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The Situation Room

Stock Market Takes Big Dive

Aired February 27, 2007 - 16:00   ET

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

JOHN KING, HOST: Susan, thank you.
John King in for Wolf Blitzer today.

That breaking news from Wall Street is creating jitters here in Washington and across the country right now.

Much more now on the stock sell-off and what's driving the market down.

Let's bring in Ali Velshi in New York -- and, Ali, let's just start with the basic question, what happened?

ALI VELSHI, CNN CORRESPONDENT: Well, it started overnight, John.

It was a -- it's been a rough few days on the stock market and then overnight jitters about the attack on a U.S. base in Afghanistan, an attack that was pretty close to the vice president of the United States.

And before traders had a chance to digest that, we had news from China. The biggest sell-off on that stock market in 10 years.

That spread to Europe and before people had finished their morning coffee in the U.S. we had a report about American companies not buying as much machinery and expensive big ticket items as they used to.

This is all before markets opened. And then, right after markets opened, we found out that existing homes are now worth less than they were a year ago, something we expected.

But all of this together was too much for markets to take. They've been in the black -- in the red all day, and suddenly -- accelerating all day. And suddenly, late afternoon, it went from being down in the 300s to all of a sudden jumping to a low of 537 points lower.

As you can see now, we're waiting for these numbers to settle in. But it looks to have moved up to about a 400 point loss.

This is unprecedented, John. This is a big deal on the markets. The only thing to remember here is we've been talking to people who are professional buyers and sellers of stock all day. And what they have been telling us is that there is nothing about the fundamentals of this economy that suggest that this should have happened today. Most people on Wall Street now are trying to buy. But what Susan just said -- Susan Lisovicz is at the New York Stock Exchange, which has closed for the day -- and there's widespread booing on the floor of the New York Stock Exchange because people feel that maybe -- maybe there was a glitch that led to that big late day drop in the stock market -- John.

KING: More on that glitch or the alleged glitch as we get it, Ali.

But if I'm somebody sitting at my desk at work right now or I'm in the car an hour from now on the drive home and I'm thinking about my 401K, you mentioned all these complicated factors that caused all this to come together, a domino effect, if you will...

VELSHI: Yes.

KING: ... should I log onto my computer? Should I be thinking I need to change my mix, I should be selling, I should be buying or should this be it's a one day blip, be calm?

VELSHI: Never a bad opportunity to look at your mix and see whether you've got the right stuff. But this loss was across the board. It was Nasdaq, it was S&P 500, it was New York Stock Exchange, it was North American markets and world markets.

I don't know if you did yourself any favors by trying to sell any stocks today. This might be one of those things that if you didn't sell, that means you didn't lock in your loss.

People we've been talking to say they do not expect this to be the trigger for a bear market. They do not expect this to be a prolonged sell-off of the market. It might just be an adjustment. And, as I said, some people think it might have been a glitch.

KING: And let's talk about the potential glitch there, Ali.

We have become more and more dependent on technology in our individual lives and so has the market, of course. So much of this is done based on technology. You mentioned that drop. If you're looking at the chart, the market is going down, down, down, and then all of a sudden, whoo, it fell a couple hundred...

VELSHI: Yes.

KING: ... almost 200 points there, I think, at that one point.

What do they think?

VELSHI: And you can see, just as we've been talking, John, the market's dropped another 10 points after it's closed because there is so much volume, there's so much to adjust right now.

But at one point -- the market is set up so that you can't -- machines, automated selling systems can't get ahead of themselves and start crashing the market, as it were. Those trading curbs came into effect and then all of a sudden, around 3:00 in the afternoon, we saw a very, very large drop -- a drop that I have never seen the likes of in a matter of minutes, more than 100 points in a matter of minutes.

Now, Susan Lisovicz is at the market. She's trying to get some answers on why people think so. But I have also never heard booing at the closing bell at the market because there are a lot of people who feel that something happened that didn't allow this market to be orderly.

The one thing that this entire market system, the best and freest in the world, depends on is orderly trade. And there are certainly some people on the floor of the New York Stock Exchange right now who think that something disorderly happened.

KING: And, again, let's check back, then, to the average Joe, Ali.

If I'm being told something disorderly might have happened, I'm reliant on this technology.

VELSHI: Yes.

KING: I'm reliant more and more on my investments. And yet I'm still looking. We're down 415 points...

VELSHI: Yes.

KING: If you read that line, you say whoa. But then the next line says well, the market closed still above 12,200...

VELSHI: Yes.

KING: ... which is a pretty good number historically.

So what do I make?

VELSHI: Yes, if you're the average person sitting at home and you were -- you were invested across-the-board, you'll have seen eight or 10 straight months of increases on the Dow, increases that, you know, you probably couldn't have planned for.

So most folks think that they've done pretty well on this market over time. Remember that all the gains for this year -- every penny that you made if you invested on January 1st to now, has been wiped out. But hopefully you didn't just start investing on January 1st.

If you've been in this market and you've been invested and you've got some discipline, you probably didn't lock in your losses today. And I think for average investors, until we know more, don't make decisions based on -- on what you don't know. Wait until you know something before plunging a trigger on a trade, one way or the other.

KING: Sound advice from our Ali Velshi, tracking this hectic day on Wall Street.

Ali, we'll be back to you. VELSHI: OK.

KING: And Susan Lisovicz, as well, as we get more information on just what caused that big market plunge.

For now, though, other stories happening now.

A possible breakthrough in Iraq War diplomacy.

Is the Bush administration now willing to talk to Iran and Syria?

We'll tell you what Secretary of State Condoleezza Rice said just a short while ago.

Also this hour, Iraq delay and division -- Democrats trying to put limits on the president stumble over their next step.

Do they have any hope of reaching consensus?

And inside Mitt Romney's presidential campaign. Leaked documents highlight a hair problem and a flip-flop problem.

I'm John King in for Wolf Blitzer.

You're in THE SITUATION ROOM.

Just a short while ago, the Bush administration opened a new door to something it has balked about in the past -- holding talks with Iran and Syria.

Secretary of State Condoleezza Rice says the United States will participate in a regional conference sponsored by Iraq. Representatives of Iran and Syria also were invited to attend that forum next month.

(BEGIN VIDEO CLIP)

CONDOLEEZZA RICE, SECRETARY OF STATE: I'm pleased that the government of Iraq is launching this new diplomatic initiative and that we will be able to support it and participate in it. The Iraqi government has invited all of its neighbors, including Syria and Iran, to attend both of these regional meetings.

We hope that all governments will seize this opportunity to improve their relations with Iraq and to work for peace and stability in the region.

(END VIDEO CLIP)

KING: For more on this development, let's bring in our Congressional correspondent, Andrea Koppel -- Andrea, a big deal?

ANDREA KOPPEL, CNN CORRESPONDENT: It is a big deal, John, when you consider the fact this is a move that the Bush administration had steadfastly resisted, pretty much for the last several years. And it was something that the Iraq Study Group had pushed for. And we heard President Bush say that that really was not a move that he supported.

Now, the Iraqi government has announced that it's inviting Iran and Syria, its two neighbors, to join in this regional conference. And we have to assume that it would not have done so without at least the tacit approval of the Bush administration.

It's significant because Iran and Syria have been asked by the Bush administration of helping insurgents in Iraq.

So the fact that you are going to have them at this meeting, as well as the United States, at least opens the door to the possibility that you could have conversations between the United States and those two governments the U.S. considers to be members of at least a broader group of an axis of evil that President Bush has used in the past.

KING: And politically here at home, I assume it quiets the criticism, at least temporarily, from those who have said the administration has been wrong from the beginning for not sitting down with Iraq's neighbors.

KOPPEL: Absolutely. I mean we have heard it from any number of Democrats, certainly since the November election, saying this is -- diplomacy is the only way to resolve this, those who are opposed to the continuing war in Iraq and who want to bring troops home have said over and over again that the United States needs to step up its diplomatic contact with those two governments.

So the fact that the Bush administration has signed onto what they're saying is an Iraqi move is something that I think all sides would look at as being positive.

KING: Andrea Koppel for us on Capitol Hill.

Andrea, thank you very much.

And in Iraq today, a children's soccer game reportedly turned into a killing field. The nation's Interior Ministry says 18 boys were killed when a car blew up next to a makeshift soccer field in Ramadi. The U.S. military, though, says it has no knowledge of that. If true, the attack caps a bloody 24-hour period in Iraq that has claimed more than 40 lives.

U.S. and Iraqi troops are stepping up their efforts to catch attackers across Iraq. Twenty-eight people were detained in raids across the nation, including Baghdad's Sadr City.

Four more U.S. troops were killed in Iraq today. Three thousand one hundred and sixty U.S. military personnel have died in Iraq since the war began.

On Capitol Hill right now, Democrats can't help but feel the weight of the Iraq War and voters' demands that they do something about it. But for all the pressure, they're still struggling to agree on a plan of action. Senate leaders now have decided to put off debate on an ambitious idea and repealing the 2002 authorization for the war. Let's get more on that now from our Congressional correspondent, Dana Bash -- Dana.

DANA BASH, CNN CORRESPONDENT: Well, John, Senate Democrats have decided to put off the Iraq debate probably for about two weeks. They say it's because the Senate is now debating the 9/11 Commission Bill, a bill to implement recommendations from the 9/11 Commission. And 9/11 victims families have said that they don't want Iraq to be mixed into this debate.

But there is something else. In talking to senators coming back from a week long recess, it is clear that there -- in addition to wanting to put off this to debate something else, it's also that there are divisions within the Democratic ranks over what to do next on Iraq.

(BEGIN VIDEO TAPE)

BASH (voice-over): Senate Democrats emerged from a closed door meeting without a clear idea of what their next step will be on Iraq.

SEN. HARRY REID (D-NV), MAJORITY LEADER: I would hope that at a time in the near future I would be able to offer an amendment on behalf of the Democratic Caucus.

BASH: Democratic leaders in the Senate had hoped to rally the rank and file behind repealing Congress' 2002 approval for war, replacing it with a new authorization that would shift U.S. troops in Iraq from a combat to a support role.

But Democrats now appear divided on that idea. Senators on both the left and right flanks of the Caucus are balking.

Liberal Wisconsin Senator Russ Feingold says he won't vote for any measure that would keep U.S. troops in Iraq.

SEN. RUSS FEINGOLD (D), WISCONSIN: And we don't want to talk about actually authorizing a new mission in Iraq. We want to figure out how we can get out of Iraq.

BASH: Moderate Democrat Mark Pryor of Arkansas tells CNN he'll probably oppose reauthorizing the war, too, but for a different reason. He agrees with Republicans that Congress should not micromanage the war.

SEN. MARK PRYOR (D), ARKANSAS: I am concerned about revisiting the original resolution that authorized force in Iraq because we have boots on the ground now. We have soldiers who are getting shot at and getting -- they're trying to blow them up every day. I just don't want to undercut them.

BASH: Pryor and other moderate Senate Democrats told CNN they're reluctant to back any move on Iraq that does not have bipartisan support. And bipartisan support. And so far, no GOP senator has endorsed the idea of modifying Congress' authorization for war.

(END VIDEO TAPE)

BASH: Now, one of the authors of this idea is Senator Joe Biden, who, of course, is a Democrat running for president. I talked to one of his Democratic colleagues today, who suggested that that is the whole engine behind this idea, that it would be to allow Democrats who are running for president who voted in 2002 for the war to have a second chance, perhaps.

For example, Senator Clinton -- she is somebody who is getting pummeled, of course, for her 2002 vote. Perhaps this would allow her to have a different kind of record on that. Our Congressional producer, Ted Barrett, talked to her today. She did not say, though, how she intends to -- whether or not she intends to support this idea yet -- John.

KING: And, so, Dana, a Democratic divide with '08 ramifications on the Senate side.

Any better luck for the new majority on the House side in getting unity on Iraq?

BASH: It's unclear. There is a meeting that is going to start, actually, at this hour, with House Democratic leaders. There is going to be a broader meeting of all House Democrats later on this evening. What they are going to try to figure out is whether or not there really is support for the primary idea in the House, which is by Congressman John Murtha, to try to set conditions on war funding.

But I can tell you, in the Senate, it's more and more clear that there is no support for that at all. I spoke to the spokesman for the Senate Appropriations Committee, Chairman Robert Byrd, somebody who is staunchly opposed to the war and has been for some time. He said that Senator Byrd simply does not support that idea, calling it an untenable position because commanders need to have those resources and the troops need them, as well, and they shouldn't be trying to hamstring troops in Iraq with even setting conditions on funding there -- John.

KING: Dana Bash for us on Capitol Hill tracking the Iraq political debate.

Dana, thank you very much.

And Americans opposed to the war have focused much of their anger on President Bush, but are they starting now to take it out on the Democrats, too?

Our senior political analyst, Bill Schneider, has been looking over some new poll numbers -- Bill.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: John, the war in Iraq is taking a political toll, but on whom?

Well, it looks like on everybody.

(BEGIN VIDEO TAPE) SCHNEIDER (voice-over): Support for the war in Iraq continues to drop, according to a new poll by the "Washington Post" and ABC News. Nearly two thirds of Americans now say the war was not worth fighting. Two thirds oppose sending additional troops.

And the toll on President Bush?

Two thirds disapprove of his handling of Iraq.

But President Bush is not the only one hurt.

SEN. JOHN MCCAIN (R), ARIZONA: We've got to sell it and it's got to be done and we've got to explain better the consequences of failure.

SCHNEIDER: John McCain is also paying a price. Forty-four percent of Americans in a "USA Today"/Gallup Poll say they are less likely to support McCain because of his support for the war. Twenty- five percent say it makes them more likely to support him.

Some Congressional Democrats are calling for enforcing the rules on troop training and rest time in order to limit the number of troops available for duty in Iraq.

Does the public support that?

Yes.

SEN. BARACK OBAMA (D), ILLINOIS: When we begin a phased redeployment, I call for it to start on May 1st of this year, to have all combat troops out, by law, by March 31st of next year.

SCHNEIDER: Does the public support a deadline for withdrawing U.S. forces from Iraq?

Yes.

Democrats are cautious about cutting funding for the war.

REP. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE: Our troops will be funded.

SCHNEIDER: Does the public want Congress to restrict funding for the war?

They're split, like Congress.

The Democrats' inability to act is taking a toll on them, too. In January, 60 percent of Americans said they trusted the Democrats in Congress more than President Bush on Iraq. Most still do, but the number is now down to 54 percent.

(END VIDEO TAPE)

SCHNEIDER: The number who trust President Bush has not changed much. What we're seeing is more people say they don't trust either one -- John.

KING: Increasingly muddied political waters.

Bill Schneider for us.

Bill, thank you very much.

And Bill Schneider, Andrea Koppel and Dana Bash, all part of the best political team on television. And remember, for the latest political news at any time, check out our Political Ticker at cnn.com/ticker.

Back now, though, to our top story today, the dramatic drop on Wall Street. More than 400 points lost in the markets today there on this very hectic day.

And putting it all together, Susan Lisovicz, who joins us now live -- Susan, let's start with the basic question, what happened?

SUSAN LISOVICZ, CNN CORRESPONDENT: Well, there's a -- all the stars were in alignment. I'll start there.

Basically, the stock market, John, has been going in one direction and one direction only since last July. That's why we've been talking about all those record highs for the Dow. The last one came just last week.

So a lot of folks were saying the market was really overdue for a correction. And when you go this long, the corrections can be severe.

But on top of that, why today?

Well, we had a very severe pullback in China. Its benchmark index, the Shanghai Composite, dropped nearly 9 percent in one day. That's worse than what the Dow did when we reopened after the September 11th attacks. There's a lot of money going into China, OK?

So we have that.

Then we had, an hour before the opening bell, we had this very bad read on durable goods. Durable goods are everything from toasters to PCs to cars to commercial aircraft. That came in worse than expected.

We have -- oil prices have been going up.

We had an attack very close to where the vice president was in Afghanistan.

And everything just came together in a very, very sharp pullback -- John.

KING: And one top of all of that, Susan, talk of a potential glitch.

Explain to our viewers what that is. LISOVICZ: Well, this was really just sort of the thing that -- that we really don't have an answer to that yet. All I can tell you is, in the final hour of trading, which is a very important one, the Dow went from about a 250 drop to a 500 point drop.

I actually had been watching, but I put my eyes down. I heard yelling on the floor. I saw what was happening and then I -- I went down to the floor and a big crowd of officials from the NYSE, including the CEO of the NYSE, were trying to figure out what created that problem, because traders want to know, was there another issue here? Is there something else we don't know about it? Was it just simply automatic trading?

When you get to certain levels, then their automatic block trading kicks in sometimes. Some traders said that did happen.

But what I think what we're seeing is that there was such stress on the system today -- that we're looking at volume that may -- that was very close to the record high that we saw, about two-and-a-half billion shares traded. I'm going to have to double check that to see where it settled at, John.

But a lot of stress on the system.

And then, finally, I was talking to traders and they said they could not execute orders in the final 20 minutes or so of trading. And that is why you heard booing as the closing bell sounded.

You had one of the folks who handles the technical operations here who was on the podium when the trading -- when the closing bell rang and there was a lot of booing. And there's a lot of people on the trading floor right now, which is also very unusual. They want answers and we'll try to get them for you -- John.

KING: Well, Susan, how about a John Q. Public, or, say, a John C. King, who's going to look at the 401K tonight, see that it's down a little bit? Is this something somebody should be thinking about moving things, buying things, selling things? Or is the best advice maybe wait this out another day or two and see what happens?

LISOVICZ: It's a great question, and I think that, you know, the savvy investor knows that when you see a pullback like this, that there are a lot of great companies that have gotten beaten down. And this may, in fact, be a buying opportunity.

So the question really is, is this -- was this the correction that the market needed?

And there are a lot of -- I think a lot of pros would say yes. We had big volume. We had a big point drop. We had very negative breadth. For every -- every stock that advanced here on the NYSE today, John, there were seven that declined. It was even worse at the Nasdaq. For every stock that advanced on the Nasdaq, there were 14 that declined.

So it was a decisive pullback. The market may have washed it out and we may start over with some -- well, the market may build. I don't really know. I don't have the answers. I wouldn't be working if I had those answers.

But this is a kind of healthy pullback and it's not surprising given the really strong gains that we've seen since last summer. It may be a buying opportunity, but that's not my business. My business is in reporting and I'd say that, you know, check things out. You want to buy low and sell high.

KING: Susan Lisovicz doing a fine job of her business, reporting on a very hectic day on Wall Street.

LISOVICZ: Thanks, John.

KING: We will check back in with you as the day goes on and we'll continue to follow those developments with Susan, with Ali Velshi and with others.

Moving on, though, our Jack Cafferty is off today.

But coming up, what to do regarding Iraq. Congressional Democrats are facing serious pressure from many of their supporters to bring about changes regarding the war.

But can they deliver?

Also, an attack on the U.S. base in Afghanistan while Vice President Cheney is there. We'll tell you what happened and we'll tell you about reports the Taliban is claiming the vice president was the target.

And should the United States participate in an Iraqi regional conference that includes Iran?

I'll ask the number two Republican in the House, Roy Blunt.

(COMMERCIAL BREAK)

KING: We want to go straight now to our Carol Costello, standing by in New York with word of a developing story just into THE SITUATION ROOM -- Carol.

CAROL COSTELLO, CNN CORRESPONDENT: Yes, the shuttle program took another blow. In fact, many tiny, teeny blows. And you'll get what I'm saying in a minute.

NASA has postponed the launch of the Space Shuttle Atlantis. It was due to take off on March 15th. But a big hail storm has prevented that. In fact, the hail made hundreds of small dents on the spacecraft's external fuel tank and on a wing. So the NASA technicians, they plan to move the orbiter back into a giant hangar to examine the damage, to decide if repairs can be made at the Kennedy Space Center.

If those repairs can be made, they're thinking maybe a launch date might be in late April. But, of course, as always, we'll keep you posted.

Back to you -- John.

KING: Carol Costello, disappointing new for the shuttle program.

Carol, thank you very much.

Democrats, of course, are trying to keep the pressure on President Bush over Iraq, even as they struggle with their own divisions about trying to put brakes on the war.

House Speaker Nancy Pelosi has tough new words for the administration on CNN's "LARRY KING LIVE."

(BEGIN VIDEO CLIP)

PELOSI: The president and the vice president are living in an illusion that is quite different from the reality on the ground in Iraq.

LARRY KING, HOST: So you don't expect them to listen?

PELOSI: Well, I'm always hopeful and I'm prayerful about it, because our -- three things have to be achieved by any military engagement which we have anywhere in the world -- does it make the American people safer, does it make our military stronger and does it make the region we're in more stable?

This -- this war has failed on all three fronts.

(END VIDEO CLIP)

KING: You can hear more from Speaker Pelosi tonight on CNN's "LARRY KING LIVE." That is tonight at 9:00 p.m. Eastern, only here on CNN.

More now, though, on the Democrats' Iraq dilemma -- how hard and how fast should they push for limits on the president and on the war?

Some members of the majority party in Congress have been at odds and they are at odds.

Let's bring in our senior political correspondent, Candy Crowley.

You heard the speaker there, very tough on the president. But she's having a very hard time herding her own sheep, if you will.

CANDY CROWLEY, CNN CORRESPONDENT: Absolutely. And so they are on the Senate side. I mean, you know, here's what they're trying to do and what they've said all along they're trying to do, is put pressure on the president, to make him feel isolated, to say, look, the president is out on a limb on this. They've counted on two things. Number one, what's going on on the ground in Iraq; and number two, that a lot of Republicans would go home, get an earful from their constituents and come back and change their mind. But what's happened in between times is that the Democrats have sort of buffeted the middle of the party, saying, on the one hand, no, I'm not signing onto any resolution that keeps those troops there, and, on the other hand, saying well, we can't tie the president's hands.

So while they're counting on one thing, what they didn't count on was this turmoil inside the party.

KING: Which is why the Republicans would say that's why we have one commander-in-chief, so Congress doesn't try to micromanage it.

If you are the speaker and you know the voters want you to deliver, what is Plan B, if you can't get a consensus?

CROWLEY: Well, that's the problem. Plan B is to keep -- keep the conversation going, again, hope for -- hope that they will look at the ground in Iraq, that the constituents in these Republican areas will give them this earful and say listen, you've got to do something.

And we've seen some movement in the polls and that may embolden Democrats. But while they're on different sides of this, in the real -- when we came out of the last election, everybody said what can they do? what can they really do to stop this war?

It's the funding. And it's the one thing they say they won't do.

So they've been in this box since right after the election.

KING: And when you talk to Democrats on Capitol Hill, is it a box that they say we're in, such is the math? We're going to have to deal with this? Or is there any dissatisfaction growing with the leader, whether it be the speaker or Minority Leader Reid?

CROWLEY: I haven't heard dissatisfaction with the speaker. I think they understand what the problem is here, and the problem is them. I mean it lies in the stars and it's them. So I think what they're trying to do now is figure out whether they -- you saw that they took it off the 9/11 Bill. They have been trying to work with Mitch McConnell, who, as you know, runs the Republican side of things, to see if they can come up with something that will be a debate, knowing that this does not satisfy the core of the party, but it does at least keep them putting the pressure on the president.

KING: Interesting time. And many of those trying to figure out what to do, of course, running to replace the president.

CROWLEY: There is that.

KING: There is that.

CROWLEY: Always.

KING: Our senior political correspondent, Candy Crowley.

Candy, thank you very much. And still ahead here, it could be part of Mitt Romney's campaign playbook -- a revealing document that reportedly looks at the Republican presidential candidate's political strengths and his weaknesses.

And how should Congressional Republicans answer Democratic criticism and intentions over the Iraq War?

I'll ask the House Republican whip, Roy Blunt.

(COMMERCIAL BREAK)

KING: Democrats and Republicans on Capitol Hill are facing very different challenges on Iraq right now. The Democrats can't agree on how far they should go to oppose the president's strategy and Republicans face the politically risky decision of whether to stand or run from Mr. Bush.

House minority whip Roy Blunt is a staunch defender of the president's Iraq policy.

He's here with us in THE SITUATION ROOM.

I want to start by getting your reaction to some time the speaker, Nancy Pelosi, said in an interview with our Larry King that will air tonight criticizing the president and the vice president when it comes to the war.

Let's listen to Speaker Pelosi.

(BEGIN VIDEO CLIP)

PELOSI: The president and the vice president are living an illusion that is quite different from the reality on the ground in Iraq.

(END VIDEO CLIP)

KING: When you go into the closed-door meeting with your fellow House Republicans, do they agree with that, that the president and the vice president are living in an illusion when it comes to Iraq?

REP. ROY BLUNT (R-MO), HOUSE MINORITY WHIP: You know, I actually think the president is very realistic about what is happening in Iraq.

I have -- I have talked to him about this often in the last several weeks. And I think he understands that the Iraqis have to step up, that we have to have some better results for Iraq. I think he is very realistic. I think General Petraeus is very realistic.

And I think there's a real chance that what they are trying to do is going to make the Iraqis understand it's time to really step up for their part of the -- to share their part of the burden, and, ultimately -- and, hopefully, quickly -- to share all the burden of their own country. KING: Help me then. If the president is realistic and his new commander, General Petraeus, is so realistic, why have they so lost the faith of the American people?

And, in asking the question, I want to show you these numbers. This is "The Washington Post"/ABC News poll, the new one just out today.

Should the United States set a deadline for withdrawing forces from Iraq? December 2005, only 39 percent of Americans thought that. By June 2006, it was up to almost half, 47 percent. Now, February 2007, a clear majority, 53 percent of the American people, say set a deadline for withdrawing forces from Iraq.

I know you think that's the bad idea. The president thinks that's a bad idea. But, if he is more realistic now about what to do in Iraq, why is he failing to convince the American people to come with him, if you will?

BLUNT: Well, I think what I believe, and I suspect what the president believes, is, what we really need for the American people to change their view of Iraq is for the situation to change.

The Iraqi government has to step up. They have to take the majority of responsibility for stabilizing their own country. They have just passed some legislation out of the proper committees to the legislature to figure out how to divide up the oil revenue, which is a way that the country can stay together.

And we need to see some results, frankly, in Baghdad. We don't need to see every day this continued level of violence that appears to be Iraqi-on-Iraqi violence.

KING: You're watching the Democrats debate amongst themselves at the moment what they want to do. And I assume you're enjoying that, to some degree, politically, watching the Democrats a little bit in disarray about deciding should they cut off money, should they reauthorize the war, but limit troops to a support role, not a combat role.

I want to set that aside for a second. When you go into the Republican caucus, and Republicans, who many have said they are unhappy with the way this war has been managed -- they might support this or that, but they're -- they have questions themselves. And they're getting an earful back home.

What changes do Republicans want when it comes to whether it's timetables, benchmarks, a message to the president?

BLUNT: Well, you know, on the House side, our leader, John Boehner, and I had proposed an alternative, where we would begin to set some benchmarks.

I think that's where the country would like to be. I think that's where our members would like to be. We would like to see things like this oil issue solved, the Iraqis themselves doing the frontline work of the effort -- clearly, movement quickly now of their troops into Baghdad, as we place the forces there that General Petraeus thinks we need there, and to see some results.

I really do think that, no matter how great a speech anybody gives, no matter what we say about this -- this, in the context of the global struggle we face, that we have to have some better results for -- from Iraq before people are going to feel good about Iraq.

At the same time, John, on the debate we had right before we left here, we went from where the Democrats expected to get 40 to 60 Republicans voting with them, to where, ultimately, 17 Republicans agreed with them. Two of the Democrats voted with us.

And I think the context of this war is an important one. The same polling that indicates people would like to see a deadline over and over again indicates that people don't want to face the consequences of being driven out of Iraq and what that does to encourage these Islamic totalitarians.

KING: Well, let's go to the question how do you fix things and how do you make things better -- one proposal now on the table, that the administration has said, let's go, and embraced is this regional conference, where you will have, initially, the U.S. ambassador at the table with Iran and Syria, and, if that pre-meeting, as they're calling it, goes well, perhaps even Secretary of State Condoleezza Rice at a table with Iranian and Syrian counterparts, something the administration has said in the past it's not so warm to doing.

I have statement after statement here from a guy named Roy Blunt, who happens to be with us today, very cautious: I'm not sure we should do that. Better be very careful if you do that.

If you're going to sit down with Iran -- and a lot of conservatives won't like this. They think you do not sit down with a nation that has thumbed its nose at the world when it comes to its nuclear program, has been sending in help to Iraqi insurgents, who are killing U.S. troops. And now you're going to sit at the table with them.

What must you get from that meeting?

BLUNT: Well, I think you have to have, just like we saw, I believe helpfully, in North Korea, the neighborhood beginning to weigh in, and say, we want to see this problem solved, hopefully, that can happen.

Now, I have been very concerned about that, as you know. In fact, the Iraq Study commission report, it was the part of the report that I was the most concerned about is the administration moves toward that. Also, in that report, they talk about the necessity of a surge in troops to stabilize Iraq for a short period of time.

Essentially, this now implements virtually the entire Iraq Study Group report. I think that's something the Americans should welcome, because you have got the administration responding to good advice from the outside, as well as realistically looking at a situation that is substantially different than any of us would have hoped it would be four years after we went into Iraq and eliminated the threat of Saddam Hussein himself.

KING: We're short on time, in fact, almost out of time. Going to drive the control room crazy.

But does the administration need to get something out of a first meeting to have a second meeting with Iran?

BLUNT: I think it's very important that we see something from Iran, rather than the histrionics and the -- what would seem unstable to us that the Iranian president has shown over and over again for the past months and even the past few years.

KING: House Minority Whip Roy Blunt...

BLUNT: Thanks.

KING: ... thanks for being in THE SITUATION ROOM.

BLUNT: Good to see you.

KING: Thank you, sir.

And coming up: the risk for Democrats if they fail to get their act together on Iraq. Bay Buchanan and Paul Begala will square off in today's "Strategy Session."

(COMMERCIAL BREAK)

KING: Now a closer look at another story making news today: The White House says it's too soon to tell if Vice President Dick Cheney was the target of an assassination attempt today in Afghanistan. Mr. Cheney was unharmed in the incident.

A suicide car bomb went off outside Bagram Air Base, where the vice president stayed overnight. But he is said to have been at least a half-mile away from that explosion. After the blast, he was briefly moved to a bomb shelter. U.S. military officials say the attack killed nine people, including the bomber, and a U.S. service member. The Taliban claims it was targeting the vice president.

We will have much more on this story at the top of the hour.

But coming up next: Can Democrats deliver on their intentions for Iraq? Paul Begala and Bay Buchanan will be here to debate just that in our "Strategy Session."

Stay tuned. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

KING: In today's "Strategy Session": congressional Democrats and their Iraq dilemma.

Many are facing pressure to effect serious changes. But they're having a hard time figuring out what to do.

Joining me to talk about that are two CNN political analysts. Paul Begala is a Democratic strategist. Bay Buchanan is president of the conservative American Cause.

Paul, let me start with you.

You're the Democrat. They're under increasing pressure. On the Senate, they can't figure out what to do. On the House side, they're dividing over what to do. At what point does this become a problem for them? Are they equally responsible for what to do about Iraq?

PAUL BEGALA, CNN POLITICAL ANALYST: That's the question.

(CROSSTALK)

BEGALA: I talked to one Democratic leader today, who said: Our political goal is to make sure that this remains Mr. Bush's war, not our war.

But they are torn. They have a base of their party that wants us out of this thing. And I think they have got to do a good job -- and they are working on it -- of trying to keep the party together -- I think Senator Reid and Speaker Pelosi are doing that -- at the same time, communicating to the American people that there is no easy way out.

My own view is, we are not going to see our troops leave Iraq until we get a new president. It's difficult to impossible for the Congress to unilaterally stop a president in the middle of a war. It's just a very, very difficult thing to do.

KING: So, Republicans are the minority now. Do they just sit there and watch this and delight in it?

BAY BUCHANAN, CNN POLITICAL ANALYST: Well, no one is delighted to see what is going on over there.

But the politics, John, it's very clear the Democrats spent the better part of the last two years criticizing the president about the war, speaking out against it, and then they have become the majority party because of it.

And, so, now they -- they are -- there is expectation that they do something. But there's clearly, in this country, only one commander in chief. So, as they try to manipulate the situation, so as to kind of hold him back from doing things, they will be criticized and be held responsible for the aftermath.

KING: Both of you have been in the war room of a campaign, when you're trying to make a critical decision about what to do, and there's conflicting pressures, if you will.

I want to talk specifically about Senator Hillary Rodham Clinton, the first credible female candidate for president of the United States. Her party, the base of her party, is mad because she voted for the war. Now you see a poll saying a majority of Americans -- all Americans, not just Democrats -- say, set a timetable.

And, yet, if you look at Senator Clinton's biggest weakness, it is with white men over the age of 50. And they don't want a timetable.

If you're Hillary Rodham Clinton, Paul Begala, and you're in a room with her right now, how do you deal with the competing short-term pressure of a base that is mad at you, and the bigger issue that, if you win the nomination, you have a problem?

BEGALA: Add to that the lesson that a lot of people learned when Bill Clinton was president. He had a one-year arbitrary deadline on troops in Bosnia.

Well, he had to blow through that deadline, teaching a lot of people that, you know, when you set an arbitrary -- arbitrary deadline, sometimes, it doesn't hold up. So, it becomes very difficult.

The thing is, she has to be who she is, right? Hillary has now served on the Armed Services Committee for -- for seven years. She knows these issues. She -- even when she voted for the war, she was very critical of the way Mr. Bush was getting us into it and then, almost from the beginning, was a pretty constant critic.

Will that be enough for the base of my party? Who knows. It's what actually makes her a better general election candidate. Her biggest challenge will be winning this primary, where I think there is a more talented field, frankly, and -- and she is the more moderate candidate.

BUCHANAN: You know, what Paul hasn't pointed out is, first of all, Hillary Clinton has point-blank said it would be irresponsible to call for a specific pullout date. It would be totally irresponsible.

Now she is considering saying, well, oh, no, we have to do it.

Her problem is, no matter what part of this war she has taken a position on, she has flipped. She is continually moving her position to try to stay up with the polls. And so her -- the issue goes back to, what kind of candidate are you? If you take a position and you tell the American people, this is where I stand, this is the position I'm fighting for, this is what I support, if you don't agree with it, fine, then you come across as courageous person, who has some convictions and leadership responsibility. That counts more than the actual position in the long run.

The flip-flops will kill her.

BEGALA: See, I disagree. I think Hillary is in trouble because she hasn't flip-flopped.

John Edwards...

(CROSSTALK)

KING: Time out.

(CROSSTALK)

KING: Time out.

(CROSSTALK)

BEGALA: John Edwards was talking like General Patton last year, and now he's Mahatma Gandhi.

(CROSSTALK)

BEGALA: ... worked out well...

(CROSSTALK)

KING: I don't want to spend our whole time debating Senator Clinton and unfairly single her out.

BEGALA: OK.

KING: I want to stay in the war room mode. I don't why we didn't learn from Oliver North: Put nothing on paper or a PowerPoint presentation.

(LAUGHTER)

KING: But there is this leaked document today from the Romney campaign in "The Boston Globe." We're going to have much more on it later in the program.

But one of the issues is discussing his potential weaknesses. And it says, here are some views of Mitt Romney causing concern inside his campaign: His hair looks too perfect. He's not a tough wartime leader. And he's earned a reputation as "Slick Dancing Mitt" or "Flip-flop Mitt."

Forgive me. We met a long time ago, when you were working for a candidate who some critics called Slick Willy.

BEGALA: Mm-hmm.

KING: How do you deal with that perception, if it's out there?

BEGALA: Well, the first thing is, you don't leak your most sensitive internal documents.

(LAUGHTER)

BEGALA: I mean, this is following on the heels of Rudy Giuliani, whose campaign leaked its most sensitive material.

(CROSSTALK)

BEGALA: Who is going to trust these people with our military secrets, if they can't even keep their own campaign secrets? (CROSSTALK)

BEGALA: But Romney has -- it's not the -- simply the problem that his hair is perfect, which is the accusation I get a lot.

(LAUGHTER)

BEGALA: It is instead that he flip-flops. He ran against Teddy Kennedy, for goodness' sakes, saying that Teddy was not pro-gay-rights enough.

(CROSSTALK)

BEGALA: And, now, all of a sudden, he is running like a knuckle- dragging, mouth-breathing Cro-Magnon of the far right. That's what -- that is Mitt's problems.

(CROSSTALK)

KING: Bay gets the last...

(CROSSTALK)

(LAUGHTER)

KING: Bay gets the last word.

(LAUGHTER)

BUCHANAN: The key here is, how does he reverse this?

There's no question, out there in Iowa and in New Hampshire and other states, you keep hearing, you can't trust him. He has moved on these social issues. He has a problem, a real one.

But his -- to his advantage is the fact that there is no candidate out there that is top-tier who is very strong on these issues. So, what he has to do is convince the right that he is solid, that this conversion is a sincere one, that it comes from his heart, and that he will indeed give him the judges that he wants. If he can succeed there, he has a chance.

But, as for the hair, I don't know.

KING: And begin to communicate, perhaps, in invisible ink, or ink that this document self-destructs in 10 seconds.

(CROSSTALK)

KING: Yes. Yes. Yes.

(CROSSTALK)

BEGALA: His hair is perfect, too. But he paid for it.

You paid for that hair, didn't you, John? KING: Yes. Yes. Uh-huh. Yes. Got to go.

Yes, I spent a lot of money on this hair, absolutely, especially on the gray.

(LAUGHTER)

KING: Paul Begala, Bay Buchanan, part of the best political team, Candy Crowley, also, a bit earlier, part of the best political team on TV.

Coming up here: more on the Romney campaign playbook. It's a revealing document that reportedly looks at his political strengths and his weaknesses -- much more on that next.

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

KING: An eye-opening glimpse today into Republican Mitt Romney's presidential hopes and his fears.

Portions of an internal campaign document were published today.

Our Mary Snow has that revealing story from New York.

Hi, Mary.

MARY SNOW, CNN CORRESPONDENT: Hi there, John.

It's a view from the inside looking out, a document dated December 11, 2006. It's described as a soup-to-nuts list of strengths and weaknesses of the Romney camp.

(BEGIN VIDEOTAPE)

SNOW (voice-over): From his hair looking too perfect, to the chance Newt Gingrich might seek the Republican nomination, to nicknames like "Slick Dancing Mitt" or "Flip-flop Mitt," these are just some of the vulnerabilities to Republican presidential nominee Mitt Romney outlined in a document obtained by "The Boston Globe."

"The Globe" says it's an internal campaign 77-slide PowerPoint presentation.

Republican opponent Senator John McCain, for example, is labeled a mature brand.

SCOTT HELMAN, "THE BOSTON GLOBE": A few mentions in here of whether or not he is -- he is, frankly, up to the task, that he is not -- that he is not too old.

SNOW: On Rudy Giuliani, the document questions whether his moderate stand on abortion and gay rights could -- quote -- "destroy the GOP brand." HELMAN: So, it sort of questions, if Rudy is our nominee, how can the Republican Party ever sort of claim that conservative mantle again?

SNOW: On President Bush:

HELMAN: It sort of talks about, how can Romney differentiate himself from Bush? And, at one point, it just says intelligence.

SNOW: "The Boston Globe" didn't elaborate on how it obtained the document, but says it is very confident it is authentic.

When contacted by CNN, a spokesman for Mitt Romney said: "We cannot verify any document that does not contain a Romney for President, Inc. marking. Outside consultants routinely offer input and analysis, both solicited and unsolicited, on the dynamics of a political campaign."

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: Do that.

SNOW: Some Republican strategists say they don't see the document as being damaging.

GREG MUELLER, REPUBLICAN STRATEGIST: I think maybe they need to reconsider ever putting anything on paper they don't want out in the public.

SNOW: What is very public, say strategists, is Romney's hurdle, convincing conservatives he is their champion on issues like abortion, since he once supported abortion rights, and now calls himself firmly pro-life.

And, in defining himself, his campaign launched ads last week focusing on targets.

(BEGIN VIDEO CLIP, AD)

ROMNEY: We face attack from jihadists.

(END VIDEO CLIP)

SNOW: Along with jihadists, some of the other listed Romney targets include Democratic presidential candidate Hillary Clinton, the Washington establishment, taxes, and France.

(END VIDEOTAPE)

SNOW: Now, France is labeled as European-style socialism. "The Boston Globe" also says Massachusetts, where Romney was governor, is also a target, and is equated with liberalism -- John.

KING: Mary Snow, a fascinating inside-the-campaign look -- Mary, thank you very much.

There's an old saying in politics, whether you're a Democrat or a Republican. When things are going bad, you just need a good bounce. Well, let's take you to a piece of video from the White House today that shows President Bush is in one of those ruts at the moment. There's a chance, the president trying to dribble there -- this a celebration all presidents like, that championship teams come to the White House -- in this case, Shaquille O'Neal and the NBA champion Miami Heat, in town for a game against the Washington Wizards tomorrow, being celebrated by the president at the White House today.

Mr. Bush trying his hand at dribbling there, and, as you saw at the top, the ball just wouldn't bounce for the president.

(LAUGHTER)

KING: Up next: A lot of people who are curious about the 2008 candidates seem to be flocking to Wikipedia, rather than the candidates' official Web sites. Why? Our I-Team will have a report.

And are Democrats ready to go to bat over funding the Iraq war? I will ask Senator Patty Murray, a member of the powerful Appropriations Committee.

That's coming up, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

KING: Wikipedia, it's the online encyclopedia that anyone can edit. But, as the Internet's influence on political campaigns grows, what role will the popular Web site play in deciding the next president?

Here with some analysis is our Internet reporter, Jacki Schechner -- Jacki.

JACKI SCHECHNER, CNN INTERNET REPORTER: Well, John, let's say you want to learn more about former New York Mayor Rudy Giuliani and his possible bid for the White House. You type his name into the search engine Google, and the first thing that comes up is his Wikipedia entry. The second thing is his official exploratory committee Web site.

The same thing happens to New Mexico Bill Richardson. Wikipedia is the first entry. His official exploratory committee Web site comes in third.

What this means is, in these instances, Wikipedia is the more popular search for -- or -- excuse me -- the most popular source for information online, more popular than the official candidates' Web site or hopefuls' Web sites.

According to TechPresident, which is a new Web site that helps track how '08 hopefuls are using the Web, this happens in the case of many of the '08 hopefuls.

So, if anyone can edit something like Wikipedia, what is to stop someone -- someone from taking these entries and stacking them with all sorts of misinformation? Well, first of all, Wikipedia is. They are very well aware of their own popularity, and they have a couple of things in place. They have vigilant editors, who keep an eye on these entries.

They also can lock them down, so that only established users can make changes. They also just keep a watchful eye on the big names. And, if they see something fishy, John, they make sure to lock it down and make sure changes can't be made.

KING: Like John King, 6'2'', 26 years old...

(LAUGHTER)

KING: ... something like that?

SCHECHNER: Very handsome, exactly right.

KING: Jacki Schechner, thank you very much.

(LAUGHTER)

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