This is a rush transcript from "The Journal Editorial Report," January 9, 2010. This copy may not be in its final form and may be updated.

PAUL GIGOT, FOX HOST: This week on the "Journal Editorial Report," giving terrorists their day in court, the case against the Detroit bomber and the decision not to hold him as an enemy combatant. Former Attorney General Michael Mukasey is here.

And top Democrats head for the exit. Two Senate retirements shake up the 2010 mid-terms. Are there more surprises ahead?

Welcome to the "Journal Editorial Report." I'm Paul Gigot.

The suspect in the attempted bombing of a Northwest Airlines flight on Christmas Day was arraigned this week in court. Umar Farouk Abdulmutallab was charged with six counts, including attempted murder and trying to use a weapon of mass destruction to kill nearly 300 people.

Michael Mukasey was the attorney general of the United States from 2007 to 2009. He joins me now.

Judge Mukasey, welcome.

MICHAEL MUKASEY, FORMER ATTORNEY GENERAL OF THE UNITED STATES: Good to be here, Paul.

GIGOT: You wrote this week that you don't think that Abdulmutallab should have been charged as he was right after he was arrested on criminal charges in normal criminal court. Why not?

MUKASEY: The principal question is timing not so much where he ultimately wound up, it's secondary. But he should have been taken initially, designated an unlawful enemy combatant or, in the current parlance, an unprivileged....

GIGOT: Belligerent.

MUKASEY: ... belligerent...

(LAUGHTER)

GIGOT: That's what they called it, yes. Sounds like a New Yorker.

MUKASEY: Exactly. And questioned by people who were interested in intent intelligence gathering, because he had a lot of it. He knew who put him on the plane and who had mixed up the stuff that he had in his underpants and he knew who had trained him, radicalized him and so forth. He had a wealth of information. We're never going to hear about that. And we're certainly not going to hear about it in a timely way. And the failure to do that I think was a major, major gaffe.

GIGOT: The argument though, you hear from the administration said if he was named an enemy combatant, he would have the right under a Supreme Court ruling to have a habeas hearing, and then if he won that habeas hearing, he could be released.

MUKASEY: A habeas hearing could challenge only the propriety of his confinement. His confinement could be based on the fact that he was dangerous and given the fact that he was apprehended with a bomb in his shorts, I think the hearing on habeas would be short and sweet.

GIGOT: Your argument is the priority for any administration is for any administration — when you're arresting suspects like this, needs to be on collection of intelligence to protect against the next terrorist attack and not on some kind of adjudication, a conviction, making sure he stays in prison?

MUKASEY: Correct. Once you've got him in custody you've virtually solved that problem.

GIGOT: He's going to be, and one way or another, in detention for many, many years.

MUKASEY: Right, you need to be forward looking and forward-leaning. And when the president yesterday failed to mention that failure among the failures he listed in investigating this case, the omission was glaring.

GIGOT: What about the argument that, look, we've tried Richard Reid, the shoe bomber, in criminal court, we've tried Zacarias Moussaoui, the alleged 20th hijacker in criminal court. They went away. Those worked fairly well. Why not Abdulmutallab.

MUKASEY: Two points, first of all, Richard Reid, you remember was apprehended barely three months after 9/11. We didn't have any of the procedures in place. Although we had an order authorizing military commissions, we had none of the elaborate procedures in place for actually implementing military commissions.

GIGOT: Now those are well established.

MUKASEY: To be proverbial, we didn't have our act together. He was put in a civilian court. Ultimately, it worked. As far as Moussaoui is concerned, my judgment on that is, it did not work. He pleaded guilty, he didn't contest his guilt, and his sentencing proceeding took over a year. The appeals took four years. I don't consider that working.

GIGOT: That's not a success story?

MUKASEY: That's not a success story.

GIGOT: The other argument is, and you've heard this from John Brennan, the senior White House counterterrorism official, this week, is that you can charge these people, you can have a plea agreement basically with somebody with Abdulmutallab. You know, we've talked with his lawyer, say in return perhaps for a lower sentence, now you'll cooperate. And we do this with criminal defendants. But in this case, could work in this case?

MUKASEY: Two problems with that. Number one, at the stage in which we do that, most of what he knows is already dated and useless.

GIGOT: So the crucial thing is getting actionable intelligence right away that you can then use to prevent something if it's planned.

MUKASEY: And secondly, what kind of message are we sending? We're bargaining with terrorists over reducing their sentences? I think that's ghastly.

GIGOT: They say, look, we're sending a message to the world that we treat everybody equally under the law, that that send the right message to the world because they'll like us better because we show we don't have the secret prisons and so on and so forth. That seems to be the real root of a lot of the case for trying them just like a criminal.

MUKASEY: We sent that message several times. We see it before the Cole bombing. We see it before Khobar Towers. We see it before 9/11. And we see the results. It's not a question of convincing the rest of the world that we have a fair system. We have a fair system and there's no reason why that fair statement couldn't eventually be applied even to these people, if people choose to do it. The first priority is making sure we gather the intelligence so we can stop the others.

GIGOT: The president did say this week that he's no longer going to be sending detainees back to Yemen where, obviously, they have an active Al Qaeda cell. Do you agree with that decision?

MUKASEY: In so far as it goes?

GIGOT: Yes.

MUKASEY: Sure.

GIGOT: But he's going to send them to Thompson, Illinois, instead. Do you agree with that one?

MUKASEY: No , and my prediction is they're not going to agree with it either once they see the difference...

GIGOT: The detainees?

(LAUGHTER)

MUKASEY: Correct — between Guantanamo and Thompson, Illinois. I've been to Guantanamo. It compares favorably with most medium security, forget maximum security, medium security federal prisons. It is remote, secure, and humane and when they get over there and find out they're in a freezing facility of cinder block and don't get to play soccer in the sun, you're going to hear a lot of complaints about prison conditions. You're going to see a lot of lawsuits relating to prison conditions. You're going to see a ton of lawsuits addressed to that, habeas petitions and so forth. It's going to be a lawyer's feeding frenzy.

GIGOT: Is it at all possible, if — when the courts hear those habeas positions, some detainees could be released in the United States?

MUKASEY: Yes.

GIGOT: At Thompson?

MUKASEY: Yes.

GIGOT: How would that work?

MUKASEY: Well, someone would bring a habeas proceeding and some federal judge would decide whether the evidence that's presented to him, and again, some of it may be classified that either can't be presented or can be presented only in redacted form, isn't sufficient to justify holding them. And then he's going to have to be released. The question becomes where he's released. Ideally, he should be deported. If no country is willing to take him, there's a Supreme Court case called Alzeda vs. Davis (ph) that basically puts a six-month limit how long we can hold him.

GIGOT: Right.

MUKASEY: Now, even the Supreme Court said, in that case, we're not talking about terrorism cases, but these things have a way of ratcheting up and becoming instrumental. And so I don't know whether that little exception, if in fact, it's seen an exception, would hold eventually.

GIGOT: And as long as Guantanamo is still open, if you had that kind of hearing, they could at least be held there indefinitely while you were looking for a place outside the United States where they can be held?

MUKASEY: Precisely. I stress, held under humane conditions. It is a very well-run, professionally run facility. All the skills that were acquired in running it are going to have to be reacquired when they open this new facility in Illinois, if they do.

GIGOT: Now, you presided over terrorist trials in New York in the 1990s, the blind sheik. What lessons did you draw from that that you think will apply to the coming Khalid Shaikh Mohammed trial in the city, the master mind of 9/11.

MUKASEY: It has to be done with great care. The anonymity of jurors and their safety and of witnesses and their safety has to be preserved. The security of the courthouse has to be preserved. Even if you do that, jurors don't parachute out of thin air. They've all got friends and associates and colleagues who can figure out they're on the jury. And eventually, the word is going to get out. I had an anonymous...

GIGOT: You're saying they're at risk?

MUKASEY: They're at risk. I had an anonymous jury in my case, their identities were not disclosed. The day of the verdict two of them found reporters on their door steps when they went home. They were terrified.

GIGOT: You think it's a mistake in general to have brought — overall, to be bringing the case here in New York.

MUKASEY: It's a huge mistake not only for reasons of security surrounding the trial, but because it puts a great big target on a city that's already a great big target, and that is New York. New York is the biggest stage in the world. It gives that stage to the terrorists on trial. And it also gives that stage to their friends who may want to make a dramatic statement in the form of a terrorist act.

GIGOT: Why do you think the administration is doing this? Because they must understand these risks.

MUKASEY: I don't read minds. I can't hypothesize a good reason they would do it.

GIGOT: It's likely that some testimony of his waterboarding is likely to come out. He can use that as a propaganda tool, can he not?

MUKASEY: Of course, he can. If that's the reason why they did it, in order to re-condemn that technique, it seems to me that that is a — that is certainly inadequate, in fact, it's a shameful basis on which to hold a trial.

GIGOT: All right, Judge Mukasey, thank you for being here. We look forward to your comments as the case develops.

When we come back, the intelligence failures that led to that close call on Christmas day. And a closer look at Yemen, the new terror hot spot.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: The U.S. government had the information scattered throughout the system to potentially uncover this plot and disrupt the attack. Rather than a failure to collect or share intelligence, this was a failure to connect and understand the intelligence that we already have.

(END VIDEO CLIP)

GIGOT: That was President Obama Thursday reacting to the release of a declassified report detailing the intelligence failures that allowed 23- year-old Abdulmutallab to board a Detroit-bound airliner with explosives hidden in his underwear.

Joining the panel this week, Wall Street Journal editorial board member, Dorothy Rabinowitz, foreign affairs columnist and deputy editor, Bret Stephens; and editorial board member, Matt Kaminksy.

Dorothy, the president said we're at war. We're at war with Al Qaeda. How impressed were you with his White House review of what went wrong in this case?

DOROTHY RABINOWITZ, EDITORIAL BOARD MEMBER: It's hard to be impressed with an academic statement of that kind even though we know, with some sympathy to the president, that this is — he had to do it and told he had to take responsibility and he did all this.

GIGOT: But he doesn't blame anybody, isn't that good?

RABINOWITZ: No, no. Look, blame is the not the point.

GIGOT: Did Bush...

RABINOWITZ: Blame is not the point and, yes, it's true he failed to acknowledge the Bush administration.

(LAUGHTER)

But here is the thing. With this list of academic citations of what we did or didn't do, what is absent? The sense of this large, terrible war we're involved in. He focused on Al Qaeda. No, we're not just at war with Al Qaeda. In fact, we're at war with a vast enemy around the world. And he didn't have to say it was a Muslim enemy, but he has continued to underplay and to slice off the debt and the width and the intensity of the great war against us if. If he had come charging out and said we will.

GIGOT: But didn't he have some obligation in this case to take up the mistakes of what happened in Detroit, which it sounds to me, were fundamentally bureaucrat particular. They didn't talk it one another. They didn't look at the evidence. They didn't, as he said, connect the dots. It's a cliche, but in this case, it looks to be true.

MATT KAMINSKI, EDITORIAL BOARD MEMBER: I'm inclined to give him more credit than Dorothy has. He sound like an adjunct law professor that he was.

(LAUGHTER)

But he did say the buck stops here. He did identify — the problem really wasn't in the field. I mean, we've known Yemen has been a problem going back to the USS Cole attack in 2000 and we're gone to deal with it. But he said the intelligence was collected, but back here, our bureaucratic structures failed and we must try and fix that.

BRET STEPHENS, FOREIGN AFFAIRS COLUMNIST & DEPUTY EDITOR: Just a couple of points. First of all, this is an area where he could have credibly blamed his predecessor. In 2004 the Bush administration, at the urgings of the 9/11 Commission, put in place this new structure, an office of the director of national intelligence.

GIGOT: Right.

STEPHENS: There are now 3,000, 4,000-odd bureaucrats who work for that. And the problem — this was supposed to solve precisely the problem we saw over Christmas, which was to synthesize intelligence collecting and didn't happen.

GIGOT: Right. Make sure it doesn't sit in some cubical.

STEPHENS: Exactly. As we warned at the time, this was one further bureaucratic blob, sitting over various other bureaucratic blobs, the CIA and our various other intelligence agencies. The failure here was not necessarily a failure of process. It's a failure of people. And where I fault the Obama — President Obama no one is going to be held to account for what happened Christmas day.

GIGOT: Do you think that people should have been fired.

STEPHENS: Absolutely, people...

GIGOT: Who? Who, if everybody is at fault then nobody is, isn't that what the...

STEPHENS: Look, there's a counterterrorism advisor, John Brennan. He's now in front of the cameras taking charge of this. He should have been...

GIGOT: Not sounding credible on the question of criminal charges, I should say.

STEPHENS: Yes. And then there's Janet Napolitano, the system worked, Homeland Security advisor. She's embarrassed herself then but she's been embarrassing herself for a long time, talking about terrorism as a so-called man-caused disaster, trying to talk this rhetoric moving away from the politics of fear and so on. These people need to be held to account, and firing is something forgotten in the American government, which what is needed for unaccountable bureaucracies.

GIGOT: If you're going to drive a bureaucracy, which is slow and hard, you've got to make terrorism a priority every day...

RABINOWITZ: Every day.

GIGOT: ... the way Bush did every day and drive it and make it clear throughout the government.

RABINOWITZ: Yes. And what good does it do it sound like a bureaucrat as you're describing this.

(LAUGHTER)

The spectacle of Janet Napolitano, who actually spoke to the German magazine and summoned things up in the War on Terror attitudes of this administration, that's chilling. She went on to say, you know what we have to do, we have to do help. We have to provide help for the families of these young people, these people who will be radicalized. As Bret said, yes, after-school madrassa activities. That's what she was saying, they don't have enough to do.

GIGOT: Matt, I want to turn here to Yemen. Is — as you say, we've known about this for a long time. General David Petraeus has been going there several times over the last 18 months. Did we drop the ball nonetheless in not being active enough in going after some of these cells?

KAMINSKI: We don't know what Petraeus was doing there. I assume he was talking to the president, who's been in power for a long time. And in the last few weeks, we've had the Yemenis taken the fight to Al Qaeda. They've leaked news of two separate attacks or at least three that have killed at least 50 people.

GIGOT: Right.

KAMINSKI: The problem with Yemen is eerily similar to the problem in Afghanistan. You have a corrupt government in the capital who's remit (ph) doesn't go far beyond the capital.

GIGOT: Right.

KAMINSKI: You have insurgencies, one, in the north, which is more of a Shiite based, and one in the south, plus Al Qaeda. It's a classic near-failed state.

GIGOT: Is this a case where we're going to have to take eventually independent military action or can we work through that government solely?

KAMINSKI: I think so Pakistan is a good model. We can work from the government solely and turn to the professionals, assuming there are some, in the Yemeni military, as there are in Pakistan. And when need be, there are always drones which we've used. And Obama, to his credit, has expanded the use of drones in the last year.

GIGOT: I think that Yemen is going to be an ongoing problem. All right, thanks.

Still ahead two prominent Senate Democrats head for the exit. What the Dodd and Dorgan retirements signal for this year's mid-terms and the prospects for more surprises ahead.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. CHRIS DODD, D-CONN.: After 35 years of representing the people of Connecticut in the United States Congress, I will not be a candidate for reelection this November.

(END VIDEO CLIP)

GIGOT: That was Connecticut Senator Chris Dodd, one of two Democrats to call it quits this week. Along with North Dakota Senator Byron Dorgan, Dodd has decided not to run for reelection in November.

For more, I'm joined by Wall Street Journal columnist, Mary Anastasia O'Grady; and assistance editorial page editor, James Freeman.

All right, O'Grady, a week ago, you predicted this would happen during the year, and a week later, you're vindicated. Did he jump, Chris Dodd, or was he burned?

(LAUGHTER)

MARY ANASTASIA O'GRADY, COLUMNIST: Paul, I hate to disavow of the notion I'm a genius. But it you watched Connecticut politics, it was a really easy prediction.

(LAUGHTER)

He had a low poll rating. He was around 40 percent approval.

GIGOT: I think under 30, yes.

O'GRADY: Yes.

GIGOT: He had seen the three O's.

(LAUGHTER)

O'GRADY: Right, and that wasn't his only problem. His other problem that he had was that the corruption scandals that brought him low had still not been resolved and they were going to sort of be following him all through the campaign. He had not released his Countrywide mortgage documents which he had promised to do and there was obviously a reason.

GIGOT: Right. It would be a big issue in the campaign.

O'GRADY: Right. And he also had this problem with property he bought in Ireland, and it was linked to a guy he had secured a presidential pardon for just as Bill Clinton was leaving office. Those two things were hanging out there. And he figured, with the poll ratings where they were, he didn't have a chance. And it wasn't only him, of course, his friends in the Senate who want to preserve that seat.

GIGOT: That's right, it was Chuck Schumer who hopes to be the next majority leader, the New York Senator, if Harry Reid loses or retires. They're relieved because they've got Richard Blumenthal, the state attorney general, seemingly forever, who is now going to run, and suddenly has declared. And he's ahead in the polls now against the Republicans. So is this a net plus for Democrats?

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Well, I think the Connecticut seat, it is definitely going to be easier for Democrats to hold it with Blumenthal than with Dodd.

GIGOT: Right.

FREEMAN: It's not a shoo-in. He's got problems in that he is the Democratic establishment in Connecticut. He's been there in the A.G. slot almost forever, friendly with Dodd, had no interest in investigating Dodd despite all the evidence suggesting there should have been...

GIGOT: And in the meantime, he's prosecuted or looked after almost every corporation he possibly could.

FREEMAN: Yes. Very, very prod view of his responsibilities as attorney general, except in this particular case where he's not interested. So I wouldn't say he's a shoo-in, but it's a certainly an easier pickup with Blumenthal versus Dodd.

GIGOT: With Dorgan, as well, it's a real shock to the Democrats. Are we looking at more of these coming down the road as some of them are in jeopardy?

O'GRADY: Yes, I think we're going to see that 60-seat majority was kind of a fluke in a year where there were lots of different things going on and weak year for the Republicans. And you have races in Illinois, Pennsylvania, Arkansas, Delaware — drawing a blank — Pennsylvania.

GIGOT: Pennsylvania, that's right.

O'GRADY: Illinois, Arkansas.

GIGOT: Arlen Specter in Pennsylvania.

O'GRADY: Colorado, where the Democrats are going to have a very tough time holding the seat.

GIGOT: So they'd be lucky, James, to — this assumes, Mary, that the Republicans are competent.

O'GRADY: Yes.

FREEMAN: Right.

(LAUGHTER)

GIGOT: And the candidates, which is not always a safe assumption.

FREEMAN: I think what you assume, North Dakota's Dorgan seat goes Republican and Blanch Lincoln's seat goes Republican. You start from there. And then you talk about Colorado where it's an appointed Senator, a Democrat, has never been elected, and now he's got a primary challenge. And then he's going to have to fight in a battle ground state, that looks pretty tough. Illinois could be tough, Nevada.

GIGOT: You mentioned a 60-seat majority, which is clearly going to be fleeting. It will be interesting to watch how the Democrats react to this, this year. Do they say, we only have 60 seats for another 12 months, therefore we need to ram everything through? We need to do as much as we can to unite and get it done, or do the individual members back off and say, sorry, I gave on health care, I'm not doing anymore?

O'GRADY: I think that they're going to be tempted to go in the former way, that they're going to try to get as much as they can done, regardless of how it affects their outcome in the fall.

GIGOT: Really? Really?

O'GRADY: I think the leadership will try to make them do that.

GIGOT: The leadership will try to do that. But Senators are notoriously independent and usually will not sign up for political suicide, James?

FREEMAN: Yes, I think the...

(LAUGHTER)

Well, if we want to hold out some...

GIGOT: Just the Republicans.

(LAUGHTER)

O'GRADY: Well, on the health care bill, they'll try.

FREEMAN: Well, this has been kind of a puzzle of this year, is how are these Democrats voting for Obama-care knowing it's the end of their political career. That's the vote Dorgan took, it's beyond weird.

(LAUGHTER)

But I think as we kind of hope for maybe a possible best outcome, maybe a Ben Nelson will decide it was a mistake and not vote for it. I don't know.

GIGOT: OK, James, thanks.

We have to take one more break. When we come back, our "Hits and Misses" of the week.

(COMMERCIAL BREAK)

GIGOT: Time for "Hits and Misses" of the week.

Bret, first to you.

STEPHENS: This is a hit and a miss. A miss to the good people who own beach-front property in Martha's Vineyard, Nantucket, and Cape Cod, many who, are earnest liberals, to worry about our carbon footprints, but have nonetheless been campaigning vigorously, including the Kennedy family, against the so-called Cape Wind Project which would bring wind turbines to Nantucket Sound. And they are about attempting to make Nantucket Sound a national-historic registered body of water to prevent this terrible thing from happening. On the other hand, it's a hit to all of us who understand wind is a terrible way of generating energy. And this is good news for the environment.

GIGOT: All right.

James?

FREEMAN: This is just a miss, a big miss to the New York Federal Reserve, which we find out blocked the release to taxpayers and investors of information about who benefited from the AIG bailout. They kept this under wraps for months and this is more reason not to give people more power to declare something a systemic risk.

GIGOT: All right.

Mary?

O'GRADY: This miss goes to France, the ultimate nanny state for making it a crime — it's a proposed law, I should say — making it a crime to insult your spouse during an argument. And this is ridiculous because, first of all, it's going to be, you know, his word against yours, unless they start bugging people's homes.

(LAUGHTER)

And secondly, I mean, why is the state intervening in personal relationships like this. Stand up for yourself.

GIGOT: Make it a crime to insult your editor, Mary, that's what I like.

That's it for this edition of the "Journal Editorial Report." Thanks to my panel and to all of you for watching.

I'm Paul Gigot. We hope to see you right here next week.

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