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Isreal and Hamas Ignore Calls for Cease-Fire; Obama Daughters Head to New School; Richardson Sheds Light On His Reason to Withdraw.

Aired January 5, 2009 - 17:00   ET

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


WOLF BLITZER, CNN ANCHOR: But let's begin this hour with breaking news coming in from Minnesota where the State Canvassing Board has now certified recount results in that U.S. Senate race.
It shows the Democratic challenger, Al Franken, winning over Republican incumbent Norm Coleman, get this, by 225 votes. But a legal challenge is likely to keep the outcome in limbo.

Al Franken due to make a statement any moment now from his home in Minneapolis. We'll go there live once he starts speaking.

But in the meantime, let's bring in our congressional correspondent, Brianna Keilar. She's working this story for us.

Lots of challenges under way. What exactly is the latest, Brianna?

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Well, Al Franken, obviously, one step closer to taking this Senate seat seven weeks after the race that was so close, triggering an automatic recount, a recount where actually Norm Coleman, the Republican incumbent, started out with the lead.

But by the end of it, Wolf, as I said, seven weeks later, Al Franken, the former "Saturday Night Live" funny man, with a lead of 225 votes.

Now this all happened today. This certification of the election results after the Minnesota Supreme Court ruled against Coleman's request that they force basically all of the counties in Minnesota to gather up absentee ballots and send them to the capital to have state officials in both camps count them.

So, now despite this ruling, Norm Coleman saying that he's going to go back to court and appeal this ruling. He's got seven days to do this.

Listen to Ken Gross, an election law legal expert, and what he says about Coleman's chances.

(BEGIN VIDEO CLIP)

KENNETH GROSS, ELECTION LAW EXPERT: He's got a whole -- three arguments regarding several hundred ballots that would be more than the 225. But first, he'd have to prevail on the legal challenge. And then once -- if he did, then the votes would have to actually go in his favor, if he did get to the point of him counting these votes. And both of those are a very tough road to hoe at this point for Senator Coleman.

(END VIDEO CLIP)

KEILAR: So -- so a tough road, but at the same time, the thought is that Franken will not be seated, that this is not over yet, because in the meantime, the thought is that Minnesota's Republican governor will not sign off on this canvassing board's decision, this certification, until all of Coleman's legal challenges are exhausted.

And at the same time, Coleman has the backing of Republicans in the Senate. For instance, Republican John Cornyn who is in charge of the senatorial committee that is dedicated just to making sure that more Republicans are elected in the Senate.

Here's what he said earlier today.

(BEGIN VIDEO CLIP)

SEN. JOHN CORNYN (R), TEXAS: The campaign still contends that there are about 700 absentee ballots that were not counted. And it's pointed to the likelihood that about 133 ballots were double counted in, in Franken's favor. So these sort of issues needed to be sorted out. The best place to do that is in court where the rules of evidence apply so we know with confidence at the end of the day who got the most votes in Minnesota in the Senate race.

(END VIDEO CLIP)

KEILAR: But again, the events of today so significant because the thought from legal experts is that Coleman, despite his legal protest, will not prevail on this. In fact, Ken Gross saying, Wolf, that it would be tantamount to pulling a rabbit out of a hat.

BLITZER: Brianna, thanks very much. And you'll get these live pictures coming in from Minnesota. Once we hear from Al Franken, we'll go live and hear what he has to say. We'll come back to this story.

Brianna Keilar working this story for us.

Meantime, let's follow some other breaking news right now. The ground war raging in Gaza as Hamas rockets strike deep into Israel and amidst stepped-up international efforts to try to bring about a truce.

President-elect Barack Obama is now speaking out. Listen to this.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: I strongly believe that the president or a president-elect or his team should be able to do more than one thing at a time. And so, obviously, international affairs are deep concern with the situation in Gaza. I've been getting briefed every day. I've had consistent conversations with members of the current administration about what's taking place. That will continue.

I will continue to insist that when it comes to foreign affairs, it is particularly important to adhere to the principle of one president at a time, because there are delicate negotiations taking place right now, and we can't have two voices coming out of the United States when you have so much at stake.

(END VIDEO CLIP)

BLITZER: We're going to get back to Gaza in a moment. But I want to go to Minneapolis, to Minnesota right now. Al Franken is speaking and he's insisting he'll be the next senator from Minnesota.

AL FRANKEN (D), MINNESOTA SENATE CANDIDATE: After 62 days of careful and painstaking hand inspection of nearly 3 million ballots after hours and hours of hard work by election officials and volunteers across this state, I am proud to stand before you as the next senator from Minnesota.

This victory is incredibly humbling, not just because it was so narrow, but because of the tremendous responsibility it gives me on behalf of the people of Minnesota. While the recount process played out, the challenges facing our state, our nation have only grown.

With tensions in the Middle East reaching the boiling are point, our economy facing its worst crisis since the Great Depression, and Minnesota's middle-class families being squeezed harder than ever, it's clear that we have a lot of important work to do.

I want you all to know that I'm ready to go to Washington and get to work just as soon as possible. I look forward to joining President-elect Obama and Senator Klobuchar in getting our country moving in the right direction again.

I know that this isn't an easy day for Norm Coleman and his family. And I -- I know that because Franni and I and our kids have had plenty of time over the last couple of months to contemplate what this would be like if the election turned out differently.

Norm Coleman has worked hard for this state and this country and I hope to ask for his help to ensure that Minnesotans can continue to count on receiving excellent constituent services from their two senators without interruption.

I also know that this was...

BLITZER: All right. So there you have it, Al Franken, the former comedian, declaring victory in Minnesota saying he will be the next senator from the state of Minnesota, beating Norm Coleman.

If, in fact, that does happen, and everything is certified, there will be 59 Democrats in the U.S. Senate, 41 Republicans.

We'll stay on top of this story.

But the other breaking news we're following right now includes the situation in Gaza. Here are the latest developments we're following right now.

Israeli troops have cut Gaza in two. There is heavy fighting with Hamas gunmen and witnesses report seeing tanks in Gaza City.

Israeli aircraft carried out at least 40 strikes hitting houses, mosques and tunnels. Hamas fired dozens more rockets into Israel. One struck an empty kindergarten in the city of Ashdod.

Neither side is heeding international calls for a cease-fire. Hamas warns it will continue rocket strikes, and I'm quoting now, "for many months." Israel's foreign minister warns the time for restraint is over.

Let's go straight to CNN's Paula Hancocks. She's on the Israeli- Gaza border watching what's going on.

It sounds ominous, Paula. What's the latest?

PAULA HANCOCKS, CNN CORRESPONDENT: Well, Wolf, the diplomatic efforts are making no difference whatsoever to the facts on the ground. In the past couple of minutes we've heard more fighter jets going over head, helicopters. We've heard heavy machine gunfire and there are still intermittent air strikes into Gaza. So another sleepless and terrifying night for one in a million -- 1.5 million residents.

(BEGIN VIDEOTAPE)

HANCOCKS (voice over): The civilian toll of the war. Palestinians search through the rubble of a destroyed house, desperately searching for survivors.

This Gaza beach camp resident says the attack resulted in the death of seven people from one family. "My brother, his two wives and four children," he says. "We took out three bodies. The rest we couldn't find."

Fears grow over humanitarian catastrophe as more Gazans arrive at the morgues searching for their loved ones. But neither side at this point is heeding international calls for an immediate cease-fire.

TZIPI LIVNI, ISRAELI FOREIGN MINISTER: I can understand the eagerness of the international community to see the region calm. This is our dream as well. This is what we are looking for. Unfortunately, there are those who cannot accept the idea of living in peace in this region.

HANCOCKS: At least 40 rocket attacks on Israel Monday show the militants still have ample capability of hitting Israel.

UNIDENTIFIED MALE (Through translator): The Zionists have legitimized the killing of their children when they killed our children. They legitimized the killing of their people all over the world when they killed our people.

HANCOCKS: One senior Israeli security official tell CNN troops have cut Gaza in half and the fighting with Hamas on the outskirts of Beit Hanoun and Beit Lahia in the northern half of Gaza searching house by house.

Hamas is fighting back with booby traps, improvised explosive devices and mortars. Israel says dozens of Hamas operatives have been taken into custody and they're now being interrogated.

(END VIDEOTAPE)

HANCOCKS: This is day 10 of the Israeli offensive. Intensive efforts to stop the rocket fire back into Israel. A goal for Israel that, at this point, remains elusive -- Wolf?

BLITZER: Paul Hancocks on the border between Gaza and Israel. We'll get back to you, Paula. Thanks.

Jack Cafferty is monitoring the situation as well. Jack?

JACK CAFFERTY, CNN ANCHOR: Ten days since Israel launched attacks on Gaza, and since then President-elect Barack Obama has remained silent on the conflict.

And as an excuse, or as a reason, he is sticking to what he said right after the election. There is only one president at a time. And therefore, it's up to President Bush to comment. Obama was even asked about it today and continues to stay that he will not say anything.

Two of Obama's closest lieutenants, Joe Biden and Hillary Clinton, have also managed to remain silent. No main feat there.

Meanwhile, many U.S. politicians are backing Israel on the conflict. Obama's critics are saying that he's not doing himself any favors with his silence on this issue.

"The Guardian Newspaper" reports that as each day passes hopes are diminishing that Obama will make a fresh start in U.S. relations with the Muslim world and that he's losing ground among Muslims and Arabs.

Al Jazeera Television ran video of President-elect Obama vacationing in Hawaii juxtaposed with video of the fighting in Gaza.

So here's the question: Is President-elect Obama making a mistake by remaining largely silent on the situation in Gaza?

Go to CNN.com/caffertyfile and post a comment on my blog -- Wolf?

BLITZER: All right, Jack, thank you.

Drastic action in desperate times. A massive tax cut. $300 billion. President-elect Obama is weighing that possibility right now. We have details of what it might mean for you. Also, an Obama Cabinet nominee pulls on. Is Bill Richardson the first crack in what's otherwise a near perfect transition? I'll speak about that and more with Paul Begala and Leslie Sanchez. They're standing by live.

And the Apple founder then and now, Steve Jobs reveals the health condition behind his dramatic weight loss. It's been the subject of so much rumor. We have the latest information and we're live at Macworld right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Here in Washington, Barack Obama certainly very much looking the part as president of the United States, and with his inauguration only two weeks from tomorrow, he's quickly easing into that role. He's meeting with lawmakers on Capitol Hill today.

Let's go to CNN's Kate Bolduan. She's watching all of this going on.

Lots of buzz here in the nation's capital about the arrival of Barack Obama.

KATE BOLDUAN, CNN CORRESPONDENT: Absolutely, Wolf. Lots of buzz. As you can expect, all eyes are on the new president and his family. The president-elect trying to hit the ground running, facing the pressure to do something about the financial crisis and the rest of his family quickly adjusting to a new city and new life.

(BEGIN VIDEOTAPE)

BOLDUAN (voice over): So long hometown, hello, new town. The Obamas making the move to Washington in the spotlight. And they're already making a presidential-like entrance.

The presidential travel, new roads closed for security around their temporary home, the Hay-Adams Hotel. And traffic tie-ups as the incoming first daughters navigate the new route to school amid flickering flash bulbs.

DOUG WEAD, "ALL THE PRESIDENT'S CHILDREN": Well, it's not going to be normal at all. But the object is to try to make it as normal as possible.

BOLDUAN: It's all part of the buzz and squirrel that comes with the presidential transition. But the president-elect is trying to get down to business. His first full day in Washington spent meeting with congressional leaders about the financial crisis and his recovery proposal.

OBAMA: The inauguration stand is being built in the background, but the reason we're here today is because the people's business can't wait. We've got an extraordinary economic challenge ahead of us.

BOLDUAN: It's still 15 days until the Obamas actually move in here along with the official swearing in. While promising to bring change to Washington, it seems the new first family is trying to make nice with the neighbors, even throwing a special inaugural ball for the people who live here.

LINDA DOUGLASS, PRESIDENTIAL INAUGURAL COMMITTEE: The tickets will be either very low cost or free altogether. This will be for folks all around the area of people who come into town and people in the Washington, D.C. area, to participate in a neighborhood ball.

(END VIDEOTAPE)

BOLDUAN: Amid all the fanfare, the reality is, this isn't Obama's first move to D.C. He was the junior senator from Illinois for more than three years. But now he's facing new fame, a new address and new pressures with the financial and national security crisis waiting for him to take office, Wolf.

BLITZER: Those pressures and the agenda enormous right now.

Kate, thanks very much.

BOLDUAN: Of course.

BLITZER: The trip to Washington was Mr. Obama's first as the main passenger onboard a plane from the presidential fleet. The Boeing 757 is smaller than the 747 that normally serves as Air Force One, although any plane with the president onboard certainly gets that designation.

The president-elect also met his future pilot, Colonel Scott Turner. Turner will serve as co-pilot to President Bush's pilot -- serves as that co-pilot. President Bush's pilot, Colonel Mark Tillman, on the trip to make the Bush family home to Texas -- to pick the Bush family home to Texas.

For the return flight, by the way, Turner and Tillman will switch roles with Turner in command, making the transition to the new president.

Barack Obama today declared the economy is very sick and getting worse. Two weeks before his inauguration, the president-elect met with Democratic congressional leaders to discuss an urgent recovery plan that is likely to include major tax cuts.

Let's go to CNN's Mary Snow. She's been looking into this and what it might mean, Mary, for a lot of our viewers out there.

MARY SNOW, CNN CORRESPONDENT: Wolf, the plan is likely to include $300 billion in tax cuts. That's twice the size of the tax rebate offered by the Bush administration last year.

It's aimed at helping both taxpayers and businesses. And some small business owners say it can't come soon enough.

(BEGIN VIDEOTAPE)

SNOW (voice over): Designer Abby Zeichner thought her creativity and business smarts alone would enable her clothing lines to flourish. But opening two stores in New York in recent months when the faltering economy has battled the retail industry, Zeichner is now looking towards an unlikely place to keep her dreams alive -- Washington

ABBY ZEICHNER, OWNER, ABBY Z. BOUTIQUE: I'd never thought I'd be looking to the government to help me roll out 40 stores in four years.

SNOW: Zeichner, along with the U.S. Chamber of Commerce, are encouraged that President-elect Barack Obama is considering about $300 billion in tax cuts for both individuals and small businesses.

How much it will help is hard to say.

For the middle class, one potential idea is a possible payroll tax cut $500 for individuals, $1,000 per couples. It was likely to be offered to wage earners below a certain bracket. Some experts see as more effective than tax rebates like the one offered by the Bush administration in 2008.

ANNE MATHIAS, STANFORD GROUP: Unless you think or you're sure you're going to lose your job next week, you view it as a sort of a permanent increase in your overall level of wealth. And that psychologically and physically makes you more inclined to spend.

SNOW: A big chunk of the proposal is geared towards businesses with a new credit for businesses that create jobs or avoid laying off workers.

Also under consideration, an idea that would increase the amount of expenditures a small business could write off to 250,000, up from 125,000. Some economists warn it won't be a silver bullet to stop the recession.

DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: What it will probably do more than anything initially is stem job losses, rather than reverse the trend what we've seen in terms of job layoffs.

(END VIDEOTAPE)

SNOW: Now political observers view the president-elect's proposed business tax cuts as a way to apiece Republicans. But the Obama camp said in a statement they're being guided by what works, not by any ideology or special interests --Wolf?

BLITZER: We just want to alert our viewers out there that Mary Snow just got married. And we want to congratulate her excellent, excellent work.

Good work, Mary. Congratulations. Many, many happy years.

SNOW: Thank you very much.

BLITZER: A lot of disappointed men out there hearing that report.

The pictures tell part of the story, from Apple founder Steve Jobs filling in the blanks, though, revealing the condition behind his dramatic weight loss.

Plus, a lost tape resurfaces showing Barack Obama as we've never seen him. Guess what, a restaurant critic. We'll share the tape with you right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Betty Nguyen is monitoring some other important stories incoming into THE SITUATION ROOM right now.

Betty, what's going on?

BETTY NGUYEN, CNN ANCHOR: Well, Wolf, the numbers are out, and they are not pretty for automakers, Ford, GM, Toyota. They saw sales drop more than 20 percent in December finishing off the worst year in more than a decade.

High gas prices are at the beginning or high gas prices at the beginning of 2008 along with a recession, they forced GM and Chrysler to ask for federal help to continue operating.

And the number of people killed in that deadly nightclub fire in Thailand has grown to 64. And now the club owner has turned himself over to police.

A raging fire broke out early on the club early New Year's Day and many people were burned. Others trampled in a stampede.

Investigators say exit signs weren't properly displayed and the club lacked sprinklers.

Listen to this. Hands over their heads forced to give up. French authorities say they captured heavily armed Somali pirates yesterday before they could pull off attacks on cargo ships in the Gulf of Aden.

Inside the small boats, France's defense ministry said it confiscated 11 assault rifles, two rockets, and two rocket launchers. This comes just three days after a French warship intercepted pirates trying to take over a Panamanian ship.

And turning to Iraq where a new U.S. embassy is now open in Baghdad. Take a look. The 27-building complex takes up 104 acres and is the largest U.S. embassy in the world. The embassy used to be housed inside Saddam Hussein's republican palace, but last week, U.S. authorities turned over authority of the green zone including that palace to Iraq -- Wolf?

BLITZER: A huge, huge building.

NGUYEN: It is.

BLITZER: All right. Let's hope it stays safe.

Thanks, Betty, very much. The first President Bush has another son he thinks would be a good president. He says his son Jeb has what it takes. But would the public consider the idea of a third President Bush?

And a long lost Barack Obama video tape, then as a state senator. He doubled as a restaurant critic.

(BEGIN VIDEO CLIP)

OBAMA: I do have to put in a plug for their -- for peach cobbler which...

UNIDENTIFIED FEMALE: Really?

OBAMA: ... which people...

UNIDENTIFIED FEMALE: See if I would lay off this part cake...

OBAMA: ... tend to gobble up pretty quickly.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

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

Happening now, where did the Republican Party go wrong? Six men think they know the answer. And it's a four-letter word. Ahead, why these men say they should lead the GOP into the future. Stand by.

And another Bush in the White House? What the elder President Bush is saying about his son Jeb.

And Barack Obama as a restaurant critic. We have the TV vault video to prove it.

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

The first major setback for the Obama transition team. The bombshell decision by the New Mexico governor Bill Richardson to withdraw as commerce secretary nominee.

Today, Richardson shed some light on his decision.

Let's go to CNN's Thelma Gutierrez. She's watching the story for us.

What are you learning, Thelma?

THELMA GUTIERREZ, CNN CORRESPONDENT: Wolf, when Governor Richardson spoke to reporters today he said he couldn't go into any details regarding the investigation, nor could he disclose any of the details of the private conversations he had with the president-elect over his decision.

But he did say the decision to withdraw was his and his alone, not one made by the Obama transition team.

(BEGIN VIDEO CLIP)

GOV. BILL RICHARDSON (D), NEW MEXICO: I want to emphasize that I acted properly and my administration acted appropriately, too. A fair and impartial review of the facts will bear that out.

GUTIERREZ: After nearly 30 years of public service and a bid for the presidency, Governor Bill Richardson of New Mexico was well on his way to becoming the U.S. Secretary of Commerce for the Obama administration. But before the confirmation hearings could begin, Governor Richardson withdrew his name, citing a federal investigation into a company that has done business with his state.

RICHARDSON: The investigation has been taking on. And I have to respect that. What I didn't want was to get into the confirmation hearings with the inquiries still going on.

GUTIERREZ: The company in question is CDR, an investment firm based in Beverly Hills that was paid nearly $1.4 million in fees from municipal bonds business in New Mexico. That same company contributed money to Richardson's causes including two Get Out the Vote organizations that focused on Native Americans and Latinos.

A CDR spokesman told CNN the firm's chief David Rubin has given thousands to liberal democratic and Jewish causes and is emphatic that there was no wrongdoing but Governor Richardson says he still decided to pull out of Obama's cabinet.

UNIDENTIFIED MALE: Governor, it's been reported that the transition team pressured you to withdraw, who's decision was it?

RICHARDSON: It was my idea to withdraw.

GUTIERREZ: Richardson's decision has saddened supporters who considered him a pioneer in Latino politics.

ARTURO VARGAS, NAT'L ASSN. OF LATINO ELECTED OFFICIALS: The disappointment for the Latin community is two-fold. One was that we will not have Bill Richardson in the cabinet, somebody who is probably the most experienced, qualified elected official, Latino or non- Latino in the country to be in the cabinet agency, number one. And number two, not to have three Latinos in the cabinet which would have been unprecedented.

RICHARDSON: Yesterday, I was hurting over this decision. I lost a cabinet appointment. But I think we have to focus on what people are losing in this country.

(END VIDEOTAPE)

GUTIERREZ: President-elect Obama released a statement saying that he is disappointed that Governor Richardson withdrew his nomination. He says "it is with a measure of his willingness to put the nation first that he has removed himself as a candidate for the cabinet in order to avoid any delay in filling this important economic post at this critical time.

What's next for Gov. Richardson. Well he said tomorrow, he goes back to work as a governor and his top priority is to work with the New Mexico legislature on state budget -- Wolf.

BLITZER: Thelma, thank you. Let's talk a little bit more about this development. The transition and more with our CNN political contributors, the democratic strategist Paul Begala and the republican strategist Leslie Sanchez. Someone screwed up here, didn't they, Paul?

PAUL BEGALA, DEMOCRATIC STRATEGIST: Yes. Now there's a big difference of course between screwing up criminally and screwing up politically. Bill Richardson is not in any criminal trouble right now. He is just in a grand jury investigation. But I do think that he should disclose this to that transition team.

What's instructive here is not that a mistake was made, how quickly President-elect Obama has moved to correct it. And that's the real test I think of a presidency. Every presidency is going to have mistakes, but will you move quickly, even painfully.

This is a guy who campaigned for Barack. I think Barack likes him very well who is not really been accused of doing anything wrong. And yet, it was getting in the way of his economic agenda, he moved quickly, corrected a mistake. So I'm impressed. I think the way the President-elect has handled this is pretty admirable.

BLITZER: That's why they call him "no drama Obama."

LESLIE SANCHEZ, REPUBLICAN STRATEGIST: Oh, well, let's call it tremendous spin. I think that's the best spin you can put on it. I mean, in the wake of Blagojevich, I don't think there is a tolerance for any type of cloud of suspicion. And to look at the fact that this is an investigation that has been ongoing. This is not new. These are actually allegations from 2004.

So for the transition team not to know that, you have to wonder, they had to know, but I think it's really, seriously, the cloud of suspicion. He had to move away from it quickly. And it's really sad. I do hope that there are other Hispanic appointments. It's just a minority appointment, not to say to replace one for the other but I think the Latino community particularly is going to watch this appointment.

BLITZER: Well you know there's another slip that happened just within the last hour or so. Leon Panetta. He's going to be named formally as the next CIA director. But the chairwoman, the incoming chair of the Senate intelligence committee, Dianne Feinstein of California saying no one told me about that, no one asked me about that. I was recommending a solid intelligence professional. It looks like there's a little bit of a slip right there as well.

BEGALA: Well, there will always be tension between the executive and legislative branches even when they're controlled by the same party. You know, Senator Feinstein wants to assert congressional prerogatives. But the President-elect and his team have shown they can keep a secret, even from their friends. It is pretty important in a -

BLITZER: So if they would have consulted with her, they're afraid it would have been leaked?

BEGALA: I'm not saying that. But I will say this for Leon Panetta. The intelligence professionals got us into this mess. You know, Leon was on the Iraq study group. He saw first hand the high intelligence level, what went wrong with Iraq. But he was also as chief of staff, the recipient of intelligence.

BLITZER: He was a customer?

BEGALA: He was a customer. And then also before that he was head of the office management -

BLITZER: I did and we clashed from time to time but I respect him and I like him a lot. He's got a strong conscience. He's got the right experience. It's a -

BLITZER: On the practical level, shouldn't they have at least consulted with Dianne Feinstein, and given her a heads-up that you know what, he's going to have to be confirmed by her committee?

SANCHEZ: You know, there's an interesting pattern that does emerge. Is this another case of hubris(ph)? We saw this with Clinton, when she was not somebody who was asked about you know her pick possibly for VP or was her name being floated. I mean there's a case of protecting information and, I will say with Panetta, people said he's an excellent executive manager when it comes to the White House.

But just because you read those briefings does not necessarily mean you're going to understand the full capacity of the agency. And I think there's going to be a tremendous amount of concern about that pick. And by all means, not to have the support on the senate, is another case for suspicion, why don't these two parties get along.

BLITZER: All right. The country has already had two president Bushes. But is there an opportunity for a third Bush to be in the White House? I want to play for you this exchange yesterday that Chris Wallace had on Fox with the former president, the first president, George H.W. Bush.

(BEGIN VIDEO CLIP)

GEORGE H. W. BUSH, FORMER PRESIDENT OF THE UNITED STATES: I'd like to see him run. I'd like to see him be president some day or maybe senator whatever.

CHRIS WALLACE, FOX NEWS: Really?

BUSH: Yes, I would. I mean right now is probably a bad time because we've had enough Bushes in there. But no, I would. I think he's as qualified and as able as anyone I know on the political scene. Now, you've got to discount that. He's my son. He's my son that I love.

(END VIDEO CLIP)

BLITZER: He's referring to Jeb Bush, the former governor of Florida. Very popular governor of Florida.

BEGALA: He was very popular, in fact, popular with both parties, I had to say as a democrat. But let me say something about the first George Bush. Of course, who I worked against when I worked for Bill Clinton and defeated him. Nobody could ever have a better daddy. This is unconditional love, and the pain that he has suffered because of the critics of his son of which I've won, I think the failures of his elder son, George W. and he's still in there pitching for that family, nobody could have a better dad than Jeb and W. Bush have. He's a wonderful man. And he's a remarkable American. So I admire how publicly he expresses that affection and love for his children.

BLITZER: Do you just assume, Leslie, that Jeb Bush is going to run for that open senate seat in Florida in 2010?

SANCHEZ: That's a very strong possibility. And for good reason. He's done a tremendously high favorability. He's done very good work in health care, education, cutting taxes, something about $19 million overall in his budget. And people really see him as independent of his brother. I think that's probably going to be the biggest case overall in his popularity.

BLITZER: And if he runs for senate in 2010 and wins in Florida, you know what people are going to start saying?

BEGALA: Well, that's a big leap, though. There's a good strong democratic bench in Florida. And he is handicapped by that name even the former president, his father, had to admit, maybe we've had enough of Bushes for now. Again, I can't say enough about a man who at age 19, 65 years ago, climbed into a plane with the youngest naval aviator in the second world war. And now he's about to turn 85 and guess out and he's going to jump out of an airplane again on his 85th birthday.

(CROSSTALK)

SANCHEZ: It's a dynasty.

BEGALA: He's a remarkable man.

I think we have a Bush fatigue right now with the son. But you know two years from now, look at 2010, with those elections. It looks like, that's going to be the report card. And we'll see what -

BLITZER: And they're about to commission a U.S. aircraft carrier with the name George H.W. Bush which is a great, great honor. We congratulate the former president.

BEGALA: Absolutely.

BLITZER: All right, guys. Thanks very much. The GOP soul searching amid very hard times. Would the leaders debate where the party goes from here?

And Barack Obama, restaurant critic. We have the lost tape that just resurfaced.

(BEGIN VIDEO CLIP)

OBAMA: That's the problem. The Johnny cakes, they'll get you early and you won't have room for the peach cobbler.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: A revealed President-elect Barack Obama as a restaurant critic. Let's get the details. CNN's Susan Roesgen is joining us now with a long-lost videotape, Susan, that has just now resurfaced.

SUSAN ROESGEN, CNN CORRESPONDENT: Boy, you bet, Wolf. I mean, you know, restaurant critic, who knew. The producer of the show is calling it "The Lost Episode." But there's actually a reason, Wolf, that it has never been seen before now.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: Welcome to "Check Please," the show where regular Chicagoans review and talk about their favorite restaurant.

ROESGEN (voice-over): Yes, there he is. Seven years ago, when he was just an Illinois state senator, a public television producer persuaded Barack Obama to be a guest on a restaurant review show.

OBAMA: I've learned from my some past mistakes, you know that -

UNIDENTIFIED FEMALE: Careful.

OBAMA: I've got to be cautious. I do have to put in a plug for the peach cobbler. The Johnny cakes, you know, they'll get you early and you won't have time, you know room for the peach cobbler.

ROESGEN: The president to-be talking about the joys of peach cobbler.

DAVID MANILOW, EXECUTIVE PRODUCER: I think the people will find it to be charming.

ROESGEN: Producer David Manilow said Obama was terrific and he seemed like a rising star even then. But there is a reason this episode never aired. Turns out Obama kind of dominated the conversation.

MANILOW: It was a little imbalanced. The reason it was imbalanced was because the other two folks probably had a little trepidation when they go in the set. ROESGEN: Even then, in a restaurant review Obama just couldn't resist being a politician, making a plug for the businesses in his district.

OBAMA: The restauranteurs that are out there. I just want to let you know if you give good value and you're not too expensive that in fact, you can do some good business on the south side of Chicago.

MANILOW: I think he provided a lot of depth. A lot of people who come on the show, they just want to talk about food, and service and atmosphere. He talked about things about community, about neighborhoods, about things that have a little bit more depth.

ROESGEN: Obama might not remember his turn as a restaurant reviewer, but Chicago viewers will get a treat, seeing a skinny guy who needed eat a lot more peach cobbler.

(END VIDEOTAPE)

ROESGEN: That lost episode will actually be the 100th episode of the show. It's been running ever since it started seven years ago. And they plan to run that particular episode, Wolf, four times between now and January 20th, Inauguration day.

BLITZER: Yes. I'm not surprised. Tell us a little bit, Susan, about the restaurant itself.

ROESGEN: You know, he chose a restaurant in his neighborhood called "Dixie Kitchen." And it's still open. We talked to the owner. He's glad to get the extra publicity now. It's you know, soul food, fried green tomatoes, those Johnny cakes, the peach cobbler. It's a high carb place, Wolf.

BLITZER: Love the peach cobbler. Let's go next time in Chicago. We'll go get some peach cobbler among other things. All right. Sue, thanks very much.

It was the first day of school for the Obama girls and the transition team is now giving us a sneak peek of their big day. And it's all on-line. Let's bring in our internet reporter Abbi Tatton. Abbi, what are we seeing in these pictures?

ABBI TATTON, CNN INTERNET CORRESPONDENT: Wolf, these images were posted online just moments after the girls headed out to school this morning. You can see Sasha and Malia with their backpacks on, ready go with their parents. Malia getting a kiss from her mother, Michelle there. Sasha smiling as she heads out of the hotel room door. These photos were posted by the Obama team on Flicker. It's a website where the Obama team has posted campaign images, images of the transition.

And occasionally, these behind the scenes look at the Obama family, around the time of the election, around November 4th, right that far, a series of dozens of photos, candid, behind the scenes shots of the Obama family were posted showing them waiting as the election results came in. Sometimes looking pensive, sometimes maybe looking a little bit bored there. Posted online, so everyone can see them. There's an intense interest in the future first family here.

People outside the hotel with their cameras at the ready. These giving us a little bit of a glimpse of what's going on inside.

BLITZER: So the girls basically got in a car and were driven to school. The parents waited in the hotel, they didn't go with them on their first day of school?

TATTON: You could see the girls like poking their heads out of the window. They're looking at the motorcade that they're going to be doing every single day.

BLITZER: All right. We wish the girls only the best with their new life here in Washington. Thanks very much for that, Abbi.

His company's health has often seemed tied to his own. Now, the Apple founder, Steve Jobs, tells why he's lost so much weight and what it means. We're going live to Mac world.

And prosecutors say the man accused of the $50 billion fraud tried to hide expensive jewels. Why they say their case against Bernard Madoff is getting stronger.

Stay with us here in "THE SITUATION ROOM"

(COMMERCIAL BREAK)

BLITZER: It's all Apple all the time at the annual Mac World Conference now underway in San Francisco. But the buzz today isn't about a new product. It's about the health of the founder and boss, Steve Jobs. Now publicly confronting rumors about his health. Let's go to CNN's Dan Simon. He's over there at Mac World, working the story for us. So what is the story behind the health issue of Steve? Dan, what's going on?

DAN SIMON, CNN CORRESPONDENT: Well, hi, Wolf. Tomorrow, it will be the big keynote address here at Mac World, usually given by Steve Jobs where he unveils the latest and greatest products from Apple. But he's not going to be giving it this year and that's led to a lot of speculation about his health. Now Jobs, who will be 54 next month, a cancer survivor, trying to put those rumors to rest. Take a look.

(BEGIN VIDEOTAPE)

STEVE JOBS, APPLE CEO: Today, Apple is going to reinvent the phone.

SIMON: No CEO is more closely identified with his company than Steve Jobs.

JOBS: Amazing. And the screen literally floats in midair.

SIMON: But lately, Jobs has been getting unwanted attention because of concerns about his health. Now he's trying to quell those concerns by releasing a statement to the Apple community saying that a hormone imbalance has been "robbing me of the proteins my body needs to be healthy."

JOBS: Now, I'm going to take this morning and talk about the iPhone.

SIMON: Rumors about Jobs' health began to percolate last summer, when he appeared noticeably thin and gaunt. Indeed, a side by side comparison from two years earlier shows a difference. Investors in the Apple faithful grew fearful because Jobs had a previous bout with pancreatic cancer.

JOBS: I just wanted to mention this -

SIMON: In September before introducing some new iPods, he joked about the rumors.

JOBS: Enough said.

SIMON: But the speculation only intensified when Apple announced that Jobs would not speak at this year's Mac World. The annual trade show in San Francisco for Apple enthusiasts. His modo, leading tech blog recently proclaimed Steve Jobs' health declining rapidly. And Jobs' silence on the issue only created more rumors and caused Apple's stock price to drop. Jobs didn't say in his letter that his hormone imbalance was related to his cancer. One oncologists tells us it's possible but there are good treatments.

DR. ANDREW KO, UNIV. OF CALIFORNIA, SAN FRANCISCO: There are certain medications that can be taken and even self-administered with relatively modest side effects.

SIMON: Tons of new stuff in it.

SIMON: Meanwhile, Jobs says he will be the first one to step up and tell Apple's board of directors if he can no longer continue as CEO.

(END VIDEOTAPE)

SIMON: About 100,000 people attending Mac World and Wolf, you have to wonder if Steve Jobs, the master showman, will have another surprise up his sleeve. In this case, will that surprise be himself. Will he actually make an appearance here at Mac World. Also, of course, everybody wondering what the new products will be from Apple. Back to you.

BLITZER: All right. Dan, thanks very much. We wish Steve Jobs of course, only, only the best. Steve Jobs, by the way, he dropped out of college in 1977. He co-founded Apple with Steve Wosniak. The company went public in 1980 with its stock debuting at $22 a share. Today it's trading in the mid $90s. Jobs was ousted from Apple back in 1985 amid a power struggle and slumping profits. He returned to the company in 1996 and started a renaissance with the introduction of the iMac in 1998 and the iPod in 2001.

Gaza, split in two. Israeli troops and tanks on the move right now as Hamas rockets continue to rain down on Israel. CNN's Anderson Cooper is on the scene for us. We are going there live.

And it's the scandal that has the congressional democrats scrambling right now. We are learning new details of a possible compromise to try to seat a controversial senate appointee.

Stay with us here on "THE SITUATION ROOM"

(COMMERCIAL BREAK)

BLITZER: Former president Bill Clinton joined other major politicians today in eulogizing the senate legend Claiborne Pell. The Rhode Island democrat died Thursday at the age of 90 and is best known for creating the Pell Grant Program, providing direct aid for college students.

(BEGIN VIDEO CLIP)

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: A long life of grace, generous spirit, kind heart and determination. Right to the very end. That life is his last true Pell Grant.

(END VIDEO CLIP)

BLITZER: Vice President-elect Joe Biden and Senator Ted Kennedy were also among those who paid tribute to Senator Pell at that service in Newport. He was a real, real gentleman, if you knew him. Jack, I don't know if you knew him at the time but it was a real honor. I used to interview him. He was a real gentleman.

CAFFERTY: I never met him and I didn't know him, but of course, the grant that bears his name has helped how many hundreds of thousands of students in this country. It's quite a contribution and a legacy that the man left.

I would like Clinton to do my eulogy. He's pretty good.

The question this hour: Is President-elect Obama making a mistake by remaining largely silent on the situation in Gaza?

J.R. in Virginia: "Come on, Jack, Obama's just doing what he always did as a senator, voting present."

Danni writes: "It is indeed a mistake if President-elect Obama can speak about the economy now, why can't he speak about international affairs like Gaza. You can't keep telling people there's only one president and that you can't comment on one topic but then keep talking about every other topic." Pardon me.

Rich in California writes: "The least he could do is call for a ceasefire so that humanitarian aid could reach the people of Gaza. If the years-long blockades were lifted, Gaza was allowed to participate in the world of nations, instead of being imprisoned and starved by Israel, maybe the homemade rockets would stop coming in from Gaza."

Alan in Maine writes: "Obama's justified in remaining silent until he actually has some authority to speak for the U.S. He is at present a private citizen who once was a senator. Any involvement now would be inappropriate."

Ricky in Michigan: "There's a difference between influencing opinions and influencing policy. Senator Obama won't influence Bush's decision-making on the Middle East by simply stating his opinion on the escalating situation. As he's going to be our next president, it would be a good idea to hear something about this situation from him soon."

Rich writes: "No, he should immediately upon his swearing in change the course in the Middle East. Go there, sit down with Israel, Abbas and the Hamas leaders, and hammer out a deal. Hamas was elected by the Palestinians. Elections pushed by the Bush administration. Funny how democratic principles don't always end up as you would like but then that's democracy. Everybody gets a voice."

And Bodo in Ann Arbor, Michigan: "As Mr. Obama has repeatedly stated, there is only one president but as Representative Barney Frank has remarked, Mr. Obama is exaggerating the number of presidents."

If you didn't see your e-mail, go to my blog, cnn.com/caffertyfile and look for yours among hundreds, hundreds of others -- Wolf.

BLITZER: And that's true. All right. Jack, thank you.