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The Situation Room

Scowcroft Advising Obama; Stocks Tumble to New Lows; Holiday Break from Foreclosure; Some GITMO Prisoners to be Freed; Iran Closer to Nuclear Bomb

Aired November 20, 2008 - 17:00   ET

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

WOLF BLITZER, CNN ANCHOR: And to our viewers, you're in THE SITUATION ROOM.
Happening now, President-Elect Obama turning to a Republican expert for some national security advice -- our sources revealing details of his previously unknown conversations with Brent Scowcroft.

Also, held without charges for seven years -- now a federal judge orders five detainees held at Guantanamo Bay released.

Is it justice served or a dangerous precedent?

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

A powerful Republican national security player advising President Barack -- President-Elect Barack Obama on some of the most pressing issues he'll be facing in the Oval Office -- the former national security adviser, Brent Scowcroft.

What does that say about a future cabinet in the Obama administration?

Ed Henry is covering the transition for us. He's joining us in Chicago with more.

What's going on? What are you picking up -- Ed?

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, some new information that the president-elect is getting private advice from someone who's very close to Defense Secretary Robert Gates, which may be a sign that Gates could stick around in a Democratic administration.

(BEGIN VIDEOTAPE)

HENRY (voice-over): Guess who's been privately talking to President-Elect Barack Obama about foreign policy?

Republican Brent Scowcroft, national security adviser to former President George Herbert Walker Bush.

Scowcroft, who opposed the war in Iraq, is a fierce critic of the current Bush administration's approach.

BRENT SCOWCROFT, FORMER NATIONAL SECURITY ADVISER: I think we developed in the -- in the Republican Party a -- well, you know, the buzzword for it is neo-conism. But I think what it is, it is a -- it's an ideology -- it's really an idealistic approach to things. But it's a combination -- a combination of idealism and, if you will, brute force.

HENRY: Two sources familiar with the conversations confirm to CNN that Obama has been reaching out to Scowcroft for phone chats, even before he ran for president. And it has continued in recent days. A senior Obama aide told CNN the president-elect "respects and admires General Scowcroft's bipartisan, pragmatic approach to foreign policy and looks forward to continuing the dialogue with General Scowcroft, as well as other key Republicans, Democrats and Independents, to get the very best advice."

What makes the conversations intriguing, Scowcroft is very close to Defense Secretary Bob Gates -- at a time when the president-elect is thinking about keeping Gates on the job. And Scowcroft recently said it would be a wise move for Obama.

SCOWCROFT: I actually think it would send the kind of signal that I think the president-elect intends -- or what he spoke about in his campaign. And that is that we need to work together. We need to work as Americans. And I think -- I think giving Bob Gates some more time to do the kinds of things he's doing would be a very wise course of action.

(END VIDEOTAPE)

HENRY: Now a senior Obama aide told me not to read too much into these conversations between Scowcroft and Obama, that the president- elect has been an admirer of Scowcroft long before he was putting together a cabinet.

But I can tell you, several foreign policy insiders who have heard about these conversations have been reading the tea leaves and wondering whether Brent Scowcroft could emerge as sort of a go-between between Gates and Obama -- Wolf.

BLITZER: Ed Henry.

Good story. Thanks for that.

Ed Henry covering the transition in Chicago.

A devastating day, meanwhile, on Wall Street, where the three major indices suffered heavy, heavy losses. The Dow was down almost 445 points, more than 5.5 percent, to a five year low. The Nasdaq down 70 points, more than 5 percent, also a five year low. And take a look at this. That's the S&P. Its 54 point loss represents almost 7 percent. And that index is now at its lowest level since 1997.

All of it underscoring what the Treasury secretary now says is a crisis of proportions that are seldom seen.

Let's go to CNN's Mary Snow.

She's looking at the story for us.

What else is Henry Paulson saying -- Mary?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, he's warning the U.S. and other countries against imposing too many regulations in response to the global crisis, saying it could make things worse. And he's offering some sobering words about what's to come.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Treasury Secretary Henry Paulson described the global financial crisis as an event that occurs once or twice in 100 years. Asked when he thought the economy will bottom out, he refrained from giving an exit point.

HENRY PAULSON, TREASURY SECRETARY: We're going to have some challenging months in here. But we're going to work through this. But I can't give you a -- a -- a date.

SNOW: Paulson spoke at Reagan Presidential Library, where he fielded some blunt questions, such as whether talk about fear of a depression is rational.

PAULSON: What we're experiencing, we haven't experienced anything like this since the Depression. But the world has changed dramatically since then. We have many institutions we didn't have. We've learned the lessons.

SNOW: The Treasury secretary cited as an example the recent G20 summit of global leaders working together to overhaul the world's financial regulatory system.

But Paulson's comments come as $700 billion financial rescue plan in the U.S. comes under increasing scrutiny.

SEN. JIM BUNNING (R), KENTUCKY: As events later proved, the Paulson plan did not save us from a worsening financial situation. But it is expected to contribute to a deficit of over $1 trillion next year.

SNOW: Paulson defended himself and his decision last week not to stick with the plan of buying bad debt from banks to free up their balance sheets.

PAULSON: By proactively addressing the problems we saw coming and being pragmatic enough to change strategy in the face of changed facts, and despite the inevitable criticism, we prevented a far worse financial crisis.

PAUL LA MONICA, CNNMONEY.COM EDITOR-AT-LARGE: I think, really, what he is clearly trying to do right now is remind people that the bailout plan may eventually work. It's not going to happen overnight. It obviously hasn't happened overnight, because the market is in worse shape now than it was back in September.

(END VIDEO TAPE) SNOW: And the Treasury secretary said he believes the Bush administration has taken the necessary steps to prevent a financial market collapse. He also told the crowd today, in his words, "This is a very difficult time," and says is he committed to a seamless transition to the Obama administration -- Wolf.

BLITZER: The Industrials down 444 points. Wow!

All right, Mary.

Thanks very much.

We have a story developing right now.

Zain Verjee is working the story.

What are we learning -- Zain?

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Wolf, Fannie Mae and Freddie Mac announcing, just moments ago, that they will suspend forecast sales and evictions of properties from Fannie and Freddie owned mortgages between November the 26th and January the 9th of 2009. It essentially involves occupied single family homes.

Wolf, this is essentially designed to allow borrowers facing foreclosure to keep their homes -- families that have been struggling during the holiday period. They're giving them a little lax time here -- a little bit of breathing room just to help out.

So again, no evictions between November the 26th and January the 9th -- Wolf.

BLITZER: That will make people a lot happier...

VERJEE: Yes.

BLITZER: ...at least during the holiday season right now.

Thanks very much, Zain, for that.

Let's go to Jack.

He's got The Cafferty File -- Jack.

CAFFERTY: Wolf, it's no secret the Republican Party has what you'd call an image problem. The last eight years of the Bush administration have been enough to take the shine off just about anything.

But a new Gallup poll shows just how bad things have gotten. Only 34 percent of Americans have a favorable view of the Republican Party. That's one in three. Sixty-one percent have an unfavorable view. And that's the highest number since Gallup started tracking this in 1992.

What's more, only 78 percent of registered Republicans like what they see when they look at the Republican Party. In other words, almost a fourth of Republicans are not happy with their own party.

And nobody seems quite sure just what to do about it. Thirty- seven percent of Americans in this Gallup Poll want the Republican Party to become more conservative. Thirty-seven percent think the party should be less conservative. And 20 percent say it ought to stay about the same. So no consensus there.

Here's the question -- what does it mean that only 34 percent of Americans have a favorable view of the Republican Party?

Go to CNN.com/caffertyfile and you can post a comment on my blog -- Wolf.

BLITZER: Jack, see you in a few moments.

It's a new report that's coming out now with some ominous news about Iran. You're going to find out why experts say they might be a lot closer to a nuclear weapon right now and what Barack Obama's options could be.

Also, new signs the president-elect plans to act decisively on health care reform -- why some believe he can succeed where others have failed.

Plus, a stunning decision some call a slap at war on terror. A judge -- a federal judge ordering some detainees at Guantanamo Bay in Cuba released. We have the reasons behind the ruling, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: There's been another legal victory for some of those terror detainees at Guantanamo Bay in Cuba. A federal judge in Washington has ordered the release of five men.

Let's go to our justice correspondent, Kelli Arena.

She's looking at the story for you.

What was the court's ruling all about -- Kelli?

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Well, Wolf, that federal judge has ordered the U.S. to release five terror suspects who are being held at Guantanamo Bay. Now, those men have been in custody for nearly seven years and they've never been charged.

(BEGIN VIDEOTAPE)

ARENA (voice-over): The government says they are enemy combatants willing to take up arms against the United States. But a district court judge didn't buy it and ordered the men released.

UNIDENTIFIED MALE: It's the first time that a federal judge has listened to the entire case that the government has and has rejected it so strongly.

ARENA: But government supporters argue evidence is hard to come by on a battlefield and warn the ruling sets a dangerous precedent.

UNIDENTIFIED MALE: We are likely going to see individuals who were picked up in Afghanistan who are far more dangerous than these five being set free.

ARENA: The government is expected to appeal. The men will remain at Guantanamo Bay as the legal fight continues.

The case is the first of hundreds to be heard after a Supreme Court ruling allowing terror suspects to challenge their detention in U.S. courts.

UNIDENTIFIED MALE: This is a new day in the life of an infamous American institution, Guantanamo prison.

ARENA: The five Algerians have been at GITMO since 2002. They were originally suspected of plotting to bomb the U.S. Embassy in Bosnia. But the U.S.-backed off those accusations and now alleges, based on information from a single source, that the men were on their way to Afghanistan to join Al Qaeda.

UNIDENTIFIED MALE: The judge simply concluded that that wasn't enough in this case.

ARENA: The decision adds to the controversy already swirling around GITMO. The U.S. continues to face global condemnation for holding most of the 250 men that are still there without charging them.

SEN. BARACK OBAMA (D), PRESIDENT-ELECT: I have said repeatedly that I intend to close Guantanamo and I will follow through on that.

(END VIDEO TAPE)

ARENA: You know, Wolf, I hate to use cliches, but as they say, the devil is in the details. And here it is very appropriate. This is one complicated mess.

BLITZER: Kelli Arena, thanks for that story.

We're going to continue to watch it with our viewers. Meanwhile, Iran apparently moving closer to a nuclear weapon -- a looming crisis Barack Obama is about to inherit.

Our State Department correspondent, Zain Verjee, is joining us now -- Zain, a very sensitive and important issue.

What do we know?

VERJEE: Exactly, Wolf.

Well, the Iran story and fears of its nuclear future really did take a step forward. Based on the latest report from the U.N. watchdog, experts are now saying that Iran has enough nuclear material to make one bomb. Now, this is a long road we're traveling and we're not at a point of no return. Iran's basically got to figure out how to make the process more sophisticated and then weaponize it. So, that's where we're at and that's going to take time.

BLITZER: And I assume the Israelis must be really concerned.

VERJEE: Yes. Of course. The Israelis really are. They see Iran as a threat to its very existence. At the same time, you know, Israel is signaling to the U.S. and to the rest of the world that it's holding back just to see how all of this plays out. But Israel already did bomb a Syrian site suspected of being a nuclear facility. So it has taken action.

BLITZER: I noticed the outgoing prime minister of Israel, Ehud Olmert, is coming on Monday to meet with President Bush at White House.

VERJEE: Yes.

BLITZER: I assume all of this is going to be very high on the agenda.

Will the President-Elect, Barack Obama, face potentially an all- out arms race in the Middle East?

VERJEE: Well, you know, there was a report that was issued today by the director of National Intelligence. And essentially it warns that if Iran goes nuclear, we could see an arms race in Iran's neighborhood in the next 15 to 20 years.

Now, take a look at this map. I mean, the geography really tells it all. Saudi Arabia -- that is Iran's rival -- they may want to buy nuclear weapons with its oil money. You've got other countries that have been pushing forward with nuclear energy programs. Others are out there really just waiting to see what Iran does.

And the arms race could end up spanning this entire region -- even places like Egypt over here, Turkey over there; the Gulf nations, too. You know, they're all in on it and they're worried.

The Obama administration is really going to have to also watch two other countries, Pakistan and North Korea, Wolf, because those are the countries that could supply the nuclear weapons or the nuclear know-how.

BLITZER: It's a nightmare scenario, potentially.

So the options facing the Obama transition team are what?

VERJEE: Well, experts that we've spoken to, Wolf, essentially say that you're looking at more diplomacy as one option. But really, with bigger carrots and bigger sticks, Iran may be more responsive this time, Wolf, because oil prices are lower, they're not in that strong a position, it's been hit by the financial crisis. And Iran is also busy focus is on an election campaign. You know, attacking Iran -- the military option -- is always on the table. But, Wolf, that could bring just economic disaster.

BLITZER: Yes. It's a nightmare scenario all around, as a lot of people have suspected.

Zain, thanks very much.

A good, comprehensive report.

VERJEE: Thanks.

BLITZER: Tom Daschle is telling CNN he's excited about the possibility of being Barack Obama's point man when it comes to changing America's health care system. The former Senate majority leader is lining up to be -- is lined up to be the Health and Human Services secretary. It's another indication about how important reform is to the president-elect.

On Capitol Hill, Senator Ted Kennedy already met with some top legislators about health care reform yesterday. He also asked Hillary Clinton to head up a task force if -- it's still a big if -- if she remains in the Senate and doesn't become the next secretary of State.

So what can Barack Obama do differently this time around in getting health care reform underway?

It's just in "Time." And we talked to "Time" magazine's James Carney, who wrote this week's cover story for our sister publication, "Time" magazine.

(BEGIN VIDEO CLIP)

JAY CARNEY, "TIME" MAGAZINE: First, the number of uninsured has increased dramatically, to 47 million people -- and more and more every day because of the economic situation we're in.

Second, the plans that we're looking at, in particular the Obama plan, are different from the ones that -- the one that Hillary and Bill Clinton promoted back in '93-'94. There's less government intervention. It allows people who like their insurance the way they have it now to keep it. And that creates less of a threat that the federal government is taking over things.

Third, and perhaps most importantly, is that businesses, both large and small, are now supporting the idea of reform, because costs have risen so dramatically.

(END VIDEO CLIP)

BLITZER: A few other facts from the new "Time" magazine cover story. More than 15 percent of Americans now are without health insurance. It's the highest rate in a decade -- about 45 million people.

And access to health care is a growing problem in rural areas. Some counties, for example, where you see the red, have no medical providers at all. And take a look at this. The problem is even worse when it comes to obstetricians and gynecologists -- leaving many women simply without access to appropriate health care.

Lobbyists and lawmakers -- business as usual right here in Washington.

(BEGIN VIDEO CLIP)

DREW GRIFFIN, CNN SPECIAL INVESTIGATIONS UNIT: Is this cynically buying access?

RICK FENTON, LOBBYIST, KLEIN AND SAKS GROUP: No. Absolutely not. We're just educators. We provide an important function, as an education function.

(END VIDEO CLIP)

BLITZER: Our cameras were there as lobbyists showed up, cash in hand, to help out new members of Congress, as their leaders defend the practice.

Plus, her presidential campaign failed, her attempt at health care reform early in the '90s failed.

Does that say anything about Hillary Clinton's future ability to lead the State Department?

The criticism coming in from the left. Donna Brazile and Terry Jeffreys -- they're standing by live to discuss, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK) BLITZER: Let's go back to Zain.

She's monitoring some other important stories incoming into THE SITUATION ROOM right now -- Zain, what's the latest?

VERJEE: Wolf, Iraq's parliament the site of a showdown, as opposing lawmakers shouted and pounded their desks in protest of a security pact with the U.S.

You see them doing it right there. Those loyal to Shia leaders disrupted the second day of deliberations before a scheduled vote early next week. The agreement basically allows American forces to stay in Iraq for three more years, withdrawing by the end of June 2011.

The economic crisis won't put a damper on the holiday travel season at three major US airports, all of which opened new runways today. New concrete at Washington Dulles, Chicago O'Hare and Seattle- Tacoma Airports is expected to alleviate both congestion and weather delays. Aviation experts say the improvements will be more effective if air space is modernized to match the efficiency on the ground.

And Taco Bell just can't sell a 50 cent idea. Not when rapper 50 Cent has anything to say about it. Now, he's suing the fast food chain for trademark infringement after it made a tongue-in-cheek request that 50 changed his name to 79, 89 or 99 cents to publicize its value menu. The company offered to donate money to his favorite charity. Taco Bell's lawyers say that the rapper distorted a bona fide good faith offer -- Wolf.

BLITZER: It's not 50 Cents.

VERJEE: It's Fitty.

BLITZER: It's Fitty Cent.

VERJEE: It's Fitty, Wolf.

BLITZER: All right...

VERJEE: It has to be Fitty. It can't be any other way.

BLITZER: Of course.

VERJEE: Fitty.

BLITZER: And that's not a British thing. That's American.

VERJEE: No.

BLITZER: Yes.

VERJEE: It is entirely -- entirely American.

BLITZER: Absolutely.

VERJEE: Yes. It is.

BLITZER: All right. Zain knows what she's talking about.

(LAUGHTER)

BLITZER: It's, arguably, the most expensive breakfast in town.

(BEGIN VIDEO CLIP)

GRIFFIN: How much money are you giving today?

FENTON: I think we're giving them $5,000.

GRIFFIN: To one or a bunch?

FENTON: No, to several. We go through that fairly thoroughly.

GRIFFIN: Oh, is that right?

(END VIDEO CLIP)

BLITZER: Lobbyists showing up in droves to help the new lawmakers pay off their debt.

Are they buying access the rest of us can't get?

Hillary Clinton's executive experience -- her campaign was sometimes said to be in disarray.

Can she manage the State Department if Barack Obama offers her the job?

Plus, millions of prescription records held hostage -- possibly yours -- along with other personal data. Details of a bold blackmail attempt.

All that coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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

Happening now, another horrible day on Wall Street. Stocks reached new lows on fears of a worsening economy and as lawmakers put off until next month voting on a potential rescue plan for automakers.

This election supposedly was all about change, but in Washington today, business very much as usual. We're going to show you how money still talks.

And plans for Barack Obama's

historic inauguration -- his team finds its tough to put on a show in such tough economic times.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

The election may have been about change, but things are very much the same when it comes to the relationship between lobbyists and lawmakers right here in Washington.

CNN's Special Investigations Unit correspondent, Drew Griffin, shows us how money still talks in the nation's capital.

(BEGIN VIDEOTAPE)

GRIFFIN (voice-over): You may not know Rick Fenton, but you can bet the freshmen Democrats in Congress who turned out at Democratic Party headquarters might not forget him. Fenton is a lobbyist who unabashedly showed up at fundraiser this morning, introducing the newest Democratic members of Congress to how the old boys do business.

(on camera): Is this cynically buying access?

FENTON: No. Absolutely not. We're just educators. We provide an important function, as an education function.

GRIFFIN (voice-over): Fenton is a lobbyist who educates members of Congress on mining interests. He was one of a string of lobbyists and political action committee contributors who responded to this invitation to a new member debt retirement reception. There was even a suggested contribution amount from $2,500 to $20,000, and a dance card so you, the contributor, can make sure you don't miss anyone.

(on camera): How much money are you giving today?

RIC FENTON, LOBBYIST, KLEIN AND SAKS GROUP: I think we're giving $5,000.

GRIFFIN: To one or a bunch?

FENTON: No, to several. We go through that fairly thoroughly.

GRIFFIN: Is that right?

Keeping them honest, we watched who went to the early morning breakfast sponsored by Congressman John Dingell who didn't talk to us and Congressman Nick Rahall who did.

It seems like same old business as usual. Retire the debt and introduce the new members to the old pack money.

REP. NICK RAHALL (D), WEST VIRGINIA: Do you have an alternative?

GRIFFIN: If this looks, sounds and seems like old fashioned pay to play politics, that's because Joan Claybrook of the watchdog group Public Citizen says well, it is.

This is change?

JOAN CLAYBROOK, PUBLIC CITIZEN: This is the old boy network at work. They know who gave them money and when the key issues come up, key bills and key amendements, these members are going to be approached by special interests and asked to vote with them because they gave them money.

GRIFFIN: Majority Leader Steny Hoyer with his arm around the newest member of congress from Michigan told us it's way overplayed that members of congress vote in their donors' interests.

So what do these people who come here with the $5,000 and $10,000 checks what, are they getting if they're not getting access and votes?

REP. STENY HOYER (D), MAJORITY LEADER: Well, of course, they're getting access just as a citizen gets access when they go a town meeting and spends some time there or when they volunteer in a campaign. They have an ear that they can talk to. That's true. But the fact is, you'd be surprised at how many people in this room are Democrats first and interest representatives second.

GRIFFIN: No one is saying just how much money was raised.

UNIDENTIFIED MALE: Did you give a lot of money?

GRIFFIN: But those new Democrats who may have come to Washington with change on their minds at least left the DNC with some change in their pockets, too.

Drew Griffin, CNN, Washington.

(END VIDEOTAPE)

WOLF BLITZER, CNN ANCHOR: All right. Let's talk a little bit about lobbying. Business as usual here in Washington with our Democratic strategist, our CNN political contributor Donna Brazile and Terry Jeffrey, the editor in chief of the Cyber Cast News Service. They promised change. But so far it, looks like it's business as usual.

DONNA BRAZILE, DEMOCRATIC STRATEGIST: Wolf, there's nothing illegal or unethical about taking money from political action committees or lobbyists. That money comes from workers. There's nothing illegal. On the other hand, to allow a special group of lobbyists to influence legislation and not allow citizens to have input, I think that's what people want to change. There's nothing wrong with that. Some lobby for student aid, others programs to help children.

BLITZER: Donna makes a good point. There are lobbyists for great causes whether cancer research or whatever. You can't argue with that. But there are plenty of others who argue for very narrow special interests.

TERRY JEFFREY, EDITOR IN CHIEF, CNSNEWS.COM: I applaud Steny Hoyer's candor there. The first amendment guarantees the right to petition the government. That's what lobbying is. There's a few anecdotes to this. The press should expose who's doing what, as makeup disclosure as possible. Big business lobbyists have a vested business. There's other lobbies, things they believe in. They shouldn't be cut off from access to members of congress. As long as we have a free press, using the first amendment to expose the lobbyists, let them use the first amendment to petition congress.

BLITZER: Let's talk about Hillary Clinton for a moment. Josh Marshal he's an influential blogger out there talking points memo says this about Senator Clinton. "Senator Clinton has been at the helm in two big undertakings, had two big executive leadership tasks. One was health care in 1994 and the other was her presidential bid in 2007- 2008. Each was something of a train wreck from an executive level perspective and the State Department is a notoriously intractable bureaucracy." Everyone isn't jumping aboard the Hillary Clinton bandwagon to become the next secretary of state.

BRAZILE: Some people can argue that Hillary Clinton is not only smart and savvy but knows how to run big things and knows how to run her senate office. No one would complain about the way she's conducted herself in the senate. I think she would be valuable to President-Elect Obama on one hand. On the other hand, there are people who worry while she has a big voice on foreign policy, who's going to continue to champion children, health care and some other issues she has taken.

BLITZER: I hear you saying you have mixed feels about her leaving the senate.

BRAZILE: She's a powerful voice. Wolf, when she speaks, everybody writes down what she says.

BLITZER: Do you have mixed feelings about this?

JEFFREY: About her leaving the senate? For Obama, I think she would be a good secretary of state. It wasn't managerial skills that lost the health care battle. The American people decided they didn't want nationalized medicine. I thought she ran an excellent campaign. She came this close. Barack Obama outflanked her to the left. She almost beat him anyway.

BLITZER: Should Barack Obama, Donna, be more assertive publicly in dealing with this auto crisis right now?

BRAZILE: You know, as she said a couple weeks ago, we only have one president at a time. I think he's making his voice known in the inner circle of congress, Capitol Hill. He wants to have a good stimulus package. He said if this congress refuses to do it, he will do it when he gets in office.

JEFFREY: His prestige is at an all-time high right now. As soon as he gets his fingers dirty, this is about as controversial as any problem is going to get. As Donna says, he's not president, he's not in the senate anymore. He can't have an affect on the ultimate outcome of the policy.

BLITZER: He's got the bully pulpit as they say. He could speak out more aggressively if he wanted to.

JEFFREY: Well he could. Today the folks from the unions were talking about like Obama's going to give them bigger bailout when he comes into power. That's not going to be popular.

BLITZER: Donna, you know about the labor unions. Can they survive, GM specifically, till January 20th when he takes office?

BRAZILE: I hope so, Wolf because I think the auto industry is a very important part of our economy. There are so many jobs connected with saving those big three companies. I hope congress gives them a lifeline to keep going.

BLITZER: Donna and Terry, thanks, guys.

In THE SITUATION ROOM, coming up, prescription for extortion.

UNIDENTIFIED MALE: This criminal has threatened to expose millions of patient records. And we're taking that very seriously.

BLITZER: A brazen and unusual attempt to shake down a company that could very well affect you. We have details coming up. You're going to want to see this.

No time for excess. With so many facing such tough economic times, should Barack Obama's historic inaugural bash be toned down? There's a debate under way right here in Washington.

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

(COMMERCIAL BREAK)

BLITZER: Brazen case of blackmail with personal information of millions of you hanging in the balance. Brian Todd is working this story for us.

Brian, what do we know about this extortion attempt?

BRIAN TODD, CNN CORRESPONDENT: Some companies get blackmailed like this all the time. What's unusual is the size of the company involved and that the company has taken the step of publicizing this and saying it won't give in.

(BEGIN VIDEOTAPE)

TODD: An attempted shakedown of a company that handles about 500 million drug prescriptions a year for some 50 million people, one out of every six Americans. Express Scripts, third largest processor of pharmacy prescriptions in the U.S., says one more extortionists are making a threat if the company doesn't pay a certain amount of money.

STEVE LITTLEJOHN, EXPRESS SCRIPTS, INC.: This criminal has threatened to expose millions of patient records. We're taking that very seriously. And we're doing everything we can to support our clients and our members in the situation.

TODD: An Express Scripts official tells us the extortionists sent the company a letter last month with the personal information of 75 members; names, dates of birth, social security numbers, in some cases prescription information. Letters were then sent to some of Express Scripts clients, the St. Louis-based company handles prescriptions for companies like unions, employers and health management companies. Express Scripts won't reveal what the letter said, won't say how much money they want. But says it has no intention of paying.

RAY DICKENSON, INTERNET SECURITY EXPERT: I applaud them for not paying the ran some and going public and getting this into the hands of law enforcement and informing their customers so each of their customers can do something about protecting any further damage from this breach.

TODD: Security experts say many company do pay these ransoms. Express Scripts tells CNN it's not sure how much data has been stolen but doesn't have evidence yet that any personal information has been publicly exposed or otherwise misused, aside from being included in those letters. Express Scripts says it's cooperating with the FBI in the case and conducting its own investigation. The FBI won't comment.

(END VIDEOTAPE)

TODD: Now, company officials say they are not ruling out the possibility of an inside job and won't say if they think the information was stolen electronically but security expert Ray Dickenson says this is a safe bet this stuff was hacked.

BLITZER: Do they have any sense at all where this information could have come from? Are they saying there's any reward money for more information?

TODD: They say they have identified the area in their system where they think this was stolen from, but not going to go beyond that and don't want it reveal too much. Last week, they started to offer a $1 million reward for information leading to the prosecution and conviction of whoever is doing this.

BLITZER: Hopefully they'll find this person or persons soon.

TODD: A lot of information could get out pretty quickly.

BLITZER: All right. Thanks, Brian Todd.

She's now believed to be the top contender for the position of homeland security secretary. We're talking about the Arizona Governor Janet Napolitano. CNN's Dan Simon has been looking into her qualifications for that job.

Dan, what are you finding out?

DAN SIMON, CNN CORRESPONDENT: Hi, Wolf. As the governor of a border state, Napolitano has extensive experience on immigration matters which would fall under her authority as homeland security chief. While terrorism may not be her expertise, supporters say she would be a quick study.

(BEGIN VIDEOTAPE)

SIMON: Napolitano was the first governor to call for National Guard troops on the boarder. That combined with Arizona's efforts to have Border States share intelligence gave her positive national attention. She also won over some conservatives by signing legislation that strips licenses from business owner who's knowingly hire illegal immigrants. We caught up with the governor last week and asked what tracts her to public service.

GOV. JANET NAPOLITANO (D), ARIZONA: That you're working beyond yourself, that the public part of public service. You can work on a veteran's issue, on an education issue. You can work on a public safety issue. But that you're just working to improve everybody's quality of life.

SIMON: She may have credentials on border issues but homeland security is so much more. It encompasses 22 separate agencies including FEMA and the TSA, the Transportation Security Administration. Napolitano is not known for being a terrorism expert although as a U.S. attorney, she was involved in the Oklahoma City bombing case. The governor's allies say she would rise to the occasion.

JOSE CARDENAS, NAPOLITANO'S FRIEND: She's very, very bright and a hard worker. Was always working nights and weekends and fast. SIMON: Jose Cardenas as has been a close friend for many years. They worked together in the same law firm before she entered public service.

CARDENAS: I think Governor Napolitano is very much like Obama in terms of reaching across the aisle.

SIMON: Senator McCain endorsed the pick by saying, "Napolitano's experience as the former U.S. attorney for Arizona, Arizona's Attorney General, and as Governor warrants her rapid confirmation by the Senate."

But Napolitano has her critics. Former congressman J.D. Hayworth, now a talk show host in Phoenix blasted her for opposing a wall to secure the border. The governor famously once said show me a 50-foot wall and I'll show you a 51-foot ladder.

JD HAYWORTH, FORMER REPUBLICAN CONGRESSMAN: How would somebody haul a 51-foot ladder to a border fence? We may be in store for that kind of forward thinking at the department of homeland security.

SIMON: If Napolitano does leave for Washington, Republicans would have something to cheer about. The governor's chair would go to a Republican who is next in line in Arizona.

(END VIDEOTAPE)

SIMON: That's because Arizona has no lieutenant governor. If the office becomes vacant. It would be filled by the secretary of state who in Arizona is a Republican. Wolf?

BLITZER: Thanks very much, Dan Simon working the story.

Should Barack Obama reconsider inauguration festivities given all the worsening economic results? We'll show you what taxpayers may pay if history in any guide.

And saying good-bye to personal freedoms. What will Barack Obama must give up to become the most powerful man in the world.

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

(COMMERCIAL BREAK)

BLITZER: These very tough economic times, how much celebrating should our next president be doing on inauguration day? Here's CNN's Carol Costello.

Carol?

CAROL COSTELLO, CNN CORRESPONDENT: Wolf, it's odd to be talking about when you have people willing to spend 13,000 bucks to buy a ticket to the inaugural parade. But if you have that kind of money, you're not hurting. President-Elect Obama has to be mindful of the whole country and in that case less may be more.

(BEGIN VIDEOTAPE)

COSTELLO: Inaugural bashes are glamorous and glitzy and expensive and President Bush raised $42.8 million for his bash, ball and parade. According to taxpayers for common sense, $16 million more was paid for by taxpayers. If President-Elect Barack Obama follows suit, some say it would be unseemly.

UNIDENTIFIED FEMALE: A lot of it is about tone and making sure that the celebrations that take place are not over the top and don't appear to be incentive to the pain that people have right now.

COSTELLO: It just might not look good to throw yourself a multimillion dollar party when crash and foreclosure and bailout are synonymous with American economy, and bloggering are harping, "Wouldn't be plain common sense to not be seen spending millions on canopies and liquor when people are struggling with heating bills." Conspicuous consumption is out. When the world leaders met next week to discuss the world wide economic crisis, they were widely criticized for sitting down to PC menu of fruit with smoked quail, quince gastrique and eggplant fondue.

JON STEWART, TALK SHOW HOST: This image of the full 20 of them at a long banquet table toasting over wine that sells, this is true, for $500 a bottle. Yeah, I know.

COSTELLO: Another good reason to cutback? Obama's promise.

SEN. BARACK OBAMA (D), PRESIDENT-ELECT: I will take power away from the corporate lobbyists.

COSTELLO: It means that Obama will be harshly criticized if corporate donors or lobbyists pick up the tab.

RYAN ALEXANDER, TAXPAYERS FOR COMMON SENSE: If you can pay for these parties with small donations maybe a lot more acceptance of that, but maybe the small donors don't have it anymore.

COSTELLO: Maybe Obama should follow the example of President Franklin Delano Roosevelt.

FMR. PRES. FRANKLIN DELANO ROOSEVELT: This great nation will endure.

COSTELLO: He gave voters that now famous pep talk about the failing economy and then he skipped the fancy balls, because he sent the wrong message. Will Obama follow suit? Most analysts say, not likely.

(END VIDEOTAPE)

COSTELLO: And CNN analysts like Republican Ed Rollins say that Obama won't skip the parties, because too many voters want to celebrate the historic win. Washington is expecting record crowds, and still watchdog groups are saying there are things that Obama can do like to make donations to charity and Michelle Obama can wear a dress that doesn't cost a mint. BLITZER: Carol Costello working the story. Thank you. Sensitive issues.

Let's go to Jack Cafferty who has the Cafferty File.

Jack?

JACK CAFFERTY, CNN CORRESPONDENT: Incredible. The question this hour, what does it mean that only 34% of Americans have a favorable view of the Republican Party, this according to a Gallup poll?

Sharon in Canada, "The grand old party is stuck in the stone age and they have not realized to strive to be a party of inclusion and also one that recognizes that the USA has changed and moving on without them. The Republicans have completely lost touch with 18 to 45 year-olds."

Jay said, "I have voted for both parties and Reagan twice, but since the likes of Falwell and Robertson and other curs took over the Republican Party, I can't vote for them. I am glad that America chose to ignore race and lies, and voted one of the smartest men of our time. I feel hope again."

Ralph in Illinois, "Does this have anything to do with us starting a war and sacrificing 4,000 men and women for the egos or attacking the rights of the citizens? I couldn't think less of the Republicans. We should keep Guantanamo open and fill it up with politicians."

Annie in Atlanta, Georgia, "You have to ask this question after Sarah Palin appeared to revel in the hate rallies she held in the campaign, and did you get a load of the folks that attended them? Well, ignorance is bliss."

Jamie says, "It is time for the Republicans to go and let the independents fill the void. We will have the Democrats and the independents to run the country and maybe the best for all, and change is in sight."

And Todd defines the dislike of the Republicans this way, "George Bush, Dick Cheney, Donald Rumsfeld, John Bolton, Richard Armitage, Paul Wolfowitz, Karl Rove, Scooter Libby, Michael Brown, Michael Chertoff, Alberto Gonzales, Henry Paulson, Mark Foley, Ted Stevens and Sarah Palin."

If you didn't see your email here, you can go to my blog CNN.com/Caffertyfile, and you can find yours among hundreds of others.

Wolf?

BLITZER: I do that everyday. Thank you Jack very much.

We've been talking about Barack Obama's political transition. Now, let's look at the personal transition to white house.

JAMES CARVILLE, DEMOCRATIC STRATEGIST: I thought that the crown jewel of the federal penal system. You don't think about it, but you are really going to jail.

BLITZER: Plus an alarming surge in pirate attacks and how the crews can best defend themselves. We will show you right here on THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Now a closer look at the down side of moving into the white house. CNN's Alina Cho has the details.

(BEGIN VIDEOTAPE)

ALINA CHO, CNN CORRESPONDENT: Barack Obama is about to trade this house for this one. Part palace, part prison.

CARVILLE: I thought that the crown jewel of the penal system. I mean, you know, you don't think about it, but you are really going to jail.

CHO: 132 rooms, 35 bathrooms and 412 doors.

CARVILLE: Literally, you can hear the door lock. I mean, you are in there now. That's it. Klink.

CHO: Obama will be the most powerful man in the world, and yet, he will have little control over his day-to-day life. He will never be alone. When he heads to the bathroom, secret service will follow him and he can't drive his car or walk alone or take a trip to the barber.

OBAMA: I have to have my barber come to some undisclosed location to cut my hair. The small routines of life that keep you connected I think, some of those are being lost.

CHO: His biographer says that the president-elect hates living in a cocoon.

DAVID MENDELL, OBAMA BIOGRAPHER: Obama is a guy who likes the freedom and likes his, you know, likes to do what he wants. His secret service team calls him renegade for a reason.

CHO: Once he moves to Washington he will have decoys in the motorcade and he may have to ditch the blackberry, too. Policy may take priority, but exercise is not far behind.

MENDELL: He loves to get the workouts. He can be a cranky guy and if events overtake him or the white house, it could be problematic.

CHO: Most agree, a small price to pay to hold the highest office in the land.

MENDELL: He has walked with a swagger for a very long time, but this may be, you know, this may humble him a little bit.

CHO: One anecdote that says how much he prizes the freedom, when he was campaigning for the senate, one of the biographers decided whether to take him seriously as a candidate, because he was driving himself to events he drove his old jeep, and when the biographer asked where is Obama, someone said, he is still parking his car.

Alina Cho, CNN, New York.

(END VIDEOTAPE)