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LOU DOBBS TONIGHT

New Defense Secretary Takes Over; United States to Share Nuclear Technology With India; Violent Crime on the Rise in America

Aired December 18, 2006 - 18:00   ET

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


KITTY PILGRIM, CNN ANCHOR: A stark warning today on Iraq from the nation's new defense secretary, a warning that failure in Iraq could haunt the United States for years. We will have complete coverage.
Today, a tough new law to make employers responsible for who they hire. Immigration raids at meatpacking plants caught 1,200 illegal aliens and exposed widespread identity theft. We will have that story and a great deal more straight ahead.

ANNOUNCER: This is LOU DOBBS TONIGHT, news, debate, and opinion, for Monday, December 18.

Live in New York, sitting in for Lou Dobbs, Kitty Pilgrim.

PILGRIM: Good evening, everyone.

New Defense Secretary Robert Gates today says, failure in Iraq would be a calamity for the United States. Also, the military announced the deaths of nine more of our troops in Iraq.

And President Bush today reverses 30 years of U.S. foreign policy, and shares our nuclear secrets. Could it spark a nuclear arms race?

Suzanne Malveaux reports on where the president stands on changing U.S. tactics in Iraq. Barbara Starr reports on the critical issues that the new defense secretary faces. And Lisa Sylvester reports on the president's signing of a new law that shares our nuclear technology.

We turn first to Suzanne Malveaux -- Suzanne.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Kitty, we could be as little as two weeks away from the president making an announcement, some sort of change in tactics regarding the Iraq policy.

But, first, two things have to happen -- he has to have his new secretary of defense sworn in, and, then, of course, that secretary paying a visit, a trip to the region, to check out Iraq himself. Today, one of those things happened.

(BEGIN VIDEOTAPE)

ROBERT GATES, SECRETARY OF DEFENSE: ... against all enemies, foreign and domestic.

MALVEAUX (voice-over): Swearing in his new defense secretary, President Bush stated the obvious.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We are a nation at war.

MALVEAUX: His plan to end the war is anybody but.

GATES: Failure in Iraq, at this juncture, would be a calamity that would haunt our nation, impair our credibility, and endanger Americans for decades to come.

MALVEAUX: Considering those tremendous stakes, it's not surprising the president's pitch man is being extremely cautious about giving anything away.

TONY SNOW, WHITE HOUSE PRESS SECRETARY: This is not like solving a crossword puzzle. It, in fact, is a highly complex situation, where you are talking about the dispositions of tens of thousands of troops already in the country, and you are dealing with international coalitions and a whole series of other considerations.

MALVEAUX: One option the president is considering, a senior administration official confirmed, is to temporarily increase U.S. troops, while the Iraqi government gets its political house in order.

Over the weekend, President Bush's former secretary of state, Colin Powell, poured cold water on that idea, saying the U.S. Army is now almost broken.

(BEGIN VIDEO CLIP, "FACE THE NATION")

COLIN POWELL, FORMER U.S. SECRETARY OF STATE: I am not persuaded that another surge of troops into Baghdad, for the purpose of suppressing this communitarian violence, or civil war, will work.

(END VIDEO CLIP)

MALVEAUX: Persuading Powell isn't a priority, the White House insisted, in its attempt to downplay his criticism. Aides say the president is weighing his numerous options for changing tactics in Iraq, following his consultations last week with Iraqi leaders and advisers at the Pentagon and State.

Sources say one conservative policy group that has the president's ear and is influencing his thinking is the American Enterprise Institute. It briefed White House officials last week about its own report, which dismisses the Iraq Study Group's recommendation to move U.S. troops from fighting positions to training Iraqi soldiers.

UNIDENTIFIED MALE: A surge of two or three months is not going to be productive. We're proposing a surge that would probably last for anywhere from 18 to 24 months. At the end of that, we would expect that we will have brought the security situation sufficiently under control.

(END VIDEOTAPE)

MALVEAUX: And, Kitty, again, not until Gates completes his trip to the region, gets a sense of Iraq himself, will the president, and, of course, his advisers sit down again and craft the possible changes in Iraq policy, and make that announcement early next year -- Kitty.

PILGRIM: Suzanne, you know the president spoke of having Secretary Gates come up to speed, be brought up to speed on Iraq -- this trip clearly part of the process. What does that do to the timetable of decision-making, especially in light of all these dueling reports now?

MALVEAUX: Well, there's certainly a lot of pressure for the president to move very quickly. We're told by his advisers that he has told them to move as fast as possible. We know he got updates from the Pentagon, the State Department, a series of advisers last week.

We expect all that information to be coming in, in the next couple of weeks, and then expect early January for some kind of announcement.

PILGRIM: Thanks very much, Suzanne Malveaux.

Well, today, Robert Gates officially became the nation's defense secretary in a public ceremony at the White House. President Bush called Gates the right man to meet the nation's challenges. And Gates said he will head to Iraq soon.

Barbara Starr reports.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): A car bomb attack at a vegetable market in a mostly Sunni area of southern Baghdad killed five and wounded 19 on Monday.

Could more U.S. troops on the streets have stopped this from happening?

ROBERT GATES, SECRETARY OF DEFENSE: I, Robert Gates, do solemnly swear...

STARR: As Robert Gates is sworn in as the 22nd secretary of defense, that is the military question he has to answer. President Bush wants to know if the violence would ease if an additional 30,000 U.S. troops were in Iraq. Gates will soon go there to meet with his commanders.

GATES: I look forward to hearing their honest assessments of the situation on the ground, and to having the benefit of their advice, unvarnished and straight from the shoulder, on how to proceed in the weeks and months ahead. STARR: Increasing troop levels would be accomplished by leaving some units in Iraq for more than a yearlong tour of duty and sending others in early.

If the idea is approved, it would mean, potentially, the highest number of troops on the ground ever, perhaps nearly 165,000. Commanders say, sending more troops might mean only putting more targets on the street.

GENERAL JAMES CONWAY, U.S. MARINE CORPS COMMANDANT: We would fully support, I think, as -- as the Joint Chiefs, the idea of putting more troops into Iraq, if there is a solid military reason for doing so. But I don't think that we believe -- in fact, I can tell you we do not believe -- that just adding numbers for the sake of adding numbers, just thickening the mix, is necessarily a good way to go.

(END VIDEOTAPE)

STARR: So, Kitty, just how violent is Iraq right now? Well, a new report from the Pentagon released just about an hour ago says that, last month, attacks were averaging close to 1,000 a week.

And that is the essential problem that commanders are facing: What if they do send more troops into Iraq, and the violence doesn't ease up? Then what do you do? -- Kitty.

PILGRIM: Thanks very much, Barbara Starr.

Well, nine more of our troops serving in Iraq have been killed. Seven soldiers and one Marine were killed in combat. One soldier died from a non-combat-related illness. Now, 60 of our troops have been killed in Iraq so far this month; 2,949 troops have been killed since the war began; 22,229 of our troops have been wounded, 9,972 of them so seriously they could not return to duty within three days.

The president today reversed a 30-year policy and signed a law that allows the sharing of civilian nuclear technology with India. The president signed the bill, despite India's refusal to sign the Nuclear Non-Proliferation Treaty.

Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): President Bush signed the U.S.-India nuclear deal, one of the last measures passed by the outgoing Congress. It allows India to receive access to civilian nuclear energy and technology, even though India has not signed the Nuclear Non-Proliferation Treaty.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This cooperation will help the people of India produce more of their energy from clean, safe nuclear power. And that, in turn, will help their economy grow.

SYLVESTER: The U.S.-India agreement reverses 30 years of U.S. foreign policy that has helped limit the number of countries in the world's nuclear club. It still has to be approved by 45 nations that make up the Nuclear Suppliers Group.

REP. EDWARD MARKEY (D), MASSACHUSETTS: It's a terrible signal for the Bush administration to be sending to Iran, to North Korea, to Pakistan, and to other countries, that it's willing to give India a pass on nuclear non-proliferation issues, while expecting those other countries to abide by them.

SYLVESTER: Under the terms of the agreement, India will allow international inspectors to visit 14 civilians nuclear plants. But nearly a dozen other reactors are not subject to inspection. The deal is strictly for nuclear energy, not nuclear weapons. But critics say it will still allow India to increase production of nuclear bombs.

JOSEPH CIRINCIONE, SENIOR VICE PRESIDENT, CENTER FOR AMERICAN PROGRESS: India has a limited indigenous supply of uranium. But the U.S. is now going to sell them uranium that they could use for power production, freeing up their own resources to make bombs. We estimate that, currently, India makes about six to 10 bombs worth of uranium a year. They could triple that, to over 20 to 30 bombs per year.

SYLVESTER: India has close ties to Iran, another point of contention. The nuclear cooperation agreement places few restrictions on India's exports of civilian nuclear technology.

(END VIDEOTAPE)

SYLVESTER: Business groups, including the U.S. Chamber of Commerce and defense contractors, were among the biggest lobbyists pushing for this deal. They're hoping to cash in, not just selling nuclear technology to India, but also hoping that this will make India more receptive to buying U.S. warplanes and defense goods -- Kitty.

PILGRIM: Thanks very much, Lisa Sylvester.

Communist North Korea has demanded some conditions before it disarms. It wants sanctions lifted. Sanctions include the embargo of sale of military goods, technology, luxury goods to North Korea, and, also, financial assets were frozen. Sanctions were put in place after North Korea's nuclear test in October.

The talks between the U.S., China, Russia, Japan and both Koreas resumed in Beijing for the first time in over a year. The U.S. envoy at the talks said sanctions will remain in effect.

North Korea says, if its demands are not met, it will increase its nuclear capability.

Coming up: A tough new law will make it harder for illegal aliens to use false or stolen I.D.s when they try to get a job in the United States. We will have a report.

Violent crimes surged in the first half of 2006, according to FBI crime statistics. We will have a report on why.

And the search for missing climbers in Colorado (sic) takes a grim turn. We will have the latest on that. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: A new law will soon go into effect that forces employers to ensure that they're not hiring illegal aliens.

Well, at the same time, there's anger and frustration tonight over a reversal on border security by one of the most powerful men in the United States. We have two reports tonight.

Bill Tucker reports on a new law requiring employers to use tougher hiring standards. And Casey Wian reports on the incoming Senate majority's leaders's new push for amnesty for millions of illegal aliens.

We begin with Bill Tucker here in New York -- Bill.

BILL TUCKER, CNN CORRESPONDENT: Well, Kitty, Colorado has a new law that takes effect in the coming year. Employers are supposed to verify their employees' working documents and to keep records of those documents.

But critics are already saying that this is a law that is all talk, and no action.

(BEGIN VIDEOTAPE)

TUCKER (voice-over): Colorado has a new state law that takes effect on January 1, aimed at tightening the standards for employers. Under the new state law, employers will have to verify that they have received documents that appear credible showing an employee is a citizen or a legal resident. The employers will have to keep a record of those papers, a requirement that federal law currently doesn't impose.

But the law, known as Bill 1017, is already attracting criticism.

DAVID SCHULTHEIS (R), COLORADO STATE REPRESENTATIVE: An employer, under 1017, could say, well, I have collected all the information. I have it here in my file. And it could be extremely fraudulent identification. But the employer could say, yes, I have done -- yes, I have done my due diligence here.

TUCKER: In other words, the law is easy to get around. And that's the opinion of the representative who was an original sponsor of the law.

The Colorado Department of Labor is even less enthusiastic, saying that, while the law requires employers to affirm the documents they are given, it doesn't know what that means, and, therefore, won't enforce it.

And while the law is clear in its requirement of keeping records on documents, the department says on its Web site -- quote -- "The Colorado Department of Labor and Employment does not believe the intent of the statute was to criminalize the failure to maintain records."

REP. TOM TANCREDO (R), COLORADO: Nothing, nothing will be accomplished by this. The legislature was hoping that the public would be -- would confuse activity for accomplishment. To the extent that anybody thinks that this is a meaningful step here in Colorado toward immigration reform, they have confused activity for accomplishment.

TUCKER: The law does fine employers for hiring illegal aliens, $5,000 for the first offense per employee, up to $25,000 per offense.

(END VIDEOTAPE)

TUCKER: But, at this point, few, if any employers, will ever be fined under the law, many believe, because who will be watching? Because, after all, Kitty, it doesn't appear that the government nor the state of Colorado will be taking a look at this.

PILGRIM: Bill, the numbers look big, and it -- it reads well. It's just...

(CROSSTALK)

TUCKER: No, it reads well. The law is fairly clear.

But, already, you can see businesses running in, trying to obfuscate the law, make it confusing. So, they don't want -- know what it means to affirm. And you have the attorney general and the administration part of the Colorado government backing away from this, clearly sending out a signal, they don't intend to enforce any of the provisions in the law. So, it's -- it's really more of the same.

PILGRIM: That's a shame. Thanks very much, Bill Tucker.

And that does bring us to the subject of tonight's poll: Do you believe that laws aimed at punishing employers are the key to ending border security and the immigration crisis in this country, yes or no? Cast your vote at LouDobbs.com. We will bring you the results a little bit later in the broadcast.

Border security activists today rallied outside the Nevada offices of the incoming Senate majority leader, Harry Reid. They are protesting his support for illegal alien amnesty, especially since Senator Reid was once a staunch opponent of illegal immigration.

Casey Wian reports.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): Waving American flags, members of the Minuteman Project and other border security groups protested outside the office of Democratic Senator Harry Reid.

DEE BARROW, MINUTEMAN PROJECT: People who come into my country illegally are criminals.

WIAN: The multiethnic coalition is angry over the majority leader-elect's support for legalization of illegal aliens.

ALBERT RODRIGUEZ, VETERANS FOR SECURE BORDERS: I ask you, Senator, are you brave enough to face an American survivor who has lost a loved one to an illegal alien criminal act?

(CHEERING)

RODRIGUEZ: Senator, you, McCain and Kennedy will have American blood on your hands if you proceed with this bill.

WIAN: Reid's pro-amnesty stance is in contrast to his previous views on border security and illegal immigration. In 1993, he introduced the Immigration Stabilization Act. It sought to toughen penalties against illegal immigration and alien smuggling, end birthright citizenship for the U.S.-born children of illegal alien mothers, and increase the size of the Border Patrol.

He even tried to dramatically reduce legal immigration and cut welfare benefits for legal immigrants. Then he said: "Our borders have overflowed with illegal immigrants, placing tremendous burdens on our criminal justice system, schools and social programs. These programs were not meant to entice freeloaders and scam artists from around the world."

WIAN: But now Reid says:

SEN. HARRY REID (D-NV), MINORITY LEADER: That's a low point -- low -- low point of my legislative career, the low point of my governmental career.

WIAN: Reid says his wife, whose father was a Russian immigrant, helped persuade him to change his position.

REID: This period of time, Mr. President, for which I'm so apologetic to my family, mostly, lasted about a week or two.

WIAN: Actually, it was at least a year. Reid introduced his bill in August 1993 and again seven months later. He then wrote a "Los Angeles Times" opinion piece supporting the proposed law in August 1994.

But that was before illegal aliens made up more than 10 percent of the work force of Senator Reid's home state of Nevada.

(END VIDEOTAPE)

WIAN: When Reid actively opposed illegal immigration, there were fewer than five million illegal aliens in the United States. Now there are between 12 and 20 million -- Kitty.

PILGRIM: Thanks very much, Casey Wian.

Coming up: The streets of America are becoming more dangerous all the time. We will have the details on this disturbing trend.

A grim day for friends and families of those climbers -- more than a week on Oregon's Mount Hood, they have been missing. We will have the very latest.

And a brawl at an NBA game results in the league's top scorer being suspended for 15 games and record fines for the teams involved.

We will have the details. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: Murders, robberies and assaults in this country are surging. Now, the FBI, twice a year, tallies up crimes reported by local law enforcement agencies.

Kelli Arena has the report.

(BEGIN VIDEOTAPE)

KELLI ARENA, CNN JUSTICE CORRESPONDENT (voice-over): Chicago: A gunman opens fire in a crowded pizzeria. Philadelphia: A 21-year-old airman is stabbed to death in a nightclub brawl. Kansas City, Missouri: A man kills two women, four of his kids, and himself -- items from the weekend's national police blotter.

If it looks bad, that's because it is. After 15 years on the decline, violent crime in the United States is on the rise.

JAMES FOX, NORTHEASTERN UNIVERSITY: Focus mostly on homicide and robbery. Those are the most meaningful and reliable indicators of what's going on. And homicide and robbery are up, particularly involving guns.

ARENA: According to the FBI, violent crime rose 3.7 percent nationally in the first half of this year. The new report proves that last year's increase was not a random spike, as some suggested.

GIL KERLIKOWSKE, SEATTLE POLICE CHIEF: When you have less money going to local law enforcement, you have less support for local law enforcement, there's a price to be paid. Unfortunately, it's our citizens that are paying the price.

ARENA: Seattle Police Chief Gil Kerlikowske blames the elimination of federal programs, like the COPS Initiative, designed to boost community policing.

KERLIKOWSKE: And now I think we're starting to -- to pay a price. Remember, Kelli, there's always a lag effect. And it takes a while for the country to kind of realize this.

ARENA: The Justice Department put the best face on what looks like a bad report, saying that it's encouraged by a drop in property crime across the country. And it says DOJ is sending a team to 18 cities to figure out why violent crime is up.

FOX: They can look all they want, but we know many of the reasons.

ARENA: One of the biggest reasons, according to experts, is simple demographics.

FOX: There are more at-risk kids in this country, particularly blacks and Latinos. And it's not race itself. It's the socioeconomic conditions in which these kids are being raised.

ARENA: Fox says many prevention programs were canceled as crime fell in the '90s. But he argues that it's time to bring them back, that it's far cheaper to prevent crime than to pay for jail cells later on.

It's a view shared by even the toughest cops.

KERLIKOWSKE: This isn't some social service, namby-pamby kind of talk.

(END VIDEOTAPE)

ARENA: And, you know, Kitty, there is another factor at play here. Police forces around the country have been focused on weeding out terrorism.

Now, while they were doing that, violent criminals were engaging in their own kind of terrorism. As one police chief that I spoke to today said, it's time to shift that focus from homeland security back to hometown security.

PILGRIM: It doesn't seem like it should be an either/or thing, Kelli, does it?

ARENA: Well, it doesn't, but the -- lots -- we -- we spoke to a lot of police chiefs today, Kitty. And they all say that they -- a lot of those federal grants have been either slashed altogether or drastically reduced.

Their people are asked to -- to rise to the occasion of helping to identify terrorism threat. They say they just can't do it all, without enough money and resources.

PILGRIM: Thanks very much, Kelli Arena.

Time now for some of your thoughts.

Karen in Florida wrote to us: "They keep talking about drafting a Constitution for Iraq. Why don't we just give them ours? It has worked for over 200 years, and we're not using it anymore."

Jonathan in Pennsylvania wrote: "If my approval rating at my job was 27 percent, I would be fired. Shouldn't the same hold true for the president as well?"

Jim in California: "You're wrong to say we have no trade strategy with communist China. Our strategy is to send them interest payments on our massive debt, and they send us pink slips for our manufacturing workers. What a bargain."

E-mail us at LouDobbs.com. We will have a little bit more of your thoughts later in the broadcast.

And each of you whose e-mail is read here will receive a copy of Lou's bestselling new book, "War on the Middle Class."

If you have ever wondered if the person on the other end of the phone is telling the truth, there is new software that is just for you. The inventors of the KishKish lie-detector system claim their technology monitors the stress levels of the speaker, to determine if they are lying.

Scientists have found that frequencies in the human voice are sensitive to honesty, and also becoming higher when a person is not telling the truth. The KishKish lie-detector system can be downloaded for free and used by people who use Internet phone service.

Coming up: The Catholic Church is blasting Immigration and Customs Enforcement for arresting illegal aliens. Bishop Jaime Soto is my guest.

The NBA commissioner hands down what some say is a harsh punishment for the players and the teams involved in the melee on Saturday night.

And, in Oregon, one climber's body is removed from Mount Hood, as rescue teams narrow their search for the other two men. We will have a live report.

(COMMERCIAL BREAK)

PILGRIM: Now our top stories.

Attacks against U.S. and Iraqi troops and Iraqi civilians have reached the highest levels in more than two years. The number of daily attacks jumped 22 percent from August through November. The worst violence was in Baghdad and the Anbar Province.

The news on the day. Robert Gates sworn in as defense secretary. Gates says failure in Iraq would be a calamity for the United States. Secretary Gates will head to Iraq soon to hear from top American commanders there.

And President Bush today reverses 30 years of U.S. foreign policy and shares our nuclear secrets with India. "Could it spark a new nuclear arms race in the region?" is what many are asking.

In Oregon, the search continues for two missing climbers, even as rescuers, friends and families mourn the death of one climber whose body was found in a snow cave. The three climbers were caught in a violent winter storm 10 days ago on Mt. Hood. It's a popular but treacherous mountain for climbers.

Dan Simon joins us live from Mt. Hood with the very latest -- Dan?

DAN SIMON, CNN CORRESPONDENT: Well, good evening, Kitty. It is a bit loud here at the moment, as you see, some of the helicopters involved in the search behind me.

The mission today was really two-fold: First, to recover the body of Kelly James, who was found dead in one of those snow caves discovered yesterday. And we're just getting word that his body is now on the ground.

The second part of the mission was to continue the search for the other two climbers. And we are told that, at this point, one of the operating theories is that the two may have had an accident and are buried beneath the snow.

Obviously, if that occurred, they would not have been able to survive. But crews are also expressing hope that perhaps they, too, might have gotten themselves in a snow cave and are clinging to life.

But they did admit today, really for the first time, that hopes are diminishing, in terms of finding those other two climbers alive. And they say finding them is a little bit like finding a needle in a haystack.

In terms of the body of the other missing climber, we are told that he died of hypothermia, although they need to confirm that with an autopsy. And, again, his body is now on the ground.

Kitty, back to you.

PILGRIM: Dan, the search conditions were abysmal initially. What are they like now?

SIMON: Kitty, again, it's really loud. If you could just repeat that for me?

PILGRIM: Yes, the search conditions were terrible initially. What are they like now?

SIMON: Well, they were absolutely atrocious for the first several days of this search. There was so much wind; it was a whiteout condition up there.

And then yesterday, really for the first time, we had sun. It was clear. And it enabled rescuers to get to the summit of the mountain and really expand their search, because it was hampered for so many days.

And, once again, today it was clear, and that enabled them to reach the summit, go down to that snow cave, and retrieve the body of Kelly James. And also we are told that the search is still progressing at this hour, in terms of locating those other two climbers.

But, as I said a moment ago, unfortunately, the hopes are fading a bit, in terms of finding those two climbers alive -- Kitty?

PILGRIM: Thanks very much, Dan Simon.

Well, it is the worst windstorm in more than a decade. The death toll in the Northwest has risen to 10. Gusts of nearly 70 miles an hour were clocked in the Seattle area. And along the Pacific coast, gusts reached as high as 95 miles an hour.

Four days later, and a quarter of a million homes and businesses still don't have power in western Washington.

Seven NBA players were suspended following a weekend brawl between the New York Knicks and the Denver Nuggets. Carmelo Anthony, the league scoring leader, was suspended for 15 games. A half-dozen other players will have to sit out from one to 10 games.

NBA commissioner David Stern also slapped both teams with huge half-million-dollar fines. He says he wants to show that he is serious about cleaning up the game.

Two astronauts have been outside on a space walk outside the International Space Station. It was the fourth space walk for Discovery's Robert Curbeam and the most by any astronaut during a single shuttle mission. The task is to free a jammed solar panel that's supposed to provide electricity for the space station. Discovery is scheduled to return to Earth on Friday after a 13-day mission.

The nation's trade deficit hit an all-time high this summer, partly because of the cost of foreign oil. And the deficit shot up nearly 4 percent to a record $225 billion between July and September. A large part of that is our soaring trade deficit with China.

The government today filed civil charges against former Fannie Mae executives. It is imposing fines and seeking the return of millions said to be tied to an improper accounting scheme. Franklin Raines, the former chief executive office, and two other former top executives of Fannie Mae were named in the civil suit filed by the Office of Federal Housing Enterprise Oversight. Now, the suit set penalties and fines for misconduct at more than $215 million.

A new poll tonight shows American support for the war in Iraq has reached its lowest level yet. Less than a quarter of the people asked think that victory in Iraq is possible at some point, one quarter. Bill Schneider reports.

(BEGIN VIDEOTAPE)

BILL SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): In November, Americans voted for change in Iraq. The new defense secretary is open to change.

ROBERT GATES, SECRETARY OF DEFENSE: You have asked for my candor and my honest counsel at this critical moment in our nation's history, and you will get both.

SCHNEIDER: The demand for change is growing louder. Only 28 percent of Americans say they approve of the way President Bush is handling Iraq; disapproval has reached 70 percent.

There seem to be four options. Some antiwar critics want to withdraw immediately. Just 21 percent of Americans support that.

The Iraq Study Group recommended withdrawing within a year; 33 percent favor that. Put those two options together, and you have a majority of Americans in favor of withdrawing within a year.

The status quo is President Bush's policy. "Take as long as necessary to turn control over to the Iraqis," 32 percent agree.

What about the McCain option, send more troops? That has the least support of all: 11 percent.

Over the past six months, support for the status quo has dropped. Every alternative has gained support. The message is: Do something different.

President Bush continues to promise victory.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We agree that victory in Iraq is important.

SCHNEIDER: Only 27 percent of Americans believe victory is likely; 20 percent predict a defeat. The prevailing view: stalemate.

Do Americans believe is even possible? They're split. But President Bush has kept his base. More than three-quarters of Republicans hold fast to the view that victory is possible.

An even larger number of Americans, 62 percent, believe a U.S. defeat is possible. That's where the president's base is getting shaky. A majority of Republicans now say, yes, a defeat is possible.

(END VIDEOTAPE)

SCHNEIDER: Sending more troops to Iraq would be intensely controversial, but there's growing urgency for a new policy and diminishing confidence in the status quo -- Kitty?

PILGRIM: Bill, they're presumably saying defeat would be withdrawal, correct?

SCHNEIDER: Well, defeat is defeat. I mean, withdrawal is something that is widely supported, but people see the possibility of a stalemate, including withdrawal, that wouldn't necessarily amount to defeat.

PILGRIM: OK, thanks very much, Bill Schneider.

Coming up, a new poll shows that Democrats already have their top-two favorites to lead the party in the race for the White House. We'll have a full report.

Also, the Catholic Church says workplace immigration raids like these are bad for a community bishop. Jaime Soto will be here. Stay with us.

(COMMERCIAL BREAK) PILGRIM: U.S. Senator Tim Johnson is said to be conscious at times as he recovers from emergency brain surgery that happened last Wednesday. The South Dakota Democrat remains in critical but stable condition, and doctors see it as a good sign that he's made it this far. But his long-term prognosis remains a bit unclear.

Johnson's illness has raised questions about whether the Democrats can maintain their one-vote majority in the Senate.

The next presidential election may be two years off, but Democrats are already lining up behind Hillary Clinton and Barack Obama, making them the early frontrunners. And their growing clout is also narrowing the field of potential Democratic candidates. John King reports.

(BEGIN VIDEOTAPE)

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT (voice-over): Just 10 days ago in New Hampshire, Evan Bayh eagerly embraced the underdog role.

SEN. EVAN BAYH (D), INDIANA: A lot like the story of David and Goliath, David did OK.

KING: But this past weekend, Senator Bayh abruptly ended his bid for the 2008 Democratic presidential nomination, saying in a statement, "Whether there were too many Goliaths or whether I'm just not the right David, the fact remains that, at the end of the day, I concluded that, due to circumstances beyond our control, the odds were longer than I felt I could responsibly pursue."

The Goliaths on the Democratic side are Senators Hillary Clinton and Barack Obama.

MICHAEL FELDMAN, DEMOCRATIC STRATEGIST: They're huge names. They have constituencies. They've started to raise money. And there's less and less oxygen for the lesser-known candidates to compete.

KING: Senator Clinton is assembling a campaign team. And in an interview with NBC's "Today," the former first lady took what could be seen as a gentle poke at Obama, who just two years ago was in the Illinois legislature.

SEN. HILLARY CLINTON (D), NEW YORK: One thing that I think is important is, whoever the next president is, has to hit the ground running.

KING: Senator Clinton long has been viewed as a formidable frontrunner. But it is the recent crush of attention on Obama that is most responsible for shrinking the Democratic field.

FELDMAN: You have an increasingly competitive media marketplace, so it's harder and harder for people to find a way in. And I think that's what's resulting in this early winnowing process. KING: Bayh joined Senate colleague Russ Feingold and former Virginia Governor Mark Warner in deciding it's best to sit out. Democrats still testing the waters include: Senators John Kerry, Chris Dodd, and Joe Biden, and New Mexico Governor Bill Richardson.

Former Senator John Edwards is set to announce his candidacy later this month. Antiwar Congressman Dennis Kucinich and former Iowa Governor Tom Vilsack are already in and already trying to navigate all the Clinton and Obama buzz.

GOV. TOM VILSACK (D), IOWA: Hey, I'm an underdog, and I've always had to work my way up.

(END VIDEOTAPE)

KING: Now, in bowing out, Senator Bayh said he realized he would have to virtually abandon his day job, the Senate, and campaign full- time to have any chance of winning the nomination. Senator Bayh was not willing to make that choice, but that same choice now, Kitty, confronts at least a half-dozen of his Senate colleagues who also think they should be the next president -- Kitty?

PILGRIM: John, you have vast experience covering the political scene for years. Doesn't this flurry seem a little earlier?

KING: It is. Everything is happening earlier. We are months and months -- every campaign it moves back a couple of months. And the fact that you have Senator Bayh getting out of the race even before Mrs. Clinton and Mr. Obama have said they are definitely in is stunning to people.

But they think he's looking around and they think he took a very serious assessment of his own chances. The question is: Will the others do the same? Will we have even smaller -- many thought we'd have eight candidates on each side, because both nominations are open. Now people think we will have a smaller field, because you have the same thing on the Republican side. John McCain and Rudy Giuliani, the stars, if you will, at the top, and everyone else saying, "How do I break through?"

PILGRIM: Very interesting stuff. Thanks so much, John King.

Democrats are preparing to announce the site of their 2008 Democratic National Convention. They may be heading west to Denver, and people in Denver are excited by the possibility of hosting the convention. It just might make political sense for the Democrats to do it.

Dana Bash reports from Denver.

(BEGIN VIDEOTAPE)

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT (voice-over): Denver, Colorado, a long way from New York City. Democrats here say that's the point.

(on screen): Why should the Democrats have a convention here?

ELBRA WEDGEWORTH, DENVER COUNCILWOMAN: Because we really feel that the pathway to the presidency is through the West.

BASH (voice-over): Denver Councilwoman Elbra Wedgeworth says the choice between her city and New York for the Democrats' 2008 convention should be a no-brainer.

WEDGEWORTH: New York's a great city, but been there, done that, you know? I mean, I think people want to think out of the box. They want to stretch the map. And stretching the map is coming to Denver.

BASH: Democrats agree the most powerful argument for a Denver convention is to seize on recent success in the West. In 2002, just four years ago, all eight Mountain West governors were Republican; now, Democratic governors have taken five of those states.

In the Senate, Montana Democrat Jon Tester just beat the GOP incumbent, joining Colorado's Ken Salazar, who won two years ago.

MAYOR JOHN HICKENLOOPER (D), DENVER: If that momentum continues, those are crucial electoral votes.

BASH: Denver's mayor is so proud of his city...

HICKENLOOPER: ... give us the exact point of where is one mile high.

BASH: ... he measured to find the mile-high mark, drew it on the wall of his office. Still, he says, a Denver convention would be sponsored by the entire Mountain West and help change the party's image.

HICKENLOOPER: It's a chance for people all over the country to rethink what being a Democrat is, because Democrats out here come in all different stripes and sizes.

BASH: Local officials are trying to allay party leaders' deep concerns about their ability to host a convention, promising Denver has more than enough hotel rooms for the expected 35,000 visitors, has the public transportation and security.

But the biggest question is whether Democrats here can raise the estimated $55 million needed for a convention.

WEDGEWORTH: As you see, this is downtown over here.

BASH: Not a problem, says Councilwoman Wedgeworth. Big corporations, even local Republicans, are pledging money. Everyone here knows Denver is the underdog, but they're betting on a Rocky Mountain high.

WEDGEWORTH: This is where the next president of the United States will be nominated, at the Pepsi Center in the mile-high city of Denver, Colorado.

BASH (on screen): You heard it here.

WEDGEWORTH: You heard it here first.

BASH: There's no guarantee holding a convention in a state or region within reach politically will lead to victory. But consider this: If John Kerry had won three mountain states that were very close in 2004 -- Nevada, New Mexico and this state of Colorado -- he would be president.

Dana Bash, CNN, Denver, Colorado.

(END VIDEOTAPE)

PILGRIM: A reminder now to vote in tonight's poll. Do you believe laws aimed at punishing employers are the key to ending the border security and immigration crisis in this country, yes or no? Cast your vote at LouDobbs.com. We'll bring the results in just a few minutes.

And coming up next, church and state. The separation is becoming blurred, as the Catholic Church inserts itself into the illegal immigration debate. Catholic Bishop Jaime Soto will be my guest. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: Hundreds of illegal aliens were arrested in raids at Swift and Company meatpacking plants, the raids by Immigration and Customs officials. That happened last week. Now, the raids were held to crack down on identity theft and the use of false Social Security documents.

My next guest says raids like these are a bad idea and target the wrong people. Bishop Jaime Soto is on the U.S. Catholic Bishop's Committee on Immigration. And he joins me now from Orange, California.

Thanks very much for joining us, Bishop Soto.

BISHOP JAIME SOTO, U.S. CONFERENCE OF CATHOLIC BISHOPS: I'm glad I could be here.

PILGRIM: You know, the U.S. Conference of Catholic Bishops has spoken out against the raids. They also held a conference call to discuss the issue. I guess the key question is: Why should the Catholic Church weigh in on this, as it is, after all, enforcement of government law?

SOTO: Well, we understand the government laws on that. And what we're concerned about, is this really the most effective way to address it, which is why we've been trying to push for a more comprehensive immigration reform.

PILGRIM: What would you like to see?

SOTO: We would like to really see an earned legalization program that would come forward. We'd also like to see some kind of a temporary worker program that would begin to address the labor flows and the labor demands here in the future.

PILGRIM: Well, these seem to be economic issues. Why are you weighing in so heavily on this?

SOTO: Well, you know, for us, the Catholic Church of the United States is an immigrant church. And through the years, both through our schools or our social services, our hospitals, we've been very involved with immigrants since our beginning.

PILGRIM: But is that not legal immigrants, of course?

SOTO: We've served all immigrants and have done our best to give them the care and the shelter that they need.

PILGRIM: You know, I would really like to pull up a comment from the homeland security secretary, Michael Chertoff, who says it's a much broader issue, it's an issue of security and not just a social issue.

SOTO: We would agree with the issue on that. There is a security issue. And we think that, quite frankly, comprehensive immigration reform, as we're proposing, would help to address some of those issues by having a significant large population in the United States today come out of the shadows so that we can know who they are and so that they can really participate more actively in American society.

PILGRIM: The raids, though, however, Bishop Soto, were to address reality as it stands now. And let's listen to Secretary Chertoff, what he had to say about the use of -- illegal aliens using forged documents.

(BEGIN VIDEO CLIP)

MICHAEL CHERTOFF, HOMELAND SECURITY SECRETARY: ... because illegal documents are not only used by illegal migrants, but they are used by terrorists who want to get on airplanes or criminals who want to prey on our citizens.

(END VIDEO CLIP)

PILGRIM: Now, certainly, you can't deny the reality of that?

SOTO: But also that the raids really don't go after the perpetrators, the real perpetrators of identity theft, that the perpetrators of this crime, who are, in fact, the real criminals in this case -- the ones who are stealing the identities to sell them to migrants -- they're not affected by these raids. I mean...

PILGRIM: Well, it covers the demand side of the equation, if we're going to talk economics. If the illegal immigrant didn't demand them, there would be no market.

SOTO: And we think that actually, you know, an earned legalization program would more effectively address that demand side of the market.

PILGRIM: Yes. The Democrats now in Congress, what do you hope to see in terms of legislation? And do you see -- I mean, certainly this is divisive issue in this country. Should it be? There should be some sort of consensus on this. And what do you hope to see coming with the new Congress?

SOTO: Well, I think that what's very clear from the last session is that people were very frustrated with a Congress that did not work, did not accomplish anything. And I think people -- I think it's incumbent on the leadership to really work for a bipartisan approach that, in fact, is going to give us real immigration reform this coming year.

PILGRIM: You know, I must ask you what you would do to secure the borders at this point on the security side of this equation. Does the Catholic Church have a position on that?

SOTO: Well, I think that some of the measures that have been looked at, in terms of some of the technology, the new technology that they would like to bring to the border, will not only lead to a better surveillance, but that, in fact, when people are at risk or in danger attempting a border crossing, that we can more quickly get to them and save lives.

PILGRIM: Yes. But it looks increasingly like the fence will not go through. The Catholic Church has repeatedly voiced its objections to building the fence on the border. Is that a shift in position that we're hearing tonight?

SOTO: No, no. I think that there are other ways -- again, I think that the problem has to be addressed together. I think that it is important to have effective enforcement at the border. We don't think the wall will do that; we think the wall will only contribute to increasing problems at the border.

But I think that the issue of border enforcement also has to be part of a more comprehensive package so that law enforcement, and particularly border enforcement, can really dedicate their time and their energy to the smugglers, those who are involved in human trafficking, instead of being involved in dealing with individuals who their only hope, their only desire is to come here and work and contribute to the American economy.

PILGRIM: Is it not a big issue that the people coming across, being trafficked across, are also victimized by some of these human smugglers?

SOTO: Absolutely. There is a lot of exploitation that goes on at the border. These people endure just unbelievable anguish and suffering in their attempts to cross the border.

And, oftentimes, they are deceived by the smugglers who bring them across. Particularly women and minors are very, very vulnerable and oftentimes wind up caught up in the sex industry and other unsavory activities, all because they are brought up not as migrants, but more as slaves.

PILGRIM: Bishop Jaime Soto, thank you very much for joining us this evening to discuss it.

SOTO: I'm glad to have the opportunity. Merry Christmas.

PILGRIM: Coming up shortly here on CNN, "THE SITUATION ROOM" with Wolf Blitzer -- Wolf?

WOLF BLITZER, CNN ANCHOR: Thanks, Kitty.

The search for survivors. We're going to take you to the top of Mt. Hood, where there's now a race against time to find those two missing climbers.

Also, general dissent. Colin Powell speaking out. Find out why he says we're not winning the war in Iraq.

Also, Fidel Castro. Is he preparing for a comeback, or is he on the brink of death? A closer look at what the Cuban government is telling 10 U.S. lawmakers.

And Hillary Clinton and Barack Obama. Are they squeezing other Democrats out of the race for the White House before the first vote is cast? All that, Kitty, coming up right here in "THE SITUATION ROOM."

PILGRIM: Thank, Wolf.

Still ahead, the results of tonight's poll. Stay with us for that.

(COMMERCIAL BREAK)

PILGRIM: Now the results of tonight's poll: 89 percent of you say that laws aimed at punishing employers are the key to ending the border security and illegal immigration crisis in this country.

Time for one more e-mail. Joel in New York: "The only way to send a message to business owners that employ illegal aliens is to close the business that harbors these illegal aliens."

We love hearing from you. Send us your thoughts at LouDobbs.com. Thanks for being with us tonight. Please join us tomorrow. For all of us here, good night from New York. And "THE SITUATION ROOM" starts right now with Wolf Blitzer -- Wolf?

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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