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CNN Late Edition with Wolf Blitzer

Interview With Condoleezza Rice; Interview With Tony Blair

Aired December 07, 2008 - 11:00   ET


WOLF BLITZER, HOST: This is LATE EDITION, the last word in Sunday talk.

BLITZER (voice-over): Recession blues.

PRESIDENT-ELECT BARACK OBAMA: We're going to need action and we're going to need action swiftly.

BLITZER: What should the Bush administration do about the collapsing U.S. economy? What could President-elect Barack Obama do?

Pennsylvania Democratic Governor Ed Rendell and Minnesota Republican Governor Tim Pawlenty weigh in.

Back for a bailout.

WAGONER: We're focused on trying to really convince the Congress that it is a good investment.

BLITZER: The big three U.S. automakers make a second plea to Congress for billions of dollars. We'll hear from General Motors CEO Rick Wagoner.

Tracking terror.

RICE: The best thing is that these two countries do what they can through their own capacity to fully investigate and bring people to justice.

BLITZER: After the Mumbai attacks, the United States steps up efforts to ease tensions between nuclear rivals India and Pakistan. Secretary of State Condoleezza Rice just back from the region joins us for a wide-ranging interview.

Plus, my exclusive Sunday interview with former British Prime Minister Tony Blair about his peace mission to the Middle East and what he expects from the next U.S. administration.

Barack Obama rolls out more cabinet picks. We'll assess his transition to power with Donna Brazile, Ed Rollins and three of the best political team on television. The first of LATE EDITION begins right now. (END VIDEOTAPE)

BLITZER: It's 11:00 here in Washington and 8:00 a.m. in Los Angeles and 7:00 p.m. in Baghdad. Wherever you're watching from around the world, thanks very much for joining us for LATE EDITION. Staggering job losses, record home foreclosures, an auto industry on the verge of collapse and a volatile Wall Street. The news about the U.S. economy is all bad and putting deep pressure on the U.S. Congress, as well as on the president-elect, Barack Obama to do something.

Let's discuss this with two leading governors. In Philadelphia, the Pennsylvania Democratic Governor Ed Rendell and in Minneapolis, the Minnesota Republican Governor Tim Pawlenty. Governors, thanks very much for coming in on this Sunday.

Let's get right to it, Governor Rendell. The U.S. economy, here are some numbers. I'll put them up on the screen. Unemployment rate rose to 6.7 percent in November, 533 jobs were lost in November here in the United States and that brings the total so far in this year and the year is not over with yet, to nearly 2 million jobs -- 1.9 million, specifically jobs lost in 2008.

Listen to Democratic Congressman Barney Frank because he's suggesting that Barack Obama, the president-elect, could be doing more.


REP. BARNEY FRANK, D-MASS.: Be the case that he is going to have to be more assertive than he's been. Nobody says, well, we only have one president at a time. My problem is at a time of great crisis with mortgage foreclosure and autos, he says we only have one president at a time. I am afraid that overstates the number of presidents that we have.


BLITZER: All right, what do you think? Should the president- elect be a more hands on kind of leader during this transition?

RENDELL: I think what he did yesterday was the type of leadership we need. He outlined a very bold and I think an absolutely terrific plan to quickly create a couple million jobs in this country. And the beauty of it, Wolf, is every one of those things would perform a very important public need. And, at the same time, construction jobs, manufacturing jobs, in a short period of time. You look at those job losses, 85,000 were manufacturing job losses, 82,000 construction. What the president-elect has outlined would vitalize, would recharge those two sectors of our economy very, very quickly and they're crucial sectors.

BLITZER: Governor Pawlenty, here's specifically part of what the president-elect said yesterday in his radio address, when he posted on the Internet, as well. Listen to this.


OBAMA: We will create millions of jobs by making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s. If a state doesn't act quickly to invest in roads and bridges in their communities, they'll lose the money.


BLITZER: We all know Minnesota's had its problem with bridges, as you well remember a year ago, that horrible collapse out in Minneapolis, St. Paul. What do you think about this proposal from the president-elect?

PAWLENTY: Well, first of all, we appreciate the gracious invitation he extended to all the governors to come and meet with him and the open-minded and constructive tone that he set at that meeting. So I think it was a good meeting.

As to the substance of what he seems to be proposing, there's one small problem with the whole concept and that is by any reasonable accounting standard, the federal government of the United States is broke. They're using credit card debt to pay off credit card debt. They're constructing their own Ponzi scheme that's going to make the subprime crisis the federal equivalent of that I think 10 or so years down the road.

All of that being said, the country is in crisis. We need to do something. They're throwing massive amounts of money at it. I think Wolf, in Minnesota's case, we're a net contributor to the federal government. We pay in way more than we get back. So some aid I think would be appropriate for our state. But as they do that, as they do that, please don't tie our hands from reforming the system.

For example, if we're going to do infrastructure, don't make it pork barrel projects where members of Congress get to pick things over merit. If we're going to fix Medicaid and send us a little money on Medicaid, please don't tie our hands from reforming and fixing the problem because structurally it's unsustainable. Those are the kinds of red tape or bureaucracy that the federal government might visit on us and we want to make sure that concern is heard as well.

BLITZER: Governor Rendell, two of Governor Pawlenty's Republican colleagues, Governor Perry of Texas, Governor Sanford of South Carolina, wrote in the "Wall Street Journal" this on Tuesday, making a similar point. "As governors and citizens, we've grown increasingly concerned over the past weeks as Washington has thrown bailout, after bailout at the national economy with little to show for it. In the process, the federal government is not only burying future generations under mountains of debt, it is also taking our country in a very dangerous direction toward a bailout mentality where we look to government rather than ourselves for solutions."

You want to respond to your Republican colleagues?

RENDELL: Sure. Number one, almost every economist in this country disagrees with it. Every economist, including Mr. Feldstein, who was the McCain/Palin economist, says that we ought to have an economic recovery plan and it has to be big to have a necessary impact to revitalize this economy, number one. Think of it as this, Wolf. You've got a patient who's got a gunshot wound and you've got to solve the gunshot wound, but, first and foremost, that patient needs a blood transfusion or he's not going it survive. This economic recovery plan is a transfusion into our economy that is going to create jobs. All of the other so-called bailouts that you talked about wouldn't create one new job or one new order for any American factory. That's the difference with President- elect Obama's plan. It is going to create jobs right away. Use it or lose it is a great plan. Tim Pawlenty, with his great stewardship when the bridge collapsed in Minnesota, they got that rebuilt, Tim, in what period of time?

PAWLENTY: Eleven months.

RENDELL: The bridge rebuilt -- in 11 months. That would never happen under ordinary circumstances. So when President Obama puts down a use it or lose it charge to governors, he knows exactly what he's doing because Tim Pawlenty in Minnesota showed how quickly you can do infrastructure and you can get jobs and get orders to American factories. BLITZER: Governor Pawlenty, the former President Bill Clinton makes a similar point, speaking this week and I'll read to you what he says. As important as the national debt is, he says "The big risk now for America and the world is deflation, contraction, dropping asset prices. We have to stimulate the economy, which means in the short run, he has to take America into even more debt," referring to Barack Obama. "There is no alternative."

The national debt, as you know, has more than doubled over the past eight years during the Republican administration of President Bush. Does President Clinton make a good point?

PAWLENTY: Well, just as a quick side note, the debt at $11 trillion, I believe is more than $35,000 for every man, woman and child in the country. So, yes, most economists are concerned or many are about the possibility of deflation in the near term. So doing things to help the economy as it relates to the federal government is a wise idea. But why not focus on things like -- what about some additional tax breaks for small businesses who are the back bone of job growth in the country? Not the large businesses or the ones that have particular interest groups around them.

So, why aren't we talked about that? But more broadly, Wolf, if we continue down this path, we're going to have a government equivalent of the sub prime crisis because I believe this amount of debt is unsustainable. The other day, we had the leader of a Chinese hedge fun and a Chinese finance official tell the United States of America that if we continue on this path, they're not going to continue to invest in our country.

BLITZER: You want to see the big three automakers bailed out by the federal taxpayer, Governor Pawlenty?

PAWLENTY: I think the big three automakers are in three different conditions. You have Chrysler is owned by some of the wealthiest people in the world and they just bought a little over a year ago with their eyes opened. Ford said right now they don't even need the money, they may need a line of credit next year. And General Motors is a basket case. And so I don't know why for them, Chapter 11 or at least some sort of pre-structured Chapter 11 wouldn't be a viable alternative rather than the taxpayers bailing them out.

BLITZER: Governor Rendell, what do you think of that analysis?

RENDELL: Well I think Tim has got a good point, but if you put a car company into Chapter 11, you're basically closing it down because no one is going to buy one of their cars, not knowing whether there's going to be any company around to service it or replace it with parts. It's a disaster to put them in Chapter 11. So I think we have got to bite our lip and do something to give them a temporary infusion of cash.

RENDELL: But I think what the American taxpayer wants in any of these bailouts is conditions. We should never have given the banks money without requiring them to get it out into the market in credible loans in a certain period of time. We shouldn't make that mistake again with the auto companies.

BLITZER: Governor Rendell, you caused a commotion this week. You were heard on an open mike speaking about the incoming, the incoming Homeland Security Secretary Janet Napolitano, the governor of Arizona. I'm going to play the little clip because I want you to explain to our viewers and the United States and around the world what was on your mind.


RENDELL: Janet's perfect for that job because for that job, you have to have no life. And Janet has no family. Perfect. She can devote literally, 19-20 hours a day to it.


BLITZER: All right, she has no family, perfect. You've got to have no life for that kind of job. All right, governor, you're in the hot seat. Explain.

RENDELL: Sure, well that's a 24/7 job more than any in the nation. The director of Homeland Security has to be on duty all of the time. And what I said about Janet is true. I think she's the gold standard for governors. She works hard, she's dedicated, she's focused. She's like all of us. I don't think Tim would contend that he has much of a life as governor because we're doing that pretty much the same in our states.

And Campbell Brown, who I love, as a person and respect as a newsperson, couldn't have been more wrong. She said that it was somehow sexist or a comment on single women. Let me tell you. If Janet Napolitano was Jim Napolitano and had no family, I would have said the exact same thing.

She's just what we need in that job and she's going to do a great job because she's dedicated, because she's focused and because she can give all of her energy to it? BLITZER: So no apology coming from Ed Rendell. You're not going to send her a dozen roses? RENDELL: I actually wrote a hand- written note and apologized if I caused her any discomfort. But gosh, Wolf, we've gotten really far off field in the way we cover news if that statement which is absolutely 100 percent true is construed as something. I would have said it about man or woman in similar position. It was meant to comment on how tough the job is and how great a choice Janet is.

BLITZER: We'll leave it right there. Governor Rendell, thanks very much. Governor Pawlenty, thanks to you, as well.

PAWLENTY: You're welcome.

BLITZER: When it comes to the Israeli-Palestinian conflict, what is the world expecting from the next president? In our exclusive Sunday interview, the Middle East envoy, the former British Prime Minister Tony Blair shares his thoughts when LATE EDITION continues. Stay with us.


BLITZER: Coming up in the next hour, my special conversation with the outgoing Secretary of State Condoleezza Rice. She talks about her recent trip to India, Pakistan and lots more. Opens up as well about Barack Obama becoming the first African-American president of the United States.

But first, in addition to India and Pakistan, the Israeli/Palestinian conflict will certainly be among the key international challenges facing the president-elect when he takes office. Just a short while ago, I spoke to the former British Prime minister, the current Middle East special envoy Tony Blair. He's here in Washington to attend the Saban Forum, a U.S./Israeli dialogue on the Middle East.


BLITZER: Prime Minister Blair, thanks very much for coming in. How worried are you right now about tensions between these two nuclear rivals, India and Pakistan, in the aftermath of what happened in Mumbai?

BLAIR: I think we should be very worried, but I think the root causes of the problem, which is the continual acts of terrorism that keep coming, being visited upon the Indian people -- I mean, Mumbai was merely the worst attack of many attacks that had been going on, I'm afraid, over a significant period of time.

And so, I think the first thing is to try and obviously calm the tensions between the two countries. And I know the leaderships of those countries will want to do that.

BLITZER: Is the Pakistani government right now doing enough to do that, to put a clamp down on these terrorist organizations that are based in Pakistan and seek to go after targets in India? BLAIR: I mean, I think the actual truth of the matter is, it's really tough, Wolf. Because some of these organizations have roots deep within their society. My own view is that, you know -- and maybe a lot of people will disagree with this -- is we've got to start getting to the roots of this phenomenon. This has been growing a long time. And it's not just India- Pakistan. You can take terrorist acts in Yemen, Algeria, half a dozen countries just in the last few weeks, and you've got to go down, for example, into the education system. You know, what are the kids being taught in the madrassas, in the schools of Pakistan? How do we partner with Pakistan in trying to deal with some of the root causes of these issues, this growth of extremism? And it's obviously important that we keep the two governments talking to try and reduce the tensions.

But in the end, my view, this is a global movement, this terrorist movement, with an ideology, and the only way we will defeat it -- whether it's terrorist attacks in India or the potential for terrorist attacks in Europe or anywhere else in the world -- is if we get to grips with the fundamental cause.

BLITZER: And is Al Qaida involved in this?

BLAIR: Well, I think it's -- you know, I think this has gone beyond, as it were, Al Qaida as a specific network. I mean, this is -- there is no central command in this ideology, the way that, you know, you would normally describe one unit of -- that leads and operation. It's not like that. But the fact is that they are loosely linked by an ideology. They have very strong links with each other, right across the national boundaries. And you know, would be no surprise to me if the people that were engaged in the Mumbai attacks had links with other countries as well. But we had terrorist activity in the U.K. The links back to Pakistan were very obvious, too. And I'm afraid it's right around the region. I mean, if you take a country like Algeria, it doesn't get the headlines in the same way, but I mean, there's tens of thousands of people that died over the past few years.

BLITZER: And speaking of tensions, there's lots of tension right now involving Iran and its suspected nuclear weapons program. I want you to listen to what the president-elect of the United States, Barack Obama, said earlier today on "Meet the Press." Listen to this.


OBAMA: We need to ratchet up tough but direct diplomacy with Iran, making very clear to them that their development of nuclear weapons would be unacceptable, that their funding of terrorist organizations like Hamas and Hezbollah, their threats against Israel are contrary to everything that we believe in and what the international community should accept, and present a set of carrots and sticks in changing their calculus about how they want to operate.


BLITZER: Is that something you support?

BLAIR: Absolutely.

BLITZER: You disagree with any of that?

BLAIR: No, I agree with it completely. And again, what I would say is, if you look at the way that Iran is operating within the region -- you take Iran's involvement in the Israel-Palestine question, I mean, it's absolutely clear they're financing and arming Hamas. And what they're doing is, they're using proxies around the region, whether it's Hezbollah, Hamas, Shia militia groups in Iraq, parts of the Muslim Brotherhood, and -- my view is, it's all part of the same thing, and it's a question of whether we can engage with the modernizing and the moderate forces within Islam, to wrench away the people or any section of the people that may be attracted by this type of ideology, and help partner them to be a part of the 21st century, where people can co-exist peacefully together.

BLITZER: You've traveled throughout the Middle East. As concerned as the Israelis are, the U.S. government is, the British government, there are plenty of Arabs who are concerned about Iran's program as well. How concerned are they?

BLAIR: Really concerned. I mean, some of the toughest language you will ever hear about Iran and nuclear weapons. And also, their support of extremism around the region. Because that's -- the nuclear weapons program is obviously a specific concern. There's a whole set of negotiations around that. But the other thing is, quite apart from the nuclear weapons program, is the continual support of extreme and radical elements, who can destabilize countries. And so, yes, some of the toughest language you will hear about Iran is -- is not actually in Washington or in London or even in Jerusalem. It's in Arab countries.

BLITZER: You've spent a lot of time over the past year, many years, dealing with the Israeli-Palestine issue. Give us some advice that you would like to see the president-elect and his new administration, the secretary of state designate Hillary Clinton and others, what best advice you give them? Because I know you've been meeting with them over these past few days while you've been in the United States.

BLAIR: Well, first of all, I don't think they needed advice...


BLAIR: But -- and incidentally, I think the great thing is, it's a real collective sense right across the leadership that this is a serious issue that has to be taken seriously from the very first day of the presidency. So that's all great.

My view, very simply, is this -- if you want peace between Israel and Palestine, we have got to build a secure and viable Palestinian state. And that is not just a matter of negotiation. It's a matter of nation building.

And so, what I've been trying to do in this past year is to try to put in place the institutions, security and law and order, economic and social development, obviously with strong support from General Jones in recent months...

BLITZER: Who's going to be Barack Obama's national security adviser.

BLAIR: Absolutely, and that obviously is a great choice from the point of view of Israel and Palestine question. And what we're trying to do is from the bottom up create the situation in which one, the Israelis feel that they do have a secure and stable part of the peace; two, the Palestinians feel that if they make that progress, then Israel will lift the occupation and allow them to run...

BLITZER: I think everybody agrees, there's been progress and dramatic progress on the military, the economic front in the West Bank. But Gaza, under the control of Hamas, there doesn't seem to be any light at the end of that tunnel.

BLAIR: No. The difficulty there is, I mean, we've had this period of calm, but it's not, in my view, going to hold for another year. So what we need to do is to get to the point where we offer the people of Gaza a way out, where they can rejoin the civilization, in essence...

BLITZER: How do you do that?

BLAIR: Well, I think what is important is that we don't just have a period of calm, but progressively, within that, we're able to start to reopen the border crossings, get not just humanitarian aid in, but also get some of the business going in Gaza again, and then we've got to stop the smuggling of arms and money through the tunnels.

BLITZER: Is it doable, any of it?

BLAIR: I think it is doable. I mean, it's difficult. I mean, I've got certain ideas on it, but it is difficult. It's very tough, because if you're an Israeli living in Sderot, there are rockets coming out of Gaza and hitting your territory. Then the Israelis, of course, go in, into Gaza, and then there's more bloodshed, more difficulty. And so it's a sort of spiraling situation where the calm is given a certain space to do something, but it's important we change the situation, because there can only be one Palestinian state. There won't be two.

BLITZER: Is there any chance that you, as a Middle East convoy, could get into Gaza and talk to these people? BLAIR: Well, I tried to do this some time ago, but in the end, the security situation didn't permit it. But I mean, I think it's important we do. I think for the people of Gaza -- I mean, I talk to people in Gaza a lot. I had a session with Gazan businessmen just the other day, and they are desperate for help. I mean, the majority of people there, I have no doubt at all, would welcome the progress that's happening on the West Bank happening to them.

So what we're going to do is find a way of doing that. And one of the reasons why the progress on the West Bank is so important is not just in its own right, but because it also offers people in Gaza a sight of what is possible if the violence stops and we get some peaceful contacts, with which we can start to make progress for the people.

BLITZER: Prime Minister, good luck.

BLAIR: I think we'll need it. Thank you.

BLITZER: Thank you.


BLITZER: And coming up, the big three U.S. automakers, they're desperately asking Congress for a multi-billion dollar loan. But what got them in trouble in the first place and what will they do differently now? My special conversation with the CEO of General Motors right after this.


BLITZER: The Democratic-elected Congress and the Bush White House, they're trying right now to reach a short-term deal that would loan billions of dollars to the big three U.S. automakers. The heads of those companies were back on Capitol Hill this week to make their desperate case for help. After he testified before the Senate Banking Committee, I spoke with General Motors CEO Richard Wagoner.


BLITZER: Mr. Wagoner, thanks very much for coming in.

WAGONER: Thanks. Great to be here today.

BLITZER: You spoke today. You acknowledged that some mistakes have been made by General Motors over the years. I guess the big question, what was the biggest mistake you made and how can the American public be assured you're not going to repeat it?

WAGONER: Well, look, we've been in the business a long time. In over 100 years, you get in habits, sometimes, that maybe aren't exactly what's right for the future.

I think probably the biggest things we've struggled with are making sure that we can get the new technologies to market at high enough volume. And I talked about the fact that we started with a -- remember the Saturn EV1. And we had to pull that off because we got financially very, very tight.

And I'd really liked to have been able to stick with those kind of technologies. So what we talked about today was, given the fact that the world's changed and we're going to be...

BLITZER: So I guess what you're saying is you were building the wrong cars -- making the wrong cars for the market that had been changing over the years? You were still living in sort of in the past?

WAGONER: Well, I think, given the low energy prices we had in the U.S. we've really been -- built up a strong position in trucks. And because of the lack of profitability in cars, in retrospect, we didn't put -- put enough effort into that side of the business.

BLITZER: Why do Nissan and Honda, Toyota, BMW -- they manufacture cars here in the United States -- why do they do so well and the American car makers don't do so well?

WAGONER: Well, but I think that's a backwards-looking way of talking about it, Wolf. Because, if you look at cars like the Chevy Malibu, this car won car of the year. It's got a hybrid system that I drove down from in Detroit yesterday, by the way. And it can compete with any cars in the category.

So the point is, several years ago -- and I credit Bob Lutz -- we really began to put a lot of effort into winning cars. And our commitment is, we're going to continue and expand that, going forward.

BLITZER: The head of the United Auto Workers, today, Ron Gettelfinger -- he was blunt. He said, if this money, this bridge loan, as it's called, doesn't come through for GM by the end of December, by the end of this month, you're going to have to file for bankruptcy. Is that true?

WAGONER: Well, that's what Ron said. I would say what we said in our filing, that we could need up to $4 billion by the end of this month. That's what we're requesting it be funded.

But I'm not going to speculate what happens if we don't get it. We're focused on trying to really convince the Congress that it's a good investment.


BLITZER: You have to have a plan b, because, right now, the mood in Congress, in this Congress, which would have to vote on it, doesn't seem to be all that receptive.

WAGONER: Well, you know, this is why we're down here, and have very much appreciated all the time that we were given today to talk, talk, talk to the committee, and felt they asked a lot of good questions.

And, you know, this is -- we think this is, by far, the best way to go. So we're going to stick with it as long as we can.

BLITZER: Is there a plan b, though?

Do you have some contingency planning...


BLITZER: ... you've been doing, if the money from the federal government doesn't come true?

WAGONER: Well, there's several options. I mean, we've been focused on the legislative process. We hope that works. But Senator Dodd pointed out today that, in his view, there are actions that the administration can take under the TARP or the Fed. BLITZER: Because they've been reluctant, the president, to use any of that $700 billion and make it available to the auto industry.

WAGONER: Sure, and they've really asked that it go through the legislative process. And we -- we're going to keep working through that.

But my point is, the consequences of this not working out would, as someone said today, would be -- at the panel -- would be just catastrophic for the economy.

So we really hope that we can, particularly with the plan we filed with the committee earlier this week, really convince them that this is a good thing to do, not just for the companies but really for the industry and the whole economy.

BLITZER: We were flooded with e-mails when we notified our viewers that you were coming in. And I guess one of the great questions they want to know is, how can the American taxpayer be assured that this won't be good money going after bad?

WAGONER: Well, I think it's -- while the amount of money being requested by the three of us is significant, if you look at the footprint of the auto industry and the number of jobs that it employs and creates, all through the supply chain and the dealers; if you look at the importance of the technology we invest in, we're going to get this right. And when we do, this is a very high return for the U.S. taxpayer.

BLITZER: Can you assure the American taxpayer that, if you get this money; if it comes through, this bridge loan comes through, you won't come back a few weeks later or a few months later and say we need more?

WAGONER: Well, certainly not in a few weeks or a few months. But, to be fair, Wolf, we were asked to lay out different scenarios of volumes and how much money we would need under each scenario.

So we put what we thought was a very conservative volume set, and that's where we came up with the up to $18 billion for GM.

We really think that the industry won't get weaker than that. So we think the amount we've asked for should be adequate under any scenario we see likely.

BLITZER: As you know, there's a lot of anger -- and there's a lot of anger, I guess, symbolically, because you flew in on the private jets, the corporate jets, as opposed to what you did this time, which is drive into Washington from Detroit.

I'm going to play for you one i-report. We got a lot of them from our viewers. And it reflects the anger that is out there. Turn around; listen to this question that comes in for you, and we'll get your response.

(BEGIN VIDEO CLIP) (UNKNOWN): My question is for Rick Wagoner. During the years 2000 to 2008, you have made about $100 million as CEO of GM. During that time, the stock price has fallen 96 percent and the company has gone from a net profit to a net loss.

Dear Rick, why should taxpayers give GM $18 billion and not fire you as CEO?


WAGONER: Yes, first of all, I understand how he'd ask the question, but I didn't make anywhere near $100 million. That's...

BLITZER: But you made a lot of money? You made a lot of money?

WAGONER: Well, last year, as we indicated in our filing, I did. I made $1.5 million. The proxy said I made $14 million.

So I think, vis-a-vis CEO-level pay, GM really -- we try to be very conservative. But I realize it's a lot of money.

The reason that I have my job is because our board thinks we've been taking on very tough issues and, really, some of the structural issues that have been around the company for years and years and years.

And, you know, I don't have a golden parachute. I don't have an employment contract. I serve at their pleasure and I'll continue to serve at their pleasure.

BLITZER: So you're staying put?

WAGONER: Well, it's -- sure, that's my plan, I mean, as long as the board wants me to stay put. If they tell me no, then I'll go.

BLITZER: One final question, and I want to read to you what Mitt Romney, who's a son of the auto industry -- his father, George Romney, used to run the old American Motors, as you know.

He wrote this in the New York Times about a week or so ago.

"Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course, the suicidal course of the declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check."

Those are powerful words... WAGONER: Yes.

BLITZER: ... from someone who's from Michigan, originally, grew up in the auto industry, and says the American public should not give you this bailout.

WAGONER: Yes, I have great respect for Governor Romney, but his information is extremely out of date. I mean, for him to comment that we don't have competitive product when we have category-winning products like -- I talked about the Chevy Malibu; investments in things like the Chevy Volt; the changes in the labor contracts the UAW has agreed to.

His comments, unfortunately, are maybe based in a Detroit 10 or 15 years ago, but do not reflect the ability of the industry to compete today. So, unfortunate, but everybody has the right to their opinion, I guess.

BLITZER: Based on what you heard from the lawmakers today, are they going to buy it?

WAGONER: Well, we got a lot of excellent questions. I think they were very much focused around the plans that were submitted. You know, I can't tell you for sure how it's going to come out, but I remain hopeful and look forward to tomorrow's testimony.

BLITZER: We'll watch it every step of the way. Mr. Wagoner, thanks for coming in.

WAGONER: Great. Thanks, nice to be with you.

BLITZER: Good luck to you and all the men and women of the U.S. auto industry. As I've been saying, the stakes, right now, not only for them but for a lot of other people are enormous.

WAGONER: Yes, they are.

BLITZER: Appreciate it very much.

Barack Obama is set to announce another Cabinet pick later today. We're going to go live to Elaine Quijano. She's standing by live in Chicago with details. Stay with us. "Late Edition" continues right after this.


BLITZER: In just a few hours, Barack Obama will announce another major Cabinet selection. Let's go to Chicago. CNN's Elaine Quijano is standing by with details.

So set the stage for us, Elaine. What do we expect to hear?

ELAINE QUIJANO, CNN CORRESPONDENT: Well, that's right, Wolf. Today, on Pearl Harbor day, which we should mention, Barack Obama will announce Eric Shinseki, the retired general, as his pick for secretary of Veterans Affairs. Now, Shinseki, as you know, is a highly decorated Vietnam veteran who's perhaps best known for comments that he made back in 2003.

It was then, as Army chief of staff, that Shinseki testified before the Senate Armed Services Committee and said that it would take something on the order of several hundred thousand troops in order to pacify Iraq.

QUIJANO: Well, that comment, of course, did not sit well with some in the Bush administration, most notably then Defense Secretary Donald Rumsfeld and Shinseki actually retired just a few month after that. But Shinseki himself did not have an actual direct role in war planning. He was not in the direct chain of command. Nevertheless, critics of the Pentagon certainly seized on his comments and continued to do so today.

Now, for his part, the president-elect said today in an interview with "Meet the Press" that General Shinseki was right about those Iraq troop levels and he also went on to explain his decision why he decided to pick the retired general.


OBAMA: So many veterans around the country are struggling even more than those who have not served. Higher unemployment rates, higher homeless rates, higher substance abuse rates, medical care that is inadequate. It breaks my heart and I think that General Shinseki is exactly the right person who is going to be able to make sure that we honor our troops when they come home.


QUIJANO: Now, we should tell you, General Shinseki himself a wounded veteran. He had to have most of his right foot removed. Veterans groups for their part are supporting, at least initially, this decision and, again, the official announcement coming today Pearl Harbor Day. The president-elect is set to hold a news conference here in Chicago this afternoon. Wolf?

BLITZER: Elaine, thank you. CNN, of course, will bring our viewers the live coverage of the president-elect's news conference. That's scheduled for 2:00 p.m. Eastern.

Should Barack Obama be doing more to address the faltering U.S. economy. Two of our top CNN political strategist Donna Brazile and Ed Rollins, they are standing by live. We'll get their take on that and a lot more. LATE EDITION will be back.


BLITZER: Barack Obama has been talking about ways to try to rescue the economy, but for some Democrats, that's not enough. He is being urged to do even more, though he won't be president for yet another 44 days. Let's get their take on what's going on. Two CNN political contributors, Republican strategist Ed Rollins is joining us in New York. And Democratic strategist Donna Brazile, she's here in the studio in Washington. Guys, thanks very much for coming in. First of all, let me get your quick reaction, both of you. Eric Shinseki, the former chairman, the chairman of the U.S. Army Chiefs of Staff, retired. Going to be the secretary of Veterans Administration, what do you think?

BRAZILE: A great choice, a strong choice. He will be a strong advocate for veterans, of course, and he will also be someone in the cabinet that can help the new president on foreign policy and especially getting us out of Iraq safely and responsibly. BLITZER: He was the chief of the U.S. army general staff, Ed. What do you think, Ed, about this appointment? Because as you heard Elaine point out, he caused quite a stir when he said correctly that dealing with a post-war Iraq was going to require several hundred thousand U.S. troops and that's not what Donald Rumsfeld, the defense secretary, wanted to hear.

ROLLINS: He was absolutely right. He had the courage to basically stand up as the army chief of staff, he was looking out for his troops. He basically spoke the truth to the Congress, which is what you always hope your military always does.

My personal felling is that he's an extraordinary choice to go along with General Jones and some others and, more important, he's going to be a guy who is going to tell the president how to take care of our troops when they come back home and the millions and millions of veterans we have out there that deserve so much that they haven't gotten.

BLITZER: He, himself is a wounded veteran himself. And, like Barack Obama, originally from Hawaii. So that's a little nugget there.

All right, let's talk a little bit about the bailout. The economy right now, Donna, as you know, it's in horrible shape. The statistics have been a disaster for so many Americans and the president-elect addressed that subject when he was on "Meet the Press" earlier today. Listen to this.


OBAMA: The key for us is making sure that we jump start that economy in a way that doesn't just deal with the short term, doesn't just create jobs immediately, but also puts us on a glide path for long-term, sustainable economic growth.


BLITZER: Now, that sounds great and it means, basically, creating jobs by rebuilding America's infrastructure, that's his proposal. What do you think?

BRAZILE: Last month we shed 533,000 jobs, that's the largest loss of jobs since 1974. The president-elect has stated that he wants a stimulus plan that will address not just job creation, but saving and preserving those jobs, new investment and infrastructure. He met with the governors, they've come up with a list of $136 billion worth of projects. So I think once he hits the ground and starts governing, he will have enough plans and enough, you know, hopefully make enough progress so that he can get this economy moving again.

BLITZER: But Governor Pawlenty, Republican of Minnesota, Ed, he pointed out the country is broke right now. Where is all this money coming from?

ROLLINS: Obviously we're going to borrow money and we're going to basically spend money. I would rather have us spend money on infrastructure than bailing out banks or bailing out entities that have failed. I think by rebuilding our roads and our water systems and what have you and creating jobs for young people and training them for the future is a very positive way of spending our money and moving this economy forward and I hope that there's bipartisan support for it.

BLITZER: Ed, look at these numbers. I'm going to put them up on the screen, how much U.S. taxpayers have spent so far in bailing out various aspects of the sector. Citigroup $45 billion, AIG the insurance giant $40 billion, if not more. Wells Fargo, $25 billion. Look at all those numbers. JP Morgan, Bank of America, Goldman Sachs, Morgan Stanley, $10 billion. You think $35 billion to bail out the big three automakers is justified, given those numbers?

ROLLINS: I think if you're going to be in the bailout business, which obviously most Republicans are not in favor of and a lot of Democrats aren't either, I would much rather bail out an entity like General Motors or Chrysler or Ford, if they have a plan to keep themselves moving forward. Because a lot of other jobs are affected. A lot of those banks on that list didn't even want the money and to a certain extent, there's no guarantee they're going to be better or do what they're supposed to do, which is bail out the mortgage problems that we have across this country.

BLITZER: Are they going to make a deal that is going to save GM, specifically? What do you think, Donna?

BRAZILE: Well, Speaker Pelosi has indicated that she is interested in some sort of short-term loan to help GM and Chrysler stay afloat over the next couple months. Look, Wolf. We've given the banks $300 million and yet one out of 10 homeowners are still struggling with their mortgage payment. So I think we need to have something that will help Main Street and not just bailout Wall Street and auto companies.

BLITZER: But there is a great fear, as you know Donna, that this is simply good money going to bad, specifically GM and Chrysler. Even Chrysler's parent company doesn't even want to lend any more money, apparently. They don't have much confidence in the future of that automaker.

BRAZILE: Well that's why Congress is taking a look at this.

BRAZILE: They're looking at the restructuring plan and they're looking at the ability to pay it back or to at least use this money to keep the company solvent and to ensure that the economy, especially those in the auto industry, the auto sectors, will not suffer anymore.

BLITZER: All right guys, stand by. I want to continue this discussion. Lots more to discuss with Donna Brazile and Ed Rollins, including the possibility of yet another Kennedy in the United States Senate.

Also, an election in Louisiana, yesterday, stay with us. LATE EDITION will be right back. (COMMERCIAL BREAK)

BLITZER: Welcome back. We're talking politics with two of the best in the business, Democratic strategist Donna Brazile and Republican strategist Ed Rollins. Hillary Clinton, is that -- she's leaving the United States Senate to become the next secretary of state. Caroline Kennedy, the daughter of the late president John F. Kennedy, a lot of buzz that she could emerge as David Paterson, the governor's selection. What are you hearing?

BRAZILE: I'm hearing that she's very interested. She called Governor Paterson. Of course, Governor Paterson is not showing his hand right now, but I hear that she's interested. She's testing the waters. She's talking to people who knows a little bit about that race, because of course, if Governor Paterson decides to choose her, she would have to run in 2010 and for a full term in 2012. So she would be a terrific choice, but Governor Paterson has a long list of people who are interested in that position.

BLITZER: He would have to make up his mind pretty quickly. What do you think of that idea, Ed?

ROLLINS: Well, I think it's a unique idea, and I think obviously it's a magic name as a family. The next senator from the state, who is obviously going to be a Democrat, is going to have to raise $30 million in two years. She has that ability. She has the Kennedy family that can help do that. My sense is that she'll fit right in the same mainstream of Hillary Clinton or liberal politics and I think to a certain extent, she's probably the best choice he has today.

BLITZER: Let's talk a little bit about 2012. Never too early, Ed, to take a look. We did a poll, a CNN/Opinion Research Corporation poll, of the GOP, and we asked Republicans out there who they like. Your guy, Mike Huckabee, you were his campaign chairman this time around, he's right at the top of the list there with Sarah Palin and Mitt Romney, Newt Gingrich. Rudy Giuliani even made the list. Bobby Jindal, the governor of Louisiana. What do you think about 2012 right now? Because I think it's fair to say we're only three years away from the Iowa caucuses.

ROLLINS: Well, we're a lot better off than we were a year ago when we were at the bottom of that list, so I'm happy for Mike Huckabee. It's way too soon -- I'm not even sure Mike Huckabee or Palin or anybody else is ready to jump into this race.

I think we need to watch this new president and see how well he performs. I think in a year from now, we'll know whether his initiatives are working. Someone certainly on that list is going to be in the game, I just don't know which ones at this point in time.

BLITZER: You know, it's fascinating. And Donna, you were a campaign manager for Al Gore. So you know, it's never too early if you're really serious about being president to figure out what's going on.

BRAZILE: I remember those at the bottom of the list today might be at the top of the list come 2012. Last year, we were talking about Rudy Giuliani and Hillary Clinton possibly being the nominees of their respective parties and look what happened.

BLITZER: Hillary Clinton got pretty close. Rudy Giuliani didn't get very close, but that's a different story. Your native state of Louisiana, huge upset yesterday in the race to fill a House seat. William Jefferson, the Democrat, indicted, a longtime member of the House of Representatives, losing to the moderate Republican Anh "Joseph" Cao, the first Vietnamese American to be elected to the House of Representatives. I was pretty surprised because Jefferson was elected the last time around even though the cloud of suspicion was all over him.

BRAZILE: I wasn't surprised. Look, there's a lot of Jefferson fatigue. A very low turnout elections and 15 to 20 percent of the black voters decided to vote for Joseph. So I think this was a historic election. I don't know if he'll be able to keep that seat. That is a very Democratic seat. But Bill Jefferson, his family, they've been in a lot of trouble. Hopefully he can now focus on some of his problems.

BLITZER: It's a predominantly An African-American district that this Vietnamese American won. What does it say to you, if anything, about the big picture, Ed?

ROLLINS: We're very happy to have a Vietnamese-American who obviously can be a young star. We have a young star as a governor in Louisiana. This may be a seat that our friend James Carville goes and decides to try to run for. I saw him at the fights last night, so maybe he's going to stay in Louisiana and become a candidate. But we're very happy. We need to basically reach out to different constituency groups. This is a fine young man who obviously was a really good candidate. This was really a special election and as Donna said, there wasn't quite the intensity that there was a few weeks ago in a presidential election, but we now have the seat and we'll fight hard to keep it.

BLITZER: We'll watch every step of the way. Guys, thanks very much for coming in. Ed Rollins, Donna Brazile. My interview with Condoleezza Rice, coming up right at the top of the hour.


BLITZER: This is LATE EDITION, the last word in Sunday talk.


RICE: This investigation needs to go forward. It needs to be transparent and Pakistan needs to act.

BLITZER: In a wide-ranging interview, Secretary of State Condoleezza Rice talks about rising tensions between nuclear armed India and Pakistan. We'll also take a look back at her years at the State Department and a look forward to the troubles Barack Obama should expect.

OBAMA: I assembled this team because I'm a strong believer in strong personalities and strong opinions.

BLITZER: The president-elect unveils more cabinet picks while some Democrats say he can't wait until January 20th to take action on the failing economy. Insight and analysis from three of the best political team on television. LATE EDITION's second hour begins right now.


BLITZER: Welcome back. The Secretary of State Condoleezza Rice, she's been desperately trying to ease tensions between India and Pakistan in the aftermath of the Mumbai terror attacks. I spoke with Secretary Rice just a short while ago.


BLITZER: Madam Secretary, thanks very much for coming in.

RICE: A pleasure to be with you, Wolf.

BLITZER: You're just back from the region, India, Pakistan. How concerned are you that these nuclear rivals, that there could be a misconception out there, a miscalculation, and this tension between the two of them, which is real right now could escalate?

RICE: Well, we have a lot going for us that we didn't have in 2001, 2002. The relationship between the countries is better. Our relationship with each of them is better. But in fact, the key here is that this investigation needs to go forward, needs to be transparent. Pakistan needs to act.

India and Pakistan are -- need to cooperate. And I do believe that if that is done, we can both -- they can bring the perpetrators to justice. But they can also prevent a follow-on attack, which has to be a concern.

BLITZER: "The Washington Post" wrote this yesterday: "In New Delhi, a high-level source in the Indian government, speaking on the condition of anonymity, said Indian has 'clear and incontrovertible proof' that an Islamist militant group based in Pakistan, Lashkar-e- Taiba, planned the attacks, and that the group's leaders were trained and supported by Pakistan's powerful Inter-Services Intelligence Agency, or ISI."

Is that true?

RICE: Well, I think there is no doubt that Pakistani territory was used by probably non-state actors. I don't think that there is compelling evidence of involvement of Pakistani officials. But I do think that Pakistan has a responsibility to act. And it doesn't matter that they're non-state actors.

There were problems with this from Pakistani territory. There are historical problems with Pakistani territory in this regard. And Americans were killed in this. And I did emphasize to the Pakistani government that the United States, of course, has a special interest in the sense Americans were also killed.

BLITZER: Well, you used the word "probably." And you're a diplomat...

RICE: No, I just -- I think that the evidence is that the terrorists did use territory in Pakistan.

BLITZER: They trained in Pakistan. Did they have any cooperation, this group -- do you, first of all, believe Lashkar-e-Taiba was responsible for this assault?

RICE: Well, I don't want to go into too much detail here, because obviously in counterterrorism, no one wants to tip of what has happened here and what may happen in the future. The important thing now is to get these perpetrators and to prevent follow-on attacks. And Pakistan's cooperation, Pakistan's action is absolutely essential to doing that.

BLITZER: What is the relationship, irrespective of this group, between Lashkar-e-Taiba, this terrorist group based in Pakistan, and the Pakistani government or the intelligence or military services?

RICE: Well, there have been historic ties. There is no doubt about that. But Pakistan is a different place now with a civilian government and an army leadership that is working in concert to try to bring an end to extremism within Pakistan.

We have to remember that Pakistan itself has been suffering at the hands of extremism. So whatever the history here, and there is a history, the important thing is that Pakistan act against those who used Pakistani soil to perpetrate attacks. I don't...

BLITZER: Are they doing enough, the Pakistani government, to deal with these terrorists?

RICE: They are certainly, I believe, committed to doing so. But we are awaiting action, and that action needs to take place soon.

BLITZER: The "New York Times" today, in an article by David Sanger, writes this: "The review contains an array of options, including telling Pakistan's military that billions of dollars in American aid will depend on the military's being reconfigured to effectively fight militants.

"That proposal amounts to a tacit acknowledgment that roughly $10 billion in military aid provided to Pakistan as 'reimbursements' for its efforts to root out militant groups has largely been wasted."

This is a review the Bush administration is preparing for the incoming Obama administration.

RICE: It is very clear that Pakistan's principal problem here is not India. The relationship is improving between Pakistan and India. But there are plenty of people who want to see that relationship blown up. And the Pakistanis and the Indians need to continue or to get back on a course of cooperation. In that regard, the Pakistani army is restructuring and does need to be restructured for different tasks. But it's not easy, Wolf, to move from the kind of army that Pakistan has had, to one that is principally counterterrorism and counterinsurgency.

BLITZER: Does President Zardari of Pakistan, the newly elected president, the widower of Benazir Bhutto, does he have complete control over all elements of his military and security, intelligence services?

RICE: Well, we treat the Pakistani government as an integrated and unified government. And I heard nothing in Pakistan that suggested that there were divisions in this regard between the army and the government.

This is an elected civilian government. It has the kind of legitimacy that the Pakistani government has not had since 1999. And I believe that it is in actually as strong a position because of that to act.

But we have been working with the Pakistanis on this for some time. This didn't start yesterday, it didn't start with the review of helping the Pakistanis to think in a more counterinsurgency, counterterrorism way.

But we in the United States have found that it's not easy to restructure your armed forces from forces that are principally aimed at fighting another state actor to forces that can deal with ungoverned regions, safe havens, and not to mention the kind of union of law enforcement and intelligence information that it takes in the war on terrorism.

BLITZER: When you were here on LATE EDITION back on July 18th, we had this exchange. And I'm going to play it for you. Listen to this.


RICE: It's very clear that more has to be done to stabilize that border between Afghanistan and Pakistan. More has to be done.

BLITZER: So they're not doing it?

RICE: More has to be done.


BLITZER: All right. Since that -- since July, have they stepped up to the plate, the Pakistani government, to stabilize its border with Afghanistan?

RICE: Well, more is being done. I think everyone knows that there have been some really dramatic Pakistani fights. The army, in parts of the region, Peshawar, for instance. And so, yes, they are doing more. But, boy, there is a lot more to be done. This is...

BLITZER: What else do you want them to do? RICE: Well, this is a very tough problem. And it requires a unity of intelligence and military capability and law enforcement capability that few countries have achieved. And Pakistan needs to do that.

But getting back to the Mumbai situation, there are some concrete steps that Pakistan needs to take urgently, quite aside from a lot of restructuring that is going to have to be done.

And I might just underscore that the Indians too were very focused on restructuring their own response to counterterrorism, because one has a sense that they said of stove-piping of information, inability to share information...

BLITZER: In other words, the left hand of the Indian government might not know what that right hand is doing.

RICE: And we have certainly experienced that. And a focus on prevention has not really been at the core. And so one of the things that we said to the Indians is that we are prepared to share our experiences, our best practices since 9/11, when we have gone a long way to...

BLITZER: What did they say?

RICE: ... restructuring. They were grateful for that -- the offer.

BLITZER: Are they going to accept that?

RICE: I think they are going to accept. BLITZER: In Pakistan, are you willing to do the same with them?

RICE: Well, we are sharing information and working with both Pakistan and India.


BLITZER: My colleague and friend Fareed Zakaria will have much more on the Mumbai terror attacks and the tensions between India and Pakistan on his program, "FAREED ZAKARIA: GPS." That comes up at the top of the hour, 1:00 p.m. Eastern right here on CNN.

But up next, we'll have more of my special interview with the Secretary of State Condoleezza Rice. I'll ask her what she thinks about her successor, Senator Hillary Clinton, and about Barack Obama's historic election. She opens up in talking about that. Stay with us. LATE EDITION will be right back.


BLITZER: Welcome back to "Late Edition." Here's part two of my interview with the secretary of state, Condoleezza Rice.


BLITZER: It seems that Hamid Karzai, the president of Afghanistan, is so frustrated about the deteriorating situation in Afghanistan right now.

He said this -- and I'm going to read it to you -- on November 27th: "This war has gone on for seven years. The Afghans don't understand anymore how come a little force like the Taliban can continue to exist, can continue to flourish, can continue to launch attacks with 40 countries in Afghanistan. The international community didn't fight the Taliban properly. Give the Afghan people a timeline."

He wants a timeline for withdrawal of the NATO and U.S. forces from Afghanistan.

RICE: Well, I've talked to President Karzai, and I think what he wants to do is to get the job done. And I understand the frustrations.

But, of course, a lot has gone right in Afghanistan as well. His government has been able to deliver for the Afghan people in ways that a country as poor as Afghanistan is, and then been at civil war for 25 years, is pretty remarkable, some of the things that they've done in education and health care.

BLITZER: But it has gotten worse. And it seems it has gotten -- it is getting worse.

RICE: There is no doubt that the problem across the border, that region that is ungoverned that we were talking about, has allowed the Taliban to regroup in ways that they were not regrouped a couple of years ago.

But there are several answers to that. Yes, the international community is prepared to do more. The United States is going to put more forces in. I believe you will see more contributions from our allies.

But it is also important to build more Afghan forces rapidly. Because, ultimately, the Afghan people have to be the -- the spear of this fight.

And frankly, there are things that can be done in terms of governance and fighting corruption and making sure that the Afghan people are protected in terms of counter-narcotics.

BLITZER: So he should step up to the plate, too...

RICE: And we've had that conversation...

BLITZER: ... Hamid Karzai.

RICE: ... and I believe that President Karzai is devoted to doing exactly that.

BLITZER: How -- can you tell the American public out there the international community who are watching that the U.S. is any closer today to finding bin Laden? RICE: Well, we are searching for him and do every day. But this isn't a one-man organization. Al Qaida dangers come not just from Osama bin Laden, as much as we all want to bring him to justice. And the United States has taken out an awful lot of their leadership, not to mention masterminds of the plots of September 11th, like Khalid Sheikh Mohammed.

It's a weaker organization today because of what we've done. But it's a different organization that poses other kinds of dangers.

And so, while the focus on bin Laden is important, the numbers of field generals that have been taken out, the tracing of their money and making it more difficult, and the worldwide umbrella in terms of law enforcement and information and intelligence has made it possible to deal with Al Qaida in ways that we could not before September 11th.

BLITZER: Was Al Qaida involved in the Mumbai attacks?

RICE: Well, we don't have any evidence of a direct link there. But I do think that we all know that there are links between these organizations. They tend to travel in the same circles. And the sophistication of this attack is what everyone is focused on.

BLITZER: So Lashkar-e-Taiba, if in fact they were responsible, do they have direct links with Al Qaida?

RICE: Well, they tend to travel in the same circles. And we -- I've -- again, I don't want to imply that there is any direct Al Qaida role here.

BLITZER: Let's move on and talk about something else in the region, Iran, and nuclear tensions, specifically with Israel right now.

The Jerusalem Post reported on Thursday this: "The IDF," the Israel Defense Forces, "is drawing up options for a strike on Iranian nuclear facilities that do not include coordination with the United States, The Jerusalem Post has learned. While its preference is to coordinate with the U.S., defense officials have said Israel is preparing a wide range of options for such an operation."

RICE: Well, I can't comment on unknown sources. I don't know what those sources are. I do know that we've had lots of very important discussions, not just with Israel, but with states in the region about the potential threat from an Iranian nuclear weapons program.

I -- the international community is focused on it because just that kind of talk lets you know how serious a matter this is. The Iranians have to be stopped, ultimately, from gaining the kind of technology and putting that technology into use to build a nuclear weapons capability.

And that's what we're all...

(CROSSTALK) BLITZER: How much time is there?

RICE: I don't think it's worthwhile, there, to try to judge the many different timelines that are out there about when they might achieve that capability. The important thing is that Iran is under a microscope on this issue; Iran is under sanctions on this issue.

Many, many companies and banks and institutions are leaving Iran. Iran is becoming more isolated and there is even a debate in Iran about whether their government's policies and the isolation it has brought is worth it.

And so we have built extraordinary pressure on Iran that was not frankly there when the president came to office. When the president came to office, nobody really believed that the Iranians were trying to do this.

BLITZER: And you have no doubt that their intent, the Iranians, is to build a nuclear bomb?

RICE: Well, I have no doubt that they could have a civil nuclear program tomorrow if they wished. We have told them, everyone has told them that the kind of reactor that the Russians built for them at Bushehr, which is a civil nuclear reactor with a fuel take-back to Russia, is available to them at any time.

So if they want civil nuclear power, they've got an option. That leaves only the assumptions that perhaps they're not looking for a civil nuclear power, but rather for a nuclear weapons program.

BLITZER: You have devoted an enormous amount of your energy to trying to advance the Israeli-Palestinian peace process. A year ago, on November 27th, this is what President Bush said at his conference -- his Middle East conference in Annapolis. Listen to this.


PRESIDENT GEORGE W. BUSH: We agree to engage in vigorous ongoing, and continuous negotiations and shall make every effort to conclude an agreement before the end of 2008.


RICE: Yes.

BLITZER: Well, it's almost the end of 2008.

RICE: Well, we have certainly made every effort, and so did they.

BLITZER: Is it a failure, then?

RICE: No, of course not. We said we would make every effort. But look at where we found this thing.

We found the Israeli-Palestinian conflict in full force, with a Second Intifada, with hundreds of Israelis and Palestinians dying, with suicide bombings at Israeli restaurants and a Passover massacre, with Israelis running large-scale operations in the West Bank and occupying Palestinian towns; Yasser Arafat stealing the people blind and refusing to make peace.

And now you have a decent Palestinian government, devoted to doing better for its people, at least in the West Bank, with Salam Fayad and President Abbas.

RICE: You have the first full-fledged negotiations between these two parties on the core issues -- all of the core issues to end the conflict.

You have international support for that, including Arab support, after all, the Saudis were at Annapolis under their own flag for the first time. And you have on the ground the training of Palestinian security forces thanks to a number of generals, including General Jim Jones...

BLITZER: Who is going to be Barack Obama's national security adviser.

RICE: Yes. And you have now decent Palestinian security forces deploying in places like Jenin and Hebron and Nablus. This is a fundamentally different situation than we found. And because of the strong support of President Bush for Israeli security concerns, Ariel Sharon, who was brought to power not to make peace, but to defeat the Intifada, said that Israel must divide the land.

And for the first time you have a broad acceptance in the international community that a two-state solution is the only solution.

BLITZER: So you think that there is a potential there...

RICE: I absolutely do.

BLITZER: ... not necessarily on your watch, but under Hillary Clinton's watch...

RICE: The foundation is there. The foundation is there. Many of the pieces are in place. Obviously the political circumstances in the region and in the countries made it difficult. Israel is in an election campaign.

But I don't think that there is any doubt that this is so much further along, really, than it has ever been.

BLITZER: Have you sat down with Hillary Clinton yet, who is going to be your successor?

RICE: Well, I was leaving town the day after she was named. And -- it was actually the day that she was named. I talked with her and we're going to sit down and I'm really looking forward to it. I've known her a long time and she is someone that I admire. BLITZER: Do you think she'll be a good secretary of state? RICE: I do.

BLITZER: You have confidence in this new national security team that Barack Obama is putting together?

RICE: They're all people I know and they are all people of substance. And the most important thing is that they are all people who are going to have the fundamental interests and values of the United States at the core of what they do.

BLITZER: I know you were watching when we reported that Barack Obama would become the 44th president of the United States. What went through your mind as you saw that dramatic historic moment in the United States?

RICE: Well, I'll tell you, from -- a kid from Birmingham, Alabama -- in segregated Birmingham, Alabama, it was quite a moment. It means this country has come an enormous distance.

It means that the United States of America is what it claims to be, which is a place of opportunity for all. I don't think, by the way, that we're still color-blind. It's remarkable that we have an African-American president. We've had back-to-back African-American secretaries of state. We have African-American heads of major corporations.

But still, we see race and that's fine. But increasingly we don't see race as all-defining, of who one is and what one can be. As long as we pay attention to opportunity -- to making educational opportunities available, which is really what got me to where I am and I think President-elect Obama would tell you the same thing.

BLITZER: So if he asks you for some help...

RICE: I think we'll do -- I think America will do all right.

BLITZER: But if he asks you for some help, would you be more than happy to help him?

RICE: Well, he is not going to need my help. He has got plenty of help. But of course, he is someone that I admire. He was on my committee, the Foreign Relations Committee. We have talked a number of times. He is going to do very well for the country.

But eight years is a long time. The American people are wise in wanting change. Two terms is plenty. And I'm going to go back to California and on to other things.

BLITZER: Good luck to you.

RICE: Thank you.

BLITZER: Thanks very much.

RICE: Thank you.


BLITZER: And just ahead, my colleague and friend, Campbell Brown, she had tough words this week for the President-elect Barack Obama. She talks about why, when LATE EDITION continues.


BLITZER: Welcome back to LATE EDITION. I'm Wolf Blitzer reporting from Washington. Earlier this week, Barack Obama was quizzed about his pick for secretary of state, Senator Hillary Clinton. Here's how it went.


PETER BAKER, NEW YORK TIMES: Going back to the campaign, you were asked and talked about the qualifications of now your nominee for secretary of state and you belittled her travels around the world, equating it to having tea with foreign leaders and your new White House counsel said that her resume was grossly exaggerated when it came to foreign policy. I'm wondering whether you could talk about the evolution of her credentials since the spring.

OBAMA: I think this is fun for the press to try to stir up whatever quotes were generated during the course of the campaign. No, I understand, and you're having fun.


BLITZER: And that response from the president-elect drew a quick reaction from my CNN colleague Campbell Brown on her show, "NO BIAS, NO BULL." Take a listen to this.


CAMPBELL BROWN, CNN ANCHOR: There we go again, the pesky media. All we want to do is have a little fun, stir things up for our own amusement. I mean, really, how silly of that reporter to dare can ask you, Mr. President-elect, how it is that you completely mocked Hillary Clinton's foreign policy experience just a few months ago and yet today you think there is no one more qualified than she to lead your foreign policy team. It's a clever device, treating a question so dismissably in an attempt to de-legitimize it. But it is a legitimate question. As annoying as you may have found it, it is a fair question.


BLITZER: And Campbell joining us now from our New York bureau. Wow Campbell, you really got irritated by that response from the president-elect. Help us better appreciate where you're come from. And I know you're a former White House correspondent, so you appreciate presidential responses, if you will, to pesky questions.

BROWN: As are you, Wolf. And I think it's my hope as a former White House correspondent that over the next four years, Barack Obama gets asked many, many annoying questions. And, you know, Wolf, back in your days as White House correspondent, you certainly asked your share of very tough, very challenging, and yes, often annoying questions, as well, of presidents.

That's our job. And my feeling was that the dismissiveness by President-elect Obama in his answer to Peter Baker's question was not warranted in this case. Many people voted for President-elect Obama based on what he said during his campaign.

If it was just rhetoric, then what else was just rhetoric? And I think it is fair and legitimate to ask him as Peter Baker did there, what the evolution of his thinking was. And for him to give us a real answer instead of just making it out as though the press is just trying to have fun. There's more to it than that.

BLITZER: Because there's no doubt there was some tension between Barack Obama and Hillary Clinton in their joint quest for the Democratic presidential nomination. And there's nothing wrong with reporters recalling that now as they move forward in their new partnership.

BROWN: I couldn't agree more, Wolf. And I think, you know, he has sort of suggested this without saying it very explicitly, is that, look, they've risen above it. And if they have, in fact, risen above it so that they can be true partners, and he has many rivals as we've certainly talked about now as part of his cabinet, and if he has the ability to get above that and make these people genuinely part of his team, he should be commended for that.

But when asked about it, I think, you know, people also deserve a real answer, which is, you know what, I regret what I said about Hillary Clinton during the campaign. I wish I hadn't. We've gotten beyond it, and I'm glad she's part of the team.

I mean, that's a more authentic answer which, frankly, people expect from him. We heard a lot of that sort of banter from him during the campaign. And so, I think he was a little shortsighted in just sort of dismissing it and shows a willingness to give us a little bit more of an explanation.

BLITZER: Campbell, good point. Thanks very much. Campbell Brown, by the way, is the host of CNN's "CAMPBELL BROWN: NO BIAS, NO BULL." It airs every weeknight at 8:00 p.m. Eastern right here on CNN. Straight ahead, three of the best political team on television. They're standing by to break down the week in politics. You're watching LATE EDITION, the last word in Sunday talk. (COMMERCIAL BREAK)

BLITZER: Welcome back. A very busy week in Barack Obama's transition to power. Let's talk about it with our CNN senior correspondent Joe Johns and our senior political analyst Gloria Borger and our fellow senior political analyst Bill Schneider. A lot of senior political analysts. A lot of seniors.

That means you're excellent. Gloria, let's talk about this auto bailout. Are they going to do a deal that would save at least GM? Chrysler is in deep trouble right now. Ford, not so much but pretty serious problems as well.

BORGER: You know, I think they're going to hold their noses and do something. Obviously, everybody understands that the auto companies have been run badly. There's a great deal of a sense if we weren't in this kind of economic crisis, that maybe we should just let them go bankrupt.

However, given the unemployment numbers we saw last week, Wolf, and given the number of jobs that this would lose, I think there are folks in the Congress, in the incoming administration, and in the current administration who say you just can't let them fail.

SCHNEIDER: They're going to do something to make sure things don't collapse immediately. When they saw those unemployment numbers, but any basically structuring -- particularly government supervision, they want to put off until the Democrats have a firmer control of Congress and let the Democrats and President Obama really shape it.

BLITZER: So they're really punting, if you will, until after January 20th.

SCHNEIDER: And avoiding catastrophe.

BLITZER: But you know, some people, including Barney Frank, they would like something to happen immediately. Listen to Barney Frank, the Democratic chairman of the House Financial Services Committee.


FRANK: It's probably the case that he's going to have to be more assertive than he's been. Nobody says is, well, we only have one president at a time. My problem is at a time of great crisis with mortgage foreclosures and autos, he says we only have one president at a time. I am afraid that overstates the number of presidents we have.


BLITZER: The master of the sound bite, Barney Frank. You've covered him for a long time. But in all seriousness, is Barack Obama, as the president-elect during this transition, doing enough?

JOHNS: He has to walk a line, and it's a very thin line, number one. The other thing he knows, I think, is that when you're talking about a lame-duck Congress, it's a very fluid situation.

Because the same allegiances aren't there. You can't necessarily convince people you could otherwise convince if you were the president in power. And I think the other thing you have to look at, too, is what happens if he steps in and fails.

Remember, even though it's a very different situation, John McCain jumped in, raced to Washington over the $700 billion rescue plan, found that he could do absolutely nothing. It made a mess of his campaign. Barack Obama understands that it's probably better to let the Congress figure out what they're going to do and then get in and add some nuance to it rather than work it the other way. BORGER: I think he intends to get in on day one, on January 20. There's going to be a stimulus package which seems to be growing by billions of dollars every single day.

BLITZER: If not hundreds of billions.

BORGER: If not hundreds of billions. He's getting a consensus, even conservative economists have become Keynesians and believe you have got to throw a lot of money at this stimulus package right now. So, he can do that. And if there's more money needed for the auto company, he can do that right after January 20th. I think Barney Frank is saying, look, I'm alone out here, guys, I need you, you understand that, but --

BLITZER: He's looking for help.

BORGER: He's looking for help.

BLITZER: And Barack Obama could certainly help him. You know, a lot of Americans have a hard time understanding, Bill, why the federal government, and its all money coming from the U.S. Treasury, the Treasury spending hundreds of billions of dollars to bail out these financial institutions. Bear Stearns getting, what, $30 billion or whatever, hundreds of billions of dollars going to the Fannie Mae and Freddie Mac, AIG, the insurance giant. But they can't come up with $30 or $35 billion to bail out these three pillars of American industrial manufacturing jobs.

SCHNEIDER: Well, they don't like it, the American public does not like the idea of a bailout. It's a bad word to use, if you ask people.

BLITZER: How about rescue?

SCHNEIDER: A rescue, interim loan, whatever you want to call it, it's not popular. That's one of the reasons why Congress is balking. And as far as the auto industry is concerned, you know, they don't like that either because the idea is they're bailing out big business, and the people who need help are people who are facing foreclosure, people who are losing their jobs. They're the ones the money should be spent on in the public's view.

JOHNS: I was just going to say the automakers have a serious public relations problem. People have been watching these companies for years. They see the automakers as having actually caused a lot of the problems that they're now facing. So, that's a real difficulty for them, too. They really have to come up here and do a massive PR job in the long run. I don't think they've really --

BORGER: Driving here helped a little bit.

JOHNS: A little bit.

BLITZER: Little symbolic things like that in the scheme of things could have such an impact. BORGER: And I think it did have an impact and they came with their tails between their legs, sort of apologetic and saying I'm really sorry.

But also, Wolf, there's another side of this equation that's very important, which is that people want some mortgage relief and that that's going to happen, as well, because you can't just bail out Wall Street. You can't just bail out the automakers. And you have to help those folks whose homes are being foreclosed on and who can't afford to get into the home market now.

BORGER: And you see lots of talk, now, about low-interest mortgages and those kinds of things, which I think Obama is going to focus on.

BLITZER: And, you know, if you take a look at these jobs numbers, more than 500,000 jobs, Joe, lost in the month of November alone. And people are bracing for, maybe, even worse in the month of December before Christmas.

This is not a good time for Americans to be losing their jobs in these kinds of numbers.

JOHNS: Yes. It's absolutely stunning, when you look at it. But when you also look at what Barack Obama said, he is looking to try to either save or restore 2.5 million jobs at the end of the day.

So what he's talking about is, when we get back to into a recovery, we're going to have to pull back a lot of the jobs.

It looks to me that somebody on his economic team accounted for the possibility that this economy would go to at least 2.5 million lost jobs. And then Barack Obama, sort of, looks like the guy who came riding to the rescue when, in fact, it sort of...

BLITZER: In the first 11 months of this year, 1.9 million gone. If there's another 500,000 gone in December, we're talking close to 2.5 million jobs.

All right, guys, stand. We have a lot to talk about. Stay with us.

Barack Obama -- he weighed in on the Big Three bailout debate earlier today. We're going to bring you what he had to say in our very popular "In Case You Missed It" segment.

And a reminder, CNN will have live coverage of President-elect Obama's news conference announcing his pick for Veterans Affairs secretary. That's at 2 p.m. Eastern, later today. We'll be right back.


BLITZER: And now, in case you missed it, let's check some of the highlights from the other Sunday morning talk shows here in the United States, and then we'll get back to the political panel. On all of the Sunday talk shows, the troubled U.S. auto industry was a key topic.


PRESIDENT-ELECT BARACK OBAMA: What we have to do is to provide them with assistance, but that assistance is conditioned on them making significant adjustments.

They're going to have to restructure. And all their stakeholders are going to have to restructure, labor, management, shareholders, creditors. Everybody's going to recognize that they have -- they do not have a sustainable business model, right now.


SEN. CHRISTOPHER J. DODD, D-CONN.: One out of every 10 jobs in this country is either directly or indirectly related to the automobile industry, including the foreign dealers, here, of cars. They're going to be affected by this; suppliers, dealers, obviously.

So, none of us like this at all, and there's a lot of reason to be furious at how the industry has handled itself, but there's a lot more at stake than just Detroit.



SEN. RICHARD C. SHELBY, R-ALA.: This is not something that happened overnight. This is 30 years in the making. These companies basically have failed or are failing.

They probably need, according to some people, about 60 percent of the management to go and about 40 percent downsize of the workers. They've got to compete. They can't compete today.



RON GETTELFINGER, UAW PRESIDENT: Countries around the world are considering aid for their auto industry. And we just need to shore up this industry with this emergency bridge loan. And that's what it is.

People often use the term "bailout," but it's a bridge loan. It's good for Main Street. It's good for side-street America. And it's good for rural America.


BLITZER: Some highlights from the other Sunday morning talk shows, here on "Late Edition," the last word in Sunday talk. We'll be back with more insight and analysis from three of the best political team on television. Stay with us.


BLITZER: We're talking with CNN's Bill Schneider, Gloria Borger and Joe Johns.

Bill, the prospect of Caroline Kennedy, the daughter of the late President John F. Kennedy, becoming the next U.S. senator from New York state, succeeding Hillary Clinton, who's going to be the secretary of state, seems to be pretty much in the cards. A lot of people are saying that's pretty realistic.

SCHNEIDER: That's right. Her cousin, Robert Kennedy Jr., has said she is definitely interested. There's a lot of stories going around that her Uncle Ted would like this to happen, and he's been making some calls.

BLITZER: And he's very sick with brain...

SCHNEIDER: He's very ill. We hope he stays in the Senate for a long time, but he would like to make sure there's always a Kennedy in the Senate.

The issue is that she has to run in 2010 and in 2012 if she wants to keep that seat Democratic. And I pity the poor Republican who run against Caroline Kennedy, JFK's daughter, in New York.

BLITZER: She could be pretty popular in New York state. What do you think?

BORGER: Sure, she already is popular. She's already -- don't forget, this is the Kennedy who really was very private, not involved in public service too much because she was raising her children, has now started stepping into the public arena first with New York City public schools and now in campaigning for Barack Obama. They've become very good friends. She managed the vice presidential selection process along with Eric Holder. And I think there is kind of a legacy there because, of course, that was Robert Kennedy's seat from New York state. And her uncle would really like --

SCHNEIDER: She wants to be part of it. She wants to be part of this Obama --

BORGER: She does have one child, though, that's left in high school and I think that's a large consideration.

BLITZER: There's no doubt though for Governor David Paterson of New York, all politics are local. He wants to get himself re-elected down the road, and so he's got to look at upstate, downstate, Kennedy, not Kennedy. So he's got a lot of considerations he's got to worry about.

JOHNS: Yes, it will certainly make him very popular. Everybody knows that name. A lot of people said Paterson himself in another world might have been a guy whose name would have been on that list. But when you look at Caroline Kennedy, it is going to be quite interesting. I think Ed Rollins said earlier on the show she'd have to raise something like $30 million over the next two years. SCHNEIDER: She could do it.

JOHNS: If anybody can, she can.

BLITZER: Barack Obama could probably help.

BORGER: And as Dana Milbank pointed out, poor Chuck Schumer. First he had Hillary Clinton with him and now he might have Caroline Kennedy.

BLITZER: He's still the senior senator.

All right, let's talk about Louisiana. History was made yesterday in a congressional district. William Jefferson who has been indicted, had some $90,000 plus dollars in his freezers, a lot of our viewers will remember. He got re-elected two years ago, but this time he lost to a Vietnamese American, his name is Anh "Joseph" Cao, a moderate Republican in a predominantly African-American district in Louisiana. And the Republicans are pretty happy about this.

SCHNEIDER: Republicans are. Look, in Louisiana, they talk about Republican diversity. They have a governor, a Republican governor of Indian American decent who's often --

SCHNEIDER: Bobby Jindal.

SCHNEIDER: Bobby Jindal, who is often talked about as a possible presidential contender. Now they have a Vietnamese American, a Republican representing a district in Congress. And they may have won the other seat. That was very close. Republicans doing well in the south and in Louisiana. They carried the Georgia seat, too.

BLITZER: That may be unique because as Donna Brazile points out, a lot of William Jefferson fatigue even in his own home district.

BORGER: Well, it's the $90,000 in the freezer, first of all. It's the fact that the family involvement in all of this, benefiting your family. I think it's enough. You know, ethics problems are things people don't have time for anymore. They just want to get the country moving.

JOHNS: It was really clear, you know, Democrats knew they had a big problem with Bill Jefferson for a long time, and Nancy Pelosi struggled with it.

And it was one of those deals where the Democrats just could not look at him and say, look, you've got a big problem, this is ugly, you probably need to step aside and let a Democratic challenger go forward in that district because at the end of the day the voters are going to turn you out. Small turnout, interesting point that we heard earlier, 15 percent of African-Americans in that small turnout actually voted for the Republican. So just sort of a new day. It shows even in Louisiana, there's only so much voters will stand for.

BLITZER: And we'll leave our viewer with a little clip from last night's "Saturday Night Live." Amy Poehler playing Hillary Clinton, the next secretary of state.


AMY POEHLER, ACTRESS: We Clintons are here to stay. You may think we're down, but like the south, vampires, and Britney Spears, we will rise again.


BLITZER: Darrell Hammond playing Bill Clinton. What do you think? You laughed.

JOHNS: Vampires? BLITZER: We'll leave it on that note. All right, thanks very much. Up next, one of the world's richest men shares his concerns about the U.S. economy. My conversation with the Microsoft founder and philanthropist Bill Gates, when LATE EDITION returns.


BLITZER: He's one of the world's wealthiest men and most generous philanthropist. Like everyone else, Microsoft founder bill gates has fears about the state of the U.S. economy right now. I spoke with him this week in "THE SITUATION ROOM."


BLITZER: How worried are you about the U.S. economy right now?

BILL GATES, FOUNDER, MICROSOFT: Well, we're in uncharted territory and we're certainly going to have a fairly serious recession. I think the right things are being discussed about stimulus, and I'm sure we'll come out of it. But it could be a tough period.

BLITZER: What worries you the most?

GATES: Well, a recession has a way of building on itself in that as people cut back on spending, that means jobs get cut back. And the federal government is one of the few sources that can be countercyclical. Figuring out how to do that in ways so that the incentive structure is right and so you come out of it the right way, it's a challenge because it's a global downturn.

BLITZER: Because I know you're worried not only about the short term but the long term, as well. Now, specifically, how deep, how long will this recession, in your opinion, go on?

GATES: Well, I'm not an expert on predicting the length. My big focus is that during this time period we continue to make the key investments that improve life so dramatically, the investments in education that are key to equality in this country, and the investments in helping other countries get to the same type of prosperity that we take for granted.

BLITZER: What was the crucial turning point, in your opinion, that resulted in this collapse, if you want to call it that, of the economy?

GATES: Well, collapse is a little strong.

BLITZER: But it's arguably the worst recession since the Great Depression.

GATES: Well, there are economic statistics that some of them should cause concern. We had a credit expansion over a 50-year period, and so more than looking at the particular things that slipped up, first you have to say OK, how far out can we get in terms of the consumers' balance sheet and what is it going to take to bring that back in line?

Clearly, we'll have a few years where consumers are spending less and their savings picture gets to be far more healthy. The U.S. was actually the much higher level of consumption than any of the other rich economies.

BLITZER: So, if you were going to give Barack Obama right now one piece of advice in dealing with the immediate economic crisis, what would that be?

GATES: Well, clearly we need a stimulus that doesn't undermine the incentives for businesses to be careful about their spending and making those correct investments. The key point I'd make is that in addition to that stimulus, you've got to fund the kind of scientific work and educational investments that can really have us be a much better country as we emerge from the recession.


BLITZER: That was Bill Gates speaking earlier. Don't forget, in one hour, 2:00 p.m. Eastern, the President-elect Barack Obama will have his news conference announcing his new secretary of veterans affairs. CNN will have live coverage, 2:00 p.m. Eastern, in one hour. That's it for me. Thanks very much for joining me. I'm Wolf Blitzer in Washington. Up next, "FAREED ZAKARIA: GPS."