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Obama's Cloak-And-Dagger Team; Jobless Rate Highest in 16 Years; Carter: Obama Vows "Active Role"; Interview with Nancy Pelosi; Loot Parachuted to Pirates; "The Mama Grizzly Rises Up in Me"

Aired January 9, 2009 - 17:00   ET


Happening now, their job of helping America outsmart its enemies may soon be shrouded in secrecy. President-Elect Barack Obama unveils his intelligence team, but his picks draw some criticism.

And a parting shot from one of the economy's worst years in generations -- the government announces another half million jobs lost in the month of December alone. And there's a troubling signal about employment in the year ahead, as well.

Plus, the new administration may try to spend its way out of a recession, but could face a trillion dollars in red ink. I'll speak about that with the House speaker, Nancy Pelosi, and ask her how worried she is about this exploding deficit.

I'm Wolf Blitzer.


President-Elect Barack Obama took the wraps off his cloak-and- dagger team -- the top officials who he says will help America face a terrorist networks, weapons of mass destruction, failed states and rogue regimes.

But are the men he picked to head the intelligence effort up to the job?

CNN's Brian Todd has been looking into this.

Some criticism of the picks, as well -- Brian.

BRIAN TODD, CNN CORRESPONDENT: Wolf, there has been since each of these names were first reported. And now that we've got these nominations, the primary question seems only to be getting louder -- can either of these men compensate for his lack of hands on intelligence experience?


TODD (voice-over): A formal unveiling that's been the talk of Washington -- Admiral Dennis Blair as director of National Intelligence; Leon Panetta as head of the CIA -- an intelligence team with impressive resumes, but, insiders maintain, not for the world they're about to enter.

ROBERT GRENIER, KROLL ASSOCIATES: Neither man really has very much of an intelligence resume. So I think that within the bureaucracy, they are going to be under particular scrutiny.

TODD: Former CIA counter-terror chief Robert Grenier says it will be hard for Blair and Panetta to get the running start they'll need, given the complicated, dangerous and largely unseen U.S. efforts in Afghanistan and Pakistan -- operations like the recent missile strike in Northern Pakistan, which killed two top Al Qaeda leaders on the FBI's most wanted terrorist list.

But their prospective boss touts the credentials Blair and Panetta do bring to the spy community.

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: They are public servants with unquestioned integrity, broad experience, strong management skills and the core pragmatism we need in dangerous times.

TODD: But another key question -- will Blair and Panetta completely eliminate the practice of enhanced interrogation techniques on terror suspects?

President-Elect Obama says he's made it clear to them.

OBAMA: Under my administration, the United States does not torture.

TODD: Vice President Cheney does not use the techniques used for the past seven years torture. In an interview with Wolf Blitzer, Cheney said some enhanced methods used with terror suspects worked.

DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: We were able to persuade them to cooperate, to give us the intelligence we needed and to give us the base of understanding about Al Qaeda.

TODD: Some intelligence veterans say certain enhanced techniques should be kept in place. Others say those methods are counterproductive.

ADMINISTRATION. JOHN HUTSON, RET, FORMER NAVY JUDGE ADVOCATE GENERAL: The techniques that are most effective are not enhanced, hot and cold, all of that. Those are not the techniques that are most likely going to produce the intelligence you want.


TODD: After today's news conference, we pressed the Obama transition team again on that question -- will all enhanced interrogation be completely scuttled under the leadership of Dennis Blair and Leon Panetta?

We were told the president-elect is sticking to his plan of making all interrogators adhere only to the Army "Field Manual," which outlaws things like forced standing, sleep deprivation or exposure to extreme temperatures. Again, some call that torture, but intelligence officials have told us some of those techniques have been very effective -- Wolf, it's going to be a debate as we proceed forward.

BLITZER: It sure will be.

All right, on the personnel front, someone who had supposedly been in the mix to become the CIA director didn't get that job, but he's getting something else.

TODD: That's right. John Brennan, who withdrew his name as CIA director last month, is now asked by Mr. Obama to serve as White House harmless deputy to intelligence homeland security adviser and deputy national security adviser for counter-terrorism. But almost more importantly, two key top CIA officials are likely going to stay in place, that is Steven Kappes, the deputy director, Michael Leiter, who's now director of the office -- of the Department of Counter- Terrorism at CIA. They're going to stay in place.

Some analysts have told us it is crucial -- Leon Panetta is going to need the top professionals in place when he gets there to help him get a good start.

BLITZER: Because the stakes really are enormous right now...

TODD: They are enormous.

BLITZER: ...especially in his first year...

TODD: That's right.

BLITZER: ...when everybody assumes the U.S. will be tested.

TODD: Absolutely.

BLITZER: All right, thanks very much, Brian, for that.

It was a miserable year for the nation's economy. 2008 is over now. But insult was added to injury today, when the Labor Department announce another half a million jobs were lost in December.

Let's go live to our senior correspondent, Allan Chernoff -- Allan, aircraft giant Boeing today signaled the year ahead may also be rough for workers.

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Indeed. Another major layoff announcement -- Boeing saying it's going to cut 4,500 jobs this year. And that came shortly after the Labor Department revealed the nation's unemployment rate shot up to 7.2 percent last month -- an increase of 0.4 percent.

Not since Bill Clinton became president in 1993 has unemployment been so high. The economy lost 524,000 jobs in December. And on top of that, the job loss for October and November turns out to be actually worse than originally forecast.

Add it all up -- 1.9 million jobs were lost from September through December -- an astounding plunge. And for all of 2008, the economy suffered a net job loss of 2.6 million. That's the biggest annual job loss since the end of World War II.

The job cuts are across the economy -- construction, manufacturing, retail and services -- on and on -- Wolf, a very grim picture, unfortunately.


So what do we hear about all this from the White House?

CHERNOFF: Well, the White House did have announcement. They were somewhat optimistic, but also a little grim at the same time. They said

In a press release today, ) "The administration" -- this is a quote -- "has taken bold and decisive actions to help the economy. But those actions will take time to have their full effect. Americans can have faith that the economy can return to growth and job creation this year" -- Wolf.

BLITZER: Allan Chernoff, thanks very much for that.

Allan, Chernoff with these horrible economic numbers.

Meanwhile, there's some breaking news -- Israel and Hamas are shrugging off the United Nations' cease-fire resolution, even as this all-out war rages on. In the latest developments, the Israeli military says aircraft attacked more than 70 targets in Gaza identified as terrorist sites, but civilians were once again caught in the middle, with seven members of one family killed in one strike. That, according to Palestinian officials.

Israel says Hamas fired more than 30 rockets across the border from Gaza into Southern Israel once again. And the prime minister, Ehud Olmert, says that proves the U.N. In a press release today, ) cease-fire resolution, in his words, "is not practical."

Hamas, which is not named in the resolution, says the measure does not meet its demands either.

In the West Bank, meanwhile, thousands protested the Israeli offensive. Palestinians clashed with Israeli troops -- and with each other. Hamas members scuffled with the rival Fatah movement, which lost a Gaza power struggle back in 2007.

Meanwhile, the former president, Jimmy Carter, says the Middle East was a key focus when he met with President-Elect Barack Obama this week.


JIMMY CARTER, FORMER PRESIDENT OF THE UNITED STATES: I -- I can't reveal what -- what happened. The day before we had the five president meeting, I spent a good bit of time just privately with this president-elect, Obama. And I had a whole series of things I wanted to discuss with him about the work for the Carter Center. I have to say that we spent at least half that time talking about what was happening and what might happen in the Middle East. The only thing I can say is what he's said publicly, that he will take an active role in trying to bring peace to the Middle East very early in his administration and not wait until the last year, as was the case with President Bill Clinton and President George W. Bush. They waited until the last year, which is really too late.


BLITZER: That was the former president, Jimmy Carter, speaking with our own Jim Clancy earlier today.

Jack Cafferty is back with "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Let me ask you a question.


CAFFERTY: You are -- you are perceived -- and I think accurately so -- as pretty much unflappable. You've interviewed about everybody there is to interview, you've worked in war zones, you've traveled the world, you anchor this program every day, you put up with me and the rest of us.

Were you a little nervous about waltzing down the steps there on "The Ellen DeGeneres Show?"

BLITZER: You know, a little bit. But I just look at it -- I look at it is a little fun. You know, in high school, I was in a rock and roll band.

CAFFERTY: Is there any tape of that?

BLITZER: Fortunately, no.

CAFFERTY: Yes, good.



CAFFERTY: In the midst of a recession, the federal government announced plans to build a massive headquarters for the Department of Homeland Security. The $3.4 billion construction project, one of the largest in the Washington, D.C. In a press release today, ) area since the Pentagon was built. That was back in the 1940s.

But it comes during an economic crisis. President-Elect Obama has issued a dire warning about the economy and is about to slash the federal budget.

So does the Department of Homeland Security really need a complex on 176-acre site, perched on a hill, with panoramic views of the nation's capital? Currently, the Department's 14,000 employees are scattered all across the Washington, D.C. In a press release today, ) area. Maybe the problem is just bad timing.

The location is on the grounds of St. Elizabeth's Hospital, which is a national landmark, because it's where the first federal psychiatric institution was established in 1852. You can do your own joke here now.

Historic preservationists have spent years arguing that this project the government wants to do now will ruin that site and the National Park Service remains opposed to building it. Not a done deal yet. The Congress has to sign off on it.

But if it moves forward, construction would last until 2016 and it would create 26,000 jobs.

So I guess that's on the plus side, right?

Here's the question: What does it mean that a $3.4 billion construction project can get approved during an economic crisis?

Go to and you can post a comment on my blog.

You were in a rock band.

What instrument did you play?

BLITZER: Keyboards. But, you know...

CAFFERTY: Did you sing?

BLITZER: No. Very bad. I cannot sing. But I was not good at keyboards either, though.


But it's high school.

BLITZER: But it was high school.

CAFFERTY: None of those...

BLITZER: But it was a band.

CAFFERTY: None of those people are any good...

BLITZER: It was a rock and roll band, you know?

CAFFERTY: any of that stuff.


CAFFERTY: It's a rock -- they just make noise in a garage...

BLITZER: Yes. CAFFERTY: And they say we're a rock band.

BLITZER: That's right. We pretended.


BLITZER: But it was fun.

CAFFERTY: I hear you.

BLITZER: Jack, thank you.

The House speaker, Nancy Pelosi, setting the ground rules for a massive economic recovery plan.


REP. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE: I can pledge to you that no earmark or any of that any description you want to make of it will be in the bill that passes the House.


PELOSI: Absolute flat out.


BLITZER: But what about a tax increase?

The speaker lays out what she wants in my one-on-one interview. Stand by.

Also, pirates holding a Saudi tanker get their ransom -- by parachute. But the hijacking isn't over yet.

What happens next?

Stand by for that.

And Sarah Palin pushes back against the news media she feels treated her unfairly. And she reveals what brought out her inner grizzly.

Stay with us.



BLITZER: The next administration and Congress may try to spend their way out of a deep recession. But that could mean a trillion dollar budget deficit in the year ahead. Just a little while ago, here in Washington, up on Capitol Hill, I sat down with the House speaker, Nancy Pelosi, and asked how worried she is about the prospect of all that red ink.


PELOSI: Well, I'm so worried about it, that that's why I want a repeal of the -- the tax cuts for the highest income people in America. I don't think we can wait until they expire. And I think they need to be repealed -- not in this legislation. That's a subject for another day.

But that is the biggest contributor to the national debt than any other subject we can name.

BLITZER: And you're...

PELOSI: We can no longer afford -- I didn't think we could, in my respects, but we can no longer afford the war in Iraq. There are things we can change.

BLITZER: Well, let's get through -- let's get through that tax cut first.

What you're talking about is the -- the tax level for those making more than $250,000 a year. Right now, it went down under the Bush tax cuts.

It's supposed to expire at the end of 2010, is that right?


BLITZER: And what you're saying is pass legislation right away -- this year -- to make it expire, for those earning more than $250,000 a year, to go from, what, 39 percent to 35 percent?

PELOSI: What I'm saying is that the sooner they are repealed -- it doesn't have to be right away, because right away, we have to do the economic recovery package. But what I am saying is the sooner they are repealed, the less negative impact they will have on growing our deficit.

BLITZER: Because the concern amongst some economists is that in a time of economic depression, you don't raise taxes. And, in effect, what you would be doing would be raising taxes.

PELOSI: What we -- what we would be doing is correcting a mistake which has contributed enormously to the tremendous deficit that we have.

But, on the other hand, we will be giving a tax cut to 95 percent of the American people. We're saying this -- this focus of the tax cuts should be on America's middle class -- the backbone of our democracy, who've gotten, really, the royal shaft in the past eight years. Instead of catering to those in the high end, we should be focusing on the middle class.

BLITZER: But it would be a tax increase for those richer Americans?

PELOSI: Well, it's not a tax increase. We're repealing something they should never have had in the first place.

BLITZER: Well, you would go from 35 percent to 39 percent.

PELOSI: Well, you may...

BLITZER: That's a tax increase.

PELOSI: You may call that a tax increase, but we're saying is, for all Americans, we want a tax cut. And we do not want to do that in a way that increases the deficit. So let's have some fairness in our tax system.

BLITZER: In this nearly trillion dollar legislation that you're talking about right now...

PELOSI: Right. Well...

BLITZER: ...can you assure the American people that there will be no pork barrel spending, none of these earmarks -- these bridges to nowhere, these phony deals that are going on, that legislators won't be able to bury stuff for their districts -- the stuff that's been so highly publicized?

PELOSI: I can pledge to you that no earmark or any of that -- any description you want to make of it -- will be in the bill that passes the House.


PELOSI: Absolute flat out.

BLITZER: And you've got -- you think you've got the support, because, you know, this is the bread and butter for a lot of your members, Democrats and Republicans?

PELOSI: There will be no earmarks in the economic recovery package that passes the House.


BLITZER: And you can see the entire interview with the House speaker, Nancy Pelosi, this Sunday on "LATE EDITION." "LATE EDITION" -- the last word in Sunday talk. It airs at 11:00 a.m. In a press release today, ) Eastern right here on CNN.

Somali pirates are counting their loot after a $3 million bounty was parachuted to them on the deck of a captured supertanker. Stunning pictures captured that ransom operation.

CNN's David Mackenzie has the story from Nairobi, Kenya.

DAVID MCKENZIE, CNN CORRESPONDENT: Wolf, the ordeal of 25 sailors taken hostage by Somali pirates might finally be over. The Sirius Star, a massive supertanker that was taken a month ago, could soon be in safer waters because a witness tells local journalists that the pirates on board that ship are now counting the ransom money. And these extraordinary photos by the U.S. Navy backs that up. They were taken from a U.S. Navy helicopter and they show the apparent ransom drop -- a small plane crossing across the Sirius Star and dropping a package from a parachute.

Now, experts believe that though each ship is a good move to be released, that the -- in fact, that ransoms are just encouraging pirates and piracy. Last year, there were a record amount of attacks and hostage taking off the coast of Somalia and in the Gulf of Aden. Pirates take over any kind of ship they can get their hands on, including this massive Sirius Star, which gained notoriety because it was taken in mid-November southeast of the Kenya port of Mombassa.

The U.S. Navy says that while these developments are encouraging, it is worth remembering that there are almost 300 sailors still held hostage off the coast of Somalia -- Wolf.

BLITZER: All right, David.

Thanks very much.

Amazing pictures.

All right, she says the media were simply unfair to her. And now Sarah Palin is naming names and sending a message directly to Katie Couric. New excerpts of her very candid interview.

And Barack Obama traveling by rail to his inauguration -- the trip full of symbolism, but also some security risks.

Stay with us.



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

WHITFIELD: Well, Wolf, this news flash -- I think Monday's "Ellen DeGeneres Show" is probably going to be one of the highest watched because I think your dance moves were very fun and very impressive.

BLITZER: Thank you.

WHITFIELD: All right. Maybe not so fun and impressive -- the mayor of Baltimore indicted. Sheila Dixon is accused of accepting illegal gifts like fur coats and using gift cards intended for the poor to pay for a holiday shopping spree. Prosecutors say Dixon bought clothes and electronics, including an Xbox and camcorder. A grand jury today indicted Dixon on theft and perjury counts. The mayor said she is being unfairly accused.

And workers whose job is rescuing other people needed rescuing themselves. A ladder truck crashed into an apartment building today in Boston, injuring four firefighters. A department spokesman says the truck was coming down a hill when it lost control and slammed into the building.

And now to a magazine mix-up piling up in one Nevada man's garage. When he called AARP to let them know that he hadn't received the organization's monthly magazine in more than a year, he expected to get just one copy -- soon. Well, what he got was 1,000 copies on his doorstep. The state AARP office picked up the extras. It turns out the orders got a little mixed up. The thousand copies were actually meant for the AARP state office -- Wolf.

BLITZER: All right. That's -- stuff happens, I guess.


BLITZER: That's what they say.

WHITFIELD: He had a sense of humor about it.

BLITZER: That's right.

Thank you, Fred.

Tickets to the inaugural parade were snapped up in seconds this afternoon after they went on sale online.

Let's go our Internet reporter, Abbi Tatton, for some details -- Abbi, lots folks want to get out there and see what's going to happen.

ABBI TATTON, CNN INTERNET REPORTER: Absolutely, Wolf. Five thousand of these inaugural parade tickets went on sale this afternoon at 1:00 p.m. And by 1:01 p.m. they were all gone. A spokesperson for Ticketmaster saying it's one of the quickest sellouts they've ever had. By way of comparison, saying it was about three times as fast as an AC/DC concert.

Now, the tickets are actually for the parade route itself. Anyone can go and watch this for free, but the tickets that were $25 guaranteed that you got a seat in the bleachers. So pretty much you're guaranteed a view.

No surprise, then, that they're already showing up online on sites like eBay for hundreds of dollars more than face value -- sometimes thousands of dollars more. Now, there are still ways to get these tickets. A couple of suggestions, Wolf -- one from the Presidential Inaugural Committee is that D.C. In a press release today, ) students can enter an essay writing competition and in the hopes that they'll get one of them. Failing that, if you want to head down there, we found this on eBay -- an Obama periscope for $20 that could come in handy -- Wolf.

BLITZER: It certainly could.

Thanks very much, Abbi, for that. It's another one of those difficult challenges facing Barack Obama when he takes office -- what to do about Iran. The president- elect says he has some ideas.

But what are they and will they work?

And Sarah Palin is tired of what she says is the way she's being treated. You're going to hear how she explains her latest comments on Caroline Kennedy.

And Barack Obama will travel hundreds of miles on a train.

Is it a secure trip or a Secret Service nightmare?

Stay with us.



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

Happening now, the vice president-elect, Joe Biden, is overseas right now.

What is he doing and is he stepping on Hillary Clinton's toes?

Plus, a tough talking woman is now getting involved in that Tennessee sludge spill. Wait until you see what left Erin Brockovich speechless.

And Illinois's governor impeached -- so why didn't Rod Blagojevich show up to try to defend himself?

That's what lawmakers want to know.

I'm Wolf Blitzer.


Sarah Palin is angry and she's not holding back. She's letting loose on the news media in a new interview. And she's singling out individuals whom she believes crossed the line.

Let's go to our senior political analyst, Bill Schneider.

He's joining us now live -- Bill, what exactly are we hearing from Sarah Palin?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, Wolf, remember that pit bull with lipstick?

She's back.

(BEGIN VIDEOTAPE) SCHNEIDER (voice-over): Call it the Palin push back. In an interview for a documentary, Palin argued the media has exploited her -- two people, in particular. Comedian Tina Fey, who played Palin on "Saturday Night Live."


TINA FEY, ACTRESS/COMEDIAN: I believe marriage is meant to be a sacred institution between two unwilling teenagers.



GOV. SARAH PALIN (R), ALASKA: A mama grizzly rises up at me hearing things like that. You know, here again, cool. Fine. Come attack me. But when you make a suggestion like that, that certainly attacks a kid, that kills me.


SCHNEIDER: And CBS News anchor Katie Couric, who asked Palin what newspapers and magazines she read.


PALIN: All of them. Any of them that have been in front of me over all these years.


SCHNEIDER: An insinuating question?

PALIN: To me, the question was more along the lines of do you read?

What do you guys do up there?

What is it that you read?

SCHNEIDER: She addressed Couric directly.

PALIN: Because, Katie, you're not the center of everybody's universe.

SCHNEIDER: Plain doesn't want to become a punching bag for the press, according to Christian Broadcasting News reporter David Brody.

DAVID BRODY, CNN CONTRIBUTOR, CHRISTIAN BROADCASTING NETWORK: And she may have a little Dan Quayle syndrome here, in the sense that, you know, once Dan Quayle misspelled potato, that was the end of it.

SCHNEIDER: If Palin wants to run for the Republican nomination in 2012, she has an issue that could rally conservatives -- her treatment by the media. BRODY: That's a home run, for the base especially.

SCHNEIDER: In her interview, Palin argues that her treatment by the media has been worse than Caroline Kennedy's.

PALIN: There is a class issue here, also, that was such a factor in the scrutiny of my candidacy versus, say, the scrutiny of what her candidacy may be.


SCHNEIDER: In a press release today, Governor Palin says In a press release today: "I was not commenting at all on Caroline Kennedy as a prospective U.S. senator, but rather on the seemingly arbitrary ways in which news organizations determine the level and kind of scrutiny given to those who aspire to public office" -- Wolf?

BLITZER: All right. Let's talk a little bit more, Bill. Thanks very much.

Let's bring in Karen Finney. She's a communications director for the Democratic National Committee. And CNN contributor, the Republican strategist, Alex Castellanos. Guys, thanks very much.

What do you think about this whole rebuttal she's now offering in response to the criticisms that she endured?

KAREN FINNEY, DNC COMMUNICATIONS DIRECTOR: This is about what the third or fourth rebuttal we've heard since the end of the campaign. Clearly, she feels like she's got to correct the record and clean up her image. The problem is blaming the media may be a good, populous, political strategy. But at a point, if you sound too whiney, I think you can go too far and I think we're seeing that in terms of some of the numbers we're seeing out of Alaska in terms of her popularity.

BLITZER: What do you think?

ALEX CASTELLANOS, REPUBLICAN STRATEGIST: I think to some degrees, Karen's right. She's feeding the problem she wants to correct. If she wants to be judged on her record, maybe it would be good to stop giving interviews about politics and things with the media and those things. However, she does have a point. She wasn't treated the same way Joe Biden was. Joe Biden said during this campaign, this campaign is about three important letters, jobs. He said FDR was going to let us out of the great depression on television. Joe Biden didn't know where the vice president derives his powers and really he got away with all that stuff. And Sarah Palin was attacked that her child was not her own. That's unfair.

FINNEY: A part of it, I think the McCain/Palin press operation deserves some of the fault for that. The Obama operation, when things like that happened, they sprung into option and strung back. I think Sarah Palin was misserved.

BLITZER: Alex, listen to David Brody, the Christian broadcasting network, one of our political contributors. I want to play this little clip for you.


BRODY: She could come back in 2012 and be totally unplugged. I mean, I think she believes that this was handled from a media perspective all wrong in 2008. So in 2012, get ready, you know, for the Sarah Palin show.


BLITZER: I don't think we've heard the last, by any means, Alex, from Sarah Palin.

CASTELLANOS: She doesn't seem to be going away. But, that may be -- if she does want to play politics, if she does want to be a serious force, then she needs a little time in the desert. She needs to retire. She needs to demonstrate growth as a politician, as a political leader. You can donate that if you keep staying in front of us day after day after day as the same person. I think it's a political mistake. If she wants to return, she could end up being a pat Buchananish figure in the Republican party, which means, you get the base happy, you get everybody excited, you raise money, but can't grow beyond a small section.

BLITZER: But she is a very popular governor in her home state of Alaska.

FINNEY: She is a very popular governor in her home state of Alaska. She's got to decide, is that where her political career will begin in end? If she wants to get into national politics, she needs that adviser who says, stop with the interviews, let's go behind closed doors, let's work on our record and then maybe come back out and try to rehabilitate.

BLITZER: The vice president-elect, Joe Biden, he's still wearing his hat as the chairman of the Foreign Relations Committee, still a United States senator, and is on this visit now to Pakistan. He's going to Afghanistan. Some are wondering, Alex, is he stepping on the future secretary of state's toes?

CASTELLANOS: While we're all sitting here looking at the economy, the foreign policy portfolio is on the table and it's up for grabs. And Joe Biden is making a power play. He's grabbing it. This happens at the beginning of a lot of administrations. It's the jockeying for turf and power. And Joe Biden doesn't want to stay home with Bill Clinton and bake cookies. He wants to be the co-president with Barack Obama and grab the foreign policy portfolio. So far, he's doing a pretty good job. I'm not sure that's good for American foreign policy when you undercut the incoming secretary of state.

BLITZER: She hasn't been confirmed yet, we're talking about Hillary Clinton.

FINNEY: That's great spin, Alex, but the truth is, I think it's sort of a false dichotomy. Whatever region he's going to, it's good for the United States of America. It sends a very clear signal. He's going in a bipartisan way. We've got real problems between Pakistan and India. I think going there on a fact-finding mission and make sure on the day they come into office, they've got the most up to date information, that's good for America.

CASTELLANOS: That's how he got to be vice president. He went to Georgia, stole the spot, got the foreign policy portfolio, he thinks it may work again.

BLITZER: We'll see. Guys, thanks very much. Going to be fascinating.

A foreign policy tease from the president-elect. Listen to this.

OBAMA: With respect to Iran, I'll have more to say about Iran after January 20th.

BLITZER: Is a major shift in U.S. policy in the works? One Iran expert has a warning for the next administration.

Plus, details of that massive security challenge surrounding Barack Obama's train trip to his inauguration. Why there's concern about chemicals among other things.

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


BLITZER: In the campaign, he said he talked to Iran. Is Barack Obama now getting ready to follow through on that? Let's go live to our CNN Pentagon correspondent, Barbara Starr.

What's the latest, Barbara?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: When you look at the president-elect's press conference today, it certainly seemed like he was taking the next step down that road.


STARR: Was this a tantalizing hint from president-elect Barack Obama that U.S. policy towards Iran is about to change?

OBAMA: With respect to Iran, I'll have more to say about Iran after January 20th.

STARR: For the last eight years, the U.S. priority has been to get Tehran to renounce nuclear weapons development, even as it has expanded its fear of influence in Iraq and Afghanistan and increased its support for radical Palestinian groups. But Mr. Obama says, it may be time to talk.

OBAMA: We should be willing to initiate diplomacy as a mechanism to achieve our national security goals.

STARR: Outgoing national security adviser Stephen Hadley has a warning. STEPHEN HADLEY, NATIONAL SECURITY ADVISER: Negotiations with Iran, as some have proposed, without leverage on Iran will not produce a change in Iranian behavior.

STARR: Hadley says keeping tough sanctions on Iran is vital leverage.

HADLEY: The issue is how the new team will use this leverage to produce a different Iranian policy on its nuclear program, terrorism, and Middle East peace.

STARR: But there may be some emerging mutual interests between Washington and Tehran. General David Petraeus worked to get Iran to stop shipping weapons into neighboring Iraq. Could the same type of thing work again in Afghanistan, which also shares a border with Iran?

GEN. DAVID PETRAEUS, CMDR. U.S. CENTRAL COMMAND: Iran is concerned about the narcotics trade. It doesn't want to see Sunni extremists running or certainly ultrafundamentalists extremists running Afghanistan again anymore than other folks do.


STARR: But here is the bottom line. Iran shows no signs of giving up its support for Hamas or Hezbollah and no signs of abandoning its nuclear ambitions -- Wolf?

BLITZER: Thanks, Barbara. Barbara Starr working that beat for us.

A week from tomorrow, President-elect Obama will travel to Washington by train for his inauguration. There are serious security risks all along the route from Philadelphia, but the Secret Service says, it's confident it can protect him. CNN's homeland security correspondent Jeanne Meserve has been looking into all of this -- Jeanne?

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: These are the tracks that Barack Obama is going to ride from Philadelphia down to Washington for his inauguration. Keeping him safe is going to be a daunting challenge.


MESERVE (voice-over): The president-elect will journey from the cradle of our democracy to the seat of our government, a trip full of symbolism, history, and risk. Mr. Obama will travel 137 miles on a fixed route with vulnerability. Hundreds of bridges that could be sabotaged, tall buildings that could hide snipers, and plants that manufacture and use dangerous chemicals, that in a terrorist attack, could be released.

RICK HINO, GREENPEACE: When you look at a map of the chemical plants in that route, there's over ten plants along that route that we can count that put 100,000 people or more at risk. Half of them put 1 million or more people at risk. MESERVE: On Saturday, January 17th, one of those people will be President-elect Obama. The Secret Service won't be specific, but says it is addressing the chemical issue. Sensors detecting not just chemicals, but biological, nuclear, and raid logical threats will be used, along with other technology, which officials say they began positioning two weeks ago.

WILLIAM PICKLE, FORMER U.S. SECRET SERVE AGENT: It would tell you if there was a problem with those tracks, if there's been a sabotage of the tracks, if there's explosives nearby.

MESERVE: The Secret Service won't comment on security enhancements to Obama's train. Amtrak's state and local police will help create a safety envelope around it as it moves south.

JOHN O'CONNOR, AMTRAK POLICE CHIEF: Security will be provided, in the air, on the ground, and in the water.

MESERVE: There is a long history of presidents taking train trips so people can see them and hear them. The Secret Service is confident that it can keep this president-elect safe.

MICHAEL CHERTOFF, HOMELAND SECURITY SECRETARY: Remember, the Secret Service has taken the president into Iraq, into Afghanistan, into some very hostile places around the world. I'm comfortable that they have the skills, working of course, with state and local authorities, to protect the president-elect in Pennsylvania and Baltimore and Washington, D.C.


MESERVE: Mr. Obama will be making stops along the way to give speeches. Those venues will be secured, as they usually are at presidential events, but they also expect throngs of people along these tracks, at the stations. The Secret Service won't say how they're going to handle that. Wolf, back to you.

BLITZER: Thank you, Jeanne.

Barack Obama was inspired by Abraham Lincoln, who arrived to Washington by rail in 1861. Lincoln's journey from Illinois lasted 12 days. When word was received about a possible assassination plot in battle or, the president-elect arrived there earlier than planned, secretly switched trains, and continued on to Washington. That sparked rumors that he snuck into Washington in disguise. As you can see, cartoonists took full advantage, showing him wrapped up in a cloak.

Homes wiped out, by a wall of sludge. These people are so angry, they brought in Erin Brockovich. We're going there to the site, the site that left her speechless.

And my one-on-on interview with Dick Cheney. He is saying some positive things about Barack Obama, you'll hear it and more right here in THE SITUATION ROOM.


BLITZER: For the second time in less than a month, the toxic spill at a Tennessee valley authority power plant. This one in northeast Alabama has been contained. But it pales in comparison to the catastrophe Christmas week in Tennessee when almost a billion -- a billion gallons of toxic sludge spilled. CNN's Brooke Baldwin is joining us live from the site.

Brooke, Erin Brockovich has all of a sudden become involved as well.

BROOKE BALDWIN, CNN CORRESPONDENT: She has indeed, Wolf. When you think of Erin Brockovich, what do you think of? The hit Hollywood movie. But I have to tell you the story here in Kingston, Tennessee, is very real and it's one that a lot of people fear without help will not have a happy ending.



BALDWIN (voice-over): It isn't often Erin Brockovich is speechless.


BALDWIN: But this tough talking environmental activist is nearly at a loss for words after seeing this sea of sludge for the first time.

BROCKOVICH: It's a huge mess. And I don't think that I can describe it. Because I think so many things. Tornado, volcano, mudslide, tsunami. And my first impression is, I'm surprised nobody was killed.

BALDWIN: That's the sludge spill's silver lining, but 42 properties were damaged after the retention pond wall collapsed at TVA's Kingston steam plant three days before Christmas. Three houses, completely wiped out.


BALDWIN: This mangled mess is the only evidence Holly Schean's family home ever sat here. Unsatisfied by TVA's response, she and dozens of others contacted Erin Brockovich to help.

SCHEAN: To have her voice speak for us is just -- it's amazing.

UNIDENTIFIED FEMALE: Why are there medical records and blood samples in real estate files? Would you mind if I investigate this a little further?

BALDWIN: Brockovich gained nationwide fame after her real-life investigation inspired a hit Hollywood movie starring Julia Roberts. The same spunky Brockovich flanked by a team of engineers, health experts and attorneys plans to get answers in Kingston, too. Question number one, is the drinking water really safe?

BROCKOVICH: Poison a poison is a poison. Doesn't look clean to me.

BALDWIN: On Capitol Hill Thursday, TVA's president faced some tough questions about previous leaks at the same plant.

TOM KILGORE, CEO, TENNESSEE VALUE AUTHORITY: We had outside experts help us with those fixes. The most expensive solution wasn't chosen. Obviously that looks bad for us.

BALDWIN: As a result of this disaster, Congress may push for mandatory federal oversight of the storage of coal ash.

BROCKOVICH: Common sense tells you at some point it's going to give way.

BALDWIN: Brockovich believes change must come. She will provide a loud voice, so there won't be a next time.

BROCKOVICH: And where is the preventive measure going to come? We have the opportunity to view that right now. If we regulate and we monitor, we should be able to prevent.


BALDWIN: Wolf, Brockovich is here tonight. Night number two, meeting with even more families. But I'm told her legal team has not filed a class action lawsuit on behalf of these sludge victims just yet. Wolf?

BLITZER: We'll see what happens. Brooke is in Kingston, Tennessee.

Let's go back to New York and Jack Cafferty -- Jack?

JACK CAFFERTY, CNN CORRESPONDENT: Question this hour, Wolf: What does it mean that a $3.4 billion federal construction project can get approved during an economic crisis?

Jeff in Minnesota says: "Jobs. Hopefully lots of them."

Jackie in Dallas writes, "While I see this as an opportunity to put people to work, I feel this is wrong to spend this money now. There are millions of square feet unoccupied already built space that could be modified to handle the department of homeland security."

Katy in Illinois says: "Congress must not approve this frivolous expenditure. Whose idea is this? Billions have already been wasted on this inept organization and this is just another sign of government waste. $3.4 billion could be put in much better use with our economy being in dire straits. This is beyond ridiculous."

Bizz in Quarryville, Pennsylvania, "I agree about the needing of building for homeland security. But $3.4 billion with the completion date of 2016 is as crazy as the land they're using to build it on." That's land that has an old mental hospital. "This only proves our government can talk the talk, but not walk the walk like the rest of us are forced to do."

Ron in Florida: "We need another site with federal builds on it like we need another hole in our heads. Use the $3.4 billion to repair and rehab other government builds that need it. That will keep the 26,000 Americans working, and improve what we already have in existence."

Frederick writes: "My main concern would be creating a new target for terrorists. They all the to be hidden and impossible to locate. That is the definition of security. Telling your enemies where you are is blowing your cover a dangerous idea for all of us that should be stopped while we still can."

And Ramona in Las Vegas says: "Jack, I think Wolf's dancing is hot."

If you didn't see your -- poor woman. If you didn't see your e-mail here, go to my blog, file and look for yours there, among hundreds of others. Maybe we ought to post some of those clips on the "Cafferty File" blog.

BLITZER: Ramona in Las Vegas, thank you very much. I taped the Ellen Degeneres show. It's going to air on Monday. The whole nine yards. But listen to this little exchange we had, Jack, and we'll discuss.

CAFFERTY: All right.


ELLEN DEGENERES, TALK SHOW HOST: You're used to the cold?


DEGENERES: Well, I'm from New Orleans originally. And so I'm not used to the cold. I just want to make sure you're taken care of, because I care for you.

BLITZER: Thank you.

DEGENERES: We want to give you some Ellen ear muffs.

BLITZER: Thank you.

DEGENERES: I want to give you one of a kind --

BLITZER: Can I keep this?

DEGENERES: Of course.

BLITZER: Thank you.

DEGENERES: Ellen mittens.

BLITZER: Perfect.

DEGENERES: This is my personal. I'm giving you mine. This is an Ellen flask.

BLITZER: Thank you. Very nice.

DEGENERES: And then, of course, the Ellen color, the muffler.

BLITZER: I'm not sharing this with Anderson Cooper.

DEGENERES: No you don't need to. He can get his own stuff.


BLITZER: Yes. I told her we were going to anchor or inauguration coverage from the roof in the museum. It's going to be cold out there that day. So she's trying to take care of me.

CAFFERTY: Oh, OK. That was cute, actually. I was waiting for you to put the ear muffs on and then I was going to leave the room.

BLITZER: There's a limit to how much --

CAFFERTY: Yes, there is.

BLITZER: All right. Stand by, we've got some more. You want more?

CAFFERTY: Sure why not.

BLITZER: We'll give our viewers more. Stand by for that, Jack has got "The Cafferty File."

The Illinois governor impeached, but defiant. He's speaking out and vowing to fight every step of the way. So what's next? Rod Blagojevich.

Vice President Dick Cheney, is he encouraged or worried about the incoming Obama administration? I asked him in my one-on-one interview.

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


BLITZER: Barack Obama will have yet another problem on his plate once he takes office. Allegations of corruption over the food and drug administration. What's this one, Lou, all about?

LOU DOBBS, CNN ANCHOR: Wolf, we've been reporting on my broadcast for several years now about the deficiencies in the so- called leadership of the FDA. The management has been absolutely incompetent in that agency. They have been derelict in their responsibilities. The working men and women in the FDA deserve so much more from their leadership. They've had their budgets cut.

Now comes further confirmation of everything we've been reporting, nine scientists at the FDA themselves saying to the Obama administration, transition team, please, please, please deal with this corrupt agency. Saying straightforwardly, that it's scientists -- its scientists have been led by a management that has insisted that some data be changed, that lives actually could be at risk here because of, not only incompetent, but absolutely dishonest executives in that agency; especially concerned about the medical device area that is, of course, overseen by the FDA, saying that a lot of that data has been changed, that lives are at stake and that it is time for this administration coming in to do something about the leadership, the management and the values that are being followed by that agency.

And at the same time, Wolf, as you know, in 40 states we've got a salmonella outbreak, and the agency, spring of last year demonstrated again it simply doesn't know how to deal with an emergency, or simply seems unwilling to protect the American consumer. So we need a serious look at this, both by the administration, and I believe a Congressional investigation as well. I'm not talking about one of those show hearings.

BLITZER: Lou's going to have a lot more on this in one hour on his broadcast at 7:00 p.m. eastern.

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

Happening now, Barack Obama torn between the economy and security. Why he's telling critics of his policy to show him something better.