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Apple Boss Taking Medical Leave; Bin Laden Challenges President-Elect, Blair; Obama Version 2.0

Aired January 14, 2009 - 17:00   ET

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


WOLF BLITZER, HOST: To our viewers, you're in THE SITUATION ROOM.
Happening now, trying to free up billions in financial bailout money -- President-Elect Obama uses a down to earth approach with Democrats on Capitol Hill.

Can he charm them into going along with his economic plan?

And a secret trip to the suburbs leads Barack Obama into the lion's den -- a dinner with some of his toughest critics -- a conservative all-star team.

And my conversation with former British prime minister, Tony Blair -- why he's warning right now that the president-elect will have to deal with the Middle East from day one.

I'm Wolf Blitzer.

(COMMERCIAL BREAK)

BLITZER: You're in THE SITUATION ROOM.

Barack Obama is running into some opposition -- serious opposition from Congress, including members of his own party -- as he tries to free up hundreds of billions of dollars in financial bailout money. He plans to take his case to the public in a campaign style -- a campaign style trip to Ohio. But the president-elect is also trying to keep things cozy with key lawmakers.

Let's go straight to our senior White House correspondent, Ed Henry.

He's working the story for us.

A low key approach, should we say, by the president-elect?

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: That's right, Wolf. The president-elect is trying to win over some of his former colleagues in the Senate with what you might call a personal touch.

(BEGIN VIDEOTAPE)

HENRY (voice-over): When he went behind closed doors with Democratic senators on Tuesday, Barack Obama trying woo them with informality. Sources inside the room tell CNN that when senators called him Mr. President-Elect, he interrupted. "I'm still Barack, until next week."

Democratic officials privately say that down to earth approach is part of a broader strategy to show he's not taking his party's support for granted, which former White House officials note can help Mr. Obama sell key issues, like his economic recovery plan.

GARY ANDRES, FORMER AID TO GEORGE W. BUSH: I think one of the big mistakes that new presidents make is to come into office and think that the job of Congress is basically to transact the White House's agenda. And that is really one of the ways you get yourself into -- into trouble.

HENRY: Team Obama learned that lesson after failing to consult Democratic Senator Dianne Feinstein about the nomination of Leon Panetta for CIA director. Now, incoming White House chief of staff, Rahm Emanuel, is trying to head off similar problems. He's giving out his cell phone number to senators, according to Democratic officials, so they have a direct pipeline. And senators privately say they were impressed that during Tuesday's meeting, Mr. Obama gave a short speech and spent most of the time listening.

SEN. HARRY REID (D-NV), MAJORITY LEADER: I think it was a very good meeting. We left and I think all of us all felt very -- very good. And we're going to work with the president-elect on this issue.

HENRY: Stroking egos, however, only gets you so far. Eight years ago, President Bush spent plenty of time socializing with lawmakers -- giving them funny nicknames. But early victories like education reform did not translate into more success, as the charm offensive faded.

ANDRES: I think what you have to do is recognize that it's going to get harder rather than easier going forward and you've maybe got to even redouble your efforts to make sure that people know why you're making the decisions that you did.

(END VIDEO TAPE)

HENRY: Now, on Friday, the president-elect is going to Ohio to talk about the economy. He's trying to recapture some of the energy from the campaign, but also trying to go outside the Beltway to build some support for his agenda.

So he's sort of trying to work an outside and an inside strategy, Wolf. Because you realize that even with this personal touch, that only goes so far. He's got a lot of work to do on the Hill to get his economic plan passed, to get this TARP situation dealt with and a lot of hard work yet to be done.

BLITZER: And he's not even president yet and he's already...

(LAUGHTER)

BLITZER: ...already got an enormous agenda.

HENRY: There's only one president at a time.

BLITZER: Ed Henry, thanks very much.

ANNOUNCER: This is CNN breaking news.

BLITZER: The Apple founder, Steve Jobs, announcing he's going out on a medical leave saying the health problem he revealed only a few days ago, in his words, is: "More complex than originally thought."

Let's go to CNN's Dan Simon, who's been watching this story for us -- Dan, what's going on?

DAN SIMON, CNN CORRESPONDENT: Hi, Wolf.

This is really an extraordinary and unanticipated development. After all, as you alluded to, just a few days ago, Steve Jobs tried to dismiss speculation that his health was declining rapidly. There had been a lot of speculation in Silicon Valley that he was in dire health.

And he put out a statement saying that his weight loss -- and we have a picture showing his weight loss over the last couple of years -- how dramatic it is. His statement said that his weight loss was attributed to a hormone deficiency and basically said that was it.

You've got to remember, Jobs had pancreatic cancer in 2004, had part of his pancreas removed. So his health has always been a fragile issue among Apple faithful and Apple investors.

Steve Jobs put out a statement just a short while ago. It reads, in part: "Unfortunately, the curiosity over my personal health continues to be a distraction not only for me and my family, but everyone else at Apple, as well. In addition, during the past week, I have learned that my health-related issues are more complex than I originally thought."

He doesn't really expand on that idea, Wolf. We do know that Steve Jobs, as I said, suffered a bout of cancer a couple of years ago. We don't know if, in fact, the cancer has returned. But the suggestion that he is taking a medical leave is certainly alarming. And so we'll just have to wait and see what comes out of this.

Steve Jobs did not attend the Mac World conference last week. That was that keynote address -- the famous keynote address that he always gives was given by the chief marketing officer, Phil Schiller -- back to you.

BLITZER: Thanks for that.

We wish him, of course, a speedy, speedy recovery.

Steve Jobs, as many of you know, dropped out of college back in 1977. He co-founded Apple with Steve Wozniak. 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.

A real, real genius. Let's hope for the best for Steve Jobs.

Let's go to Jack Cafferty for The Cafferty File -- Jack.

CAFFERTY: That's a -- that's an ominous announcement for Mr. Jobs. We wish him well.

Senator Hillary Clinton intervened six times in government issues that directly affected companies or individuals who became donors to her husband's foundation, according to the Associated Press.

Now, this raises obvious questions about the potential for ethical conflicts that could arise in her official business as secretary of State.

Christopher Hitchens of Salon.com has written a remarkable piece that calls into question whether Hillary Clinton should ever have been nominated for this job at all. It's a sort of a primer on the way politics, if it isn't working in the public interest, can run amok -- how quid pro quo can become a major coin of the realm, if you will.

Hitchens has it figured out. He lays it out on Salon.com in a very easy to understand and very well written piece. He points out that everybody around the world knows that you can get the former president's attention -- Bill Clinton -- through his foundation. Not a problem in itself.

But when you factor in that he is the confidante to the would-be secretary of State, his wife, Hillary, someone she's sure to rely on, since she has no foreign affairs track record of her own, it can become one.

The foundation has agreed to disclose its list of confidential clients and every year new donors from foreign states could be subject to the scrutiny of the Obama administration lawyers.

But here's the question -- should the foreign financial affairs of Bill Clinton's foundation be enough to prevent Hillary Clinton's confirmation as secretary of State?

Go to CNN.com/caffertyfile and you can post a comment on my blog. And then go to Salon.com and read this thing by Christopher Hitchens. It is -- it's really a very enlightening bit of well-written commentary -- Wolf.

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

Thanks very much.

CAFFERTY: Yes.

BLITZER: Good advice.

Osama bin Laden talking about Barack Obama in what's believed to be a new terror tape from the al Qaeda leader. Should the new administration adopt new tactics to capture the world's most wanted terrorist?

Also, crisis in the Middle East -- what will the fighting in Gaza mean for the president-elect?

I'll ask the special envoy to the region, the former British prime minister, Tony Blair.

Plus, the president-elect dining in the lion's den -- his not so secret dinner with idea logical enemies, some of the nation's top conservative columnists. We'll tell you what happened last night in Chevy Chase, Maryland.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: In a new audio message, Al Qaeda's leader calls for a holy war over Israel's military campaign in Gaza and seems to challenge the president-elect of the United States, drawing this quick response.

(BEGIN VIDEO CLIP)

BARACK OBAMA (D), PRESIDENT-ELECT: 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 so they can attack America. That's the bottom line.

(END VIDEO CLIP)

BLITZER: But can the next president of the United States do anything differently in fighting Al Qaeda?

CNN's Pentagon correspondent, Barbara Starr, has more.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): Just days before Barack Obama takes power, a challenge from Osama bin Laden. In the latest audio recording believed to be from the al Qaeda leader, bin Laden says of the soon to be president...

OSAMA BIN LADEN (THROUGH TRANSLATOR): He either withdraws and faces military defeat or carries on the fight and drowns his nation in financial trouble.

STARR: Mr. Obama has long said getting bin Laden remains a priority.

OBAMA: We go after him. We will kill him or we will capture him, try him, apply the death penalty to him where it is necessary.

STARR: Easier said than done. Vice President Dick Cheney told Wolf Blitzer finding just one man is always tough, but the U.S. pursuit, he says, has had an effect.

DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: He's operating in an area that's very difficult and very hard to get to, that he's not an effective leader, at this stage. He just can't really engage with his organization without coming out of whatever hole he's hiding in.

STARR: One suggestion for a new approach -- take away bin Laden's safe haven, but not necessarily with more military action.

MICHAEL O'HANLON, BROOKINGS INSTITUTION: The best way to get bin Laden -- or to have a chance to get bin Laden -- is to work hard at stabilizing Afghanistan and Pakistan. That's the way you maximize the odds of getting bin Laden himself.

TIM ROEMER, 9/11 COMMISSION MEMBER: How do we use our smart power in diplomacy?

What about economic surges in places like Afghanistan?

And how do we work with other countries, building alliances to take on Al Qaeda?

STARR: With no new intelligence about where bin Laden is and no sign that anybody will turn him in for the $25 million reward, engagement with others may be the only option left.

(END VIDEO TAPE)

STARR: Now, you know, there have been all those missile strikes inside Pakistan from unmanned U.S. drones. They've killed a number of al Qaeda operatives and militants believed to be partially protecting bin Laden. But it really hasn't changed the situation on the ground. So far, no indication bin Laden has any intention or is going to make the accidental mistake of coming out of hiding -- Wolf.

BLITZER: Barbara Starr at the Pentagon.

Thank you, Barbara.

Egypt and Hamas are reportedly close to working out a deal for a 10 day cease-fire between the Palestinian militant group and Israel. But a Hamas spokesman says Israel must withdraw its troops and lift the blockade on Gaza. And an Israeli spokesman suggests Hamas is just looking for a time out to prepare for the next round.

Meantime, Barack Obama is likely to be preoccupied with this Middle East conflict from day one. That's the view of the former British prime minister, Tony Blair. He's now a special enjoy to the region.

I spoke with Tony Blair about what he calls "the ghastly events taking place right now."

(BEGIN VIDEOTAPE)

BLITZER: Who's most responsible for this immediate source of violence over the past two weeks or so?

TONY BLAIR, MIDDLE EAST ENVOY: Well, look, there is no doubt that underlying all of this, there is one very one simple question. If you want a two state solution -- a state of Israel, a state of Palestinian -- it can only be done on the basis that you accept the existence of the State of Israel, because otherwise, it is pointless talking about two states. And you pursue that objective of a State of Palestinian by peaceful means.

Hamas, at the present time, will not accept that. And therefore -- you know, you can argue, of course, about the actions the Israelis have taken. You can argue about whose fault it was that -- were the crossings being opened properly, according to various agreements?

I mean, all of that is an argument and debate. But the proximate cause, undoubtedly, was the Hamas ending the cease-fire that has existed, the truce that existed, the tadia (ph), as they call it, the khan (ph) and firing rockets again on Israeli cities.

And I think in that sense, it's absolutely clear we will not resolve this for the long-term unless we get, one, a viable, credible negotiating process for lasting peace.

Two, real change and improvement on the West Bank, where the majority of Palestinians live, which is the largest part of the territory.

Three, we need to reconstruct Gaza.

And, four, of course, we need unity between Gaza and the West Bank -- unity on the Palestinian side -- but on terms that help us toward the two state solution, not harm us.

BLITZER: Do you believe from day one, the Obama administration will be preoccupied -- will be really involved in this Israeli- Palestinian conflict?

BLAIR: Yes, I do. And I was hoping that if, in a sense, we learned the lesson from the last year, where there has been a -- you know, a huge commitment from Condi Rice, particularly. Actually, it has yielded some benefits. I mean even with these ghastly events that are going on, it is worth just saying, in the political negotiation, for the first time, the two sides have sat down and discussed the really tough issues.

BLITZER: Has Israel's response to the launching of these rockets into Southern Israel so poisoned the atmosphere now, given the casualties on the Palestinian side, that this hope that you have is -- has -- is likely to be dashed?

BLAIR: No. I think, of course, you know, the feelings are intense and strong on all sides in relation to this. And, you know, it's -- one of the things that happens in these situations is that everyone lives with their own medias reporting of a conflict. And so if you are in Israel, you are acutely aware that civilians live in fear on the Israeli side. If the Israelis had not shut some of their schools (INAUDIBLE) some of these rockets were landing on classrooms in school hours. Now, the Israelis sent their children home, so they weren't there when the rockets landed.

But, you know, if you're an Israeli, that's what you see.

If you're in the Arab world and you're watching Al Arabiya or Al Jazeera, you know, the other international TV and you're seeing these terrible scenes in Gaza, yes, of course. You know, there's a huge amount of anger and anguish.

However, we have got to be in the position as people charged with taking this forward, where, at the end of it, we've got the determination and the energy and the strategy to find a way through.

Now, I think it's possible to do that.

BLITZER: Did Israel overreact?

BLAIR: You know, when people ask me about the proportionality of the Israeli response, I -- you know, I say to people, there is no sense of proportion when there are innocent children that die. But that's -- when you start a conflict like this, this is what happens. And, therefore, rather than argue about you know, what should Israel have done, were there other things they could do, actually, let us focus on how after this conflict -- bringing the conflict to an end. But then after it is finished, to start the process of -- of building peace.

BLITZER: The Israelis say -- and U.S. officials seem to agree -- that Iran has played a role instigating Hamas.

Is that true?

BLAIR: Well, there's no doubt. I mean, Hamas, to a significant extent, take their instructions from Syria and Iran. And there's -- I mean, Hamas are headquartered in Damascus. And one thing, incidentally, is this is all very well for the people in Damascus to be very militant. But, actually, if you're in Gaza, life must look a little different to you.

But, yes. And I mean Iran, for sure, support, finance, arm Hamas. And that's why the implications, of course, of all of this go a lot broader than the immediate dispute -- Israel-Palestine. And this is why the stakes that we are playing for here -- this is what I -- why I keep saying to people this is of such fundamental impatience. The stakes we're playing for -- you know, of course, they matter most to the actually rather small number of people living in this rather small piece of land out in the Middle East. But the implications stretch across continents and billions of people.

(END VIDEO TAPE) BLITZER: And in a show of tensions awaiting the next president of the United States, Iranian students today set fire to posters of Barack Obama, along with Egyptian and Israeli leaders in a protest in Tehran.

President Bush revealing one of the lowest point of his time in the White House.

(BEGIN VIDEO CLIP FROM "LARRY KING LIVE")

BUSH: And I can remember people saying George Bush is a racist because of the response.

(END VIDEO CLIP)

BLITZER: Very candid reflections in these, the final days of his presidency. We'll talk about that and more with Jamal Simmons and Alex Castellanos.

Plus, the House speaker, Nancy Pelosi's, unusual effort to promote her new YouTube channel.

Stick around.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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

VERJEE: Wolf, European nations that rely on Russia for natural gas are spending another cold winter day with no heat, as a gas dispute between Russia and neighboring Ukraine just drags on. Russian gas hasn't been shipped to Europe -- excuse me, Ukraine -- in more than a week. Russian and Ukrainian leaders are blaming each other for that.

Moscow is urging European officials to just come to Moscow for a weekend summit on the crisis.

Manuel Noriega is asking a federal appeals court to prevent U.S. officials from extraditing him to France. The former Panamanian dictator has been in U.S. custody since being captured after U.S. troops invaded Panama in 1989. Noriega was convicted of drug charges, but still faces money laundering charges in France. During an appeals court hearing today, Noriega's attorneys argued the former dictator's official status as a prisoner of war protects him from extradition under the Geneva Conventions.

And another down day on Wall Street. The Dow Jones Industrial Average fell 248 points, closing at 8200. Experts blame investor fears over several bad economic reports, including worse than expected retail figures for the holiday months. It was the sixth consecutive session of losses. Much of the U.S. is in a deep freeze -- bone-chilling below zero temperatures that are being reported from Montana to New England. And in parts of the Midwest, blowing snow is adding to the misery. More than 300 flights were canceled at Chicago's O'Hare Airport. No immediate release in sight. The cold weather is expected to continue for several days -- Wolf.

BLITZER: I know you love the cold weather.

VERJEE: No. God, no.

BLITZER: You lived in...

(LAUGHTER)

BLITZER: You lived in Canada for a few years, didn't you?

VERJEE: I don't -- I did. I did. I lived in Canada for seven years. I don't know how I did it. It was just -- I hate it. And, you know, I just got back from Nairobi. It was 80 degrees. So it's -- it's a rude awakening, Wolf.

BLITZER: And let's be precise -- you hate the cold weather, but you love Canada, right?

VERJEE: No, I -- I hate the cold weather and I love Kenya.

BLITZER: Kenya.

What about Canada?

VERJEE: I love Canada, too.

BLITZER: All right. Good.

VERJEE: But I hate the cold.

BLITZER: I just wanted to...

VERJEE: And I don't ski.

BLITZER: We have a lot of viewers in Canada.

VERJEE: Yes.

(LAUGHTER)

BLITZER: A lot of viewers.

VERJEE: I love Canada. I love beaver's tails (INAUDIBLE).

BLITZER: OK. Good.

VERJEE: Those are good to eat.

BLITZER: Thank you. VERJEE: Very sugar filled.

BLITZER: Stand by.

VERJEE: Yes. Yes.

BLITZER: Call it Obama Version 2.0 -- he'll soon be president, but he's still able to draw on the resources of his campaign's vast social network -- his grassroots ties to millions and millions of Americans.

And just hours after he presided over his swearing in, the Illinois Senate begins the process of deciding whether to oust the governor, Rod Blagojevich.

Plus, searchers catch up to the accused swindler who crashed his own plane in a move to fake his own death -- supposedly. We have new information.

Drew Griffin on the case.

(COMMERCIAL BREAK)

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

Happening now, the man accused of being the 20th hijacker on 9/11 will not -- repeat -- not face trial because a top Bush administration official says he was a victim of torture at the hands of the U.S. government. We have an in-depth report coming up.

President-Elect Barack Obama is standing by his nominee to head the Treasury department, calling his failure to pay back taxes "an innocent mistake." But it's not that controversy some key lawmakers are deeply worried about right now -- their concerns, coming up.

And getting Bernard Madoff out of his luxury penthouse and into jail -- what exactly happened?

Prosecutors tried once again today. They again failed. We're going to tell you why a judge is refusing to lock up the disgraced financier.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

For his presidential run, Barack Obama was able to draw on an extraordinary campaign apparatus tied directly to millions of everyday Americans. Now that's evolving into a new and improved version.

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

He's working the story for us.

What exactly is what they're calling Obama 2.0? WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Wolf, that's text-speak for the next new thing in American politics.

(BEGIN VIDEOTAPE)

OBAMA: Change has come to America.

SCHNEIDER (voice-over): Last year's Obama campaign -- that would be Obama 1.0 -- is turning into this year's grassroots organization -- Obama 2.0. Obama 2.0 is more than a campaign. It's not quite a political party. You've got to know the buzzwords -- network and connect.

ABBI TATTON, CNN INTERNET REPORTER: A social network is a place online where you can meet other people. You can message people. You can make friends. You can connect to other people online just using your computer.

SCHNEIDER: Remember how the Obama campaign announced its vice presidential choice last year by an instant message to supporters? Obama invented an alternative media model that bypassed the old.

STEVE MCMAHON, DEMOCRATIC STRATEGIST: They made use of video on You Tube in ways that were never contemplated before.

SCHNEIDER: They want to continue using it to govern. In the old model, the president talks to people on television, they talk back in polls. In the new model, communication is online and two way.

MCMAHON: They invited people to submit comments. They invited people to host parties and events to talk about health care reform and they want information going not just from them, to the voter, but from the voter back to them.

SCHNEIDER: What will Obama 2.0 be campaigning for? Obama's agenda.

MCMAHON: 13 million people pushing a button, sending an email to their elected representatives, making a phone call. Taking action. It's a powerful lobbying tool.

SCHNEIDER: Some Democrats are nervous. Obama 2.0 may operate out of the Democratic National Committee, but it's not primarily a partisan organization. Its main loyalty is to him.

(END VIDEOTAPE)

SCHNEIDER: Obama campaigned for a new kind of politics that is not highly partisan. He wants big, bipartisan majorities behind his policies and for that, he needs his own personal, political base, Obama 2.0. Wolf?

BLITZER: It looks like he has that Bill. Thanks very much.

Let's talk about Obama 2.0 and more. Joining us to talk about this, the democratic strategist Jamal Simmons along with CNN contributor, the republican strategist, Alex Castellanos.

It's the technology that played such a significant role for him during the campaign. Can he use that same technology now to help him win his legislation he wants on the hill?

JAMAL SIMMONS, DEMOCRATIC STRATEGIST: It's going to be extraordinarily powerful tool for Barack Obama to do this as a sitting president who has a direct connection to millions of people. Already today I just got an e-mail from the inaugural committee from Barack Obama, saying this is our inauguration. He's staying with the people throughout this period and will keep that going into the white house.

BLITZER: It's pretty impressive you have to admit Alex and you're in the business.

ALEX CASTELLANOS, REPUBLICAN STRATEGIST: It's hugely powerful. It's the new way of doing things. In the old world, you would elect someone, say good-bye, wouldn't see them for four years. Obama's doing something completely different. He said change begins from the bottom up. He's empowering these voters to govern themselves every day. If he can keep that organized and mobilized he's going to be a successful president.

BLITZER: He's also doing something pretty different as well. Last night, he was invited by the conservative columnist George Will to dinner with some other conservative columnists over in Chevy Chase, Maryland right outside of Washington, including some very harsh critics of his, some of those so called neo-conservative columnists. And he went.

SIMMONS: That's right. Barack Obama is really the same person today that he was when we first saw him in 2004 on the stage in Boston when he said there's many that unites us than divides us. That's what he's doing now. He's reaching out to conservatives, saying we have big problems to face, let's sit down and talk about it.

BLITZER: And he met today for lunch with a bunch of liberal columnists here in Washington as well so he's meeting with all sides. It's pretty extraordinary you've got to admit.

CASTELLANOS: I guess when your mother-in-law's going to be staying with you in the white house, you better be eating out a lot. I would but he's doing something again breaking the mold. What it does is it makes it harder to criticize someone when you've sat across the table with him. I think the danger for the news media, are there going to be Obama critics left? There should be. There are still differences on issues. Republicans are not going to turn into democrats nor are democrats into republicans but maybe the tone will be better and more mature.

BLITZER: Brian Todd's working on a story on what exactly happened over at George Will's house in Chevy Chase last night between Barack Obama and some of those conservative pundits and that's going to be coming up in the next hour. Do you want to add a point?

SIMMONS: Yes, I do think there's one thing to be careful of. This is going to be a contest during the beginning of the Obama administration between the purest whether on the left or right and pragmatists on either side. Those in the middle working with each other will do fine, but the people who want pure stances will be in trouble.

CASTELLANOS: You don't have to compromise your principles to work together. You're not going to see republicans all of the sudden say more big spending, more Washington is what we need. We ought to fight for our principles and have differences.

BLITZER: As you know, President Bush has been giving a lot of exit interviews, including to our own Larry King last night. I'm going to play a clip and I want your reaction. He was asked what he felt was the low, personal point over the last eight years.

(BEGIN VIDEO CLIP)

PRES. GEORGE W. BUSH, UNITED STATES: I think being called a racist because of Katrina was a low point. I can remember people saying George Bush is a racist because of the response.

(END VIDEO CLIP)

BLITZER: He was obviously very sensitive to the accusation that he wasn't doing enough to help the folks in New Orleans and elsewhere in the gulf because they were largely black.

SIMMONS: We remember when Kanye West says George Bush doesn't care about black people. I think the truth is George Bush probably does care. He didn't care enough. He didn't care enough to get food to them fast. He didn't care enough to get them out of the dome and get them rescued. That was really a big part of the problem. You talk to people like Al Gore who's flying an airplane down there to lift people off a tarmac and get them out of New Orleans, even the entertainers who were driving to New Orleans to give aide. I don't want to get into motives about race, but it's clear the federal government didn't act fast enough.

CASTELLANOS: I think to tribute that to race though is wrong. Donna Brazile, CNN contributor, was thanking Bush for getting people into homes. This is the president who created no child left behind to help kids in the inner cities, black kids who need help the most, school choice so that every child can have a chance to go to the best schools. Who's that going to help the most? Colin Powell, Condoleezza Rice, the most racially diverse cabinet that we've had. That was a republican President George Bush. 2/3 of New Orleans is black. 1/3 is white. When the federal government failed, it didn't pick color.

SIMMONS: I find it hard to believe though had that been Kansas and there would have been a tornado, there would have been scenes of white people walking up and down the street, who didn't have food, water, the federal government wouldn't have moved faster.

CASTELLANOS: It doesn't work well for anybody. We can do better. We should.

BLITZER: We'll leave it on that note. Thanks very much.

Major new developments in two cases. First, a big move in a killing that sparked a riot in California. A transit police officer arrested far from home and now charged with murder. Where he was found and what happens next.

And a nationwide man hunt for a fugitive pilot who tried to fake his death. The mistake he made and the shocking end to a chase.

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Major new development in a case that sparked rioting. A former transit police officer is now under arrest facing a murder charge in the videotaped shooting of an unarmed man. CNN's Dan Simon is working the story for us in Oakland, California.

All right. Dan, what's the latest?

DAN SIMON, CNN CORRESPONDENT: Well, hi, Wolf. This is a shooting that has really angered a lot of people especially people in the Oakland community. Today, the district attorney here, Tom Orloff, announced that the officer Johannes Mehserle involved in the shooting has been charged with murder. In Alameda County they don't specify the kind of murder like first degree or second degree. If Officer Mehserle is convicted by the jury, then the jury would decide whether it would be a first degree or second degree murder conviction.

Now just to review the fact, this happened on New Year's Day very early in the morning. Three officers, including Officer Mehserle were trying to arrest grant. Mehserle reached for his gun and fired a fatal shot into grant's back. Grant was lying face down when the shooting occurred and today, the D.A. announced why it amounted to a murder charge. Take a look.

TOM ORLOFF, ALAMEDA CO., CALIF. DA: Murder charges were filed because at this point, the way I feel the evidence indicates is an unlawful killing -- done by an intentional act and from the evidence we have, there's nothing that would mitigate that to something lower than a murder.

SIMON: Officer Mehserle was arrested without incident in Nevada near Lake Tahoe. He has not given a statement and we have not heard his side of the story on this, but his attorney is expected to give a press conference in about 30 minutes from now in Sacramento, Wolf.

BLITZER: We'll check back with you, Dan. Thank you.

In the last hour, federal charges have been filed against a rogue pilot accused of crashing his plane in an effort to fake his own death. The manhunt for him came to a dramatic end overnight. Drew Griffin of CNN special investigations unit is joining us with more on this story.

You're in Tallahassee. What do we know? DREW GRIFFIN, CNN CORRESPONDENT: Marcus Schrenker is still recovering in the hospital behind me in custody and we know that these two federal charges are the ones he'll be facing first. They involve sending a false distress call to the Coast Guard and secondly, deliberately crashing his plane. When he's released from the hospital, he'll go to Pensacola to face those charges before heading back to Indiana. All of this after a dramatic capture where this pilot who tried to fake his death was caught trying to take his life.

(BEGIN VIDEOTAPE)

SIMON: Right up until the very end, the end of the chase at this campground, Marcus Schrenker was telling lies.

CAROLINE HASTINGS, CAMPGROUND MANAGER: He said he was riding cross country with some buddies and didn't want to stop.

SIMON: Caroline Hastings says she didn't suspect a thing when he road into her campground Monday.

HASTINGS: He got some waters, beers and talked.

SIMON: Something else. He got the campground's Internet code. Police showed up the next day. Hastings said lured in by emails Schrenker was sending out.

HASTINGS: They knew he had e-mailed someone from the area.

SIMON: Inside the tent, the 38-year-old who had faked his death was now, according to police, was trying to take his life. He had slit his wrists and even had taken Ultraset and aspirin, medication to dull pain and thin blood.

LT. JIM CORDER, GADSDEN COUNTY SHERIFF'S DEPT: Look like he'd been bleeding for some time. There was a large amount of blood inside the tent.

SIMON: It was a bizarre end for the high flying investment adviser. His plane crashing less than 75 yards away from homes and miles away from the speculated planned crash site, the Gulf of Mexico, where searchers presumably would not discover the plane missing. Somewhere over Alabama, Schrenker had parachuted out of the plane, reclaimed a pre-stored a motorcycle and took off.

For years, this was the Marcus Schrenker known to his investors, a successful high rolling financial advisers with a beautiful wife, hobbies that included flying stunt planes. Investors say that behind the facade was a smooth talking pathological liar. Mike Kinney and nearly his entire family once trusted Schrenker with their life savings.

MIKE KINNEY, FORMER INVESTOR: I've never in my life seen anybody that could tell the dishonest untruths that he told over and over again and expect you to believe them. I guess that's one thing that caught me by surprise.

(END VIDEOTAPE)

SIMON: Wolf, also caught in the deceit of Schrenker is his wife, Michelle. She says today in a statement that she filed for divorce on December 30th after finding out about an affair and that she didn't know about the financial troubles until police showed up the next day and served a search warrant on her house.

BLITZER: All right Drew, thank you; Drew Griffin in Tallahassee.

The new Illinois state senate is getting ready to start an impeachment trial against the governor.

And Nancy Pelosi takes part in a popular Internet prank. Wait until you see it. We have details right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Happening now, the Illinois state senate deciding whether to out Rod Blagojevich just hours after he presided over his swearing in. CNN's Susan Roesgen is joining us now live.

What is the latest? What's going on?

SUSAN ROESGEN, CNN CORRESPONDENT: We're one step closer to this actual state senate trial when they will decide whether or not to throw the governor out of office. He has denied any wrong doing. He has not actually been formally charged for the crime either, but today, the senate constitution, the state rules, required him to face his accusers.

(BEGIN VIDEOTAPE)

ROESGEN: Like the unloved uncle who spoils the family reunion, Governor Rod Blagojevich had to come for this reunion of state senators and the swearing-in of new ones. At the opening of the new session of the Illinois state senate, the governor could only listen as members of his own Democratic Party took swipes at him.

LOU VIVERITO (D), ILLINOIS STATE SENATE: Today we have the opportunity to take one significant and meaningful step towards finding the process of restoring the public's trust.

HEATHER STEANS (D), ILLINOIS STATE SENATE: Our first order of business in this new session will be to conduct an impeachment trial of our governor. This proceeding has profound implications for the immediate leadership of our state as well as our ability to protect the public trust and ensure that the sound rule of law prevails.

ROESGEN: For his part, the governor touched on his troubles only lightly.

GOV. ROD BLAGOJEVICH (D), ILLINOIS: I hope we can find a way as we deal with other issues to find the truth and sort things out.

ROESGEN: And as he ended, he praised former Illinois state senators Barack Obama and Abraham Lincoln. BLAGOJEVICH: I hope we can find some inspiration in Abraham Lincoln's words with malice towards none and charity for all, let us come together and get the business of the people done.

ROESGEN: Perhaps a hope for no malice and much charity as the state senate begins soon to decide whether or not to force the governor out of office.

(END VIDEOTAPE)

ROESGEN: Wolf, that trial is set to begin in less than two weeks, and it's actually called a trial even though it's not a criminal trial. The state senators were actually sworn in today as jurors, which means Governor Rod Blagojevich can't really talk to them, because if he does, he can be accused of juror tampering.

BLITZER: Wow. All right. Susan Roesgen in Chicago.

Here's a question for you. Have you ever been Rick rolled? Even know what it means? The popular online crank has made it to Capitol Hill right into the office of the house speaker. Let's go to our Internet reporter Abbi Tatton to explain what this is all about.

I suspect a lot of our viewers have no idea what we're talking about.

TATTON: Needs a little explanation. What's happening is House Speaker Nancy Pelosi is trying very hard to show that she understands the Internet. This is her new YouTube channel. She's urging people to have a look at this video of cats on Capitol Hill. If that's not weird enough, keep watching. After a few seconds, the cats disappear and up pops red-headed British crooner Rick Astley with his classic, "never going to give you up."

If you don't spend hours a day on You Tube, you might need an explanation. This is a popular online prank known as Rick rolling. It got so big last year that at the Macy's Thanksgiving Day parade, you might have seen it. The singer himself jumped up out of a float and started serenading the crowd. Now Nancy Pelosi is trying it on her channel, trying to appetize the fact that the U.S. Congress is now on YouTube. She certainly has tens of thousands of views with this new video, but also some comments like this one. You know that Rick roll has died when Nancy Pelosi uses it.

BLITZER: There was a great song, you're too young to remember --

TATTON: I'm really not. I don't think I was a fan, actually.

BLITZER: I liked that song. All right. I don't know what it says about me but that's it. I admit it. Thanks very much.

Bumps and road blocks on the road to the white house. Now Barack Obama is speaking out with some of the distractions cropping up as he prepares to take office.

Plus, we're following the breaking news involving the Apple founder, Steve Jobs. He's forced to temporarily step down because of his health. Stand by for details.

(COMMERCIAL BREAK)

BLITZER: Let's check back with Jack for the Cafferty File.

Jack?

JACK CAFFERTY, CNN CORRESPONDENT: The question this hour, Wolf, is should the foreign financial affairs of Bill Clinton's foundation be enough to derail Hillary Clinton's confirmation as secretary of state.

Mike in New York writes, "No but Mr. Bill should decline any foreign contributions while she is Secretary of State."

John in Colorado, "The Clintons are absolute masters at pushing all of their dealings just past the edge then moving on without blinking and without consequences. This is just the skill set a secretary of state needs to play international poker with today's world leaders. It would be a poor fit if Hillary were just a nice stay at home mother who liked to bake cookies."

Frank in California says, "We don't deny people positions because of potential for wrongdoing. If we did that, no one would get hired anywhere for anything. If Hillary is the best person for the job, she should get it. We should all assume she'll perform her duties ethically unless proven otherwise. It's our duty as the voting public to watch her as it would be for any public official but we can't condemn her for something that hasn't happened."

Stan in Ontario says, "It depends whether you want someone that's up to the job or simply someone who has no external complications. If Hillary can keep Bill's affairs apart from her decisions related to foreign policy, there's no reason why she shouldn't be confirmed."

Lane in Tennessee says, "Let me understand this, if she had been elected president, this wouldn't be an issue, but she's not able to be secretary of state because her husband does charity work?"

D.F. writes, "The issue is not impropriety or the appearance there of. It is the conflict of interest itself. For anyone to have a conflict of interest and deny that it will influence his or her behavior is purely narcissistic. The Greeks called it hubris. It is the core evil of or system of government. Senator Clinton will be confirmed specifically because congress persons don't want attention drawn to their own conflicts of interest."

And Gale in Alabama says, "I can't think of a better person to be secretary of state. Jack, you are just looking for something to grunt about. You don't like the Clintons, and you would like to see her fail."

If you didn't see your e-mail here, go to my blog at CNN.com/Caffertyfile and look for yours there among hundreds of others. Do I grunt?

BLITZER: Occasionally. Once in awhile. But you're a really nice guy.

CAFFERTY: I am a nice guy.

BLITZER: I know. All right. Thank you.

He's been an eyewitness to history. A real eyewitness to history as President Bush's pilot on Air Force One. I sat down with Colonel Mark Tillman in the cockpit to talk about some of his more memorable moments, an interview we will be sharing with you over the next two days. Imagine flying the president on 9/11. This is what Colonel Tillman recalls.

COL. MARK TILLMAN, AIR FORCE ONE PILOT: The president was in full contact with everyone he needed at the white house, the vice president, et cetera, so he was getting information channeled on him here on Air Force One. So as the threat scenario would develop, we would counter it. The concern was we may be a target, so I took him out into the Gulf of Mexico just because there were no airliners out in the gulf. Then we started working to find a location so that he could land and address the nation and let them know basically what the status of the nation was, was my understanding.

BLITZER: A really fascinating interview with the air force one pilot, Colonel Mark Tillman. We will share it with you tomorrow and Friday only here in THE SITUATION ROOM.

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