This is a rush transcript from "Special Report," October 29, 2010. This copy may not be in its final form and may be updated.


PRESIDENT OBAMA: Our intelligence and law enforcement professionals working with our friends and allies identified two suspicious packages bound for the United States, specifically two places of Jewish worship in Chicago. Those packages have been located in Dubai and East Midlands Airport in the United Kingdom.

An initial examination of those packages has determined that they do apparently contain explosive material.


BRET BAIER, HOST OF “SPECIAL REPORT”: A thwarted terrorist threat in the form of packages, two of them intercepted in the U.K. and Dubai. This is the one intercepted in U.K. And it is said to contain explosive material.

We don't have all the details but they're saying this is a legitimate threat and intelligence officials are looking for other packages around the country. They say they are on top of this. They've had good intelligence from the beginning, but this is a serious development on this, just four days from the mid-term election.

Let's bring in our panel, Steve Hayes, senior writer for The Weekly Standard. A.B. Stoddard, associate editor of The Hill, and columnist Peter Wehner. Steve, let's start with you. The president saying this is real, they contained the material and it came from yes Yemen, saying that the Al Qaeda in the Arabian Peninsula is likely behind it.

STEVE HAYES, THE WEEKLY STANDARD: Yes, by all accounts, certainly everybody I've talked to believes it was a real threat, a real attack. I think the president and the White House are wise to treat it as such.

I think the first point to take away from the activities today is that the intelligence seems to have worked in this case. The administration claimed this in the past when in fact it hadn't actually worked, but in this case it seemed working with liaison partners and intelligence communities particularly in Saudi Arabia, we have thwarted an actual attack, or potential attack.

BAIER: You mentioned Saudi Arabia.  There is a statement just out minutes ago from John Brennan, the terrorism advisor, in which he says, he praises, “The United States is grateful to the Kingdom of Saudi Arabia for their assistance in developing information that helped underscore the imminence of the threat emanating from Yemen…”and goes on to thank the friends for stopping this.

HAYES: I think actually what John Brennan said in the briefing is one of the other things that in an ironic way was something more reassuring in the way that the administration is handling this episode in comparison to how they handled  previous ones.

John Brennan was asked whether he was asked if it was a dry one or an actual attempted attack. He said and he said very clearly "I don't know."

BAIER: You are two for two. You have a graphic and now a sound bite. Hold on.

HAYES: This is not planned.


JOHN BRENNAN, WHITE HOUSE COUNTERTERRORISM ADVISER: I'm saying that whenever you pull a string, there is a reason you start to pull the string. And we had a reason to pull it. And as a result of what we were able to uncover in East Midlands airport with the very strong cooperation of British authorities, we were able to also then take additional steps.  And that's why those prudent measures were taken today to ensure that we were able to identify any other packages that might be out there of concern.

I'm concerned since there were explosive materials in it; a traditional dry run is something you would not use with explosive materials.


BAIER: He went on to say "I don't know," whether it was a dry run or not.

HAYES: Right. I think the inclination of the administration in the previous or similar episodes had been always initially to downplay the threat and to almost dismiss it. Here he is acknowledging. Look, there is a lot we don't know. This is early in the process. We don't want to jump to conclusions or put out bad information.

I think that's a dramatic improvement in the way they are handling just the discussion of the attack or potential attack.


A.B. STODDARD, THE HILL: I agree. I think John Brennan's statement, "I don't know," says something, which is it doesn't matter the administration doesn't differentiate between a dry run or something else.  They're being proactive and vigilant.

And I think we should be happy that the system worked. Another attack, a plot on our subway system here, locally was foiled by the FBI this week. I think we are all breathing easier because of that. And the administration should be given credit when the system is working.

BAIER: Peter, Yemen. Umar Farouk Abdulmutallab, the Christmas day bomber, comes from Yemen, also the radical cleric Anwar al-Awlaki, believed to be in Yemen, a bad guy as well. This is a place that's been a focus for us.

PETER WEHNER, COLUMNIST: It has. It's where the USS Cole was bombed. It's now the Al Qaeda center du jour, where Al Qaeda has various networks that are going on. David Petraeus earlier this year went to Yemen to talk to the president there to try to up the counterintelligence, counterinsurgency effort, counterterrorism effort there.

It's a real problem. I give credit to the Obama administration, they realized. There were strikes against there. But a reminder Yemen is a country right now, of a great source of problems. But we face a militant ideology. This is a fluid ideology. It was in Afghanistan. It's now in Yemen. It can go to Somalia. It's a reminder that we face an ongoing war on terrorism and politics. The attention of the country may fade but terrorists' attention doesn't.

BAIER: You mention politics and obviously we are four days away from the election, and people will be saying is this the October surprise? Will it affect mid-firm in any way, shape, or form?

HAYES: I think it's unlikely to affect the midterms. I think this is a real attack. The intelligence folks say this is a real attack, not something ginned up to effect an election.

Going back to the Yemen point, it was interesting to see the president and John Brennan praise the Yemeni regime, saying they were a courageous partner. I'm worried that the administration not be snookered by an inconsistent and uneven partner in this war on terror; many times in the past looking the other way if not actively facilitated the work of Al Qaeda and its affiliates in the area.

So if the Yemenis are now being cooperative, it's a big change from where they were in the better part of the decade.

BAIER: Impact on thinking of voters at all?

STODDARD: I agree with Steve. This is not the issue that the Americans are upset about. It's the economy and the fact that they believe under the Obama administration, we have seen an agenda of incredible growth and reach of government and government spending. That’s what they are upset about.

There is no way the Democrats can say we have kept -- they don't have a record that's long enough of foiling attacks and keeping us safe.  It might be the case in four or six years, but that's not going to be the case this weekend.

BAIER: Pete, last word?

WEHNER: I agree with both of them. If the attack succeeded that would have been one thing. This was foiled and won't affect the races one bit.

BAIER: It is a concern going forward as far as the intel officials say they are looking for other packages, something that it’s still developing.

WEHNER: Absolutely, and this is a reminder in to public this is a crucial issue.

BAIER: You voted for your favorite lightning round topic on the home page FOXnews.com/specialreport. The winner is up next.


BAIER: Every week on the FOXnews.com/specialreport homepage, viewers vote on what we should discuss first in this, the Friday lightning round. And the big winner is military ballots. Where is the outrage? It won with 67 percent of the vote. Pete, what about this, military ballots?

WEHNER: This should be outrage. If you were going to deny ballots to anyone, the military is last group in America that you would do it to. These are the people, after all, who are fighting for our freedom.

BAIER: A number of states, I should point out, have delayed or missed the deadline to get them out in time, and there’s concern about it.

WEHNER: Illinois and New York. And in New York the tenth mountain division is one of groups that had been denied the ballot. That is the division that has more deployments than any other in the army. This is very bad politically and substantively.


STODDARD: I think that there is a new law in 2009 that the states are not willingly trying to ignore but they just haven't adapted to it yet. The Justice Department is being very firm and taking them to court to compel them to get these ballots back on time.

It simply needs to be done earlier. Not only do we put the early voting back, but the military ballot question, they were an issue in the great, you know, hanging chad recount of 2000. Why can't we get this right?

BAIER: This shouldn't be a problem.

HAYES: It's such extraordinary incompetence. Were people surprised there would be an election on November 2?

BAIER: There are people out there saying there is not incompetence and there is something behind it. But the fall position in incompetence.

HAYES: I think in the vast majority of cases, the ones I've looked at, it is incompetence, but it really matters in these cases. The local election that don't get the ballot out, they literally may not be counted in some cases. In Illinois there are open questions about whether they'll be counted.

In Maryland a guy from the Maryland National Guard sued because the ballot included only federal candidates. So they can’t vote for candidates. That is crazy.

BAIER: We'll follow it Tuesday and beyond. Next up, Florida, the Senate race -- it can't get weirder down there with Kendrick Meek saying he wasn't asked to step aside by former president Clinton. Clinton folks saying privately, yes, in fact, he was. Steve?

HAYES: Clinton folks saying that privately and President Clinton saying I didn't actually ask him to, but we had the conversations. Nobody has told a straight story anywhere. There are contradictions in every direction.

But I think the big takeaway to me is just what great length the senior member of the Democratic Party from the White House potentially to President Clinton to other senior Democrats went to, to deny Marco Rubio a seat in the Senate. I think it speaks volumes about the kind of candidate Marco Rubio is and what he is likely to become in the next couple of years.


STODDARD: Marco Rubio is the great-comer of the Republican Party; he’s a great hope for a future presidential candidate now before he even wins. It is clear the Democrats do not want him to win. I agree, the worst thing the Democrats involve could do, especially after the story of Joe Sestak in Pennsylvania being urged to step aside in that race, is to deny it.

President Clinton has now completely refurbished his image and he is the most popular politician in the nation. For him to have a spokesman come out and say we tried to tell him he would lose, and then today President Clinton is denying it, and Meek is denying it. It's so obvious.  I have no idea why they're doing it.

BAIER: Seems like a sputtering to the finish line.

WEHNER: Yes. It depends on what the word "dropping out" means I guess with Bill Clinton. The big story here, you have Florida, not Utah where the Democrats are conceding. The only way they can win is not have a democrat in the race. After all, Crist is the Republican governor now.  It’s true he's running as an independent. But it's pretty extraordinary they're trying to get the only Democrat in the race to drop out.

BAIER: Quickly, last topic, voter fraud allegations. We have a list, a graphic up of some of the allegations out there, a series of them.  There's 900 absentee ballots rejected in Pennsylvania. In North Carolina, election machine problem. Some voters going in to cast a ballot and they vote a straight line Republican and the screen that switches the vote to show all the Democrats, people upset about that.

Connecticut, some absentee ballots signed out to vacant lot.  An investigation in Alabama until possible fraudulent absentee ballot applications. And California, canvassers attempting to collect mail-in ballots. There’s a whole bunch of questions here. How big a problem is this?

WEHNER: I think in individual states it is. Clark County in Nevada is a problem. The others and one ought to be against voter fraud.  There ain't enough voter fraud in the world to stop the tsunami that’s coming. This is a bucket in the ocean for Democrats. And this is not going to stop what is now forwarding.

STODDARD: Voter fraud is something that everyone is always afraid of before the election. I agree with Peter that it probably helps the turn out if these stories come out soon enough. But what happens after the elections these have to be investigated individually and we go on. And nobody ever really gets behind legislative push to try to fix the system.  Everyone moves on to other things.

And so it's just one of those problems that doesn't get solved.  I think most of the fraud is usually with those absentee ballots, and also people registering that shouldn't be registered. This has gone on forever.  I fear it will continue to.

BAIER: Steve, you commented last night, as we ran out of time.

HAYES: Fair enough.

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