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Obama Probe Results; Worst Month for Home Prices; Two-Thirds of Public Thinks Economy 'Very Poor'

Aired December 23, 2008 - 16:00   ET

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


SUZANNE MALVEAUX, CNN ANCHOR: Happening now, the Obama camp is about to release an internal report on contacts with the embattled Illinois governor. Now, will it help the president-elect move beyond the corruption scandal in his home state? We are standing by to bring you that report.
Plus, a leading voice of the religious right offers surprising criticism of President Bush. This hour, my interview with TV preacher and former presidential candidate Pat Robertson. He has an equally surprising take on Barack Obama.

And just in time for Christmas. A closed cookie factory reopens and dozens of laid-off workers are getting paychecks again.

Wolf Blitzer is off today. I'm Suzanne Malveaux.

And you're in THE SITUATION ROOM.

It is just a short while from now the Obama transition team will provide new details about any connections to the man at the center of America's hottest political scandal. That is, of course, the governor of Illinois, accused of trying to sell Obama's former Senate seat to the highest bidder.

Our Senior White House Correspondent Ed Henry is with Obama in Hawaii.

Ed, we just got word on how the Obama camp is going to put out this information. Obviously, too, there's a lot of spin around this.

What can you tell us at this hour?

ED HENRY, CNN SR. WHITE HOUSE CORRESPONDENT: That's right, Suzanne. In fact, we've just learned that they are going to have a conference call in about 30 minutes, trying to lay all this information out there, try to get this Blagojevich case behind them, because this is less about criminal exposure and more about limiting political exposure.

(BEGIN VIDEOTAPE)

HENRY (voice-over): Team Obama eager to try and turn the page on the controversy over its contact with embattled Illinois Governor Rod Blagojevich.

SEN. JOSEPH BIDEN (D-DE), VICE PRESIDENT-ELECT: It's been clear that the president-elect has had no contact with Blagojevich and/or anyone on his team. That he's asserted and you'll soon find in the report released today that there's been no inappropriate contact by any member of the Obama staff or the transition team with Blagojevich.

HENRY: This matters because of the lingering questions about whether top Obama aides like Rahm Emanuel had any role in the so- called pay-to-play scandal, allegations the governor tried to auction off President-elect Barack Obama's seat in the Senate. Democratic officials say their internal investigation shows there was limited contact and no wrongdoing, leading Vice President-elect Joe Biden to suggest there's no there there.

BIDEN: I don't think there's anything to exonerate.

HENRY: On the same day of the report's release, the transition team scheduled a Biden event on the economy. Not that they are trying to change the subject or anything.

BIDEN: We need a robust and sustained economic recovery package. There's virtually no disagreement on that point, with economists from left to right agreeing that the greater threat to our economy lies in doing too little rather than in not doing enough.

HENRY: He issued a warning to the Democratic Congress about not loading the package, which could reach $775 billion, with pork projects that may do little to stimulate the economy.

BIDEN: We will not tolerate business as usual in Washington. There will be -- let me say it again -- there will be no earmarks in this economic recovery plan.

I know it's Christmas. I know it's the Christmas season. But President-elect Obama and I are absolutely, absolutely determined that this economic recovery package will not become a Christmas tree.

(END VIDEOTAPE)

HENRY: Now, CNN has learned that today, Senate Majority Leader Harry Reid had a conference call with key Democratic governors from around the country, and they talked about coming up with as robust a stimulus package as possible to try to fix this economy, deal with the financial crisis. But what's interesting is these individual Democratic governors are going to want certain pet projects in this package. As you know, members of Congress are going to want pet projects. And that may collide with what Joe Biden said there, issuing that warning about not having pork projects, not having earmarks.

It will be a real battle ahead in what's going to actually be in this rescue package -- Suzanne.

MALVEAUX: Thanks, Ed. And obviously we'll be keeping in touch with you about that internal report coming out about the Illinois governor.

Thank you so much, Ed. We'll be back to you very shortly. Now to a stunning new plunge in the value of your home. The National Association of Realtors reports that in November, home prices took the worst hit in at least 40 years, and probably since the Great Depression.

Our own CNN's Christine Romans has those numbers -- Christine.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Suzanne, the value of Americans' biggest asset is dropping by the day. For years, home prices rose with almost no end in sight. Today, it's the opposite.

Home prices plunged again last month, the biggest drop on record. The average price of an existing home now $181,300. A year ago that same house was worth $208,800.

The problem, first a housing bubble, then the stock market meltdown in October, and now a furious pace of job cuts. For millions of Americans, their home is now worth less than the value of their mortgage.

Where there is buying, it is solvent buyers looking for a bargain. The National Association of Realtors says about 45 percent of all home sales are of distressed properties -- foreclosures, short sales, properties that owners literally walked away from.

It's even worse for brand-new homes. New home sales are down more than 35 percent over the past year.

Where do home prices go from here? Many economists predict more pain ahead, but mortgage rates are dropping, and they are expected to keep moving lower next year. That might entice new homeowners into the market, and homeowners with good credit might get a nice chance to refinance and lower their monthly payment -- Suzanne.

MALVEAUX: Thanks, Christine.

Americans are showing a new glimmer of hope in the midst of the nation's economic mess. A new report out today shows that consumer confidence rose slightly this month after sinking to a 28-year low. There's cheaper oil, and holiday season discounts really help lift consumer spirits. But there's still plenty of pain and worry out there.

Our Senior Political Analyst Bill Schneider has some new poll numbers on the economy, the plans to jump-start it.

And I guess the question is, Bill, does the public actually support this economic stimulus package?

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Yes, they do, because there is a sense of crisis in the country.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): The economy overwhelms all other issues. Three-quarters of Americans say it's their biggest concern. No other issue -- Iraq, health care, terrorism -- is even in double digits.

Look at just the last six months. In June, 39 percent describe the economy as very poor. It reached the majority by November. Now two-thirds feel that way.

There's a sense of crisis. For a new administration, crisis means opportunity.

BIDEN: This is a place where every successful administration in our history is taking crisis and turning it into an advantage.

SCHNEIDER: An $800 billion economic stimulus package? The public says OK. Republicans are concerned.

REP. ERIC CANTOR (R), VIRGINIA: What I'm concerned about, when we hear these staggering numbers, close to a trillion dollars right now in spending, where is that going to take us over the long run?

SCHNEIDER: There's no evidence the public's view of government has changed. They are still skeptical. They continue to believe the government is doing too many things that people should do for themselves. And distrust of government has gone up in the past two years. The success of the economic stimulus plan depends on the private sector.

BIDEN: Eighty-five percent of these jobs will be private sector jobs. We're not out there looking for make-work projects.

SCHNEIDER: The program will work only if Americans gain confidence in the economy and start spending and investing again.

There's some good news on that. Most Americans believe economic conditions in the country will be good a year from now. Not just better, good.

(END VIDEOTAPE)

SCHNEIDER: And that is where politics comes in. Democrats are much more likely than Republicans to say that the economy will be in good shape a year from now. A new administration brings hope. And hope may actually be the key to economic recovery -- Suzanne.

MALVEAUX: We'll see how that goes. Thank you.

Bill Schneider.

Jack Cafferty is off today.

We are standing by to bring you the Obama's teams report on contacts with the embattled Illinois governor.

Also in THE SITUATION ROOM this hour, an icon of the religious right is practically gushing about President-elect Obama.

(BEGIN VIDEO CLIP) PAT ROBERTSON, THE CHRISTIAN BROADCASTING NETWORK: I am remarkably pleased with Obama. I had grave misgivings about him, but so help me, he's come in forcefully, intelligently.

(END VIDEO CLIP)

MALVEAUX: Stand by for my interview with Pat Robertson. He is not at all complimentary, however, about President Bush.

Plus, new questions about whether Caroline Kennedy is Sarah Palinized. And there's growing pressure on the New York governor to decide soon whether Kennedy will get Hillary Clinton's Senate seat.

And the sweet smell of jobs restored. It's a cookie factory in Ohio that is making holiday dreams come true.

(COMMERCIAL BREAK)

MALVEAUX: Well, if you listen closely enough, you might think that Barack Obama is a Republican and President Bush is a Democrat. But clearly that's not the case, but some well-known Republicans are offering high praise of Obama while offering low opinions of Mr. Bush.

(BEGIN VIDEOTAPE)

MALVEAUX: Joining us now, Pat Robertson.

Thank you so much for being here with us on THE SITUATION ROOM. Happy Holidays to you.

I want to start off -- obviously, Barack Obama just four weeks away from becoming president. What do you think the first thing, the most important thing he needs to do?

ROBERTSON: Well, I think he has to take hold of this economy. We're in serious trouble. And I understand Barney Frank wants to move legislation forward even ahead of the inauguration. But I think it's getting the economy moving and making sure people have jobs. That's going to be the first, second and third priority, I think, for the new president.

MALVEAUX: You had actually predicted in the beginning of the year that we would be in this financial mess. You said in January, "I also believe the lord was saying by 2009, maybe 2010, there's going to be a major stock market crash."

You predicted a recession. Why?

ROBERTSON: Well, I don't know why, but that's -- you know, I go away to pray at the end of each year and sort of try to ask for some leading guidance as to what's going to happen and what I'm supposed to be doing. And this came to me last -- the end of last December, that we were going to have a serious downturn.

I'm afraid that it looks like 2009 is shaping up to even be worse than this year. We've got some bad things lurking in the wings. So I wish it weren't true, but it is.

MALVEAUX: Do you think that the president now is handling it correctly with all of this bailout money, these loans to some of these private industries and these banks?

ROBERTSON: Suzanne, I frankly think that that this TARP has been mishandled, mismanaged. I am not at all pleased with the way they have done it.

I know they needed a rescue, but they pulled a number out of a hat, $700 billion. They didn't know exactly what they needed, and they haven't spent it helping the consumers, helping homeowners. It's all going in to shore up the balance sheet of the banks and the banks aren't lending. So I don't, to me, think it was well done.

MALVEAUX: Who do you think actually dropped the ball? Do you think it was the president, the administration, or perhaps the automakers, the banks? Do you blame anyone in particular?

ROBERTSON: Well, it's hard to assess blame. But over the years -- I hate to be critical. I mean, I am a Republican, and this is the president of the party that I'm a member of. But I think we've had some serious goofs along the way.

The Katrina matter was terrible. The rebuilding of Iraq has been terrible. The handling of the economy right now has been terrible. It hasn't been handled in what I would consider a professional manner.

MALVEAUX: How would you grade the president in light of all of the laundry list that you've just listed there?

ROBERTSON: Well, you know, history may accord him a higher grade than his contemporaries, and I think he's hoping for that and we are. But I believe I would look at about a C minus right now if I were grading him.

MALVEAUX: Are you looking forward to an Obama administration, a change?

ROBERTSON: You know, I am remarkably pleased with Obama. I had grave misgivings about him, but so help me, he's come in forcefully, intelligently. He's picked a middle-of-the-road cabinet. And so far, if he continues down this course, he has the makings of a great president. So I'm very pleased so far.

MALVEAUX: What do you think of the pick as Rick Warren, the evangelical leader, as the one to deliver the invocation at his inauguration? Obviously, a controversial pick. And there are some conservatives who believe that, perhaps, he's being used as a pawn.

I want to give you this quote here by Tony Perkins of the Family Research Council. He says, "Let's hope that Rick Warren will use his channel of communication to the new president to press him for more pro-family policies, rather than simply being used by Mr. Obama to make political inroads with evangelicals."

Do you think that Warren is being used by Mr. Obama?

ROBERTSON: I don't think so. I think Rick is an extraordinarily able person. Has he a huge church. His book on "The Purpose-Driven Life" is one of the all-time bestsellers.

He's a very dynamic individual. And I don't think he's going to be anybody's pawn.

He has his own agenda and I think he'll stick to it. But after all, all he's been asked to do is give an invocation. He isn't asked to endorse Obama. He's going to stand up there on the steps of the Capitol and he's going to say, "God, please bless this country," and he will do that very well.

MALVEAUX: There are others who are upset by that pick. Obviously, there are some gay activists who have expressed concern about it because he's not for pro-gay marriage.

This from Colin Powell, what he had to say about the "Don't Ask, Don't Tell" policy about military exposing their sexuality, saying that they're homosexuality in the military. He says, "We should reevaluate it."

(BEGIN VIDEO CLIP)

COLIN POWELL, FORMER SECRETARY OF STATE: We definitely should reevaluate it. It's been 15 years since we put in "Don't Ask, Don't Tell," which was a policy that became a law. I didn't want it to become a law, but it became a law. Congress felt that strongly about it. But it's been 15 years and attitudes have changed.

(END VIDEO CLIP)

MALVEAUX: Do you think it's time to put that policy aside and to let gays serve openly in the military?

ROBERTSON: Well, you know, I think I would leave that to the field commanders. And it seemed to be the unanimous decision of the military leadership that the question of open homosexuality in the barracks and showers and all the rest of it was not a good thing for the discipline of the troops. That was their policy, and President Clinton is the one that put that into effect.

I'm not sure that we ought to change that. It's worked pretty well so far.

MALVEAUX: President Bush obviously has some decisions to make before he leaves office. One of those being the power to pardon those who have been convicted of crimes. What kind of person do you think should receive a pardon by President Bush? What type of crimes do you think are acceptable to pardon?

ROBERTSON: I think that Scooter Libby got a raw deal. Patrick Fitzgerald knew in advance of all this questioning, that Richard Armitage was the one who leaked Valerie Plame's name and her connection with the CIA. And for him to grill Scooter Libby on whether he remembered he talked to this reporter and the other reporter, and then get him on the basis of perjury, I think it was an outrageous thing.

And the man's career has been ruined. And I think the president certainly ought to pardon Scooter Libby.

Beyond that, we don't want any more Mark Riches. That was not a good pardon. But I think a man like Scooter Libby is the one that the president should help before he leaves office.

MALVEAUX: President Bush has already commuted his sentence, so he has not had to serve any jail time. But you're saying that you don't think that President Bush went far enough?

ROBERTSON: Oh, absolutely not. His life and career is ruined.

He's a very accomplished lawyer. He can't practice law. And why would you allow that to happen when the prosecutor knew full well that Armitage was the leaker and that Scooter Libby wasn't?

And he had no information to give, but it's like these prosecutors just get carried away. And as they say, they want to nail a skin to the wall, and it was Scooter Libby who got nailed. But it was a very bad decision, I think, in the heat of the anti-Bush sentiment that was up in Washington.

MALVEAUX: Pat Robertson, thank you so much for joining us on THE SITUATION ROOM. Have a great holiday and a great Christmas.

ROBERTSON: And to you, Suzanne. Thank you.

MALVEAUX: Thank you.

(END VIDEOTAPE)

MALVEAUX: Some people in Minnesota may be saying, when is it all going to be over? The last election race in the country -- we'll find out who is up, who is behind and who is desperate in that Senate recount.

And are there any secrets in store? Well, we are waiting the secret report from the Obama transition team. Did any top aide play any role in the scandal that is hovering around the Illinois governor.

(NEWSBREAK)

(COMMERCIAL BREAK)

MALVEAUX: You're in THE SITUATION ROOM.

Happening now, out with the old guard and in with you new, except, perhaps, at the Pentagon. We look at why hundreds of Bush loyalists are being asked to stay with the Obama team, at least for now.

Well, getting the money shot these days is President-elect Barack Obama. Well, how are the paparazzi getting close enough to snap it?

And from road to raging river, a massive Maryland water main break puts commuters in peril. We'll show you some of their heart- stopping rescues.

Wolf Blitzer is off today. I'm Suzanne Malveaux. And you're in THE SITUATION ROOM.

We have new information about the last undecided U.S. Senate race. The Minnesota secretary of state is disclosing where the recount cliffhanger stands right now.

Our CNN Deputy Political Director Paul Steinhauser joins us.

Paul, tell us who is ahead.

PAUL STEINHAUSER, CNN DEPUTY POLITICAL DIRECTOR: Who is ahead?

Al Franken, the Democratic challenger, is ahead right now, but this thing is still far from over. If this was like a game, this thing would be in triple overtime now.

Take a look at this. Right now, Al Franken ahead by 47 votes after almost three million cast in this election. This is where it stands right now.

During the recount, they have been kind of adding some of the ballots that were challenged. But far from over.

Right now, today, the state Supreme Court is taking a look at 130 votes that the Coleman campaign says were double counted. So they have got to deal with that. That will be added to the total.

And wait, it's still not over yet. We've got more to go.

We've got about 1,600 absentee ballots that were never counted in the first place. These absentee ballots were deemed to be improper, but the state Supreme Court says you have to count them.

And now, Suzanne, that's going to take us into next year, probably January 5th, the day before the new Senate comes back. And you know what? Whoever loses, whenever they finally have a winner here, whenever they declare a winner for the canvassing board, which controls the recount, the loser will probably take this thing to court.

This thing is going to go on for a while.

MALVEAUX: OK. So I guess the question is, when is it finally going to end? When is it going to be over?

(CROSSTALK)

STEINHAUSER: ... into next -- we're going into next year, January 5, at the earliest.

But, then, after that, the loser could take this to court. Then it gets sticky.

And you know what? The governor has talked about maybe stepping in. The U.S. Senate itself, which, of course, is controlled by the Democrats, will have a say in this thing. We probably will have an open seat when the new Senate comes back on January -- in January.

MALVEAUX: And there's a lot of legislation people are really eager to pass. So, it will be very fascinating to see what happens with this last race.

Thank you so much, Paul.

By most accounts, Caroline Kennedy is at the center of a media circus. Reporters are questioning her. Critics are blasting her. And, supporters, well, they are encouraging her efforts to become a senator.

But amid the scrutiny is some urgency to get this thing wrapped up and get it wrapped up fast.

Our Mary Snow joins me.

One prominent New Yorker wants this decided soon. Tell us who.

MARY SNOW, CNN CORRESPONDENT: That's right, Suzanne.

That prominent New Yorker is the city's mayor, Mike Bloomberg, who is putting a bit of pressure on the state's governor.

(BEGIN VIDEOTAPE)

SNOW (voice-over): The scrutiny of Caroline Kennedy is growing, and so is the line of people weighing in on whether she should be appointed a U.S. senator. Governor David Paterson, who will pick the replacement for Hillary Clinton, is getting an earful. And now New York City Mayor Michael Bloomberg has a message for him: Whoever you choose, hurry up.

MICHAEL BLOOMBERG (I), MAYOR OF NEW YORK: It's up to the governor. And I think the governor should make a decision reasonably quickly, because this is just getting out of control, and everybody is focusing on the wrong things.

SNOW: Mayor Bloomberg says he's not endorsing Kennedy, who has worked for the city's Department of Education, but he did defend her.

BLOOMBERG: The fact that she comes from a family with illustrious history of service to the country, you certainly shouldn't hold it against her.

SNOW: Bloomberg's comments come as New York Democratic Congressman Gary Ackerman stepped up his criticism of Kennedy, taking aim at her on CBS' "Face the Nation" for not facing the press.

(BEGIN VIDEO CLIP) REP. GARY ACKERMAN (D), NEW YORK: They have basically Sarah Palin-ized her, if I can coin a phrase. They have -- they have -- they're answering questions that you have to submit in writing.

(END VIDEO CLIP)

SNOW: Kennedy has only taken a few questions from reporters. She submitted written answers to some organizations, including "The New York Times." But she declined to provide "The Times" with information about financial disclosures, something that would be required if she were running for election.

Kennedy's spokesman says, "If Governor Paterson were to choose Caroline, she would, of course, comply with all disclosure requirements."

The watchdog group Center For Responsive Politics says, Kennedy would only be subjected to disclosure rules if she is appointed. But other people being considered hold elected office and have a public financial record.

UNIDENTIFIED MALE: And, so, she may want to put herself on an even playing field with them by submitting to this sort of disclosure, even though she doesn't really have to right now.

(END VIDEOTAPE)

SNOW: Now, Governor Paterson was asked about Mayor Bloomberg's comments. He says he does not feel rushed and reminded everyone that Hillary Clinton's Senate seat is not yet vacant, and won't be until she's confirmed by the Senate as secretary of state.

Paterson spoke with reporters on a conference call. He visited Iraq and Afghanistan in recent days. And, Suzanne, he told us that troops even asked him about the New York Senate seat.

MALVEAUX: OK. Thank you very much, Mary.

ANNOUNCER: This is CNN breaking news.

MALVEAUX: Again, we have been awaiting the report from the Obama transition team, their accounting of their contact with the scandal- ridden Illinois governor.

We're going to talk more about this now, because that report coming out, with our own CNN's Ed Henry, as well as senior legal analyst Jeffrey Toobin.

I want to start off with Ed, if you can hear us.

What have you learned so far about this report from the Obama transition team?

HENRY: Specifically, Suzanne, what the Obama team is stressing is that, when you look at this report, first of all, in terms of president-elect Barack Obama, he had absolutely no contact either with the governor, Rod Blagojevich, or any of his staffers, in terms of -- of the handling of the Senate seat, any quid pro quo Rod Blagojevich may have been offering to anyone about who might replace Barack Obama in that Senate seat.

And, also, this inquiry, which was run by the incoming White House counsel, Greg Craig, we're told, found that there was only one staffer in the Obama orbit who had any conversations with either the governor or his staff about all of this, and that would be Rahm Emanuel.

And what these transition officials are stressing is that their own investigation found that the conversations Rahm Emanuel had with both Rod Blagojevich and his staff was not inappropriate. We had been suggesting that that's what this report would say. And now we're being told that's exactly what they have laid out, that, basically, Rahm Emanuel was the only person who had any sort of direct conversations about this Senate seat and that they want to stress that he did not talk about any kind of quid pro quo for the Senate seat, that it was more of a cursory conversation, and, specifically, that there was more than one conversation with the governor.

One or two calls with the governor is what they are saying between Rahm Emanuel and Rod Blagojevich, and at least four calls between Rahm Emanuel and governor's former chief of staff, John Harris.

So, they are trying to lay this out and account for exactly how many calls there were. But the big point here that they are trying to stress in the Obama team is that there was nothing inappropriate in the actual phone calls, in these contacts.

And that's why I think the bottom line here is that they are really trying to focus on political -- political exposure, not criminal exposure, because there's really no credible allegation here that any of this contact had any criminal ramifications.

And, instead, they are trying to make sure that sort of the seamier side of politics that has come out in this investigation of Rod Blagojevich does not get connected in any way to Barack Obama, who obviously has focused so much on a change message -- Suzanne.

MALVEAUX: Ed, I want you to hang on there for a moment.

I want to bring in Jeffrey Toobin, our legal analyst, obviously, to talk about the legal aspect of this.

Ed brings up a very good point here. This is an internal report. This is simply the transition team asking members of their own transition team, did you reach out to the governor; did you reach out to his aides?

This is not sworn testimony. It's not even based on the transcripts from the FBI and those taped conversations. So, what weight should we put on this report? Is this simply a political gesture?

JEFFREY TOOBIN, CNN SENIOR ANALYST: Well, it certainly has a political air about it, but it is all that we have.

This is the only evidence we have of what the contacts were between the Obama future administration and the Blagojevich selection group. I mean, it appears to be just two people. It appears to be Blagojevich himself and his chief of staff, John Harris, and speaking to one person, Rahm Emanuel.

Now, it could be that there is additional information that comes out. But, certainly, there is no reason to think that this is a false report. So, this -- and this is all -- all that we're likely to have for the -- for the immediate future.

And it's important to remember that this message that's coming out of the report is very much consistent with what the story that Pat Fitzgerald, the prosecutor, told in his complaint against Blagojevich, because, in that complaint, Blagojevich is quoted on the wiretaps complaining about the Obama administration, saying, they won't make a deal with me. They are not giving me anything except their appreciation.

That's consistent with what the Obama people are putting out today.

MALVEAUX: What are you going to be looking in the prosecutor's report, Patrick Fitzgerald, when that finally comes out? Are you going to be looking for inconsistencies perhaps with the Obama transition team's report and that of the prosecutor? And are you going to be looking for anything that suggests money, any discussion of money, occurred?

TOOBIN: Well, I think we need to be careful about what -- what products we're likely to see from both sides.

Patrick Fitzgerald is not going to issue a report. He very likely is going to issue an indictment of Blagojevich and Harris. That's certainly the next likely step in this investigation. It is not a comprehensive summary of everything he's learned in this case. It will be a more detailed summary of what the evidence is against those two people.

Now, it could be, in that indictment, that he discloses something about further contacts with the Obama administration. And, certainly, we will be looking for that. But there are different priorities here. Patrick Fitzgerald is working on building a case. The Obama administration is working on getting facts out that are helpful to the Obama administration and, presumably, also true.

But the differing agendas here will not give us a complete picture of everything that went on until a trial. And that's likely to be many, months from now.

MALVEAUX: Jeffrey, thanks.

I want to bring back In Ed, if you will.

Ed, obviously, this might be -- might be an ongoing problem for Barack Obama, if it continues. We heard Blagojevich last Friday saying he's going to fight, fight, fight, and continue to fight this.

HENRY: Mm-hmm.

MALVEAUX: What -- what concern does the Obama team, those aides, have, in terms of having this drag on, and be a potential liability for them?

I think we lost Ed Henry.

I want to go back to Jeffrey Toobin, if -- Jeff, if you're still there?

TOOBIN: I'm here.

(LAUGHTER)

MALVEAUX: OK.

Obviously...

TOOBIN: I'm -- I'm not in Hawaii. I don't get to go to Hawaii.

(LAUGHTER)

TOOBIN: I'm here in New York, where it's cold.

MALVEAUX: You and I -- well, you and I both.

But, you know, you look at the legal aspects, you look at the political aspects of this, I want to ask you the same question. This -- this drags out -- the longer this drags out, does team Obama need to do anything else, besides issuing this report today? Do they need to answer more questions? They are certainly not obligated, legally, I would imagine.

TOOBIN: Certainly, they don't have to do anything as a legal matter.

Politically, they could continue to answer questions. But there is the possibility for embarrassment down the road. If there's a trial, Rahm Emanuel could be called as a witness. Just because you're a witness doesn't mean you did anything wrong, but it's certainly not how the White House chief of staff wants is going to want to be spending his time.

That's the potential embarrassment down the road. But it's a ways to go. We have got an indictment. We will see if anyone pleads guilty. That's the likely next step.

MALVEAUX: OK. Jeffrey Toobin, thanks so much.

And we will get back to Ed Henry in a little bit.

Well, you might think that Joe Biden is sounding like Scrooge these days in hard economic times. In our "Strategy Session": Does the vice president-elect secretly wish he could do on a spending spree?

And, later, well, it's the sweet smell of getting your job back.

(BEGIN VIDEO CLIP)

RITA DEVAN, LANCE EMPLOYEE: I walked in the garage last night. My husband said, you actually smell like a cookie again.

(LAUGHTER)

DEVAN: He said, boy, I missed that smell.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

MALVEAUX: Zain Verjee is the monitoring stories that are incoming to THE SITUATION ROOM right now.

Zain, what are you working on?

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Suzanne, be careful what you wish for, if you're dreaming of a white Christmas. Seattle got up to a foot of snow over the past weekend, and another wave of winter is expected to roll into the Pacific Northwest.

The harsh holiday weather is making it really difficult for travelers. Flight schedules are returning to normal, but long waits are likely for holiday travelers.

Low ratings and tanking stocks -- shares of General Motors and Ford stocks took a dive today. The impetus for the freefall was the bleak outlook for the auto industry issued by ratings agencies yesterday. Standard & Poor's lowered the carmakers to junk status. Ford took a similar hit from Moody's investor service, all this despite emergency government loans to help the companies avoid bankruptcy.

Another big dip in oil prices today -- a barrel of February light sweet crude settled today at under $39 on the New York Mercantile Exchange. Prices fell below $38 earlier in the day on news that sales of new homes slowed to their -- the slowest rate in almost 18 years. New home prices also dropped by the largest amount in eight months -- Suzanne.

MALVEAUX: Thank you, Zain.

In the "Strategy Session": vice president-elect Biden on issue number one.

(BEGIN VIDEO CLIP)

BIDEN: We need desperately to get this economy moving. We have got to create more jobs now. And we have, fortunately or unfortunately, a ready plate already set as the things we must do.

(END VIDEO CLIP)

MALVEAUX: But do the American people think that the government is already doing too much?

And Secretary of State Condoleezza Rice tries to solve a problem that plagued Thomas Jefferson: pirates.

(COMMERCIAL BREAK)

MALVEAUX: Well, it seems that, even if we weren't in a recession, the new administration would still be looking to spend some serious cash.

Well, the question is, is that a concern?

Joining me for today's "Strategy Session," our CNN political contributor and Democratic strategist Paul Begala, and Republican strategist Karen Hanretty, who served as press secretary for Fred Thompson's presidential primary campaign.

Thanks for joining us here in THE SITUATION ROOM.

I want you guys to take a listen to what Joe Biden said recently.

(BEGIN VIDEO CLIP)

BIDEN: You know, let me put it slightly differently.

If we did not have this economic recession and this crisis we're facing, the -- the future prosperity of the country would still depend on us significantly improving our -- our infrastructure, significantly improving our education system, significantly improving our health care and availability and cost of health care, and significantly improving our energy circumstance.

(END VIDEO CLIP)

MALVEAUX: So, Karen, I ask you the question. Even if we weren't in a recession, it seems like the plan is, is to do a lot of spending on -- on various areas. Does that concern you at all, that they are coming in with that mind-set?

KAREN HANRETTY, FORMER FRED THOMPSON CAMPAIGN SPOKESWOMAN: No, I think -- you know, I think it's actually something that Republicans and Democrats alike can agree upon, that, you know, government spending money on infrastructure is a good investment.

I think the question is, are they making this investment as an excuse for creating jobs, and is that going to happen in the short term, and are there better measures that can be taken to infuse more money into the economy in a more immediate fashion? I think that's really what we're looking at right now.

MALVEAUX: But, if you look at the crumbling infrastructure, though, Paul, I mean, this seems like this is decades of neglect. I mean, really, isn't it Congress to blame that we're in the position where we are now, when you look at the roads, the bridges, the kind of thing we -- we might have seen with this water main break in the D.C. area?

PAUL BEGALA, CNN POLITICAL ANALYST: Exactly, a five foot -- a five-foot-in-diameter water main apparently broke in Maryland today.

MALVEAUX: Right.

BEGALA: It had cars trapped in that. Of course, last year, a tragic bridge collapsed on I-35 in -- in Minneapolis/Saint Paul.

So, of course, we have had decades of neglect of our infrastructure in this country. And that's why I think Karen is right. What the vice president-elect was saying was inarguably true, that we have to rebuild our roads and bridges, our infrastructure.

(CROSSTALK)

BEGALA: But I will also, though, he said no Christmas trees, no big spending.

MALVEAUX: OK. I have got to interrupt you really quickly here.

We have some more information.

ANNOUNCER: This is CNN breaking news.

MALVEAUX: I want to go to our Ed Henry, who is in Hawaii. He has more information about that report from the Obama transition team and kind of contact either Obama or any of his top aides had with the Illinois governor and his top aides regarding his Senate seat, whether or not there was any kind of quid pro quo, any kind of deal-making when it came -- or discussions about deal-making to appoint that seat.

Ed, what are you learning?

HENRY: Well, Suzanne, we have got a new piece of information that this report tells us.

There was a lot of speculation about why, in fact, it took so long for the Obama team so long to put out this report. They kept saying that it was at the direction of the prosecutor, Patrick Fitzgerald. He needed to conduct more interviews.

A lot of people thought that would be witnesses, people being interviewed sort of outside the Obama circle. But, in fact, this report says that the president-elect himself was interviewed last week, along -- according -- well as with two aides, that, basically, that the U.S. attorney's office sat down last week with the president- elect Thursday, December 18, for an interview about what information he knew about the Blagojevich case, any conversations, contacts he may have had with the governor or his staff, and, then that, on December 19, Valerie Jarrett,, obviously an incoming senior White House aide, very close to the president-elect, she was interviewed on December 19.

And, then, Rahm Emanuel, the incoming White House chief of staff, he was interviewed by the U.S. attorney on December 20 of last week. That's some new information, that, in fact, these three top people, including the president-elect himself, sat down with the U.S. attorney last week to tell all they knew in this case.

And that's why what's significant is that the final word is not this internal investigation that the Obama transition team put out. The final word will be what Patrick Fitzgerald puts out in the weeks and months ahead.

And, again, as we have been reporting, Patrick Fitzgerald has given no indication at all that there was any wrongdoing, criminal or otherwise, by either the president-elect or his staff in any of these conversations -- Suzanne.

MALVEAUX: OK, Ed, thank you so much.

I want to bring back in Paul and Karen.

I interrupted you. And I apologize.

But the fact that they interviewed Barack Obama, Valerie Jarrett, and Rahm Emanuel, does it suggest to you that they had critical information that they needed to build his own case, the prosecutor's case, or is this simply clearing the decks, if you will, exonerating these folks?

BEGALA: If you look at other famous cases that Fitzgerald has had, Governor George Ryan, the previous governor of Illinois, who he sent to prison, Scooter Libby, the chief of staff to the vice president, who he convicted on felony counts, this seems to be a very thorough and very professional prosecutor.

I have to say, the president-elect is a very busy man. And the fact that at -- in the middle of putting his government together, he stopped and gave this interview to the prosecutor speaks very well of him. It suggests that, like the good lawyer he is, he knows that no one is above the law, that if there's any chance that he has any material information, he needs to cooperate. And he did.

And I think it speaks very highly of the president-elect and his team. I will also say, Mr. Fitzgerald, most prosecutors don't usually come forward and say, as Ed Henry just reported, there's nothing that looks untoward about these people. Usually, they are quiet and they speak only through an indictment. And they say, Smith was wrong, and they never exonerate Jones.

And I think it's pretty impressive that the Obama team is exonerated, my -- particularly my buddy Rahm Emanuel, the new chief of staff. I think a lot of people are going to owe him an apology when all these facts come out.

MALVEAUX: Karen, what are you looking for? If you take a look and you're looking at what the prosecutor has left, are you looking for inconsistencies at all between what the Obama team is saying and what he's saying, or does it seem like they're all basically saying the same thing, that these guys didn't do anything wrong, and this is really just all about nothing?

HANRETTY: Well, considering so little has been said, it's difficult to find inconsistencies. And I -- I doubt that much more will be said, although, quite frankly, it seems -- you know, Obama certainly lucked out that this is the holiday season. No one is paying that close of attention.

But I also think that, if the president-elect were to go out publicly, say, listen, I am cooperating fully, this is terrible, what has happened in the state of Illinois, I just -- it continues to build on the political capital that seems to grow day by day by day, that this is a man who is not going to tolerate corruption in government. He's going to, you know, follow through on a transparent administration.

I actually think all of this helps Obama.

MALVEAUX: Paul, there was a poll that -- CNN/Opinion Research poll, there were some numbers that came out where it -- it -- pretty much people were divided over this. They thought, in some ways, that it might have been illegal, the contacts between Obama's team and the Illinois governor's team, or unethical -- there was half of them that went on that side -- and the others who thought that he did nothing wrong.

This was before we -- that a report even came out. Does he need to convince the American people? Does he have more work to do in saying, look, I really am a reformer here; you can trust me; you can believe me.

BEGALA: Right. I think we have more work to do in the press.

When Mr. Fitzgerald came out with -- it wasn't really an indictment, but with the first documents that he released, 70 pages of information, he said -- well, the -- the tapes apparently said, according to the transcripts that Fitzgerald released -- that Governor Blagojevich was complaining that the Obama team was not corrupt, right?

Apparently, on the tape, Blagojevich is saying, we don't get anything from them except appreciation.

MALVEAUX: Right.

BEGALA: Right?

And, so, I think it's kind of -- and it's not -- frankly, I brag on us -- it's not so much our network. But there have been some others who, if they were skiers this time of year, they were way out ahead of their tips, and they were -- now they are falling down the mountain, because I think they are looking pretty foolish. The Obama team, it looks like, conducted themselves with real integrity.

MALVEAUX: Karen, what do they need to do next to put this aside, to move forward and say, look, you know, here is our agenda; this was a hiccup here? What do they need to do to change the focus?

HANRETTY: Well, I think that, you know, I -- I hate to admit it, but I think Obama, so far, his team has really done a tremendous job of consistently putting out new appointments. He's moving ahead. He's got a stimulus package that it looks like he wants Congress to have ready to go on the day of his inauguration.

If he can continue to, I think, at least provide some comfort to the public, that, you know, moving forward, that there's hope for the economy to turn it around and bring some calm to the situation, that's the best thing he can do.

MALVEAUX: All right. Have to leave it there. Thank you so much. Appreciate it. Thank you both.

We're going to switch gears here with a special story for you in this holiday season. It is about jobs lost and found in Ohio. It's a state that's been especially hard-hit in these tough economic times. And, while the national unemployment rate now stands at 6.7 percent, the jobless rate in Ohio is 7.3 percent.

It is the highest it's been in 20 years. But in the city of Ashland, Ohio, the bitter times have suddenly turned sweet for employees of a cookie factory.

Here's our chief national correspondent, John King.

(BEGIN VIDEOTAPE)

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT (voice-over): Oatmeal cookies fresh from the oven, 20,000 pounds worth in a 10-hour shift, chocolate chip in this line, a bakery shuttered just days ago now bustling, with 60 eager employees who had expected Christmas on the unemployment rolls.

Kathy Sexton had told her children it would be a very modest holiday.

KATHY SEXTON, LANCE EMPLOYEE: They understood. They said, that's all right, mom. You always want to give them more, but I didn't think I would be able to.

KING: Like many small towns, Ashland is struggling. And things have been especially bleak since Archway Cookies was abruptly closed in early October by the private equity firm that owned it.

UNIDENTIFIED FEMALE: ... that shutting down the operation was the only course left to take.

KING: Then the Lance snack company bought Archway at a bankruptcy option. Last week, sixty workers were asked to return immediately, hopefully the rest in the months ahead.

TERRY MOWRY, LANCE EMPLOYEE: It's hard to describe. I mean, you just saw life being breathed right back into the face of these people. KING: Terry Mowry in the first wave, as is Rita Divan.

RITA DEVAN, LANCE EMPLOYEE: I walked in the garage last night. My husband said, you actually smell like a cookie again.

(LAUGHTER)

DEVAN: He said, boy, I missed that smell.

UNIDENTIFIED FEMALE: They don't know any more answers than what Jenny (ph) knows.

KING: Two months ago, workers felt betrayed by bosses who at first said there would be more work in a day or two, then changed the locks.

DEVAN: They were just -- kept taking and taking and taking, until there was nothing more to take. And they didn't care that they were putting 300 people out of work at the time.

KING: Things are very different now. When it promised to reopen the bakery, Lance handed all employees an early Christmas gift, a $1,500 prepaid debit card.

DEVAN: I was crying. I'm like, pinch me, pinch me. And then it just kept getting better. You're getting your seniority. And I'm like -- and they're going to get you a card tonight. I'm like, what are these people doing? They don't know me. They don't know us. They didn't know any of the Archway people. And they are giving each and every one of us $1,500?

SEXTON: It was awesome. My first thought was, I can give my kids a Christmas.

KING: Lance CEO David Singer said the gift cards were a way of Ashland know the new owners are different.

DAVID SINGER, CEO, LANCE, INC.: And we wouldn't do it willy- nilly. We do want to make money. But this is the pool of folks that we intend to hire. And we just wanted to let them know who we were. It's great to see these folks come back to work. We're proud of -- of what we have been able to do.

KING: These are Lance cookies sold to big chains like Target and Wal-Mart. But Archway production will resume soon. And the new owners say, if the new orders keep flowing in, more jobs will follow.

John King, CNN, Ashland, Ohio.

(END VIDEOTAPE)

MALVEAUX: You're in THE SITUATION ROOM.

Happening now: a water main break in Maryland flooding out a street and endangering drivers.