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LOU DOBBS TONIGHT

Hazleton Immigration Law on Trial; Bush Stands by Embattled Attorney General; Marine Risks Life to Save Comrades

Aired March 16, 2007 - 18:00   ET

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


KITTY PILGRIM, CNN HOST: Thanks, Wolf. Tonight, a staggering number of college students are getting drunk. Are colleges doing enough to stop binge drinking on campus?
Also, the illegal alien lobby launches a new assault on the small town of Hazelton, Pennsylvania. We'll have the latest on a court case that is being watched across the entire nation.

And the army is sending more helicopters to Iraq. We'll show you how the army is training its pilots for combat, all that and much more straight ahead.

ANNOUNCER: This is LOU DOBBS TONIGHT. News, debate and opinion for Friday, March 16. Live in New York, sitting in for Lou Dobbs, Kitty Pilgrim.

PILGRIM: Good evening, everybody. A stunning reversal by the White House today in the controversy over the dismissal of eight U.S. attorneys. The White House today retreated from earlier assertions about who first suggested the firings.

The White House also under fire today from Valerie Plame, a former undercover agent at the CIA. Plame today accused the White House and State Department officials of recklessly exposing her identity to discredit her husband.

Suzanne Malveaux reports on the rapidly escalating controversy over the firing of the U.S.. attorneys. Brian Todd reports on Valerie Plame's scathing criticism of the Bush administration and Barbara Starr reports from the Pentagon on a blunt new warning about the war in Iraq. We turn to Suzanne Malveaux first. Suzanne?

SUZANNE MALVEAUX, CNN CORRESPONDENT: Well, Kitty, today the White House kicked the can forward. White House counsel failed to meet a deadline set by Congress on whether or not to decide White House officials would be testifying about this whole firing of those U.S. attorneys. That fight is going to continue throughout the weekend.

As you know, this controversy continues in part because it's about whether or not the Bush administration fired those attorneys for political reasons. But another part of it, as well, is about who do you trust and who do you believe?

(BEGIN VIDEOTAPE) MALVEAUX (voice-over): Credibility is at the heart of this controversy. On Tuesday, the White House said it was the president's former counsel Harriet Miers who introduced the idea to Karl Rove to fire all the U.S. attorneys. A prospect he quickly dismissed.

DAN BARTLETT, COUNSELOR TO THE PRESIDENT: His recollection was that that was not a good idea.

MALVEAUX: By Friday, the White House line was this.

QUESTION: Tony, do you now know whether it was Harriet Miers who first brought up the idea of removing all 93?

TONY SNOW, WHITE HOUSE PRESS SECRETARY: Again, no, I don't.

MALVEAUX: Republican lawmakers say it's that kind of factual fuzziness that has twisted a perfectly legitimate process of removing some U.S. attorneys into a near scandal.

Democrats say these constantly changing explanations for the administration actions are exactly why they need Rove to tell his story to them. Under oath and in public.

SEN. CHARLES SCHUMER, (D) NY: Karl Rove was in the middle of this mess from the beginning.

KARL ROVE, WHITE HOUSE ADVISER: This to my mind is a lot of politics. I understand that's what congress has the right to play around with, and they're going to do it.

MALVEAUX: E-mails that have emerged from the weeks after the 2004 election show Rove and Gonzales involved in discussions about the fate of the U.S. attorneys from the beginning, even before Gonzales was officially confirmed as attorney general.

There's no wrongdoing in that, but some lawmakers are accusing White House and Justice Department officials of downplaying the roles Rove and Gonzales played since the firings have become so controversial.

ALBERTO GONZALES, ATTORNEY GENERAL: Some two years ago, I was made aware that there was a request from the White House as to the possibility of -- of replacing all the United States attorneys. That was immediately rejected by me. I felt that that was a bad idea. And it was disruptive.

(END VIDEOTAPE)

MALVEAUX (on camera): Now, Kitty, the firing of the attorneys has become so controversial because it's really considered a test case, on the one side, you have a Democratic Congress with subpoena power, they want to exercise that muscle. On the other side, you have a White House that not only believes in executive privilege but executive power. Kitty?

PILGRIM: Thanks very much, Suzanne Malveaux. Congressional Democrats today stepped up the pressure on the White House. The Senate Judiciary Committee demanding answers from current and former administration officials. Meanwhile, another Republican today indicated it may be time for attorney general Alberto Gonzales to resign. Congressman Dana Rohrabacher said there is what he calls a quote, "pattern of arrogance" unquote, in the Bush administration.

Dana Bash reports from Capitol Hill. Dana, what are the Democrats saying about the administration's reluctance to allow officials to testify?

DANA BASH, CNN CORRESPONDENT: Well, they're not happy about the fact they set a deadline for the White House today, Kitty, on whether or not they were going to allow White House officials like Karl Rove to come and talk to Congress as requested. But they're certainly not surprised as the day went on, they got a lot of vibes from the White House that this simply wasn't going to happen.

It didn't diminish their disappointment. One Democrat called it a dangerous game of chicken, and the House Judiciary Chairman John Conyers immediately put out a statement. I'll read it to you. It said, "The committee must take steps to ensure we are not being stonewalled or slow walked on this matter. I will schedule a vote to issue subpoenas next week for the documents and officials we need to talk to."

Now, a committee spokesman said that that actually could be as soon as Monday that the House Judiciary Committee could schedule a vote to subpoena Karl Rove and others if they don't get an answer about whether they'll come voluntarily.

Now certainly it is the Democrats who now of course run Congress who are the most outspoken about all this. But what is noteworthy also is that this is a bipartisan demand. I actually spoke with the ranking Republican on the House Judiciary Committee, James Sensenbrenner. Listen to what he said.

(BEGIN VIDEO CLIP)

REP. JAMES SENSENBRENNER, (R) JUDICIARY COMMITTEE: Because there was misleading testimony given to the judiciary committee by a representative of the Justice Department, it is our obligation on a bipartisan basis to bring everybody who's been involved in this mess before the committee, put them under oath and find out what the truth is.

(END VIDEO CLIP)

BASH: Find out what the truth is, that is the key statement from that senior Republican here in Congress. That is really what is fueling the frustration among Republicans here on Capitol Hill. That they simply feel that they are not getting direct answers and in fact they are getting misleading information from top officials at the Justice Department about exactly why these prosecutors were fired. Kitty? PILGRIM: This is definitely intensifying. Thanks very much, Dana Bash.

BASH: Thank you.

PILGRIM: Also on Capitol Hill, scathing testimony today by the former CIA undercover agent Valerie Plame. Now Plame blamed the Bush administration for quote, "carelessly and recklessly revealing her identity," unquote.

It was the first time Plame had spoken publicly about the leak of her identity. Brian Todd reports from Washington. Brian?

BRIAN TODD, CNN CORRESPONDENT: Kitty, some real political theater here in Washington today. As you mentioned, for the first time, the woman at the center of the CIA leak case answered detailed questions about her covert identity being revealed. Valerie Plame Wilson told a House committee she felt she had been hit in the gut back in 2003 when her husband showed her that newspaper column by Robert Novak making her name public.

She said senior White House and State Department officials acted quote, "carelessly and recklessly in revealing her identity to the media," and she had some choice words about the president's top political advisor.

(BEGIN VIDEO CLIP)

VALERIE PLAME WILSON, OUTED CIA AGENT: ... my name and he still carries a security clearance to this day despite the president's words to the contrary that he would immediately dismiss anyone who had anything to do with this.

(END VIDEO CLIP)

TODD: Now, a White House spokesman would not comment on that an assertion. Karl Rove told CNN in 2004 he did not leak Plame Wilson's name, but Robert Novak testified during the trial of Lewis "Scooter" Libby that Rove was one of his sources for her identity. Kitty?

PILGRIM: Thanks very much, Brian Todd. News from Iraq. Two more of our troops have been killed there. One in combat, the other in a non-combat-related incident. Forty-six of our troops have been killed in Iraq this month, 3,210 troops have been killed since this war began, 24,042 troops have been wounded, 10,685 of them seriously.

The new commander of all U.S. troops in the Middle East, Admiral William Fallon today gave a stark warning about the future of Iraq. Admiral Fallon today replaced General John Abizaid as the head of U.S. Central Command. Barbara Starr has the report.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN CORRESPONDENT (voice-over): For the first time in almost four years, a new man is at the helm of the U.S. Central Command overseeing the war in Iraq. Admiral William Fallon always known as plain spoken was blunt.

ADM. WILLIAM FALLON, NEW CENTCOM COMMANDER: Much work is in front of us. The situation in Iraq is critical. And time is of the essence.

STARR: The man Fallon is replacing John Abizaid gave his farewell with a warning about a war that he knows many Americans simply want to be over.

GEN. JOHN ABIZAID, OUTGOING CENTCOM COMMANDER: We will need both courage and time to withstand the impatience and dissatisfaction that could cause us to fail despite our great abilities to succeed.

STARR: On the ground in Iraq, the question remains -- is the security crackdown working? Even as the U.S. plans to send up to 3,000 additional troops with dozens of helicopters.

It all adds up to nearly 30,000 more U.S. troops by summer.

Diyala Province is one example of how tough things are. A U.S. Army Stryker unit has just arrived. Attacks here against U.S. troops are on the rise as insurgents flee Baghdad. But a commander in western Baghdad says attacks against U.S. troops are down in his area.

COL. J.B. BURTON, 1ST INFANTRY DIVISION: The key about all of those IEDs we are finding is not only have they decreased in number but they have decreased in effectiveness. I believe that has to do with us being out in the neighborhoods constantly 24 hours a day, day and night.

(END VIDEOTAPE)

STARR (on camera): But Kitty, of course, in Baghdad, it's far from all good news. The colonel went on to say in recent days, car bomb attacks are on the rise. The targets there, Shia gathering places and Iraqi security forces. Kitty?

PILGRIM: Thanks very much, Barbara Starr.

A security scare at the white house today. Uniformed Secret Service agents arrested a man who jumped over a fence at the White House. The Secret Service ordered a security lockdown that lasted three hours. Officers used a water cannon to destroy a suspicious package. President Bush was inside the White House at the time.

Still to come, the national crisis over binge drinking in our colleges and universities. What, if anything, are colleges doing to help students? We'll have a special report.

And the army is sending dozens more helicopters to Iraq. We'll have an exclusive report on the training of army helicopter pilots.

(COMMERCIAL BREAK)

DOBBS: Tonight, the war within. It's our special report looking at this country's battle against both drug and alcohol abuse. A staggering number of college students are drinking with the sole intention of just getting drunk. And they're frequently bingeing on alcohol and drugs in an environment where the weekend can last from Wednesday to Monday. Christine Romans reports on what is being done to combat dangerous college drinking and whether that is working.

(BEGIN VIDEOTAPE)

CHRISTINE ROMANS, CNN CORRESPONDENT (voice-over): Alcohol abuse remains the number one public health issue on campus. According to the National Center on Addiction and Substance Abuse between 1993 and 2001, the number of college students who get drunk each month jumped 26 percent. Even as overall drinking rates remained steady.

TOBEN NELSON, HARVARD SCHOOL OF PUBLIC HEALTH: This is a serious public and social problem, and we do need to be, you know, taking serious measures to address it.

ROMANS: To combat the image of college drinking as a rite of passage, over the past decade, some campuses have banned alcohol at campus events and in fraternities and sororities. Campus towns have enacted zero tolerance policies for drunk driving and public intoxication. And a dozen campuses have tried social norm marketing, reinforcing the message that the majority of students are moderate drinkers.

JEFF LINKENBACH, MONT. SOCIAL NORMS PROJECT: College students like the rest of us, have a need to fit in and belong and we will gravitate towards what we perceive to be normal.

ROMANS: He says social norming can cut binge drinking rates by 18 to 20 percent in as little as two years with messages like this, most students work hard. Drink moderately. Or this one, recognizing that students party, so pace drinking to one drink per hour or less.

But it's not perfect. Dangerous drinking is still too common. There's more work for students, parents, administrators and teachers.

PHILLIP JONES, UNIVERSITY OF IOWA: Faculty on campuses have a responsibility that in my judgment have not been taken. That is to say to return Fridays and Mondays to academic days.

ROMANS: The most difficult barrier to retaking the academic week, the perception that heavy college drinking is a rite of passage.

(END VIDEOTAPE)

ROMANS (on camera): Researchers say some universities are resistant to radical prevention measures. They see their role as educational and their adult students are free to make their personal choices. Advocates go so far to recommend that all college students be regularly screened for substance abuse problems and all universities provide counseling and treatment when necessary, Kitty.

PILGRIM: Now, the culture in a college changes from campus to campus. And there are, we all know, so-called party schools. Isn't the approach different? Shouldn't it be different in each campus? ROMANS: That's exactly right. A lot of people say each university has to set its own substance abuse policies and follow them, have consequences and enforce them. You can't just have a blanket kind of requirement for every university. Each culture is different.

Some of the party schools have really been attacking this with the help of federal grants, Robert Wood Johnson foundation has a grant to help some of these so-called party schools try to figure out how to cut these numbers. It's working in some places. But it means sort of tough love in a lot of situations. If a kid is in trouble, get him counseling, talk to the student, but then at some point, wash your hands and say this isn't the place for you if you can't tow the line.

PILGRIM: And they also have to be vigilant because the party schools will shift from campus to campus as the pressure comes on.

ROMANS: That's absolutely right.

PILGRIM: Thanks very much, Christine Romans. That does bring us to our poll tonight. Do you believe that an ad campaign by schools telling college students to drink moderately will be effective in curbing binge drinking? That's a yes or no vote. Cast your vote at loudobbs.com. We'll bring you the results a little bit later in the broadcast.

Last night we reported on the Justice Department's shocking handling of drug smuggling cases in Arizona. Federal prosecutors in the border state are not pursuing cases where the amount of marijuana seized is under 500 pounds.

Local prosecutors in Arizona are being forced to deal with those cases. And some smugglers do end up going free. In response to our question on the issue, a spokesman for the Justice Department tells us that narcotics prosecutors are -- prosecutions are made on a case by case basis.

And that official went on to say when the U.S. attorney is unable to prosecute, there are quote, "existing agreements with the county attorney in Arizona that allow these county attorneys to prosecute such cases. And the bottom line, these cases are being prosecuted."

But local prosecutors tell us those agreements aren't working because federal officials knows full well that they don't have the resources to handle the cases and the smugglers often walk free.

Now, as we reported, drug smugglers know how to skirt the 500- pound rule. They simply lighten their load to avoid criminal prosecution.

Well, there was certainly no lightened load in a massive drug bust in Mexico City. Authorities confiscated a whopping $206 million in U.S. currency from a band of meth producers. That is the largest cash seizure in Mexican history. Seven people were arrested following an investigation that began in December when 20 tons of a key ingredient of the production of meth was seized. Now, the cash was mostly in $100 bills, weighed more than 4,500 pounds.

Coming up, new training to keep American helicopter crews safer in Iraq. We'll take you for an exclusive look inside the army's top helicopter pilot school.

And Hazelton, Pennsylvania spends another day in court defending its efforts to protect its citizens. We'll have a report. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: Insurgents in Iraq are stepping up their attacks on U.S. helicopters. Now, the enemy appears to be using new tactics to target our helicopters. But the army and Marine Corps are changing tactics, too. Jamie McIntyre has this exclusive report on army aviation training at Fort Rucker, Alabama.

(BEGIN VIDEOTAPE)

JAMIE MCINTYRE, CNN CORRESPONDENT (voice-over): Welcome to the unfriendly skies of Falluja.

MAJ. MIKE HANSEN, APACHE INSTRUCTOR PILOT: I would say we're taking some kind of large caliber fire, RPG, or ...

MCINTYRE: I'm sitting next to Major Mike Hansen, an instructor pilot, as we dodge flack in a Black Hawk over Iraq. Except we're actually in a simulator 7,000 miles away. But it sure feels real.

Wow, I think we actually pulled some Gs on that turn.

Hansen is demonstrating a technique called run and dive, it's the opposite of the old Cold War doctrine of holding a position and firing from long range. In Iraq, that could be a fatal mistake.

HANSEN: The longer you stay in one general location, the more interest you are going to bring upon yourself.

MCINTYRE: Simulators like this one at the Army's Aviation War Fighting Center at Ft. Rucker Alabama allow pilots in training to fly the same missions they'll fly in combat without the danger.

(on camera): What kind of feedback do you get from the pilots who go through this training and then actually flight real mission?

HANSEN: They see it and they say, gosh, this is just like what we were flying in at Fort Rucker in the center. Obviously, we don't have every single building out here. And a lot of the weather effects may not be the same, depending on what time of year they show up.

MCINTYRE: But that's changing, too. This next generation virtual recreation of Falluja does have every single building and constantly updated from satellite images. Brendan Kelly is working on a program that allows pilots to rehearse their mission on a laptop.

(on camera): All of these buildings are exactly where they are. CW4 BRENDAN KELLY, U.S. ARMY: Yes, and they are dimensionally and height wise accurate.

MCINTYRE: And the trees, too.

KELLY: Yes, all placed based on the imagery.

MCINTYRE (voice-over): Back in the simulator, we hit a building, encountering the red screen of death.

HANSEN: You fly into something in the virtual environment, you're going to crash as well.

MCINTYRE: Some day, in the not too distant future, the technology may be so good, that pilots will fly unmanned aircraft into the battle by remote control. But the experience may still have a familiar side effect of flight.

(on camera): Actually, was getting a little motion sick there.

(voice-over): Jamie McIntyre, CNN, Fort Rucker, Alabama.

(END VIDEOTAPE)

PILGRIM: The army just announced that another aviation brigade is being deployed to Iraq. Now that brigade is going to Iraq 45 days earlier than scheduled as part of the president's announced troop buildup.

Coming up, the illegal alien lobby and its corporate backers step up their courtroom assault on the small town of Hazelton, Pennsylvania. We'll have a special report.

And a huge winter storm blasts the Mortheast. More than 2,000 flights are canceled, thousands of travelers delayed.

And look at this. Complete white conditions here in New York City right now. We'll have the latest on the storm right after this quick break.

(COMMERCIAL BREAK)

PILGRIM: Winter is taking a late swipe at the Northeast today. It's leaving thousands of air travelers stranded. Just yesterday, it was almost 70 degrees in New York. But by this morning, temperatures hovered around freezing, and then the storm moved in. And snow started in the early morning. It made commutes difficult, caused the cancellation of thousands much flights in the northeast. Now, this storm is expected to move up the coast towards Maine by Saturday morning.

Today was the fifth day of the trial against Hazelton, Pennsylvania. Now Hazelton is being sued by well-funded national illegal alien groups over its regulations which are designed to combat the problems caused by illegal immigration.

Hazelton was forced to take these measures due to federal inaction on the illegal alien crisis.

Joining me now with his perspective on today's court action is senior legal analyst Jeffrey Toobin. Jeffrey, we've been following this literally for months. We've been following this since the day that the mayor actually made the first statement about it. It's generated enormous controversy. Now they're in court and we've come through a week. The mayor defends his laws saying that basically the city cannot handle the infrastructure of influx of illegal aliens and the crime rate was soaring. How well do you think this plays?

JEFFREY TOOBIN, CNN LEGAL ANALYST: It's funny. This trial is operating at two levels. The legal issue itself, the main legal issue is actually kind of narrow and technical. It's called preemption. Is the matter of immigration something that is reserved exclusively for the federal government and is it something that Hazelton or any other town simply can't regulate. That's the main legal issue.

And that has almost nothing to do with the facts of the case itself. It's really sort of an abstract legal issue. But what the plaintiffs, the ACLU, the Chamber of Commerce are trying to do is to show the judge this is a bad idea and it is sort of vaguely racist. That, I don't know really how successful that's what they're doing is, but that's what they're trying to do in front of the judge.

PILGRIM: And the defense is also trying to prove that the city's unprepared to enforce this law, correct, because of course, the application of this law is very complicated. But Mayor Barletta says it's very important to enforce this law because the city can't sustain this influx of illegal aliens.

TOOBIN: And that's what the testimony was about today, which had to do with the people who will be enforcing the law, the plaintiffs were trying to say, they are not ready. They don't know the difference between a legal and illegal alien. It won't work the way it's supposed to.

That really is sort of an irrelevant argument to the constitutionality of the law. But it's all part of the plaintiff's attempt to show the law is basically a bad idea so that if the judge has some discretion, he should rule in favor of the plaintiffs and strike the law down.

PILGRIM: You know, I've been to Hazleton, Pennsylvania, as many of the people that are associated with this broadcast have been over the course of this coverage. This town, when you look through the crime statistics, it's really shocking the level of crime that's there now.

Can't the mayor simply say we can't afford to enforce, you know, our crime laws? Would that be a legitimate...

TOOBIN: The best argument that the -- that Hazleton has and the mayor made it, is that we are not -- this is not about racism. This is about protecting our community. This is about dealing with the problems that we have and the failure of the federal government to deal with the problem of illegal immigration. The irony here is that the plaintiffs are saying, "Oh, leave it to the feds. Leave it to the feds."

And Hazleton is saying, "We tried to leave it to the feds. And they failed." So that's the legal issue that's posed, and the trial is, you know, heading towards a conclusion.

PILGRIM: This has been actually the end of the first week in this trial. How long do you think this might go, and how -- what's the composition of this courtroom that it may go longer or shorter?

TOOBIN: Trials actually tend to wind up being a little shorter than people expect once the witnesses start going. The mayor was the main witness. And the plaintiffs made a big effort to show that, despite the fact that the law specifically did not say that Hispanics were more likely to be stopped than others, that it was really meant to be that way.

The mayor is now off the witness stand. The witnesses are moving pretty quickly now. I bet it's going to end next week.

PILGRIM: You know, it's -- do you see this as a litmus test for other -- for other towns? Because a lot of cities took a look what Hazleton did and considered similar measures.

TOOBIN: As a technical legal matter, this decision will only be binding in this part of Pennsylvania.

But you're absolutely right. This is the first big test of one of these laws. And almost certainly, other communities will either follow Hazleton, if their law is approved, or give up, if the law is struck down, or find some way of complying with the law as the court defines it. But it probably won't be several months till you get a decision from the judge.

PILGRIM: Is there also that possibility that if they do not allow this law to continue and they strike this down in court that, sort of indirectly, this law could have an influence on the community?

TOOBIN: Absolutely. I mean, it already has. I mean, it has become a focus of so much attention, not just from here. And the whole country, which has been so concerned about illegal immigration, is watching to see what happens.

PILGRIM: Jeff, just take a second and let's break off for a minute. And we have the very latest on the Hazleton court case. Bill Tucker is there, and the plaintiffs today trying to show that Hazleton was ill prepared to implement the ordinance.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): In court today, Hazleton city officials, members of the code enforcement office, the head of planning, the city's administrator, all called to the stand, all grilled on whether they had received any training in immigration enforcement, asked if the city has completed the needed paperwork to use the necessary verification programs and questioned why notices of the new ordinance ran in the local paper in English.

TOM FIDDLER, PLAINTIFF'S ATTORNEY: The city is taking a typical approach to an ordinance that is anything but typical. It is the first illegal immigration ordinance in the country. There were no provisions for the due process. They haven't thought out the issues.

TUCKER: City officials rejected that charge, answering that no money has been spent on training, because the court hasn't allowed the city to begin implementing the ordinances, saying that to spend money on something not certain would be foolish.

The city official who would be in charge of making the ordinances work told the court that, while they may be historic, as far as he's concerned, they are just ordinances and denied that the phrase "illegal alien" was code for Hispanic.

KRIS KOBACH, HAZLETON ATTORNEY: We have taken great pains to say no, the ordinance does not refer to race. It only targets all people unlawfully present in the United States and living in Hazleton. And the ordinance in no way accepts any complaint that mentions race.

TUCKER (on camera): Next week, the city's chief of police will take the stand. The chief expected to face some tough questions on how illegal aliens have affected crime in Hazleton.

Bill Tucker, CNN, Scranton, Pennsylvania.

(END VIDEOTAPE)

PILGRIM: Now, you can see that we have a little audio trouble with that, basically weather-related.

Jeff, you know, how are they going to implement this? It really is sort of based on this, isn't it?

TOOBIN: And that's what today's testimony was really about. The plaintiffs claiming that they have no plan, that it's going to be a chaotic, dangerous situation when they implement.

You know, that may or may not be true. That doesn't mean it's unconstitutional. But that just shows how they're trying to show the judge, "Look, this is a bad idea. You find a reason to strike it down."

PILGRIM: Jeff, thank you very much for your analysis on this. A very important issue. Jeff Toobin.

And Wal-Mart is reversing a controversial decision to offer banking services to its customers. Now, the FDIC says the company made a wise choice.

The company came under fire in July 2005 for applying to open an industrial loan company, which many critics saw as the first step into commercial banking. Now Wal-Mart already offers customers check cashing and money transfer services, as well as Wal-Mart brand credit cards. More evidence today of the failure of the Bush administration's economic and trade policies, and policies that are costing American workers their jobs. Overseas investors for the first time earned more on their U.S. investments than Americans earned on their investments overseas.

Americans earned a record $622 billion on their investments abroad last year. But foreigners took in $629 billion from their investments in the United States. That means a $7 billion loss, the United States to foreign countries. That's according to the Commerce Department. That has never happened before.

So simply put, this is yet another example of the economic decline of this country.

And meanwhile, a liberal political group opposed to President Bush's fast-track trade authority, is targeting Democratic Senator Max Baucus in a radio spot.

Senator Baucus favors renewal of fast track authority with some conditions. Fast track expires at the end of June, and the president has asked Congress to renew the authority.

Coming up, President Bush is standing behind his embattled attorney general, for now at least. We'll have the report on how the president might handle this latest controversy.

And "Heroes", our tribute to the servicemen and women of the country. Tonight, the story of Sergeant Chris Bain. He was severely wounded while protecting his comrades.

Stay with us.

(COMMERCIAL BREAK)

PILGRIM: President Bush is standing by his attorney general, at least for now. Alberto Gonzales is embroiled in a political controversy following the firing of eight U.S. attorneys.

Bill Schneider has more on why the president may be having a -- have a hard time saying good-bye.

(BEGIN VIDEOTAPE)

BILL SCHNEIDER, CNN POLITICAL ANALYST (voice-over): How long can President Bush hold out in defending his attorney general?

STEPHEN HESS, BROOKINGS INSTITUTION: What we're talking about is a person who has become a liability to the president, but the president cares about him deeply. So that's the equation. Do you throw him overboard? The president has done it before, with Harriet Miers.

SCHNEIDER: Like Miers, Gonzales is not a favorite of conservatives, who regard him as wobbly on abortion. But he's a personal friend of President Bush. If President Bush's job rating were high, that might be enough to save Gonzales, but it's not.

So Republicans are asking, is Gonzales becoming a political liability for us?

SEN. JOHN SUNUNU (R), NEW HAMPSHIRE: Many Republican senators have expressed these concerns on the record. And quite frankly, there are a lot of others that talk very frankly in private conversations.

SCHNEIDER: The president has the right to fire federal prosecutors. It's usually done after the president is reelected. So what's the problem?

HESS: It's a scandal because it was handled so badly from the get-go, not because there's anything illegal about it.

SCHNEIDER: Had President Bush fired the attorneys when he began his second term in 2005, with a Republican Congress, he might have avoided a scandal. But he did it at the worst possible time politically, just after the Democrats took over Congress.

HESSE: It was out of sync to propose this and then to do this after another election, in which they had lost control of the Congress was, if not suicidal, it was amateurish.

SCHNEIDER: Now the Democrats have subpoena power, and they intend to look into whether there was improper political interference. And whether Justice Department officials deliberately misled Congress.

When will Republicans start clamoring openly for Gonzales to go? When they feel the scandal has become politically threatening to them.

(on camera) Many Republicans have bad memories of the Donald Rumsfeld case. They defended the defense secretary and paid a bitter price for it, only to see the president get rid of him after the damage was done.

Bill Schneider, CNN, Washington.

(END VIDEOTAPE)

PILGRIM: Joining me now, our panel of distinguished political analysts: former White House political director Ed Rollins; Democratic strategist Robert Zimmerman; and Michael Goodwin of "The New York Daily News".

Gentlemen, thanks for being here.

You know, it seems the -- the hazy memories of the White House are intensifying here. Let's listen to what Tony Snow had to say, and we'll fill in from that.

(BEGIN VIDEO CLIP)

TONY SNOW, WHITE HOUSE PRESS SECRETARY: What happened was, and I'll lay that on myself. I was referring earlier, as I said today, to a Kyle Sampson memo that came out that had stated it was her idea. But at this point, I think I want to try to err on the side of caution by noting that Kyle had a recollection that she had mentioned it to him. And that's really as far as we can go with it.

(END VIDEO CLIP)

PILGRIM: Her being Harriet Miers. What's your version of this set of events, Robert?

ROBERT ZIMMERMAN, DEMOCRATIC STRATEGIST: Well, I think the hazy memories really sums it up well.

What this is really about is not about Alberto Gonzales. This is about a White House that has complete disdain for the political and constitutional process of our country.

And the fact that they would even attempt to try to fight to try to create roadblocks from Karl Rove answering questions in front of Congress, appearing in front of Congress and responding to subpoenas, indicates not just what a scandal this is, but just how arrogantly they've abused their positions.

PILGRIM: Now, this has definitely picked up some steam throughout the week. I mean, the initial position was this was in their -- you know, they could do this. This was legal, right?

MICHAEL GOODWIN, "NEW YORK DAILY NEWS": Right. Well, I mean, that was our argument originally. I think that the e-mails certainly damned them, and I think also, there's just the sense that they're hiding something. They are hiding something. They have to hide something, because it's such a terrible unseemly thing that they did.

So they've got to drag their feet and just hope that something else worse comes along, perhaps, and they don't have to put Gonzales up there or Karl Rove. So I think they're in trouble, and they're just trying to figure out how to play it.

ED ROLLINS, FORMER WHITE HOUSE POLITICAL DIRECTOR: The big picture, stepping back, the president certainly can fire anybody he wants to as a political appointee. You just don't. And this administration lately has been extremely incompetent in anything they try and do, whether it's fixing the hospital or putting a replacement in.

The problem here is do you want to spend the next three or four months having the judiciary -- having the Justice Department under the scrutiny of the judiciary committee and basically look at everything that Gonzales has done, from the early days when he was the White House counsel?

And I'm sure the Justice Department lawyers, who are first-rate professionals, are very unhappy about this.

And my sense is they ought to stop the bleeding. This president has one focus that he needs to be focused on, which is that Iraq war and to get distracted in another battle defending what's gone on in justice, I think is just -- diminishes his presidency even more.

PILGRIM: The timing is ill advised all around, is it not? I mean, sort of the initial proposal coming at an odd time.

ZIMMERMAN: I think it's more than just odd timing. Understand what the White House did.

It's traditional, of course, for every new administration to put their U.S. attorneys and new appointees in when they take office. This White House, unlike past administrations, put their U.S. attorneys in without Senate confirmation.

They used a small technical provision in the Patriots Act, which would be done, ostensibly, if a U.S. attorney was killed due to terrorism and they needed someone in place right away. They took that fine print, they took that loophole to try to fire competent, quality -- qualified professionals who were conducting investigations against some important powerful Republicans.

PILGRIM: But perhaps this is a linchpin for a big political fight that everyone wants to square off about, you know, using this as the vehicle perhaps. Republican Senator John Sununu is calling for Gonzales to resign, basically, or President Bush to fire him.

Ed brings up a great point. This is a political battle that maybe we -- we cannot afford at this point.

GOODWIN: Well, I think you have to look at, though, too, what is the long-range implication here for both sides? And I think for Democrats, to the extent that there are these scandals that keep erupting, even you know, fairly small ones, that they can turn them into something significant. I think it begins to peel away support for the president on Iraq, and on everything else.

And so I think that it emboldens the Democratic Congress. It gives them more ammunition, more support. And so I think there are real damages to the president across the board.

PILGRIM: Let's go on to...

ROLLINS: One very important player that's in this White House who has a great history is Fred Fielding, the new White House counsel. Fred was the White House counsel when I was in the Reagan White House. More important, he was the White House counsel -- deputy counsel during Nixon.

He's got the long memory. He knows what can happen when the Justice Department gets looked at and scrutinized. He lived through it before. He knows how to deal in crisis.

And I think that he will look at facts. He'll look at all the information, and he'll get a strategy, which will be the first time they've had a good legal strategy.

GOODWIN: I'd just like to raise a question. I mean, the question of whether Gonzales should resign now, whether Bush should fire him, would that stop it?

ROLLINS: I think if Gonzales resigned, I think the U.S. attorney issue would go away. And equally as important, you can't be dragging him up in front of the judiciary committee.

As the attorney general, they can get him up anytime they want, but as the former attorney to the president, he has some -- some legal counsel issues.

So I think at this point in time, the quicker they make this go away -- like Rumsfeld. Once Rumsfeld went away, Gates gave a new inspiration to the Defense Department, and I think a new prominent attorney general could do the same.

ZIMMERMAN: I have a different perspective on that. And I understand your point. I think your point about Secretary Gates is well taken. He's brought a level of professionalism to the administration that I think has been very important.

But Gonzales is the least of it. Gonzales is just one person. This goes -- this scandal goes to Karl Rove. In fact, press secretary Tony Snow didn't discount whether President Bush had any knowledge of the situation. This is really...

GOODWIN: He said I don't know.

ZIMMERMAN: He said I don't know. And so the point is this is a scandal about how the White House conducts business, where politics comes first and the Constitution comes second.

GOODWIN: But I think, though, what happens is, when you kind of lop off a head in this case, attorney general's head, that would sort of end it.

The question is, I think, whether it's premature. Whether that has to happen now or it has to happen in two weeks out to kind of let all the steam out. Just as Rumsfeld, as you said, that stopped a lot of stuff, but it had gone on a long time. I don't know that this has gone on long enough yet that one firing would solve it.

ROLLINS: And that may be true. My sense is sooner or later, whether it's this one or a month from now. And the quicker you undo the damage -- there's 22 months left in this administration. And this president can't lose Republican senators.

And the issue here is he's got two Republican senators who are against him on this issue. They'll be another ten in another week. And you can -- when you start eroding that base, then you're in trouble.

PILGRIM: You know, as we all sit here and agree Iraq is the big picture thing that we should be talking about, the Pentagon announced this week 2,600 more troops would be going to Iraq. That's 30,000 troops eventually going to Baghdad Anbar province.

The U.S. commander in Iraq, General David Petraeus, requested the additional soldiers to support the troops there. This is the big picture. What's your assessment of what's going on in Iraq -- Bob?

ZIMMERMAN: What we're witnessing is an escalation far beyond what President Bush says it was going to be, and what the White House doesn't disclose are the number of support staff that are going there. The Congressional Budget Office said there could be anywhere between 13,000 and 20,000 additional support staff.

And ultimately, we're witnessing from this White House a stay the course strategy in Iraq. There is no dramatic change in their policy.

GOODWIN: I don't think the numbers are that high. Thirteen to 20 would be almost one to one combat to support. It's not that high. Probably 5,000 or 7,000.

But I think in any event, the surge is happening. We almost at this point have to give it time. The Senate couldn't come to some resolution on it, even nonbinding.

So I think it's going on. There are some signs. But it's really way too early to say whether it's working. We're kind of stuck with it now. We have to see whether it works.

ZIMMERMAN: Petraeus obviously has the ball for another year. And I think the reality is he's got to make progress. He's got to get the Iraqi Army involved. If he doesn't, then there's no support anywhere.

PILGRIM: And Congress's role here?

ROLLINS: I think Congress's role is pretty much over in the sense that it basically yelled -- the Democrats yelled and screamed and made as much point as could but couldn't basically do anything to block any appropriations of what have you, because that looks like it's going against the troops. It's clear the Democrats don't want to do that.

PILGRIM: A tough week in Washington, I have to say. Thanks very much for helping me sort it out. Ed Rollins, Robert Zimmerman, Michael Goodwin, thank you.

A reminder now to vote in tonight's poll. Do you believe that the ad campaign by schools telling college students to drink moderately will be effective in curbing binge drinking? Yes or no. Cast your vote at LouDobbs.com, and we'll bring you the results in just a few minutes.

Coming up next, "Heroes", our weekly tribute to the men and women serving this country in uniform. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: Coming up at the top of the hour, "THE SITUATION ROOM" with Wolf Blitzer -- Wolf.

WOLF BLITZER, HOST, "THE SITUATION ROOM": Thanks, Kitty. I sat down with Donald Trump today. His very blunt comments about President Bush, about the war in Iraq, are all sure to have people talking all weekend. You're going to want to see this interview.

Also, Washington's showdown over Attorney General Alberto Gonzales and the firing of government prosecutors. The story is going into overtime. We have the very latest on the -- whether the White House will let Karl Rove, among others, talk to Congress.

And at long last, Valerie Plame Wilson goes public with never before disclosed details of the CIA leak case. All that, Kitty, coming up right here in "THE SITUATION ROOM".

PILGRIM: Thanks, Wolf.

Now "Heroes". It's our weekly tribute to the men and women who serve this country in uniform.

And tonight, the story of Army Staff Sergeant Chris Bain. His courage under fire during a mortar attack in Iraq saved the lives of the soldiers under his command.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Patriotism runs through Staff Sergeant Chris Bain's family. Even the flowers in his kitchen are red, white, and blue. His father, a Marine, did tours in Vietnam. His wife is in the military. So are his uncle, nieces and twin brother.

STAFF SGT. CHRIS BAIN (RET.), U.S. ARMY: Everybody in our family really is -- we have all Marines and all Army.

SYLVESTER: April 8, 2004, Chris Bain was serving in Iraq as a chemical weapons specialist. It began as his best day since he had been in the country. Against the odds, he bumped into his twin. He didn't know his brother had just arrived in Iraq.

Later, the day turned into the worst of his life. At dusk, the convoy Bain was commanding left the base camp. He heard the sound of mortar fire.

BAIN: As I jumped underneath this truck, I turned around towards the blast, and I swear everything just stopped, went in slow motion.

SYLVESTER: Bain immediately started throwing his soldiers undercover, pushing them out of harm's way. A mortar landed three feet in front of him, slicing his left arm. His ring finger was all but severed. A shock went through his right elbow.

BAIN: I was getting hit, with bombs hitting me. Shrapnel hitting me in the back and, basically, a shrapnel feels like a hot knife going through butter.

SYLVESTER: Now back in his Pennsylvania home, Bain, who was given a Purple Heart, reflects back. He says he was just doing his job.

BAIN: I'm supposed to put my life in danger for them, because they would do it for me. That's why we call them band of brothers. That's why we're brothers and sisters. We're a family.

SYLVESTER: Bain's injuries have forced him to retire from the military. But he still wants to serve his country. Next up, he wants to run for Congress.

Lisa Sylvester, CNN.

(END VIDEOTAPE)

PILGRIM: We salute Army Staff Sergeant Chris Bain and all his comrades.

Still ahead, the results of tonight's poll and some of your thoughts.

(COMMERCIAL BREAK)

PILGRIM: Now the results of tonight's poll. Ninety-five percent of you say ad campaigns by schools telling college students to drink moderately will not be effective in curbing binge drinking.

Time now for some of your thoughts.

Mark in Hazleton, Pennsylvania, wrote, "Our mayor is a true leader who dedicates himself to hard-working, middle class, tax-paying citizens. Our mayor's position is clear. Common sense has gone out the window!!"

And Catherine in Virginia: "Anyone who dares to point out that illegal aliens are here illegally is called a racist. I'm proud of the mayor and the people of Hazleton for standing up and doing what is right. They are an example for this country."

And Joanne in Hawaii: "I am frightened to think what will happen if Hazleton loses its battle to uphold federal immigration law."

Marie in Pennsylvania: "Lou, thank you for opening up your web site for a defense fund for Hazleton, Pennsylvania. My donation is in the mail today. We have got to get this country back."

Audrey in California: "If Hazleton wins, I'm moving there."

We love hearing from you. Send us your thoughts at LouDobbs.com. And every viewer whose e-mail is read will receive a copy of Lou's book, "War on the Middle Class".

Thanks for being with us tonight. Please join us this weekend for "LOU DOBBS THIS WEEK". For all of us here, thanks for watching. Have a great weekend. Good night from New York.

"THE SITUATION ROOM" starts right now with Wolf Blitzer -- Wolf.

BLITZER: Thanks very much, Kitty.

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

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