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Jesse Jackson, Jr.'s Role in Blagojevich Probe; First Meeting of Illinois Impeachment Panel; A Financial Murder

Aired December 16, 2008 - 17:00   ET

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

WOLF BLITZER, HOST: I'm Wolf Blitzer.
You're in THE SITUATION ROOM.

ANNOUNCER: This is CNN Headline News breaking news.

BLITZER: But first, the breaking news we're following right now on Congressman Jesse Jackson, Jr.

I want to bring in Gary Tuchman.

He's working this story in Springfield, Illinois -- the Illinois capital -- the state capital.

What are we learning precisely, because it's a very, very sensitive subject as all of our viewers know -- Gary?

GARY TUCHMAN, CNN NATIONAL CORRESPONDENT: Quite a surprising story, Wolf. But two sources who are close to Congressman Jesse Jackson, Jr. say that the congressman, for at least 10 years, has been an informant with the U.S. attorney's offices and has actually informed against Governor Rod Blagojevich -- but not in this current investigation. And that's very important to emphasize. He hasn't been an informant in this investigation.

But according to these sources, back in 2002, when Blagojevich was running for governor, it was made known to Congressman Jackson that the governor wanted $25,000 donation from local congressmen for his campaign.

At this point, Jesse Jackson's wife Sandi was up for a job as the director of the lottery commission. Well, according to our sources, Jesse Jackson, Jr. did not give the $25,000 donation and his wife did not get the job and that after Blagojevich took office as the governor of the State of Illinois in early 2003, according to these sources, the governor came up to Jesse Jackson, Jr. and said something to the effect of, "you see what $25,000 would have done?"

Well, it took three years, but Jesse Jackson, ultimately, in 2006 -- the summer of 2006 -- told the U.S. attorney's office for the Northern District of Illinois that he believed that this was an attempted shakedown -- that because he didn't give the $25,000, his wife no longer got the job.

The reason, according to these sources, that Jesse Jackson said this three years later, not right, away is because during the trial -- it's complicated. But during the trial of developer Tony Rezko -- the fraud and corruption trial against Rezko -- it came up that there were $25,000 donations repeatedly made to the governor. And that's what Jesse Jackson's sources say reminded Jesse Jackson to bring this up to authorities.

But, nevertheless, Wolf, over the last 10 years, according to these sources, Jessie Jackson, Jr. has talked to the U.S. attorney's office, given them information about all kinds of investigations, mostly local investigations in his district.

But what's clear to say, the headline of the story is it basically marks out this current governor, who is in so much trouble right now, the governor of Illinois, Governor Blagojevich -- Wolf.

BLITZER: All right, Gary, stand by, because I want to get back to you. I know you're working the story. It's a very, very sensitive story, as our viewers can appreciate, the suggestion by two sources that Congressman Jesse Jackson, Jr. has been working with the U.S. attorney's office for some time now as an informant in his corruption investigation.

Meanwhile, the governor is ignoring calls for his resignation, apparently intent on fighting back on all fronts. This, as a special impeachment panel is meeting right now. He's accused of trying to sell Barack Obama's Senate seat -- allegations the governor's attorney says are trumped up.

Brian Todd has been looking at this story for us.

What's the latest on this part -- Brian?

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, the vote yesterday to establish that impeachment committee was unanimous. But today the chair said they cannot start hearing from key witnesses until they get a green light from the Feds.

(BEGIN VIDEOTAPE)

TODD (voice-over): The embattled governor of Illinois aiming to project business as usual.

UNIDENTIFIED FEMALE: Thank you, Madam chairman.

TODD: But at the first meeting of the state's special impeachment panel, Rod Blagojevich did not have a single defender out of 21 lawmakers who spoke.

UNIDENTIFIED FEMALE: Unfortunately, unless and until he does the right thing and resigns, we need to move forward as rapidly as possible.

TODD: But the lawmakers' timetable may depend on Patrick Fitzgerald, the criminal prosecutor.

UNIDENTIFIED FEMALE: Some of the people that we might have wanted to call as witnesses today, we don't think we can until we get clearance from him.

TODD: Prosecutors face a delicate balance, according to a former U.S. attorney.

UNIDENTIFIED MALE: On the one hand, they obviously want to help legislators get a crook out of office. On the other hand, their responsibility is to try to put this governor behind bars. And that means they're not likely to want to turn over their witness, their evidence to a political process.

TODD: Blagojevich, through a spokesman, has denied doing anything wrong. His newly hired lawyer, Ed Genson, says the Democratic governor will not resign.

ED GENSON, ATTORNEY: I think that the case -- the case that I've seen so far is significantly exaggerated. It's just not -- it's not what people think it is.

UNIDENTIFIED MALE: Ed Genson is a trial attorney. He's not a guy who's known for pleading out any cases. So, certainly, if Rod Blagojevich is meeting with Ed Genson, that's an indication that he wants to go to trial and fight these charges.

(END VIDEO TAPE)

TODD: Now, the impeachment panel decided to wait until tomorrow to start combing through the criminal complaint so that Blagojevich's attorney, Ed Genson, can be there to represent the governor -- Wolf.

We'll see what happens.

BLITZER: Now, Tony Rezko, who was convicted -- a fundraiser, a businessman in Chicago -- he was supposedly going to get his sentence.

But what's going on on that front?

TODD: Not clear exactly what's going on on that front. We're going to get more information on that later. You know, Rezko's implication in this is -- his involvement in all this is going to be very key to the case. We're going to get more information on that later.

BLITZER: And we're going to see if he's cooperating. And, presumably, if he's cooperating and spilling the beans, whatever he knows...

TODD: Right.

BLITZER: ...that might result in a reduced sentence for him. I think that's the way these kinds of situations normally unfold.

TODD: Right.

BLITZER: So we'll watch all of this.

Brian, thanks very much. We'll get back to this story, but let's move on to other important news. Right now, investors who lost everything in a massive alleged pyramid scheme are stunned. Some went from being millionaires to being virtually penniless. And they blame money manager Bernard Madoff, now accused of running what may be one of the largest Ponzi games in history.

Our senior correspondent, Allan Chernoff, spoke with some of them. And he has more.

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Wolf, one investor told me that he feels as if there has been a financial murder in his home. For years, investors of Bernie Madoff felt special. They felt that they were lucky to have money with him today. But today, they feel taken.

(BEGIN VIDEOTAPE)

LARRY LEIF, MADOFF INVESTOR: And I didn't believe it at first. I said this is impossible.

CHERNOFF (voice-over): Larry Leif says he had $8 million invested with Bernard Madoff -- virtually all of his money, now apparently gone.

LEIF: You know, I was living the American dream. And within a day, my American dream was taken away from me.

CHERNOFF: It was the late '70s when Leif put the pension of his sporting goods company with Madoff. The money, he says, grew steadily every year -- producing annual returns better than 10 percent -- so good that Leif has been living off the returns since retiring a decade ago.

LEIF: And I used to say that Mr. Madoff was the smartest man on Wall Street. Unfortunately, I have to say he probably still is, to pull this off.

CHERNOFF: Now Madoff is charged with running a multi-billion dollar Ponzi scheme, in which he allegedly used new investment contributions to pay returns to his investors. Victims blame the SEC, which concluded an investigation of Madoff last year without bringing any charges.

LEIF: How could the government let me down 100 percent?

CHERNOFF: The Madoff firm is a member of the Securities Investor Protection Corporation -- which means some customers of Madoff may get back up to half a million dollars.

UNIDENTIFIED MALE: If you had a direct relationship with the brokerage firm, the chances are you will be protected. But if you were investing through another vehicle, you know, you would not have a direct relationship with the civic (ph) member.

CHERNOFF: Those who invested with Madoff through an intermediary may have lost everything.

Larry Leif was lucky enough to have recently sold his home, so he has cash. But at 58 years of age, his plans for an easy retirement are crushed.

(END VIDEO TAPE)

CHERNOFF: Leif says that account statements he received were meticulous -- dividends always perfectly accounted for, which indicates to him that Bernie Madoff was not operating alone.

Now, according to the securities fraud charge complaint, Madoff did confess to an FBI investigator. Still, a Madoff attorney has said Mr. Madoff intends to fight to get through this unfortunate set of events -- Wolf.

BLITZER: Allan, thanks.

We're going to have more on this story coming up very soon. Among those taken in by Madoff, the editor-in-chief of "U.S. News & World Report," Mort Zuckerman, the publisher and businessman. His charitable trust lost about $30 million. Mort Zuckerman will be here in THE SITUATION ROOM live momentarily to talk about that and morning.

Stay with us for that.

In the meantime, let's check in with Jack.

He's got The Cafferty File.

This Madoff story unbelievable -- Jack.

CAFFERTY: Mr. Zuckerman is about 10 feet behind me here in the newsroom in New York City. I heard Allan say that the SEC concluded an investigation of this thing he was doing and said it looks good to me.

Is that right?

BLITZER: Yes. Well, apparently, they didn't do enough.

CAFFERTY: Yes, apparently.

Caroline Kennedy wants Hillary Clinton's Senate seat -- and she might get it. Her resume is long on politics but short on public service. Ms. Kennedy has not had a full-time job in years, never held an elected office.

Last week, New York Representative Gary Ackerman, a Democrat, said that Caroline Kennedy's only qualification was her name recognition. In a radio interview, Ackerman said that Kennedy is no more qualified than Jennifer Lopez to be a senator.

According to "The New York Times," Kennedy worked three days a week as director of strategic partnerships for the New York City public schools for just under two years. Other than that, most of her time has been spent on boards for various non-profits, which has included raising millions of dollars for some charities.

The usually private 51-year-old daughter of the late President Kennedy feels that this has prepared her for the job of senator. And she has asked New York's Governor, David Paterson, to appoint her.

Critics have been quick to note her lack of experience. But friends and family are coming out in support, saying that behind-the- scenes, her work that she's done over the years is exactly what has prepared her for this job. And if you compare her, for example, to Senator Hillary Clinton and the qualifications that she had when she became the senator from New York, well, Kennedy looks OK.

Here's the question -- what qualifies Caroline Kennedy to suddenly become a member of the U.S. Senate?

You can go to CNN.com/caffertyfile and post a comment on my blog.

My guess is if she wants it, it's probably a slam dunk, don't you think, Wolf?

BLITZER: Well, it's up to David Paterson. He's the governor of New York. You're there...

CAFFERTY: No, I understand.

BLITZER: ...in New York. He can do whatever he wants.

CAFFERTY: Well, I -- my guess is if she wants it -- if she says publicly, I'd like to have that Senate seat, he's not going to say you can't have it, I don't think.

BLITZER: Well, she's definitely said that. She's hired a firm to help her.

CAFFERTY: Yes.

BLITZER: And she's got a lot of friends, as you know.

CAFFERTY: Yes.

BLITZER: Thanks very much, Jack.

The list of alleged victims growing, he's helped catch.

Meanwhile, we're going to get more on that story.

Also, he's helped catch hundreds of America's most wanted. Now John Walsh's own case is finally closed. You're going to hear his emotional reaction. That's coming up.

And Dick Cheney, widely seen as the most powerful president in history -- he talks about his role. That's coming up.

But how will Joe Biden be different?

And our exclusive one-on-one interview with President Bush today, reflecting candidly on Iraq, as his days in office dwindle -- revealing that he, too, had doubts about the war.

Candy Crowley spoke with him in the Oval Office. You'll see the interview right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Charities are especially hard-hit in the scandal surrounding the money manager, Bernard Madoff, and the alleged pyramid scheme used to bilk investors out of billions and billions of dollars.

Among them, a charitable trust established by publisher and real estate magnate, Mort Zuckerman. He's editor-in-chief of "U.S. News & World Report," publisher of the "New York Daily News."

Mort is joining us from New York.

It's so shocking to so many people -- and especially, Mort, that some of the most sophisticated investors out there could have been bilked by this guy.

But give us your -- the specifics of your case right now.

MORT ZUCKERMAN, "U.S. NEWS & WORLD REPORT": Well, the charitable foundation that I founded, which is devoted to cancer research and education and archaeological explorations, has an endowment which, in fact, I contributed to. But that endowment is invested by six or seven different investment managers.

One of these investment managers made an investment, in turn, without my knowledge or the knowledge of anybody on the board of this foundation, with this man, Mr. Madoff. Not only did he make the investment of our funds, he had a fund of $1.8 billion and he invested all of it with whatchamacallit (ph) -- Madoff, which is really astounding in and of itself.

And not only I, but many of other people who were investing in these funds did not know anything at all about it. I never heard of Madoff, I never saw Madoff, I never met Madoff. About the only time I heard of him was last Friday, when we were informed that all of the money that we had put into this fund, which was called Ascot Fund, was completely lost because 100 percent of it was invested with Madoff.

BLITZER: Who is this individual that ran the Ascot Fund and decided to put a billion dollars of potentially charitable funds, with $30 million from your charitable trust alone, who is this guy?

ZUCKERMAN: He's a man by the name of Ezra Merkin, who is somebody who has been involved in the investment decisions of many charitable funds, such as for universities and for community organizations, etcetera.

So it was as astonishing to me as anything that I could ever remember happening that he would put all of this money -- I mean, a 100 percent of it, which violates every principle of investment management, including the basic principle of diversification, which was contrary, I might add, to the agreements he made with us. So we had no way of knowing what he did. He never revealed this to us, even though I had any number of conversations with him and so did many other people.

BLITZER: And some of the -- some major institutions, universities like Yeshiva University, according to "The New York Times"...

ZUCKERMAN: Yes.

BLITZER: ...lost maybe $100 million from its endowment.

ZUCKERMAN: That's correct. That's correct.

BLITZER: Through this same -- the same fund?

ZUCKERMAN: This, I don't know. I don't know what the particular entree they had or -- into Madoff. But a lot of individuals -- I mean I keep on thinking to myself, what was this Madoff thinking of, when so many families and so many people who were the beneficiaries of charities were now going to be destroyed by his efforts.

How could he have done this?

And I just can't imagine doing it. I also can't imagine why people who ran funds invested with him, even if they invested less than 100 percent of the funds, but to invest all of their funds is preposterous on any level, no matter who -- if it were Warren Buffett, I wouldn't invest 100 percent of my funds with him.

So why these people did it, at this point, is still a mystery.

BLITZER: Because you're one of the most charitable guys out there, in the top 50 in the United States, your charitable trust.

Should you have been more diligent and done more due diligence in seeing where that $30 million goes?

ZUCKERMAN: Well, it's a fair question. I mean we did a lot of due diligence on this investment manager. It was somebody who, as I said, had been involved with many other charitable funds. We had every reason to believe he was a responsible and honorable person.

I don't know what -- when you deal with somebody and he misrepresents to you under those circumstances, it's hard, really, to figure out how to get around that. There's only a certain limited amount you can do to find out what he has done.

He indicated what the returns had been over the years. He never once indicated that all of the money was invested with Mr. Madoff.

So it's just astonishing to me how this took place. And I guess if, on some level, there was a way that I could have found this out, then I'm certainly -- was short in my due diligence.

But I did a fair amount of due diligence on him, which I've done on any number of other fund managers. This is the only time that this kind of event has ever taken place. And it's really, really astonishing and outrageous, because this money was contributed to this charitable fund to do good works, not to be frittered away by this kind of reckless or irresponsible or worse.

BLITZER: Mort, where was the federal government in terms of regulation, oversight?

Because, based on everything I've read so far -- and heard -- it was largely missing in action.

ZUCKERMAN: Absolutely. They were missing in action. And I think what has happened is going to really spark major changes in the regulation of this -- and rightly so, because what has emerged is a new -- what we call a shadow banking system of all these huge money market funds, these investment funds, these fund to funds, of hedge funds, even investment banks, all of whom now make up over 70 percent of the financial transaction in this country. And the commercial banks only make 30 percent up.

And it's the commercial banks that were regulated in the 1930s. And now this shadow banking system is going to have to be regulated.

Now, we have learned that this is not possible, to put the entire economy of this country at risk -- never mind the wealth of a lot of people that they have accumulated over a lifetime or the endowments of charities, such as the one that I'm involved with. It's just an outrage.

And we are going to have to find people who are sophisticated enough in the world of finance, which is not true of most people in government, to understand how to regulate it and what to do about it.

So we're in a very, very critical position and I think the new government is going to have to address this very, very thoroughly and very carefully.

BLITZER: I hope so. Like a lot of other people, Mort Zuckerman it's going to be just fine. His charitable trust will be just fine. But you know there's a lot of heartbreaking stories out there about people who went to sleep thinking they had millions and woke up the next day and told they're penniless. And we're going to stay on top of this story, Mort.

ZUCKERMAN: And a lot of charities have had to shut down...

BLITZER: Right.

ZUCKERMAN: ...because the vast bulk of their endowment was just literally obliterated and disappeared as a result of -- who knows what was going on there?

But, obviously, some enormous amount of fraud. And how this man can live with himself is beyond me.

BLITZER: And the question that they're investigating -- who else may have been involved... ZUCKERMAN: Right. Exactly.

BLITZER: ...with this Bernard Madoff.

All right. Thanks, Mort.

Thanks very much for coming in.

ZUCKERMAN: You're welcome.

BLITZER: The vice president, Dick Cheney, saying the Obama administration may be grateful for some very controversial moves by the Bush White House spokesman. You're going to hear what those are. That's coming up.

And millions of people all on their cell phones at the same time at the same place -- the danger it might cause for the inauguration. We have new information you need to know, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The upcoming change of administration is expected to bring with it sweeping changes to the office of the vice president, transformed under Dick Cheney, soon to be in the hands of Joe Biden.

Let's go to CNN's Samantha Hayes.

She's working this story for us.

So what can we expect under the incoming vice president -- Sam?

SAMANTHA HAYES, CNN CORRESPONDENT: Well, Wolf, Joe Biden set a different tone early on. But that doesn't necessarily mean that he'll be a backseat V.P..

(BEGIN VIDEOTAPE)

HAYES (voice-over): The smiling Senator from Delaware is already adapting to his new position out of the spotlight.

NIA-MALIKA HENDERSON, POLITICO: I think it's a matter of kind of the incredibly shrinking Joe Biden. He's very much going to take the anti-Dick Cheney approach to the vice presidency.

HAYES: He made that clear during the vice presidential debate in October.

(BEGIN VIDEO CLIP FROM OCTOBER 2)

SEN. JOSEPH BIDEN (D), VICE PRESIDENTIAL NOMINEE: Vice President Cheney has been the most dangerous vice president we've had, probably, in American history.

(END VIDEO CLIP)

HAYES: Cheney has been criticized for playing a heavy hand in national security policy, but recently told ABC he has no regrets.

(BEGIN VIDEO CLIP, COURTESY ABC NEWS)

DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: And I think, given the circumstances we've had to deal with, I think we've done pretty well.

HAYES: Biden has indicated his vision of V.P. is to support and advise the president. But historian Allan Lichtman says he may also be trying to downplay expectations.

PROF. ALLAN LICHTMAN, AMERICAN UNIVERSITY: Never underestimate Biden. This is a guy who's been around for decades, is filled with ideas, has strong opinions and is anything but shy.

HAYES: And as vice president, Biden has a staff of his own, headed by a man considered to be very influential.

LICHTMAN: He's picked Ron Klain as his chief of staff, was also Al Gore's chief of staff. So I don't think Joe Biden is planning to be a shrinking violet. I think he's going to use his staff is a very proactive way.

(END VIDEO TAPE)

HAYES: And you may that in areas of foreign policy. In the Senate, Biden was the chairman of the Foreign Relations Committee. He's also tightly connected to labor unions -- an important economic issue right now.

BLITZER: Sam Hayes, thanks very much for that.

Sam is working the story.

He's been the picture of confidence when it comes to Iraq, now President Bush admits he had his own doubts about the controversial war and the decision to invade. He's opening up in an exclusive interview with our own Candy Crowley.

Also, Newt Gingrich criticizing the Republican leadership right now over how the GOP should treat Barack Obama. He thinks the Republican National Committee is on the wrong track.

Plus, millions of people witnessing history -- could they inadvertently cause the cell system to crash?

Emergency officials have growing concern about the Obama inauguration. We'll explain, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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

Happening now, parting words from the future former president on Iraq, weapons of destruction, mass destruction and more.

CNN's Candy Crowley sits down for an exclusive, rather frank conversation with President Bush. Stand by.

Millions of people and millions of cell phones -- Washington faces the prospect of a potentially dangerous telecom meltdown during the inauguration week.

And kidnapping in Mexico -- an American anti-abduction consultant was snatched himself in Mexico, where this kind of crime is right now at record levels. The FBI is working with Mexican authorities to find Felix Batista.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

George W. Bush reflecting candidly on his presidency with only 35 days left in office. His most important decisions -- second-guessing the Iraq War and fear of losing. He talked about that and more in an exclusive one-on-one interview with our senior political correspondent, Candy Crowley who is here to share more of this exclusive interview with us.

Candy?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: You know, Wolf, you cannot talk about the legacy of George Bush or an exit interview with George Bush without talking about Iraq. So we started out right away in the Oval Office, when I asked him about the most important decision he had made in that room, and he said, it was, in fact, the decision to go to war in Iraq. The question is if he ever doubted that.

(BEGIN VIDEOTAPE)

CROWLEY: If you made that decision with clarity, would you say you did? And did you ever come back in here on a dark night or after seeing relatives or after watching something happen in Iraq, did you ever come back and think, wow, and revisit that decision?

PRES. GEORGE BUSH, UNITED STATES: I've thought about it, of course, but I usually came back and, you know, with a concern about whether or not we would succeed.

CROWLEY: Are you worried about that sometimes?

BUSH: I have worried about it in the past, in 2006 in particular, in Iraq. I was deeply concerned about whether or not we would succeed. And I felt that, you know, the political people beginning to fall away where people were saying, you know, you must withdraw. It wasn't just the political people. A lot of people in Washington were saying, let's get out now. And I, obviously, chose not to do that. But that was a very difficult period.

CROWLEY: Did you consider it ever?

BUSH: Of course I considered all options. Absolutely. You know, ultimately, I had great faith in the universality of liberty. I had great faith in our military. I had faith in the Iraqis who had suffered so much. And I couldn't live with myself if I had chosen to just leave and leave behind the valor and the sacrifice of a lot of our young men and women. I would have never been able to face their loved ones.

You know, the military looks at the president and wonders whether or not the president is going to make decisions based upon victory, or whether or not the president will be making decisions based upon his political skin. And if you ever make decisions based upon your political skin, with troops in harm's way, you as commander in chief will have a lot of problem keeping the respect of the military.

CROWLEY: You know, one of the things that -- some of the criticism of you is he doesn't listen to outside voices, he doesn't hear people telling him to do something different than what he wants to do. Were there people saying to you, Mr. President, you need to think about getting out right now?

BUSH: Oh, absolutely. I've heard all kinds of voices. There's urban myths in Washington, D.C., and, you know, of course I listened. I listened to a lot of people before we went into Iraq, and I listened to a lot of people, including in my own administration, who said, it's just not working, let's get out. And I listened very carefully to them and obviously came to a different conclusion.

CROWLEY: OK. So tell me who told you to get out.

BUSH: You know, there's just a lot of people. And, you know, get out, the definition of get out was get out all the way or pull out of Baghdad and sit around there and hope that the violence doesn't spill out to the countryside, and protect, you know, Iraq from, you know, outside influences. I mean, there was just a -- along the scale of out to in, there was a lot of different opinions.

By the way, there were a lot of opinions after the liberation of Saddam, where people came in here and said, let's just impose their own person and get out of here. Let's pick our own strongman. Who cares about democracy? Or who cares about, you know, working hard to encourage the growth of a society based upon institutional law. And I obviously chose a different route, as well.

CROWLEY: You know, Karl Rove, you know him fairly well, right?

BUSH: Never heard of him.

(LAUGHTER)

CROWLEY: He said last week, listen, maybe if we had known the WMD weren't there and that al Qaeda wasn't there, and there was no connection between Saddam and 9/11, maybe we wouldn't have gone in. Did you have a moment in your presidency when you began to learn these things, when you began to learn that the intelligence was wrong? Did you think, oh, maybe we shouldn't have gone in? BUSH: First of all, my dear friend, much recognized, there are no do-overs. And so the idea of us walking back in time and saying, well, this, that or the other is just not a realistic assessment. Because once you're in, you're in for victory. And I truly believe the world is better off without Saddam Hussein in power. I know we're safer. I know our allies in the Middle East are safer. And I know the Iraqi people are better off without him in power. And...

CROWLEY: Were you ever angry about it? When you found out? Like what was that moment when you found out?

BUSH: No weapons?

CROWLEY: No weapons and the intelligence was wrong.

BUSH: You know, I wouldn't -- I think angry is too strong a passion. I was not happy. And I vowed to find out why the intelligence was wrong and then to do something about it. Because one, I respect the intelligence communities. I've got great regard for the people that work at the CIA, and I want to make sure the institution was credible, because in the future -- because a president is going to have to rely upon the intelligence in order to continue to protect the United States. And I am -- we've worked hard to strengthen the morale, the spirit and the foundation of our intelligence communities.

CROWLEY: Did you find out what went wrong? Was it a matter of interpretation, or was it a matter of just wrong information?

BUSH: I think it was just bad analysis. But it wasn't just our CIA. It was intelligence services all over the world that believed the same thing.

CROWLEY: Did you ever sit in that Oval Office recently and think, wow, an African-American is going to be sitting here? Do you have that sense of history in there?

BUSH: I do, absolutely. I will have a front row seat at an unbelievable moment in American history. And I was deeply touched by a lot of the people I saw on election night, with tears streaming down their face and saying I never, ever thought I would see this day coming.

CROWLEY: Did you ever, ever think...

BUSH: Yeah, I did. I've got great faith in democracy, and I believe there will be a woman president. Obviously, there will be others.

CROWLEY: Are you looking for a Republican woman?

BUSH: That's what I'm always pulling for, you know, but anyway, it's...

(END VIDEOTAPE) BLITZER: He seemed to be in a pretty good mood, Candy, over there. Reflective as I said earlier. When you say a little tired, because of the --

CROWLEY: Iraq and Afghanistan and he had just gotten back. He's got Christmas parties, as you know, sort of nonstop now. But he did admit to being tired after the trip. And he seemed -- he was reflective.

BLITZER: He seemed also sentimental. And he reached out to you. I'm showing our viewers this picture. There he is. You can see him holding hands with Candy Crowley. There they are. Talk a little bit about the history here because we don't want Laura Bush to get any wrong impressions.

CROWLEY: She is the least bit worried, trust me. But you know, we do go back to his first governor's term. The first time I ever covered him was about two years before he ran for the second time for governor and quickly became a presidential candidate. But you haven't lived in a surreal moment until the president of the United States takes a hold of your hand and leads you into the oval office because you're trig, okay, we should not holding hands, but yet, there they are and you can't do this. So I think he really is nostalgic. I think, again, I've covered him for a long time. Hadn't interviewed him since the night before his inauguration so it had been eight years. So he's definitely reflecting back on where it came from and all of that. But it was -- his weird moment was the shoe throwing and my weird moment was the hand holding.

BLITZER: What do you do when the president of the United States reaches out and grabs your hand?

CROWLEY: Absolutely.

BLITZER: You did the right thing. We've got more. Candy will be back in the next hour.

Newt Gingrich is taking aim at his own party. Some blunt words about a web advertisement about Barack Obama.

And the cell phone logjam that's not just inconvenient, but potentially very dangerous. Could it happen during the inauguration January 20th?

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

(COMMERCIAL BREAK)

BLITZER: Republicans are ads at odds. Should they be attacking the president elect Barack Obama over the scandal surrounding the Illinois governor and alleged efforts to sell Obama's senate seat? Let's talk about that and more with democratic strategist Jamal Simmons and republican strategist, CNN political contributor, Leslie Sanchez.

Newt Gingrich, Leslie, rather blunt on the political quoted as saying I was saddened to learn in a time of national trial when a president-elect is preparing to take office in the mist of the worst financial crisis in over 70 years that the Republican National Committee is engaged in the sort of negative, attack politics that the voters rejected in the 2006 and 2008 election cycles. The president of the Republican Party saying why are you doing this now?

LESLIE SANCHEZ, REPUBLICAN STRATEGIST: It's very similar to what Senator McCain said with respect to the tone of the Republican National Committee. But I would argue in this case, with all due respect to speaker Gingrich, this is not really the road. The party has a responsibility to be the powerful opposition. We know the democrats are in power. This is our role. This is the way our institution is written and if you look at the times when you don't challenge an existing presidency, you look at the 50s and 60s, you basically have bad presidencies. I'm arguing that it's good politics, it's good government. Look at an Illinois GOP poll.

BLITZER: So you disagree with Gingrich?

SANCHEZ: I disagree. Two-thirds of voters in Illinois say they want a special election. There are issues that need to be raised and the republicans ...

BLITZER: What the RNC did, they did this ominous video raising questions about Barack Obama and Rob Blagojevich and they issued a statement saying they need a lot more information. What's wrong with that? What's wrong with raising questions about the democrat that will be the next president?

JAMAL SIMMONS, DEMOCRATIC STRATEGIST: I don't know, but I wish we had this Leslie Sanchez a year ago when we were arguing about George Bush. I think newt Gingrich is doing this the right way. This is the beginning of the administration. Barack Obama hasn't been inaugurated yet. Give him a little bit of rope. If you're Newt Gingrich, you want to look reasonable. Let your opponent have as much rope as possible. That way when he does make a real mistake, you can wrap it around his neck.

BLITZER: Because he basically is following, Newt Gingrich, the advice of Colin Powell, another republican, the advice of John McCain, another republican, saying there is a time to go crazy with politics and there's a time to step back and do what the American people want.

SANCHEZ: There's no doubt they're stewards in terms of our republican leadership. But the party is doing what it's supposed to do. It frames the issues. It is talking about OK let's look at leadership. If Barack Obama is truly a post partisan candidate, then he needs to step up to the plate with respect to transparency, integrity. He's done that so far. This is just basically laying out the issues and the opposition.

BLITZER: We heard similar things that the Republican Governor's Association meeting in Miami. I was down there for that. Tim Pawlenty, Mark Sanford. Some saying there's a time for politics, there's a time for moving on and getting ready for a new president. But I want you to listen to Dick Cheney. He was on Rush Limbaugh's show and he said, you know what? Joe Biden, the incoming vice president, is going to be grateful to what he did over the past eight years. Listen to this.

DICK CHENEY, VICE PRESIDENT: Well, my guess is once they get here and they're faced with the same problems we deal with every day, that they will appreciate some of the things we've put in place. I think the Obama administration is not likely to feed that authority back to the congress. I think they'll find that given the challenge they face, they'll need all the authority Czech muster.

BLITZER: Do you think he's right?

SIMMONS: I don't. Certainly there are probably some things inside the intelligence community that they'll take a look at and they may realize we need them in order to keep America safe. But there are other things, such as the office that Dick Cheney had outside the speakers office that Nancy Pelosi and Joe Biden has said he won't have an office outside in the congress. At the same time, I think if you're looking at just some of the overreaching that's taken place in the white house in terms of torture, we saw the way George Bush was treated when he got to Iraq, having shoes thrown at him. I don't think that the Barack Obama administration is looking to put themselves in the same position the Bush administration was in.

SANCHEZ: You know, I can understand your point, but I disagree because I think Vice President Cheney said directly what Barack Obama has implied indirectly with the sense of his appointments and some of his statements. When you look at what he's done, his economic team is much more centrist, is much more pragmatic when he's keeping the appointment of Secretary Gates for defense and General Jones. Those are positions that he's basically -- it's a message that he needs as much flexible that he can have so he can lead.

BLITZER: It will be a great story over the next four years. We'll see what happens with Joe Biden and Barack Obama and see if they do follow in the footsteps on some of these issues with their predecessors. Thank you so much for coming in.

Heading off a dead zone, making a cell phone call during the inauguration could be a challenge. What the phone companies are now doing about a potential problem, maybe a disaster.

They fled Europe to escape prosecution from the Holocaust. A revealing look at the lengthy hunt for Nazis hiding in the United States. There's new information coming out right now right here in THE SITUATION ROOM.

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BLITZER: Next month's inauguration poses certainly a number of challenges here in Washington from finding a place to stay to just getting around the city. One more thing that might be stretched beyond capacity is cell phone service. CNN's homeland security reporter Jeanne Meserve is following developments on this front.

Enormous security concerns but tell us about this, Jeanne. JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: Well, if you think you can snap a picture of the inauguration on your cell phone and then send it instantaneously to your grandmother, you may be in for disappointment.

(BEGIN VIDEOTAPE)

MESERVE: At the stroke of midnight last December 31st, revelers texting holiday greetings via cell phone overwhelmed the system. Messages didn't receive messages hours into the new year. But just wait until the inauguration which could bring millions of cell phone users to downtown D.C. texting, calling, surfing the web, sending photos and sharing videos.

JOE FARREN, CTIA SPOKESMAN: Imagine a brilliant 85-degree beautiful blue sky July 4th weekend and imagine at the end of that weekend everyone leaving the beach at the same time. Picture what the roadways would look like in that scenario, and that could be what our wireless network looks like.

MESERVE: The bottom line, expect delays and disruptions even though the wireless industry is spending millions to boost capacity in Washington. More lines are being installed so existing towers can accommodate more traffic and portable cell phone towers will also be brought in to enable more calls to get through. Emergency personnel communicate by radio, but as a backup, thousands are being outfitted with point-to-point cell phones which don't need towers to work. And some first responders will be given priority access so that their cell phone calls will go through first.

But a cell phone can have a different role in a security incident, because a cell phone can be a detonator. A former homeland security official says that in certain circumstances that mean cell phone service could be intentionally disrupted.

GEORGE FORESMAN, FORMER DHS OFFICIAL: You could find yourself in a situation where if there is a credible threat, the federal authorities have no other choice but to disable all but the essential first responders communications equipment.

(END VIDEOTAPE)

BLITZER: But even if the inauguration goes without a hitch, there are things that the attendees can do to ease the strain on the wireless system, text and don't call. Texting takes less bandwidth and your message is more likely to go through, and if you have pictures or video, save it and don't send it. Share it later. Wolf?

BLITZER: Good information. We will be watching what happens on January 20th. It will be an incredible day here in Washington.

Cell phone usage can spike in certain incidents and sometimes service will indeed crash. Back in August of 2003 many of you will remember that service was lost in a power blackout, because so many people in New York City tried to use their cell phone at once. Then the same problem overloaded cell phone networks last year after this highway bridge collapsed in Minnesota. And cell phone calling and text messaging surged as much as 500% during the Philadelphia Phillies World Series victory parade last month.

All right. Now, let's go back to Jack Cafferty. He's got the Cafferty File.

JACK CAFFERTY, CNN CORRESPONDENT: I don't own a cell phone and I'm not worried about any of this.

BLITZER: How is that possible, Jack?

CAFFERTY: I just never got one. I never had one. I'm 66 now. I got this far without it. Everything is fine.

The question this hour, what qualifies Caroline Kennedy to suddenly become a member of the U.S. senate? She has expressed an interest in the soon to be vacant seat that Hillary Clinton occupies because of course Senator Clinton is going to be secretary of state, we think.

Ann in Florida writes, "I am all for Caroline becoming a senator. She's smart. She grew up around politicians. This is a good woman and knows what is going on and who has devoted herself to both mothering and public service. Really, what qualifications are more important? She should not be given the seat because of her name, but neither should she be rejected because of it."

Bill in New York writes, "Caroline Kennedy is as politically qualified as I am to get Hillary's seat, and in other words, not at all. What she has going for her is that she has a famous name. Her dad is one of the most beloved presidents, and she a big fund-raiser and she's a huge Obama supporter, so get who is going to get the seat."

Ray in Tennessee says, "Actually there's no training to be a politician, so she is as qualified as anyone else. That being said, she is too inexperienced to be appointed to the seat. If she wants to run in 2010 and the voters in New York want her there, they can elect her."

Hugh in California writes, "Caroline Kennedy obviously has the name but more than that, she has the kind of personality which is too often lacking in Washington. She doesn't seek the limelight nor the power. She has come to a crossroads in her life. She feels compelled to serve like so many in her family have done before."

Mickey in the Bronx writes, "The best qualification for anyone running for office, she seems to care. She's always been interested in trying to make things better."

And Ryan in Indiana, "What qualifies Fran Drescher? What qualified Arnold Schwarzenegger to be the governor of California? How about Jesse Ventura? At least Caroline Kennedy comes from a family of politicians and has a history of working around government. I would say she is as qualified as the aforementioned names." If you didn't see your email here you can go to my blog at CNN.com/Caffertyfile, and look for yours there among hundreds of others. How many cell phones do you have Wolf?

BLITZER: I have one. It's a combination cell phone blackberry. Do you have a blackberry, Jack?

CAFFERTY: No. I don't have any of the stuff, fax machine, pager, none of it. I have a trimline phone with a cord that goes into the wall at my house.

BLITZER: Not even a wireless?

CAFFERTY: No, no, no wireless. Plug-in.

BLITZER: Thank you, Jack. Standby.

We are following breaking news here in THE SITUATION ROOM, a stunning revelation about Congressman Jesse Jackson, Jr., and sources are saying that he worked as a government informant in the case against the Illinois Governor Rob Blagojevich.

And more of Candy Crowley's exclusive interview with President Bush. He is responding to Karl Rove's recent assessment of Iraq and faulted it. The president surprisingly open, the one on one interview with Candy and more coming up.

(COMMERCIAL BREAK)

BLITZER: Let's check in with Lou to see what's coming up in an hour from now.

I know one of the subjects you're talking about you're reporting on today Lou is what's going on in Mexico right now because it seems like crime is really on the rise.

LOU DOBBS, CNN ANCHOR: We suggest 5,000 people murdered in the drug cartel wars in Mexico just this year, last week, a U.S. expert on kidnapping Felix Batista kidnapped himself while in northern Mexico, and today, we receive, Wolf, from the U.S. Justice Department, a new drug assessment saying clearly an unequivocally that the drug cartels in Mexico are the single largest organized crime threat in the united states. Imagine that, and we have been talking as you know on my broadcast for years about Mexico being the principle source of methamphetamines, heroin, cocaine and marijuana and the Justice Department is now saying, clearly to everyone who will listen, it is time to take seriously the threat to the United States, by these drug cartels, and they have to be dealt with.

BLITZER: And Lou will have a lot more on the story in one hour. Thank you, Lou. And to the viewers, you are in THE SITUATION ROOM.