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THE SITUATION ROOM

Prime Minister Junichiro Koizumi Visits Graceland; White House Says Guantanamo Bay Will Remain Open Until For Now; Republicans Attempt To Breach Immigration Policy Divide; Nicolle Wallace; "New York Times" Versus "Wall Street Journal"

Aired June 30, 2006 - 16:00   ET

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


JOHN KING, CNN ANCHOR: And to our viewers, you are in THE SITUATION ROOM, where new pictures and information are arriving all the time. Standing by, CNN reporters across the United States and around the world to bring you today's top stories.
Happening now, it's 3:00 p.m. in Memphis. He's a fan of George W. Bush, but a bigger fan of Elvis, so the president rewards Japan's prime minister with the trip of a lifetime, a private tour of Graceland. Just wait until you hear the prime minister sing.

It's 4:00 p.m. at Guantanamo Bay, Cuba. Dealt a stunning setback by the Supreme Court, the Bush administration looks for ways to deal with terror detainees. Do Republicans in Congress have the answer?

He lost his post as Majority leader, gave up his seat in Congress amid a swirling corruption scandal, but the Supreme Court okayed his plan to redraw the map of Texas. Does that make Tom DeLay a winner?

I'm John King, in for Wolf Blitzer. You are in THE SITUATION ROOM.

KING: After this, the Texas ranch just may not be good enough for VIP visitors. Japan's prime minister, Junichiro Koizumi, has been a loyal ally to President Bush. But his idol is Elvis Presley. So the president pulled out all the stops today and flew the prime minister to the Presley mansion in Memphis. Let's just say, it made for quite the memorable day.

Our White House correspondent, Elaine Quijano, is there and joins us live.

Hello, Elaine.

ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Hello to you, John.

That's right -- memorable and, I have to say, surreal. The two leaders -- this was likely the last trip that they will ever be taking together. And if President Bush was looking to give the prime minister an unforgettable experience, I think it's safe to say President Bush got one, as well.

(BEGIN VIDEOTAPE)

JUNICHIRO KOIZUMI, JAPANESE PRIME MINISTER: Love me tender...

QUIJANO (voice-over): In the Jungle Room at Graceland, an impromptu performance by one of President Bush's staunchest international allies.

KOIZUMI: Wise men say...

QUIJANO: The president often cites his unlikely friendship with Japanese Prime Minister and Elvis fanatic Junichiro Koizumi as an example of how freedom and democracy can turn formerly warring countries into allies.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Mr. Prime Minister, thank you for agreeing to come here. A lot of Americans were thrilled you are here, particularly at Graceland. It means a lot to our country that you would be that interested in one of America's icons, Elvis Presley.

QUIJANO: Their alliance is bolstered by a close personal relationship. Exactly five years ago at Camp David, the two tossed aside the careful choreography planned by advisors and playfully talked of baseball to each other.

Since then, their connection has shaped foreign policy. A former Bush aide says, after September 11, Koizumi made clear that Japan stood with President Bush in fighting the war on terror.

MICHAEL GREEN, CTR. FOR STRATEGIC & INTERNATIONAL STUDIES: He sent handwritten notes to the president throughout the difficult days after 9/11, and really stood up as a friend and an ally.

QUIJANO: But that ally is stepping down in September, and President Bush is losing the backing of a leader he's called his best international friend.

Friday's pilgrimage to Elvis' Memphis mansion was the president's thank you, and the White House pulled out all the stops. As the prime minister boarded Air Force One in Washington, Elvis music played on the overhead speakers. There were fried peanut butter and banana sandwiches on the menu, though neither leader tried one. And the culmination for the wide-eyed Koizumi, a private tour of Graceland by Presley's daughter, Lisa Marie, and wife, Priscilla.

KOIZUMI: To dream the impossible dream -- my dream came true.

(END VIDEOTAPE)

QUIJANO: And it was shortly after that the prime minister donned a pair of these Elvis glasses, which I will not put on. But he had to be ushered away by the president because he was holding court with these for a few seconds.

And on those fried peanut butter sandwiches, I want to disclose that, while neither the president nor the prime minister actually tried one, White House chief of staff Josh Bolten did. And John, 36 grams of fat -- we are told the chief of staff felt every bit of that -- John.

KING: No way we can get you to put those glasses on, Elaine?

QUIJANO: Oh, fine, here you go. The things you do for TV.

KING: Elaine Quijano for us, outside of Graceland. Elaine Quijano on a play day for the president, not a work day. Elaine, thank you very much.

A day after the Supreme Court ruled that military trials for terror suspects are illegal, the White House says the detention center at Guantanamo Bay will remain open until the government comes up with another solution for the prisoners there.

President Bush may be counting on Republicans in Congress to help him out. Joining me now here in THE SITUATION ROOM, CNN congressional correspondent Dana Bash.

Counting on Republicans to help him how -- do they have a policy proposal?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: They are actually working hand in glove, John. The White House aides were on Capitol Hill, working with Senate Majority leader, his staff and other key players in this process, coming up with legislation. They want a bill, at least the Majority leader does, ready by a week from now, by the time they come back from recess.

That bill, the Majority leader wants it to authorize military tribunals for prosecuting terrorists. But there's an interesting dynamic shaping up here, and that is that Armed Services Chairman John Warner, who is really -- his committee is taking the lead on this, he is actually taking a little bit of a go-slow approach. What he told me yesterday is, you know, maybe legislation isn't actually necessary.

Why -- because he said, what you could do is actually have the terror suspects go through the military court system, which essentially means courts-martial. So that is something that he is looking at that right now. He says legislation might not be necessary. He essentially says the whole world is watching, so we need to do something that actually makes it very clear that these detainees have rights, very clear rights, in this process.

KING: As they sort this out, perhaps a bit of a policy disagreement, or at least not resolved yet between the chairman of the Armed Services Committee and the Majority leader.

What about the political calculation for Republicans? Obviously this is a slap by the Supreme Court at a Republican president. How do the Republicans in Congress think it plays out for them?

BASH: Certainly there's no question -- you can't find anyone who doesn't agree that this is a legal setback for them. However, many Republicans I've talked to over the past 24 hours, they say, you know, this is a political gift. Why -- because it puts their number one issue -- really the only issue, frankly, that they are still doing better on when it comes to Republicans versus Democrats -- that is terrorism.

It puts that squarely at the top of the legislative -- election year legislative agenda for them. They are going to be talking for the next month, probably, at least, about how do you put terrorists -- suspected terrorists, I should say -- on trial.

That's something that comes on the heels of what they think has actually been a pretty good month, talking about this issue, whether it was the killing of Zarqawi, putting Iraq equaling the war on terrorism on the House and Senate floor, and of course what we saw last week with the -- this week, I should say -- with them trying to say that, anybody who leaks classified information related to terrorism is wrong.

KING: So then, what about the Democrats? Do they see a political calculation here, or is there -- are they content simply to say, The Supreme Court ruled against you, Mr. President?

BASH: It's interesting to watch the Democrats. Definitely, they are happy -- gleeful -- at the fact that this was essentially a smack down from the Supreme Court against the president on the way he views, perhaps, executive authority.

However, most Democrats are trying to be very careful. They don't want to look like they are doing anything that would support suspected terrorists. They're very cognizant of that. In fact, that's the approach that you saw the Senate Minority leader, Harry Reid, take yesterday, saying, Look, we are going to work with the White House, work with the president to come up with a process going forward.

However, the House Minority leader, Nancy Pelosi -- she released a statement yesterday, and she said that the decision "reaffirms the American ideal that all are entitled to the basic guarantees of our justice system." She said, "This is a triumph for the rule of law."

Well, the Republicans, today, cut-and-pasted that, sent it around like this, and the new top from Republicans is, Capitol Hill Democrats advocate special privileges for terrorists. I can tell you, some Democrats I've talked to are not very happy about this. This is exactly what they were trying to avoid.

KING: A big policy debate, and lo and behold, a big political debate.

Congressional correspondent Dana Bash -- thank you very much.

And as Congress takes a holiday break, there's still no agreement on an immigration reform plan. Ahead of some crucial and controversial hearings next week, has there been any shift in this debate? Let's go live now to our congressional correspondent, Andrea Koppel -- Andrea.

ANDREA KOPPEL, CNN CONGRESSIONAL CORRESPONDENT: That's right, John. After weeks of hearing Republicans in the House and the Senate go at it, highlighting, basically, the deep divide in there and the differing opinions they have as to how to bring about some kind of comprehensive -- or any -- immigration reform, in the last few days now, Senate Republicans have been trying to bridge the deep divide.

(BEGIN VIDEOTAPE)

SEN. JOHN MCCAIN (R), ARIZONA: Our borders are broken; they must be enforced.

KOPPEL (voice-over): It was a subtle shift in message.

SEN. ARLEN SPECTER (R), PENNSYLVANIA: Nobody wants to let more people in without having the borders secure.

KOPPEL: One by one this week, key Senate Republicans, who have insisted comprehensive immigration reform must include a guest worker program and earned path to citizenship for millions of illegal immigrants, signaled a willingness to compromise with the House.

SPECTER: We are prepared to commit to secure borders, but we have got to have a timetable on the rest of it as well.

KOPPEL: At the heart of this idea, to ensure the border is enforced first, the main House demand, before eventually triggering a guest worker program and path to citizenship. Arizona Republican John McCain said it's the most realistic approach.

MCCAIN: So tomorrow we started on setting up a temporary guest worker program. It would take a long time for us to set it up, have it functioning and working -- same thing with the path to legalization. I mean, you just don't have it happen overnight.

KOPPEL: So far, House Republican leaders, strongly opposed to making illegal immigrants citizens -- what they call amnesty -- have said they are open to discussion.

REP. DENNIS HASTERT (R-IL), HOUSE SPEAKER: I think there probably has to be some metric there so what probably that Senator McCain is talking about has some substance. Some of our own members are floating ideas similar to that.

(END VIDEOTAPE)

KOPPEL: A senior administration official who is involved in trying to work out a deal between the House and the senate basically said that they feel that there is, you know, a lot of progress that's being made, but there is no single plan, nothing has gelled, so to speak, John.

In fact, this official said nevertheless the White House is encouraged by the fact that at least both Republicans in the House and the Senate are trying to work some kind of deal -- John.

KING: Andrea, are they truly encouraged in the sense that you have the Senate having hearings on its plan, the House having hearings on its plan? Do they think this is actually going to lead them to a compromise, or are both sides trying to stiffen their position, if you will?

KOPPEL: Well, certainly House Republicans, many of them, are probably going to be using these hearings that start off next week as a way to kind of fire up the conservatives in their districts. They are all facing reelection in just a few months.

Nevertheless, this official did say that let's see what happens -- they're not counting their chicken's yet, John. Let's see what happens in July. We have got a number of hearings then. And, you know, they have a long way to go before they are ready to say that they have got some people who are ready to sign on the dotted line, John.

KING: Andrea Koppel on a fascinating internal Republican tug of war. Andrea, thank you very much, and our thanks to Andrea Koppel, Dana Bash and Elaine Quijano and Elvis, part of the best political team on television, CNN America's campaign headquarters.

And coming up, it's the last day on the job for one of the top officials in President Bush's inner circle. I'll sit down with Nicolle Wallace.

Also, the "Wall Street Journal" versus the "New York Times" -- Howard Kurtz looks at a clash of the media titans over a controversial leak about the war on terror.

That will also be one of the topics we discuss later in our "Strategy Session." Bill Press and Terry Jeffrey take on immigration reform. Stay with us. You are in THE SITUATION ROOM.

(COMMERCIAL BREAK)

KING: Our Zain Verjee joins us now with a closer look at other stories making news. Hi, Zain.

ZAIN VERJEE, CNN ANCHOR: Hi, John.

"It is what it is" -- with those words White House spokesman Tony Snow today confirmed that analysts now believe the voice on an audiotape released yesterday is that of Osama bin Laden. On the tape, the al Qaeda leader mourns the death of the organization's leader in Iraq, Abu Musab al-Zarqawi. Bin Laden calls on President Bush to turn over al-Zarqawi's body to his family.

Russia is intensifying its hunt for the killers of five Russian diplomats in Iraq. Moscow's just announced a $10 million reward for information leading to the killers. Four of the diplomats were apparently killed after being abducted.

A group linked to al Qaeda claims to have carried out the killings. It's posted a video that appears to show two of the diplomats being beheaded and one of them being shot in the head.

U.S.-led coalition forces are stepping up counter-insurgency operations in Afghanistan. Commanders say troops today killed 14 militants during a raid on a safehouse in eastern Afghanistan's Nuristan Province. Another suspected extremist was killed, and eight more were detained during operations in southern Kandahar Province.

Federal prosecutors are arguing that six men who allegedly were plotting to blow up the Sears Tower in Chicago should be held without bail until that trial. Appearing in a Miami courtroom just hours ago, a government attorney said the ringleader had contact with an explosives expert. Defense attorneys are expected to address the court this hour. The six co-defendants were arrested during an FBI sting last week -- John.

KING: Thank you, Zain. We'll see you a bit later.

And better late than never -- that could be the retrain for a man who received sweet vindication from the Supreme Court Wednesday, and today is the recipient of the "Political Play of the Week."

Senior political analyst Bill Schneider explains. Hey, Bill.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Hi, John.

The recipient paid a high price for this week's "Political Play of the Week." Tom DeLay made Texas redistricting his personal cause. He masterminded the campaign to elect a Republican state legislature in 2002. He then orchestrated the new legislature's plan to redraw district lines in order to increase the number of Republican House seats.

Now, DeLay was admonished by the House Ethnics Committee, indicted for campaign finance violations, forced to give up his post as House majority leader, and then he resigned from Congress.

Well, this week the court upheld DeLay's legacy. They ruled it's OK for a state to draw new district lines between Census years to gain partisan advantage, as long as it doesn't violate minority voting rights, Well, was it worth it? DeLay says it was. He told the "Washington Post," quote, "It's always worth it to stand up for the Constitution" -- John.

KING: Bill, Tom DeLay gets the "Play of the Week." Is this ruling a total victory for DeLay and Republicans of any silver lining for Democrats?

SCHNEIDER: Democrats, as soon as they gain the majority in any state, they can go ahead and redraw the district lines. The Supreme Court opened the door to perpetual redistricting. That's raw politics, and it's DeLay's legacy.

KING: To the victor go the spoils. Bill Schneider, thank you very much. Thank you, Bill.

And still ahead, her last day at work and now a reflection of what the last few months have been like. I will speak to one of President Bush's key advisers.

Elvis is not a hero just to Japan's prime minister, but to many American presidents.

Stay with us. You are in THE SITUATION ROOM.

(COMMERCIAL BREAK)

KING: The Supreme Court blocked President Bush and the president bashes the "New York Times." Just two of the topics we are covering in today's "Strategy Session" with Democratic analyst and radio talk show host Bill Press and Terry Jeffrey of the conservative weekly, "Human Events." Gentlemen we will get to those in a minute, but let's start with immigration.

You have these competing hearings, if you will, the Senate Judiciary Committee holding hearings on the Senate plan, House Republicans holding hearings on their plan. The president says this is an issue in which he wants a bill this year. I want you to listen, before we have a discussion, to Secretary of Homeland Security Michael Chertoff talking about this issue in a speech here in Washington.

(BEGIN VIDEO CLIP)

MICHAEL CHERTOFF, HOMELAND SECURITY SECRETARY: The president has used the tools of the so-called bully pulpit to speak very aggressively and clearly about the solution, the comprehensive solution, he thinks is appropriate. Of course, the president doesn't get to vote in Congress but that is the way presidents move Congress.

(END VIDEO CLIP)

KING: Terry, let me start with you, the president has the bully pulpit. He's been using it to an effect of angering much of his conservative base by calling for this guest worker program that they consider to be amnesty. How long in an election year is it smart for this president to continue to use his bully pulpit and anger his very base? Is he at some point going to hurt his party?

TERRY JEFFREY, "HUMAN EVENTS": I think he was starting to hurt the party John. I think the House Republicans have their act together politically on this. They had a major press conference with all the House leadership a week ago. They are going to do a series of hearings all across the country. They start next week with Ed Royce. He's the chairman of the Terrorism Subcommittee in the House.

He's going right down to the border in San Diego, Laredo, Texas and he's going to illustrate for the public how the Senate bill, he believes, actually makes it easier for terrorists to penetrate that border. The House is now going after the Senate bill, they now call it the Reed-Kennedy bill. They think can make immigration a plus for them in November.

KING: You agree with the president's approach for the most part. You want him to keep talking about this for policy reasons, but do you think it helps you politically for the president to be out there dividing his own party.

BILL PRESS, RADIO TALK SHOW HOST: Well look, I think the story here is, John, the American people don't want more hearings. We don't need more hearings. They want action. I think they see the plan, they see the landscape. The Republicans control the White House, they control the Senate, they control the House.

Yes, I think President Bush is right on this issue, but what American people see is the Republicans can't deliver. They have the power but can't deliver on one of the most important issues facing this country. I think it hurts them.

KING: Let's move on to an interesting policy debate, that has become a very interesting political debate, all about this "New York Times" story and then other media reports about this terrorist tracking program, monitoring bank records and financial transactions around the world. I want you to listen, the House, the Congress decided they had to get involved in this, to condemn these leaks. There are some people saying prosecute the "New York Times."

I want to read to you, this is from the House of Representatives resolution on this, it says the House of Representatives expects the cooperation of all news media organizations in protecting the lives of Americans and the capability of the government to identify, disrupt and capture terrorists by not disclosing classified intelligence programs.

So the resolution, which passed 227-183, says we have a responsibility in our business to withhold information if it would be classified, to print or broadcast it. But at least one member of the House, and she's not the only one, this is Democrat Jane Harman. I want you to here her view on this resolution.

(BEGIN VIDEO CLIP)

REP. JANE HARMAN (D), CALIFORNIA: If anyone wants to live in a society where journalists are thrown in prison, I encourage them to move to Cuba, China, or North Korea, to see if they feel safer.

(END VIDEO CLIP)

KING: Bill Press, on that issue, the president says national security was damaged by publishing this, yet the administration says it's doing all it can to track financial records. Is this a policy argument from the White House? Should the "New York Times" be prosecuted?

PRESS: Two quick points, one, good for Jane Harman. This week, communist China passed a bill saying that newspapers could only print the articles that the government gives them advanced permission to print. This resolution on the House of Representatives tries to make this country just like China. I think it's shameful, I think it's un- American and John here's the second point.

JEFFREY: That's a slight exaggeration.

PRESS: That's my job. Second point, you know this was no secret. President Bush signed an executive order making this possible. It was printed on the White House Web site. You heard the president give speeches where he bragged about that they were tracking down the financing of all these terrorists, which they should. The "Wall Street Journal," the "L.A Times" printed it. I read about it before the "New York Times" had run Suskind's book, "The One Percent Doctrine." So this was no secret. It is purely political. Go after the "New York Times," stir up the conservative political base.

KING: Congress have a roll in this and might they have put in there that Congressman shouldn't leak classified information either?

JEFFREY: Congress shouldn't leak classified information. First of all, this was secret enough, John, that it nailed at least two al- Qaeda terrorists, including Hambali, the guy who masterminded the Bali Resort bombing, killed 202 people. But look, I believe we need an adversarial press. I don' think we have, there are many stories in Washington that go unreported because reporters aren't chasing them.

And I don't believe reporters should be prosecuted, however in very rare circumstances, when a crime has been committed by someone in government, I believe that reporters are going to need to called before a grand jury and name their sources. In this instance we had crimes committed by people in government.

They revealed a very important program that was covert, that was successful, that was legal in a war on terror. I think that the reporters and editors involved in this for the "New York Times" need to be subpoenaed before a grand jury. They need to name their sources. Those sources need to be prosecuted.

KING: Let's go quickly to another legal issue. I know you have more to say, but we're limited by time. Another legal issue, the Supreme Court ruling about Guantanamo Bay. Justice Stephen Breyer saying this in his concurring opinion in Hamdan v. Rumsfeld, "the court's conclusion ultimately rests upon a single ground: Congress has not issued the executive a blank check." You know Terry, since 9/11 this has been one of the debates, has the administration overreached in asserting executive power? Proof it has?

JEFFREY: No, I don't think so. I think that the branch of government that overreached here was the judiciary. In December the Congress expressly passed a law stripping the jurisdiction of the federal courts in these case. The Constitution expressly says Congress has that power.

Not only that, but the Constitution gives the power of military tribunals, article one, section eight, clause ten does it. Congress has the Uniform Code of Military Justice, had given the president the discretion to do this. This is an outrageous overreach by the Supreme Court.

PRESS: It sounds to me like Terry's auditioning for the Supreme Court. Now wait a minute, the court has already ruled.

JEFFREY: I'd do a better job than Stephen Breyer, I'll tell you that.

PRESS: The court has already ruled here. Let me tell you something, this is just a total humiliation for George Bush. Here's what happened. The President of the United States went into the Supreme Court of the United States, against Osama bin Laden's driver and the president lost. That just shows how weak his case is.

That court, that's a very strong decision. What the court said is even in a time of war, the president must obey the law, and John, what I think is really important here, Terry, you too, is where do we go from here? This idea about legislation I think is crazy.

What this calls for is closing Guantanamo Bay, getting rid of that black mark on the soul of America, and bringing those prisoners on the mainland, putting them in military prisons and let them go through military trials, just like we did with Moussaoui and the issue is solved.

KING: Let's talk though, four months to an election, there's danger for the Democrats in a position like that. In a press release that says this is a victory for the rule of law, if I'm a Republican candidate, I would say that Democrat is supporting Osama bin Laden's driver and body guard.

PRESS: By standing up for the Constitution of the United States, the Declaration of Independence, the Bill of Rights, you are not standing up for Osama bin Laden. I say let's all take a break over the fourth of July and read the Bill of Rights, read the first amendment, read the fourth amendment.

KING: A debate worth having?

JEFFREY: The truth is we have five liberals on the Supreme Court who overruled a law of the United States Congress, who overruled the president and the constitutionally authorize war against al-Qaeda. We cannot have five liberals running this country. It will be an issue in every Senate election this November. If the Democrats get back the Senate, we're going to have more J.P. Stephens and Stephen Breyer on the Supreme Court. We need more Sam Alitos and John Roberts.

PRESS: You know what you call that? A poor loser, read the decision.

(CROSSTALK)

PRESS: The court said the president has to obey the law.

KING: I am going to call time out there gentlemen. I suspect we will revisit this between now and November and perhaps beyond. Bill Press and Terry Jeffrey, thank you very much.

Today, this afternoon, is the last day on the job for White House Communications Director Nicolle Wallace. She has been with the president since early in his first term and has been one of the few women in the White House inner circle. I spoke with Nicole a bit earlier at the White House.

(BEGIN VIDEOTAPE)

KING: Let me ask you this question, as you prepare to leave the White House on our last day, you are often the only woman in the room when key decisions are being made, does that concern you, that the president is surrounded by an inner circle, forgive me, that is white men.

NICOLLE WALLACE, W.H. COMMUNICATIONS DIRECTOR: That's not entirely true and certainly with the focus on our intense work on the legislative side of things, that effort is lead by Candy Wolf, who is an incredibly bright and incredibly strong woman, who is at his side, really, kind of a congressional whisperer, helping to push our agenda through on Capitol Hill and certainly advising the president.

And as evidenced by yesterday's decision at the Supreme Court, there are obvious huge legal issues that we're grappling with in this war on terror and all those efforts are spearheaded by another bright, strong women in Harriet Miers. So, on the big issues that's he's dealing with, there are still going to be plenty of women in the room.

KING: You brought up Harriet Miers. I was going to ask about her later. But let me ask about her here.

Take us inside the room when all of that was going down, one of the most troubling moments, politically for this president. He nominates his friend, his White House counsel, Harriet Miers. And conservatives, the part of the party that had most supported him throughout his administration, go into revolt.

WALLACE: Yes.

KING: What was the president's reaction when he was seeing quotes in the newspapers, people on television, saying he betrayed him?

WALLACE: Well, you know, the most interesting thing about that whole experience is, you know, obviously, the consultation process was important. It was an important part with the Roberts nomination.

We, I think, did an unprecedented number of consultations. And one thing that came up again and again was the stated desire to have someone from outside the judiciary. And it turned out that they were not really that interested in that after all. But, you know, it was a learning experience. It all is. I think we learned about the kind of woman that Harriet Miers is. You know, I think she had...

KING: What did you learn about president...

WALLACE: Well...

KING: ... at that moment?

WALLACE: ... I think the president is somebody who, you know, fights for what he believes in, and -- and, you know, he stood by her, and I think was proud to do so. And, you know, it was a difficult time here, no doubt.

KING: Anyone who does this for a living has there "Oh, my God" moments, where things just go disastrously bad, and you think...

WALLACE: Right.

(LAUGHTER)

KING: ... you think, "That was horrible," or, "Oh, my God, I am going to get fired for that."

I know I have had more than I can count over the years.

(LAUGHTER)

KING: What is yours?

WALLACE: I will -- because I am leaving and can no longer be razzed for this, I will -- my "Oh, my God" moment was an event over here, when we were doing a live teleconference with troops in Iraq. And it was supposed to be a real casual and spontaneous exchange.

And it -- it turned out, through miscommunications -- that I will take responsibility for -- that they ended up being kind of rehearsed. And it really was one of those moments where I thought, oh, my God. You know, we -- you know, it was a disaster on so many fronts. We made the troops look like we didn't trust them to speak their mind. We made the president look like we had to make the troops rehearse. And it was really a low point in my...

(LAUGHTER)

WALLACE: ... in my world.

KING: People talk about how the place is running better under Josh Bolten, under some of other changes that have been taken place in the West Wing.

Were those too slow in coming? Was the president's own loyalty to his friend Andy Card a detriment, if you will, in the end?

WALLACE: Oh, I don't know. I -- you know, and I don't know what value any of us can find in looking back.

I think that, if you look at the way Josh is running the West Wing, there is no doubt things are going well. Tony Snow is doing a tremendous job as our press secretary, and Josh is doing a tremendous job as -- as our new chief of staff.

And that -- you know, I don't -- you know, it's not a commentary on the people that held the post before. It's just a good sign for the things that we are going to be deal -- dealing with in the coming year. Certainly, we head into the midterm elections with our mojo back, which was Josh's goal for us when he took the reins.

KING: What does the president say when he watches television or reads the newspapers and sees the term lame duck?

WALLACE: I -- you know, I don't think he will accept that, you know, until he's back at his ranch. And, even then, I think he will always be an incredibly consequential and relevant leader of our times. And, so, he's told the press directly, the folks that cover us, that they are going to be sprinting until the finish, that he is going to keep it interesting. And I'm sure he will.

KING: And, on your last day, if the president pulled you aside and said, Nicolle, give me one piece of advice, something I can do better, what would it be?

WALLACE: Oh, I think he needs to keep doing what he does best, which is pull back the curtain and show people how he makes decisions. And, you know, luckily, it's something he's very willing to do.

KING: Off to New York to join your husband.

WALLACE: Yes.

KING: Will we see Nicolle Wallace in the 2008 presidential election?

WALLACE: Oh, I don't know. I am going to -- I'm going to take a good, long rest. And we will see what I do next.

KING: Thank you very much.

WALLACE: Thank you. Thank you very much.

KING: You will miss some of it.

(LAUGHTER)

(END VIDEOTAPE)

KING: Last day on the job for Nicolle Wallace, off to New York.

And just ahead: His term is up soon as the Japanese prime minister, but he may be able to get a job at an Elvis impersonator. If you haven't seen or heard the prime minister sing, stick around. You will next.

And he spent three decades as a crime-fighter, but now former New York City Police Commissioner Bernard Kerik pleads guilty to a crime himself.

(COMMERCIAL BREAK)

KING: Welcome back. You are in THE SITUATION ROOM. Wolf Blitzer is off today. I'm John King in Washington.

Conservatives are bashing the "New York Times" for reporting on a once-secret banking surveillance program targeting terrorists. But, in at least one case, this may be the pot calling the kettle black.

"Washington Post" media critic and host of CNN's "RELIABLE SOURCES," Howie Kurtz, has the story -- Howie.

HOWARD KURTZ, CNN CONTRIBUTOR: John, the war of words over the president's role in disclosing classified information took a strange turn today.

(BEGIN VIDEOTAPE)

KURTZ (voice-over): The "Wall Street Journal's" conservative editorial place loves to bash the liberal press. So, with President Bush, Vice President Cheney and plenty of Republicans ripping the "New York Times" for disclosing a secret administration program to examine the banking records of terror suspects, Paul Gigot and his editorial page staff at "The Journal" had a prime opportunity.

There was just one little problem. The "Journal," along with the "New York Times" and "The Los Angeles Times," had published the same story about the same program last Friday. Today, the "Journal" editorial page smacked the "New York Times" anyway, using some rather self-serving language.

More than a few commentators have tried to link the "Journal" and "Times" at the hip: "We suspect that the 'Times' has tried to use the 'Journal' as its political heat shield, precisely because it knows out editors have more credibility on these matters."

Huh? Well, the editorial says the spokesman for Treasury Secretary John Snow contacted "Journal" reporter Glenn Simpson -- the newsroom operates independently of the editorial page -- and leaked him the banking story, after concluding that "The Times" was going to reject Snow's plea to kill the piece.

One problem with this narrative is that the "Journal" reporter had been pursuing the banking story long before the Bush administration dropped the information in his lap. The "Times"' decision to reveal this classified information was, without question, a controversial one, but the "Wall Street Journal" made the same decision.

Howard Kurtz, CNN, Washington.

(END VIDEOTAPE)

KURTZ: John.

KING: Howie, a little technical issue there.

Walk through this for me now. Is it a media debate internally? Is it a political debate? Is it simply "The Wall Street" editorial page trying to have its own political views? Where's -- where's this debate going to head?

KURTZ: Well, it seems to me that, you know, the media, perhaps rightly so, have really their lumps this week, because a lot of people out there think that we don't give enough consideration to the fact that these programs are aggressively aimed at tracking down terror suspects.

But, at the same time, if you work for a newspaper, even though the conservative editorial page is separate from the newsroom, that has also published this information on the same day as "The New York Times," it seems to me it's a little harder, rhetorically, to make the case that one newspaper did a terrible thing, but our newspaper did nothing wrong.

KING: Is it harder for the administration to make the argument? They issue announcements when they see seize records, they seize some bank accounts. They have made clear since 9/11 that they are doing this, tracking terrorist money, perhaps without giving the details. But can they tell half-a-loaf and then get mad at the media when perhaps we find a piece of the program that is still secret and report on it?

KURTZ: It is interesting that the president, the vice president and congressional Republicans, who had talked rather openly about the fact that we -- they were trying to track the money trail left by terrorists and suspected terrorists, were so upset over the revealing of the details of this program.

And, at the same time, I you know, it is very clear to me, in the weeks since this happened, that this has now become an orchestrated Republican effort to bash the media and the "New York Times" in particular. Why hasn't the White House gone after the "L.A. Times" or the "Wall Street Journal"? "The New York Times," a very big, fat, juicy target for this administration -- John.

KING: I think, perhaps, a little politics has to do with that target.

Howie Kurtz, Howard Kurtz of CNN's "RELIABLE SOURCES" and "The Washington Post" -- Howie, thank you very much.

KURTZ: Thank you.

KING: He's a huge Elvis fan. Japan's prime minister belts out the King's tunes during a visit to Graceland with President Bush. The prime minister sings for you up next.

And exciting rides that can turn tragic -- how do you stay safe at theme parks this holiday season? We will try to help you.

You're in THE SITUATION ROOM.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

KING: Our Zain Verjee joins us now with a closer look at other stories making news.

Hi, Zain.

VERJEE: Hi, John.

Former New York Police Commissioner Bernard Kerik will avoid jail time, after pleading guilty, just hours ago, to taking improper gifts. Kerik allegedly accepted tens of thousands of dollars in gifts while working as the city's corrections commissioner. He rose to national prominence in the wake of the 9/11 attacks in New York. He has been under investigation since December of 2004, when he withdrew from consideration as homeland security secretary, after allegations that he may have employed an illegal immigrant at his home. A full report on this story is coming up in our 5:00 hour.

"USA Today" is backing off some aspects of a story charging that three national telecom countries turned over bulk customer phone records to the National Security Agency. The newspaper now says it can't confirm that BellSouth and Verizon cooperated with the NSA program. Both companies deny having contracted with -- with the agency to turn over data. A new article published today quotes lawmakers saying that AT&T did provide records for the massive database.

Federal officials say that more than 26 million veterans can now breathe easy about their identity data. A series of forensic tests completed in recent hours essentially show that no personal data was accessed from stolen Veterans Affairs computer equipment. The equipment was recovered earlier this week. It contained personal data, including names, birth dates, and Social Security numbers, for more than 26 million veterans.

Water levels are receding this hour and cleanup is under way, after severe flooding in part of the Mid-Atlantic and Northeast regions. Senator Charles Schumer and Hillary Clinton of New York were among those surveying the damage today -- damage from New York to Virginia really expected to total in the tens of millions of dollars. Thirty-four counties in Pennsylvania have now been declared federal disaster areas. And at least 18 people lost their lives in the floods -- John.

KING: Zain Verjee, thank you very much.

And, up next, no pulp fiction potboilers here -- our Jeff Greenfield has got a real summer reading list for you.

And President Bush leads the Japanese prime minister on a pilgrimage to the home of Elvis Presley. But there are many strange ties between president and Presley. And our Bill Schneider will fill you in.

(COMMERCIAL BREAK)

KING: A look now at some of the "Hot Shots" coming in from the Associated Press, pictures likely to be in your morning newspaper tomorrow.

Nablus in the West Bank -- Israeli soldiers arrest a militant of the Al-Aqsa Martyrs Brigades after a gun battle at a cemetery.

Baghdad -- two men use a donkey and cart to get around the city's weekly Friday vehicle ban. That's designed to reduce car bombings.

Millersburg, Ohio -- Amish farmer Arlie Stutzman sits in court. He was busted selling a jug of raw unpasteurized milk in an undercover sting operation. Stutzman maintains the FDA regulation mandating pasteurization violates his religious beliefs.

And Sydney, Australia -- an 8-month-old koala bear clings to his mother at a zoo.

And that's today's "Hot Shots," pictures often worth 1,000 words.

You have to see it to believe it. How about hear it to believe it?

(BEGIN VIDEO CLIP)

KOIZUMI: Wise men say...

(LAUGHTER)

KOIZUMI: ... only fools rush in. But I...

BUSH: I thought...

(END VIDEO CLIP)

KING: President Bush there with one of his fans at the Elvis Presley estate in Memphis. The Japanese Prime Minister, Junichiro Koizumi, is a bigger fan of Elvis. And when it comes to politics, there are many Elvis fans.

Let's turn to the man who knows it best, CNN senior analyst Bill Schneider.

Hi, Bill.

SCHNEIDER: Hi, John.

Well, the president and the prime minister pay their respects to the King, but the King has seen it all before.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Presidents and Elvis, it's an old story. Bill Clinton channeled Elvis in the 1992 campaign.

(BEGIN VIDEO CLIP, 1992)

WILLIAM J. CLINTON (D), PRESIDENTIAL CANDIDATE: You know I can be found.

That's all I can do.

(LAUGHTER)

(END VIDEO CLIP)

SCHNEIDER: Elvis, the first rock star.

(MUSIC)

SCHNEIDER: Clinton, the first rock star president.

(BEGIN VIDEO CLIP, "THE ARSENIO HALL SHOW")

(BILL CLINTON PLAYS THE SAXOPHONE)

(END VIDEO CLIP)

SCHNEIDER: Two bad boys who tried to do good.

Then there was the day in December 1970 when Elvis visited the Nixon White House unannounced. Bud Krogh was the aide on duty.

BUD KROGH, FORMER AIDE TO PRESIDENT RICHARD NIXON: When Elvis came to the White House, it was just a total surprise. No one knew it was going to happen.

SCHNEIDER: What did Elvis want? He brought with him a handwritten letter to President Nixon. "The drug culture, the hippie elements, the SDS, Black Panthers, et cetera, do not consider me as their enemy. I can and will do more good if I were made a federal agent at large."

KROGH: What Elvis asked for was a -- a badge from the Bureau of Narcotics and Dangerous drugs. And I remember looking at me, and he says, "Well, Bud, can -- can we get him a badge?"

And I said: Yes, sir, Mr. President. If you want to give him a badge, we could do it."

SCHNEIDER: Followed by a very unlikely and unphotographed scene.

KROGH: Well, when Elvis heard that, he stepped across -- he was just about three or four feet away from the president. He grabbed him, gave him a big hug. And, you know, president-hugging was not the norm in that White House.

SCHNEIDER: Elvis' badge is on display at Graceland.

Prime Minister Koizumi, a huge Elvis fan who has put out an album of his favorite Elvis songs, could see it there.

(END VIDEOTAPE)

SCHNEIDER: The most remarkable thing about Elvis' visit to the White House, it was kept secret for more than a year, until Jack Anderson revealed the story in a newspaper column.

You know, President Bush may want to find out more about how they did that -- John.

(LAUGHTER)

KING: I bet he would like to know that.

Bill, so, Elvis got a badge. How about President Nixon? Any gift from the King? SCHNEIDER: Well, yes. Elvis did bring him a gift, a gun, a World War II commemorative Colt 45. It's currently on display at the Nixon Library in Yorba Linda, California. Maybe that could be the next stop on their pilgrimage.

(LAUGHTER)

KING: I suspect not.

Bill Schneider...

(LAUGHTER)

KING: ... thank you very much.

SCHNEIDER: Thank you. Thank you very much.

KING: Oh, boy. I knew that was coming.

(LAUGHTER)

KING: We just have heard how Prime Minister Koizumi is a huge fan of Elvis.

Abbi Tatton has more now on what has been a lifelong obsession -- Abbi.

ABBI TATTON, CNN INTERNET REPORTER: John, Koizumi has been a member of the Elvis Presley Fan Club in Tokyo for decades.

The president of the fan club tells me that his brother is, in fact, a senior adviser to the club. And, together, the brothers, back in 1987, were instrumental in bringing this statue of Elvis to Tokyo. That's Koizumi there from '87, second from the right.

It was together with this club that Koizumi launched his 2001 album of his favorite Elvis songs that we just saw there in Bill Schneider's package, along with doctored photos of the prime minister with the King, 25 of his favorite songs there, including "I Want You, I Need You, I Love You," which is his favorite.

Incidentally, he once sang that as a duet with Tom Cruise.

The White House has been doing their best to accommodate this obsession. We are told today that Air Force One today served Elvis' favorite sandwich. That's peanut butter and bananas. We are told that both Koizumi and Bush declined -- John.

KING: Duet with Tom Cruise, Elvis' favorite sandwiches -- I think we are bordering or long past too much information.

(LAUGHTER)

KING: Abbi Tatton, thank you very much.

We want to show you a live picture here of Air Force One on the ground in Columbus, Ohio. President Bush obviously has left the prime minister behind, back to politics now after a day of play at Graceland in Memphis, Tennessee -- Air Force in Columbus, Ohio, so the president can attend a fund-raiser for -- tonight for Republican Senator Mike DeWine, Republican incumbent in one of the most hotly contested Senate races in this midterm election year, one example -- and you will see many over the next weeks and months -- of President Bush, even though there are some disputes in the party, slumping poll numbers, out raising money for Republicans, especially in key races -- Ohio one of the key battlegrounds in this year's campaign.

And still to come here in THE SITUATION ROOM: As the summer kicks off with a long holiday weekend, how about kicking back with a good book? Senior analyst Jeff Greenfield gives us his summer reading list.

And, in our next hour: the hunt for Osama bin Laden -- does a new audiotape contain any clues which could lead the United States to the al Qaeda leader?

(COMMERCIAL BREAK)

KING: The holiday weekend marks the real start of the summer vacation period.

And our senior analyst, Jeff Greenfield, has a summer reading list just for you -- Jeff.

JEFF GREENFIELD, CNN SENIOR ANALYST: This holiday weekend is a perfect occasion for the readers among us to run to the beach, or the lake, or the mountains, or the backyard with a nice, juicy, light book.

But for those of us who are politically obsessed, this is also a weekend to catch up on reading of a very different kind.

(BEGIN VIDEOTAPE)

GREENFIELD (voice-over): First, "Kingfish: The Reign of Huey P. Long," by Richard White Jr., this is a new look at the man who, as governor of, then senator from Louisiana, championed the interests of the forgotten poor of his state and also became the closest thing America has ever seen to an out-and-out dictator.

(BEGIN VIDEO CLIP)

HUEY P. LONG: ... expect to have this state ruled by the people and not by the lord and the interests of high finance.

(END VIDEO CLIP)

GREENFIELD: Brilliant, flamboyant, he was the inspiration for the classic political novel "All the King's Men."

A mesmerizing speaker, and utterly ruthless, Long brought roads and free schoolbooks to his people. But he also used the legislature as his personal playground, ramming bills through that punished political enemies and sought to muzzle the press.

White also shows that, contrary to myth, Huey Long was personally corrupt, lining his pockets with fees and payoffs, playing footsie with the very corporate and oil interests he publicly attacked.

He had not been assassinated in 1935, Huey Long might very well have challenged FDR for the presidency in 1936, and, as a third-party candidate, might have cost Roosevelt a second term.

And speaking of Roosevelt, there's "The Defining Moment" by "Newsweek"'s Jonathan Alter, an account of Roosevelt from his nomination through his first 100 days as president. Alter's book reminds us that Roosevelt was regarded as a lightweight. "Feather Duster Roosevelt," he was called. Indeed, powerful media voices at the time, like columnist Walter Lippman, thought him clearly unequipped for the job.

Alter reminds us the powerful, badly needed sense of encouragement his famous inaugural brought to the Depression-struck nation.

(BEGIN VIDEO CLIP)

FRANKLIN DELANO ROOSEVELT, PRESIDENT OF THE UNITED STATES: That the only thing we have to fear is fear itself.

(END VIDEO CLIP)

GREENFIELD: Alter also reports that, in those days, some very significant figures in politics, finance and the media thought that what America really needed was a benevolent dictator, powers Roosevelt happily refused to assume.

Finally, there is "Politics Lost" by Joe Klein, of anonymous fame as the author of "Primary Colors."

Klein's argument is that political consultants, with their polls, focus groups and risk-averse counsel, have bled badly needed authenticity out of public life. His tale of what happened to the campaigns of Al Gore and John Kerry will leave partisan Democrats both saddened and angry.

Disclosure time here: Joe Klein is an old friend.

(END VIDEOTAPE)

GREENFIELD: I might also mention a hilarious, brilliant satirical novel written some 10 years about the Electoral College called "The People's Choice," but, frankly, modesty forbids -- John.

(LAUGHTER)

KING: Thank you, Jeff.

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