DAVID GREGORY: Good morning. The president is close to making a decision on a Supreme Court nominee. Over the weekend, aides prepared Mr. Obama with materials and their final recommendations, clearing the way for the president to now make his choice to replace retiring Justice Stevens. Here with us now, the attorney general of the United States, Eric Holder.

Welcome to the program.

MR. ERIC HOLDER: Good to be here.

MR. GREGORY: My apologies for my voice, I'm under the weather. I'll keep my distance.

MR. HOLDER: All right.

MR. GREGORY: Let me ask you about that Supreme Court choice. The president will make this decision, will announce this decision as soon as when?

MR. HOLDER: I think the decision will be announced very shortly. The president has had a wealth of good candidates to consider, and I think he's looking for a person who will understand that we have to have a Supreme Court that understands its decisions and the impact those decisions have on the American--the average American person.

MR. GREGORY: An announcement tomorrow?

MR. HOLDER: I think we're going to have an announcement very soon.

MR. GREGORY: Very soon. As early as tomorrow, is that fair?

MR. HOLDER: I'd say we're going to have one very soon.

MR. GREGORY: One of the people that you work closely with, of course, is thought to be one of the finalists, and that's Elena Kagan, the solicitor general of the United States. She's 50 years old, she was a former dean of Harvard Law School. She doesn't have much of a paper trail. Is it reasonable to expect that we can get an understanding of her judicial philosophy given that background?

MR. HOLDER: Oh, yeah. I think that she's done a great job as solicitor general, the first woman to ever hold that job, the first woman to be the dean of the Harvard Law School. I think people have a--will get an understanding of who she is, what her judicial, judicial philosophy is, if, in fact, she is, is the pick. She's done a wonderful job in the Justice Department. I've known her since the Clinton years, and I think she would be a great justice.

MR. GREGORY: Let me move on to the Times Square plot. The suspect involved here is Faisal Shahzad, who is responsible, you have said, for planting a bomb that did not go off in Times Square. The important question now is whether Shahzad is part of the ongoing jihadist campaign against the United States.

MR. HOLDER: I can say that the evidence that we've now developed shows that the Pakistani Taliban has directed this plot. We know that they helped facilitate it, we know that we helped--they helped direct it, and I suspect that we are going to come up with evidence that shows they helped to finance it. They were intimately involved in this plot.

MR. GREGORY: Now, the Pakistani Taliban is a militant organization that has pulled off huge terror plots within Pakistan, thought to be behind the assassination of Benazir Bhutto. What specifically was done here and over what period of time that they would plan to do something rather unusual, which is an external operation against the United States?

MR. HOLDER: Well, this is an ongoing investigation, there's only so much that I can talk about, but I am comfortable in saying that they were involved in what Shahzad tried to do. And I think that's an indication of the new threat that we face, these terrorist organizations, these affiliates of al-Qaeda or--these organizations are somehow connected to the kinds of things that al-Qaeda wants to do, indicates the worldwide concerns that we have to have if we're going to be effective.

MR. GREGORY: Well, before I ask you about that changing face of terror, is it a danger when you have officials like Secretary of Homeland Security Janet Napolitano saying, at this very table last week, that this appeared to be a one-off attack, or the general of Central Command, David Petraeus saying that Shahzad appeared to be a lone wolf, and now you're saying no, this was part of a, a Pakistani Taliban plot?

MR. HOLDER: Well, you know, the evidence develops, and I think we have to always try to be careful to make sure that the statements that we make is consistence with the evidence that we have developed. And it certainly looked, I think, at the beginning of this investigation, like it could have been a one-off. Over the course of this week, we've developed information, we've developed evidence that shows that the involved--shows the involvement of the Pakistani Taliban.

MR. GREGORY: Was there an attempt to falsely reassure the public?

MR. HOLDER: No, that's not it at all. I think that those, those comments--that certainly was my view at least, I think, initially that that was probably what we were, were dealing with, but as the days have passed and as we've had a chance to investigate, we've come to the conclusion that I've just announced.

MR. GREGORY: What kind of cooperation are you--we getting from Pakistan with regard to tracking down those elements who might be responsible and how high up within the Pakistani Taliban organization does this go?

MR. HOLDER: Well, again, I don't want to get in to too much of the ongoing investigation, but I am satisfied with the help that we've gotten from our Pakistani counterparts. I think they have done an awful lot; they have been aggressive. Do we want them to do more? Yes. And we will be making more requests of them in the coming days.

MR. GREGORY: What happened to this guy, Shahzad? He's an American, he's living happily here with his family, and then he starts traveling back and forth to Pakistan, leaves his family over there and comes back and lives a very different life. How does he get radicalized, if that's what happened?

MR. HOLDER: That's not something that we fully understand yet. He is in the process of cooperating with us. He's talking to people who are interviewing him on behalf of the United States government. And part of that is to try to understand what is it that took him over the edge and that converted him from being a person who seemingly was an average American to somebody who was bound and determined to kill Americans. We are in the process of trying to determine that.

MR. GREGORY: Why doesn't he get on the radar screen earlier? If he is ferrying money, as we know, back and forth over a number of years, if you think the Taliban is providing him with money when he's living--when he comes back to the U.S. in pretty modest means, how does he not get on the radar at a time when we know that law enforcement here and intelligence officials are tracking people who go back and forth to Pakistan?

MR. HOLDER: Well, that's one of the things that we're looking at, to see if he was, in fact, in any of our databases and to see what we knew about him before the events of, of last week. Again, the investigation is ongoing, he is cooperating with us, and we think, through the combination of what we're doing and what he is telling us, we'll get a better, better sense of who he is and, and who he was.

MR. GREGORY: Look at this changing face of terror. We put up on the screen some of the people who have been involved in recent plots. You have Najibullah Nazi***(as spoken)***involved in that New York subway plot, an American citizen; Major Nidal Hasan, the Fort Hood massacre, also a U.S.-born Army psychiatrist; then you have Hussain and other students from northern Virginia who go and are arrested in Pakistan; December 2009, Abdulmutallab, he's a Nigerian, but he had a visa to the United States; in March of this year, Colleen Larose, she was called "Jihad Jane" for a, a plot to kill a Swedish cartoonist, she's from Pennsylvania; and then Shahzad. Former Secretary of Homeland Security Michael Chertoff told Andrea Mitchell on MSNBC this week there is a pattern here. Here's how he described it. We put that on the screen. He said, "This is why they are recruiting people who ... have clean records, are American citizens, have lived in America, because they want to take advantage of that cleanliness as a way of invading our defenses." We have a new attempt here to use people who have easy access to the U.S.

MR. HOLDER: Yeah. I mean, you certainly hear from them that they're looking for people, as they call it, people with "clean skins." They're trying to get people into the country or use people who don't fit any kind of a profile or not people who you might expect to be involved in these kinds of activities. And that's why we have to redouble our efforts in terms of intelligence-gathering to make sure that we are fully cognizant of what is it they're planning to do, who are they trying to use in, in coming up with these plots? It makes our job more difficult, not one that we can't do, but certainly makes it more difficult.

MR. GREGORY: How many people right now are we tracking who are going back and forth to Pakistan?

MR. HOLDER: Well, 200,000 people per year go back and forth between the United States and Pakistan, and we're doing a, a fair amount of monitoring with regard to, to that number.

MR. GREGORY: When, in this context, when is racial profiling illegal?

MR. HOLDER: Well, I'm not sure--I don't even talk about whether or not racial profiling is legal, I just don't think racial profiling is a particularly good law enforcement tool. If one focuses on particular groups, that necessarily means you're taking law enforcement away from places where they probably ought to be, especially given...

MR. GREGORY: But what happened in this case?

MR. HOLDER: Well...

MR. GREGORY: Wasn't it racial profiling that led us to ultimately get the most important piece of information from this guy, which was a telephone number that he uses in the plot because he was held aside from for a second screening earlier this year?

MR. HOLDER: No. What led us to him was good normal law enforcement. Looking at what people did tracking down that car, where did that car come from, who owned that car, who sold that car? Doing all the kinds of things that we do in traditional law enforcement without any resort to, to racial profiling.

MR. GREGORY: But where is the line, Mr. Attorney General? Because, I mean, this is very complicated. If you have U.S. citizens who are being used who are going back and forth to Pakistan--we are tracking people from Pakistan and Yemen for reasons that are relevant, that are germane to law enforcement not because they just happen to be Pakistani. So where is the line when you talk about profiling?

MR. HOLDER: Again, I don't think that profiling is good law enforcement. What you want to do is to see people who are going back and forth, what, in fact, are they doing? Are they bringing substantial amounts of cash back and forth? What are they doing when they're over in Pakistan, when they're in Yemen? What are they doing here in the United States? Is there a predicate, is there a basis for us to believe that we ought to focus our law enforcement attention on them? Not based on the basis of the color of their skin or the kind of name that they have, but on the basis of what it is that they do?

MR. GREGORY: So if a Pakistani, who is a U.S. citizen, is coming back from Pakistan today and a white woman from Pennsylvania is coming back from Pakistan, you're telling me that at the airports they ought not pay more careful attention to the Pakistani?

MR. HOLDER: You ought to pay attention to the person who you have a suspicion about, a person who you have a basis to believe wants to do harm to our nation. If you look at the arrest that we made in Pennsylvania of white women, those were people who were bound and determined to do something very negative with regard to the United States...

MR. GREGORY: Do you...

MR. HOLDER: ...and racial profiling would not have picked those people up.

MR. GREGORY: Do you support stripping American citizenship from those who are thought to be involved in terrorist activity?

MR. HOLDER: You know, that's something that Senator Lieberman has proposed. I've really not had a chance to look at the bill that I guess he is in the process of, of putting together. But I do know that using just traditional law enforcement techniques we can put people in jail for extended periods of time, we can put them in jail for the rest of their lives, we can even execute them. I think there are constitutional concerns with the bill that Senator Lieberman is proposing.

MR. GREGORY: You issued a Miranda warning to Shahzad, the right to remain silent, at which point a lot of defendants, suspects could get a lawyer. You did that after eight hours and after you had already gotten him talking. There's criticism about injecting the possibility that a suspect will not provide intelligence if you give them that Miranda warning. Take me through that process of what the balancing test is before Miranda is actually issued.

MR. HOLDER: Well, I wouldn't say that we talked to him for eight hours without giving his Miranda warnings, but aside from that what you do is you use the public safety exception that the Supreme Court has defined to make sure that there are no immediate threats.

MR. GREGORY: The quote/unquote "ticking time bomb" scenario.

MR. HOLDER: Ticking time bomb. And then you make the determination whether or not it is appropriate, whether you think that giving Miranda warnings to that person is going to stop the flow of information or whether the flow of information will continue, and you make the determination. In this particular case, is it more important for us to get intelligence from this person, or is it more important for us to build the case? One of the things that we have certainly seen is that the giving of Miranda warnings has not stopped these terror suspects from talking to us. They have continued to talk even though we have given them a Miranda warning.

MR. GREGORY: Is that still the case here with Shahzad?

MR. HOLDER: It's clearly the case. He was given his Miranda warnings after the public safety exception questioning was finished, and he has talked to us and he continues to talk to us.

MR. GREGORY: But would you like interrogators to have more flexibility?

MR. HOLDER: I think we have to look at the rules that we have and look at the situation that we now confront. The public safety exception was really based on a robbery that occurred back in the '80s and something to do with a supermarket. We're now dealing with international terrorists, and I think that we have to think about perhaps modifying the rules that interrogators have and somehow coming up with something that is flexible and is more consistent with the threat that we now face.

MR. GREGORY: So let me, let me unpack that a little bit. What you'd like to see happen is that Congress would pass a law that would say to judges, "Hey, look, in this environment if we extract information that could be valuable intelligence about another terror plot, about who they're involved in, whether they're connected to the Pakistani Taliban, we want to get all that without them lawyering up and still be able to use that against them in the court of law." And you need more flexibility to do that, you think.

MR. HOLDER: Yeah. We certainly need more flexibility, and we want the public safety exception to be consistent with the public safety concerns that we now have in the 21st century as opposed to the public safety concerns that we had back in the 1980s.

MR. GREGORY: So that's news. I mean, that's an important development. Would you work with Congress to try to get that new law passed?

MR. HOLDER: Yeah. We want to work with Congress to come up with a way in which we make our public safety exception more flexible and, again, more consistent with the threat that we face. And yes, this is, in fact, big news. This is a proposal that we're going to be making and that we want to work with Congress about.

MR. GREGORY: So a new priority for the administration.

MR. HOLDER: It is a new priority.

MR. GREGORY: Will Shahzad be tried in civilian court?

MR. HOLDER: We will see. I suspect that he will. We have developed information that I think we can use in a civilian court. It's not even sure at this point whether or not there'll even have to be a trial.

MR. GREGORY: OK. But if there is a trial, it's not a decision you've made 100 percent yet.

MR. HOLDER: No. But I suspect he'd be in the civilian court.

MR. GREGORY: Let's talk about another decision you haven't made yet with regard to a trial for Khalid Sheikh Mohammed, the alleged mastermind behind 9/11. You announced that he would be in a civilian trial in New York. And when you made that announcement back in November, this is what you said.

(Videotape, November 13, 2009)

MR. HOLDER: For over 200 years our nation has relied on a faithful adherence to the rule of law to bring criminals to justice and provide accountability to victims. Once again, we will ask our legal system in two venues to rise to that challenge. I am confident that it will answer the call with fairness and with justice.

(End videotape)

MR. GREGORY: Fairness and justice. That same month you were asked what happens if Khalid Sheikh Mohammed is acquitted, and this is what you said.

(Videotape, November 18, 2009)

MR. HOLDER: If there were the possibility that a trial was not successful, that would not mean that that person would be released into, into our country. That would--that is not a possibility.

(End videotape)

MR. GREGORY: So, if he's acquitted, he would not be released. How is that consistent, Mr. Attorney General, with fairness and justice that you believe in of our system?

MR. HOLDER: Well, he certainly would be provided fairness and justice with regard to the trial that would occur. And with regard to the outcome of that trial, we have--if--and if he were acquitted, what I was trying to say that there are other mechanisms that we have that we might employ, immigration laws that we could use, the possibility of detaining him under the wars of law. There are a variety of things that we can do in order to protect the American people, and that is the thing that I keep uppermost in my mind.

MR. GREGORY: But, but if he's acquitted and the United States says we will not let him free, then what is the point of having a trial?

MR. HOLDER: Well, there are other charges that are--that could be brought against him in addition to those he would stand accused of with regard to the 9/11 plot. There are a variety of other things that he could be tried for. And I think we can provide him with fairness and with justice in the systems that we now have in place.

MR. GREGORY: But you said, with regard to any KSM trial, failure is not an option, and yet you know full well you send prosecutors into court every day in this country knowing that there is plenty of uncertainty. Paul McNulty, the former deputy attorney general, said earlier this year with regard to the Moussaoui prosecution, he said, "The criminal justice process is not designed to guarantee any particular outcome. If that option (civilian court) is followed, we have to accept that it is unpredictable." A trial of Khalid Sheikh Mohammed in civilian court is unpredictable, isn't it?

MR. HOLDER: Well, I'm confident that if we try him in a civilian court, given the evidence that we have amassed, given the experience of the prosecutors who would try the case, given the skills that they have, that we will stand a very, very good chance of, of convicting him.

MR. GREGORY: But that's not what you said. You said failure is not an option. You said he will not be released. And the broader criticism is, of you, that you say you believe in our civilian justice system. And you said when you became attorney general that "I'm going to stick to those principles even when it's hard." And yet, with all the political pressure to be tough on terrorists, you said "I believe in the system" at the same time you appear to be rewriting the rules of that system, which, ultimately, critics say, can undermine the system. Even with Shahzad, before he was charged, you held a press conference announcing that he had confessed. Shouldn't that be a concern to those who work with you and others who believe, as you say you do, in our civilian justice system?

MR. HOLDER: Well, I believe in the civilian justice system. I have certainly worked all my life in the civilian justice system. I have confidence in the civilian justice system's ability to handle these new threats that our, our, our country faces with regard to Shahzad, with regard to Khalid Sheikh Mohammed. I think that we have conducted ourselves in a way that's consistent with the best that is about our, our, our civilian justice system. I'm not--I don't think that I have to take back anything that I have said in the past. One of the things that we did with regard to that press conference was to get out there early to assure the American people generally and people in New York specifically that the person we thought was responsible for that attempted bombing was, in fact, in custody.

MR. GREGORY: Will KSM be tried in New York?

MR. HOLDER: We are still in the process of trying to decide where that trial will occur.

MR. GREGORY: What is the holdup? Everybody seems to be saying this is a foregone conclusion, it's never going to New York. Why won't you say that it won't be there?

MR. HOLDER: Well, we're taking a look at all of our options and trying to decide where the case can best be tried. There are federal statutes that we have to deal with that dictate where the case would have to occur if we're going to seek the death penalty, as I've indicated that we will. There are a variety of things that have to be taken into consideration, both--in addition to what I've talked about, we also have to take into account what the political leadership in these various jurisdictions wants, what the, what the people in these various...

MR. GREGORY: New York doesn't want it. New York doesn't have the resources for it. You just deployed all these FBI agents to catch Shahzad. What if they had to protect a trial of KSM? I mean, it's fairly clear that it doesn't belong in New York, according to elected officials and other law enforcement officials, and yet there is this basically inaction on this issue of where the trial is. Is this being overly politicized by this administration and by you?

MR. HOLDER: No, it's not being overly politicized. What we're trying to do is come up with the best decision that we can. We're taking our time, we're considering all of our options. We want to make sure that we put this trial in the place where it can best be held.

MR. GREGORY: Should it be a military tribunal?

MR. HOLDER: That is one of the things that we are in the process of trying to decide.

MR. GREGORY: Is it more likely that now than a civilian trial?

MR. HOLDER: No, I wouldn't say one is more likely than the other at this point. We are, as I said, working our way through this and, again, trying to come up with the best place for the trial to occur.

MR. GREGORY: But critics, including more progressive, liberal critics of this administration and of you say, "Look, you said there was going to be a civilian trial, you said you were going to close down Guantanamo, you announced that there would be five military tribunals when you made the announcement about Khalid Sheikh Mohammed. What is the holdup? Gitmo is still open, there is no movement on military tribunals. And, by the way, what happens if you capture operatives on the battlefield somewhere overseas? You have nowhere to put them."

MR. HOLDER: Well, there are a variety of questions you put up--you've packed a lot into that one question.

MR. GREGORY: You can unpack it.

MR. HOLDER: There are a whole bunch of things that we have to do. First, with regard to Guantanamo, we're bound and determined to close Guantanamo. It is a place that has served as a recruiting tool for, for al-Qaeda, and so we're in the process of working our way through that. We've asked Congress, in the budget for the Justice Department for 2011, to give us the money necessary to buy a facility in Thompson, Illinois, and we would be able to close Guantanamo, transfer prisoners there. With regard to the selection of a trial site, that is something that we are working through with our law enforcement components, with the intelligence community, to try to come up with ways in which we can find the best place to try, to try the case.

MR. GREGORY: But you will stick to your belief in the civilian justice system. If Khalid Sheikh Mohammed is acquitted in a U.S. court, will the United States let him free?

MR. HOLDER: We will consider our options at the conclusion of that unlikely event. As I said, there are other charges that can be brought. It is hard for me to imagine a situation in which he would be let free given all the evidence that we have against him with regard to the trial that we would bring, and then beyond that with regard to other charges that we have and other abilities that we have to try to keep him detained.

MR. GREGORY: Two other matters before we are out of time. Arizona: What is specifically wrong with the anti-immigration law that has been passed there, and are you close to filing a legal challenge to it?

MR. HOLDER: Well, one of the things I think we have to acknowledge is that our immigration system is broken in many ways, and I think it requires a national solution. The concern I have is trying to do it state by state. I understand the frustration of people in Arizona, but the concern I have about the law that they have passed is that I think it has the possibility of leading to racial profiling and putting a wedge between law enforcement and a community that would, in fact, be profiled. People in that community are less likely then to cooperate with people in law enforcement, less likely to share information, less likely to be witnesses in a case that law enforcement is trying to solve.

MR. GREGORY: So you're close to filing a legal challenge to it?

MR. HOLDER: We are considering all of our options, and we--one of the things that we are thinking about is the possibility of filing, filing a lawsuit. But we're considering all of our options at this point. Whether or not it is something that we can file a lawsuit based on federal pre-emption grounds, whether we think that the law as enacted could violate federal civil rights statutes.

MR. GREGORY: All right. Finally, on the issue of race, when you first became attorney general, you, you talked about the country being "a nation of cowards," and you said we, as average Americans, simply do not talk enough with each other about race. Do you think that's changed since the president's been elected?

MR. HOLDER: I think it's changed a bit. I don't--still don't think we're at a place where we need to be. I think that we need to talk to each other more about race and the racial things that divide us, especially when one looks at the demographic changes that this nation is about to undergo. The demographic changes we're about to undergo can, I think, be a real source of pride, real source of strength for this nation if we handle that change in the correct way. If we don't, it can be a very divisive thing. And one of the things I think we can do in that regard is to talk to one another about race and about these coming changes so that it becomes a positive force in this nation.

MR. GREGORY: Do you think the discussion about immigration, the arguments about what's happening in Arizona is, is part of more constructive dialogue?

MR. HOLDER: Yeah. I think this is, I think, I think a teaching possibility that we have here, to talk about why people think this law is good, why other people think this law is bad, and then to unpack that and go underneath what those arguments are all about and have a very frank dialogue about what we really think about ourselves as individuals, as members of different ethnic groups. I think we need to have that courage and, and have those kinds of conversations.

MR. GREGORY: We will leave it there. Attorney General Holder, thank you very much.

MR. HOLDER: Thanks for having me.

MR. GREGORY: Appreciate it.