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Dems Blast Bush on the Economy/Bailout and Buyout: Bears Stearns/Recession or Worse/Iraq: What the Democratic Candidates Would Do

Aired March 17, 2008 - 17:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


BLITZER: To our viewers, you're in THE SITUATION ROOM.
Happening now, the Bush administration uses bailouts and jawboning to try to stem the turmoil that's sweeping through financial markets. The president says he's acting decisively. Democrats say he's actually dropped the ball.

As violence sweeps Iraq, John McCain pays a visit, saying he'd do whatever is necessary to achieve success there, while Democrats compete to see who would get out sooner.

And Barack Obama plans a front and center speech on race in America.

Can that overcome any setback caused by the racial rhetoric of his spiritual adviser?

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

Global stock markets plummet, the dollar touches record lows and a major Wall Street firm all but collapses. But against the drumbeat of bad news, President Bush is upbeat, saying his administration is on top of the situation.

(BEGIN VIDEO CLIP)

GEORGE BUSH, PRESIDENT OF THE UNITED STATES: We obviously will continue to monitor the situation. And when need be, we'll act decisively, in a way that continues to bring order to the financial markets. In the long run, our economy is going to be fine.

(END VIDEO CLIP)

BLITZER: The Democratic presidential candidates suggest the administration has done too little too late.

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D), PRESIDENTIAL CANDIDATE: We have got to get control over our economic destiny. There are so many dangerous signals on the horizon. And for the president not to be standing up and exercising leadership, I would call the leadership of Congress and say you may be on a two week vacation, I want everybody here. We're going to sit here and figure out what we're going to get out of this Congress, ready to be passed as soon as you come back. This cannot wait. I cannot stress to you, we are in a very dangerous period in the economy. We need vigilance and we need leadership. And we've got to get it from, you know, this administration.

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: Everybody knows -- you can read it in the papers -- that this economy is contracting. It is heading toward recession. We're probably already in one.

But you know what?

Things weren't all that great before we tipped into recession. People here in this community know that. Wages, incomes -- they hadn't gone up over the last seven years. Corporate profits were great. Wall Street was doing fine. But ordinary folks were struggling. And so if you're really ready for change, we can't just tinker around the edges, we've got to bring about a fundamental change to our economy.

(END VIDEO CLIP)

BLITZER: The American public is leaving little doubt where it stands. In our CNN/Opinion Research Corporation poll, 42 percent say the economy is the most important issue. That's topping the war in Iraq as an issue two to one -- a two to one margin -- the economy number one.

In a stunning move, one of Wall Street's major institutions is saved from total collapse by a bailout and a buyout. The Federal Reserve backing the takeover of Bear Stearns by another Wall Street titan, JPMorgan Chase.

If a giant of the finance world can be so easily toppled, what about you?

Let's go to Mary Snow.

She's watching this story for us in New York -- the impact, Mary, on average investors out there, what's going on?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, you know, from stock losses to the effect on the overall economy, economists say the ripple effect of the bailout will no doubt impact consumers.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Wall Street veterans call it the worst financial crisis of their lifetimes. Treasury Secretary Henry Paulson emerged from a White House meeting trying to ease nerves.

HENRY PAULSON, TREASURY SECRETARY: The thing that I am emphasizing as I -- as I talk in the markets is that we have capital markets that are the envy of the world, that they're competitive, that they're efficient.

SNOW: But the Federal Reserve's rare bailout of investment bank Bear Stearns did little to stem fears of what might come next. JASON FURMAN, BROOKINGS INSTITUTION: It if can happen to Bear Stearns, the question is, is another financial institution next?

SNOW: With no clear answers, that uncertainty sparked fears in markets from Asia to Europe to the U.S. Economists say consumers will feel the crisis of confidence in their retirement accounts and it will make it all that much harder for everyone, from individuals to companies, to borrow money.

PROF. PETER MORICI, UNIVERSITY OF MARYLAND: Across the country, businesses are facing banks that want more collateral, that are tightening up terms. With businesses not being able to get loans, they don't invest. They lay people off and the economy continues its spiral downward.

SNOW: And average Americans will feel even more financial pain.

MORICI: The combination of consumers pessimistic about the future, facing high gasoline prices, spending less on other items and businesses cutting back because they can't get credit, is enough to throw the economy not just into a recession, but into a long and deep recession.

SNOW: The Federal Reserve is trying to avoid that with the aggressive action it just took in trying to help bailout Bear Stearns. That move, though, could also come at a cost to consumers.

FURMAN: No question that it creates a risk for the Federal Reserve. And if the Federal Reserve lost money, ultimately it would be the taxpayers that would pay for it.

(END VIDEO TAPE)

SNOW: Now tomorrow we'll get new indications of the financial health of investment banks when Goldman Sachs and Lehman Brothers release their earnings report -- Wolf, it obviously will be very closely watched on Wall Street.

BLITZER: Mary, thank you.

Mary Snow reporting.

Wall Street watched markets around the world tumble and started to follow suit earlier today. But after dropping nearly 200 points, the Dow Jones Industrial Average clawed its way back to end the day up -- up about 21 points. The Nasdaq stayed in negative territory, down more than 35 points. The S&P 500 also ended down, by a bit less than 1 percent.

So how bad is it out there?

Seventy-four percent of Americans now say the economy is in a recession. And in our latest CNN/Opinion Research Corporation poll, three in 10 say it's a serious -- a serious recession.

Let's turn to our personal finance editor, Gerri Willis. She's watching this story for us -- Gerri, as bad as things are right now, there are some who say it could actually be getting worse, that the next president could actually be walking into not a recession, but a depression.

What are you seeing?

What are you hearing?

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Well, it's worth listening to the words of the National Bureau of Economic Research president, Martin Feldstein. He's the fellow who will call this recession. He says it's his personal opinion that we are in a recession. He said in a statement Friday: "I think the recession will last longer and be deeper than the last two recessions, which lasted only eight months from peak to trough. It could well be longer and deeper than the recession in the early 1980s that lasted 16 months."

Now that is a very bad downturn, but a depression is something else entirely. The average recession lasted 10 months, by the way. But the Great Depression lasted three-and-a-half years -- a 25 percent unemployment rate, hunger, dislocation -- a totally different kettle of fish.

It's hard to say that that's on the horizon, but certainly a lengthy recession wouldn't be out of the question -- Wolf.

BLITZER: Here's the fundamental question a lot of people are asking -- should the federal government be taking yet more action to deal with this economic crisis or should the markets try to handle it alone?

WILLIS: Well, that's where we started -- FHA Secure, Hope Now -- the programs that the administration put out were essentially the industry stepping forward to solve the problems in the mortgage market. That didn't work.

Now the Federal Reserve has stepped in. Congress stepped in with the stimulus package. But we're still waiting to get some traction on each of these elements.

Keep in mind, though, that the Fed rate cuts will take six to nine months to work their way through the economy, so it takes a while. But I have to tell you, we tried letting the private sector fix this problem. It didn't work so well.

BLITZER: Gerri Willis and Ali Velshi are going to have a lot more on this coming up tomorrow. All this week, special "ISSUE NUMBER ONE, " noon Eastern.

We'll be watching, Gerri.

Thanks very much.

WILLIS: My pleasure.

BLITZER: Let's go to Jack Cafferty.

He's in New York and he's got The Cafferty File -- Jack.

CAFFERTY: No doubt that this campaign thus far has been full of a lot of twists and surprises.

Here's another one. Republicans are coming out in huge numbers to vote for Hillary Clinton. That's right. A hundred thousand Republicans voted for her in Ohio; 119,000 Republicans voted for Hillary Clinton in Texas and 38,000 voted for her in Mississippi.

The "Boston Globe" reports why this is happening. Some Republicans are supporting Hillary Clinton hoping that it will prolong her bitter fight for the nomination with Barack Obama. Others think that Clinton would be an easier opponent for John McCain to beat in November. And still others are voting for Hillary Clinton because they want to keep her in the race to expose more information about Obama ahead of the general election.

Consider this -- until recently, Obama was getting a lot of support -- much more than Clinton was -- from Republicans in the primary contests. At the time, a lot of traditional GOP voters said they liked Obama and were willing to cross party lines.

But once McCain sealed the deal with his party's nomination, things began to change. In Texas and Ohio, more than double the number of Republicans turned out to vote in those Democratic contests than in earlier ones. And Clinton ran about even with Obama in both states.

Some loud voices within the party, like conservative radio host Rush Limbaugh and Laura Ingraham, have been actually urging Republican voters to go out and vote for Clinton. For example, Limbaugh said that Republicans should vote for Hillary Clinton "if they could stomach it" since it's so important to sustain the soap opera between Clinton and Obama.

So here's the question -- is it a smart strategy for Republicans to vote for Hillary Clinton in the primaries?

You can go to CNN.com/caffertyfile and post a comment on my blog -- Wolf.

BLITZER: Jack.

Thank you for that.

See you in a few moments.

John McCain on the ground in Iraq, saying he'll do whatever is necessary to achieve success in the war, while Hillary Clinton and Barack Obama battle over who would bring American troops home earlier.

Also, after President Bush calls the war in Afghanistan "romantic," angry vets aren't feeling the love. And Barack Obama plans a major address tomorrow on race and politics.

Will he address the racial rhetoric of his former pastor?

Lots of news happening today right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: In the Iraqi city of Karbala, a female suicide bomber attacked worshipers near revered Shiite Muslim a shrine. Iraqi officials say at least 33 people are dead. dozens more wounded.

And two American soldiers were killed today by a roadside bomb. The military says the incident came during combat operations north of Baghdad. The violence comes during separate visits by Vice President Cheney and the Republican presidential candidate, John McCain.

In an interview with CNN's John King, McCain was asked if the military requested reinforcements, would he go to the American people and say that more troops are need in Iraq?

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: I don't anticipate that. Everything I've seen on the ground, I don't envision that scenario. But as I said a long-time ago, my friend. I'd much rather lose a political campaign than lose a war. But -- so I will do what's necessary, as long as we can achieve success. And there's no doubt in my mind that we are achieving success. And I'll do -- support whatever is necessary, with the full awareness that the American people, over time, will not support an unended commitment that doesn't succeed. That's just the way democracies work.

(END VIDEO CLIP)

BLITZER: The Democratic presidential candidates are battling over Iraq and who's got a better plan for getting troops out.

Let's to go CNN's Brian Todd.

He's watching this part of the story -- Brian, unlike McCain, they're not necessarily using words like success when it comes to the war in Iraq.

BRIAN TODD, CNN CORRESPONDENT: No, Wolf. They use very, very different language, indeed. But they hammer at each other, as well.

Today Hillary Clinton going after Barack Obama for what she claims are his inconsistent positions on the war. He hit back against her judgment for voting for the invasion. But in reality, there is very, very little that separates the two candidates on Iraq.

(BEGIN VIDEO CLIP)

TODD (voice-over): Hillary Clinton says 30 generals and admirals, all retired, now support her. But as president, what would she order the generals and admirals in charge to do about Iraq?

CLINTON: Direct them to draw up a clear, viable plan to start bringing our troops home within the first 60 days of my taking office.

TODD: Barack Obama, according to his advisers, wants to start that process sooner.

What about completing the withdrawal?

Advisers to their campaign say Clinton and Obama both want to bring home one to two combat brigades -- up to 10,000 troops -- each month, with the goal of getting nearly all combat troops out within one year of taking office.

OBAMA: I will bring this war to an end in 2009. That is the commitment that I have made to the American people.

TODD: Both Democrats say their timetables may change, depending on conditions in Iraq. And both refuse to sign a pledge to have all U.S. soldiers out by the end of their first terms.

Two military analysts we spoke to -- both retired generals who haven't declared support for any candidate -- say the idea of setting a schedule for a complete withdrawal is worrisome for security reasons. One area where they say the candidates have left themselves wiggle room...

LT. GEN. DANIEL CHRISTMAN U.S. ARMY (RET.): They would leave a residual force behind -- a residual force to train, to advise, to further assist in the stability operations.

TODD: But both Democrats strongly oppose keeping permanent U.S. bases in Iraq. With so little daylight between them, Clinton and Obama hammer each other on the question of judgment. She says he doesn't have enough experience to make sound judgments on the war. Obama counters that Clinton's judgment has been wrong from the start.

OBAMA: I have been clear that this was a strategic error, unlike Senator Clinton, who voted for this war and has never taken responsibility for that vote.

(END VIDEO TAPE)

TODD: Now, Hillary Clinton did sign onto a failed effort in the Senate to de-authorize the war last year and she has introduced legislation that would ban President Bush from negotiating a long-term security commitment to Iraq. Both measures, in fact, supported by the Obama campaign -- Wolf.

BLITZER: All right, Brian.

Thank you.

Brian Todd watching this story for us.

President Bush may have meant something else, but he somehow described the war in Afghanistan as "romantic" and some veterans aren't happy about that.

Let's go live to our Pentagon correspondent, Barbara Starr.

She's watching this story for us.

What's it all about -- Barbara?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, Wolf, it is a very unusual comment from the president of the United States, indeed, that is getting a lot of attention from some troops.

(BEGIN VIDEOTAPE)

STARR (voice-over): It was a video conference last Thursday between President Bush and reconstruction teams in Afghanistan made up of U.S. military and civilian personnel.

BUSH: And so it's been a great pleasure for senior members of my administration to hear the stories and to hear the -- to hear the issues that they face.

STARR: But when the camera wasn't rolling, the president apparently got very enthusiastic, according to Reuters New Agency, saying: "I think it would be a fantastic experience to be on the front lines of helping this young democracy succeed. It must be exciting for you; in some ways, romantic, in some ways, you know, confronting danger."

Afghanistan romantic?

The White House doesn't dispute the quote, but insists the president was talking mainly to the civilians and not the troops.

White House Spokesman Dana Perino says: "He was in no way romanticizing in terms of war and violence."

Some veterans don't buy it.

BRIAN MCGOUGH, VOTEVETS.ORG: That may be what they say, but that's still not a romantic job. You're still in a combat zone. You still have the threat of an IED going off next to you at any time. You still have the threat of being shot.

STARR: Brian McGough is an adviser to VoteVets.org, a veterans political action group often critical of the administration.

MCGOUGH: There's nothing romantic about not seeing your children grow up.

STARR: One analyst says the president's remarks were tactless.

MICHAEL O'HANLON, MILITARY ANALYST: Frankly, I find it an extremely insensitive thing for any civilian, especially one who has never faced direct combat himself.

(END VIDEO TAPE) STARR: Now, Wolf, of course, no one currently on active duty in the military will confront or criticize the president directly. But I can tell you, there were plenty of rolling eyeballs around here earlier today when these remarks were being spread around -- Wolf.

BLITZER: Barbara Starr at the Pentagon.

Thank you for that.

Barack Obama's campaign has dropped the pastor who made very controversial comments about race in America.

But many people want to know this -- why did Obama choose that pastor as his spiritual adviser?

We're going to tell you about a major new move by the senator to answer that question.

And gruesome murders horrified the nation nearly 40 years ago.

But did Charles Manson and his so-called family kill even more victims than we thought?

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's go back to Carol.

She's monitoring some other important stories incoming into THE SITUATION ROOM right now.

What's going on -- Carol?

CAROL COSTELLO, CNN CORRESPONDENT: Well, Wolf, listen to this. Cult leader Charles Manson and his followers may have killed even more victims than previously thought. A police detective's dog out on a training mission has found possible human remains buried just a few hundred yards from the California ranch where Manson holed up. He and his followers killed actress Sharon Tate and seven other people in gruesome killings back in 1969. Manson is currently serving life in prison.

Searchers have now pulled a seventh and final body from the rubble of a crane construction accident in New York City. The victim is believed to be a woman who was visiting the city for Saint Patrick's Day festivities. The bodies of two construction workers were found earlier today. A huge crane collapsed on Saturday, crashing into apartment buildings, demolishing a townhouse. Investigators say a supporting steel collar failed.

The bitter divorce battle between Paul McCartney and Heather Mills is finally over. And I know you want to know how much is she getting. Well, a British judge today awarded her $48.5 million. Mills originally asked for nearly $250 million. She says the settlement shows she was right to fire her lawyers and represent herself, since now legal fees can go to charity. She's appealing the judge's order to publish the hearing transcript, though.

It's being called the Peace Without Borders concert. Thousands of peopled flocked to the border between Colombia and Venezuela this weekend for a music show featuring Latin American performers. The show was in response to the diplomatic crisis that started after Colombia raided a rebel camp inside Ecuador earlier this month. Venezuela and Ecuador briefly broke off ties with Colombia before tensions eased.

That's a look at headlines right now -- Wolf.

BLITZER: Carol, thanks.

See you in a few moments.

Barack Obama speaking out on the controversy swirling around his former minister.

(BEGIN VIDEO CLIP)

OBAMA: The statements that were the source of controversy from Reverend Wright were wrong and I've strongly condemned them. I think the caricature that's being painted of him is not accurate.

(END VIDEO CLIP)

BLITZER: We're going to tell you why Senator Obama says the media portrayal is simply off base and what he plans to do about it, to put race and politics in the spotlight.

A new governor is in charge in New York State.

Can David Paterson unite state lawmakers in the wake of the Eliot Spitzer prostitution scandal?

And Bill Clinton one-on-one -- you're going to find out why he says it was a mugging in South Carolina.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now, the United States Supreme Court will decide whether the FCC can fine broadcast networks for allowing curse words on the air. Fox, ABC, CBS and NBC challenged the FCC's indecency policy, saying it violates free speech.

The pilot of that oil tanker that crashed into the San Francisco Bay last November is now facing criminal negligence charges. The ship spilled nearly 60,000 gallons of oil into the Bay. If convicted, the captain could get 18 months in prison.

And are you waiting for your tax rebate checks from the IRS?

The government says it will start sending out the checks on May 2nd. They're aimed at trying to boost the overall U.S. economy. Most people will get those checks, the IRS says, by July 11th.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

Barack Obama is putting the issue of race front and center. He plans to give what his aides say will be a major speech on the issue of race and politics tomorrow.

This comes amid the fallout of those controversial sermons by the Reverend Jeremiah Wright, who has now been dropped from Obama's campaign.

Let's bring back Carol.

She's watching this story for us.

And you're getting reaction from Obama's church.

What are they saying?

COSTELLO: What does Obama's church say?

Well, two words, Wolf -- character assassination. But there is no doubt Pastor Wright's words are so wrong in the ears of many voters. Still, the Trinity Church is far from radical, despite Wright's rhetoric.

(BEGIN VIDEOTAPE)

COSTELLO (voice-over): The most glaring question in many voters' minds now is why choose a spiritual adviser whose rhetoric, at least at times, seems so inflammatory?

QUESTION: And why did you choose this particular church with this particular pastor to help lay the moral foundation for raising your children?

OBAMA: I know you guys are curious about this. This is why I'm giving a speech. I will absolutely address it.

COSTELLO: His explanation on Tuesday will no doubt catch the attention of millions of voters -- who will want to know why Obama did not go beyond simply condemning the specific comments from Pastor Jeremiah Wright that have been getting so much attention.

(BEGIN VIDEO CLIP FROM YOUTUBE.COM DECEMBER 25, 2007) REVEREND JEREMIAH A. WRIGHT TRINITY UNITED CHURCH OF CHRIST: Barack knows what it means to be a black man living in a country and a culture that is controlled by rich white people. Hillary can never know that. Hillary ain't isn't never been called (OBSCENE WORD OMITTED).

CHERI JACOBUS, REPUBLICAN STRATEGIST: The problem for Barack Obama is that he has known about this for quite some time. And he gave this man a leadership position on his campaign. And he's telling us to, you know, judge him on his judgment.

COSTELLO: Obama has belonged to Pastor Wright's Trinity United Church of Christ for decades. And he's not the only prominent professional African-American to admire Wright and his church.

(BEGIN VIDEO CLIP FROM YOUTUBE.COM)

COMMON: What's his name?

Obama.

(END VIDEO CLIP)

COSTELLO: The rapper Common led Wright's 2008 New Year's celebration. Another prominent attendee of the church, Cheryl Burton, a Chicago news anchor, who described Trinity Church in a news story as "unashamedly black and unapologetically Christian."

Oprah Winfrey was also a member. Her Harpo Productions told me Oprah was a member of Trinity Church from 1984 to 1986, but was unable to confirm why she isn't a member anymore. Her viewers are curious, though, since she campaigns for Barack Obama. Hundreds of people responded critically on her Web site, including this.

:Shame on Oprah for going there. Shame on Obama and his wife for allowing their daughters to hear this hatred towards white America."

No comment on that from Harpo, who told me: "We are not releasing any statements about the Pastor Wright's comments."

Supporters of Wright say what's being said about him though is unfair. His church calling it character assassination.

REV. DR. FREDERICK D. HAYNES, FRIENDSHIP-WEST BAPTIST CHURCH: We still have a nation that is in many instances divided by race and class. And as a consequence, you have experiences that are different. And whenever the experience is different, the expression will be different.

COSTELLO: An example, Pastor Wright might describe Jesus' crucifixion as a lynching because lynching is a word resonates loudly for African-Americans. But will that explanation resonate with white Americans? That will be up to Barack Obama on Tuesday.

(END VIDEOTAPE) COSTELLO: And you know, they are those who wonder how Obama can distance himself from his pastor, a man he greatly admires. I mean, is it politically convenient or is it sincere? I guess we'll see that -- we'll see what he says about that tomorrow as well -- Wolf.

BLITZER: All right. He has got a job ahead of him. Thanks very much, Carol, for that.

Senator Obama says his speech will focus tomorrow not only on the Reverend Wright, but also on the larger issue of race in this campaign. Let's discuss Obama's move and more with Obama supporter, the former Dallas mayor, Ron Kirk, and Clinton supporter, Maria Echaveste, from the University of California in Berkeley. She once worked for the Clinton White House.

Guys, thanks very much for coming in. Mr. Mayor, he has tried to avoid, really, race as an issue in this campaign, but he has decided he needs to address it front and center tomorrow morning. What's going on?

RON KIRK, FMR. DALLAS MAYOR: Well, I think given the extraordinary amount of attention on some of the selective words of Reverend Wright, it's important for Senator Obama to address this. One, so that he can get the campaign back onto critical issues that most Americans are concerned about.

We just passed the anniversary of the five-year mark in Iraq, in the war that we now understand we went into without proper planning and wisdom. And it has cost us trillions of dollars. And we saw the Federal Reserve Bank step in overnight to bail out Bear Stearns while millions of Americans are still waiting on help for those that are caught in this home ownership crisis.

And I think it's a very smart move for Senator Obama to try to get this issue behind him so he can get on to his more unifying mission, the central theme of how we bring this country together to solve these very difficult problems.

BLITZER: What do you think about this issue that has come up, Maria? Is this automatically good for the Clinton campaign, whatever is bad for the Obama campaign?

MARIA ECHAVESTE, CLINTON SUPPORTER: Absolutely not. In fact, I think what has happened is that race and gender are issues that are permeating in this campaign in ways that have never been discussed before. And I think that -- I applaud Senator Obama for seeking to speak to the nation on this issue.

The fact is, is that this is a teachable moment. There is so much that so many different parts of this country don't understand about what it's like to be an African-American or to be a minority or to be a woman. That hopefully it can cause us to be more thoughtful about understanding the really different experiences that we all have in this country.

BLITZER: But you understand, Mr. Mayor, when a lot of people hear those words that are excerpted, those little sound bites from the Reverend Jeremiah Wright, it sounds so awful to so many Americans. Talk a little bit about the political problem that Barack Obama has as a result of that, given his 20-year membership in that church.

KIRK: Well, the fact that he has been there for 20 years ought to (INAUDIBLE) to his benefit. I mean, it just happens I've been at my church over 20 years. And there are a number of times my pastor had said things that I didn't fully agree with. And I'm sure I did things as mayor that my pastor didn't agree with.

But the reality is I think most Americans understand, at least those of us that are of faith, that our faith is informed by our relationship with God. And it is perfected through any number of relationships, including those with whom we worship and our pastor.

And if you look at Pastor Wright, we are fond of saying, if you are going to take the measure of a man, take the full measure of your man. If you look at Pastor Wright's full ministry, he has done great works there in Chicago.

Now, he comes from a generational time in which the church served a lot of different needs for the African-American community. And some of that is expressed in a different manner than I might, or certainly in a way that Senator Obama does. And so I hope people can appreciate the fact that Senator Obama should be applauded for being faithful to his church and his congregation that has loved and nurtured him and understand that he doesn't have to agree with everything that is said by Pastor Wright.

BLITZER: Maria, what do you want to hear from Barack Obama tomorrow morning?

ECHAVESTE: I actually am very interested, as all of us. I expect with a candidate like Barack Obama and from Senator Clinton that we have before us two really capable people who are also formed by their race and by their gender. And what I'm looking is for someone who can unify us in the same way that I think Senator Clinton is able to talk across many lines, talk about the things that are most important, like the economy, which is, first and foremost, the thing I think that most people are more concerned about right now.

What are we going to do with what really seems to be panic at our financial markets? And I think Hillary Clinton has a plan for that. And I think most people want to hear also what Senator Obama wants to do about the economy.

BLITZER: Well, let me pick up on that. We only have a little while left, Mr. Mayor. What does Barack Obama bring to the table as someone who could deal with the economy? He has never really been in the forefront in terms of managing an economy, has he?

KIRK: Well, no. But neither have any of these other leaders. I think his most relevant experience is his work as an organizer in Chicago. If you look at his career path, his chosen life work, it has been working with those families that have been hardest hit and most in need of help. And so if anything else, you've got to believe his intuitive sense is to be as concerned about those families that have been hit by the home mortgage crisis and displaced workers and others as he is about helping those on Wall Street. And then he has shown a remarkable ability to pull together the best minds of all kinds and try to come up with a plan that makes sense for all of us.

And that ought to give Americans great comfort to know that is where his first thought would be, is with America's working families.

BLITZER: All right. We'll leave it there, continue this conversation down the road. Ron Kirk, Maria Echaveste, thanks, guys, for coming in.

KIRK: Thank you.

ECHAVESTE: Thank you.

BLITZER: A sigh of relief in the state capital as New York swears in a new chief executive.

(BEGIN VIDEO CLIP)

GOV. DAVID PATERSON (D), NEW YORK: Let me reintroduce myself. I am David Paterson, and I am the governor of New York State.

(END VIDEO CLIP)

BLITZER: The state's first African-American governor vows to move past the prostitution scandal that brought down his predecessor. We'll have a full report.

And Bill Clinton denies he played the race card in his wife's campaign. The former president, one on one, a CNN interview coming up on his controversial role. You're going to want to see this. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: David Paterson is now the governor of New York State. He was sworn in today as Hillary Clinton and Mayor Michael Bloomberg, among a lot of other people, looked on. The state's first African- American governor vows to move past the prostitution scandal that brought down his predecessor, Eliot Spitzer. Let's go to Mary Snow once again. She's in New York watching the story for us.

The new governor has got a lot of challenges before him -- Mary.

MARY SNOW, CNN CORRESPONDENT: He really does, Wolf. And one of them is the economy. Paterson said it appears headed for crisis. And he cited the meltdown of New York-based Bear Stearns. He said lawmakers would need to adjust their budgets due at the end of this month. But also he faces the challenge of uniting both parties in New York.

(BEGIN VIDEOTAPE) SNOW (voice-over): One week after news of a sex scandal broke, forcing Eliot Spitzer to resign, Lieutenant Governor David Paterson was officially sworn in as New York's 55th governor and the state's first African-American to hold the office.

PATERSON: Let me reintroduce myself. I am David Paterson, and I am the governor of New York State.

(CHEERING AND APPLAUSE)

SNOW: Paterson, who is legally blind, vowed to move beyond the scandal that shocked New York and beyond. He sprinkled in some humor, poking fun at himself.

PATERSON: I have a different kind of a marriage. I know a little bit about finding one's way through the dark.

(LAUGHTER)

(CHEERING AND APPLAUSE)

SNOW: Paterson was surrounded by a who's who of New York politicians that included Democratic presidential hopeful Senator Hillary Clinton.

PATERSON: The last time I was in this chamber, I was gaveling in for the state of the state. And Speaker Silver had brought me in here to practice so I didn't destroy anything.

(LAUGHTER)

PATERSON: In our first year, but in our second year, I told the speaker, don't bother, I know how to do this. Apparently I was about to bring the gavel down on a glass like this one.

(LAUGHTER)

PATERSON: The speaker at the last second grabbed the gavel away from me, and he told me in his own inimitable way, as only Shelly (ph) can, I would not allow you to turn the state of the state into a Jewish wedding.

(LAUGHTER)

SNOW: And while introducing the senate majority leader, Paterson introduced his Republican friend, Joseph Bruno, this way.

PATERSON: The other day we had lunch. And he said, listen, some evening if you feel like it, you should come out to the ranch and have dinner with me. I'll go. But I'm going to take my taster with me.

(LAUGHTER)

SNOW: Laughter aside, Paterson told lawmakers there was a trust to be restored and issues that need to be addressed. PATERSON: This transition today is an historic message to the world. That we live among the same values that we profess and that we are a government of laws and not individuals.

(END VIDEOTAPE)

SNOW: Many in New York State also say Paterson's conciliatory approach is welcomed after Spitzer's rocky tenure that caused sharp divisions across party lines -- Wolf.

BLITZER: All right. Mary, thanks very much. Good wishes and good luck to the new governor of New York State. That's my home state.

Jack Cafferty is asking, is it a smart strategy for Republicans to vote for Hillary Clinton in the primaries? Jack and your e-mail, that's coming up.

And as the Supreme Court prepares for a landmark case, two women tell very different tales about handguns and have two very different takes on the Constitution. Stay with us, you are in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: This just coming in from Florida right now. The Democratic political party in Florida now says it will not, repeat not, hold another primary, another primary in the state of Florida because of the earlier one didn't count according to Democratic National Committee rules. A statement that we have just received from Congresswoman Karen Thurman, chair of the Florida Democratic Party says that they're not going to go ahead with another primary.

Apparently it was too complicated for Florida Democrats and the state legislature to put through. Instead they're hoping that the Democratic National Committee here in Washington will be able to come up with some sort of other solution to deal with the seating of those Florida delegates. But they're saying right now there's no opportunity for Florida to go forward with a primary. John Zarrella is our man in Miami right now watching the story for us.

I see this letter that Karen Thurman has put out. Is this the final word from the Democrats in Florida? No redo. No makeover primary?

JOHN ZARRELLA, CNN CORRESPONDENT: Well, I don't think they have ruled -- I think they have basically ruled everything out as far as anything they can do on this end. You know, and it's funny, Wolf, because going into this last week as we know, this whole idea of a mail-in redo was kind of shot down before she even got the words out of her mouth last week proposing this, because you had the Democratic legislative delegation in Washington saying, look, we don't want to do this.

And you know, the bottom line to all of this, Wolf, was it was going to cost $10 million to $12 million to do this mail-in redo. A lot of the folks that we spoke with, the Democrats we spoke with said, look, we're taking a chance on doing another vote that we might mess up and get all screwed up as well, so we would have two messed up elections instead of one.

The Democratic Party of Florida had to come out and do something. They did this even knowing going in that nobody really wanted to do it. So it was just sort of something they had to do to be out in front of this and come back today and say, look, we tried, we did what we could. It's now out of our hands.

And a lot of folks have told us, Wolf, that it's now up to the candidates to step forward, and we're not seeing that yet either, because so much is at stake and so much is -- it's so tight that certainly it's going to be difficult for the candidates to come up with some sort of a compromise between themselves as to what to do about Florida.

So it's a very, very difficult situation that Florida now finds itself in, even more so than a week ago -- Wolf.

BLITZER: Karen Thurman, also writing in this letter, which we now have, she writes stately (ph) -- and she's the chair of the Democratic Party in Florida: "A party-run primary or caucus has been ruled out. And it's simply not possible for the state to hold another election, even if the party were to pay for it."

She then goes on and says: "This doesn't mean that Democrats are giving up on Florida voters, it means that a solution will have to come from the DNC rules and bylaws committee which is scheduled to meet again in Florida."

All right. So it looks, John, like they can't get their act together for a variety of reasons in Florida. And it's going to be up to the DNC to decide now whether or not those Florida delegates should be seated at the Democratic Convention in Denver at the end of the summer.

ZARRELLA: Yes, Wolf, and you know, the great, great fear that a lot of Democrats in Florida have expressed to me in the last couple of weeks is that if they end up with not having a nominee and ending up going to Denver and Florida still has no resolution to the delegate problem, that then you will really have a problem in Denver. And they are literally crossing their fingers, the Democrats are telling us. They hope that there is a nominee by May or they're saying there could be real, real problems -- Wolf.

BLITZER: All right. Just because the Democrats in Florida couldn't get their act together doesn't mean the Democrats in Michigan won't be able to get their act together and have a make-over primary there. We're watching Michigan very closely as well. All right. John, thanks very much. Breaking news that we're watching here in THE SITUATION ROOM.

Let's go back to Jack Cafferty. He's joining us now in New York.

Are you surprised, Jack, that the Florida Democrats couldn't get another election going?

CAFFERTY: Gee, no, Wolf. They probably, if they did, couldn't get the votes counted in time for November anyway. And based on past experience, Florida should not be allowed to vote anymore in any elections, period. You can remain a member of the United States, but you're no longer allowed to vote in our elections because you don't know how to do it.

The question this hour, is it a smart strategy for Republicans to vote for Hillary Clinton in the primaries? Ohio and Texas, Hillary Clinton got over 100,000 Republican votes in each of those states.

J.D. writes in New Hampshire: "If you're a Republican, it's a great strategy. Given what took place in the White House during the Clinton years, running against Hillary is a dream come true for them. They'll run a couple of ads to jog the memories of 'American Idol'- infatuated Americans, mention the words 'cigar' and 'blue dress' a few times, and the next thing you know, they'll be swearing in John McCain for a third Bush term."

Cindy writes: "I had a Republican neighbor admit to voting for Senator Clinton, her 21-year-old son was with her. I think it sets a bad example, and to me, it mocks the importance of voting."

Allan in California: "Has Obama been investigated to the degree that Hillary has? The right wing has caused the most intensive and expensive investigation of the Clintons, and they came up with nothing. They'll eat Obama alive. Hillary is the only one who can beat McCain and is continuing the status quo. If you like war and depression, then vote for McCain."

Ken in Seattle: "The Limbaugh Republicans know exactly what they're doing given how much these folks hate the Clintons. Don't you think it is odd that they're voting for Hillary and not lambasting her and Bill as usual? They're champing at the bit to have her as the candidate so they can come out swinging. Can you imagine the stuff they've been sitting on and can't wait to start talking about? Marc Rich's pardon, his ex-wife's timely contribution to the Clinton Library come to mind."

And Kathleen writes this: "Most of my family are Republicans living in Texas. Each and every one of them voted for Hillary Clinton because they think she can be beat. That was 15 votes for Hillary because Rush Limbaugh said to do it."

Wolf.

BLITZER: See you in a few moments, Jack. Thanks very much.

The delegate numbers have been a hot controversy out on the campaign trail. Now Bill Clinton is talking about it.

(BEGIN VIDEO CLIP)

BILL CLINTON, 42ND PRESIDENT OF THE UNITED STATES: If we had the Republican rules, Hillary would have a prohibitive lead in the delegates and Senator Obama's people would be upset because he has a little bit of a lead in the popular vote.

(END VIDEO CLIP)

BLITZER: You don't want to miss what else the former president has to say about the campaign and the so-called race card. That's coming up. The interview with Bill Clinton and Sean Callebs, right here in THE SITUATION ROOM.

And it's looking like 1992 all over again, as in, "it's the economy, stupid." I'll talk to CNN's Lou Dobbs about the plunging dollar, what it means for you and your wallet.

Stay with us, we're going to have more on the breaking news out of Florida as well. No redo in Florida, you're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The nose-diving dollar today plunged to its lowest level in nearly 13 years against the Japanese yen. And it has hit record lows against the euro as well. So is there worse to come? Let's go to Lou Dobbs for some analysis.

What do you think, Lou, about this plunging dollar?

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Well, the dollar is reflecting what is a real sickness in this economy right now, a nation that is laden with debt. We are a debtor nation, and it looks as though we will be in perpetuity because neither of these political parties nor none of these political candidates running for office in either party have the guts to tell the American people what is rusting (ph) right before their eyes, and that is that our economy is in deep, deep crisis.

BLITZER: And if you take a look at the overall situation, the bailout, if you will, of Bear Stearns and JPMorgan Chase, what they bought at bargain basement price, this once venerable investment house on Wall Street, what do you make of this?

DOBBS: Well, it's a bailout by the federal government. JPMorgan Chase getting what appears to be a good deal, something around $2 a share for Bear Stearns, a bank that was selling for about $80 just about 10 days ago. It's a terrific deal because it's also indemnified by the Federal Reserve Board. All of this done with the blessing of the president and Treasury Secretary Henry Paulson.

And what is terrible, Wolf, is that this is a bailout by the federal government of a Wall Street firm, a bailout that has been denied to just about 2 million Americans facing foreclosure, or undergoing foreclosure right now.

And that is a double standard which we can't afford in this free enterprise democracy of ours.

BLITZER: But they argue that if the federal government wouldn't have done it, the Federal Reserve wouldn't have stepped in, God knows what would have followed. DOBBS: Well, God does know, but the reality is that they talk about "moral hazard" on Wall Street and in Washington, D.C. That moral hazard applies just to consumers of fraudulent mortgages in many cases, and hundreds of thousands of cases, but doesn't apply to an institution in which the CEOs made a fortune. And a third of the stock owned by the employees and the debt-holders being protected by the federal government. That is a double standard of the most sickening kind. And which puts just too little emphasis on the well- being of working men and women and too much emphasis on the elites of Wall Street.

BLITZER: See you in an hour, Lou, thanks.

DOBBS: You've got a deal.

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