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The Situation Room

Americans Gunned Down in Mexico; Toyota Disputes Runaway Prius Story

Aired March 15, 2010 - 18:00   ET

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

SUZANNE MALVEAUX, CNN ANCHOR: Senator Harry Reid's wife Landra is out of the hospital after suffering a broken back and nose in a traffic accident. Doctors say she will not be paralyzed. Both Reid's wife and adult daughter were hurt when their minivan was rear-ended by a tractor-trailer on Thursday.

Senator Reid spoke about the accident just a short time ago on the Senate floor.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER: Really was a close call, but we're grateful it wasn't worse. And we're confident she will be making a full recovery. Won't be tomorrow or the next day, but she will be back on her feet as soon as she can.

(END VIDEO CLIP)

MALVEAUX: The Reids have been married for 50 years.

You're in THE SITUATION ROOM.

Happening now: shocking killings in Mexico. Two families connected to the U.S. Consulate in Juarez are devastated as a result of a drive-by shooting. Are Mexico's drug gangs raising the stakes?

And Toyota is casting doubt on a driver's terrifying story about a runaway Prius -- what investigators are learning more in this case.

And a serial abuse case in the Catholic Church is turning the spotlight on the highest levels of the Vatican.

Wolf Blitzer is off today. I'm Suzanne Malveaux. Welcome to our viewers in the United States and around the world. You're in THE SITUATION ROOM.

The violence which has killed thousands in northern Mexico is sending shockwaves across the border. The FBI is helping investigate the drive-by shootings which killed three people linked to the U.S. Consulate in Juarez.

A pregnant American Consulate employee and her U.S. husband were killed in one attack. Their 10-month-old child survived. Now the husband of a Mexican Consulate employee was killed and two children wounded in it another shooting. Mexican authorities say they were targeted by a gang tied to drug traffickers. The State Department has authorized the temporary departure of consulate employees' families.

We want to dig deeper now with our CNN senior Latin American affairs editor, Rafael Romo.

Rafael, tell us, what is going on here? What is the latest? What's happening?

RAFAEL ROMO, CNN SENIOR LATIN AMERICAN AFFAIRS EDITOR: Suzanne, all three victims attended a children's party hosted by another consular employee. As they were heading home, they were chased down by armed men who opened fire, killing both the American Consulate employee identified as 35-year-old Lesley Enriquez and her 34-year-old husband, Arthur Redelfs, a detention officer at the El Paso County jail.

Their baby girl, who was riding in the back seat, was not harmed and is now in the custody of Mexican social services. This afternoon, I spoke on the phone with the mayor of Juarez, Jose Reyes Ferriz, who tells me they believe, they believe at this point a local gang known as Los Aztecas, the Aztecs, may have been responsible for the killings.

This gang is known to work for the Juarez cartel, specifically their enforcement line known as La Linea, or the Line. The Juarez cartel is involved in a turf war with their archrival the Gulf cartel.

Also, Suzanne, in another development, the FBI announced today that they're assisting the Mexican attorney general's office in their investigation. But, so far, there's no information that the victims were specifically targeted because of their connection to the consulate.

Suzanne, that's the latest.

MALVEAUX: And the consulate in Juarez is closing. Some Americans are returning back to the states. Is that right?

ROMO: That's right, Suzanne. The consulate in Juarez is closed today because of that, and also because it's a holiday in Mexico, and will also remain closed tomorrow to allow employees to mourn the death of their co-worker.

The State Department is allowing the families of consular employees in six cities along the U.S./Mexico border to return to the United States for 30 days while they investigate the incident. This includes consulates in cities like Tijuana and Ciudad Juarez, of course.

This afternoon, a State Department official said about 400 dependents of consular employees are eligible to temporarily return to the United States.

MALVEAUX: And Juarez is called one of the most dangerous cities in the world, but there are Americans who travel back and forth there every day. Tell us why. ROMO: Well, Suzanne, it's a very important city to both Mexico and the United States. There are more than 300 American assembly plants located in Juarez, and the trade between the border city and El Paso is estimated to be about $50 billion a year. Of course, many Americans work in these companies and live in Juarez or constantly travel to the border city.

MALVEAUX: Why is the city of Juarez so much more violent than the other cities in Mexico?

ROMO: It's a very interesting dynamic, Suzanne. As you know, Juarez is at the epicenter of an earthquake of violence in Mexico caused by drug trafficking. It's located right in the middle of territories controlled by two of Mexico's most powerful drug cartels, the Gulf cartel and the Juarez cartel.

So, we're very much talking about a turf war that the Mexican army hasn't been able to control, in spite of having deployed thousands of troops there. Definitely a very scary situation, Suzanne.

MALVEAUX: OK. Rafael Romo, thank you so much for that update.

Juarez, just across the U.S. border from El Paso, is home to about 1.3 million people. It's also considered Mexico's most violent city. Already, more than 480 people have been murdered in Juarez so far this year. Now, last year, there were more than 2,600 that were killed. In 2008, there were more than 1,600 homicides. Most of these deaths are blamed on the drug trade.

Well, the U.S. and Mexico have previously vowed to step up the fight against these drug cartels, but do these latest killings mean that the cartels are now fighting back?

I want to bring in our CNN national security contributor, Fran Townsend. She was homeland security adviser to President Bush and worked in the Justice Department during the Clinton administration.

Fran, thanks so much for being with us.

FRANCES TOWNSEND, CNN NATIONAL SECURITY CONTRIBUTOR: Good to be here. MALVEAUX: I was with President Bush in Mexico City when he made that visit, and he stood beside the president, President Calderon, and said something that we hadn't heard before from the Bush administration, that the U.S. in part is responsible, right, for the violence of the cartels, because we're the ones who are seeking these drugs.

Is the U.S. in part responsible now? What is our responsibility for this rise in violence that we're seeing?

TOWNSEND: Well, you know, Suzanne, we have been working for years on a bilateral basis with the Mexican government, trying to get them the intelligence, the law enforcement help that they need. You have reported that the FBI is going down there now to help with the investigation of these recent killings. But we have got to do more. We can't keep doing the same sort of cooperation and expect it to get better. I think the cartels have raised the stakes.

When you look at this most recent series of killings, the shootings were 10 minutes apart. They clearly targeted people leaving this one party. They intended to target people who were working at the consulate. The other interesting thing to me is, while the State Department is permitting families of those working at the consulate to leave, you know, ordinarily, in a terrorism situation, like when we had an explosion in Saudi Arabia, what we did was, we demanded that the families leave.

The -- those became unaccompanied posts for a period of time until the security situation got better. I will tell you, that seems to me where this is going. You can't have consular officers and their families and their employees be the targets. And so you're going to have to reduce the target set for the bad guys until you can get the security situation under control.

MALVEAUX: The people that you're talking to, whether they're in the White House or advising the White House, do they think that the Obama administration needs to do something more about this?

Because they have been pouring billions of dollars into Mexico, been working very closely to try to help Calderon fight these cartels. What needs to be done?

TOWNSEND: Well, that is -- it is true, Suzanne. And, truthfully, if you go back to the Clinton administration -- you mentioned that I had worked in the Justice Department -- there was millions upon millions of dollars being poured into Mexico then, and it's been consistent across Republican and Democratic administrations. And nothing seems to be working.

I mean, I really think that this is -- this now has become such a crisis. When you see the flow of immigration across -- you mentioned the El Paso border. The real concern for southern border governors is going to be, is that violence going to seep across the border into the United States?

Remember, Janet Napolitano, the secretary of homeland security, was the governor of Arizona. She understands this problem. And when she was governor, as part of an immigration reform effort, we put National Guard troops on the southwest border of the United States.

And, so, the question is going to be, will the violence go up and be so severe, that they're going to be willing to put U.S. National Guard troops on the U.S. side of the border to make sure that the violence doesn't seep over into the United States? I think that's really the next test for policy.

MALVEAUX: And does the Obama administration need to be more open in how it's dealing with Mexico? Is there a certain sense that neither side is being open enough in terms of how they are approaching this problem?

TOWNSEND: Well, it's a sensitive political issue, of course.

The government of Mexico doesn't want to be seen to be taking too much assistance from the United States. Both, frankly, we need more than platitudes anymore. Both sides say, we're going to work together. The president comes out and I think sincerely says he's outraged by these recent killings.

But I think to give the American people and the Mexican people confidence that we have a plan that will work and that we're committed to, you have got to be honest about what are at least the broad strokes, the pieces of that plan that we think we're going to put in place to make this better.

MALVEAUX: OK, Fran Townsend, thank you so much for joining us.

TOWNSEND: Thank you.

MALVEAUX: Well, citing these latest killings in Mexico, Texas Governor Rick Perry is calling on the federal government to prevent violence from spilling over the border. It's a follow-up to his appeal last week requesting that the government deploy Predator drones along his state's border with Mexico.

Well, we showed you last week how those unmanned aircraft were able to track illegal immigrants until agents on the ground can catch up with them.

Toyota casts doubt on a driver's harrowing tale of a ride in a runaway Prius. We're going to tell you what the investigators are saying.

And the wife of Supreme Court Justice Clarence Thomas says she wants to join the front lines of the Tea Party movement. But is that appropriate?

Plus, a serial sex abuse case in the Catholic Church causing some embarrassment at the very highest levels of the Vatican.

(COMMERCIAL BREAK)

MALVEAUX: Jack Cafferty is in New York with "The Cafferty File."

Hey, Jack.

JACK CAFFERTY, CNN ANCHOR: Suzanne, the cost of long-term unemployment to the American taxpayers may soon be unsustainable.

DailyFinance.com reports more than six million workers say they have been unemployed for more than 26 weeks. That means long-term unemployed now represent more than 40 percent of all the unemployed in this country, one of the highest levels ever. The average length of unemployment among this group, seven months.

The payment of unemployment benefits for longer and longer periods of time of course adds to the deficit. One expert points out the high unemployment rate, plus longer time collecting jobless benefits, is a dangerous combination, saying the government could be on track to spend $250 billion a year on unemployment benefits alone.

Another downside is that, over time, some workers tend to lose their skills, and that means they risk becoming unemployable. They either have to move down the employment ladder or be re-trained to do other jobs.

No surprise, then, that a new poll suggests that jobs are a top concern for many Americans, a Gallup poll showing 31 percent of those surveyed say that unemployment is the most important problem facing the country today.

And, when asked what they think will be the top problem facing the U.S. in 25 years, the top response is the federal budget deficit.

The irony, of course, is, the more the government spends on jobs programs and unemployment benefits now, the more our $12 trillion-plus national debt will continue to mushroom out of control.

Here's the question: What's the ultimate solution to long-term unemployment?

Go to CNN.com/caffertyfile and post a comment on my blog -- Suzanne.

MALVEAUX: OK, thank you, Jack.

Well, the U.S. wants Israel to roll back a decision to build new homes in a disputed area of Jerusalem. And it's demanding other steps to encourage peace efforts.

The housing project was announced during Vice President Biden's visit to Jerusalem just last week, embarrassing the Obama administration.

I want to turn to our CNN foreign affairs correspondent, Jill Dougherty.

Jill, obviously, the heat is on here, and we have heard some pretty outstanding rhetoric from the secretary of state and we understand directed from the president as well. What is the latest here?

(CROSSTALK)

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Right.

Well, Suzanne, you know, this really is becoming serious. In fact, an Israeli official tells CNN that the ambassador from Israel to the United States, Michael Oren, actually told his fellow Israeli diplomats that the relationship between the United States and Israel is in a crisis.

(BEGIN VIDEOTAPE) DOUGHERTY (voice-over): The Israeli announcement on settlements in East Jerusalem turns into a full-blown diplomatic crisis when Hillary Clinton took the gloves off in an interview with CNN.

HILLARY RODHAM CLINTON, U.S. SECRETARY OF STATE: The announcement of the settlements the very day that the vice president was there was insulting.

DOUGHERTY: Secretary Clinton wants action. In a tense phone call Friday with Israeli Prime Minister Benjamin Netanyahu, Clinton, according to U.S. and Israeli officials, demanded Israel reverse its decision on the settlement project and take concrete steps to prove it wants to negotiate with the Palestinians.

P.J. CROWLEY, ASSISTANT SECRETARY OF STATE FOR PUBLIC AFFAIRS: She asked for a formal response by the Israeli government. And we await that response.

DOUGHERTY: Israeli officials tell CNN, Jerusalem is debating what steps it might take to diffuse the crisis. But Netanyahu stood his ground Monday. While calling the timing of the announcement regrettable and hurtful, he says settlement building will not stop.

The spat is stirring a hornet's nest on Capitol Hill...

SEN. JOHN MCCAIN (R), ARIZONA: It doesn't help them to have public disparagement by the secretary of state.

DOUGHERTY: ... and within the powerful Jewish lobby. Conservative AIPAC called the public rebuke a matter of serious concern and a distraction from important issues like Mideast peace and Iran.

The liberal J Street termed the U.S. reaction understandable and appropriate. A former U.S. Middle East adviser to Republican and Democratic administration says, being tough with Israel is fine, if there's a strategy.

AARON DAVID MILLER, PUBLIC POLICY SCHOLAR, WOODROW WILSON INTERNATIONAL CENTER FOR SCHOLARS: The fight has to be worthwhile. In other words, it has to make the president look good, and it has to advance the American national interest, and it also has to create some measure of a breakthrough in the negotiations.

(END VIDEOTAPE)

DOUGHERTY: And, Suzanne, we're getting more information on that conversation by phone between Secretary Clinton and Benjamin Netanyahu. A senior U.S. official tells CNN that Clinton warned him that this announcement calls into question the U.S./Israeli relations, that working against the peace process is working against U.S. interests, and there are consequences from that.

In addition to reversing that decision on the settlements, Clinton also wants the Israelis to make an official declaration that the peace talks, even if they're indirect peace talks, will deal with the core issues of the conflict, and that, of course, includes borders, refugees, Jerusalem, and especially the settlements.

And then, finally, we are expecting, we're told that Secretary Clinton will be speaking with Mr. Netanyahu in the coming days to get his response to all of this -- Suzanne.

MALVEAUX: Thank you, Jill.

Clearly, President Obama tried to make it a priority year one, and he is still having some trouble with this. Thank you, Jill.

Toyota tells its side of the story. Investigators are casting doubt on the terrifying account by a driver who said that he was trapped in a runaway Prius.

And will Justice John Stevens be leaving the Supreme Court? What he is telling CNN's Jeffrey Toobin. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

MALVEAUX: Well, the driver's story was gripping. Trapped behind the wheel of a runaway Prius, he tops 90 miles per hour before a highway patrol officer caught up with him, helped him bring the car to a stop. Well, now Toyota says an investigation is casting doubt on that account.

Our Brian Todd has been looking into this.

And, Brian, I guess we have some questions about whether or not this is really true, huh?

BRIAN TODD, CNN CORRESPONDENT: We do now, Suzanne, Toyota pushing back very hard and very publicly against this driver's account that he had an out-of-control Prius.

Jim Sikes had claimed that the gas pedal on his car got stuck recently on a highway near San Diego, that it got past 90 miles per hour. He says he kept trying the brakes, that the car kept speeding up, and, finally, a highway patrol officer caught up to him, instructed him by loud speaker to apply the brakes and the emergency brake at the same time, that that tactic worked, he was able to stop the car, and no one was injured.

But now Toyota says it is conducting a joint investigation with the National Highway Traffic Safety Administration. They tested Sikes' Prius and an identical one, and Toyota says his account is not consistent with their findings so far.

(BEGIN VIDEO CLIP)

MIKE MICHELS, VICE PRESIDENT, TOYOTA MOTOR SALES USA: The system was tested under driving conditions and found to be functioning normally, indicating that, if the accelerator pedal was stuck, pressing the brake pedal would have resulted in dramatically reduced power to the wheels.

(END VIDEO CLIP)

TODD: The reason for that, Toyota says, is because driving a hybrid car like the Prius with both the gas pedal and the brakes simultaneously depressed would cause serious damage to the motor and to other parts of the car. So, the car is designed to prevent that from happening.

Therefore, with the gas pedal depressed and the brakes depressed at the same time, power was shut down to the wheels. They say in their test, Toyota said the car performed as it was designed to do. The car did not show damage, Toyota says, that is consistent with the engine having been at full throttle while the brakes were on. It is now a he said/she said situation.

(CROSSTALK)

MALVEAUX: So, how did Sikes' attorney respond to this?

TODD: Well, he pushed back hard. This attorney, John Gomez, says this report doesn't really -- st prove that his client was wrong or that he was lying. He says that the fact that Toyota wasn't able to replicate what exactly happened doesn't mean anything, because they haven't been able to replicate any of the incidents of sudden acceleration in this recall.

Toyota now says, look, we just got to look further into this claim, so they're going to keep digging into it, and, again, this could get even messier from here. And this guy Sikes and his attorney says -- they say they have no plans to sue Toyota at this time. But this is just getting a little bit uglier as we go.

MALVEAUX: So, there's still a lot of questions around this.

TODD: That's right, absolutely.

MALVEAUX: OK. Thank you, Brian. Appreciate it.

(NEWS BREAK)

MALVEAUX: The wife of Supreme Court Justice Clarence Thomas launched a new group to lobby for fiscal conservatism. Is there a conflict of interests? We will ask legal analyst Jeffrey Toobin.

And California's budget in crisis, and school districts are now taking the hit -- thousands of pink slips handed out just today. How can school systems survive?

And another sex scandal rocks the Catholic Church. This time, it's in the archdiocese once shepherded by Pope Benedict XVI.

(COMMERCIAL BREAK)

MALVEAUX: You're in THE SITUATION ROOM.

Happening now: health care reform hanging in the balance. The clock is ticking. President Obama takes his pitch on the road again today, and comes away with a new rallying cry: We need courage.

And travel by taxi, well, it's a way of life in New York City, but now the city is investigating a suspected scam by thousands of drivers. Have they been fleecing riders out of millions of dollars? Well, we're going to look into that.

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

President Obama will almost certainly get another opportunity to name a Supreme Court justice. That would be to replace Justice John Paul Stevens.

CNN senior legal analyst Jeffrey Toobin -- he is author of "The Nine" -- interviewed Justice Stevens in the new issue of "The New Yorker."

Jeff, thanks for joining us here.

And you made a little news here in your interview when you asked him about how long you think he would be staying, and he said about three more years. So, this obviously does give President Obama a chance to -- for another nominee.

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: Well, what he actually said was, no more than three more years.

I actually think it will be less than that. He said that he will decide in the next month whether he retires this spring. And given the fact that he has hired only one law clerk, instead of the usual four, this year, I think it's very likely that this vacancy will happen this spring.

So it's just when President Obama doesn't have enough on his plate, he's probably going to have a Supreme Court vacancy.

MALVEAUX: Well, obviously, he made history in nominating Justice Sonia Sotomayor. What would this look like in the court if he had a second shot at this in replacing Stevens?

TOOBIN: Well, I think, again, as with the replacement of David Souter by Sonia Sotomayor, the voting blocks probably wouldn't change much. Even though John Paul Stevens was appointed by Gerald Ford in 1975, he has become the leader of the liberals on the court.

And it is likely that Obama would appoint someone whose politics would be very similar. Perhaps at the moment it looks like the front runner is Alaina Hagen, the solicitor general. So the voting blocks wouldn't change, but the leadership would be very different.

John Paul Stevens has really rallied the four liberals -- Sonia Sotomayor, Ruth Ginsburg, Stephen Breyer -- and the question of whether those four would remain a cohesive force that would be very interesting and uncertain if Stevens left.

MALVEAUX: And something very interesting that Justice Stevens told you was that this is a court that has become more political, an atmosphere that has become more political.

TOOBIN: Well, that was really striking to me that -- you know, in my interview in "The New Yorker," Justice Stevens really talked about how much the court had changed since 1975, how much more conservative it had become, how much the court had moved to the left on so many issues.

The case that he was particularly outraged about was the Citizens' United case earlier this year, the case that said corporations have the same right to free speech as individuals. He wrote a blistering dissent in that case.

But just in general, here you have this Republican appointee, this life-long Republican, a moderate Republican, an endangered species, talking about how he -- the court was really a very different place now than the one he joined almost 36 years ago.

MALVEAUX: Let's talk a little bit about what's making news today. Justice Clarence Thomas's wife, Virginia Thomas, started a new group now. It's a nonprofit organization, a lobbying group that is linked to the same philosophy as the tea party group, espousing fiscal conservatism, a limited government.

It's called Liberty Central, and there's a quote that she gives the "Los Angeles Times" saying, "I adore all the new citizen patriots rising up across this country. I felt a call to the front lines with you, with my fellow citizens, to preserve what made America great."

Now experts say this is not a violation of the ethical rules, but clearly, this might give a look -- an appearance of partiality, would it not, to have Justice Thomas's wife engaged in something so partisan here?

TOOBIN: I'm really not sure it's all that dramatic a development. You have to consider who Ginny Thomas is. Ginny Thomas is a veteran political activist in her own right. She used to work for Dick Army, the former Republican leader in the House. She's has worked for various conservative foundations.

She is an outspoken conservative, just like her husband, the Supreme Court justice. You know she shouldn't have to give up her career to -- because she is married to Clarence Thomas.

Now could she get a job that is somewhat less explicitly political? Sure. But it's not prohibited by the laws. It's not prohibited by any ethical rules. And my sympathies are basically with Ginny Thomas here.

MALVEAUX: I used to talk to Ginny Thomas all of the time in covering President Bush, and obviously she was a big part of the Heritage Foundation.

TOOBIN: Right.

MALVEAUX: A very conservative group. Is there anything that Justice Thomas needs to do, however, to reassure the American people that he's not aligned with his wife's philosophy or the lobbying? Would there be cases where he would have to recuse himself?

TOOBIN: Well, if her organization were a party to any case before the court, of course he would have to recuse himself there, or if she filed a brief in some case. But I don't think she'd be silly enough to file a brief in a Supreme Court case.

Look, her politics are his politics. That's presumably part of why they love each other. I mean there is no mystery here about Clarence Thomas's conservative politics, nor about hers.

So, yes, if she were directly involved in a Supreme Court case, sure, he would have to recuse himself. But other than that, I think this is obviously a match made in heaven.

(LAUGHTER)

MALVEAUX: All right. Thank you, Jeffrey. And obviously, get back to us if you have more news on Justice Stevens. I know he's 90 years old, but still very active. He plays tennis. And -- but we just -- we don't know when he's going to make that decision. But you let us know when you get a whiff of it.

TOOBIN: I'll be here. I'll tell you.

(LAUGHTER)

TOOBIN: All right.

MALVEAUX: Thank you, Jeff. We appreciate it.

Well, a new twist in the latest sex abuse scandal in the Catholic Church. This time, it is in an archdiocese once overseen by Pope Benedict himself.

And she was revealed as the "other woman" in the John Edwards scandal. Well, now Rielle Hunter is speaking publicly for the first time.

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

(COMMERCIAL BREAK)

MALVEAUX: In Germany, an archdiocese once overseen by now Pope Benedict XVI says a priest convicted in 1986 of sexually abusing minors has been suspended for violating a condition that he not work with young people.

Our CNN senior Vatican analyst, John Allen, joins us now from Denver. His biography of Cardinal Joseph Ratzinger, now the Pope, is titled "The Rise of Benedict XVI."

John, tell us what you can explain about what happened here. What are these charges about, and how are they linked -- allegedly linked to the Pope?

JOHN ALLEN, CNN SENIOR VATICAN ANALYST: Hi, Suzanne. Well, here's what we know. Pope Benedict XVI served as the archbishop in Munich from May 1977 to February 1982. During that time, a priest from another diocese in Germany, who had been accused of molesting young men in that diocese, was sent to Munich -- that is the Pope's diocese -- for therapy that was more or less the practice in the church at the time.

That happened with the Pope's knowledge. However, what also happened is that while he was in Munich, this priest was given a new assignment in which he apparently went on to commit other acts of abuse for which, as you say, he was criminally convicted in 1986.

Now what church officials are saying is that that assignment, that decision to put him back in the field, happened without then Cardinal Joseph Ratzinger, now Pope Benedict XVI, so without his knowledge. The church official who is responsible for it has admitted his own failure, has taken full responsibility, and has said that the Pope was not aware.

But in any event, Suzanne, it obviously happened on his watch, and that clearly is creating a whole series of new problems for Benedict XVI.

MALVEAUX: What do you think is the fallout here for the Pope?

ALLEN: Well, I mean, immediately this is the first time that he's been directly linked to the crisis in the sense not just of managing the church's policies, but apparently of a breakdown in the system in a diocese for which he was directly responsible.

I think long-term, the problem is this. I think when we talk about the sex abuse crisis, there are really two interlocked problems. There's the problem of priests who abused and there's the problem of bishops who failed to clean it up.

So the question some critics may be asking is, what credibility will Benedict XVI have in writing (INAUDIBLE) on bishops if it turns out that during his own term as a bishop he had more or less the same problem.

MALVEAUX: Is this an investigation that is ongoing, or have they -- have they basically cleared the Pope? Are we going to learn more about this?

ALLEN: Well, I think if we learn anything from the way the sex abuse crisis is played out in other places, it is that one accusation, one charge, one report typically leads to more.

I'm quite certain the Vatican is hoping tonight, Suzanne, that this is the end of it. That this will be the only case of a priest who was moved around on Cardinal Ratzinger's watch. But I don't think we know that for sure.

And I can tell you that right now, reporters and reform activists in Germany are poring through the records of those five years that the Pope was archbishop of Munich very carefully, looking to see if there are indeed other instances of priests who slipped through the cracks. MALVEAUX: How concerned do you think the Vatican is about this?

ALLEN: I think they're extraordinarily concerned about it. I think that the proof of that is that normally when a crisis erupts someplace, the Vatican measures its words very carefully and takes an awful long time to say anything publicly.

In this instance, just hours after this report broke in the German press, the Vatican had a statement indicating that the guy who had been the Pope's deputy at the time had taken full responsibility for this decision, and then going on to complain about efforts to attack the Pope, to drag him into this crisis.

I think all of that has a reflection of the fact that they realize, this is potentially very damaging, and they're worried about where the story might go.

MALVEAUX: Is there -- in your reporting, is there any soul- searching that seems to be going on within the church itself about why there are so many priests who allegedly have abused children?

ALLEN: Well, I think that soul searching has been going on for some time, from the point in which this crisis first erupted and I think the conclusion that most people have drawn is that however you explain the crisis, what it has shown is the danger of putting priests on a pedestal.

That after all, you know, despite their Roman collars, these are still just human beings. Some of them are going to fail. And in a few instances, they'll fail in spectacular ways. And therefore, you need to have strong accountability mechanisms in the church. Strong policies to ensure that when this kind of abuse does occur, swift and sure justice is applied.

I think today, most people would say the church has done a pretty good job on that front. But obviously, its failures in the past are now coming back to haunt it.

MALVEAUX: Do you think this Pope gets credit for stepping out? Obviously, he was the first Pope to address this head on, and in even talking with some of the alleged victims and vowing that this would never happen again.

Do you think that he has some credibility in this issue, or is that damaged now?

ALLEN: Well, I think from Vatican's point of view, that's one of the real frustrating things about this story. Because up to this point, in a papacy which has otherwise had its problems, Benedict's handling of the sex abuse crisis has been something that a lot of people have praised.

As you say, you know, he was the first Pope who has really brought the hammer down on some high-profile priests who were previously thought of as untouchable. The first Pope to meet with victims, the first Pope to adopt strong policies, the so-called zero tolerance policy. First Pope to apologize directly and in his own voice for the crisis.

And, of course, now in some ways, at least in the court of public opinion, all of that may be brought into question because of decisions he either made or failed to make 30 years ago. And I'm sure for the Pope's friends and admirers, that's got to be enormously frustrating.

MALVEAUX: John Allen, thank you so much for joining us. Really appreciate it.

In New York City, taxis are, of course, a part of the culture. But now city officials want to make sure being overcharged is not a part of the culture as well. They're investigating a suspected multimillion-dollar rip-off.

And a long affair and a 2-year-old child. Until now the mistress of former presidential hopeful John Edwards has held her tongue. But that has changed. Rielle Hunter finally breaks her silence.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

MALVEAUX: Mary Snow is monitoring some of the other top stories that are coming into THE SITUATION ROOM right now.

Hey, Mary, what are you working on?

MARY SNOW, CNN CORRESPONDENT: Hi, Suzanne. The head of the Senate's banking committee is proposing sweeping regulatory changes for the financial system. Senator Christopher Dodd unveiled the bill today.

It would give the government new power to break up giant failing companies, force the industry to pay for its failures, and create a consumer watchdog within the Federal Reserve.

The Coast Guard says high water levels on the Potomac River are to blame for a barge colliding with Washington's 14th Street Bridge. The Coast Guard spokesman says an initial assessment shows no structural damage to the bridge or the barge.

The bridge is open to traffic and the barge is tied to the bridge and so barge almost decides where to move it.

And if you want to save the federal government $1.5 billion, the Census Bureau has a suggestion. The agency estimates that's how much could be saved if we all mailed in our census forms instead of waiting for a census-taker to show up at the door.

The bureau has mailed the first 120 million forms to households to the mandated population count.

Suzanne, they say it takes 10 minutes, 10 questions.

MALVEAUX: OK, great. Thank you, Mary.

SNOW: Sure.

MALVEAUX: Well, here's a loaded question. What is the ultimate solution to long-term unemployment? That is Jack Cafferty's question of the hour, and Jack is going to read your answers just ahead.

A secret affair and a secret child. No secrets anymore for former Senator John Edwards' long-time mistress. Rielle Hunter goes public.

You're in THE SITUATION ROOM.

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MALVEAUX: Time now to check back with Jack Cafferty. Hi, Jack.

JACK CAFFERTY, CNN ANCHOR: Suzanne, the question this hour is what is the ultimate solution to long-term unemployment?

Dave writes, "Lower the tax rates for small business. My small business last year did exceedingly well. I paid a six figure sum for my corporate annual tax. And I would gladly have used much if not all of that money to hire additional people. I already have a staff of 18. And we all work more than 40 hours a week. Business is great and I want to grow."

Mo in Dallas writes, "Let's get the jobs back here in our country. Yes, I'm sure that goods would cost a little more. But paying for unemployment and welfare and other benefits would go down a lot. Wouldn't it be nice to call about a bill or a computer repair and be able to understand the other party?'

Joe writes, "Unemployment will be a major problem as long as we allow unfair trade and don't stop illegal immigration. We need to renegotiate our trade agreements to take into account the unfair advantage countries have that have no health insurance, no Social Security, no worker protections and no environmental regulations. It all contributes to the cost of manufacturing here in this country."

Pat in Staten Island writes, "The facilitation of private sector growth via tax cuts is what has always worked in the past. Sadly, it seems that growth lately has been only in government employment. The pending health care bill is chock-full of mandates that will cripple small business. The people who provide jobs, contrary to what this administration thinks, are not the enemy."

And Jim writes, "I don't think there is a government solution to the current problem. Life comes at us in cycles, some good, some not so good. It's up to each individual to persevere and make it the best they can from the situation. Each person should strive to enrich themselves with education and to support others. I doubt there'll ever be a government solution to self-motivation. You either have that or you don't."

If you want to read more on the subject go to my blog at CNN.com/caffertyfile. Suzanne?

MALVEAUX: OK. Thank you, Jack.

Rielle Hunter tells the world that she is in love with Johnny. Johnny is former Senator John Edwards. What else does the one-time presidential hopeful's mistress have to say?

Next CNN's Jeanne Moos delves into Hunter's revealing new "GQ" interview.

Also, if you thought that a New York City cab ride was too pricey, well, you know, maybe it was. We're going to tell you about an investigation into what could be a multimillion dollar rip-off.

You're in THE SITUATION ROOM.

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MALVEAUX: The other woman in the scandal surrounding former Democratic presidential hopeful John Edwards is speaking up for the first time.

Our CNN's Jeanne Moos takes a most unusual look at Rielle Hunter's revealing "GQ" interview and photo shoot.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): She used to be his mistress and campaign videographer.

(BEGIN VIDEO CLIP)

JOHN EDWARDS, FORMER PRESIDENTIAL CANDIDATE: Very graceful, camera girl.

(END VIDEO CLIP)

MOOS: Now the camera girl is in front of the camera for "GQ."

UNIDENTIFIED MALE: Sit like this, but drop this leg like --

MOOS: Rielle Hunter showed some leg, she showed some midriff while holding her 2-year-old daughter fathered by John Edwards, but when the photos appeared --

UNIDENTIFIED MALE: That's beautiful.

MOOS: -- she told Barbara Walters she cried for two hours.

BARBARA WALTERS, CO-HOST, "THE VIEW": She said she found them repulsive. When I asked well, if that was the case, then why did you pose the way you did, she said that she trusted Mark Seliger, whom she said is a brilliant photographer, and she, quote, "I went with the flow."

MOOS: That's pretty much how the affair with Edwards started, according to Rielle, when they bumped into each other on the street. "I just uttered to him, you're so hot. And he said, why, thank you, and he almost jumped into my arms."

Later in his hotel room, she said, "I had never experienced anything like what was flowing between us." But what was flowing through commentators wasn't sympathy.

WHOOPI GOLDBERG, CO-HOST, "THE VIEW": She's with us now like, I don't know, foot decay.

(LAUGHTER)

MOOS: Speaking of decay, Rielle Hunter said John Edwards' relationship with his wife had been "dysfunctional and toxic and awful for many, many years. The home was wrecked already. I was not the home wrecker."

Rielle Hunter told "GQ" she gave Edwards a phone that looked like his work phone so he could call her on it, but Elizabeth Edwards confirmed suspicions when she picked up her husband's phone and hit redial. "And I answered the phone and said, "Hey, baby," and click.

UNIDENTIFIED MALE: That was a good one.

MOOS: Their first night together Edwards told her, "Falling in love with you could really mess up my plans for becoming president." She told "GQ", "We love each other very much and that hasn't changed, and I believe that will be until death do us part."

At least the nude photos are an improvement over the previous tabloid ones.

(On camera): Rielle Hunter has company in one of the "GQ" photos, a lot of company, in bed with her. It's not exactly a menage a trois. Well, you count.

(Voice-over): Barney and friends.

UNIDENTIFIED MALE: Dora and Kermit.

UNIDENTIFIED FEMALE: That is so bad.

ELISABETH HASSELBECK, CO-HOST, "THE VIEW": If you're going to involve Kermit, Barney and Dora, put your pants on. OK?

MOOS: Keep Barney out of this.

Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

MALVEAUX: Happening now, President Obama and Democrats put on their game faces and make their final big play for health care reform.

This hour the arm-twisting, the promises going on behind closed doors. And the risk for the president if he comes up short.