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THE SITUATION ROOM

Obama Defends Treasury Choice; Madoff Remains Out On Bail; Pentagon Official Speaks Out About Gitmo; NY'ers Cool on Caroline Kennedy

Aired January 14, 2009 - 16:00   ET

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


WOLF BLITZER, CNN ANCHOR: Happening now: new remarks by Barack Obama about his treasury secretary nominee's tax troubles. We're going to hear at length from the president-elect. Stand by. That's coming up.
Plus, the president-elect courtside -- he's reaching out to America's top justices and possibly thinking about their replacements, the ramifications enormous.

Also, this hour, Republicans are adding to president-elect Obama's bailout misery, taking their cues from some disgruntled Democrats.

And shocking details about the alleged torture and humiliation of a 9/11 suspect, a Pentagon official's new claims about what's going on at the Guantanamo Bay prison.

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

But up first this hour, president-elect Obama is standing by his choice to be the treasury secretary. He says Timothy Geithner's failure to pay some $34,000 in taxes several years ago should not derail his nomination.

And, just a short while ago, the president-elect appeared with vice president-elect Joe Biden and Republican Senator Lindsey Graham just back from a trip to Southeast Asia and the Middle East. He answered reporters' questions about Geithner and the new Osama bin Laden tape.

Take a listen to this.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT-ELECT OF THE UNITED STATES: Thank you, Joe, for the outstanding trip that you took. And thank you for having the wisdom and foresight to invite Lindsey Graham, because there -- these two represent, in their respective parties, as smart and as dedicated a pair of public officials as we have.

And, Joe, I drafted as vice president. But Lindsey Graham, I'm drafting as one of our counselors in dealing with foreign policy because the fact is, as our tradition has always been, that our differences end at the water's edge and that at a certain point it is imperative for us to have a clear, coherent strategy at home, so that the young men and women who are day to day engaged in extraordinary -- extraordinarily difficult, you know, deployments in Afghanistan and Iraq, that they are well served.

And so, the trip that both of you took and the recommendations that you're going to be delivering to me are going to be of enormous help in making sure that we do what is my number-one task as president-elect and as president, and that is to keep the American people safe and to make sure that when we deploy our military, that we do so with a clear sense of mission and with strong support from the American people.

And I think the trip that you've taken helps us move in that direction.

So, with that, I'm going to take...

JOSEPH BIDEN, VICE PRESIDENT-ELECT OF THE UNITED STATES: One comment that I want to make (inaudible).

OBAMA: Yes?

BIDEN: Every place we went, we visited our troops.

OBAMA: Right.

BIDEN: Every place, the degree of enthusiasm and well wishes for you personally were -- I have been there a lot -- were spontaneous. So they're wishing you well, man, and they're looking forward to you being commander in chief. And it really was -- it was heartening to see.

OBAMA: Well, that's wonderful.

QUESTION: Sir, just a quick question, going back to Capitol Hill: Are you concerned that Timothy Geithner's taxes mishap will affect his chances of confirmation and, if he is confirmed, will affect his credibility?

OBAMA: No. Tim Geithner when I nominate him was right -- rightly lauded by people from both sides of the aisle, from the market, from labor as somebody who is uniquely qualified to deal with, as what Lindsey described properly as the biggest crisis that we've had since the Great Depression.

You know, look, is this an embarrassment for him? Yes. He said so himself. But it was an innocent mistake. It is a mistake that is commonly made for people who are working internationally or for international institutions. It has been corrected. He paid penalties.

And as I have said before, if my criteria, whether it was for Cabinet secretary or vice presidents or presidents or reporters was that you'd never made a mistake in your life, none of us would be employed.

So my expectation is that Tim Geithner will be confirmed. And my expectation is, is that he is going to do an outstanding job on part -- on part of the -- on behalf of the American people. STAFF: Last question.

OBAMA: Lindsey, you want to add...

(CROSSTALK)

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: Just speaking as a single -- as one Republican, I couldn't agree more. These are huge times. It's not -- now is not the time to think in small political terms.

He has a great resume. He's been involved with Secretary Paulson. He knows the past. I think he can help fashion the future.

So the problems that we talked about, I think, have been dealt with responsibly, and I don't see any desire by the Republican Party to play gotcha on something like this.

We need -- we need a new secretary of treasury that understands where this country's at financially and has a game plan to move forward. I think he's the right guy.

STAFF: Mr. President-elect...

(CROSSTALK)

OBAMA: I'm sorry. I think we had interrupted her question.

QUESTION: Thank you, Mr. President-elect.

Mr. Vice President-elect, first of all, what was the update on Osama bin Laden (inaudible)?

Also, Mr. President-elect, new tapes have surfaced from Osama bin Laden. What are your thoughts about those tapes? And what are your efforts moving into your new administration (inaudible)?

OBAMA: Yes, I'm going to take the question first, and then, Joe, if you want to add something.

But I have been assiduous about this, I have been consistent about this, that we have one president at a time when it comes to foreign policy. And so I don't want to get too far afield in terms of what our -- our policies are going to be.

I can refer back to what I said during the campaign and the fact that I haven't changed my mind, that bin Laden and al Qaeda are our number one threat when it comes to American security, and this administration, working in concert with Congress, with Republicans and with the American people, we're going to do everything in our power to make sure that they cannot create safe havens they can attack America. That's the bottom line.

Now, as Joe indicated, we have to take a regional approach. We're not going to solve the problem just in Afghanistan; we're going to have address issues in Pakistan as well. (END VIDEO CLIP)

BLITZER: All right, so, there you have it, the president-elect speaking only a few moments ago here in Washington.

Let's get to Capitol Hill right now, where the Obama camp is trying to put out a new fire in the effort to tap into the remaining federal bailout money.

Our senior congressional correspondent, Dana Bash, is working this part of the story.

The stakes are enormous right now and the sums of money enormous as well, Dana. What's going on?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Well, what is going is that Barack Obama's economic adviser and his incoming chief of staff are on their way, as we speak, here to Capitol Hill, and they are going to meet with Republican senators.

You know, in order for Mr. Obama to get this first big task accomplished, he's going to need a healthy amount of Republican support. And I have got to tell you, I talked to many Republican senators today, and it's pretty clear he's going to have trouble getting their votes.

(BEGIN VIDEOTAPE)

BASH (voice-over): Barack Obama is already having big trouble convincing fellow Democrats to give him the last $350 billion in that giant financial bailout. Now he has a growing Republican problem.

SEN. JOHN ENSIGN (R), NEVADA: I think it would be very difficult to vote for the TARP funds, knowing, first of all, the first $350 billion, there was no transparency. We don't even know how exactly it was spent. There's -- the Obama administration has not been forthcoming on how that they would spend this money.

BASH: Nevada Congressman John Ensign is one of many GOP senators who voted for the rescue in the fall, but tells CNN they will oppose it this time.

John Cornyn is another.

SEN. JOHN CORNYN (R), TEXAS: I did so in good faith, based on the representations of the administration and the Treasury and the Federal Reserve chairman. But, frankly, they seem to have acted with the virtual disdain of Congress when it comes to oversight and accountability for that money. They seem to use it as a slush fund.

BASH: Many Republicans say they're angry the bailout funds have not only been mismanaged, but, in their view, misdirected, when used for the auto industry. But another factor is raw politics.

ENSIGN: My constituents overwhelmingly were against it. And they still are. As a matter of fact, they're probably more opposed today than they were back then.

BASH: Opposing hundreds of billions more in taxpayer dollars for a controversial bailout would please outraged folks back home, and, for Republicans, has the added benefit of making life even more difficult for the Democratic president-elect, since securing the money is the first big test of his clout.

Obama allies are frantically trying to round up votes, warning, the economy can't rebound without this $350 billion infusion.

SEN. CHARLES SCHUMER (D), NEW YORK: The bottom line is very simple. You cannot have the financial system in lockdown.

(END VIDEOTAPE)

BASH: Now, in the fall, 34 Republican senators voted for this. And now most of those who are still here apparently are planning to vote against it.

And, you know, several Republicans actually told me in a private lunch with Republican senators yesterday, Wolf, that they discussed the benefits of voting no and essentially having Democrats -- quote -- "own" this controversial issue. Now, this vote could tomorrow or even Friday. Fifty-one votes are needed in order for Barack Obama essentially to get this.

And everybody, Democrats and Republicans, say it is going to be very close.

BLITZER: Even with the Democrats having, what, 58 seats right now, since that one Minnesota seat remains up in the air? The Illinois seat, I guess, is not yet ready either, is it?

BASH: That's right.

You know, depending on when this vote is, Roland Burris from Illinois might be voting on this as well. But the problem that Barack Obama has is that he also has a lot of opposition in his own caucus among fellow Democrats. And that's why this -- this -- this is so close, because it's not an easy sell on either side of the aisle -- Wolf.

BLITZER: Thanks very much. We will watch the vote tomorrow.

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

JACK CAFFERTY, CNN ANCHOR: Timothy Geithner, the president of the Federal Reserve Bank of New York and Obama's pick for secretary of the treasury, hit a roadblock yesterday on his path to Washington to help lead this country through its current economic crisis.

His confirmation hearing turned into a closed-door meeting between members of the Senate Finance Committee and the would-be secretary. And at issue at that meeting, Geithner's failure to pay Social Security and Medicare taxes while he worked at the International Monetary Fund, and employing an immigrant housekeeper who had expired work papers for a period of three months.

The president-elect and his aides chalked these problems up as honest mistakes. They were quick to point out that all the back taxes, interests, penalties have been paid, filings were amended. As treasury secretary, though, Geithner would ultimately oversee the IRS, so his tax mistakes conceivably could be an issue.

Some members of the committee said they still support Geithner, who has been widely praised for his experience, but others aren't willing to give him a pass just yet. As for the housekeeper, she is married to an American and has her green card now. Geithner's confirmation hearings have been rescheduled for next week, after Obama's inauguration.

Here's the question. Should Timothy Geithner's tax and housekeeper problems cost him the post of secretary of the treasury?

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

BLITZER: Jack, ask me what I did most of today.

CAFFERTY: What did you do most of today? Why do I -- why you trap me into these things? What did you do most of today?

BLITZER: Because I want to tell you and tell our viewers, because I'm really excited about this. I spent most of the day today at Andrews Air Force Base outside Washington aboard Air Force One with the pilot who's been flying that huge plane for eight years. He was the co-pilot during the Clinton administration. And he has some amazing stories to share with us.

We're going to play that interview tomorrow and Friday, because there's a lot of good stuff there, here in THE SITUATION ROOM.

That's what I was doing most of today.

CAFFERTY: That's very exciting. Now, do we get like a tour of that airplane, too? I mean, did you get the cameras to walk around and look at some of the pictures inside?

BLITZER: Well, you're seeing some pictures. You're seeing the cockpit right there.

CAFFERTY: No, I understand.

BLITZER: You see me in the co-pilot's seat, sitting right there, and talking to the pilot, who's a great guy.

CAFFERTY: But, I mean, do we get to see the rest of the airplane?

BLITZER: You will see. Wait until tomorrow.

CAFFERTY: Oh, please.

BLITZER: Get ready. (LAUGHTER)

CAFFERTY: OK.

BLITZER: Thanks, Jack.

(LAUGHTER)

CAFFERTY: Yes.

BLITZER: The president-elect's choice to be the attorney general gets a grilling tomorrow. And Eric Holder can expect some tough questions from the ranking Republican on the Senate Judiciary Committee. I will speak with Senator Arlen Specter about that and much more.

And the stunning claims of humiliation and torture. Wait until you hear with what a top Republican Pentagon official is saying about the treatment of a terror suspect.

And jail or not jail? A new ruling on the fate of the alleged Wall Street swindler, Bernard Madoff.

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

(COMMERCIAL BREAK)

BLITZER: Hearings for president-elect Barack Obama's pick to head the Justice Department set for tomorrow before the Senate Judiciary Committee. Sparks could fly.

Let's talk about that and more with Republican Senator Arlen Specter of Pennsylvania. He's the ranking member, the ranking Republican, on that committee.

We learned today that Fran Townsend, Senator, who was President Bush's homeland security adviser -- she's a CNN analyst -- she's going to testify in favor of Eric Holder. She worked for him when she was at the Justice Department.

What's your problem with Eric Holder?

SEN. ARLEN SPECTER (R-PA), JUDICIARY COMMITTEE RANKING MEMBER: The concerns arise as to his independence with respect to a number of situations.

One was the pardon of Rich, where it was irregular, did not go through the Department of Justice. And Mr. Holder made the recommendation of neutral, leaning positive. Rich was a fugitive on the FBI 10 most-wanted list. And the issue is whether he modified his views to accommodate the president.

And with the independent counsel issue, as to Vice President Gore, there was a -- were substantial indicators that independent counsel ought to be appointed. That's what FBI Director Louis Freeh said. And the Department of Justice turned that down. We want to see...

BLITZER: Is he qualified, Senator, to be the next attorney general, in your opinion?

SPECTER: Well, I want to hear what he has to say, Wolf.

When I made these statements on the Senate floor, I very carefully said that I was reserving judgment. I wanted to hear his explanations about Rich and Gore and also about the FLN, the terrorist organization which had been involved in murders and bank robberies, where he recommended commutation of the sentence. Those are important issues on his independence, which is very important.

BLITZER: Do you believe that Timothy Geithner should be confirmed as the treasury secretary, in light of these embarrassing revelations about back taxes and documentation for a housekeeper?

SPECTER: Well, he also has some important questions to answer.

As the housekeeper, Wolf, I think that's a technicality. As to his failure to pay taxes, I want to know if he paid those taxes only to get confirmation. If you have a man who is going to be treasury secretary, in charge of the Internal Revenue Service, and he hasn't paid his taxes, you can see that that would be a cause for so many, many people to say, well, if he can do it, why can't -- why can't I?

But, before coming to a judgment, I want to know -- I want to know the detailed facts as to exactly what happened. So far, we only have press accounts.

BLITZER: How are you going to vote, Senator, on this $350 billion, the second installment of the financial bailout money, the so-called TARP money, that vote coming up as early as tomorrow?

SPECTER: Well, I'm very troubled about it and am concerned about what they have -- have done with the first $350 billion.

We have had a number of reports that there has not been transparency, there has not been accountability. We do hear that the experts at the Treasury and the Fed say that the money is absolutely necessary in order to avoid a further economic downturn.

It's a -- it's a very close question. And I talked today to leading officials at the Fed. And we're thinking about it.

BLITZER: Senator Specter, thanks for joining us. Hope you're feeling good.

SPECTER: I feel very good, Wolf, terrific, top of my game. Thank you.

BLITZER: Excellent. You look great.

SPECTER: Thank you.

BLITZER: Senator Specter, as usual, thanks for joining us. Barack Obama does something for the first time, meets with members of the U.S. Supreme Court. And what's unique is that it came because of a very special invitation.

And will it calm people's anger, the former police officer accused of shooting an unarmed man who died now facing justice? You are going to find out what happened -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(NEWS BREAK)

BLITZER: A Pentagon official is speaking out about the alleged torture of terror suspects at Guantanamo Bay. The details are indeed shocking.

And a new push to put alleged Wall Street swindler Bernard Madoff behind bars right now -- just ahead, the ruling and what comes next.

(COMMERCIAL BREAK)

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

Happening now: In a new audiotape, Osama bin Laden says that, under the new administration, America will either, in his words, face military defeat or drown in financial troubles -- the president-elect wasting no time in responding.

Also, in the lion's Dean -- president-elect Obama in a confidential secret meeting with some of his harshest critics. We're going to tell you who was there, what they said to Mr. Obama.

And embattled Illinois Governor Rod Blagojevich shows up for the opening of the state Senate, but that didn't stop lawmakers from speaking their minds about him. We have some details.

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

Nothing short of a bombshell -- as President Bush and others in the highest levels of government insist the United States never tortured during terror interrogations over the last eight years, an official who works for President Bush reportedly says the U.S. did, in fact, use torture.

Let's go straight to our White House correspondent Dan Lothian, who's following the story.

A bombshell, bombshell article on the front page today, Dan, of "The Washington Post."

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: That's right.

You know, this admission of torture is really a serious claim, Wolf, but what is even more disturbing is that, because of this, the official says, this case was not referred for prosecution. (BEGIN VIDEOTAPE)

LOTHIAN (voice-over): It's a stunning revolution from a key Bush administration official, that this man, Mohammed al Qahtani, a Guantanamo Bay detainee, was tortured by the U.S. government.

MICHAEL BERRIGAN, GITMO DETAINEES DEFENSE COUNSEL: This isn't some bleeding-heart judge saying this. This is a Republican appointee.

LOTHIAN: Susan Crawford is that official charged with deciding with Gitmo cases should be prosecuted. Al Qahtani, according to a top official involved in defending detainees, was subjected to harsh interrogation techniques.

BERRIGAN: Complete periods of sleep deprivation for weeks on end, extreme exposure to variations in temperature, forced nudity.

LOTHIAN: Now Crawford tells "The Washington Post" the combination and duration of those techniques -- quote -- "met the legal definition of torture."

Last May, she ordered prosecutors to drop charges against al- Qahtani.

White House spokeswoman Dana Perino refused to comment on any individual Gitmo cases, but pushed back on the notion that torture is an accepted practice.

DANA PERINO, WHITE HOUSE PRESS SECRETARY: It has never been the policy of this president or this administration to torture.

LOTHIAN: U.S. Sources say al-Qahtani was planning to be the 20th hijacker of 9/11, but he was blocked from entering the U.S. a month before the attacks. The Pentagon says that an investigation into techniques used on al-Qahtani concluded they were appropriate then, but not now. They say more restrictive policies are currently in place.

President-elect Barack Obama has made it clear that he wants to shut down the Guantanamo Bay detention facility. Transition sources have indicated the process to do that could begin within his first week in office, but Mr. Obama admits that process and the legal maze over what to do with detainees such as al-Qahtani will be complex.

BARACK OBAMA (D-IL), PRESIDENT-ELECT: We've got a bunch of folks who have been detained, many of whom may be very dangerous, who have not been put on trial or have not gone through some adjudication. And some of the evidence against them may be tainted even though it's true.

(END VIDEOTAPE)

LOTHIAN: There are questions about timing, why is this claim of torture being raised now? That's unclear, but one official tells CNN that this could really turn up the heat on Barack Obama as he works to implement his campaign promise of shutting Gitmo down, on really what to do with those detainees, especially those that the U.S. government has admitted to waterboarding -- Wolf.

BLITZER: Thanks very much.

Dan Lothian over at the White House.

Let's get back to another important story we're following in New York right now.

It was back to court for the man accused potentially of the biggest money scam ever. Just a short while ago, a decision was handed down regarding this question: Should Bernard Madoff be allowed to fight his case from his luxury $7 million New York City penthouse, or should he be forced to do it from behind bars?

Our Senior Correspondent Allan Chernoff is watching this story for us.

So what's the decision of the judge on this day, Allan?

ALLAN CHERNOFF, CNN SR. CORRESPONDENT: Bernard Madoff remains out on bail. Judge Lawrence McKenna immediately making his decision, ruling from the bench, saying that the government had failed to show that Bernard Madoff was likely to give away more of his assets. The government had made its claim based largely on the fact that Madoff and his wife mailed out packages of jewels worth more than $1 million on Christmas Eve, saying that this was an effort to give away some of his assets, assets that victims might have claim to down the road.

The judge said there really does not seem to be any basis for believing Madoff will try to give away any further assets. His defense lawyer said it was a mistake, it was done stupidly, it was innocently done. And the judge seemed to believe that.

So, for now, Madoff remains out. And the fact is, he may remain in that apartment for months and months. His lawyer right now is engaged in plea negotiations with the government. That could take a very long time.

So Madoff, in his penthouse apartment now, under 24-hour guard, wearing an electronic ankle bracelet -- Wolf.

BLITZER: There's still a lot of outrage over this story.

All right, Allan. Thank you.

Barack Obama's conducting a full-court press right now. Ahead, his trip to the U.S. Supreme Court and why he may be trying to show the justices he's got game.

And a new wrinkle in the saga of Caroline Kennedy as a would-be senator. New Yorkers now weighing in.

And how much has President Bush lost in the economic meltdown? Why he's in the dark about his own personal finances. Stick around. You're in THE SITUATION ROOM,

(COMMERCIAL BREAK)

BLITZER: Sad news to report. Let's go back to Zain.

What's going on, Zain?

ZAIN VERJEE, CNN ANCHOR: Wolf, we're just learning now that actor Ricardo Montalban has died. He passed away at 6:30 this morning at his home in Los Angeles. His family was by his side.

His health had been deteriorating for a while, Wolf. We understand, too, though, that he knew that his time was up and that he died peacefully. The cause of his death, though, is unknown.

You'll remember he starred in the TV series "Fantasy Island."

Wolf.

BLITZER: Of course our condolences to the family.

Zain, thank you.

This hour, the president-elect has been visiting the U.S. Supreme Court, taking part in a "get-to-know-you" session with the justices.

CNN's Kate Bolduan is here in THE SITUATION ROOM.

Is it unusual in any way for a president-elect to head over to the Supreme Court?

KATE BOLDUAN, CNN CORRESPONDENT: Not so unusual, Wolf. In the meeting happening right now, it's behind closed doors, no press allowed.

Now, it's not unusual, as I said, for the president-elect to visit the court before taking office. The meeting in recent years has come as a suggestion of the president-elect. But what's interesting this time around is Chief Justice John Roberts is the one extending the invite to the incoming president and vice president, in the chief justice's words, in order to get better acquainted. So you can expect the meeting is much more of a courtesy call than anything about business, but it's probably a meeting of particular interest to the president-elect since, of course, he's a lawyer and taught constitutional law as a professor years ago.

BLITZER: He's potentially going to have an enormous impact on the Supreme Court because he's going to be around, at least president four years, maybe eight years. A lot of those justices not so young right now, and the shape of the court on decisions effecting all of us could be significant based on the people he selects to serve there.

But he apparently had another reason why he's interested in visiting the Supreme Court. Didn't he?

BOLDUAN: Absolutely, Wolf. And it actually had to do with court availability.

Now, the gym availability, there is -- actually, let me get back to the chief justices for one thing.

BLITZER: All right. Go ahead.

BOLDUAN: When we talk about filling vacancies, that's a very important job of the president. And while no one knows for sure the names most often discussed in terms of possible retirement, three of the courts most left-leaning justices, take a look at this.

Justice John Stevens, he's the oldest justice on the court. He's been on the bench for 33 years, nominated by Gerald Ford.

Another justice, Justice Ruth Bader Ginsburg. She's another. She's in her mid-70s, the only woman currently on the court, a cancer survivor nominated by President Bill Clinton.

The third justice, David Souter. He's in his late 60s, nominated by President George H. W. Bush. A bachelor and, Wolf, known to hate the Washington scene.

Now, court sources say no justice is seriously thinking about stepping down in the near term, but you can be sure the Obama team will quickly start gathering a list of possible nominees once he takes office.

BLITZER: If they haven't already, because the decision and the enormity, as I was saying, is really significant.

All right. Let's get back to maybe a hidden reason why he'd like to visit the Supreme Court.

BOLDUAN: A court in the court. He may be wanting to ask about gym availability.

There is a basketball court in the top of the Supreme Court building appropriately known as The Highest Court in the Land. Yes, very funny.

This is -- if you can see it -- yes, this an unofficial picture of the court. Now, it's from the photo-sharing Web site Webshots. We do know this is the basketball court, but no one in the press is allowed up there.

We do know very well, also, that Obama himself is looking for a good court. This could be a good option. It's private, it's exclusive, it's government-owned.

BLITZER: And it's secure and it's not very far away. It's all great. I guess it would be easier to go there than to the Verizon Center, where the Washington Wizards play, or George Washington University, where the Colonials play, although he might want to show up on those courts as well.

BOLDUAN: It might be a nicer court, from what I hear, the Supreme Court's court.

BLITZER: Good point. Thank you.

President-elect Obama used text messages frequently during his campaign. They were even used to reveal Joe Biden as his running mate. Now those text messages are making a comeback for the inauguration.

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

Abbi, what's he texting about this time?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, yes, you'll remember that this is the team that used text messages to announce their vice presidential pick. Well, now they're using texts to help people navigate the inauguration in the next few days.

Here's President-elect Barack Obama, in a YouTube video, telling people to sign up because it's going to be busy.

(BEGIN VIDEO CLIP)

OBAMA: You've probably heard the reports that unprecedented numbers of Americans are planning to join us in Washington. That will mean long lines, a tough time getting around. And most of all, a lot of walking on what could be a very cold winter day.

(END VIDEO CLIP)

TATTON: The text messages will be used to update people who are coming to Washington, but they're also going to be used to communicate with people who are participating in other events around the country. One of the things that the Presidential Inaugural Committee is pushing is Monday. Martin Luther King Day is a day of service, and so, far through this Web site, more than 8,000 volunteer events have been organized -- Wolf.

BLITZER: All right, Abbi. Thank you.

Barack Obama, by the way, is gearing up for several days of pre- inauguration activities. On Saturday, he'll ride a train from Philadelphia to Washington, D.C., a whistle stop tour inspired by Abraham Lincoln's inaugural journey to the nation's capital.

On Sunday, a welcoming event will be held at the Lincoln Memorial featuring entertainers such as Beyonce, Bruce Springsteen and Sheryl Crow.

On Monday, the Obama and Biden families will take part in a day of national service in connection with the Dr. Martin Luther King, Jr. holiday.

And, of course, Tuesday is Inauguration Day, featuring the traditional swearing-in ceremony, parade, and 10 -- repeat, 10 -- official inaugural balls.

Stay with CNN for complete coverage with reporting, analysis and some surprises, you're going to see only right here on CNN.

A new step forward today toward President-elect's Obama's promise to provide health care to all Americans who want it. The House of Representatives voted overwhelmingly to expand government-sponsored medical care to four million more children.

Let's go to our congressional correspondent, Brianna Keilar, for more on this story.

Talk a little bit, Brianna. Tell us what's going on, especially the timing.

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Yes, not a coincidence, the timing, Wolf. Democrats and many Republicans have wanted to do this for years, and they have tried, but President Bush saying it was a step down a slippery slope toward government-funded health care blocked it.

(BEGIN VIDEOTAPE)

KEILAR (voice-over): Democrats are hoping the third time's a charm.

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: The bill is passed.

KEILAR: After President Bush twice vetoed expanded health care coverage for millions of poor children and pregnant mothers, Democrats in Congress are poised to send it back to the White House, with Barack Obama holding the pen.

PELOSI: By ensuring health care coverage for 11 million children, families will have regular doctor visits and preventive care. We will ensure that children get the care they need and the health care costs are not inflated due to expensive emergency room care.

KEILAR: The bill would add four million more Americans to the State Children's Health Insurance Program, or S-CHIP, covering a total of 11 million. It also would put Mr. Obama one step closer to fulfilling his campaign promise of health care reform.

OBAMA: We've got an administration that isn't interested, that vetoes S-CHIP, that would provide health insurance for poor kids around the nation.

KEILAR: As in 2007, the bill passed with broad bipartisan support, but some Republicans like House Leader John Boehner insist illegal immigrants will receive free health care under the plan.

REP. JOHN BOEHNER (R), MINORITY LEADER: The whole verification process that should be in here to ensure that only American citizens and legal residents are entitled to these benefits, no verification to speak of is contained in the bill.

KEILAR: Democrats deny that claim, saying the verification process is the same one used for doling out Medicaid benefits. Right after the vote, House Speaker Nancy Pelosi, beaming, said the president-elect called with congratulations.

PELOSI: And I said how I looked forward to this being one of the first bills that he will sign into law.

(END VIDEOTAPE)

KEILAR: And the president-elect also issuing a statement that says in part, "In this moment of crisis, ensuring that every child in American has access to affordable health care is not just good economic policy, but a moral obligation."

Now, this still would have to pass the Senate, which could take it up next week. And Wolf, even aides to Republican senators who oppose this expansion say it likely will pass.

BLITZER: Brianna, thank you.

Brianna Keilar up on the Hill.

Is Caroline Kennedy qualified? Should she be the junior senator from New York? Wait until you see what some people in her state are saying, and the news not necessarily all that good for her.

And they're calling it Obama 2.0. How to get the millions of people who helped him win the election help him deal with lawmakers.

You're going to find out what's going on, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Caroline Kennedy was considered an early favorite to take over Hillary Clinton's Senate seat. That potentially could be changing.

Let's discuss it in our "Strategy Session."

Joining us are CNN contributor and editor-at-large at the HuffingtonPost.com, Hilary Rosen, and Republican strategist John Feehery.

This Quinnipiac University poll, which I'm sure you've seen, Hilary -- "Is Caroline Kennedy qualified to be senator?" -- 37 percent say yes, 48 percent say no.

How's that going to impact the governor? One person has to make this decision, Governor David Paterson.

HILARY ROSEN, CNN CONTRIBUTOR: You know, for the last several weeks, what Governor Paterson has witnessed and heard about is kind of a divided New York over Caroline Kennedy. And I don't think that helps her.

I think, first of all, it's hard for her to get support if she's not going to publicly campaign, and yet, she can't publicly campaign. So what are his choices?

You know, we hear he's looking at a couple of House members. But you know, you pick a single member of the House congressional delegation and you upset all those other New York members of the delegation who wanted it.

You know, I think that Governor Paterson may end up going outside these traditional routes and looking for another candidate.

BLITZER: We know the attorney general, Andrew Cuomo, potentially could be interested as well.

JOHN FEEHERY, REPUBLICAN STRATEGIST: She failed her audition process, and the audition was done by the New York press. And they tortured her.

(CROSSTALK)

BLITZER: That front page interview in "The New York Times," that was a tough write.

FEEHERY: And my mother said, you know a lot is not what you need in a senator. She's not even from New York. I think that Andrew Cuomo right now is slipping into the lead in this race, and he would be a formidable opponent. And it's also like an inter-Kennedy/Cuomo fight, because he used to be married to a Kennedy.

BLITZER: Well, and we know that he's got to make a decision very soon, because Hilary Clinton, by all accounts, is going to be confirmed by the Senate in the next few days. At that point, she's going to be a secretary of state. New York State, my home state, needs a senator -- two senators. They have Chuck Schumer.

ROSEN: I think the governor will give you one.

BLITZER: Yes, I'm sure he will.

All right. Let's talk a little bit about the Don't Ask, Don't Tell policy. Robert Gibbs, the new White House press secretary, he said this when he was asked if the president-elect would take steps to repeal it right away.

Listen to this.

(BEGIN VIDEO CLIP)

ROBERT GIBBS, OBAMA'S SPOKESMAN: Thadias (ph) from Lansing, Michigan, asks, "Is the new administration going to get rid of the 'don't ask don't tell' policy?"

Thadias (ph), you don't hear a politician give a one-word answer much, but it's yes.

(END VIDEO CLIP)

BLITZER: All right. What do you think? You know, it's easier said than done, dealing with a huge bureaucracy like the U.S. military.

ROSEN: It is a big bureaucracy.

First of all, I give Robert Gibbs and the president-elect credit for not shying away from where they are in their policy positions. I think some Republicans are going to try and make some hay out of this, because as we say, there was a perception in 1992 that Bill Clinton kind of got distracted by the gays in the military debate.

I don't think that's going to happen with Barack Obama. The allies we've been fighting with overseas from England and from other countries in Europe have all had openly gay and lesbian members of the military, fighting alongside American soldiers in the trenches.

Congress is ready for this. I think the military is getting prepared for it. And I think that the new commander-in-chief is going to play it smart.

FEEHERY: The military is not ready for it yet. And we're in the middle of two wars, and they require complete attention on the military on those two wars.

I know that the chairman of the Joint Chiefs, Mike Mullen, is thinking about this, I know that he knows the policy is coming. I know he's trying to prepare his big bureaucracy, as you point out. But this is not an easy decision, and what I've heard is that it's going to take a lot longer than some of the people maybe in Congress want it to take.

ROSEN: And I don't think that a President Obama will force the military commanders into being distracted from anything that's important right now. Obviously, the first priority is to establish the appropriate troop levels in Iraq, hopefully withdraw troops, deal with what we need in Afghanistan. That's the priority, and everybody knows it, including the Democrats in Congress.

BLITZER: We'll see how he deals with this. And Robert Gates, the secretary of defense, will have a huge say as well.

All right, guys. Thanks very much.

Barack Obama is using a casual style to show Democratic members of Congress he's not taking them for granted, even telling them not to call him "Mr. President-elect." We have some details.

And embattled Illinois Governor Rod Blagojevich swears in the very people who may be about to remove him from office. We'll explain what's going on in Illinois.

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

(COMMERCIAL BREAK)

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

JACK CAFFERTY, CNN ANCHOR: Are we going to get a tour of Air Force One?

BLITZER: You'll see. You'll see tomorrow. We'll get a little bit.

CAFFERTY: The question this hour, "Should Timothy Geithner's tax and housekeeper problems cost him the post of secretary of the Treasury?"

Dan writes from Virginia, "I couldn't care less about the housekeeper thing, but the failure to pay taxes, that's a bit of an issue. An honest mistake is something that Joe Schmo everyday American does on their taxes. A guy like Geithner, who's supposed to be a financial guru, doesn't make honest mistakes on tax forms."

Claudia in Houston says, "If the economy and war didn't cost President Bush his job, then Geithner's confirmation should be smooth sailing. Our so-called value system is almost too low to go cherry picking anyone."

Gerald in Queens writes, "If the IRS told me I owed them additional monies, I think I would get the message on the first notification. On the fourth notification, I think the IRS would be thinking of jail time for me. This is not an honest mistake by a long shot. It's only honest when a politician's involved."

Sandy in Tennessee says, "From what I understand, he has unique experience that makes him valuable for the success of the Obama team. These are extraordinary times and we need all the help we can muster."

Jane in Wisconsin says, "Geithner was trying his very best not to pay the taxes. He knew there was a possibility because of the six- year statute of limitations that he could get away with 2001 and 2002. He's just another crook."

Debra says, "Geithner's taxes are current, his housekeeper is married to a U.S. citizen. What's the big deal?"

Connie in Indiana, "Jack, since he will be over the IRS if he becomes secretary of the Treasury, it's like the fox guarding the hen house. I guess if he doesn't make it for treasury, they could put him in charge of immigration."

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

How did that interview aboard Air Force One come about, Wolf? Was that a tough thing for you to secure?

BLITZER: Yes, I've been working to get an interview like that for, what, 16 years, something like that? I used to fly in Air Force One when I was CNN's White House correspondent.

CAFFERTY: Right.

BLITZER: And many times I've been on that plane, but, you know, walking all around, going in to where the president and the first lady, they have their bedroom there, going upstairs into the cockpit, seeing some of those secure areas, it doesn't happen every single day, you know, Jack.

CAFFERTY: No. And as a reporter, you're kind of stuck in the little section of the plane reserved for the traveling press corps, and you don't get to roam around. Right?

BLITZER: Right. You're stuck way, way back of that 747. It's -- you're right, you're stuck back there, although once in a while, President Clinton used to invite me to come up into the conference room and speak to him, speak to some of his top aides. So that's always nice.

CAFFERTY: You've led a much more exciting life than I have, Wolf. No question about it.

BLITZER: Thank you, Jack. Stand by -- tomorrow, Friday, the interview.

All right.

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