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THE SITUATION ROOM

Dow Plunges Again; Lawmakers to Automakers: Show Us the Money; Obama's Tough Vetting Process

Aired November 20, 2008 - 16:00   ET

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


WOLF BLITZER, CNN ANCHOR: Happening now, cash and query. Lawmakers tell automakers, show us the money, then we'll show you -- they want to see the plan, as well. They say the big three must show exactly how they'd spend $25 billion of our taxpayer money or they won't get a dime. That's what they're saying.
As hoards of people clamor to go to work for Barack Obama, is one woman turning down a top economic post?

And in just 61 days, your boss could have access to some of your medical records, or you may be forced to breathe more polluted air. President Bush could enact some last-minute rules. What will he do by midnight tonight? That's the deadline.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

But first the breaking news. Another horrible day on Wall Street.

Ali Velshi, our senior business correspondent, is standing by.

Ali, down right now 431 points. This is turning out to be a lot worse than many observers thought.

ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: Yes, there's a whole new set of things going on right now. Some of it is driven by the situation in the auto industry and the fears of failure there, but there are other problems going on.

We've got some major financial stocks that are very heavily down today. Citigroup closing right now -- just looking at the numbers, and they're moving rapidly -- down about 26 percent today. General Electric losing another 11 percent. JPMorgan losing close to 20 percent of its value today.

We are looking through numbers, Wolf. You and I have talked about that range, 8,500 to 9,000 on the Dow that was thought of as being a bottom. We blew through that. Then we blew through 8,000, which was another resistance level. Then 7,800, and then we were thinking 7,600 would be the next resistance level, and we're down below that right now.

These resistance levels are points at which professional investors think that there is a reason to buy stocks, and we tend to bounce around those levels. So there's two kinds of thinking. One is when it gets to that kind of a sale, people jump in and say what a bargain and get in. But, you know, we're waiting to see whether that sort of thing has happened.

We have plunged 440 points. That is a very substantial drop. This is a multiyear low on the Dow, on the Nasdaq, more than six years. We're just looking -- crunching the numbers to see how serious it is -- and on the S&P 500.

So Wolf, this is definitely an area of concern right now. There's a great deal of uncertainty about the health of the banks, the auto industry. And without any solution to that on the horizon, you add to that the number of jobs that we know are continuing to be lost, and it's a dire situation -- Wolf.

BLITZER: When you think about it, to give it some perspective, Ali, the Dow Jones industrials right now at 7,500 or so, 7,553. It was not that long ago last year when it was what, 14,000, the Dow Jones industrials?

VELSHI: Right. In October.

BLITZER: That's looking like it's about half of what it was.

VELSHI: That's right. In just over a year, this thing has lost more than half its value.

And of course, if you're invested in some of these stocks, that's your 401(k) that you've seen diminish over that period more than 35 percent since the beginning of 2008. So this is affecting real people in their pocketbooks, but the bottom line is the fear of losing jobs is what's holding on to the rest of the money. People aren't spending it because they can't credit or they're worried they won't have it. And until there's some certainty about where this economy is going, that's the kind of fear that rules these markets.

BLITZER: Stand by, Ali, because we're going to be getting back to you. This is an important breaking story that we're watching.

There's no such thing as easy money on Capitol Hill. That's essentially the message coming from lawmakers to automakers.

Just a short while ago, Democratic leaders in the Congress came out and laid out what the big three automakers must do if they want to get a penny of that $25 billion proposed bailout. And it includes demands, deadlines and a bit of derision in the process.

Let's go to Capitol Hill. Our Congressional Correspondent Dana Bash is working the story for us.

The clock is ticking for GM, Ford and Chrysler.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: It absolutely is. And Wolf, what you saw Ali reporting on, the fluctuation in the market and the way the markets react negatively to whatever happens or doesn't happen here on Capitol Hill, that is one of the reasons that Senate Majority Leader Harry Reid cited not taking votes that he knows will not pass with regard to the auto industry. But it's not just that. It was in large part because of the frustration that lawmakers felt here on Capitol Hill this week with hearings with the CEOs of those big three automakers, feeling that they couldn't get answers to questions about how taxpayer money would be spent. You take those things and you add up just overall bailout fatigue here, that equaled Congress kicking the can today.

(BEGIN VIDEOTAPE)

BASH (voice-over): A hastily arranged news conference to announce that struggling auto companies will get no federal assistance until they present viable business plans.

REP. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE: Until they show us the plan, we cannot show them the money. And that is really where we are with this.

BASH: Well aware that they risk blame for leaving Washington and doing nothing, Democratic leaders emerged from a closed-door meeting determined to put the onus on Detroit, a December 2nd deadline for auto companies to present a business plan. Congress would return in mid-December only if lawmakers deem the big three proposal is acceptable.

SEN. HARRY REID (D-NV), MAJORITY LEADER: I know it wasn't planned, but these guys flying in their big corporate jets doesn't send a good message to people in Searchlight, Nevada, or Las Vegas, or Reno, or any place in this country. We want them to get their act together. We want them to come up with something.

We are here to help. We're not against the auto industry. We want to help those people keep those jobs. And yes, we're kicking the can down the road because that will give us the opportunity to do something positive. But that will only happen if they get their act together.

BASH: This decision preempted a bipartisan proposal by several auto state lawmakers to loan the industry $25 billion from a previously approved fund to modernize vehicles.

SEN. GEORGE VOINOVICH (R), OHIO: If we don't get this done, and they do go under, I believe that we're going to have a deep recession and, quite frankly, from what I can pick up, we may just go over the cliff.

BASH: But Democratic leaders insisted that compromise would not have passed because of deep skepticism towards Detroit.

REID: What kind of a message do we send to the American people by having a bunch of failed votes here? We do not have the votes.

(END VIDEOTAPE)

BASH: Now, Ford immediately released a statement saying that it welcomes the opportunity to present Congress with a plain for its viability, a business plan for that company. We likely will expect other companies to do the same.

But one thing that is very murky here, Wolf is, what constitutes a viable business plan? How will Congress determine that? I asked one senior Democratic leadership aide that, and the answer was simply, "We'll know it when we see it."

Wolf.

BLITZER: All right, Dana. We're going to stay in close touch with you.

Here's a closer look at GM's bottom line right now. The automaker facing crippling costs.

For every one of its workers, there are about 10 dependents, meaning retired workers and their families. These so-called legacy costs add up to about $2,000 a car.

In addition, GM has seen its market share shrink from more than 50 percent back in 1962, to only 22 percent right now. And take a closer look at this. GM's stock has gone from more than $90 a share in the spring of 2000 to a historic low this morning, just over $2.50 a share.

If you own stock in GM, you lost a lot, a lot of money.

Let's go to Jack Cafferty. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: If you own stock in about anything, you've lost a lot of money these days.

BLITZER: You're absolutely right.

CAFFERTY: It's all going down the sewer.

President-elect Barack Obama inheriting a lot of problems from the Bush administration. He's got this economic crisis, he's got a couple wars, got a whole list of international challenges, the most urgent of which is probably Iran. According to a new International atomic Energy Agency report, Iran is continuing to increase its stockpile of uranium and now has enough nuclear fuel to make a single atom bomb.

That's encouraging, isn't it?

Iran insists it only wants nuclear energy to fuel nuclear power plants, but the U.N. Security Council isn't so sure. It has passed three sanctions resolutions demanding that Iran suspend its nuclear program, and the Tehran government has ignored them all. President Mahmoud Ahmadinejad told the United Nations in September, "As far as we are concerned, the nuclear issue is resolved."

The Bush administration joined European-led negotiations very late in the game, actually sent some representatives to Tehran to meet with the Iranians, but to no avail. Two months from today, it will be Barack Obama's turn. He's indicated a willingness to negotiate with Tehran, but this IAEA report could complicate matters considerably.

Here's the question: How should Barack Obama deal with Iran when he takes over?

Go to cnn.com/caffertyfile. You can post a comment on my blog -- Wolf.

BLITZER: Jack, thank you.

The secretary of defense, he's sending a memo to his team, don't tell Obama's people everything, not yet. So why some secrets need to be kept secret from the transition team.

Stand by. We have details.

Also, Barack Obama's pick for homeland security secretary, but is Janet Napolitano qualified for the post? We're taking a closer look at the Arizona governor.

And Barack Obama's chief of staff meeting with Republican leaders on Capitol Hill. We'll update you on what happened right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's get to the Obama presidential transition right now. There's a development involving one of the most important economic posts in an Obama administration.

Let's go to Chicago. Our Jessica Yellin is standing by with the latest.

What's going on, Jessica?

JESSICA YELLIN, CNN CORRESPONDENT: Hi, Wolf.

Chicago businesswoman and Obama campaign aide -- or Obama adviser Penny Pritzker tells CNN that she is not a candidate to be secretary of commerce. In a conversation with our own Don Lemon, she said that there were informal and preliminary discussions, but that she decided not to submit the paperwork that all candidates must apply.

Penny Pritzker herself says, "I have obligations here in Chicago that make it difficult for me to serve at this time." In a statement, she says, "I think I can best serve our nation in my current capacity: building businesses, creating jobs and working to strengthen our economy."

Now, multiple Democratic sources had told CNN that Penny Pritzker was the leading candidate for that job, but aides say that the Obama transition never submitted her for a full vet because she indicated she was not interested in serving at this time.

Now, you'll recall Penny Pritzker was finance chair for the campaign and led their record-breaking fund-raising efforts. She is well regarded by the campaign. And their transition spokesperson, Robert Gibbs, says, "Penny Pritzker is a trusted adviser, a valued friend to the president-elect, and played a critical role in the campaign. She would be an enormous asset to an Obama administration given her experience in business and economic growth, but has decided given her family and business commitments, she is not interested in serving at this time." He says, "She will continue to be a close economic adviser to the president-elect and his team."

And that is the latest today. A new development. Penny Pritzker, a trusted adviser and respected here in Chicago, but not moving into a cabinet position with this administration -- Wolf.

BLITZER: There's some suggestion, as you know, Jessica, that the vetting process is very, very rigorous, as outlined by the Obama transition. And that potentially could be turning off some people who might not necessarily want to go through that kind of enormous vetting process.

YELLIN: One person involved in this, in the vetting, said to me, Wolf, that it's an agonizing experience. That they ask for so much detailed information, much more than previous vets. That it is stressful and it can be so difficult.

And one ethics lawyer who deals with a lot of these vets and these processes says, look, there's no shame in saying you don't want to go through it. It can be a really tough thing to put your family through. This one, a particularly difficult process -- Wolf.

BLITZER: Is that a little snow we see behind you? Is that what it is?

YELLIN: It's winter. It started snowing today, Wolf. It's cold.

BLITZER: It's pretty in Chicago.

All right, Jessica. Thanks very much. You better button up your coat.

Barack Obama continues to receive highly classified government briefings, but it appears some secret information is still off limits to his transition team.

Let's go straight to our Pentagon Correspondent Barbara Starr.

It concerns the Pentagon, the defense secretary. What do we know, Barbara?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, you know, Wolf, the transition is now under way here at the Pentagon, but as you say, some of the answers to some of the questions still being kept secret.

(BEGIN VIDEOTAPE)

STARR (voice-over): Behind closed doors, Defense Secretary Robert Gates had his first detailed meeting with President-elect Barack Obama's transition team. The meeting, scheduled for 45 minutes, focused on the immediate military issues facing the new administration. But for now, the Obama team isn't getting access to the big secrets.

A Pentagon memo spells out that "disclosure of sensitive information..." about current military operations and intelligence "... will not be provided" until arrangements for security clearances are worked out. But topic number one at the Pentagon, will Gates stay on the job for President Obama, has he even been asked?

Bob Gates, a former CIA chief, is determined to keep what may be his biggest secret even as the press corps tries to crack the spymaster.

This was Gates in June.

ROBERT GATES, DEFENSE SECRETARY: Look, I learned a long time ago never to say never. So my answer is, the circumstances under which I would do that are inconceivable to me.

STARR: This was Gates just days before the election.

GATES: Well, let me just say that I'm getting a lot more career advice and counseling than I might have anticipated.

STARR: And this week on Capitol Hill?

UNIDENTIFIED FEMALE: (OFF-MIKE)

STARR: Just a friendly smile.

(END VIDEOTAPE)

STARR: Well, you know, Wolf, we here in the Pentagon press corps keep trying to crack the spymaster. He will not be cracked. He simply won't say a word.

But I did speak with a senior official here in the building who has spoken to Mr. Gates since the election, and he says he does believe that Gates would seriously consider staying on in the Obama administration if he thought he could be of service with two wars still ongoing -- Wolf.

BLITZER: Barbara, thank you for that.

Barbara Starr with the latest at the Pentagon.

Now let's take a closer look now at some of the high-profile cabinet picks already being mentioned by the Obama transition. Rahm Emanuel is President-elect Obama's pick for White House chief of staff. And of course, there's lots of speculation over whether or not Hillary Clinton will become the secretary of state.

But in terms of cabinet appointments we know about right now, former Senate majority leader Tom Daschle is apparently Obama's pick to become the next health and human services secretary. Eric Holder, a former official in Bill Clinton's Justice Department, is apparently Obama's pick to become the next attorney general. And the current Arizona governor, Janet Napolitano, appears to be the pick for homeland security secretary.

Barack Obama promised change. Is he ushering it in with a key show of bipartisanship? He's sending his right-hand man to talk with GOP leaders on Capitol Hill.

And still no announcement about Hillary Clinton and secretary of state. What's taking so long? We're going to ask her longtime ally and friend, James Carville. He's standing by.

(NEWSBREAK)

(COMMERCIAL BREAK)

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

Happening now, when will the economy bottom out? The treasury secretary, Henry Paulson, talks about the global financial crisis and how to prevent another one.

Washington is expecting huge crowds for Barack Obama's historic swearing in ceremony on January 20th, but how do you put on a show in these tough economic times? Some say this is no time for excess.

Plus, Iranian nuclear ambitions, troubling new details about their ability to make a bomb. How will an Obama administration deal with it?

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

The president-elect is reaching out to Republicans. Barack Obama sending the man who will be his White House chief of staff to meet with House and Senate GOP leaders on Capitol Hill today.

Our Senior Political Analyst Bill Schneider is looking into this story.

Bill, the significance of Barack Obama's decision to send Rahm Emanuel up to meet with these congressional leaders, what's it all about?

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Well, it's one more piece of evidence that President-elect Obama intends to pursue a different kind of politics.

(BEGIN VIDEOTAPE)

SEN. HILLARY RODHAM CLINTON (D), NEW YORK: ... Barack Obama.

SCHNEIDER (voice-over): President-elect Obama reaches out to Hillary Clinton for his cabinet. He meets with John McCain.

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: Just going to have a good conversation about how we can do some work together to fix up the country. SCHNEIDER: He advises Senate Democrats not to be too harsh on Joe Lieberman.

He sends his new chief of staff to meet with Republican leaders of Congress.

REP. RAHM EMANUEL (D), INCOMING WHITE HOUSE CHIEF OF STAFF: There is enough area and enough good will for ideas from both parties to solve those challenges.

SCHNEIDER: A new kind of politics?

OBAMA: If we want to meet the challenges of this moment, we're going to have to get beyond the old ideological debates, the divides between left and right.

SCHNEIDER: Obama is not the first president who set out to end the red versus blue divide that has defined American politics since the 1960s. Bill Clinton promised a third way. George W. Bush said he would be a uniter, not a divider. But the two baby boomer presidents ended up being defined by the cultural divide.

The generation Obama brings to power, some are calling it Generation O, does not identify with the left/right battles of the '60s. In his book, "The Audacity of Hope," Obama writes about moving beyond the psychodrama of the baby boom generation, a tale rooted in old grudges and revenge plots hatched on a handful of college campuses long ago.

It was Hillary Clinton who ran as the tough partisan fighter.

CLINTON: If I tell you I will fight for you, that is exactly what I intend to do.

SCHNEIDER: Obama's style is not partisan or ideological. It's casual, cool, connected, like Generation O. You could call it the "What's up, dude?" approach to politics.

(END VIDEOTAPE)

SCHNEIDER: All this reaching out does have some progressives worried. They don't want the new president reaching too far -- Wolf.

BLITZER: Bill Schneider, thank you.

A new Gallup poll shows the GOP has hit a new low in the view of the American public with only 34 percent giving it a thumbs up. So what could Republicans do to get back on track?

Joining us now, a rising star among the Republicans, the Utah Governor Jon Huntsman.

Governor, thanks very much for coming in.

GOV. JON HUNTSMAN (R), UTAH: Thanks, Wolf. Good to be with you. BLITZER: I saw you at the Republican Governors Association meeting in Miami last week. Governor Tim Pawlenty of Minnesota, he was blunt, saying you guys need to do a lot right now.

What's the most important thing that Republicans need to do to reach out and convince the American public they know what they're doing?

HUNTSMAN: We have to realize fundamentally that politics, successful politics, is a game of addition and not subtraction. We've got to reconnect with people in this country on the issues that really matter.

BLITZER: Like what?

HUNTSMAN: And some of those are going to be nontraditional issues like the environment. I mean, when was the last time that we as a party really connected meaningfully on the environment, the legacy that we're leaving to the next generation?

BLITZER: Because some Republicans think global warming is manmade global warming, is a hoax.

HUNTSMAN: Well, and that's a debate we'll have to have within our party.

BLITZER: What do you believe?

HUNTSMAN: I believe that it's real, and we have got to deal with it in real time, based on real science.

And, so, we, as Western governors, are putting forth some ideas on energy and the environment. To the new administration, we will be handing over some of our ideas even tomorrow.

It's -- the big ideas...

(CROSSTALK)

BLITZER: When you say tomorrow, what does that mean?

HUNTSMAN: Well, I mean, it's tomorrow. We're going to hand over some ideas to the transition team, just representing the Western governors, who I -- which I chair...

(CROSSTALK)

BLITZER: And the environment is a big issue for you.

HUNTSMAN: It is.

And energy is a huge issue. It's probably the biggest issue in the West right now. And I would say, aside from the economy right now, it is energy. And energy is inexorably tied to the environment and -- and climate change.

BLITZER: Listen to this exchange I had yesterday with a former governor, Mike Huckabee of Arkansas. Listen to this. He was here.

(BEGIN VIDEO CLIP)

MIKE HUCKABEE (R), FORMER ARKANSAS GOVERNOR: I would have come back to Washington, but it wouldn't have been to suspend the campaign. It would be to bring the campaign right to Capitol Hill and say, we're marching here with 80 percent of the American people who think this is the dumbest idea we've heard, the government picking winners and losers in the private sector.

BLITZER: Do you think that hurt McCain?

HUCKABEE: It hurt McCain badly.

(END VIDEO CLIP)

BLITZER: He says McCain made a huge blunder in supporting that $700 billion bailout of the financial sector. Do you agree with Huckabee?

HUNTSMAN: I think there's a lot of sentiment to that end.

And I would have to agree that, as it relates to bailing people out, I mean, there's such a thing as Chapter 11, before you get to Chapter 7 bankruptcy. Chapter 11 is there for a reason.

It's there to reorganize and to prioritize your assets, to basically make your company more efficient. It's after that that you can make decisions about whether or not taxpayer dollars should be used.

BLITZER: So, I take it you're -- you're not in favor of a bailout of Ford, GM, and Chrysler either?

HUNTSMAN: No, initially, I think that's a big mistake. That's why Chapter 11 is there.

BLITZER: Should they -- should they -- should they -- should we let them go under?

HUNTSMAN: Well, I think Chapter 11 is there for a reason. I think...

BLITZER: To reorganize?

HUNTSMAN: They have to reorganize. They have to look at the assets that they critically need to have to be competitive in today's marketplace, and to move on.

And, at that point, if they need some taxpayer help, let's have that discussion. But it is foolhardy and I think nonsense to be talking about this before you have really taken a critical look at your company and why it is inefficient today.

BLITZER: Your state has a surplus. It's -- it's blessed. Why is Utah doing that well, when so many other states, whether California, or New York, or elsewhere around the country, they're in deep financial crisis right now?

HUNTSMAN: Well, it's the greatest state in America, I have got to tell you.

BLITZER: Other than that.

(LAUGHTER)

HUNTSMAN: We represent tomorrow in America.

I think we represent the hopes and dreams and aspirations of the American people. The industries of tomorrow are going to be launched in the state of Utah. You look at personal medicine, for example, cures for human disease, you look at environmental solutions and the technologies that are going to make our country cleaner and greener, they're going to come out of places like Utah, because...

BLITZER: What have you done to encourage these industries to -- to develop and flourish in Utah?

HUNTSMAN: Entrepreneurship still works. People still believe in entrepreneurship as being the absolutely critical phase in innovation and technological development, without which, we become Europe.

BLITZER: Do you think, speaking of Western states, the governor, your colleague from Arizona, Janet Napolitano, she is rumored right now to become the next secretary of homeland security. You know her, I assume. She was an ardent supporter of Barack Obama. You were a supporter of John McCain.

What do you think of her as homeland security secretary?

HUNTSMAN: She's -- she's an excellent individual. She's been a good leader. I can say that even as a Republican. She has dealt with border issues, which is highly sensitive in our part of the country. She's worked with fellow governors. She's worked with Mexican counterparts.

I think she understands homeland security in ways that many people might not imagine.

BLITZER: And what do you think about Hillary Clinton as secretary of state?

HUNTSMAN: Well, that's an interesting dimension there.

And you have to remember that foreign leaders are going to interpret messages differently. Is it from Hillary Clinton, based upon her own world view, or is it actually a message from Barack Obama?

BLITZER: So, you have got some problems with that? You think it could be a complication?

HUNTSMAN: I think it could complicate things, absolutely.

BLITZER: We're going to leave it right there.

But I hope you will be a frequent visitor here in THE SITUATION ROOM.

HUNTSMAN: Whenever you would like, Wolf.

BLITZER: Governor Huntsman, thanks for coming in.

HUNTSMAN: Thank you.

BLITZER: The world is watching what's going on with those pirates off the coast of Africa. Jamie McIntyre is standing by.

(BEGIN VIDEO CLIP)

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: (AUDIO GAP) to tell you how the U.S. Navy says you can outrun and outgun the pirates -- coming up -- Wolf.

(END VIDEO CLIP)

BLITZER: All right, Jamie, stand by.

Also ahead: last-minute regulations being pushed through by the Bush administration -- why one of them has environmentalists angry.

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

(COMMERCIAL BREAK)

BLITZER: The clock is ticking right now on the Bush administration, with only 61 days left before Barack Obama's inauguration.

The White House is making use of every minute. They're pushing through new rules that could have a huge impact on all of us.

Let's go to CNN's Deborah Feyerick. She's following the story for us.

What kind of regulations, Deb, are we talking about?

DEBORAH FEYERICK, CNN CORRESPONDENT: Well, Wolf, you know, other presidents have definitely tried to overturn some of these rules, but we are talking about everything from family leave, to birth control, to highway safety, and the environment.

(BEGIN VIDEOTAPE)

FEYERICK (voice-over): As medical director for family planning at a clinic in West Philadelphia, Dr. Steven Sondheimer worries that last-minute rule changes by the Bush administration will hurt his uninsured patients.

DR. STEVEN SONDHEIMER, HOSPITAL OF THE UNIVERSITY OF PENNSYLVANIA: They're going to make access to care more difficult and they're just to going to burden us, and it's going to burden the patients.

FEYERICK: With time running out, President Bush and his agencies have been working hard to push through last-minute rules known, because of their timing, as midnight regulations.

MICHAEL WHITE, MANAGING EDITOR, THE FEDERAL REGISTER: This is about 2,000 pages of regulatory material.

FEYERICK: Michael White works at the Federal Register, where the new rules are published.

WHITE: This administration has really planned it out much more aggressively.

FEYERICK: Once the rules are finalized and printed, it takes 60 days for them to go into effect, meaning many will be in place the day president-elect Obama is inaugurated.

JERRY BRITO, SENIOR RESEARCH FELLOW WITH THE REGULATORY STUDIES PROGRAM, MERCATUS CENTER, GEORGE MASON UNIVERSITY: That's what makes the regulations possibly so pernicious, is that you have a president issuing rules at the last minute that he knows might be contrary to what his predecessor will want to do. It sort of ties the hands of -- of -- of the next president.

FEYERICK: But experts say presidents are entitled to extend their agenda and promote their legacy. Among the biggest changes, employers now able to access some of your health information, truck drivers clocking longer 11-hour shifts on the highways, and family planning clinics that get government money now able to deny information on abortion and birth control.

SONDHEIMER: It's mean-spirited and wrong to not have available basic health care.

FEYERICK: Other big changes would weaken the Endangered Species Act, raise levels of air pollution, and make it easier for companies to destroy mountaintops to remove coal.

Matt Nadia (ph) with a liberal watchdog group says many of the new rules favor industry.

UNIDENTIFIED MALE: Some of the damage that will be done to the environment as a result of these rules will be irreversible, even, if a couple of years down the road, these policies are undone.

(END VIDEOTAPE)

FEYERICK: So, what are president-elect Obama's choices? Well, he can start over and try to pass his own rules. But that takes years. Or he can try to reverse the midnight regulations using a law that has been used successfully only once since it was created two decades ago.

The Senate -- the Senate and House pass a joint resolution overturning things they don't like. The president signs it. And given the Democratic majority it, well, it could work this time -- Wolf.

BLITZER: Deborah, let's get some more background on this story. The so-called midnight regulations can affect things like how efficient your washing machine must be, the labeling on your food, even designations, by the way, for monuments or national parks.

The phrase midnight regulation was coined during the last days of President Jimmy Carter's administration. He issued more than 24,000 pages of new rules in the time between Election Day and Inauguration Day. Years later, President Clinton beat that number, issuing more than 25,000 pages of new rules in his remaining days.

Russia right now is joining in the effort to stop a wave of brazen pirate attacks. Its sending additional warships to the Horn of Africa to try to keep Somali pirates from hijacking more vessels. A Saudi supertanker brimming with oil is in the pirates' hands right now. And they're demanding millions of dollars for it.

Let's go to our senior Pentagon correspondent, Jamie McIntyre. He is watching this story unfold.

Jamie, first of all, where are you, and what -- what's being done to try to keep these pirates away from these ships?

MCINTYRE: Well, Wolf, we're here in the Port of Baltimore, one of the busiest ports on the East Coast. And you can see behind me a couple of U.S. Navy cargo ships. It's unlikely that pirates would mess with the U.S. Navy.

But the ships give you an idea of the scale that we're talking about. For pirates to get up the side of those ships with grappling hooks, they have got to go 30, maybe 50 feet on -- on board.

The U.S. Navy is patrolling, along with other nations, the Gulf of Aden, but they can't be everywhere at once. So, the Navy says their advice to -- to merchant shippers is, you have got to mount a better defense. What can the ships do? Well, for one thing, they can put more people on deck to watch out for the pirates. They can use lights at night to see farther away from the ship.

Even something as simple as putting barbed wire along the gunwales of the ship can make it harder for the pirates to get on board. And one thing that most ships have -- we're on a fire boat, so I don't know if you can see this, but this is a water cannon. Most ships have some sort of fire prevention, fire hoses that they can use to blast the pirates off the side of the ship, a perfectly good nonlethal defense.

But -- and the other thing, of course, is ships can just go faster, have a greater speed and outrun the pirates. But the main thing the U.S. Navy is telling these merchant ships is, you have got to have some kind of defense.

Once they see -- the pirates see a security team is on board, that the ship is prepared for an assault, they generally let the ships go, and wait for the next one to come by -- Wolf. BLITZER: Is there a downside, Jamie, to having these security patrols on these ships be armed and ready to fire if necessary?

MCINTYRE: Well, there is. I mean, obviously, if pirates get on board, there can be a very nasty confrontation. That is when you have hostages taken. That's when the situation gets out of hand.

What you need to do is everything possible to avoid that situation. And -- and, as I said, most of the time, the pirates are not looking for a difficult fight. They're looking for the easy pickings. And, right now, there's too many easy pickings, too many fat targets off the coast of Africa.

BLITZER: Good point. Jamie McIntyre, thanks very much.

A power struggle -- the Democrats have won even more control of Congress and soon the White House. So, why is Barack Obama reaching out to the GOP right now? We will explain.

And a huge blow for the Bush administration: A federal judge orders five Guantanamo Bay detainees set free -- why the White House says this is a dangerous move.

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

(COMMERCIAL BREAK)

BLITZER: So, what's taking so long for an announcement about Hillary Clinton and whether she will become Barack Obama's secretary of state?

Let's discuss this and more in our "Strategy Session."

Joining us, our CNN political analyst the Democratic strategist James Carville, and our CNN political contributor Bill Bennett. He's the co-author of a new book entitled "The American Patriot's Almanac." I have got it right here in my hand.

Bill, congratulations.

BILL BENNETT, CNN CONTRIBUTOR: Thank you.

BLITZER: Another thick book written by Bill Bennett. We will talk about that on another occasion.

BENNETT: Frustrated professor.

BLITZER: Let's talk about Hillary -- Hillary...

BENNETT: Frustrated professor.

(LAUGHTER)

BLITZER: Yes, that's right.

(LAUGHTER) BLITZER: Well, let's talk about Hillary Clinton right now.

James, what is taking so long?

JAMES CARVILLE, CNN POLITICAL ANALYST: Well, you know, there's -- obviously, her husband, you know, has got a lot of things that they had to go through it. They're going through it. And, you know, she's a United States senator. I mean, it's not as simple as some of these other Cabinet appointments.

And I suspect that this thing will get resolved. But -- and I suspect it will be sooner, as opposed to later.

BLITZER: Because...

(CROSSTALK)

CARVILLE: We will see.

BLITZER: ... he says, Bill Clinton says, whatever they need, I'm more than happy to cooperate.

But then there was a story in "The New York Times" yesterday saying, well, she is -- might be having some second thoughts about all of this, not sure.

What do you think?

CARVILLE: Well, A, I think that -- I think that, from what I understand, is the president-elect's people and President Clinton's people have sat down. I think they're working real hard.

I think these issues are resolved or being resolved as we speak. And I think we will probably hear something here in the next day or so.

BLITZER: What do you think about all this to-ing and fro-ing, Bill

BENNETT: Well, I like -- play back James' first sentence. With -- with her husband, there's always a lot of things.

(LAUGHTER)

BENNETT: And there are always a lot of things with Bill. And there's always more things to come and more things to talk about.

I will tell you, what I'm fascinated by is this whole selection thing. I mean, Rahm Emanuel, Eric Holder, Hillary Clinton, I mean, I have got to maybe tip my hat to James. Was this the Manchurian candidacy? This is Clinton redux. We're seeing a lot of Clinton people coming back in. I thought they lost their bid for the executive branch.

This is amazing to me. It's not as good as us winning, but it's a fascinating thing to see. I don't know how this is going to be resolved, but I'm sure there are lots of questions, lots of complications.

(CROSSTALK)

BLITZER: Eric Holder, by the way, did support Barack Obama, not Hillary Clinton...

BENNETT: I know.

BLITZER: ... in this race for the Democratic nomination.

Rahm Emanuel was on the sidelines. He didn't take a position. Hillary Clinton obviously supported Hillary Clinton.

CARVILLE: Well, yes. A lot of people in this country -- I don't really know what irritated people the most on the right, the peace or the prosperity in the Clinton administration.

But, at any rate, you know, as I recall -- people recall it being very competently run and there are a lot of talented people. And I think it says a lot for the president-elect that he -- you know, that he believes in a meritocracy, that if somebody is performed -- is talented, he's not going to take political allegiance first. He's going to take based on merit. And I think that's a good principle.

BLITZER: If the Democrats, Bill, are looking for people with experience, as Democrats, they either have to go to the Jimmy Carter administration or the Bill Clinton administration if they want people who know something about how the executive branch works.

BENNETT: Yes, I think you both mistook my comments. I -- it was lighthearted, but I didn't mean it as a criticism. It's not a criticism.

CARVILLE: No, I...

(LAUGHTER)

BENNETT: Really, I -- I mean, first of all, it's a compliment to the Clinton administration. It is, I think, about competence. I know a couple of these people. Rahm Emanuel is -- is damn competent. Holder, I know and like. I don't have -- I have disagreements with him.

But what is interesting here is that what's going on, on the left -- if you go to the left blogs, some of them are starting to go a little nuts. They don't know what to do, because this is the most popular man in the world.

(LAUGHTER)

BENNETT: But they're saying, where's the change? Are we just back to the -- to the triangulation, the centrist thing?

But, I mean, I am not shocked or horrified by these appointments. And I think a lot of people on the left were hoping people like me would be. (LAUGHTER)

BLITZER: James, listen to what Governor Huntsman, Jon Huntsman of Utah -- he's a rising star in the GOP right now, just got reelected with an overwhelming majority out there.

CARVILLE: Right.

BLITZER: This is what he just told me a few minutes go about some of the complications, potentially, involving Hillary Clinton as secretary of state.

(BEGIN VIDEO CLIP)

HUNTSMAN: That's an interesting dimension there.

And you have to remember that foreign leaders are going to interpret messages differently. Is it from Hillary Clinton, based upon her own world view, or is it actually a message from Barack Obama?

BLITZER: So, you have got some problems with that? You think it could be a complication?

HUNTSMAN: I think it could complicate things, absolutely.

(END VIDEO CLIP)

BLITZER: How much of a team player do you think she is, James?

CARVILLE: Well, I think, first of all, the president-elect, I think, taught constitutional law at the University of Chicago, and he's pretty familiar with the Constitution. And he understands that Cabinet members serve at -- at -- at his pleasure.

And I think he's a very confident person. But I think he wants -- as evidenced by some of his decisions, he wants some strong-willed people out there. And I think if he -- he obviously values Senator Clinton's opinion on these matters.

And, I mean, Governor Huntsman is -- from everything I know, is a good guy. And that's a legitimate question for people to look at -- look to. But I think that this president is pretty familiar with the Constitution and is a pretty self-confident guy, as evidenced by the way he's -- he's acted so far. So, I -- I think they will have a pretty good understanding.

BLITZER: Pretty soon.

All right, let's talk about Rahm Emanuel going up to Capitol Hill today, Bill, and meeting with the GOP leadership.

BENNETT: Yes.

BLITZER: You have got some nice words to say about the incoming White House chief of staff. Is -- is he the point man now in trying to make these kinds of deals? He's obviously leaving his seat as a Democrat in the House of Representatives.

BENNETT: Well, it looks like he may be.

I mean, I don't want to be mistaken here. He's -- he's no puppy dog. He is a tough, tough customer. But what it seems to me that is going on, whether you're talking about Hillary Clinton, Wolf, or the Republicans, is that Barack Obama is trying to put his arms around everybody.

I do think it shows magnanimity and a certain generosity on -- on the Clinton thing. But this effort with the Republicans, you know, the guy said he wanted to govern all the people. And one of the things we noticed during the campaign is, this guy would always look for agreement, when he could. He would always try to lower the temperature, you know, not exaggerate differences, but, you know, try to find common ground.

Now, there are going to be huge, huge disagreements. But this approach, it seems to me, is very smart. And, you know, we -- we know we're in the minority in the Senate and the House, but we still have some numbers. And look at this -- like this auto deal thing. I don't -- you couldn't have gotten that through, even with the Democrats. So, you're going to need Republicans from time to time.

BLITZER: And there's no doubt, James, that the Republicans, at least most of them, are saying very nice things about wanting to work, trying to help this incoming president.

CARVILLE: Well, they are.

And I think that Rahm is very committed. I think the president, the new president, is. And I think their model -- I think, when you see some of these Cabinet appointments -- I have said this before -- that you're going to see, you know, more than -- you will probably see more than one Republican in the Cabinet. I'm sure you will see one.

And you're going to see some Republicans in the agencies. I think that their model is -- it won't be just like that, but it will be somewhat of a coalition government. I think that -- that they're very committed to that.

And, again, what I see from -- from the new president is, is that, you know, he doesn't fear people who have opposed him in the past. And you're right. The auto deal and other things -- and I think the country is, frankly -- you know, I don't know -- they're apprehensive about what's going on, and they expect people in Washington to sort of work together. And I think that they understand this.

(CROSSTALK)

CARVILLE: And the signals are good.

BLITZER: I have said it before, Bill. It shows a lot of self- confidence, that he's willing to surround himself with some -- some tough... BENNETT: Sure.

BLITZER: ... and very, very politically independent types, like Hillary Clinton.

BENNETT: Yes.

You know, we used to say in the university the test of a good department chairman is, will he hire better, more experienced, smarter people than he is?

And I'm not saying he's done that, but he's shown tremendous confidence in getting people who are very well-known, very famous, and who some people might argue would outshine. But what he's trying to do, I think, is, again, govern as he said he would.

And, so far, I have to tell you, it's very impressive. It looks to me like a very smart thing to do. And I wouldn't be surprised if some of the first fights that this administration has could be with a Henry Waxman, rather than a John Boehner. That could happen. And that will be interesting.

BLITZER: All right.

BENNETT: And I will be on the president's side, probably.

(LAUGHTER)

BLITZER: We will watch it very closely.

James Carville and Bill Bennett.

Bill Bennett's book is called "The American Patriot's Almanac." There it is. I'm holding it right now. It's not thin, but it's good.

BENNETT: Neither am I.

BLITZER: You might want to get a copy of it. Thanks very much.

(CROSSTALK)

CARVILLE: We're all bipartisan now. It's great.

(LAUGHTER)

BLITZER: Yes. All right. Good.

"The American Patriot's Almanac."

It's a delicate diplomatic question Jack Cafferty is asking. How should president-elect Barack Obama deal with Iran when he takes office? Jack is standing by with your answers.

And, for a historic event, should no expense be spared during Barack Obama's inauguration, or should expenses be dramatically scaled back, given these tough economic times? Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's check back with Jack Cafferty. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: The question this hour is, how should Barack Obama deal with Iran when he takes office?

The question is prompted by this IAEA report that says Iran is now enriched enough uranium to build one atomic bomb. Not good.

Warren says: "President-elect Obama should do exactly as he promised during the campaign: serious dialogue, no predetermination. This kind of attitude is exactly what the United States needs to reestablish its credibility on the world stage and negate the current administration's destructive policies."

Mike in Wisconsin: "Just because they've got this nut case for a vocal leader doesn't mean we need another war. There are sensible people in Iran who know that what they are doing is not in their best interest. Seek them out. And, with honest support, maybe we can help change the region without firing a shot. No one's saying it's going to be easy."

Randy in New York: "Diplomacy first, sanctions second, war third. Bush got it backwards."

Thomas writes: "Mahmoud Ahmadinejad has already proved he isn't playing with a full deck with his comments about Israel. He definitely should not be allowed to have any type of nuclear activity. A person that shoots off his mouth about destroying a whole race of people should not be allowed to have a box of matches."

Amir writes: "I think President Obama has to wait until June of next year, see about the outcome of the Iranian presidential election, before initiating any talks with Iran. Unlike what most people think here in the west, Ahmadinejad is not very popular in his own country, and could very well lose in the upcoming election."

And Steve writes: 'Keep a close eye, but don't overreact. We do this all the time, making our enemies 10-foot giants, while that country is actually decaying from within. All that money we spent to defend against the USSR Would sure come in handy now."

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

BLITZER: Thanks very much, Jack.

And, to our viewers, you're in THE SITUATION ROOM.

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