration on January 20.

And more anger over what some of the nation's mayors want Congress to spend, spend millions of dollars, your taxpayer dollars, on.

(BEGIN VIDEO CLIP)

ABBIE BOUDREAU, CNN SPECIAL INVESTIGATIONS UNIT: A new ride at a water park?

MANNY DIAZ, MAYOR OF MIAMI, FLORIDA: Well, you know, again, I would have to -- I would have to look that the particular project and try to understand why that city feels that it's an important project.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: America's mayors are asking Congress to spend billions of dollars on a wide range of projects, from a costly water ride to an even more expensive polar bear exhibit. The mayors say the money is an investment in new jobs. Critics however say many of these projects are simply a joke.

Let's bring in CNN's Abbie Boudreau of our CNN Special Investigations Unit.

All right. So, you have been looking at all these projects. What did you find, Abbie?

BOUDREAU: OK. Wolf, if you read this 800-page report from the U.S. Conference of Mayors, you will see some of the ready-to-go projects include rebuilding roads, waterways and schools, but we discovered other projects that are now raising red flags.

(BEGIN VIDEOTAPE)

BOUDREAU (voice-over): You usually don't think a nearly $5 million polar bear exhibit in Rhode Island would help turn around the economy. But the U.S. Conference of Mayors sure thinks so. It's one of more than 11,300 ready-to-go infrastructure projects proposed by 427 cities, at a total cost of $73 billion.

SEPP: To the people supporting them, these proposals aren't a joke, but, to the taxpayers funding them, yes, it will be a joke to them. Only, they won't be laughing.

BOUDREAU: Just this month, Miami Mayor Manny Diaz, the president of the U.S. Conference of Mayors, and other big-city leaders went to Capitol to make the call for their list of critical projects.

DIAZ: Our plan calls for investments that will stimulate our economy by quickly creating jobs.

BOUDREAU: Mayor Diaz even held up the report, saying the projects weren't a bailout, but a build-out to put Americans back to work.

(on camera): Did you have a chance to even read through the report?

DIAZ: Well, I read through -- I read through a lot of it. Obviously, I didn't sit there and look at all 11,300 projects that were submitted.

BOUDREAU: Why is that?

DIAZ: Why is that? I didn't have time.

BOUDREAU (voice-over): If he made the time, he would have found projects like a $20 million minor league baseball museum, $42 million for improvements to zoos, $3 million for murals, and even $1.5 million for a new water park ride.

DIAZ: You can't simply just say that because something like that it isn't right, that it isn't in fact right.

BOUDREAU (on camera): A new ride at a water park?

DIAZ: Well, you know, again, I would have to -- I would have to look that the particular project and try to understand why that city feels that it's an important project. But, again, we're talking about 11,300 projects, not just one.

BOUDREAU: The new ride at the water park is in your city.

DIAZ: Mm-hmm.

BOUDREAU: So, what is your response? I mean, I'm asking you as a mayor. I'm surprised that you didn't know about the new ride at the water park.

DIAZ: Well, we have a number of projects, and I don't know which one you're referring to. But we just built a new water park. And it may be related to that water park, or it may be outside the city. I'm not sure.

BOUDREAU: A million-and-a-half dollars for a new ride at a water park.

DIAZ: But -- but the point is that part of investing in infrastructure also includes parks.

BOUDREAU (voice-over): While there were plenty of roads and bridges and water treatment projects on the list, we also found plenty of other interesting multimillion-dollar projects, like skateboard parks, museum and zoo renovations, aquatic centers, bike and horse paths, a dog park, even programs beyond infrastructure, to help prostitutes get off the street, and buy thousands of Tasers for police departments.

The total cost? More than $300 million. And many of the proposals in the report don't create jobs.

Pete Sepp of the National Taxpayers Union says, it smells like pork.

SEPP: It's impossible for any normal taxpaying American to read this and not come away scratching your head and saying, wait a minute, this isn't about infrastructure. This is about political power grabs, money grabs.

BOUDREAU (on camera): To the average American, doesn't this sound like pork?

DIAZ: I don't know. You would have to ask the average American.

(END VIDEOTAPE)

BOUDREAU: Mayor Diaz says he would hope that members of Congress would read the entire list of projects his group submitted to make sure that they are legitimate before handing over billions of dollars. He also tells us there will be even more proposed projects from other cities by the end of the year -- Wolf.

BLITZER: And let's hope the Obama administration scrubs all these projects before they simply write that taxpayer check.

Abbie, thanks very much for doing the story for us.

The Obama inauguration is reigniting the culture wars.

(BEGIN VIDEO CLIP)

OBAMA: I think that it is no secret that I am a fierce advocate for equality for gay and lesbian Americans.

HARRY KNOX, RELIGION AND FAITH PROGRAM DIRECTOR, HUMAN RIGHTS CAMPAIGN: The president has chosen to send a message that gay and lesbian people are not welcome.

(END VIDEO CLIP)

BLITZER: At issue, an opening prayer by Pastor Rick Warren and outrage among some gay activists, even some evangelicals. The best political team on television is standing by.

And Bill Clinton breaks a decade of secrecy to help his wife seal the job of secretary of state. We are going to tell what we have learned about donations to his foundation.

And the top generals in Iraq outlining a new troop withdrawal plan, does it square with what the president-elect has in mind?

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

(COMMERCIAL BREAK)

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

Happening now; The former President Bill Clinton goes public with some big-dollar donors to his foundation. It's meant to clear the air before secretary of state designate Hillary Clinton's confirmation hearings. But does the list raise some new questions about a potential conflict of interests?

The inaugural invocation, president-elect Barack Obama chooses the conservative Pastor Rick Warren and he's angering some gay rights activists in the process. Also, the president spreads the blame everywhere as he names a new team of financial regulators to work on the economic crisis who Obama says was asleep at the switch. All of this coming up, plus the best political team on television.

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

Some Barack Obama supporters do not support something he wants to do, and they are angry. Gay rights activists say they feel disrespected by the choice of a prominent evangelical pastor to speak at Barack Obama's inauguration on January 20.

Samantha Hayes has been doing the story for us, looking at it.

It is causing quite a stir out there, Sam?

SAMANTHA HAYES, CNN CORRESPONDENT: Yes, Wolf, he has been getting sharp criticism from some groups, and today, he responded to that backlash.

(BEGIN VIDEOTAPE)

HAYES (voice-over): Before Barack Obama takes the oath of office, this man, Pastor Rick warren, will lead the nation in prayer for his presidency.

Warren was a strong supporter of a movement to ban same-sex marriages in California. And that doesn't sit well with some liberals and and gay rights groups.

KNOX: It's really very sad for us because we worked very hard for Senator Obama's election -- and now president-elect. And for us to not be respected by his choices in this case is -- it's really very disappointing to us.

HAYES: Warren's influence in politics was evident in August, when both presidential candidates came to his California mega church for a forum on faith.

On same-sex marriage, Obama said...

(BEGIN VIDEO CLIP)

OBAMA: I believe that marriage is the union between a man and a woman.

(END VIDEO CLIP)

HAYES: But Obama does support civil unions -- something he pointed out today when pressed on the issue.

OBAMA: I would note that a couple of years ago, I was invited to Rick Warren's church to speak, despite his awareness that I held views that were entirely contrary to his when it came to gay and lesbian right. There are going to be a wide range of viewpoints that are -- that are presented. And that's how it should be. HAYES: Warren is not the only pastor speaking during the inauguration. Civil rights icon, the Reverend Joseph E. Lowery, who supports same-sex marriage, will deliver the Benediction.

KNOX: Reverend Lowery is a great friend of our community and we're delighted he will be there. But he's not the main event.

HAYES: As it turns out, Warren's selection is also angering many on the right, who are concerned about another social issue -- abortion.

DAVID BRODY, CHRISTIAN BROADCASTING NETWORK: My e-mail box is flooded with pro-life conservatives saying this is ridiculous and why is Rick Warren associating himself with Barack Obama on such an historic day?

They're not happy about it. But, you know, at the end of the day, Rick Warren has heard this criticism before.

(END VIDEOTAPE)

HAYES: And we've been in touch with Rick Warren's P.R. firm, Wolf. They tell us that there may be, you know, a statement forthcoming. But for now, they don't have a comment.

BLITZER: We'll wait and you'll get that to us when it comes in.

HAYES: Yes.

BLITZER: Thanks very much, Sam, for the story.

The Rick Warren pick, by the way, is creating a furor online, as well. And now some people are using Barack Obama's own Web site to challenge this controversial decision.

Let's go to our Internet reporter, Abbi Tatton.

She's looking at this story for you.

What are you seeing online -- Abbi?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, these are Barack Obama's official Web sites -- where his supporters are encouraged to go online and leave a comment or ask a question. And people are certainly doing that today to voice their opposition to this Rick Warren pick.

On the transition Web site, change.com, multiple messages there taking over an online discussion, like this one: "Starting off the Obama administration with Rick Warren is a disgrace."

At MyBarackObama.com -- this is the social network that really did so much to organize online during the election -- "Rick Warren, bad choice."

Many of the people leaving messages here members of gay and lesbian groups for Obama, like this person, writing: "He's driving a stake right into the heart of his gay and lesbian supporters."

And this debate is going on elsewhere online -- on liberal blogs, on sites like Facebook, where groups are rapidly forming to oppose this pick.

But it's these people who are parking themselves right on Barack Obama's Web site that know they're getting seen, like this person leaving a message saying: "Hey, transition team, I hope you're tallying up all these responses" -- Wolf.

BLITZER: Abbi, thank you.

One of the best kept secrets in Washington is finally being revealed. Former President Bill Clinton releasing the names of more than 200,000 donors to his charitable foundation, detailing gifts ranging from just a few dollars to millions of dollars from some Middle Eastern governments.

Dana Bash has been going through all these documents today. And it's pretty amazing. It's a long, long catalog of names and numbers.

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: It sure is. And, you know, we've learned that over the past decade, Bill Clinton scored millions for his foundation from big moguls like Bill Gates and famous Hollywood friends, like Barbara Streisand. But it is the massive amounts raised from foreign governments and business executives abroad that's getting the most attention.

(BEGIN VIDEOTAPE)

BASH (voice-over): Former President Bill Clinton broke a decade of secrecy about who gave to his foundation to quell concern about conflicts with his wife as secretary of State. Yet many of the tens of millions in donations came from foreign governments Hillary Clinton would deal with as the nation's chief diplomat.

In the Middle East, at least $10 million from the kingdom of Saudi Arabia; between $1 million to $5 million from Kuwait, Qatar, Omar and Brunei. Big ticket donations also came from big foreign business executives with keen interest in U.S. policies abroad. For example, Indian businessman Amar Singh, who reportedly lobbied Hillary Clinton for help with nuclear technology, donated between $1 million and $5 million to her husband's foundation -- a revelation that could prove dicey for Clinton as tensions grow between India and Pakistan.

SHEILA KRUMHOLZ, CENTER FOR RESPONSIVE POLITICS: The Middle East and India are all going to be flashpoints that the next secretary of State is going to have to deal with early in the administration. So this is -- this is not helpful in that regard.

HAYES: While a good deal of the donations went to finance the Clinton Presidential Library, Clinton associates emphasize that much of the money donated goes to fighting global AIDS and poverty and that most of the more than 200,000 donors gave $250 or less.

The former president told CNN earlier this month he hopes transparency proves there's nothing to hide.

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: Say who the donors are and let people know that there's no connection to the decisions made by America's national security team, including the secretary of State.

BASH: Still, his foundation got at least $10,000 from Blackwater, a controversial company that protects diplomats in Iraq. As secretary of State, his wife would have to decide whether to renew Blackwater's contract.

(END VIDEOTAPE)

BASH: Now, earlier this month, Bill Clinton's foundation and the Obama transition signed a carefully negotiated memorandum of understanding. And it lays out his role there should Hillary Clinton actually become secretary of State. And it was circulated, Wolf, today, by the chairman and ranking member of the Senate Foreign Relations Committee.

Of course, they are going to be in charge of her confirmation hearings. It was circulated to senators on that committee and we obtained a copy of it.

And in this memorandum, basically, Bill Clinton agrees to limit his role in leading and raising money for the foundation. And it also says that he agrees to contact the ethics office -- officials, I should say -- in the State Department and maybe even the White House counsel, if, in fact, he is going to give personal speeches or maybe have some consulting contracts in the future.

BLITZER: Yes. The other former presidents, Jimmy Carter and George Herbert Walker Bush, they don't have to release the names of their donors. But we'll see if they do right now, following Bill Clinton's example. We'll stay on top of this story.

BASH: Don't hold your breath.

BLITZER: All right.

(LAUGHTER)

BLITZER: Thank you.

Democrats, Republicans -- who's to blame for America's financial meltdown?

(BEGIN VIDEO CLIP)

OBAMA: We have been asleep at the switch. We have not been as aggressive.

(END VIDEO CLIP)

BLITZER: The president-elect delaying partisan blame for the fiscal crisis. The best political team on television is here to discuss that and more.

Plus, a first in the modern history of China -- what the country is planning to do to fight piracy.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: That's what America is about that. That's part of the magic of this country, is that we are diverse and noisy and opinionated and -- and so, you know, that's the spirit, in which, you know, we have put together what I think will be a terrific inauguration.

(END VIDEO CLIP)

BLITZER: President-Elect Obama confronting the inaugural firestorm ignited by his decision to invite well-known Evangelical pastor, Rick Warren, to give the invocation at his inauguration.

Let's talk about that and more with our CNN senior Congressional correspondent, Dana Bash; our CNN political contributor Dana Milbank, of "The Washington Post;" and Tara Wall, the deputy editorial page editor of "The Washington Times." They're all part of the best political team on television.

Do you think he really expected sort of an uproar the way it's developed over the past 24, 48 hours?

BASH: I think it would be hard not to expect it, particularly from the gay rights community. There's no question about it.

But here's a reality that was -- that I was just reminded of in talking to a Democratic source on Capitol Hill right before coming on this show, that Barack Obama is president, in part, because he won conservative Democrats, who subscribe to some of the things that Rick Warren subscribes to -- conservative Democrats in Virginia and in North Carolina.

And it is because he had connections with the people like Rick Warren during the campaign that he was able to reach out to those conservative Democrats. And even those on Capitol Hill say we have to continue to keep our tent wide and try to pull in those people.

BLITZER: And let's not forget that Rick Warren took some grief from his own members when he invited Barack Obama out to his Saddleback Church in California.

DANA MILBANK, CNN CONTRIBUTOR "WASHINGTON POST": He certainly did. And, yes, he's got that position on gay rights. But he's also on Obama's side on global warming, on AIDS, on poverty. I think it's extraordinary that gay rights groups are picking a fight with Obama on this, which amounts to nothing and then drawing this antagonism for when they're going to actually have, you know, legislative battles ahead.

He's sort of taking the place, if you will, of Billy Graham. Well, guess what, Billy Graham is opposed to gay marriage, as well. I mean it's -- it's just an extraordinary thing to be (INAUDIBLE).

BLITZER: I guess they're upset because he did get involved in trying to support Proposition 8 in California, which banned same-sex marriage.

TARA WALL, "WASHINGTON TIMES": Well, he certainly wasn't going to pick Reverend Wright to do his -- his prayer. We know that. So, I mean, you know, they're picking apart -- mincing -- it's something, like you said, I mean there's going to be bigger fights to pick here.

The fact is most Americans, most Californians oppose gay rights. This is reflective of the nation...

BLITZER: Not gay rights, but same-sex marriage.

WALL: Excuse me, same-sex marriage. This is reflective of the nation as a whole. And, quite frankly, it's laughable that liberals would -- you know, derided -- they derided Bush for reaching across the aisle. It's the same thing Obama is saying -- look, we can all find issues in which we're going to agree on, disagree on. He's not -- Rick Warren is not going to be making any policy or on -- you know, going to be on his cabinet.

The man is saying a prayer and the bible says, you know, pray for our leaders. It didn't say which leaders. It didn't say just pray for Republicans or Democrats, but pray for our leaders. And that's what he's doing.

BASH: And I think it's also important to point out that there already are some sore feelings there with the gay community and the Obama campaign because of Proposition 8 in California. Because there was an onslaught of money against -- or, excuse me -- for the Proposition and the Obama campaign intentionally, basically, stayed out of that, because they had so many other things to worry about and for the reason we were just talking about, because they didn't want to antagonize some conservative Democrats who agreed with it.

BLITZER: Yes. He was asked by our own Jessica Yellin today to talk about the economic crisis a little bit and where was the oversight, where was -- where was the oversight, the regulators, Congress.

And listen to what he said.

(BEGIN VIDEO CLIP)

OBAMA: We have been asleep at the switch. Not just some of the regulatory agencies, but some of the Congressional committees that might have been taking a look at this stuff. We have not been as aggressive. (END VIDEO CLIP)

BLITZER: When I heard that, I'm saying to myself, now, Barney Frank and Chris Dodd, who are chairmen, respectively, of those two oversight committees, Financial Services and Banking in the House and in the Senate, maybe they we're not too happy to hear the president- elect take at least an indirect swipe.

MILBANK: Yes. I don't think Obama was talking about his own committee, the Foreign Relations Committee, there...

(LAUGHTER)

BLITZER: No.

MILBANK: But, I mean, he's right, of course, in the sense that there's plenty of blame to go around on the administration, on Congress and even on the investors themselves. I think he can afford to take -- to make a statement like that, because the polls will show that Bush and the Republicans are getting the blame for this, whether they deserve it or not, entirely.

So he's sort of being magnanimous, I think, in just making a statement like that.

WALL: And I think most Americans would be hard-pressed to -- if they thought about it, to figure just out what Congress has done these last couple of years, aside from this $700 billion -- what some equate to government, you know, welfare -- what else have they done and where have they been?

Have they been asleep?

I mean, Congress' approval ratings are abysmally low, as well -- 37 percent. I think he's drawing a line in the sand and saying, as he has said, you know, when we make mistakes, we need to admit mistakes. I think that the Nancy Pelosis and the Harry Reids have been reticent to admit when those mistakes have happened, as opposed to just pointing fingers at the administration. That's not going to get anyone anywhere. BLITZER: You're going to be busy on the Hill, because there's going to be a tremendous desire to regulate, regulate, regulate.

BASH: Yes.

BLITZER: And I suspect that much of that regulation that went out the door is going to come right back in.

BASH: It went out the door, I think, you know, we can remind our viewers -- by -- because of a Democratic president, for the most part. I mean Bill Clinton signed some of the biggest deregulation laws when he was there.

But, you know, in talking to Democrats this today, after hearing Barack Obama, they said look, inside those very important banking committees -- it's their jurisdiction -- they were already planning on working on serious regulation on a whole bunch of issues because of the banking crisis that we saw in the fall.

They were kind of thrown off a little bit -- a lot -- by the auto bailout. They were trying -- they were going to do this during this Congressional recess and they didn't get to it. But they are going to spend a significant amount of time to try to put laws back on the books.

BLITZER: And this Bernard Madoff scandal...

BASH: Yes.

BLITZER: There was no regulation, apparently, whatsoever of the $50 billion that he apparently...

WALL: I think ethics and oversight are going to be a theme of this incoming administration...

BLITZER: Yes.

WALL: ...and this Congress. It has to be.

BLITZER: All right, guys. I think you're right, all of you, as usual.

Not always, but sometimes.

(LAUGHTER)

BLITZER: Lou Dobbs is getting ready for his show, that begins right at the top of the hour -- Lou, what are you working on?

LOU DOBBS, CNN ANCHOR: Wolf, thank you.

Yes, we've got a lot of people exorcised about a $50 billion swindle and not paying very much attention to $8 trillion in bailout. We'll have the latest for you on the struggle to save the big three carmakers from collapse.

The Bush administration is talking about supports some kind of bankruptcy, so long as it's orderly, for the big three?

What's that about?

We'll have the complete story for you here tonight.

Also, gay advocacy groups, left-wing Democrats absolutely furious with the president-elect because he chose Pastor Rick Warren to give the inaugural invocation.

Have those liberal groups lost confidence in the president-elect?

Three top political analysts will join us to assess whether they've lost some sense of proportion.

Also tonight, unusual winter storms dumping snow across Western states. A huge snowstorm is headed toward the northeast. All of this is global warming?

dumped across the Midwest. We'll have special expect guests and a special report.

Please join us for all of that at the top of the hour, all the day's news and much more, from an Independent perspective -- Wolf, back to you.

BLITZER: See you in a few moments, Lou.

DOBBS: You will.

BLITZER: Thank you.

The year in mug shots, from celebrities to people in costume and more -- Jeanne Moos takes a "Moost Unusual" look at the hall of shame we won't soon forget.

And should President Bush commute the sentence of John Walker Lindh, the so-called Taliban American?

That's this hour's question. Jack with your e-mail and more, coming up.

(COMMERCIAL BREAK)

BLITZER: Fredricka Whitfield is monitoring some other important stories incoming into THE SITUATION ROOM right now -- Fred, what's going on?

FREDRICKA WHITFIELD, CNN CORRESPONDENT: Hello again, Wolf.

Well, Defense Secretary Robert Gates has issued a new request for an updated proposal on closing the prison at Guantanamo Bay. A Pentagon spokesman says the secretary wanted a hand in case President- Elect Obama asks for one after taking office. Shutting the prison down is an Obama priority. The Bush administration has studied the issue, but was unable to resolve the challenges of where to relocate detainees and how to settle their cases.

A top U.S. general has given Pentagon brass his vision of how troops should pull out of Iraq. General Raymond Odierno commands U.S. forces in Iraq and military officials say that he envisions a gradual drawdown of the nearly 150,000 troops to achieve full withdrawal before 2012. It would begin early next year. But it would last longer than President-Elect Obama's target of 16 months.

And for the first time in modern history, China's Navy is planning a major mission beyond the Pacific. China says it will send warships to join an international effort to stop piracy off Somalia. The announcement comes a day after the crew of a Chinese cargo ship armed only with water hoses and Molotov cocktails, fought off hijackers in the Gulf of Eden.

And remember the case when a man sued a Washington, D.C. dry cleaner for $54 million over the loss of a pair of pants?

Well, he lost that case and appealed. And today, the D.C. Court of Appeals resoundingly ruled in favor of the Chung family and against the plaintiff, Roy Pierson. The Chungs, who have lost two stores fighting Pierson, say they hope this time the nightmare is finally over.

A pretty expensive pursuit for everybody.

BLITZER: Yes. And what an outrageous story that is.

All right, thanks, Fred, very much.

Jack Cafferty is joining us once again with "The Cafferty File" -- Jack.

CAFFERTY: The question this hour is: Should President Bush commute the sentence of John Walker Lindh, the so-called Taliban American?

Preatorian in Fort Myers, Florida: "Absolutely not. If young Americans think they can put a rag on their head and denounce our nation and kill our armed services personnel, then they need to think again. Death penalty -- that's the verdict under Sharia law, which he has advocated. Cut off his head or hang him -- either is too good a punishment for being a traitor."

Terry in Arizona writes: "Walker was a victim. When he joined the Taliban, he joined as a freedom fighter. He wasn't fighting against the U.S. as the U.S. was not at war with the Taliban at the time. I'm sure he was in a position where he could not simply say excuse me, but I'd like to go home now, when the U.S. went into Afghanistan."

Dave writes: "It's simply not in Bush's character to pardon this individual. Remember his governor's actions in Texas and the executions recorded. This is not a forgiving man."

Al in Iowa writes: "John Walker Lindh is as much a victim of the Bush-Cheney neo-con preemptive war oil grab strategy as the 100,000 dead innocent Iraqi women and children, the four million displaced Iraqi refugees and the fabled heroism of Jessica lynch. They've all been used, abused and killed for the control of fossil fuels wrapped up in the farcical ideology of spreading democracy."

Pat in Georgia writes: "No. If Bush commutes Lindh's sentence, he's saying it's OK to be a terrorist if you happen to also be an American. But then Bush didn't think "Scooter" Libby deserved what the judicial system meted out. He didn't object to waterboarding and torture and he condoned listening in on private phone calls. So who knows what he'll do as he slithers out of office?"

Lyn writes: "No, probably not. But I don't adhere to the idea that there's no room for forgiveness, either. He's as much a victim of terrorism as other young men and women who rallied to this particular cause.

And Terry in North Carolina writes: "No pardons for anyone ever."

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 -- Wolf.

BLITZER: I'll do that after the show, Jack.

CAFFERTY: (INAUDIBLE).

BLITZER: Thanks very much.

Picture perfect -- or maybe not. But however you see it, they're the best mug shots of 2008. And our Jeanne Moos is taking a good look.

(COMMERCIAL BREAK)

BLITZER: Looking back on 2008, it wouldn't be complete without checking out who's made a not so coveted list -- the best mug shots of the year.

CNN's Jeanne Moos has this "Moost Unusual" report.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): Should old acquaintance be forgot...

(VIDEO CLIP)

MOOS: ...the least we can do is acquaint you with the top mug shots of 2008 -- from the guy photographed without his teeth then with them, to the fellow whose metallic grill caught the light like a twinkling star, to the man with a handle bar mustache...

UNIDENTIFIED MALE: That's very Salvador Dali.

MOOS: And who better to make the picks than the Smoking Gun Web site?

(on camera): We've got to hand it to the guys at the Smoking Gun. They have to sift through over 100,000 mug shots a year.

(voice-over): At number 19, we have the joker. He went to the movie the "The Dark Knight" dressed as the Keith Ledger character.

UNIDENTIFIED MALE: Kill the "Batman."

MOOS: Then got arrested for stealing "Batman" posters.

This guy was out on Halloween.

UNIDENTIFIED MALE: Dressed up as a prisoner and arrested smoking some marijuana with his friends in a parking lot.

MOOS: Sad to say...

UNIDENTIFIED MALE: This was not a banner year for celebrity mug shots. You know, there were no Nick Noltes this year.

MOOS: So we'll have to settle for Andy Dick, arrested for pulling a teenager's top down. He pled guilty to battery.

(on camera): Number 10.

UNIDENTIFIED MALE: Oh.

UNIDENTIFIED MALE: See, this is nice because...

MOOS: Yes.

UNIDENTIFIED MALE: ...you know, he's all made up for the arrest.

MOOS (voice-over): This guy was arrested after placing an ad offering a cross dresser in short tight miniskirt. Number eight is a father/son tattooed duo. Then there was this guy, with before and after tattoos. This dad was arrested after an accident.

UNIDENTIFIED MALE: He was -- he was he was drunk, had about 15 beers and asked his little kid to drive the van.

MOOS: This compilation of 15 people arrested over the year wearing Obama gear was awarded the top spot. But we preferred the guy with Obama-Biden carved into his hair. And all he did was play his music too loud.

Our favorite mug shot came in at number two -- though she did number one on a neighbor's porch.

(on camera): Dressed as a cow?

UNIDENTIFIED MALE: Dressed as a cow.

MOOS: Scaring kids?

UNIDENTIFIED MALE: Yes. Scaring -- running around the neighborhood, blocking traffic, drunk at the time.

(VIDEO CLIP)

MOOS (voice-over): Meanwhile in North Baltimore, Ohio, the police department has decorated its Christmas tree with sex offender photos, hoping they'll get more attention than if they were stuck on a bulletin board.

UNIDENTIFIED MALE: Nothing says Christmas like sex offenders hanging from a tree.

MOOS: Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

BLITZER: By the way, they may or may not be guilty of the charges brought against them, but they should all be glad that bad judgment is not necessarily a crime. Thanks very much for joining us.

I'm Wolf Blitzer in THE SITUATION ROOM.

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