This is a rush transcript of "Special Report With Bret Baier" from December 30, 2009. This copy may not be in its final form and may be updated.


ERIK AKERBOOM, DUTCH ANTI-TERRORISM COORDINATOR: We think that there is no w a new threat because, of course, this attack has been claimed by Al Qaeda, and that's why we take new measures and we introduce the body scan for flights towards the United States.


WALLACE, GUEST HOST: Well, the Dutch government announces it will beef up airport security, while here at home the finger-pointing has officially started inside the U.S. government about who was responsible for what President Obama called a "systemic failure."

Let's bring in our panel, Steve Hayes, senior writer for The Weekly Standard,, Mort Kondracke, Executive Editor of Roll Call, and syndicated columnist Charles Krauthammer.

I assume you all saw Catherine Herridge's report at the beginning of the show, a fascinating report, the intelligence community now in full swing, pointing fingers, who knew what when, who shared what, was there a smoking gun. What do you make of it all, Steve?

STEVE HAYES, SENIOR WRITER, "THE WEEKLY STANDARD": Well, I think we will find out in the coming days, because there will be leaks and counter-leaks and you will see this Washington game where one agency points fingers at the other, and we will find out ultimately who is at the bottom of this.

The bigger problem from my perspective is that this is a failure of presidential leadership more than it's a bureaucratic problem, the system didn't work. I mean, you have an administration, I think, that is totally out of sorts on this.

On Sunday they were talking about the system working. On Monday, the president said it was an isolated extremist. But on Tuesday they were leaking that they were picking bombing targets in Yemen. That is out of control. They don't have any idea what's going on, and I think they're scrambling to find out.

And they're having to scramble in public, which does exactly the opposite of what you need to do right now, which is inspire confidence.

WALLACE: But Mort, in fairness, that's all after the fact. Is it a failure of presidential leadership that let this guy get onto plane?

MORT KONDRACKE, EXECUTIVE EDITOR, "ROLL CALL": I don't think so, but we're going to get into the political back and forth in the second segment as to the Republicans versus the Democrats. Here we have the intelligence agencies going after one another.

Clearly, we do not have a seamless Jack Bauer-style counterterrorism operation. There were systemic failures here, as the president said.

It is worth remembering that there have been systemic successes. I mean, there have been a lot of terror plots uncovered over the past couple of years, some during this administration, a lot during the Bush administration, airplanes that were going to get blown up over the Atlantic, that was discovered and so on, and people were arrested who were going to go after military bases.

On the other hand, you know, this system needs to be improved. We still don't know who failed and how they failed in the case of the Fort Hood shooting. I mean, that is — it was two months ago. We ought to be able to find out pretty soon what did we learn, what was done as a result of it that could have helped here.

Clearly this guy Awlaki in Yemen is responsible for a lot of it, and the sooner he gets a Predator in his front yard, the better.

WALLACE: Let's talk about this, Charles, because it's always easy to find fault, and hindsight is 20/20. The State Department cable that Catherine Herridge got her hands on said the subject may be involved with Yemeni-based extremists. I mean, given all of the intelligence all over the world is, that a smoking gun?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: It may not be on yet, because the event hadn't happened, but it is a high enough index of suspicion that you have to make sure is heard in Washington.

Obviously it's not matters of the system failing, as if it's all algorithm in a computer and it was an algorithm failure. It was humans who did not look at the information and say, oh, my god, if a father walks in, it's not an ex-spouse but a father who cares about his son, and says he is radicalized. He's in Yemen. He called me from Yemen.

Well, that information is extremely important, and there were underlings who missed it.

The larger issue of presidential leadership in this I think starts with the Bush administration. Under pressure from the left, and also their own desire to empty Guantanamo, and they released a lot of Yemenis, including two that are now the head of Al Qaeda in Yemen.

And the Obama administration has made a fetish of closing Guantanamo. It released six Yemenis already this month. There are 91 remaining.

And I love the way the press covers all this. It says that this event in Detroit creates complications for the further closing of Guantanamo, as if the closing of Guantanamo is an unassailable, absolute good, and this is going to get in the way.

What it ought to do is cause a reconsideration of the closing of Guantanamo. You don't release these Yemenis. You keep them in detention until the war is over, and if Al Qaeda doesn't end the war, let them stay until the end of time in Guantanamo.

WALLACE: You know, there are so many different developments and strands of this, and I at least want to touch on this with you Steve, reports that Al Qaeda and Yemen has dozens more jihadists ready to strike the west. That's not only what U.S. intelligence says, it's also what this fellow, AbdulMuttallab was saying.

I mean, that's a pretty frightening prospect.

HAYES: It is a frightening prospect, particularly because we now know that he is basically lawyered up. He is not talking anymore. So he said this apparently in the initial stages before the FBI had even the kind of information about him and about Al Qaeda in the Arabian Peninsula to ask these questions, and these are the important questions.

But this, again, I think, goes back to a failure of presidential leadership. And this is not taking partisan shots or ideological shots. Some of this was knowable. Back in January of 2009, we have the U.S. ambassador to Yemen saying we wanted to repatriate a majority of the Yemenis in Gitmo, and not just repatriate them, but repatriate them and reintroduce them to society so they could make a future for themselves. That's a direct quote.

And the Obama administration backed them up when I asked them about it.

WALLACE: Well, this seems a good time as any to plug "FOX News Sunday" which I have an interest in. John Brennan, the assistant to the president for counterterrorism and homeland security will be our guest and obviously these are all questions to ask him.

We have to take a break here, but when we come back, we will turn to the politics of national security. The finger-pointing has already started not just among the agencies but among politicians on both sides of the aisle as they try to turn the failed plot to their advantage.

The panel takes a fair and balanced look at that, next.



OBAMA: As president, I will do everything in my power to support the men and women in intelligence, law enforcement, and Homeland Security, to make sure they've got the tools and resources they need to keep America safe.

But it is also my job to ensure that our intelligence, law enforcement, and homeland security systems and the people in them are working effectively and held accountable.


WALLACE: President Obama talking about the review that he has now ordered following the attempted terror attack on Christmas Day.

With the politics of national security now being waged at full volume, let's bring back the panel. So Republicans have since, as these days have played out, started going after the Obama administration, some GOP officials making the claim the Democrats are soft again on national security.

And check out the comment that Vice President Cheney made in an exclusive statement to the "Politico" Web site today. Let's put it up on the screen. This is Vice President Cheney about Obama. "Why doesn't he want to admit we're at war? It doesn't fit with the view of the world he brought with him to the Oval Office. It doesn't fit with what seems to be the goal of his presidency, social transformation, the restructuring of American society."

Mort, is this a good issue for Republicans?

KONDRACKE: No, I don't think so. Look, if you look at it on the merit, the fact is that — well, the first thing I want to say about this is that it is disgusting, that instead of reacting as we did after 9/11 to unite the country and realize that we have a common enemy, there they go. The polarization is so bad, that everybody is after each other in trying to make political hay out of this.

The White House is accusing the Bush administration of having spent so much time on Iraq that we failed to conquer Al Qaeda, and now you have Dick Cheney, you know, instead of just defending his own administration, attacking day after day after day the Obama administration for being weak.

Look, Richard Reid practically did —

WALLACE: That's the shoe bomber.

KONDRACKE: The shoe bomber, did practically exactly what the Nigerian did and almost the exactly the same way. Don Rumsfeld said this is a matter for law enforcement. He was handed over to civilian authorities. He was not waterboarded. He was tried and convicted and he is now spending the rest of his life in jail.

So, you know, what is — the — both sides, I think, ought to stop beating on each other and start worrying about how we unite fight terrorism.

WALLACE: Mr. Krauthammer?

KRAUTHAMMER: I dissent. The Reid affair happened three months after 9/11. It was a few weeks after the Afghan war, it was after the anthrax attacks. We didn't have any of these systems up and running.

And this whining on the part of Democrats about how this becomes political — the opposition opposes. The Democrats were perfectly right in attacking the Bush administration over the conduct of the war in Iraq and a moral critique of the interrogation policies. The opposition opposes.

And now all of a sudden when we are in the midst of a fiasco, self-admitted on the part of Obama, of course Republicans ought to highlight it and attack it. And this idea that somehow it's beyond the bounds or it's illegitimate is absurd.

If the Democrats immortalized the words "good job Brownie" in which Bush commended the failed FEMA director over the dealing with Katrina, the Republicans are surely in their right to immortalize the words that "the system worked" said by Janet Napolitano in reaction to an obvious failure in this case.

Politics is politics, and it's a game for grown-ups. Enough of the whining.

HAYES: Well, I think it was a mistake to treat Richard Reid as a criminal. I worry that they didn't get as much intelligence that they might otherwise have gotten.

WALLACE: Let me get to the politics of it. Does it make sense -- I certainly agree these are national security issues that should be debated, and I thought when the president and Cheney were arguing about enhanced interrogation that was a very sensible conversation to have.

In the first three, four days after an event like this, should it become as political as it has become?

HAYES: Yes, it should be. First of all, I don't think it is necessarily political to make fact-based arguments pointing out the flaws what the administration has done.

When you have a president come out in the face of a mountain of information and open source information that this was connected to Al Qaeda, you had Al Qaeda claiming responsibility, you had reports in various news organizations from various news organizations that this was, in fact, related to Al Qaeda, or that he had had contact with Al Qaeda, and the president comes out and says this was the work of an isolated extremist, it would be crazy not to criticize him for that. Why wouldn't you criticize him for that?

The comparisons to Richard Reid are not apt. George W. Bush in the days after September 11 spent every single day making the case that counterterrorism was the most important function of the U.S. government and it's what we were going to do. If we were going to err, we were going to err on the side of being too aggressive.

Barack Obama was elected in no small part because he made the opposite case. And he has been given the benefit of the doubt again and again. You have Janet Napolitano talking about man-made disasters rather than terrorism.

WALLACE: Mr. Kondracke, you have 30 seconds. Would you like to retract your comments?

KONDRACKE: No, I would not.

Obama is fighting terrorism. He is waging a war on terrorism. He just added 30,000 troops to fight a war on terrorism. And for Dick Cheney to go around saying he is weak on terror is just ridiculous.

HAYES: Cheney is going soft in his old age. I was surprised it wasn't even tougher.

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