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Final Iowa Push for Republicans; Unrest in Syria; How Ad Attacks Deflated Gingrich; Romney Slammed In Attack Ads; North Korea Nixes Thaw With South; Officials Hunting California Arsonist; Wall Street Ends 2011 Mixed; Verizon Flips On $2 Charge; Panetta Calls Egypt On Rights Groups Raids

Aired December 30, 2011 - 16:00   ET

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

WOLF BLITZER, HOST, CNN'S THE SITUATION ROOM: Happening now: Newt Gingrich chokes up.

(BEGIN VIDEO CLIP)

NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: Whole emphasis on brain science comes in directly from dealing -- see, I'm going to be emotional of dealing with...

(END VIDEO CLIP)

BLITZER: Emotions are running very, very high right now. Newt Gingrich's presidential campaign is slipping. This hour, will his tears help or hurt him in Iowa?

Plus, Mitt Romney tries to close the deal with Iowa voters heading into the final weekend before the caucuses. Is he getting too confident now that it's crunch time? And we're digging deeper into Ron Paul's past writings and finding some startling criticism of AIDS patients, minority groups, and sexual harassment victims.

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

We're here in the new CNN Election Center counting down to the final few days and hours before the first presidential contest of 2012. A new Iowa poll out today reinforcing Mitt Romney's place at the top of the pack, running neck and neck with Ron Paul.

And it drives home the bombshell findings of our poll this week, showing Rick Santorum has surged into third place in Iowa, while Newt Gingrich has faded. It's also putting more and more pressure on Mitt Romney to go for broke in Iowa, trying to pull off a win Tuesday night.

CNN's Jim Acosta is joining us now live from Des Moines with more.

The stakes enormous right now, Jim.

JIM ACOSTA, CNN CORRESPONDENT: That's right, Wolf.

Mitt Romney has the big mo and the question heading into this critical weekend is whether he will win the Iowa caucuses without breaking a sweat.

(BEGIN VIDEOTAPE)

ACOSTA (voice-over): No wonder Mitt Romney appears to be going all in in Iowa. He just might be holding a winning hand. At his side just days before the caucuses, a political ace and Republican rising star Chris Christie.

GOV. CHRIS CHRISTIE (R), NEW JERSEY: You don't do what you're supposed to do on Tuesday for Mitt Romney, I will be back, Jersey- style, people. I will be back.

ACOSTA: Romney barely mentions his GOP rivals these days, aiming all of his zingers at the president.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: He's in Hawaii right now. We're out in the cold and the rain and the wind because we care about America. He out there. He just finished his 90th round of golf.

ACOSTA: A new NBC/Marist poll backs up findings from CNN earlier this week. Romney is statistically tied for the lead with Ron Paul and well ahead of the rest of the pack.

UNIDENTIFIED FEMALE: And I'm actually hoping you can help me with doing a one quick question survey.

ACOSTA: The trick is to translate those poll numbers into boots on the ground and beat the more organized Ron Paul army in Iowa.

But Paul and the rest of the GOP field may have given Romney the opening he needs. The libertarian Republican is heading home to Texas to spend New Year's Eve with his family, while the well-financed Rick Perry is battling for third place with Rick Santorum.

GOV. RICK PERRY (R-TX), PRESIDENTIAL CANDIDATE: Why did you ask taxpayers of Iowa to support a teapot museum in North Carolina, an indoor rain forest in Iowa?

Former Bachmann campaign manager Ed Rollins tells CNN the Minnesota congresswoman has held her fire against Romney in the hopes of being his running mate, saying "It was a theory they had that if Romney became the nominee, he would need her to get Tea Party support."

Romney's only gaffe this week came from his son, who joked why he has yet to release his tax returns.

MATT ROMNEY, SON OF MITT ROMNEY: I heard someone suggest the other day that as soon as President Obama releases his grades and birth certificate and sort of a long list of things, then maybe he would do it.

ACOSTA: Another sign Romney prefers a fight with President Obama, who he now compares to French royalty.

QUESTION: Why did you call President Obama Marie Antoinette? Can we ask you that one?

MITT ROMNEY: When he said -- I didn't call him Marie Antoinette. I said it reminded me of Marie Antoinette when she said let them eat cake. He said, it could be worse. It could be worse is not what Americans look for. What we look for is, it can be better.

ACOSTA: In response, the Obama campaign tweeted this article from "The London Telegraph" that reported Romney once lived in a mansion when he was a missionary in France.

(END VIDEOTAPE)

ACOSTA: The only other contender in this field that's hitting Mitt Romney right now is Jon Huntsman. His super PAC has a new ad out that calls Romney a chameleon. The problem, though, that ad is running in New Hampshire -- Wolf.

BLITZER: Mitt Romney's son, Jim, he did back away from the assertion about the president not releasing his birth certificate, since we all know the president did in fact release his birth certificate. He's now backing away from that.

ACOSTA: That's right. That's right. He put out a tweet earlier this afternoon saying it was a bad joke and he apologizes, Wolf.

BLITZER: Jim Acosta is going to be busy over these next few days. Thanks, Jim Acosta joining us from Iowa.

Now to the most-attention grabbing moment on the campaign trail on the day, Newt Gingrich getting very emotional talking about his mother at an event in Iowa. Listen to this.

(BEGIN VIDEO CLIP)

FRANK LUNTZ, FOUNDER, LUNTZ GLOBAL: This is a group of moms here. When you think of your mom, what special moment comes to mind that -- I know that she's not still with us. What moment do you think of when you think of your mom?

GINGRICH: Well, first of all, you will get me all teary-eyed.

First, I will tell you I get teary-eyed every time we sing Christmas carols.

(LAUGHTER)

GINGRICH: Excuse me.

My mother sang in the choir and loved singing in the choir. Late in her life, she ended up in a long-term care facility. She had bipolar disease and depression and she gradually acquired me some physical ailments.

And that introduced me to the whole issue of quality of long-term care, which I did with Bob Kerrey for three years. And then that introduced me to Alzheimer's, which I did with Bob Kerrey for three more years.

And my whole emphasis on brain science comes in directly from dealing -- see, I'm going to be emotional of dealing with, you know, the real problems of real people in my family.

And so it's not a theory. It's, in fact, you know, my mother.

(APPLAUSE)

GINGRICH: I do policy -- I do policy much easier than I do personal.

(LAUGHTER)

(END VIDEO CLIP)

BLITZER: A very human side of the former speaker.

CNN's Shawna Shepherd caught up with the former speaker later, asked him about his show of tears. Watch.

(BEGIN VIDEO CLIP)

QUESTION: Mr. Speaker, how are you holding up? Did you expect them to -- did that catch you off guard?

GINGRICH: About my mother?

QUESTION: Yes.

GINGRICH: Oh, yes. But it does at the Basilica on Christmas Eve.

There's something about Christmas carols that just triggers my mother and I find myself back there again, which in a way is very nice.

(END VIDEO CLIP)

BLITZER: Let's bring in our chief political correspondent, Candy Crowley, the host of "STATE OF THE UNION." She's in Des Moines, Iowa, right now.

A very different side of the speaker, I must say. I have known him, covered him for 20 years or so. I have never seen him cry like that. Have you, Candy?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: I have not.

Setting aside the moment, he was talking to a group of mothers, Mothers Matter 2012. You can hear the kids in the background. It recalled for me actually in an even more poignant way the -- Hillary Clinton, when she got choked up talking in New Hampshire right after her loss here in Iowa.

There is something about the rigors of the campaign trial. At this point, you're talking about some pretty tired campaigners, the season, which is Christmas and New Year's and that kind of triggers this. I think this was a good moment for Newt Gingrich.

What is the -- some of the rap on him is that he's this cold, sort of arrogant intellectual and here he is. What mom can't relate to a son choking up about his mom? I thought it was -- if you want to look at it purely politically, it was a good moment for him.

BLITZER: It was a good moment because it did show a very personal side of Newt Gingrich.

And we remember four years ago when Hillary Clinton broke down in tears in New Hampshire when she was -- got emotional speaking about her daughter or whatever. In fact, I think we have that clip. Let me play it, Candy, and then we will discuss.

(BEGIN VIDEO CLIP, 2008)

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: This is very personal for me. It's not just political. It's not just public.

I see what's happening. And we have to reverse it. And some people think elections are a game. They think it's like who's up or who's down. It's about our country, and it's about our kid's futures and it's really about all of us together.

(END VIDEO CLIP)

BLITZER: Certainly showed a very personal side of Hillary Clinton. That actually helped her on the campaign trial, didn't it, Candy?

CROWLEY: Well, it did. It seemed to. Certainly, she came from behind and won the New Hampshire primary when there was a lot of worry in her campaign since they thought they'd win the Iowa caucuses and she came in third.

So it was a moment when the human side comes up. And you can say -- well, you know, why is that so important? Part of it is that we know that voters have this kind of X-factor they go on. Can I relate to this person? Those are relatable moments. Everybody can understand why, you know, somebody might choke up at a time.

She was talking about the country as a whole in the state that she found it in at that particular point. Obviously we knew at that point that the economy was really beginning to tank. She was talking about all the families she had met, et cetera.

It matters because people look at that and go, wow, that's really interesting. I feel like I know that person a little bit better now. That's really key when they go into a caucus or in New Hampshire when they go in to do their primary voting. It's key to feel as though you have some take on who this person is personally.

BLITZER: Yes, although you and I are old enough to remember Ed Muskie when he seemed to cry out on the campaign trail. Pat Schroeder, the former congresswoman up in Colorado, she cried, and that didn't help either one of them in their chances of getting the party's nomination.

CROWLEY: Bill Clinton changed all of that. Feeling your pain is very in vogue. Yes. It was a long time ago. I think it has changed. People want to see that kind of human -- I mean, they don't want to see fake crying, but those human moments tend to humanize people that just seem like flat caricatures to most people when they see them on TV.

BLITZER: Yes. Bill Clinton, I feel your pain.

Candy, thanks very much.

Candy will be anchoring "STATE OF THE UNION" Sunday from Iowa. We will be watching, of course.

Candy, thanks very much.

Ron Paul is planning to turn his final campaign push in Iowa into a family affair. His son, the Senator from Kentucky Rand Paul, will be at his side for a whistle-stop tour to five Iowa cities on Monday.

Ron Paul is in Iowa today, but he's taking a break from his campaigning this New Year's weekend, a risky move, I should say, in the last critical days before the caucuses. He's been struggling to deal with some tougher scrutiny, including questions about racist newsletters written under his name decades ago.

Our political reporter, Peter Hamby, is joining us now from Iowa.

You have been looking specifically, Peter, at a 1987 book by Ron Paul.

PETER HAMBY, CNN POLITICAL CORRESPONDENT: Yes, that's right, Wolf.

This was written under Ron Paul's name in 1987 right before he ran for president under the libertarian party banner. And unlike those newsletters, which he has been able to distance himself from, this book was written by Ron Paul and there are several passages in there that are sort of, of questionable taste or sort of inflammatory that might hurt him.

Let me read to you a couple of these passages that are in this book, which is called "Freedom Under Siege."

The first one is about sexual harassment. Ron Paul writes -- quote -- "Employee rights are said to be valid when employers pressure employees into sexual activity. Why don't they quit once the so- called harassment starts?"

And another passage that I found in this book when I was reading through it over the last few days was, "Every year, new groups organize to demand their rights. White people who organize and expect the same attention as other groups are quickly and viciously condemned as dangerous bigots. Hispanic, black and Jewish caucuses can exist in the U.S. Congress, but not a white caucus, demonstrating the absurdity of this approach for achieving rights for everyone."

So, again, Ron Paul's hard-core libertarian views coming back to haunt him a little bit. Again, these are not sort of outside mainstream libertarian thinking. A lot of the book hits on Ron Paul's familiar themes about the gold standard, protecting gun rights, and basically personal liberty. That's what he's writing about.

But amid this whole newsletter flap, this book has escaped scrutiny, but now he might have to answer for this in the next few days before the caucuses -- Wolf.

BLITZER: You spent a lot of time in Iowa, spent a lot of time in New Hampshire, South Carolina. How is this likely to impact him?

HAMBY: Well, I don't think it will hurt him here in Iowa where he's doing well and his supporters are so devoted and frankly agree with a lot of his positions.

The problem for him, which has been the problem for him this whole campaign, is most Republican voters don't view him as palatable. Nationally, only about 6 percent according to our recent poll think he can beat Barack Obama next November.

It might hurt him in New Hampshire, where someone like Jon Huntsman is competing for independent voters against Ron Paul. So if you throw these quotes back at him basically saying if you're a victim of sexual harassment, you might as well quit your job, that might turn off some independent voters.

And again it feeds this narrative that Ron Paul is sort of out of step with not just Republicans, but also independents. As much Ron Paul has tried to graft this idea that his views on debt and spending are in line with today's Republican Party, this reinforces the narrative that quite frankly his views are not. So it's a problematic for him on a national level.

BLITZER: Peter Hamby reporting for us from Iowa, thanks, Peter.

We have several days of complete coverage ahead on the Iowa caucuses. First, please be sure to join me Saturday night, 6:00 p.m. Eastern, for a special edition of THE SITUATION ROOM, with my interviews with all seven Republican presidential candidates, Saturday 6:00 p.m. Eastern.

Then, 8:00 p.m. Eastern on Sunday, tune in for a CNN politics special, "Countdown to Iowa: The Final 48 Hours." That's Sunday night, 8:00 p.m. Eastern. And it all leads to the Iowa caucuses on Tuesday. Our special coverage begins at 7:00 p.m. Eastern, only here on CNN.

Democrats are stepping up their attacks on Mitt Romney and asking, what is he hiding? Will Mitt Romney be forced to reveal more about his finances sooner, rather than later? And an exclusive look inside the uprising and violence in Syria that the Bashar al-Assad government doesn't want you to see. Stand by for some secret reporting behind the front lines.

(COMMERCIAL BREAK)

BLITZER: We're taking a closer look at what's going on in Iowa, much more coming up on the Iowa caucuses. That's coming up in a few moments.

But there's other important news we're watching right now, including overseas, another bloody Friday as Syria antigovernment protesters take to the streets by the thousands to crackdown by the Bashar al-Assad regime appears to be hardening, even as Arab League monitors assess whether Syria is upholding a peace agreement.

A freelance journalist was able to get inside Syria to report on the unrest and filed this exclusive report for CNN, anonymously for security reasons.

(BEGIN VIDEOTAPE)

JOURNALIST: The neighborhood of Homs, anti-Assad fighters took me into a house where the men were engaged in a shootout with snipers from the Syrian military. These men say they are all defectors from Assad forces. They call themselves the Free Syrian Army.

One of the men managed to take a rifle with a precision scope with him when he defected. But most of the fighters from the Free Syrian Army are ill-equipped, short on guns and ammunition and with no weapons. Still, they have managed to kick Assad forces out of Bab Amr and hold the area. It's possibly the first place in Syria beyond government control.

Check points like this mark the front line.

UNIDENTIFIED MALE (through translator): Assad's troops are about 25 to 30 meters away from us with soldiers in tanks. We are here to prevent them from passing and killing young and old.

JOURNALIST: The man introduced me to one of their leaders. Abdel Razzaq Tlas is one of the few willing to be identified. He was a lieutenant in Assad's army before defecting. His uncle is a former Syrian defense minister.

ABDEL RAZZAQ TLAS, DEFECTED OFFICER (through translator): We got orders in army that went against my oath as a soldier. I had sworn to protect civilians, but when I saw what the government forces were doing to the people, I defected on June 2nd.

JOURNALIST: People like Abdel Razzaq Tlas are heroes for the people of Bab Amr. He was cheered at an antigovernment demonstration.

But Bab Amr is surrounded by the Syrian military and constantly shelled by tanks and artillery. In a meeting in a safe house, Abdel Razzaq Tlas insists that even though Assad has not used his air force against the uprising, only a no fly zone imposed by the international community could help the rebels win.

TLAS: We are in contact with soldiers who are in the army. They tell us that a no fly zone is essential to prevent them from getting bombed if they defect.

JOURNALIST: For now, the men of the Free Syrian Army are fighting a guerilla war against an overpowering fold. They smuggle fighters in and out of the neighborhood they control, evading government checkpoints. At night, they search everyone entering and leaving the area to stop government death squads -- the so-called Shabiyah -- from getting in.

UNIDENTIFIED MALE (through translator): The street you see over there is controlled by the Shabiyah. They are known to kidnap our women and children. We try to prevent this. When strangers come here, we stop and search them.

JOURNALIST: The people of this part of Homs are not afraid to take to the streets. There are regular nighttime rallies, but after months of casualties, they have long lost their faith in nonviolent protests. In Bab Amr, many believe that real change in Syria will only come from the barrel of a gun.

(END VIDEOTAPE)

BLTIZER: Report from inside Syria, the reporter wants to remain anonymous for security reasons.

Let's dig a little bit deeper right now about what's going on in Syria. CNN's Mohammed Jamjoom is following all of the unrest from Egypt. Syria, as you know, has restricted access by international journalists.

Mohammed, the Arab League of observers in Syria right now, do they have any real opportunity to see anything or are they completely controlled by the Syrian regime?

MOHAMMED JAMJOOM, CNN INTERNATIONAL CORRESPONDENT: Well, Wolf, we've been trying to reach those Arab League monitors on the ground directly and having a lot of difficulty doing so. There's been a lot of questions as to whether these observers have unfettered access, whether they're being heavily monitored by the Syrian security forces.

What's interesting is even though we haven't been able to speak to them directly, there's a lot of videos popping up on sites like YouTube, purporting to show them in various cities, interacting with citizens there, getting into confrontations and arguments at some times.

One video I like to cite today purports to show a scene in the city of Daraa where one Arab League monitor or somebody who appears to be an Arab League monitor, wearing the orange vest and the white hat that we're told these monitors are wearing there, is talking to a man, a Syrian man, who said he was tortured by Syrian security forces. He's showing the monitor his back and describing what happened to him.

And this is -- we're just seeing more and more scenes like this coming out of Syria. Even though we're not getting to talk to these monitors, we're not hearing the reports they're supposedly giving back to the Arab League or what their interactions are with the Syrian government, the fact is, a lot of Syrians want people to see what is going on on the ground there and so, they're posting these videos and a lot of these videos are being corroborated by what we're being told by eyewitnesses there on the ground -- Wolf.

BLITZER: Yes. But a lot of people have raised questions, as you know, Mohammed, about the credibility of these Arab League monitors, the Arab League headquartered in Cairo, where you are. The head of this Arab League delegation was the intelligence chief for the leader of Sudan, who's wanted by the International Criminal Court for crimes against humanity and this is the guy they send over to Syria to see what's going on? What kind of credibility does he have?

JAMJOOM: There has been so much criticism, Wolf, of the choice of General Mohamed al-Dabi to be leading this mission, a man with a high position in the Sudanese government, a government responsible for atrocities in Darfur. A lot of Syrians saying, you know, it would have been better if the U.N. had sent in a mission, and they're questioning his credibility.

The Arab League has shot back saying that these claims are without merit.

But the fact of the matter is, even while these Arab League monitors are there trying end the violence, we're hearing reports of more and more violence. Just today in Douma, a suburb of Damascus, where there were protests, we see videos purporting to show huge clashes between security forces there and protesters.

And it's really begging the question, how effective are these monitors? There's so much outrage as to the fact that these monitors are there. They've been there now for a few days. They're going to increase their numbers in the country. And yet, by all accounts, we're hearing in that country, violence only increasing, deaths only increasing, injuries only increasing as the protest swell. It just seems like this brutal by the al-Assad regime isn't going to end anytime soon -- Wolf.

BLITZER: His regime in Sudan was accused of slaughter against so many fellow Sudanese in Darfur. And now, the Arab League picks him to go ahead and represent the Arab League in Syria. What an outrage.

All right, Mohammed. Thanks very much.

We'll check back with Mohammed Jamjoom. He's watching all of this unfold in Egypt. Syrian regime will not allow international journalists to come in to actually see what is going on.

The primary season kicking into high gear and the gloves are coming off. When we come back, with the Iowa caucuses around the corner, attack ads are coming fast and furious. Who's taking the big hits and is anyone taking the high road?

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: I, of course, could get up and say, oh, I decry all of the negative ads and so forth, but I don't. I mean, what -- this is part of the process.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: You can certainly bet there's a lot of talk inside Newt Gingrich's campaign about why his support in Iowa has nosedived with the caucuses now just four days away. Two words are probably coming up: attack ads.

Our Lisa Sylvester is taking a closer look at the power of these negative ads and the super PACs that are often behind them -- Lisa.

LISA SYLVESTER, CNN CORRESPONDENT: Wolf, Newt Gingrich made a promise to not run negative ads and he's probably rethinking that decision, considering his opponents have been lobbing a lot of negative ads his way.

(BEGIN VIDEOTAPE)

NARRATOR: Leaving us with debt, earmarks --

SYLVESTER (voice-over): Iowa voter this week are seeing a blitz of political ads and the latest tally says three quarters of them are negative.

NARRATOR: Ever notice how some people make a lot of mistakes?

NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: It was probably a mistake. I made a mistake.

NARRATOR: Serial hypocrites and flip-floppers can't clean up the mess. Mitt Romney raised business taxes 20 percent in Massachusetts.

SYLVESTER: Some strategists think attack ads have already claimed their first victim, Newt Gingrich, whose poll numbers have taken a tumble. Gingrich was way outgunned according to Ad Trackers, 45 percent of all political ads in Iowa this month have been hits on him. Only 6 percent were supporting him.

RON BROWNSTEIN, CNN SENIOR POLITICAL ANALYST: Disparity between what the pro-Romney super PAC was able to spend in Iowa and what Gingrich was able to mount in his own defense during the month of December I think clearly was a key factor in this precipitous fall in the polls.

SYLVESTER: Mitt Romney was the target of the only 20 percent of the ads and who's paying for these ads? Often independent groups called "Super PACs," mostly allowed to spend unlimited amounts, often run by friends of the candidate and sometimes backed by undisclosed donors.

In an interview with CNN's Wolf Blitzer, Gingrich is crying foul and blaming rival Mitt Romney.

NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: He's buying millions in attack ads paid through a phony "Super PAC" run by his former staff paid for by his millionaire friends.

But Romney says the law forbids him from telling a "Super PAC" what to do.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: I, of course, could get up and say, I decry all of the negative ads and so forth, but I don't. This is part of the process.

SYLVESTER: But the "Super PACs" do have tied to candidates. The ones supporting Romney, Perry and Gingrich are all led by former aides or advisers and Huntsman's is backed by his billionaire father.

Negative ads have been around since 1964 ad suggesting Barry Goldwater was too risky for the nuclear age, but will they be a key factor in Iowa?

STEVE DEACE, SYNDICATED RADIO HOST: Iowans do not like negative ads. They would prefer to get to know a candidate individually.

CHERI JACOBUS, REPUBLICAN STRATEGIST: People look at the content of the ads and it does affect them, whether they will admit to it or not.

(END VIDEOTAPE)

SYLVESTER: Analysts say there can be a voter backlash against candidates who sponsor negative ads, but if an attack ad is sponsored by a "Super PAC," the blame doesn't go to a candidate. So the candidate can run positive ads and keep their hands clean while their "Super PAC" runs attack ads and does the hard hits -- Wolf.

BLITZER: Lisa, thank you. In Iowa, by the way, the presidential primary candidates will get their first big test next Tuesday and the attack ads are airing with a vengeance and from all sides.

Take a look at part of this ad by the Democratic National Committee going after Mitt Romney about not releasing his taxes.

(BEGIN VIDEO CLIP)

ROMNEY: With regards to income taxes, that's not something that's required by the law. I'm not planning on releasing my income taxes anytime soon.

(END VIDEO CLIP)

BLITZER: Joining me now in the "Strategy Session," CNN political contributor, the Democratic strategist, Donna Brazile and CNN contributor, Will Cain. He's a columnist for the blaze.com.

They're hitting Romney hard, the Democrats, in this ad and a whole lot of other ads. How big, Will, potentially is this an issue for Mitt Romney? WILL CAIN, CNN CONTRIBUTOR: I don't think and I expect and hope it won't be an issue, Wolf. Here's what's going on essentially. This search for his tax returns, essentially the argument to set up, look how rich Mitt Romney is.

He's the poster child for income inequality. Income inequality completely independent of how it's acquired a corruption. I hope that message doesn't resonate, that income inequality argument. I expect it won't.

Americans don't begrudge people's success. They see it as inspirational. They realize that capitalism is a system that lifts all boats. The tide rises and lifts all boats. I think this income inequality, which I think this issue is about, will not resonate come the general election.

BLITZER: You know, donna, the -- a lot of conservatives and Republicans say Mitt Romney should release his information to be fully transparent, when President Obama becomes fully trans parent and allows his college and university to release his grades, reports, his thesis, all of the stuff that he did then, which he's refusing to release. Is that a fair analysis?

DONNA BRAZILE, CNN POLITICAL CONTRIBUTOR: Absolutely not. Look, it's a long standing precedent to have major candidate, frontrunners, release their tax returns.

When Mitt Romney ran for United States Senator against Ted Kennedy in 1994, he called on Senator Kennedy to release his tax return. Mitt Romney has been running for president now, Wolf, over five years.

What is he hiding? Are there any personal conflicts of interest that we might find? Is he playing by the same set of rules as the rest of us Americans?

So we know he's a wealthy man and we don't begrudge people who make a lot of money. We're just trying to see if he's playing by the same rules as everybody else.

BLITZER: But, Donna, if the president wants transparency and has nothing to hide, why is he refusing to release his information about his years in college and law school?

BRAZILE: Well, Wolf, I'm sure we all can see his diploma and we can see his records, if that's the case. But you know, what are we comparing here? We're comparing his grades. We know he graduated from college, law school.

Mitt Romney is right now the frontrunner in the Republican nomination. He called on others to release their tax returns. I think he should release his tax return. What is he hiding? That's what people want to know. What are you hiding, Mr. Romney?

BLITZER: Well, Will, there is a difference between releasing your college information as opposed to releasing your more recent income tax returns, isn't there?

CAIN: Yes, I mean, I don't know that we can draw the strict parallel between the two. I think it's an interesting little retort, but I don't know what the assumption also, Donna, is that if he doesn't release his tax return, he's hiding something.

I mean, we do have the Internal Revenue Service. I mean, I assume they've looked over his tax records. I assume if there's anything untoward in there, they're going to pick up on it.

I think asking a candidate to release their tax returns is largely interest on our part to say, wow, man I didn't know he own that kind of house and that he made that kind of money last year. I just don't know how important that is. It's not that big a deal one way or another.

BRAZILE: It's not a amount of money. It's his taxes. Is he paying the same as people who are cutting lawn or his hair or is he paying, you know, at the rate that many of us are paying in the higher income brackets.

And I say that because yes, December 31st is tomorrow and some of us have to pay quarterly taxes. So people just want to know what is his tax rate? What is he paying? That's it. Release it. There's nothing to hide. We know it's probably more than 12 pages. Release it.

BLITZER: I assume at some point if he gets the Republican nomination, he'll do that. But that's just my assumption. Guys, we'll continue to conversation over the coming days and weeks. Thanks very much.

New information meanwhile about a rash of fires in the Los Angeles area and who's behind them. We told you about raids affecting Americans and others in Egypt yesterday, but guess what? Now, there's a new development. Stand by.

(COMMERCIAL BREAK)

BLITZER: Lisa Sylvester is monitoring some of the other top stories in THE SITUATION ROOM right now. Among them, is it going to be status quo on the Korean Peninsula? Lisa, what's going on?

SYLVESTER: Hi, there, Wolf. Well, North Korea has pretty much dashed hopes that new leadership might mean a thaw this relations with its neighbors to the south.

In an official statement today, Pyongyang declared that, quote, "South Korean puppets and foolish politicians around the world should not expect any change." That statement comes after two days of ceremonies honoring the late Kim Jong-il. His son, Kim Jong-un has been named supreme leader.

And almost 20 vehicle fires have California fire and police officers on the hunt for whoever set them. A Los Angeles fire official says they are work of an arsonist. A citywide tactical alert has been issued. Thirteen fires were in Los Angeles, six more were in West Hollywood. Several of the fires spread to nearby buildings.

Investors have bid farewell to 2011. The year's final day of trading sputtered to a start, but at the closing bell, the Dow Jones Industrial average had gained 124 points. It's closed at 12,294. It's closed the year up, 640 points. That's 5.5 percent higher.

The Nasdaq lost 47 or 1.8 percent for the year and the S&P 500 was virtually flat losing 0.04 points. That's the smallest annual change in S&P history.

And Verizon is scrapping its controversial plan to slap some customers with a $2 fee just the day after it was announced. The telecommunications company had planned to add a so-called "convenience charge" for customers who made one time payments on their bills using debit or credit cards.

Verizon said they decided against the fee after listening to feedback from customers. There certainly were -- there was a lot of backlash for that $2 fee, Wolf. I know it was all over the internet for a while.

BLITZER: That was a ridiculous decision by Verizon and fortunately, they recognized it. Public relation, no matter how much they would make on that, it was just a disaster.

If you mailed in a check the old fashioned way, put it in an envelope, put a stamp on it, no fee, but if you do it electronically, they're going to charge you. That's obviously ridiculous. They didn't take very long for them to realize that was a mistake. Lisa, thank you.

They came, they seized and now say they're giving it all back. Authorities triggered outrage with raids across Egypt. So what were they looking for? Is there an about face right now? Is it really happening or just a fake that's going on? Stand by.

(COMMERCIAL BREAK)

BLITZER: This just coming into THE SITUATION ROOM. Right now, Defense Secretary Leon Panetta gets involved after Egypt's raids on human rights groups, prodemocracy groups with American ties.

Our world affairs correspondent, Jill Dougherty is joining us right now. Jill, what's the very latest on this issue?

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Well, Wolf, you know, this is an indication of how seriously this is being taken here in Washington.

The Pentagon is saying that Secretary of Defense Leon Panetta spoke by phone with Egyptian Field Marshal Tamtawi and expressed deep concern about the raids.

Thanked Tamtawi for his decision to stop them, but he also emphasized that it's critical for Egypt to continue on the path to democratic transition.

You know, we were at the offices of one of those NGOs today and even as we were shooting video, they were getting the latest from Cairo.

(BEGIN VIDEOTAPE)

DOUGHERTY: The National Democratic Institute's Les Campbell just got a fax from Cairo, the police report from their Cairo director who had just been interviewed on CNN.

LESLIE CAMPBELL, NATIONAL DEMOCRATIC INSTITUTE: -- security forces entering, refusing to allow people to make phone calls including to the embassy and then taking all the computers -- took a number of safes, except one that was too heavy to carry.

DOUGHERTY: The raid by Egyptian security forces, Campbell says, is unprecedented, even under former President Hosni Mubarak.

(on camera): What does it say to you?

CAMPBELL: Well, it says to me that the Egyptian government is serious about trying control the atmosphere. They seem and particularly, the military commanders, appear to be nervous. They appear to be perhaps unsure and they're lashing out.

DOUGHERTY (voice-over): With 1,500 employees and 65 officers around the world, NDI based in Washington, D.C. is a non-profit, nonpartisan, non-governmental organization funded by the State Department, the U.S. Agency for International Development and private donations.

It trains local citizens in how to create political parties, how to run and monitor elections. It was created by Congress in 1983 along with a Republican sister organization, the International Republican Institute. Their Cairo offices were raided, too.

THOMAS GARRETT, INTERNATIONAL REPUBLICAN INSTITUTE: This is an official credential from the government of Egypt inviting us to be witnesses as they call observers.

DOUGHERTY: Election observers. Thomas Garrett says IRI is bewilders and confused.

GARRETT: And even during the periods when the Mubarak government was very clear they were unhappy with our institute training the opposition, we never had anything like this occur.

DOUGHERTY: The raids have unleashed a torrent of outrage from the institute's Capitol Hill supporters. So why would Egypt's military pick a fight with Washington?

CAMPBELL: Egypt is the single largest recipient of aid from the United States in the entire world and it's a relationship that's fraught. There had been a number of disagreements particularly post Mubarak. How should that aid be proportioned? Should the Egyptian government have a veto over which groups get that aid.

(END VIDEOTAPE)

DOUGHERTY: And Campbell says NDI and other NGOs might have been caught up in that high stakes diplomatic negotiation. Meanwhile, the State Department says Egypt is assuring the U.S. ambassador that those raids will stop and that property will be returned immediately. Should be talking with authorities to resolve whatever issues led to these raids -- Wolf.

BLITZER: I'll believe it when I see it. Jill, thanks very, very much. It's a very disturbing development in U.S.-Egyptian relations with lots at stake including more than a billion dollar as year in U.S. stance to Egypt. Let's see where this goes. Thanks very much.

The Republican presidential hopeful, Mitt Romney, is credited with turning around the 2002 Winter Olympic games in Salt Lake City. It was his first big national test, but we're taking a closer look at what's going on. What happened then, how it could impact his campaign now?

Also, a scandal intensifies in Pakistan, the players of the country's military, its civilian leadership and a memo. We'll explain.

(COMMERCIAL BREAK)

BLITZER: Here's a look at some of the other political headlines making news on the CNN Political Ticker.

A setback in Michele Bachmann's hunt for votes in Iowa. Her plan to shoot pheasant with influential Congressman Steve King apparently fell through and we're told a campaign appearance with King in northwest Iowa didn't get a very good turnout.

Newt Gingrich says he might fight fire with fire to counter negative ads about his ties to the mortgage giant, Freddie Mac. He told Iowa supporters last night he was thinking of running his own ad to dispute the claim he lobbied Congress on behalf Freddie Mac when he had a lucrative consulting contract with the company.

It's been kind of a rough day for Gingrich. We told you earlier how he got emotional. Check out this mishap during the same event in Iowa.

(BEGIN VIDEO CLIP)

NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: All of you experience, robocalls -- and you see, there's an attack right there. I bet Ron Paul is behind that curtain.

(END VIDEO CLIP)

BLITZER: A lighter moment on this campaign trail. For complete political coverage, go to cnn.com/ticker for all the political news.

It's enough to make a presidential candidate cry. Stand by for more on Newt Gingrich's struggling campaign and his very emotional day.

(BEGIN VIDEO CLIP)

GINGRICH: My whole emphasis on brain science comes in directly from dealing -- got me emotional -- from dealing with --

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: President Obama's heading into the 2012 election year with some foreign policy successes under his belt, but there's also plenty of room for his Republican rivals to criticize him and they're trying to make the most of it.

Our chief White House correspondent, Jessica Yellin, takes a closer look at the president's past year on the global stage.

(BEGIN VIDEOTAPE)

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: In 2011 brought some foreign policy successes for President Obama. The hunt for Bin Laden came to a close.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: The United States has conducted an operation that killed Osama Bin Laden, the leader of al Qaeda.

YELLIN: An end to a controversial war and a campaign promise kept.

PRESIDENT OBAMA: As promised, the rest of our troops in Iraq will come home by the end of the year. After nearly nine years, America's war in Iraq will be over.

YELLIN: But since the December withdrawal, violence has rocked the country and critics have pounced.

SENATOR JOHN MCCAIN (R), ARIZONA: It is clear that this decision of a complete pullout of the United States troops from Iraq is dictated by politics and not our national security interests.

YELLIN: The same critics decry the president's plans to withdraw the 90,000 troops currently in Afghanistan by 2014 as well as his policy toward Israel. A speech President Obama gave in May prompted Israeli Prime Minister Benjamin Netanyahu to lecture President Obama in the oval office.

BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: While Israel is prepared to make generous compromises for peace, it cannot go back to the 1967 lines.

YELLIN: Of course, 2011 was also the year of the Arab spring. A democratic protest movement whose goals the president embraced.

PRESIDENT OBAMA: There must be no doubt that the United States of America welcome changes that advances an opportunity. YELLIN: In some cases, the protests turned violent. In March, President Obama authorized U.S. planes to assist NATO's military mission to protect the Libyan people from Moammar Gadhafi.

PRESIDENT OBAMA: Left unchecked, we have every reason to believe that Gadhafi would commit atrocities against his people.

YELLIN: Military action made a difference. Months later, Gadhafi was killed and his regime fell. U.S. took a different approach when violence erupted in Egypt and Syria.

Republicans have reserved their sharpest criticism for the president's policy toward Iran and some Republican presidential candidates have described his posture toward enemies generally as appeasement. That word does not go over well at the White House.

PRESIDENT OBAMA: Ask Osama Bin Laden and the 22 out of 30 top al Qaeda leaders who have been taken off the field whether I engage in appeasement.

(END VIDEOTAPE)

YELLIN: In the year ahead, there are some predictable challenges for the president, the uncertainty of a new regime in North Korea, rising tensions with Pakistan and broad instability in the Middle East. But remember, it's often the unexpected foreign policy crisis that shapes a president's legacy. Jessica Yellin, CNN, Washington.