This is a rush transcript of "Special Report With Bret Baier" from January 7, 2010. This copy may not be in its final form and may be updated.


PRESIDENT BARACK OBAMA: I am less interested in passing blame than I am in l earning from and correcting these mistakes to make us safer, or ultimately, the buck stops with me. As president, I have a solemn responsibility to protect our nation and our people, and when the system fails, it's my responsibility.


BRET BAIER, "SPECIAL REPORT" HOST: President Obama today, late this afternoon, after pushing back this speech, delivering a speech about the failed Christmas day bombing, what happened, what they knew, what they didn't know, and what he wants to do about it. He did not fire anybody, didn't call for any resignations.

What about this? Let's bring in our panel, Steve Hayes, senior writer for the Weekly Standard, Mara Liasson, national political correspondent of National Public Radio, and syndicated columnist Charles Krauthammer. First an overview of the speech — Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I thought it was rather appalling. I find it mind-numbingly bureaucratic, flat, bloodless. It was almost inside baseball describing how bureaucracies work.

And his conclusions, high directive number one is high priority intelligence will now have to be treated urgently not just some of the time, but all of the time. That's a remarkable advance.

And then he said at the beginning, the first conclusion is that in this world timely intelligence, et cetera, et cetera, is of the utmost importance.

Well, this is a president who after we seized Abdulmutallab, who had extremely timely intelligence regarding Yemen, who had been armed and trained in Yemen, was given a lawyer and Miranda rights and shut up almost immediately after singing at the beginning about everything he knew.

That is the timeliest of intelligence regarding Yemen, which the president's terrorism advisor said today is of the newest and the most aggressive and the most surprising Al Qaeda element in the world. Here is information waiting to be gleaned and received, and we are gratuitously giving it away.

Talking about not connecting the dots, the administration has little control over what happened before a terrorist attack, but it had total control over what happened afterwards, and it blew it.

BAIER: National Security Advisor, Jim Jones, Mara, started by telling USA Today, and it was a sound bite we heard a couple times today, that the American people might be shocked by this review, shocked at what's in it and the details. And were you shocked?

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: It's unclear in retrospect what he meant. Either there were things that were shocking that ended up not being in the president's statement.

BAIER: Which could be the reason for the delay.

LIASSON: It might have been, we don't know.

Or he did say that people would be shocked, will be surprised that these correlations weren't made.

What I did think was actually shocking in the review is it was a scathing indictment of the intelligence failure. That I did think was shocking. The fact that not only were the dots not connected, but there was a failure to understand the intelligence, not just to connect the piece, but to understand it. That's pretty damning.

I thought there was a lot of this that was damning about the intelligence community. Maybe that's what he meant.

BAIER: What about the president's original statement on 12/28? Here is what he said.


OBAMA: This incident, like several that have preceded it, demonstrates an alert and courageous citizenry are far more resilient than an isolated extremist.


BAIER: Now, who put that in that speech? He's not firing anybody, calling for any resignations, but who put "isolated extremist" in that 12/28 speech?

LIASSON: They spoke too soon. In the beginning, the message was, one guy, lone guy, only one person, we learned later and the president did talk later about how this was Al Qaeda on the Arabian Peninsula.

BAIER: Steve?

STEVE HAYES, SENIOR WRITER, "THE WEEKLY STANDARD": That's a really good question. How does the president come out three days after the attack and make that kind of a categorical statement that this was an isolated extremist?

Remember, Robert Gibbs has said that we had usable, actionable intelligence from Abdulmutallab almost immediately. If that's the case, unless he was providing actionable intelligence about himself, of course he was talking about the conspiracy, of course he was talking about who trained him and who provided him with the arms or things of that nature.

BAIER: They also called him a "known terrorist" at one point.

HAYES: Yes. It was an interesting shift. In his comments today, the president called him a "known terrorist," whereas before he had referred to him as a suspect.

And what was potentially interesting about that was in the subsequent session with John Brennan and Janet Napolitano, Brennan took a question about why he was referred to as a "known terrorist" this time and he really couldn't give an answer. He really struggled to explain why the president would call him a known terrorist.

And it does, I think, raise the question, at least, as to what wasn't in the president's remarks today. What did they cut out? What was not declassified to share with the American public that might have been more shocking than what we heard?

BAIER: We point to that briefing afterwards. And it happened late in the day. But both Brennan and Napolitano were asked what they found shocking in this review, and here is what they said.


JOHN BRENNAN, DEPUTY NATIONAL SECURITY ADVISER: We didn't know they had progressed to a point of actually launching individuals here. And we have taken that lesson and so now we're full on top of it.

JANET NAPOLITANO, HOMELAND SECURITY SECRETARY: I think following up on that, not just the determination of Al Qaeda and Al Qaeda Arabian Peninsula, but the tactic of using an individual to foment an attack as opposed to a large conspiracy or multi-person conspiracy such as we saw on 9/11, that is something that affects intelligence.


BAIER: Steve?

HAYES: I mean, I really do not understand how she survives saying this. I think it's almost as bad as her claim that the system worked immediately after. She's surprised by the determination of Al Qaeda in the Arabian Peninsula to attack us? Really?

BAIER: She's saying with individuals.

HAYES: That was the more troubling part. First of all, she's surprised at the determination and secondly she's surprised that they're using individuals as a tactic. The shoe bomber, Richard Reid was. There have been small conspiracies, one or two people, the truck bombers, for the past eight years. It's as if she hasn't read newspapers for a decade.

BAIER: Charles?

KRAUTHAMMER: Look, it's quite remarkable. You got to ask yourself, why did the president speak today? What exactly was the news he gave us?

It was a recap — perhaps he was undoing the impression he gave two days ago in which he blamed everybody on his team and he said, as we know, people haven't been held accountable, there has been mistakes, and he kind of in his usual way hovered above it regally.

And today he grudgingly altered the buck stops here, although there are no consequences of that, it doesn't mean anything. He says it and then he moves on.

So it's not exactly clear to me in what way he advanced anything here other than to make an appearance, to announce a lot of bureaucratic steps which are — I mean, we haven't even discussed them because they are so meaningless.

And what exactly is he going to do? He says we'll spend an extra $1 billion on security in airports. Well, he could start by allowing — by changing the rules under which 80-year-olds are strip-searched and half of the time in the TSA is wasted on people who obviously aren't going to be a threat to anybody on airplanes.

BAIER: We thought this was important. We're going to spend two panels on it. We're going to examine the political fallout from what the president calls the "screw up" when we come back.



GEN. JIM JONES, (RET) NATIONAL SECURITY ADVISER: I think once people read it, I think there is a certain shock to it in the sense that the man in the street will say — will be surprised that, you know, these correlations weren't made. That's two strikes and he certainly doesn't want that third strike, and neither does anybody else.


BAIER: National Security Advisor Jim Jones talking to USA Today, saying the president doesn't want a third strike, but they've got two strikes, referring to Fort Hood, the shooting there, and the attempted bombing on Christmas Day.

We're back with the panel. Mara, the politics of this and that statement in context is what we saw today.

LIASSON: Yes. I think that the White House has been working hard to correct the impression that it left in the early days right after Christmas where I think it sent out a lot of incorrect messages about how it was only one guy, everything was under control, the system worked.

I think what the president wanted to do today was show that he has been and continues to be — sees this, and that he won't stand for another incident where balls are dropped and dots are not connected or understood.

I think that we haven't seen yet in the polls any damage to him throughout this incident. I think if something had happened and this guy had succeeded, it would have been devastating politically.

BAIER: It's on the public's mind.

LIASSON: Yes. It's on the public's mind. I think this is a very perilous place for any president, particularly Democratic presidents, to be. But so far we've seen no evidence that he's suffering politically for this.

Now, as he goes on, the question still is out there, is anybody going to lose their job because of this? He laid out such a scathing indictment of the intelligence community, you think there would be some person held accountable in this whole thing.

One guy, Steve, that we thought perhaps would be on the chopping block after we saw the New York Daily News, was National Counterterrorism Center director Michael Leiter. He, according to the New York Daily News and was later confirmed, did not cut short a ski vacation over Christmas when this attempted bombing happened.

John Brennan, the counterterrorism advisor, talked about that today. What about Leiter?

HAYES: He did. There was a story this morning in which, as you say, he did cut short his skiing vacation.

He talked to people about Leiter, intel folks, and they basically say he's a standup guy, he's smart, he's a hard worker. But this was a stupid move to go skiing the day after Christmas.

Brennan in this question and answer session after the president's remarks said, "I told him to go on the skiing vacation." So he was apparently gone for six days, the head of the NCTC in the immediate aftermath of these attacks. He was there for the attack, but he was gone for the six days after that.

Brennan said, "I told him to go." Brennan later, 20 minutes later in the same press conference says, in response to a question about whether the NCTC is really looking hard at other evidence, ties that Abdulmutallab has had, Brennan says, well, the NCTC has been working 24 hours a day, seven days a week since Christmas looking at these things and scouring the data while the director was on the ski slopes. It is almost beyond parody.

BAIER: And Brenna also said that "I essentially let the president down," but he did not resign. No one has, from what we've seen so far.

Charles, you wanted to point about the president saying we are at war, war with Al Qaeda, and calling them terrorists numerous times.

KRAUTHAMMER: It looks as if he gave this speech in order to undo the impression of his earlier addresses. A, he said the buck stops here, because it looked as if he was detached and blaming everybody else. Secondly, he said we are at war, which is a concession, because people are complaining about the fact, rightly so, that he gave the bomber over Detroit a defense lawyer and treated him as a civilian and defendant. But here is how the president actually said it. He said we are at war with Al Qaeda, who are a network of hatred. Now, first of all, it's not just Al Qaeda. It's jihadism. Al Qaeda is a leading edge of it, but there are imitators, affiliates, cells all over the world. It's a religious ideology, a religious cult. It's an extremist cult.

And when he speaks about hatred, there is a lot of hatred in the world. It's not an inchoate hatred. It's hatred of a specific kind. It's religious fanaticism, hatred of the west and of its liberties, et cetera.

And when you don't identify what the war is about, you leave everyone cold, and you end up saying, as Obama did, one of our responses, he talked about, of course, himself, was reaching out and assuring Muslims of an interest in mutual respect, that we understand their aspirations, meaning three items, education, secure job, and security.

Well, the bomber over Detroit was well-educated and he had all the security of a mansion in London. The guy who killed the seven CIA agents in Afghanistan was a doctor. Usama bin Laden is a multi- millionaire. This is not about oppression or poverty or lack of education. The Fort Hood shooter had education and security as an army psychiatrist.

He will not speak about the nature of the war in a way that remains incomprehensible, and thus you got to ask yourself, a network of hatred, why and over what?

BAIER: Quickly, Steve, we talked about al-Awlaki, the radical cleric in Yemen, contacted both Hasan, the charged shooter in Fort Hood, and connection with this Abdulmutallab. He's a common denominator here in a lot of ways.

HAYES: He is. And the question I think is at what point did the administration or the intelligence community realize that he was more than just a guy who gave sermons on the Internet?

There are some indications there are nonprofits, there were think tanks and scholars looking at him back in January and February of this year. There was a report by the NEFA Foundation that talked about him as a radicalizer, as something much more than just an internet cleric.

BAIER: Much more on this topic and the politics, definitely.

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