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Obama Asks for Bailout Billions; Awaiting Trial in A Penthouse; Obama's Hope Yielding to Sacrifice

Aired January 12, 2009 - 17:00   ET


WOLF BLITZER, HOST: And to our viewers, you're in THE SITUATION ROOM.
Happening now, Barack Obama is trying to build a fiscal arsenal he can use to wage war against recession. He wants hundreds of billions of dollars -- government bailout dollars -- waiting for him when he arrives at the White House, one week from tomorrow.

Also, President Bush is claiming partial credit for keeping the economic meltdown from spreading into what he says could have been even worse -- even worse than the Great Depression.

And a CNN exclusive -- a Somali pirate recounts the dramatic climax of a hostage drama. The ransom is paid, the ship released -- but then something goes horribly wrong.

I'm Wolf Blitzer.


A major move by President-Elect Barack Obama with tremendous implications for a country mired in recession. He's asking Congress and President Bush to make the remaining $350 billion in the government bailout fund available to him the moment he takes office.

Our Congressional correspondent, Brianna Keilar, is joining us now live -- but, Brianna, is he going to get the money?

BRIANNA KEILAR, CNN CORRESPONDENT: Wolf, it appears to be likely. In a letter from Larry Summers, a top economic adviser to President- Elect Obama, he makes a case for making this allotment -- this second allotment of funds available. And he promises that the Obama team will make -- will use the money to get credit flowing, to reform oversight and to reduce foreclosures, because feeling burned, Democrats wanted promises in writing.


KEILAR (voice-over): $350 billion down $350 billion to go -- in asking Congress to make the rest of the Wall Street bailout funds available, President-Elect Obama acknowledged anger at how the first set of money was spent.

BARACK OBAMA (D), PRESIDENT-ELECT: I think many of us have been disappointed with the absence of clarity, the lack of transparency, the failure to track how the money has been spent and the failure to take bold action with respect to areas like housing, consumer credit so that we can maintain credit for those small businesses.

KEILAR: Democrats want assurances from the Obama team that homeowners facing foreclosure will get help and won't be left out while financial institutions grab taxpayer money. They want those companies to follow strict rules.

SEN. KENT CONRAD (D), BUDGET CHAIRMAN: That they can't take that money and go buy other healthy financial institutions; that they can't provide bonuses to their executives; that they can't use this money in a way that's simply not effective and that does not assure that there is more credit available to businesses across America.

KEILAR: Congressional Democratic leaders are trying to avoid a scenario where enough Democrats join Republicans in a vote to deny the funds -- a situation that would force Obama to use his veto pen just days after taking office.

Barney Frank, chairman of the House Financial Services Committee, is trying to provide cover for Democrats to back the president-elect's request by pushing a bill of bailout safeguards.

REP. BARNEY FRANK (D-MA), FINANCIAL SERVICES COMMITTEE: The bill will say that member -- because the Democrats said they have a great deal of confidence in the new president and in the people he's appointed. But in this case, we are Reaganites. We tend to trust, but verify. And we're going to verify it with the banks. We're going to put some requirements in there.


KEILAR: A vote on the measure is scheduled for Thursday, but it's not expected to actually go over to the Senate. What this is, is a chance for House Democrats to get on the record in placing some conditions on this second allotment of bailout funds -- Wolf.

BLITZER: Brianna Keilar joining us from Capitol Hill.

Brianna, thanks very much.

And the president-elect is taking some other dramatic steps to try to make sure his grip on power will be real and impressive as soon as he takes office.

Our senior political correspondent, Candy Crowley -- I guess he realizes he doesn't have a second to wait once he becomes president of the United States.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Absolutely. And I think they've realized that all along, but somehow, as we get closer and closer, there certainly is an urgency.

Now, we've been in transition now for two months. But somehow, today felt a little different.


OBAMA: We are ready to turn the page and write a new chapter in this story.

CROWLEY (voice-over): Of all the days of transition, this one felt like the day the balance of power shifted -- the day Barack Obama held his maiden foreign policy meeting with Mexican President Felipe Calderon and then got George Bush to ask Congress for the final chunk of money from the Bush bailout plan.

OBAMA: I felt that it would be irresponsible for me, with the first $350 billion already spent, to enter into the administration without any potential ammunition should there be some sort of emergency or a weakening of the financial system.

CROWLEY: And then the president-elect had his aides leak the news that one of his first executive orders will be to shut down Guantanamo Bay.

And over at the White House, George Bush held his final news conference.

GEORGE BUSH, PRESIDENT OF THE UNITED STATES: I wish him all the best. And people say oh, that's just a throw away line. No. It's not a throw away line. The stakes are high.

CROWLEY: It was as if all the George Bushes showed up at the same time -- he was gracious and defensive. There was both melancholy and humor. And there were lessons learned.

BUSH: You know, the -- President-Elect Obama will find this, too. He'll get in the Oval Office and there will be a lot of people that are real critical and harsh. And he'll be disappointed at times by the tone of the rhetoric. And he's going to have to do what he thinks is right.

OBAMA: Change has come to America.

CROWLEY: And for all the history in the making and despite all the urgencies of the time, George Bush predicts that after the swearing-in and the lunches and inaugural parade, there will be times that the incoming president will be no different than the 43 men who proceeded him.

BUSH: He'll walk in the Oval Office and there will be a moment when the responsibilities of the president land squarely on his shoulders.

CROWLEY: The balance of power shifts.


CROWLEY: And, you know, Wolf, it's not just what's going on in public with Obama that makes this different. I mean, he's got aides up there on the Hill just pounding away to try to get that stimulus package as soon as they can -- trying to figure out where they can give and where they can put funds from one place to another, just so he can get that stimulus package as soon as he takes office.

BLITZER: You know, because had exactly the same impression that you had, that once the current president -- that he says he's still president -- once he said today, you know what, I can't do anything unless I'm authorized to do so from the president-elect. And then the president-elect goes ahead and calls him and says go ahead and make that request for the $350 billion, I felt exactly what you felt -- that shift today.

CROWLEY: That power shift went like this almost.

BLITZER: All of a sudden.

CROWLEY: Yes. It was interesting.

BLITZER: Yes. It was dramatic.

All right. Thanks, Candy, very much.

Let's go to Jack Cafferty.

He's got The Cafferty File -- Jack.

CAFFERTY: Hey, ask Candy a question for me, will you?

The next time she's in New York, ask her if she's got a little time to teach me how to write.

BLITZER: I know.

CAFFERTY: Because she's good.

BLITZER: Candy, do you want mission impossible, Candy?


CAFFERTY: You don't want to come.

CROWLEY: I'd sit down with Jack anytime about anything. He knows that.

CAFFERTY: There you go.

All right. (INAUDIBLE).

BLITZER: All right. You know, but let me just reiterate what Jack just said. Candy Crowley is, by far, the best television news writer bar none -- Jack, do you agree me?

CAFFERTY: Well, yes. That's why I brought it up.

BLITZER: OK. I just wanted to make sure.

CROWLEY: OK. Fine. I'll come back at 6:00.


I just wanted to make that point.

CAFFERTY: There you go.


CROWLEY: Thanks, guys.

CAFFERTY: All right.

President-Elect Barack Obama was asked if he plans to appoint a special prosecutor to investigate certain Bush administration policies -- most notably, wiretapping and torture.

In an interview on ABC, Obama seemed to waiver on his answer. Now, you might recall during the campaign he condemned these practices and called them unjustified.

Now he said he hasn't decided exactly what he's going to do.

The president-elect said that he's not likely to launch a broad investigation into the treatment of terrorism suspects and the eavesdropping under the Bush administration. But he did say that prosecutions will proceed if the Justice Department finds that laws were broken.

Well, if they open their eyes, perhaps we'll see some prosecutions.

President-Elect Obama said it's more important to look forward than it is to look back.

Is it?

Mr. Obama's walking a fine line here. He wants to establish trust, make friends at the CIA and with conservatives in Congress. These are both groups that opposed any investigation into Bush practices.

But there's also pressure for the Bush administration to be held accountable. And there's already a measure in the House to create a commission to investigate detention and interrogation techniques under the outgoing administration.

So here's the question -- what should President-Elect Barack Obama do when it comes to a broad investigation of Bush administration policies such as eavesdropping and torture?

Go to and you can post a comment on my blog -- Wolf.

BLITZER: You're a good writer, Jack. I'm sorry I...

CAFFERTY: I'm not in Candy Crowley's league. BLITZER: No. You're -- neither am I.


BLITZER: But you're an excellent writer, too.

CAFFERTY: Thank you.

BLITZER: Thank you.

CAFFERTY: You're an attractive man, Wolf.


BLITZER: Thank you.

CAFFERTY: You're a handsome fellow.

BLITZER: Thank you, Jack.


BLITZER: Thanks.

Did you see the rest of "Ellen" today...

CAFFERTY: I think...

BLITZER: ...the whole show?

CAFFERTY: I knew you were going to -- no, I didn't. I was...

BLITZER: All right, you know what?

Coming up later, we're going to run another clip of a little exchange we had when I was on "The Ellen DeGeneres Show".

CAFFERTY: Well, that's good because I...

BLITZER: Not dancing. No more dancing.

CAFFERTY: No. No. But I planned to watch today, but I was cleaning the lint filter in the drier and that...

BLITZER: All right...

CAFFERTY: ...that just took precedence, so...

BLITZER: I don't blame you.

All right.

You TiVoed it, right?

CAFFERTY: I don't...


CAFFERTY: I don't have one of those...


BLITZER: Jack will be back.

The country's expectations are certainly high and President-Elect Obama is increasingly trying to manage them. Now, hope is sharing the stage with sacrifice.

Also, a may day call, a plane crash and a pilot vanishes -- what happened that has investigators in three states looking for answers?

We're live with the story.

Plus, it may be the most luxury sell ever -- a judge makes a decision in the Madoff case and his victims are furious.

Stay with us.



BLITZER: President Bush is claiming credit for keeping the financial crisis here in the United States from being even worse than it is.

CNN's Mary Snow is working that part of the story for us.

What exactly is the president saying that justifies the fact that he insists the economy could even be in worse shape than it already is?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, the president painted a picture of the country on the verge of an economic doomsday four months ago, when the financial crisis began to unravel.


SNOW (voice-over): President Bush, defending his handling of the economic crisis, didn't miss words when describing the dangers if the government didn't pump billions into financial institutions. He laid out a stark scenario.

BUSH: And I'd readily concede I chucked aside some of my free market principles when I was told by chief economic advisers that the situation that we were facing could be worse than the Great Depression.

SNOW: Some economists we spoke with were skeptical of the doomsday scenario, but they say it's impossible to know exactly how bad things would have gotten if the government didn't help rescue financial institutions after Lehman Brothers and Washington Mutual collapsed. But agree on this point.

BUSH: The actions we have taken, I believe, have helped thaw the credit markets, which is the first step toward recovery.

SNOW: Is there a thaw in credit markets?

MARIA FIORONI RAMIREZ, PRESIDENT & CEO, MFR: I think that there is less panic in the credit markets than we had a few months ago.

SNOW: Economist Maria Fiorini Ramirez says one indicator is the LIBOR Index, which measures the rate at which banks borrow from each other. It spiked in September and October when fears were high, but has since declined.

RAMIREZ: There was a freeze in terms of businesses lending to each other, especially by banks.

SNOW (on camera): So it give us a pulse on the credit market and whether or not it's flowing?

RAMIREZ: Exactly.


SNOW (voice-over): And that pulse is showing improvement, say economists, who also see as a positive sign that mortgage rates are at a 37-year low. But they say credit is by no means flowing easily.

DAVID WYSS, CHIEF ECONOMIST, STANDARD & POOR'S: One area that really scares me is student loans. You're seeing very little private student loan activity.

SNOW: Economists say while lending improves, it still won't be able to stem massive job losses. Some economist estimate the U.S. could lose two million more jobs in 2009.


SNOW: And that forecast, Wolf, of more jobs lost comes today. And that's from the Conference Board. That's a business research firm. It says it sees no sign that the labor market will improve anytime soon -- Wolf.

BLITZER: Mary Snow, thanks very much.

Mary Snow is in New York.

The man accused of stealing billions from investors will stay in his Manhattan penthouse until he goes to trial -- that's the ruling today from a federal judge.

Allan Chernoff has been covering this story -- so, wow, a lot of people are outraged by what's going on -- Allan.

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Very true, Wolf. And the prosecutors, as well. They had argued that Madoff violated the terms of his $10 million bail and should be detained in prison rather than being permitted home detention.

But the prosecutors failed to convince the judge.


CHERNOFF (voice-over): Bernard Madoff, the alleged Ponzi scheme mastermind, will keep living a life of luxury inside his Manhattan penthouse apartment.

CILGIA BRAXTON, MADOFF NEIGHBOR: I think it's a miscarriage of justice.

ALEXANDRA PENNEY, VICTIM: He's being protected by the system and he's gaming the system.

CHERNOFF: Judge Ronald Ellis was not deciding Madoff's guilt -- only whether there's a risk Madoff may flee and whether he may try to hide or give away some of his assets.

Prosecutors argued that was Madoff's intent when he mailed diamond and gold jewels and watches to relatives.

Defense attorneys argued the mailings were innocent, since Madoff didn't realize he was restricted from giving away valuables.

Judge Ellis ruled: "Because the government has failed to meet its legal burden, the motion is denied."

JEFF TOOBIN, CNN SENIOR LEGAL ANALYST: The judge said, look, he's not going to flee, he's not going to commit any more crimes, so I'm not revoking his bail.

CHERNOFF: Under terms of his home detention, Bernie Madoff is paying for a private security company to make sure he doesn't leave his apartment. The guard is right there in that car. And the terms of his home confinement are about to get even tougher. The private security company now is going to receive a list of valuables inside of the apartment. And every two weeks, they'll have to make sure those valuables are still in here.

In addition, Madoff is going to have the private security company check all of his outgoing mail.

(voice-over): An attorney for Madoff told CNN: "The decision speaks for itself and we intend to comply with the court's order."

Prosecutors had no comment.


CHERNOFF: Under federal court rules, prosecutors had until today to indict Mr. Madoff, but they reached agreement with Madoff's lawyers to push that deadline back by 30 days. While the government continues to investigate, prosecutors say they have a strong case against Madoff that is getting stronger -- Wolf.

BLITZER: Allan, thanks very much for that story.

It's causing a lot of shock -- shock waves out there.

Britain's Prince Harry at the center of a controversy once again. This time, it's the own home -- his own home video that got him into some trouble. The racist name-calling he's apologizing for -- that's still ahead.

And pirates who thought they had the perfect escape. But once they got their ransom money, something went terribly wrong. Now, one of those pirates speaks exclusively to CNN about their deadly mistake.

Stay with us.



BLITZER: Zain Verjee is monitoring some other important stories incoming into THE SITUATION ROOM right now -- Zain, what's going on?

VERJEE: Wolf, a Black Hawk helicopter has crashed at the campus of at the campus of Texas A&M University. No one was killed. The six crew members were taken to a hospital in Bryan, Texas about four miles away. The chopper was doing a demonstration to ROTC cadets at the time of the crash.

And pictures from just a short time ago coming into us from the Gaza Strip -- lighting up the night sky, as you can see, as Israeli troops push closer to Gaza City. Meanwhile, Hamas prime minister, Ismail Haniyeh, says that there will be no surrender and he vowed the battle with Israel will bring Gaza a new future.

Palestinian medical sources now say more than 900 Palestinians have died since Israel began its assault on Gaza two weeks ago. Thirteen Israelis have died.

Another company slashes jobs. Aircraft maker Cessna says it's laying off 2,000 employees. The Wichita company says the cuts will affect all pay categories. Cessna, owned by Textron, is one of the largest employers in Kansas.

And former U.S. President Jimmy Carter visited China to commemorate three decades of ties between Washington and Beijing. He called U.S.-China ties "the most significant relationship in the world today." And he had a message for Chinese president Hu Jintao from Barack Obama.


JIMMY CARTER, FORMER PRESIDENT OF THE UNITED STATES: I explained the purpose of this visit to President-Elect Obama. And he wanted me to extend to you his personal greetings and his commitment to continue the mutual respect and the partnership that we've enjoyed for the last 30 years.


VERJEE: Carter's administration formalized the diplomatic ties with China 30 years ago and he says that he expects China to continue to liberalize -- Wolf.

BLITZER: I remember that day. You don't remember covering that event 30 years ago?

VERJEE: No, I don't.

I don't.

BLITZER: You just came back to Washington, though, from Kenya...

VERJEE: I did.

BLITZER: ...where your parents are.

How was it?

VERJEE: It was wonderful. It was 80 degrees. I got home-cooked food. I was spoiled. I acted like I was a young kid running around with my parents. It was really nice. And my brother was there, too, so...

BLITZER: The whole family.

VERJEE: I still feel like I'm on holiday.

BLITZER: Good. Excellent.

Welcome back, Zain.

VERJEE: Thanks, Wolf.

BLITZER: All right.

We're awaiting, by the way, a news conference. Roland Burris, the man who's now going to be the next U.S. senator -- the junior senator from Illinois. He's about to speak to reporters. The Democrats have decided to let him go forward and be seated in the coming days.

So we're going to hear from Roland Burris. That's coming up -- the breaking news we're following.

Also, the president-elect made the challenge.


OBAMA: Krugman has a good idea in terms of how to spend money efficiently and effectively to jump-start the economy. And we're going to do it.

(END VIDEO CLIP) BLITZER: Now the Nobel Prize-winning "New York Times" economist, Paul Krugman, is stepping up to bat, laying out what he says Obama really needs to do.

Will the next president listen?

Also, a plane crash, but no sign of the pilot. It's now a three state mystery that has investigators trying to piece together what really happened.

And Britain's Prince Harry at the center of the royal uproar -- his offensive slurs all caught on tape.

Stay with us.



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

Happening now, Barack Obama turns somber as he prepares to take office. He's warning of tougher times to come.

Faced with a deep recession, will the president-elect be forced to delay some campaign promises?

We're working that story.

Also, Israel's reported attempts to obtain bunker-busting bombs to strike Iran -- the nuclear facilities there.

What do the Israelis plan to do beyond that and how did the White House handle the request?

We have developments coming in.

And pomp and security -- how the U.S. military is now preparing for double duty during next Tuesday's presidential inauguration.

I'm Wolf Blitzer.


A year ago, he was taking about hope and change. And while that's still part of the Obama mantra, the president-elect is adding new words, including give and sacrifice, as he tries to manage expectations amid a financial crisis.

CNN's Jim Acosta has more -- Jim.

JIM ACOSTA, CNN NATIONAL CORRESPONDENT: Wolf, in style and substance, Barack Obama is sounding, in some ways, like a different president than the candidate Americans got to know during the campaign.


OBAMA: This recession could linger for years.

ACOSTA (voice-over): Now the change is in him. Just days from inauguration, Barack Obama is striking a different tone.

OBAMA: Not everything that we talked about during the campaign are we going to be able to do on the pace that we had hoped.

ACOSTA: The soaring campaign rhetoric...

OBAMA: America, this is our moment.


OBAMA: This is our time.

ACOSTA: ...has given way to grim reality.

OBAMA: Everybody is going to have to give. Everybody is going to have to have some skin in the game.

ACOSTA: With the country mired in an ugly recession, the president-elect is calling for national sacrifice -- warning there could actually be more job losses this year than last.

OBAMA: You know, the estimates are that if we don't do anything, we could see four million jobs lost this year.

ACOSTA: The economy is also forcing Mr. Obama's team to reconsider some campaign pledges...

OBAMA: I don't believe in running up debt for the next generation.

ACOSTA: ...such as reigning in deficit spending and scrapping the Bush tax cuts on the wealthiest Americans before they expire in late 2010.

OBAMA: We have tried it George Bush's way and it hasn't worked.

ACOSTA: Some of the maneuvering is aimed at attracting Republican support for the incoming president's economic recovery plan. But that could set up an early battle in the now heavily Democratic Congress.


REP. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE OF REPRESENTATIVES: I want a repeal of the tax cuts for the highest income people in America.

BLITZER: There would be a tax increase for those richer Americans...

PELOSI: Well, that's not a tax increase. This focus of the tax cuts should be on America's middle class -- the backbone of our democracy, who have gotten, really, the royal shaft in the past eight years.


ACOSTA: Mr. Obama is asking for sacrifice from Congress, as well. Some political observers say the economic crisis raises the stakes.

DAVID GERGEN, CNN POLITICAL ANALYST: This strengthens Barack Obama's hand with the Congress and with the public. It's so urgent that it's going to be very, very hard, I think, for people who don't like parts of this package to vote against it.


ACOSTA: Mr. Obama is now in the business of managing expectations -- warning Americans the country not only needs hope, but hard work. He calls the task ahead a heavy lift -- Wolf.

BLITZER: Jim Acosta, thank you.

One of the greatest expectations placed on the president-elect is that he can actually turn the economy around. Some suggest his political future may depend on this issue.

Joining us now to talk about that and more, our CNN political contributors, Donna Brazile, the democratic strategist, and Leslie Sanchez, the republican strategist.

You probably read, Donna, "The New York Times," the story today and I'll read a line from it. "If this stimulus plan doesn't work out, he may very well be a one-term president. It's hard to imagine that he could be reelected if the economy's in the exact same position four years from now." So you know I guess he's not thinking about politics right now, but some of his political strategists no doubt are.

DONNA BRAZILE, DEMOCRATIC STRATEGIST: I think President-elect Obama understands that he will inherit so many challenges that requires his immediate action. There's no question that the economy is going to be his number one priority, but Wolf, with two wars, the ongoing crisis in the Middle East and Gaza, as well as the tensions that still exists between India and Pakistan and so many other hot button issues on his plate, I think the American people will judge him by his leadership, how well he handles this issues and of course at the end of the day, they'll look at they're pocketbook and determine if Barack Obama made the right investments to get them back on their feet.

BLITZER: And I guess the question will be asked in four years, Leslie, as it always is asked of the American people, are you better off today than you were four years ago. That will be the challenge Barack Obama's facing.

LESLIE SANCHEZ, REPUBLICAN STRATEGIST: The truth be told, Wolf, that would be the challenge any president was facing. If you can go back at the election, the fact you go back to the date of September 15th, when this economic downturn really went into high gear, was when people said let's give the democrats an opportunity, benefit of the doubt and look in a different way and McCain never recovered from that. This is a very real problem. He does not want to be Herbert Hoover. He's trying to see or Jimmy Carter for that matter and end up you know four years from now with higher unemployment, higher inflation. They are very real concerns and Americans, republicans, democrats want to put politics aside and find good government solutions.

BLITZER: On Friday, as you remember Donna, the president-elect said, if anybody has a better idea, help me. I want to hear your ideas. He specifically referred to Paul Krugman, the Noble Prize winning economist who writes a column in the "New York Times" and Paul Krugman wrote in today's "New York Times" ideas for Obama. "My advice to the Obama team is to scrap the business tax cuts, and, more important, to deal with the threat of doing too little by doing more. And the way to do more is to stop talking about jump-starts and look more broadly at the possibilities for government investment." All ideas no doubt a lot of democrats would like, but he's trying to bring in republicans, too, by throwing out tax cuts for businesses, that's something republicans and a lot of democrats like.

BRAZILE: Well, Paul Krugman is a very smart economist and what he's saying is that the plan should be big enough, bold enough and provide enough fiscal relief to ordinary Americans so that people will feel the effect of this plan right away and not two, three years down the pipe.

So I understand what he's arguing, but I have to believe that Larry Summers and the team that President-elect Obama has put around the table will come up with the right fiscal relief measures that will not just help us in the short term, but also get America back down the road in terms of fiscal prosperity for years to come.

SANCHEZ: You know what? I will tell you Wolf there's a lot of concern especially among conservatives that this is going to turn into one of those efforts where it's just you know aimless government spending. There's no accountability. I mean look for a tremendous amount of scrutiny in these dollars. People are going to want to know that every dollar is accounted for in an efficient way. For as much as I think President-elect Obama's trying to tamp down expectations, I think a lot of questions were raised and continue to be raised about what kind of government spending is good spending.

BLITZER: Well, they both have made the pledge, both President- elect Obama and Speaker of the House Nancy Pelosi, Donna as you know and Nancy Pelosi raised her right hand when I interviewed her on Friday, there will be no pork barrel spending, none of those so called earmarks in this $700 billion or $800 billion rescue plan that President-elect Obama will put forward.

BRAZILE: Let me just reassure Leslie that the era of incompetent government is over with.

SANCHEZ: I'm going to hold that to you, Donna.

BRAZILE: Don't you worry. I think the democrats have learned a great deal from the last eight years. They've seen money thrown out the door, special interests controlling Washington, D.C., lobbyists writing legislation. President-elect Obama is quite serious when he says that he is going to invest.

BLITZER: Hold on because Roland Burris, the next U.S. senator from Illinois, is just speaking in Chicago right now. The Democrats have decided to let him be the senator. I want to listen quickly to his statement.

ROLAND BURRIS (D), ILLINOIS SENATOR-DESIGNATE: I will officially be sworn into the United States Senate as the Illinois junior senator. I'm thankful for the opportunity to serve and I ask for your support and prayers so that I may work with you, my senate colleagues and our new president to succeed at the challenges which face our state and our country.

I would like to publicly thank Senate Majority Leader, Harry Reid, and my long time friend and Illinois Senior Senator, Dick Durbin. Never once did I doubt their intentions were motivated by doing anything other than doing what was right for the people of Illinois and by what they believe had to be done to protect the senate as an institution. It will be my honor to both serve with them and to learn from them.

Secretary of State Jesse White, whom I've known for more than 30 years, is also owed a debt of gratitude. He also happens to be someone who's autograph I cherish. Some have criticized Jesse and I think somewhat unfairly. He stood for what he believed was right and in our state's best interest. His actions only reinforced what I have always known him to be, an honorable man.

I'd like to thank all of my staff and volunteers for all of their efforts in helping me get to this point. Most of all, I'd like to thank the community for their support.

And now, let me take a moment to speak to the people of Illinois. Our state find itself in the midst of an unfortunate time. We're disappointed and disheartened that Illinois has become the national focus of alleged scandals and improprieties that were not of our making, especially during a time when we should be rejoicing in the presidential inauguration of our own Barack Obama.

I recognize that my appointment triggered a challenging time for many. Reasonable people can and will arrive at different decisions that although were in the best interest of our state, they should not be faulted for doing their best to serve our state in the best way they thought possible.

The single most important reason why I fought to defend this appointment was because I believe Illinois people didn't deserve to unfairly be punished again by delaying their right to have full representation and equal voting rights at such a crucial time for our state and our nation.

BLITZER: All right. There it is, the new senator. He's about to be sworn in after all from the state of Illinois. Roland Burris, the democratic leadership in the senate just a little while ago making it clear they will accept the appointment of the embattled Illinois governor Rod Blagojevich of Roland Burris to replace Barack Obama in the United States Senate. Donna, what do you think?

BRAZILE: I applaud Senator Reid and Senator Durbin for acting swiftly after Roland Burris testified before the Impeachment Committee, after Secretary of State Jesse White signed a different form and now it's time to move on. Roland Burris will be a great public servant for the state of Illinois. The people of Illinois deserve to have the very best.

BLITZER: Leslie?

SANCHEZ: I think Donna got it right when she said move on. The democrats wanted to move on from this. I think Roland Burris was magnanimous in his acceptance of a speech considering it was Majority Leader Reid that did not want to seat him and Senator Durbin who wanted to have a special election to fill that seat. So I clearly hope -- I think a lot of people hope that this moves the issue forward.

BLITZER: All right, guys. And it doesn't look like he's made any concessions, Roland Burris, at all about not running in 2010 when that election still has to go forward. All right. Donna, have a safe trip. I know you're heading off tonight. Jerry, you'll be back in a few days. We'll see you when you get back in plenty of time for the inauguration, right Donna?

BRAZILE: I have my tickets, Wolf, I'm excited. But I'm going to share with the people of Africa. It's wonderful to go to Africa at this moment.

BLITZER: And Leslie we'll see you back here in Washington. Guys, thanks very much.

A frantic emergency call from a pilot sounded frightening. It prompted rescuers to launch an all-out search, but it turned out, guess what, to be a fake and that's just the beginning of the mystery.

Plus, Prince Harry's apologizing, again. Ahead, the offensive name calling on his own home video that got him into trouble.


BLITZER: It's really a mystery spanning three states. Investigators say a pilot took off from Indiana, faked an emergency and bailed out from his plane over Florida and then showed up in Alabama, using a fake name only to vanish again. What a mystery this one is.

CNN's Brooke Baldwin is joining us now. She's on the scene in Harpersville, Alabama.

What's going on here, Brooke?

BROOKE BALDWIN, CNN CORRESPONDENT: Well Wolf, this story just keeps taking all kinds of different twists and turns, doesn't it?

We are in Harpersville, Alabama. This is the last place anyone spotted 38-year-old Marcus Schrenker. He checked into a hotel room just over my shoulder. I have the receipt he actually wrote on using a fake name. That was early this morning.

Let's tell the whole story. This whole thing really starts yesterday. 7:20 p.m., central time, Schrenker is flying, according to police, from Anderson, Indiana. He's from outside of Indianapolis, flying down to Destine, Florida where apparently he has a condo. Well right around when he's over Huntsville, Alabama, he radios into air traffic control in Atlanta. He tells them that his windshield has imploded, that he's profusely bleeding. As a result, air traffic control tells him to land as soon as possible in a nearby landing space in Alabama.

What ends up happening is that he doesn't respond. Flash forward to the fact that military jets are then sent up into the air. They see the plane presumably on auto pilot. They see the plane door open, no pilot.

9:15 p.m., we'll take you to Florida for the next piece of the story. Investigators find that the plane crashed near some homes in a swampy area in Santa Rosa County, Florida. That's near Milton and upon investigating the plane, of course FAA is involved by this point in time, looking at their radar, noticing that it was on auto pilot, authorities presume he must have had had a parachute and parachuted out of this place.

Then we'll take you here to Alabama. Early this morning, around 2:00 central time, according to police, a man, Schrenker, shows his Indiana license to a police officer just down the road in Childersburg. The police officer noticed he's wet from his knees down and he also has some goggles which could be flight goggles. Tells the police officer that he was in some kind of canoeing accident. The officer, not knowing anything, not being able to put two and two together there about the plane crash in Florida, takes him here to the Harpersville Hotel. Schrenker checks in, uses cash. Later, Childersburg police put two and two together, find out that this is the guy, they come back, he's not in the room Wolf. He has apparently put on a black cap and fled into the woods here. Long and winding story.

BLITZER: What do we know so far?

BALDWIN: What we know so far, I talked to a friend and colleague who's known him for four years. He said he's a very accomplished pilot. He has a regular plane. He has a stunt plane, learned how to fly in the Air Force. He also runs his own wealth management firm. The name of it is Icon Management Group or I should say that's the latest name. According to the Indiana secretary of state, he's three companies are being investigated. In fact they just served a search warrant investigating security violations. Apparently, he's married, according to this friend, but also according to reports, she filed for divorce December 30th. They have kids. This whole thing Wolf just keeps going and going. BLITZER: All right, Brooke. Thanks very much. Brooke Baldwin is in Alabama working this complicated story for us.

Britain's Prince Harry meanwhile is finding himself in the center of controversy once again. He apologized through a spokesman after video surfaced over the weekend. It shows Harry using racist language to describe people in his military unit. A warning, this story contains language considered extremely offensive in much of the world. CNN's Phil Black has more.


PHIL BLACK, CNN CORRESPONDENT: Wolf, the third in line to the British throne had been working very hard to try and change his image as a party loving trouble maker, but now, Prince Harry is being forced to explain why he used language that is considered extremely offensive by many in his country.


BLACK: Prince Harry's public relations blunder was caught on a camera he was operating and the video leaked to British tabloid news of the world. This is the prince's description of a fellow trainee officer three years ago -- that soldier marched with the prince at their graduation. Prince Harry apologized in a statement and tried to offer some context. "Prince Harry used the term without any malice and as a nickname about a friend, a highly popular member of his platoon. There is no question that Prince Harry was in any way seeking to insult his friend." That may be, but there is nothing affectionate in the word's origin. It comes from a time when Pakistani, Indian and Bangladeshi migrants frequently experienced verbal and physical abuse in many British communities. It is a word historically loaded with racism and hate.

The prince's critics say he should have known better and that's what makes his behavior offensive and stupid.

MASSOUD SHADJAREH, ISLAMIC HUMAN RIGHTS COMMISSION: I think too many people who are abused by those terms on a daily life at schools or places of work is extremely sensitive and is rightly to be sensitive. I think even Prince Harry understands that use of this term is racist, is provocative and is unacceptable.

BLACK: It's not the first time Harry has offended. In 2005, the prince with a playboy reputation thought it was a good idea to wear a Nazi uniform to a fancy dress party. He has since tried to rehabilitate his public image with charity work. And most famously while serving in Afghanistan last year, the prince's defenders say Harry is now a changed man.

DICKIE ARBITER, ROYAL COMMENTATOR: He shouldn't have said it, but he did say it. He said it three years ago. It's interesting how it's taken three years to come out and the man that Harry was three years ago is not the same person today.

BLACK: The video also features the prince using the term "raghead." No apology for that one, just an explanation. The prince's statement said he used the term to mean Taliban or Iraqi insurgent.


BLACK: British Prime Minister Gordon Brown has condemned the language as unacceptable and says the prince will now be called before his commanding officer, who will make the same point very strongly. Wolf?

BLITZER: Phil Black in London for us, sensitive story, thank you.

An openly gay bishop picked to pray at an event for the Obama inauguration. Details of a new development coming up in an ongoing controversy.

Plus, this practice inaugural parade looks fun but what the military is doing behind the scenes to get ready might give you some of the chills.

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


BLITZER: We're now hearing firsthand how a group of Somali pirates made a deadly mistake in their escape. Friday $3.5 million of ransom money parachuted onto the Serious Star the Saudi oil tanker hijacked back in November. One of the pirates on board spoke exclusively to CNN. He says after they got their money, several pirates jumped into smaller boats to get to shore. That's when competing pirates on beach fired shots at them. In the attempt to head back to the ship, the small boat capsized, drowning at least four of those pirates. The Serious Star's crew was released and is now safe.

The U.S. military is gearing up for its dual role in the Obama inauguration. Not only will it provide much of the pomp and ceremony, but it also will be guarding against the unthinkable, an attack on this historic event itself. Our pentagon correspondent, Barbara Starr, is working the story for us.

Barbara, what is the U.S. military planning on doing?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: The military is planning on being ready for whatever could happen.


STARR: 26-year-old army staff sergeant Derek Brooks stands in for President-elect Barack Obama as the military rehearses the pomp and circumstance of the upcoming inauguration. The full-blown dress rehearsal is all about practice, practice, practice. The army band will lead the parade.

SGT. 1ST CLASS HAROLD SUMMEY, U.S. ARMY BAND "PERSHING'S OWN": This is the biggest thing that's happened in my musical career, my military musical career, I think ever. STARR: Behind the scenes, a more serious task is being rehearsed. The U.S. military is working with the Secret Service and others to ensure security. General Gene Renuart commands the thousands of troops that will be on alert.

GEN. GENE RENUART, U.S. NORTHERN COMMANDER: We certainly understand that there are forces out there in the world who would love to disrupt something like this.

STARR: There's no specific threat, Renuart says, but the military's taking no chances. This week, fighter jets will practice in the skies over Washington on how to intercept a hijacked airplane. If the unthinkable happened --

RENUART: Then you could take a recommendation to the secretary of defense for engagement authority in order to interdict that aircraft.

STARR: A worrisome threat, the crush of people. Massive crowds are expected and the military will have medical teams at the ready.

RENUART: We have docs out there that are helping people as the normal kinds of medical situations arise, just having that large a number of people in one place.

STARR: While military bands are playing for the crowd, other troops will help with crowd control, any hazardous substances and of course, snow removal if need. But General Renuart has a prediction on that item.

RENUART: It beginning to look like partly sunny, temperatures in the mid 40s, so it could be just fine.


STARR: Wolf, that's the latest weather prediction. But whether the troops are in the parade or on alert, for the U.S. military, inauguration day will be marked by a combination of precision ceremony and razor-sharp alertness. Wolf?

BLITZER: Barbara Starr working the story. She'll be busy the next few days at the pentagon. Thank you.

A bold push by one of America's closest allies to attack Iran's nuclear facilities. We're getting new information.

Also, the Israeli prime minister now says it's a vote that left Secretary of State Condoleezza Rice, quoting now, quite embarrassed. We have details.


BLITZER: Check back with Jack Cafferty. He's got the Cafferty File.

Jack? JACK CAFFERTY, CNN CORRESPONDENT: The question this hour is what should President-elect Obama do when it comes to a broad investigation of the Bush administration policies such as eavesdropping and torture?

Paul in Brooklyn writes, "If Obama thinks the constitution is worth more than the paper it's written on then all who knowingly and willingly violated it must be dealt with. If our Constitution can be savaged the way it has been for eight years with no consequences, what does that say about us as a society? I contributed to, campaigned for and voted for Barack Obama. If he wants to prove me wrong, all he has to do is look the other way and ignore all the high crimes and misdemeanors of the Bush administration."

L.J. writes, "I admire the vigilance and perseverance of the Bush administration in preventing another attack. People who object to the wire tapping might have something to hide and objecting to aggressive interrogation in time of war is self destructive. Which is the lesser of two evils, infringing on the constitution or the loss of life on 9/11?"

Jeremy says, "I 100 percent agree with Obama that we should, as a country, look forward and not back. However, this country and its citizenry were wronged by several policies and practices of the current administration. If we'll not hold our own government accountable to the ideals of individual liberty that we encourage other countries to practice than how can we move forward?"

Eric says, "President Ford had it right. You have to get rid of the past before you can move on. He pardoned Nixon and the country moved on. President Obama has to stop any investigation before it begins. He can't waste his administration's time and energy on some sort of revenge against the republicans or President Bush. To really go forward, he might consider a pardon."

And S. writes, "It took eight years for this country to get this far off course. The hijackers are still on board and Obama doesn't even have the helm yet. The American people have basically demanded accountability. I think they'll get it in due time. There's no telling what we'll find once the curtains are pulled back and daylight filters back into all those undisclosed locations."

If you didn't see your e-mail, you can go to my blog, Look for yours there among hundreds of others. Wolf?

BLITZER: Jack, see you soon. Thank you.

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