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THE SITUATION ROOM

Dean Possible Surgeon General; Keeping Your Money Safe; Interview with Mark Zandi; "Astounding" Job Losses; The Make or Break Stimulus; North Korea Threatens Airliners; Gandhi's Sandals, Specs Sold; Robin Williams' Heart Surgery; First Lady Opens Up to Oprah

Aired March 6, 2009 - 17:00   ET

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


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

Happening now, the stimulus keeps two dozen police cadets employed, but the nation's jobless rate is now the highest in a generation. President Obama says that's simply unacceptable.

The agency that insures your bank deposits is now running out of money and may needs hundreds of billions in credit.

Will your savings stay safe?

And Governor Sarah Palin appoints a liberal judge to Alaska's Supreme Court over the opposition of social conservatives.

Is there a new political strategy at work?

What's going on?

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

ANNOUNCER: This is CNN breaking news.

BLITZER: But we begin with breaking news this hour -- word that President Obama may be considering former Democratic Party Chairman Howard Dean as the next surgeon general of the United States.

Let's go straight to CNN's senior White House correspondent, Ed Henry, who's got all the latest on this story -- Ed, what do we know?

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Well, Wolf, as you know, CNN's own Dr. Sanjay Gupta has taken himself out of the running for the surgeon general post. He had been the leading choice for this president.

I'm now learning from senior Democratic officials that the name of Howard Dean is emerging.

As you know, he's a medical doctor, the governor of Vermont. He also pushed health care reform. And he is privately making clear to this White House that he's interested in the post. White House officials are not dismissing this out of hand, saying that this is a possibility.

And they're stressing that look, Dr. Sanjay Gupta just pulled out in the last few days. They don't have an official list yet, but they're saying that Dean is a distinct possibility.

One of the potential challenges for him, though, is that he was also being bandied about for secretary of Health and Human Services. He was blocked, in part, because he had this feud with White House Chief of Staff Rahm Emanuel.

You'll remember, there was some bad blood in the 2006 election cycle. But some supporters of Howard Dean are now telling me they think he's in the mix here and they think that maybe some of the tension is gone and he's a possible pick for surgeon general -- Wolf.

BLITZER: And, as you know, Governor Dean was here in THE SITUATION ROOM, Ed, only last week.

And I asked him about those reported tensions between himself and Rahm Emanuel, the former congressman, now the White House chief of staff.

Here's that exchange.

(BEGIN VIDEO CLIP)

HOWARD DEAN, FORMER DNC CHAIRMAN: I had a perfectly nice meeting with Rahm Emanuel and David Axelrod a couple of weeks ago...

BLITZER: Did you make up with the White House chief of staff?

DEAN: I don't think there was any big, enormous...

BLITZER: Because there was some tension there.

DEAN: Well, that was mostly in the -- in the -- in the columns of various gossip...

BLITZER: No, no, no.

(END VIDEO CLIP)

BLITZER: The tension, as you remember, Ed, involved the strategy that Howard Dean wanted to pursue as chairman of the DNC -- a 50 state strategy to try to get Democrats elected in traditionally Republican states. And Rahm Emanuel, at that time, was trying to get members -- Democratic members of the House elected. He thought it was important to focus in on some of those more Democratic states where they had greater opportunities.

HENRY: That's right, Wolf. This was not gossip, as Howard Dean was trying to say in that interview to you. As you know, this was clearly a big feud between Rahm Emanuel and Howard Dean.

I can tell you, some people here at the White House -- people outside the White House close to Howard Dean, though, insist that it's been a couple of years. There's still some tension, but that it's -- it's receded. And, in fact, I've learned from two Democrats -- Democratic officials -- that, in fact, Rahm Emanuel recently offered another post to Howard Dean -- a lower profile health post. That was turned down.

But it suggests that maybe this is thawing a bit and maybe they can finally bridge their differences on a (INAUDIBLE)...

BLITZER: And as you point out, Governor Dean is himself a medical doctor. So he understands these issues rather well.

Thanks very much for that.

Ed Henry breaking the story right here in THE SITUATION ROOM.

It's been busy -- very busy cleaning up the mess left by bankrupt banks. But now the agency that guarantees your deposits -- guess what?

That agency right now running low on cash itself.

Wow!

Let's go to Mary Snow.

She's got the story this story -- it impacts everyone who's got a bank account, Mary, who thinks that the government is ready to insure that money.

MARY SNOW, CNN CORRESPONDENT: Yes. And, Wolf, the FDIC is being careful to say that it still will insure that money. That won't change. But take a look at the this -- 25 banks failed last year. So far this year, 16 banks have failed. The Federal Deposit Insurance Corporation expects more to fail and it's looking to make sure it can tap into a larger pool of federal money if it needs to.

(BEGIN VIDEOTAPE)

SNOW (voice-over): The FDIC exists to make sure that if a bank fails, you don't lose all your money -- the government will cover it.

(BEGIN VIDEO CLIP, COURTESY FDIC.GOV)

SUZE ORMAN, FINANCIAL ANALYST: Those depositors have never lost one penny in the history of the FDIC.

(END VIDEO CLIP)

UNIDENTIFIED FEMALE: May I help you?

SNOW: While the FDIC says it will always meet it obligations to depositors, up to $250,000, it's moving to shore up it's depleted insurance funds. It's supporting a bill introduced by Senate Banking Committee Chairman Senator Christopher Dodd to temporarily extend the FDIC's credit line from $30 billion to as much $500 billion.

One economists calls it a sign of the unusual times. ALAN BLINDER, PRINCETON UNIVERSITY: When you're an insurance company and things go bad, you get big bills. So, you know, that happens when a hurricane hits and what's happening now is a hurricane in the banking industry.

SNOW: Earlier this year, FDIC Chairman Sheila Bair warned bankers: "The Deposit Insurance Fund could become insolvent this year unless the FDIC imposes new fees on banks." She warned: "A large number of projected bank failures are likely to occur this year and next."

But the idea of imposing fees on banks was met with protest.

DIANE CASEY-LANDRY, AMERICAN BANKERS ASSOCIATION: The bankers are very, very unhappy. You know, all these monies being taken out of their banks and they're not going to be able to lend it in their community. So it's really -- it's a very serious situation.

SNOW: A group representing small community banks says they are hit hardest.

CAMDEN FINE, INDEPENDENT COMMUNITY BANKERS OF AMERICA: We feel like we're getting punished -- and punished unfairly -- for the economic debacle that was really a Wall Street train wreck.

SNOW: And banking groups are hoping Congress will extend the FDIC's credit line for now, because it will mean fees to them won't be as large.

(END VIDEOTAPE)

SNOW: Now, the FDIC says it wants to have the resources necessary to address future contingencies, but says it wants to be clear that no depositor has ever lost a penny on an insured deposit and that is not going to change -- Wolf.

BLITZER: That's encouraging.

All right, good.

Thanks, Mary, very much.

Jack Cafferty once again has "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Despite a plunging stock market, Wolf, the majority of Americans still think stocks are the good place to put their money for the long-term.

A new Gallup Poll shows 53 percent of all adults and 67 percent of stock owners agree stocks are a good long-term investment. However, although most people say they back investing in the market in theory, actually going to the hip and putting some money down in this market -- that's a whole different story.

When stock owners were asked what they plan to do with their money in the next month, only 21 percent said they plan to buy more stocks. Seventy-three percent said they plan to hold onto their stocks, but not buy more -- not right now.

It seems it's going to take more than these bargain basement share prices to lure investors back into the market. Stock prices are driven by corporate earnings. And until there's some indication that companies are going to start making money again, don't look for a turnaround on Wall Street.

The truth is, nobody knows how long it's going to take for the stock market to recover. And so many people have the jitters and are simply waiting on the sidelines.

The market continues to take a hammering. In the last two weeks, the Dow Jones Industrial Average has lost more than 735 points. And this Gallup Poll we were talking about shows 20 percent of Americans think it will be at least four years before the stock market recovers.

So here's the question: If you suddenly came into extra money, would you invest it in the stock market?

Go to CNN.com/caffertyfile, where you can post a comment on my blog.

And you've got companies like General Electric selling for $6 or $7 a share. The prices are stunningly low on some of these big blue chip operations.

BLITZER: Yes. There's -- presumably, they're bargains. But you know what, a lot of people fear they're going to still go down before they start going back up -- Jack.

CAFFERTY: Well, that's the fear that is keeping the market headed low right now.

BLITZER: Yes. We've got a top economist coming up to discuss this very point. Stand by.

Stunning new job losses revealed today and the worst may still lie ahead.

(BEGIN VIDEO CLIP)

MARK ZANDI, MOODY'S ECONOMY.COM: These kind of job losses will continue for at least the next three, perhaps six months.

(END VIDEO CLIP)

BLITZER: That's Mark Zandi. He's the -- he's a leading economist. You're going to also want to hear his prediction about the stock market -- how long will it take to rebound?

And some international flights to the United States are changing their routes after their -- after a thinly veiled threat sends airlines scrambling.

Michelle Obama, meanwhile, giving her most revealing look yet at her new life inside the White House -- what she told Oprah Winfrey. We'll share that with you and more, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The nation's jobless number has jumped to its highest level in a generation. And one top economist says there may be light at the end of the tunnel, but it's a pretty long tunnel.

Joining us now is Mark Zandi of Moody's Economy.com.

Mark, thanks very much for coming in.

MARK ZANDI, MOODY'S ECONOMY.COM: Thanks for having me.

BLITZER: I want to get to the stock market in a moment. But the jobs numbers -- another 651,000 jobs lost last month alone. What, four million jobs lost over the last year or so.

How much longer is this slide going to continue?

ZANDI: You know, I think these kind of job losses will continue for at least the next three, perhaps six months -- that it will take that long before some of these policy responses really engage and begin to help our economy.

And, unfortunately, we're feeling the fallout from the financial panic and crisis that hit late last year. And until those policies kick in, I'm afraid we're going to experience these kind of losses.

BLITZER: So maybe over the next six months another million -- 1.2 million jobs lost, is that what your fear is?

ZANDI: Yes. Well, we're down 4.4 million since we started losing jobs a little over a year ago. I think we could easily lose a couple more million in the next three to six months.

BLITZER: Eight percent or so, the unemployment rate right now.

How high is number that likely to go?

ZANDI: Well, I think 10 percent -- I think that now seems likely. And that probably won't happen until -- all the way into the spring and summer of 2010. So all indications are that the job market is in for a rough ride.

BLITZER: You think -- and correct me if I'm wrong -- that the country is going to need another stimulus package, beyond this one that was just passed, in order to do more to turn this economy around?

ZANDI: Yes, I'm afraid so. You know, the $800 billion package that was signed into law -- you know, it was a good package -- a reasonably good-sized package, pretty well designed. I think it will be helpful. We'll see that later in the year. But if I were constructing it, I would have made it larger. And I think ultimately we will have to come up with another stimulus plan.

BLITZER: Where is all this money coming from? ZANDI: We're borrowing it. Fortunately, global investors are willing to lend it to us at low interest rates. The 10-year Treasury yield is 3 percent and that's a low rate. So we have a window to borrow, because, frankly, no one else is borrowing. There's no private borrowing. And global investors don't know where else to put their money.

We're the cause of this mess, but we're still the AAA credit on the planet. Nowhere else better to go when you're in trouble than into the United States. And we're beneficiaries of that.

But having said all that, if we don't start making some real concrete progress in reducing our deficits in the long run -- after we get on the other side of this crisis -- then we're going to have a problem.

BLITZER: The Dow Jones, back in October of 2007, was over 14000. Now it's well below 7000. People are wondering when it's going to bounce back. And you think it could take a long, long time.

ZANDI: Well, to get back to 14000 is going to take a long, long time -- probably a decade. I mean it -- if I were -- if you're doing prudent planning, you probably should expect annualized stock returns of somewhere between six, seven percent per annum. Now, that's not going to happen now, in '09. But over a 10 year period, I think that's a reasonably good forecast. That's what pension funds use when they do their planning.

And if you assume seven percent every year for 10 years, you get back to 14000 from where the stock market is today.

BLITZER: Is it your fear that the markets have not yet hit rock bottom -- that this number right now, under 7000, it could go down to 6000 or 5000 or even lower?

ZANDI: It's possible. But you know, I don't think so. I think that the market -- the stock market investors are expecting a lot of very bad news. You know, these numbers I'm giving you with respect to employment and jobs and all that is -- is already baked into the cake. Investors already know this and expect this. So we're expecting a lot of very bad news.

The other thing to consider is that 7000 -- you know, we're back to levels we haven't seen since the mid-1990s. But our economy and the entire global economy is measurably larger than it was 10 years ago. And, yes, it is going to shrink in this recession and downturn. But I think the market is -- is oversold, over done.

Now, that doesn't mean it can't go lower in the next week, the next month, the next quarter. But I do think we're going to be able to draw a line through this period, ultimately, and say that this was the bottom.

BLITZER: Is the president taking on too much by trying to reform health care right now instead of simply focusing in like a laser beam solely on the economy? ZANDI: Well, you have to give him credit for being ambitious. And he's absolutely right, if we're going to address our long-term fiscal situation, we have to reign in the growth in health care costs. If we don't do that, nothing else is really going to matter. We're going to break the budget and we're going to have huge deficits ad infinitum into the future.

So I think it is appropriate to focus on it. Having said that, it's going to be incredibly difficult to solve this problem in a short period of time. And this country really needs a win. We need a win. We need to focus on something that we can say we succeeded.

And so, hopefully, he can pick a couple of other battles that he knows he can win and actually win them.

BLITZER: Let's see if he can do that.

Mark Zandi of Moody's Economy.com.

Mark, thanks for coming in.

ZANDI: Thank you.

(END VIDEOTAPE)

BLITZER: A general reliving the horror of war every night.

(BEGIN VIDEO CLIP)

BRIG. GEN. GARY PATTON, U.S. ARMY: Your brain has a funny way of remembering those things and not only recreating the exact sound, but also the smell of the battlefield and the metallic taste you get in your mouth.

(END VIDEO CLIP)

BLITZER: Now he and a peer are going public with the battle that followed -- a battle against depression, anger and grief.

Plus, Supreme Court Justice Ruth Bader Ginsburg battling cancer and firing back at a senator who predicted her early demise.

Stick around.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: It's called Post-Traumatic Stress -- the shock and horror of combat certainly have taken a toll on so many U.S. troops long after they return from the war zone. Top commanders also -- also can suffer.

Let's bring in our Pentagon correspondent, Barbara Starr.

She's been looking at this story for us. What's going on -- Barbara?

BARBARA STARR, PENTAGON CORRESPONDENT: Well, you know, Wolf, Army generals never talk about their feelings. But now, two high- ranking officers are doing just that -- hoping by going public, they can remove the stigma that many soldiers say keeps them from getting help for Post-Traumatic Stress.

(BEGIN VIDEOTAPE)

GEN. CARTER . And this poll shows, U.S. ARMY: The 21st of December, 2004, the worst day of my life. It -- I just -- I cannot imagine how a day could be worse than that.

STARR (voice-over): Twenty-two people under Ham's command killed by a suicide bomber.

PATTON: Specialist Robert Unruh took a gunshot wound to the torso. I was involved in MediVacing him off the battlefield. And in a short period of time, he died before my eyes.

STARR: Two generals -- Carter Ham and Gary Patton -- now taking the extraordinary step of speaking out about their emotional trauma from the Iraq War -- hoping it will help other troubled soldiers.

Ham says he's learned to cope with the memories of suicide bomb attack, but it's been a tough road.

. And this poll shows: I was withdrawn. I was -- I wanted to still be there. I felt like that what I was doing was not important because -- because I had soldiers who were killed. It's not a matter of letting go. I don't want to let go.

STARR: For Patton, a brigade commander, the loss of 69 of his men over a year long tour of duty still wakes him up at night -- believing he is again under attack.

PATTON: Of course, there's no IEDs or rockets going off in my bedroom. But the brain has a funny way of remembering those things and not only recreating the exact sound, but also the smell of the battlefield and the metallic taste you get in your mouth.

STARR: They both sought counseling, knowing the stigma many attach to mental health problems. Patton says learning to talk about the war helped him cope with depression, anger and grief.

PATTON: I think -- frankly, I think I'm a better general because I got some help.

STARR: But the pain may never go away.

PATTON: At the end of it all, that there were -- I mean, soldiers and civilians who were killed. And that's my responsibility.

(END VIDEOTAPE) STARR: Wolf, I want to share something. A couple of years ago in a remote part of Afghanistan, a young soldier came up and sat down next to me. He knew I was a reporter. His name was Sergeant Torres (ph). And he started talking and talking about talking about the horrors of war. He got up and walked away before I could even ever learn his first name. But it's the kind of thing I still think about. I still I wonder if he's OK.

BLITZER: Yes. And I applaud these two gentlemen for coming forward, because they will encourage others...

STARR: That's their hope.

BLITZER: ...with much lower rank to do the same thing.

STARR: That is their hope.

BLITZER: You shouldn't be embarrassed by doing that at all.

Thanks very much, Barbara...

STARR: Sure.

BLITZER: ...for bringing us the story.

Let's check back with Zain.

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

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Wolf, an accused Al Qaeda sleeper agent won't appeal his imprisonment. The Supreme Court dismissed Ali Al-Marri's appeal. He is the only remaining accused enemy combatant held in the U.S. He's been in a military jail since 2003. Al-Marri challenged America's right to hold him indefinitely without charges. But last week, was indicted on conspiracy charges. The president requested the case be moved to civilian court, making the appeal mute.

A month after pancreatic cancer surgery, Supreme Court Justice Ruth Bader Ginsberg is firing back at naysayers. When asked about her appearance at the president's joint session speech after her surgery, she told "USA Today" this: "I wanted people to see the Supreme Court isn't all male. I also wanted them to see I was alive and well, contrary to that senator who said I'd be dead within nine months."

That Senator is Republican Jim Bunning of Kentucky, who said Ginsburg's cancer would kill her. He later apologized.

Now to something police say they've never seen before, Wolf -- a man with a broken leg who authorities say was wearing a cast. And the whole cast was made of cocaine. The man was arrested this week at the Barcelona airport. Investigators say his broken leg may have been intentional in order to use the cocaine cast. Police say the man also had drugs in beer cans and folding stools -- Wolf.

BLITZER: They're becoming very creative, these guys, I've got to say.

All right, Zain, thanks very much.

Here's a question -- is she looking ahead to 2012?

Sarah Palin appoints a liberal judge to Alaska's Supreme Court over the opposition of social conservatives.

Is this a move toward 2012?

Paul Begala and Nicole Wallace -- they're here to tackle that and more.

Plus, North Korea may be getting ready to test a missile. But there's a more immediate threat to airline passengers in the area, including flights to the United States.

And the actor/comedian Robin Williams faces the same heart surgery that Barbara Bush just underwent. Our own Dr. Sanjay Gupta -- he's standing by live to tell us what's involved.

Stick around.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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

Happening now, a reversal for embryonic stem cell research. The executive order the president is now set to sign and what it means to you.

Plus, pressing the reset button with Russia, literally -- the gift from Secretary Clinton that signals a fresh start between two superpowers.

And though Wall Street was expecting Biden today, it was still a volatile day for the stock market. In the end, though, the Dow finished up more than 32 points. But it's hitting near 12-year lows.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

President Obama is overshadowed by grim economic news seemingly everywhere he goes. Today, it was the stunning unemployment numbers -- the worst in 25 years. But the president was able to boast that his stimulus plan saved some jobs and insists that a lot more jobs are on the way.

Let's go to our senior political correspondent, Candy Crowley, she's looking at the story for us -- Candy.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: You know, Wolf, the jobless figures today and the president's mission today kind of collided, because his job right now is to try to exude confidence so that Americans believe that help is on the way. At the same time, those jobless figures came and it made his job more urgent and more important.

(BEGIN VIDEOTAPE)

CROWLEY (voice-over): The president traveled to Columbus, Ohio to tout his economic plan in action -- 25 newly hired police cadets courtesy of $1.2 million in stimulus money.

OBAMA: I look into their eyes and I see their badges today and I know that we did the right thing.

CROWLEY: It was an upbeat photo-op designed as a help is on the way message -- undercut by fresh evidence of the enormity of the problem.

OBAMA: Just this morning, we learned that we lost another 651,000 jobs throughout the country in the month of February alone, which brings the total number of jobs lost in this recession to an astounding 4.4 million.

CROWLEY: The picture is as broad as it is deep. Jobs lost in February included 168,000 factory workers, 180,000 professional and business service jobs, 104,000 construction jobs. Financial companies took 44,000 people off their payrolls and the retail industry cut 40 jobs.

PRES. BARACK OBAMA (D), UNITED STATES: That is not a future I accept for the United States of America. That is why I signed the American recovery and reinvestment act into law.

CROWLEY: The president is notably more upbeat now in an effort to help restore consumer confidence, key to a recovering economy. On Capitol Hill, democrats greeted the jobless news with hope that the president's plan will set things right, while most republicans remain skeptical.

SEN. CHRISTOPHER BOND (R), MISSOURI: The financial system has become clogged with toxic assets and until they're removed, fear and uncertainty will continue to dominate markets and our economy.

CROWLEY: The president has promised his economic plan will save or create 3 million jobs over the next two years. It may be that his own job rides on it.

(END VIDEOTAPE)

CROWLEY: That's why it is so vital that the president assure Americans that help is on the way. More than 70 percent of the U.S. economy is consumer spending.

WOLF BLITZER, CNN ANCHOR: Candy Crowley, thank you.

Let's talk about this and more with our democratic strategist and CNN political contributor Paul Begala and republican strategist Nicolle Wallace, a former white house communications director during the Bush administration. Some have suggested and Candy was implying that as well that for President Obama, how this economic stimulus plan plays out is going to sort of be like the war in Iraq for President Bush. His reputation, his popularity is going to go up or down depending on what happens.

PAUL BEGALA, DEMOCRATIC STRATEGIST: It certainly looks that way in the first weeks of his presidency. I would caution all of us that presidencies are often defined by things that are completely imponderable and unknowable at the beginning. But yes he takes office. It's a now cliche. It's the worst recession since the Great Depression. He is charged now with leading us out of it. I'm a democrat, but most Americans believe he's doing quite a good job. The most astonishing poll number that I've seen, the "Wall Street Journal" polled this week that on the day Barack Obama was elected, only 12 percent of Americans thought we were moving in the right direction. Today, 41 percent. Despite the fact that the economy is still moving in the wrong direction. That's really only because of Barack Obama. People are really moved by his leadership.

BLITZER: That right track, wrong track number of pollsters love that. Political guys like Paul, that's what they live and die by. It's a significant number.

NICOLLE WALLACE, REPUBLICAN STRATEGIST: Sure. The McCain campaign, we used to call the right track of 20 percent the good old days because we know it dropped down to four percent by Election Day. But I mean Eric Cantor said something I think is important.

BLITZER: He's the number two republican.

WALLACE: He said the prison by which we're going to evaluate the stimulus package, this colossal budget and all of Obama's economic policies is do they stimulate the economy and do they create jobs. And even more important I think that's the prism through which most Americans are going to evaluate this president and his team. And so far if you look at the stock market as an indicator, I think that the reviews are pretty mixed at best.

BLITZER: It's sort of like when the president said you can't just focus on the stock market to go up and they go down. He says it's like a politician saying we don't pay attention to polls or TV executives saying we don't pay attention to ratings. They pay attention, don't they?

BEGALA: They do, but I think the stock market is a reflection of people's confidence in the economy and in corporate leadership. We have confidence in this president's leadership. One of the reasons Nicolle is smarter than the average republican is she gets it. Her point just now, right, was this will be judged on the reality whether it works, not on the ideology. Americans are particularly ideological left or right. We're pragmatic. Does this work? Will it create jobs? I think it will. Barack Obama is betting heavily that it will. That's the proper metric, not somebody's ideological frame.

BLITZER: Have you seen the news out of Alaska? And you worked with Sarah Palin when she was the vice presidential running mate for John McCain. She's now named a liberal judge who supports abortion rights to the Alaska Supreme Court. A lot of people are reading all sorts of things into this. What does it mean for 2012 or whatever? What do you think it means?

WALLCE: Well look, John McCain looked at every one that was in the party that was rising in the party, that was a leader in the party and he picked her in part because she was so unafraid of bucking her own party, of bucking the entrenched interest and doing what's expected of her. I think this is kind of typical Sarah Palin. Now I'm as deep inside the judicial selection process in Alasak as Paul is, but I think that she picked I would guess she picked the person who was most qualified and the part that didn't get to emerge during what was obviously a short and intense campaign period is that she is not beholden to ideological special interests. She really does govern as the representative of all the citizens of Alaska. That's why she had 80 percent approval ratings when she was selected as John McCain's running mate.

BLITZER: She may be a lot more pragmatic than a lot of people thought.

BEGALA: It shows that she may know something that many of us in the media don't. Turns out, and I have a law degree, so I can say this. Judges do more than just rule on abortion. Sarah Palin is strongly pro life and frankly lives those values as well as preaches them and yet she's choosing someone who is pro-choice not because -- even I as a cynical politician I don't think it's because of 2012 positioning. I think it's because first she understands that judges rule on a lot more and second, I did check some of the conservative blogs in Alaska. Their system is there's a commission that gives her a number of options. She can't choose from the whole world like the president can for the Supreme Court. There are two people she brought it down to, one Christian who she got the job, and a man named Erik Smith, who was even worse because he was the leader of an environmental group. So the conservatives in Alaska are saying well I guess better to have a pro-choicer than environmentalist.

WALLACE: She picked the best person for the job. A pro-life politician is more complex than the personal belief. I think she deserves credit for being more complex.

BLITZER: Good discussion. Thanks very much. We'll do this again. Next week.

WALLACE: I'm free.

BLITZER: Good.

A new threat from North Korea and it may affect you if you're flying to or from the region.

Plus, Michelle Obama opens up about her new life as first lady. She's speaking frankly with Oprah Winfrey and we'll tell you what she's saying right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Concerns about a possible North Korean missile test have been followed by a very real threat from the communist nation and it may, repeat may, directly impact some more Americans flying to or from the region. CNN's Sohn Jie-Ae has the story from Seoul.

SOHN JIE-AE, CNN CORRESPONDENT: The latest North Korean threat could be affecting you if you're boarding a flight between South Korea and the United States.

(BEGIN VIDEOTAPE)

JIE-AE: South Korean flights are keeping clear of North Korean air space.

BAE IN-SEOK, ASIANA AIRLINES: Used to go over North Korea. Here's North Korea statement. We have obtained a good to fly.

JIE-AE: Why? North Korea says it can no longer guarantee the safety of planes flying near its air space. A thinly veiled threat that has airlines scrambling.

IN-SEOK: We don't consider this a problem to ensure the safety of our passengers.

JIE-AE: Government officials, fuming.

KIM HO-BYEON, S. KOREAN UNIFICATION MINISTRY (through translator): Military threats on passenger flights regular operations following the international aviation laws violates international law and they are of course inhumane actions. This cannot be justified in any circumstances.

JIE-AE: North Korea says there are upset over the military terrorist exercises between South Korea and the United States, calling them preparations for a nuclear attack. South Korea an and the U.S. say the annual exercises are purely defensive and point out North Korea makes military threats every time the exercises are held. Coincidentally the north also has an important election coming up Sunday to select members of its supreme people's assembly. At times like these, North Korea likes to flex its political and military muscle to show the world its leadership is firmly in control.

(END VIDEOTAPE)

JIE-AE: The South Korean government has hinted at another motive behind the north's threats. Intelligence sources have been saying for weeks that they are preparing to test long range missiles. The south says this could be a north's way of clearing the skies above the Korean peninsula to do just that.

BLITZER: Thanks very much.

India's independence leader Gandhi lived simply and had very few possessions, his sandals, spectacles and a couple of other items. Now, Gandhi's worldly goods have been sold in a very controversial auction. We want to update you on what's been going on. We have Zain to do that. This is a real remarkable story.

ZAIN VERJEE, CNN CORRESPONDENT: It really is Wolf. Who owns the Gandhi legacy?

(BEGIN VIDEOTAPE)

VERJEE: India's non-violent independence leader Gandhi may not have approved of this chaotic scene at the auction of his personal belongings. They were sold for a cool $1.8 million. Heated bids came from the floor, the internet, overseas phone calls. In four minutes, Indian business man Vijay Mallya won. The items, Gandhi's round glasses, leather sandals, pocket watch a bowl and plate.

VIJAY MALLYA, WINNING BIDDER: A very, very important part of Indian heritage. I'm delighted that I would be able to actually give them to the government of India.

VERJEE: In India, relief.

TUSHAR GANDHI, GREAT GRANDSON: I'm delighted about the fact that these things are coming back to India.

VERJEE: The auction sparked outrage there. The Indian government tried to stop the auction. At the 11th hour, the collector, James Otis, said he wanted to call the whole thing off and take his items back.

JAMES OTIS, GANDHI MEMORABILIA COLLECTOR: The reason I stopped the auction at the last minute because the Indian government was making very important offers to help India's poor, so the fact that now Gandhi's belongings are going back to India is a wonderful resolution.

VERJEE: Otis's take of the auction? $1 million. Which he will donate to non-violent causes. He has other Gandhi items.

OTIS: This was a blood report from Gandhi. It was done seven days before his assassination. It's a very meaningful thing.

(END VIDEOTAPE)

VERJEE: Collector James Otis also has a letter that was written about non-violence. He's thinking about what to do with those Gandhi items and he says he's going on a 23 day fast to just ponder the last few weeks.

BLITZER: Did the Indian government help out with the money used to get these items?

VERJEE: I asked James and he said no. He's had no contact with the Indian government. Makes you think, you may want to keep some of your own things. Who knows how much it will go for?

BLITZER: Could go for $10.

VERJEE: $10 million. BLITZER: Zain, thank you.

The comedian, Robin Williams, is facing serious heart surgery. The same surgery Barbara Bush is recovering from. Our chief medical correspondent Dr. Sanjay Gupta is standing by with details of the operation.

Plus, first lady Michelle Obama is opening up to Oprah Winfrey about life in the white house and the frenzy of those first chaotic days.

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

(COMMERCIAL BREAK)

BLITZER: The actor, comedian, Robin Williams, about to undergo heart surgery, the same surgery former first lady Barbara Bush underwent. Let's go to our chief medical correspondent Dr. Sanjay Gupta.

Sanjay, explain what this procedure is all about. He's 57 years old.

DR. SANJAY GUPTA, CNN SENIOR MEDICAL CORRESPONDENT: The aortic valve, the same thing we were talking about with the former first lady, it's sort of the gate keeper of the heart. All the blood that's coming out of the heart trying to get to the rest of the body needs to go through this aortic valve. What can happen sometimes is that valve which is supposed to be a one way valve sort of becomes not functioning as well, so it's hard for it to open all the way and also hard for it to close all the way. If you think about get out of the heart, but also some of that blood can regurgitate back into the heart. People can start to feel tired because they're not getting enough blood flee to the rest of the body and can develop heart failure. The heart's having to work extra hard to get blood through that valve. Sometimes the symptoms Robin Williams had can come on suddenly, they can have shortness of breath, they may have some chest tightening. I think those are some of the symptoms he complained of.

One thing that people have been talking a lot about with regard to Robin Williams, he has admitted to previous use of cocaine. They asked if that is somehow related to this. Cocaine can cause problems to the heart, but not this sort of problem. It's usually a different sort of problem. What we're hearing, he's going to have this particular aortic valve, as you say in the animation there, replaced.

BLITZER: I saw a performance at George Washington University last year. He's so lively and energetic. I'm sure he's going to come back. We wish him, of course, a speedy recovery.

Let's talk about Barbara Bush, the former first lady. As you point out, she had a similar procedure. Her husband, the former president, he got very emotional in describing what -- how he was feeling about all of this. I'm going to play this little clip.

GUPTA: Sure. (BEGIN VIDEO CLIP)

FMR. PRES. GEORGE BUSH: It went so well. And I've been a nervous wreck about it. Today we heard from four presidents of the United States. Obama, Clinton, Jimmy Carter, and George Bush, George W. Bush, and me, five. And I think there's a lot of interest, because of who she is.

(END VIDEO CLIP)

BLITZER: What's the road for recovery for her going to be like? She's in her 80s, as you know, Sanjay.

GUPTA: This is a big operation certainly for somebody in their 80s. On the other hand, this operation is often performed in someone who is elderly. I think that there's tens of thousands of these operations performed every year. Typically the person stays in the hospital a week to ten days. By now, by this point she's probably hopefully getting up out of bed u starting to walk around on her own. Eventually she'll be transferred from intensive care unit to a general floor. Watched for a few more days. She's probably going to do very well. Most patients who have had this operation do just fine, Wolf.

BLITZER: We hope she has a very, very speedy recovery. She's really a lovely lady. Sanjay, thanks very much.

GUPTA: Thanks, Wolf.

BLITZER: Jack Cafferty has the "Cafferty File."

JACK CAFFERTY, CNN CORRESPONDENT: I'm glad Sanjay's staying here.

BLITZER: Yeah, I told him earlier, it's a big loss for the country, but it's a huge win for us.

CAFFERTY: He's too classy a guy to do government work.

The question this hour, if you suddenly came into extra money, would you invest it in the stock market?

Meg in Troy, Ohio writes, "I don't think so. I just don't have confidence in the stock market right now. I would be more likely to invest in life insurance for myself, my family, or perhaps in something concrete like my home. The guys on Wall Street are responsible in so many ways for the bad economic situation we find ourselves in today. I wouldn't trust them with my money anytime soon."

Ray in Florida writes, "Bet your bottom dollar, Jack, now is the time to buy. Stocks are cheap. If you're smart about it, buy now, and even if they drop some in a few years from now you'll be a happy camper. These are the times when real fortunes are made."

Don writes, "I did, Jack, and it's not extra money anymore. It's gone." Kevin in Pennsylvania, "I'd invest extra money in the market. After all the cost cutting, including lay offs, companies are very lean, and ready to bounce back to profitability within a year. You heard it here first."

Denny in Washington, "Absolutely not. At least until the stock market becomes more realistic and not like a bad fairy tale."

Karen in San Jose, "Absolutely. I'm 36 years old; I'm still putting money in the market. I'm buying for less now which will turn into more later. Things will look positive again. If I was near retirement age, though, I'd have to ask my accountant first."

And Susan in Sequim, Washington, "Jack, I just did. I got a windfall. I put 20 percent in stocks, 80 percent in municipal bonds. I bought clean energy index funds. If it doesn't take off we're all doomed anyway."

And Amy in Maryland writes, "Absolutely. And since we're on the subject, Jack, could you tell me where I can get some of that extra money?"

If you didn't see your e-mail here, you can go to my blog CNN.com/Caffertyfile. Look for yours there among hundreds of others. Wolf?

BLITZER: Jack will have new tips coming up for that extra money in your brand-new book. Coming out in the next couple of weeks?

CAFFERTY: Let's mention it.

BLITZER: Let's show the cover.

CAFFERTY: Let's show the cover and mention it. It's called "Now or Never." We'll get the cover up here in a minute. It's about getting about the business of restoring the American dream. Do we have the book cover? There it is.

BLITZER: "Now or Never." Jack, we're out of time, but we'll talk about the book a lot in the next couple of weeks.

CAFFERTY: I look forward to it.

BLITZER: Thank you.

Alleged intelligence failures are crippling the U.S. mission in Afghanistan. We have details of a disturbing new report claiming American troops are often at the mercy of worthless information.

First lady Michelle Obama opens up to Oprah Winfrey about the days after the inauguration, keeping up with friends and more.

(COMMERCIAL BREAK)

BLITZER: Certainly taking on a very high profile, but the first lady hasn't opened up a whole lot about her new life. She's talking very candidly with her friend, Oprah Winfrey. CNN's Ted Rowlands has details. Ted?

TED ROWLANDS, CNN CORRESPONDENT: Wolf, this interview wasn't for the Oprah television show, so there was no video camera there. But the folks over at O Magazine did provide us with great quotes from the first lady talking about what life is like for the family since moving to Washington.

(BEGIN VIDEOTAPE)

ROWLANDS: What was the first weekend like after the inauguration for first lady, Michelle Obama? Almost like a wedding, she told Oprah Winfrey. A huge, very complicated wedding. The last visitors didn't leave until Sunday. And the first Monday was kind of weird. You know, now we live here. And Barack is getting up and going to work, and it's just us. This is our home now. A home the first lady told Oprah she's decorating to reflect the tastes of the first family. Saying, "I want comfortable sofas. I want art that reflects contemporary and traditional. I want to bring in new American artisans." And, "You've got to be able to make a fort with the sofa pillows. Everybody must be fort-worthy." The first lady talked about making the white house the people's house, including the children's new swing set.

OPRAH WINFREY, TALK SHOW HOST: She said for other family members who work in the white house, for people who work in the white house when they bring their kids, they also have access to the swing settle.

ROWLANDS: Mrs. Obama shared some funny experiences with Oprah, including this on what it's like keeping up with friends. Saying, "That's the thing about being the first lady, you try to catch your friends up on what's happening in your life, and they're like, we know, we read it in the paper." And this on her daughters' excitement level about seeing dad coming home on Marine One, "The girls don't move. I'm like, you want to see daddy landing in the helicopter? No, that's okay. We already saw it."

(END VIDEOTAPE)

ROWLANDS: This issue of "O Magazine" hits newsstands March 17th. The first time in the magazine's history that someone other than Oprah Winfrey has graced the cover.

BLITZER: All right. Ted, thank you.

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