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Sarah Palin Flies Solo; Lehman Brothers Files For Bankruptcy; Worst Financial Crisis Since Great Depression?; Obama Speech

Aired September 15, 2008 - 18:00   ET

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


WOLF BLITZER, CNN ANCHOR: And, to our viewers, you're in THE SITUATION ROOM.
Happening now: the breaking news we're following, the worst stock market nosedive in more than seven years. Since 9/11, this has been the worst day, Wall Street in meltdown after one big investment bank goes bust and another one is bought out.

Trading blame for the exploding financial crisis. Will one presidential candidate come out looking better than the other? Is this a game-changer with only 50 days or so left in this election? The best political team on television is standing by.

And Sarah Palin flies solo out on the campaign trial, but the McCain camp still is keeping a hand on all the controls.

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

More fear and misery this hour for a nation in the grip of a huge financial crisis -- the breaking news from Wall Street, the Dow Jones industrials plummeted more than 500 points today. The worst one-day loss since right after the 9/11 attacks.

And driving the market down, the bombshell news that the mega investment bank Lehman Brothers is declaring bankruptcy, And another Wall Street institution in deep trouble, Merrill Lynch being bought out by Bank of America. Candy Crowley and Dana Bash, they're standing by out on the campaign trial. They're going to look at the political fallout of what's going on. And that's coming up in a moment.

But let's go to our senior correspondent, Allan Chernoff. He's watching all of this.

Allan, I take it you're right outside of the headquarters of Lehman Brothers.

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Absolutely, Wolf.

And this is just a stunning day, two iconic names on Wall Street, Lehman Brothers and Merrill Lynch, falling together, one going bankrupt, the other seeking a buyout.

(BEGIN VIDEOTAPE)

CHERNOFF (voice-over): The crisis of confidence that first hit home prices, then mortgage investments, that financed the housing boom has now claimed two of Wall Street's most venerable names, Lehman Brothers declaring bankruptcy, Merrill Lynch selling itself to Bank of America, both occurring under Washington's watchful eye.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We're working to reduce disruptions and minimize the impact of these financial market developments on the broader economy.

CHERNOFF: Lehman employees, who had already taken heavy losses on company stock, were stunned.

YURI KORSKY, LEHMAN BROTHERS EMPLOYEE: On Friday, coming out of the office, everyone thought that it would be OK. Something will work out in the end.

CHERNOFF: But, in the end, Treasury Secretary Hank Paulson refused to use taxpayer money to support Lehman, as he had for the buyout of Bear Stearns and for Fannie Mae and Freddie Mac just last week. The line was drawn at Lehman's door.

HENRY PAULSON, U.S. TREASURY SECRETARY: I never once considered that it was appropriate to put taxpayer money on the line with -- in resolving Lehman Brothers.

CHERNOFF: Merrill Lynch, the nation's biggest brokerage firm, fearing it could be next, agreed to be bought by Bank of America.

PAULSON: The American people can remain confident in the soundness and the resilience of our financial system.

CHERNOFF: But, on Wall Street, the crisis of confidence sent stocks sinking and threatened yet another financial giant, the nation's largest insurance company, AIG.

To help, New York Governor David Paterson said he would allow AIG to access cash from its own subsidiaries.

GOV. DAVID PATERSON (D), NEW YORK: No taxpayer dollars are involved. This is not a government bailout.

(END VIDEOTAPE)

CHERNOFF: What this is, is capitalism at work. Lehman Brothers and Merrill Lynch bet heavily on mortgage investments, hoping to get spectacular returns. For a while they did, but in the end it all failed miserably. And now the companies are paying the price. Unfortunately, that is going to include the loss of thousands of jobs and many fortunes as well -- Wolf.

BLITZER: Fortunes, indeed.

All right, Allan, stand by.

Let's get to the presidential candidates and their immediate responses to this emerging crisis on Wall Street. They're acutely away that the troubled economy is by far the number-one issue for voters right now.

Listen to Senator Barack Obama in Colorado earlier today.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: Today offers more evidence, Colorado, that too many folks in Washington and on Wall Street weren't minding the store. Well, for -- for eight years, we have had policies that have shredded consumer protections, that have loosened oversights and regulation, and encouraged outsized bonuses to CEOs, while ignoring middle-class Americans. The result is the most serious financial crisis since the Great Depression.

(END VIDEO CLIP)

BLITZER: Let's go right to Candy Crowley. She's on the scene for us at that other rally. He's about to speak where you are, in Pueblo, Colorado, Candy.

Do some of the Obama supporters and strategists, and you speak to them all the time do they sense that this economic crisis, this financial crisis, potentially could be a bonanza politically for Senator Obama, given that it's happened under the watch of the Republicans?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Well, absolutely.

It makes their point. They believe that any time the subject matter turns to the economy, it certainly favors them, number one, because they know that John McCain is seen as better at the commander in chief, defending the nation, securing the nation, but they know that the economy in general always favors Democrats and speaks to their main point, which is that George Bush and John McCain are two sides of the same coin.

So, yes, what they're saying today is, listen, Barack Obama was out ahead of this, that he saw this sort of trouble coming. He said that the -- or that Wall Street and some of these firms and some of these mortgage brokers needed more regulation, more oversight, that he has introduced legislation.

And they claim, listen, John McCain was behind the curve on this. He didn't even realize there was a mortgage crisis. So, they believe, again, that this is a way that they can say, listen, for eight years, he has agreed with the man who brought you this economy today.

So, absolutely, Wolf, they believe it favors them.

Candy, stand by. We're waiting for Senator Obama to speak. Once he starts speaking, we will go there live, anxious to hear what he has to say right now.

As the markets reel, John McCain was forced to make a course correction today after suggesting that, despite this latest banking crisis, the U.S. economy, the fundamentals, he says, remain strong at its core.

Let's go to CNN's Ed Henry.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Wolf, John McCain came here to Florida seeking its critical 27 electoral votes, but he got a little tripped up after borrowing a line from President Bush about the state of the economy.

(BEGIN VIDEOTAPE)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: We have to win Florida. We have to win Florida, and we need your help to do it.

HENRY (voice-over): With former Governor and presidential brother Jeb Bush looking on in Orlando, John McCain blamed Wall Street's chaos on Washington being asleep at the switch, with the twin goals of separating himself from an unpopular president and highlighting his ticket's case for change.

MCCAIN: We're going to put an end to the abuses in Washington and on Wall Street that have resulted in the crisis that we are seeing unfold today. Enough is enough. Enough is enough. We're going to reform the way Wall Street does business.

HENRY: But McCain found himself on the defensive after comments at an earlier stop in Jacksonville in which he echoed one of President Bush's talking points.

MCCAIN: Our economy, I think, still, the fundamentals of our economy are strong, but these are very, very difficult times.

HENRY: Democrat Joe Biden immediately lashed out at that claim.

SEN. JOSEPH BIDEN (D-DE), VICE PRESIDENTIAL NOMINEE: On the issues that you talk about at your kitchen table, can we afford Mary's tuition, what are we going to do about mom's MRI, how are we going to pay for it, winter is coming, how are we going to heat the house, on those issues, the issues that we talk about every day, middle-class people, John is profoundly, profoundly out of touch.

HENRY: So, in Orlando, McCain quickly did some backpedaling.

MCCAIN: Those fundamentals are threatened. They are threatened and at risk because some on Wall Street have treated Wall Street like a casino. So, we're going to fix it. The top of our economy is broken. We have seen self-interest, greed, irresponsibility, and corruption undermine these hardworking American people.

(END VIDEOTAPE)

HENRY: Joe Biden's claim is that after 26 years in Washington, John McCain has a thin record of shaking up regulation of Wall Street. Of course, Biden has to tread carefully. He's been in Washington 36 years -- Wolf.

BLITZER: Ed Henry in Orlando for us, a key battleground state of Florida. That's where a lot of the candidates are going to be spending a lot of time.

Let's go back to Jack. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: It's breathtaking to me that John McCain talks like he just got out of the back of a vegetable truck that just got into town. He's been in Washington as a member of the United States Senate for 26 years. You're not an outsider, Senator. End of story.

This country is struggling in a way that I can't remember. I'm 65, and I don't remember it being quite like this, financial institutions failing left and right, people losing their life savings to a falling stock market, falling housing prices, rising food, energy costs eating away at everybody's budget. We are hemorrhaging jobs. We are $10 trillion in debt.

A major hurricane just slammed the Texas Gulf Coast, four million people without power, damage estimated in the tens of billions of dollars, at a time when insurance companies like AIG don't know if they're going to open their doors for business next month or next year.

We are slaves to imported oil. Global warming is threatening to destroy the planet. Had enough yet? The political race is tightening, which indicates we're a long way from any sort of consensus on how to solve our problems. More gridlock and partisan rancor lie ahead at a time when we cannot afford either. And foreign trouble spots abound like, Iran, Afghanistan, Georgia, North Korea.

The question is this. How confident are you about the future of our country? Go to CNN.com/caffertyfile. You can post a comment on my blog.

It's getting serious, Wolf.

BLITZER: It certainly is. And a lot of people's life savings are at stake right now.

Jack, thanks very much.

Barack Obama will be speaking at an event this hour. We will be going there live once he starts speaking. We're anxious to hear what he has to say right now about this economic crisis. Will he also echo what his campaign is saying in brand-new attack ads, that McCain's campaign is launching some of the -- quote -- "sleaziest political tricks" ever? We will see what the Obama camp is doing on that front.

And John McCain's running mate is on a political first. We're seeing the governor of Alaska, Sarah Palin, do something she hasn't done since becoming the vice presidential nominee.

And with Wall Street in meltdown, who actually is to blame? Analyst say some key warnings signs were there all along, but were ignored.

Stay with us. You're in THE SITUATION ROOM. (COMMERCIAL BREAK)

BLITZER: There's a major shift in CNN's Electoral College map. We're moving Minnesota from a state considered leaning toward Barack Obama to a tossup.

Both campaigns desperately want Minnesota's 10 electoral votes. Now there's speculation that Minnesota is up for grabs, after the Republicans held their convention there in Saint Paul. We will see what else is going on.

The candidates certainly are campaigning in other battleground states as well. Sarah Palin has been out in Colorado. And she's doing something she really hasn't been doing since becoming John McCain's running mate.

Our Dana Bash is in Golden, Colorado. And she's standing by with more on this part of the story.

What exactly is she doing differently, Dana?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, Wolf, we have actually been following Sarah Palin in her first campaign tour alone to battleground states, Western battleground states, as you mentioned, first to Nevada and now in Colorado.

She's been out for two-and-a-half days. She's had two rallies, and she's really been sticking largely to her central task, and that is to gin up enthusiasm in Republican strongholds for John McCain, where there really wasn't much before.

(BEGIN VIDEOTAPE)

BASH (voice-over): Sarah Palin didn't hesitate to point fingers at a town run by a Republican president.

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL NOMINEE: Our regulatory system is outdated and it needs a complete overhaul.

(CHEERING AND APPLAUSE)

PALIN: Washington has ignored this.

(CHEERING AND APPLAUSE)

PALIN: Washington has been asleep at the switch and ineffective.

BASH: A taste of the reform message McCain advisers call the key to winning, and the biggest bonus of adding a Washington outsider to the ticket, especially in the anti-establishment Mountain West, her first foray at campaigning alone.

PALIN: We have got a lot in common, these Western states.

(CHEERING AND APPLAUSE)

PALIN: You know, we hold together and we pull together.

BASH: Here, Palin added a few new lines to her stump speech, like what she would do in the White House.

PALIN: My mission is going to be energy security and government reform.

(CHEERING AND APPLAUSE)

BASH: And got a big response for a new swipe at Barack Obama.

PALIN: Our opponent wants to raise income taxes, and raise payroll taxes...

(AUDIENCE BOOING)

PALIN: ... and raise investment income taxes.

(AUDIENCE BOOING)

BASH: But independent groups say, that's not true. Most Americans would get a tax cut under Obama's plan. And Palin is still repeating another claim that doesn't tell the whole story.

PALIN: And that infamous bridge to nowhere, I did tell Congress, thanks, but no thanks.

BASH: The reality, she originally supported federal dollars for Alaska's infamous bridge. But McCain aides won't drop the line, because those stories are drawing these crowds, newly enthusiastic GOP voters, and even some conservative Democrats, like Gayle Loughridge.

GAYLE LOUGHRIDGE, PALIN SUPPORTER: I haven't been political my whole life. And Palin just has got me energized up at 3:30 this morning to come see what she has got to say.

BASH: And what she has to say is still carefully scripted with teleprompter and her events tightly controlled. Even these homemade looking yellow signs were distributed by the campaign.

(END VIDEOTAPE)

BASH: And Palin, at both of her rallies here out West, spent as much, if not more, time furiously signing autographs for voters as she did speaking to them.

And, Wolf, she is obviously spending a lot of time at these rallies -- not a lot of time -- in fact, no time -- with those of us in the press corps. Another interesting point, she hasn't yet taken any questions from voters at these events, but that is going to change in the middle of the week. She is going to have a joint town hall meeting with her running mate, John McCain. And that is going to be in Michigan -- Wolf.

BLITZER: I also noticed, Dana, she's got the teleprompter there. Is she simply just reading a prepared speech or is she going off- message, just saying -- speaking -- ad-libbing, if you will, to the audience?

BASH: You know, it's hard for us to see what she's reading. So, I can't answer that question precisely, but, yes, she has had teleprompter, but she -- if you sort of watch her, she's very comfortable with the teleprompter. So, there's a very good chance she goes off of it.

But we are reminded that, even today, Barack Obama also used teleprompters. So, it's not unusual for candidates to use a teleprompter, but she is somebody who definitely has her lines and a lot of familiar lines. And she's repeating them, but today she had some new ones.

BLITZER: She's a former sportscaster. She's very good at teleprompter. Barack Obama may be the best with teleprompter among politicians I have ever seen.

All right, Dana, thanks very much for that.

Former Secretary of State Colin Powell says he's still in the ranks of voters who remain undecided about this presidential race. While taping a CNN forum today, General Powell was asked how the rest of the world would react to an African-American being elected president.

Listen to this.

(BEGIN VIDEO CLIP)

COLIN POWELL, FORMER U.S. SECRETARY OF STATE: ... be electrifying. But, at the same time, we have to make a judgment here within our country as to which of the candidates brings the right measure of experience and judgment to the task and which would be best for America.

I have been watching both of these individuals. I know them both extremely well. And I have not decided who I'm going to vote for yet. And I'm anxious to see what the debates are going to be like, because we have got to get off this lipstick-on-a-pig stuff and get into issues.

(APPLAUSE)

(END VIDEO CLIP)

BLITZER: And you can hear a lot more from Colin Powell on a CNN special, "The Next President: A World of Challenges." It airs Saturday night at 9:00 p.m. Eastern, once again Sunday at 2:00 p.m. Eastern. This is a CNN exclusive.

Many people who left their homes to save their lives are warned, don't come back for now. We're following Hurricane Ike's aftermath.

And many of you are sending us pictures of how the storm turned lives upside down. Oil turmoil. Wait until you hear what impact Ike and the financial hurricane on Wall Street is having on oil prices. And it may surprise you.

And Barack Obama's campaign says John McCain is part of one of the sleaziest campaigns in modern history. So, it's fighting back.

We're standing by to hear from Senator Obama live this hour right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Scenes of utter devastation in Texas today, as the state struggles to cope in the aftermath of Hurricane Ike.

Right now, we're getting a first look at some of the devastation. This is Bolivar Peninsula in Texas. There was major flooding there. Rescue teams say entire subdivisions simply disappeared. And it's not just there. We're watching coastal areas and massive damage. Take a look at the city north of Houston right now. Houston itself, by the way, remains under curfew, many of the buildings are heavily damaged, streets littered with debris.

Similar situation on the island of Galveston, dozens of beach houses smashed to bits. Rescuers have saved hundreds from flooded homes there. And, for now, possibly many more days, residents are being told simply, simply stay away.

Our I-Reporters have been sending in hundreds of photos of the devastation caused by Ike.

Let's go to our Internet reporter, Abbi Tatton.

You have been going through these pictures. And they're very dramatic.

ABBI TATTON, CNN INTERNET REPORTER: Wolf, some of these communities, there's just very little to return to.

We are going to zoom right in here to Galveston, Texas, to the community of Bermuda Beach there. There's no barrier here. There's no seawall. And resident Carlos Ortega has taken these pictures. He says that his used to be a second-row house, second row back from the beach, but because there's been so much damage, he now looks right on to the beach.

There's been so much left, houses wiped out without a trace. But, Wolf, as the weekend went on, as the day went on today, we have been increasingly hearing from I-Reporters way inland, who are saying it's not just the coastal communities.

We can fly way up now. We are going right up to Mechanicsburg, Ohio, where Tina Campbell has been sending in her pictures. She says the worst damage she's ever seen from high winds there, a tree that fell on to her house, 100-year-old tree, worst damage she's ever seen. She's pointing out that Ike had impacts, the remnants of Ike had impacts way, way inland.

BLITZER: Yes. That's amazing. All right, Abbi, thanks very much.

We want to alert our viewers, we're standing by to hear from Senator Barack Obama. He's out in Colorado right now, in Pueblo, Colorado, just a short while after the closing of the -- closing bell on Wall Street, a dramatic plunge in stock prices. We are going to go live there once we see Senator Obama. We're told he's going to address this economic crisis head on.

And Obama is also accusing John McCain of pedaling political sleaze. The best political team on television is standing by to discuss this and a lot more, as this campaign gets closer and closer and uglier and uglier.

And it's imitation, but is it flattery? Jeanne Moos on the new art of acting like Sarah Palin.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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

Happening now: We're standing by for live remarks from Democratic presidential nominee Barack Obama. He's expected to talk about today's devastating financial news, stocks plummeting on a banking meltdown, 500-point loss on the Dow Jones industrials.

Also, as this crisis has been brewing, has Washington been asleep at the switch? Who is to blame for the worsening financial crisis?

And, as this is happening, the campaign is getting uglier. Can the candidates stay focused on the real issues? All of this, plus the best political team on television.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Once again, we're awaiting a live event in Colorado with Senator Barack Obama. That should be happening any moment now. We'll go there live once he starts speaking. It's not yet clear if the senator will repeat a line his campaign has been using in new ads. It claims that John McCain is part of one of the, quote, "sleaziest campaign" - "one of the sleaziest campaigns in modern U.S. history." The Obama camp is clearly fighting back right now. CNN's Jim Acosta is in Grand Junction, Colorado.

(BEGIN VIDETAPE)

JIM ACOSTA, CNN CORRESPONDENT (voice over): His poll numbers singed by a barrage of Republican attacks, Barack Obama reached for his flame-throwing and turned it on some of the former lobbyists working for John McCain's campaign.

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: If you think those lobbyists are working day and night for John McCain just to put themselves out of business, well, I've got a bridge to sell you up in Alaska.

ACOSTA: And with the financial markets reeling from the latest turmoil on wall street, Obama invested much of his time in slamming McCain on the economy.

OBAMA: I certainly don't fault Senator John McCain for these problems. But I do fault the economic philosophy he subscribes to. This country cannot afford four more years of this failed philosophy.

ANNOUNCER, POLITICAL AD: Obama's one accomplishment?

ACOSTA: Obama is coming off a tough week of absorbing another round of McCain's scorched-earth TV ads. Spots that were labeled misleading by political analysts on the left and the right. So the Illinois senator launched his own ad, accusing McCain of pedaling political sleaze.

SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: I will not take the low road to the highest office in this land.

ANNOUNCER, POLITICAL AD: What's happened to John McCain? He's running the sleaziest ads ever, truly vile.

ACOSTA: Aides to Senator Obama acknowledged they are sharpening their lines of attack on McCain.

SEN. JOE BIDEN, (D), VICE PRESIDENTIAL CANDIDATE: Folks, we've seen this movie before. And we know the sequel is always worse on the original.

ACOSTA: Some of those lines coming from running mate Joe Biden in the economically hard-hit battle ground of Michigan.

BIDEN: Just as George Herbert Walker Bush was nicknamed Bush 41 and his son was named Bush 43, John McCain could easily become known as Bush 44.

ACOSTA: And the pressure is on. Polls suggest Barack Obama is losing ground in swing states that were once leaning in his direction. For now, Obama is making the bet that going negative is the change he needs. Jim Acosta, CNN, Grand Junction, Colorado.

(END VIDEOTAPE)

BLITZER: Let's talk about of this. The candidates and the growing financial crisis. Joining us, our CNN Senior Political Analyst Gloria Borger, our CNN Correspondent Dana Bash, and Steve Hayes, a writer for "The Weekly Standard". They're all part of the best political team on television.

Are the Obama people, those who see this economic crisis, Gloria, right now, as a potential game-changer, a real bonanza for Obama in this campaign, are they overly optimistic or is there something there? GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: They're not going to say that out loud, Wolf. Actually, what I'm hearing all day from Democratic strategists is fear that Obama is not going to take advantage of this in the way that he should.

Obviously the economy is the key issue out there. And there are people who say, look, it's not enough just to say that John McCain is more of the same. We all sort of understand that message. What Barack Obama now has to do is talk about how he would make your life better. How he would not privatize Social Security. How he would provide jobs. How he would not tax your health insurance. That's what Democrats are saying. He's got to do it. He did it in his convention speech, his campaign points out. They now say he's going to start doing more of that on a daily basis.

BLITZER: It's interesting, Steve, that early in the morning, as his first rally, John McCain basically repeated that remark that the fundamentals of the U.S. economy remain strong. He was immediately hammered by the Democrats. How can you say that? How out of touch can you possibly be with what's going on out there? And then he sort of -- he tried to clarify what he meant. Listen to the clarification.

(BEGIN VIDEO CLIP)

MCCAIN: My opponents may disagree, but those fundamentals, the -- the American workers and their innovation, those are the fundamentals of America and I think they're strong. But they are being threatened today. Those fundamentals are being threatened today because of the greed and -- and corruption that some engaged in, in Wall Street, and we have got to fix it.

(END VIDEO CLIP)

BLITZER: All right. Is that line going to work, Steve?

STEVE HAYES, WRITER, "THE WEEKLY STANDARD": No. I don't think it's going to work. Those are not the fundamentals John McCain was likely talking about when he said what he said this morning. I think he was talking about things like relatively low unemployment, you know, other numbers that would suggest that even if we're in -- headed towards serious trouble, we're not in serious trouble yet.

But the problem for, I think, McCain is that the comments he made fit the narrative that the Obama campaign is trying to put out to the country and to reporters. And, you know, they've been trying for weeks to say that John McCain is out of touch, that he doesn't get it. That he doesn't know anything about the economy. I think they're going to capitalize, as we've seen today, on a comment like this, which was sort of an unforced error, to try to pound John McCain about this going forward.

BLITZER: Dana, you've been out with Sarah Palin over the past couple of days. But you're in touch, obviously, with John McCain and his top aides, but a lot of them are with Sarah Palin, themselves, right now. How do they deal with this notion that the Obama people say he's out of touch, he doesn't know about the economy, he's said that over the past year or so, and that this is a serious problem moving forward?

DANA BASH, CNN CORRESPONDENT: Well, the line that we're going to hear from the McCain campaign is likely what we've heard, really, dating back to the Republican primaries when Mitt Romney said that John McCain doesn't have a clue about the economy. He's going to talk about his experience as chairman of the Senate Commerce Committee and so on and so forth. But on this issue that you and Steve were just talking about on McCain's statement this morning, that the fundamentals of the economy are still strong, following John McCain around, that is something that he has said many, many times before.

And as you heard him later in the afternoon, today, he tries to couch and explain what he means by that and then he quickly says, but, remember, times are tough and I completely get that. It is a balancing act that the McCain campaign is trying to do. They understand that they can't be too optimistic, but they also don't want to be too pessimistic. Because the fact that they think that's a bit of a turn- off for voters who are looking for people to feel their pain, but not be too pessimistic about it.

BLITZER: About 80 percent, correct me if I'm wrong, of the public in our polls show that the American people think that the country is moving in the wrong track right now, not the right track. That number could go up following this crisis.

Guys, stand by for a moment. We'll continue our conversation. >

For Barack Obama, campaigning right now in Colorado, we're standing by for his remarks. If he speaks this hour, we're hoping he will, we'll go there live to hear what he's saying about this growing financial crisis. >

Also, Democratic vice presidential nominee Joe Biden. He's getting tougher and tougher on his old friend, John McCain, giving him one particular nickname. >

And how confident are you about the future of our country? That's Jack Cafferty's question this hour. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's get right back to Steve and Gloria, also joining us, David Gergen, our senior political analyst.

We didn't get your thought, David. Is this a game-changer, this financial Wall Street meltdown, if you will. How it will play in these remaining 50 days.

DAVID GERGEN, CNN SR. POLITICAL ALNALYST: It's potentially a game-changer, Wolf. It's certainly going to change the direction of the conversation. We're not going to have much more lipstick on a pig anymore and all the trivial silliness that we've been going through over the last several days. Now, we're going to get to some real basics. Because this is the worst financial crisis we've had since the Depression. People are scared. They're scared about their investment, they're scared about their assets, their financial holdings.

So it potentially could be a game-changer in the Democratic favor. There is one potential irony here, and that is that in the time of real uncertainty, people may want to go with John McCain who they think may be less risky. But otherwise, other than that possibility, I have to say it's -- it would normally favor the Democrats because the team in power will get the blame.

BLITZER: Yes.

BORGER: And something I've heard, Wolf, and who knows if this is going to happen, but Obama was on the phone today with a lot of those Bill Clinton economic advisers who brought you a lot of prosperity in the '90s. So maybe Barack Obama would talk about appointing an economic team and maybe John McCain would do the same. But that's to kind of reassure voters that they're on top of this crisis because neither of these candidates are economic experts.

BLITZER: Because the former Treasury secretary, for example, Bob Rubin, Steve, he was widely considered to have done a pretty good job during the Clinton years over at the Treasury Department. I want you to weigh in on your thoughts on what's going on, Steve.

HAYES: Well, I think David is probably right. This could really be a gang game-changer to use the cliche of the day. It is one of these situations where, take all your papers, take everything in front of you and you throw them up in the air. And you look at the situation around us and if this truly is as bad as David and as Alan Greenspan have said in the past 24 hours, you could be looking at a political landscape that actually looks nothing like the one we were looking at 48 hours ago.

BLITZER: Joe Biden, David, is hammering away, even though he and John McCain have been close friends for 30-plus years or whatever. He's now saying that there was a Bush 41, a Bush 43, and John McCain is really Bush 44. Those are pretty biting words.

GERGEN: They are, and it's a clever line. But Joe Biden and Barack Obama intended to go hitting back today, regardless of what happened because they were -- McCain had the momentum and Sarah Palin had the momentum. And they had to get the conversation off of Sarah Palin.

Nobody foresaw this black Sunday this weekend that was so transforming. And now it is naturally shifting the conversation. It's giving them enormous ammunition. The question will become do they play their cards well? Do they play this well or does McCain play it better? Both sides are being tested at how well they adapt to these new circumstances and can persuade people that they truly understand not only what's going on, but they'll have the team, as Gloria says, to fix it.

BLITZER: I think those three presidential debates and one vice presidential debate that are coming up, Gloria, those could be decisive. BORGER: They are. Although, you know, the foreign policy debate comes up first, which is kind of interesting. Look, I think what John McCain has done is claim the reform mantle. He and Sarah Palin are saying they're going to cut waste, fraud, and abuse from the budget, et cetera, but that's not enough, right now, to solve the economic problems we have. The challenge, as David was saying, for Obama is to get very specific about what he would do to fix these problems and to make a difference in your life.

BLITZER: And the challenge, Steve, for John McCain is to make it clear to voters that when it comes to the economy, he's very different, has a whole different strategy than George Bush.

HAYES: Yeah. I've been perplexed by the Democratic attacks on John McCain as George W. Bush's next term four years. This is a guy that came up. We know him because he challenged George W. Bush in 2000. He's been on TV so much because basically he's not George W. Bush and he's challenged Bush's policies. So, it doesn't make any sense --

BORGER: Accept on the war.

HAYES: Didn't make any sense to me. The one area where it could actually succeed would be the economy if Barack Obama and his campaign are able to, as David says, associate John McCain with George W. Bush, with this economy and get voters to look at him and say, oh, it's the Republicans' fault.

BLITZER: All right, guys, we've got to leave it right there. Thanks, as usual. We'll continue this conversation. Let's check in with Lou to see what's coming up at the top of the hour.

What are you working on, Lou?

LOU DOBBS, CNN ANCHOR, LOU DOBBS TONIGHT: Today on Wall Street, what it means for working men and women and their families. Bush administration officials trying to reassure all of us that this economy remains sound, but is it? Three of the smartest economic thinkers in the country join me here tonight. >

Also, new questions about the willingness of our elected officials to protect Americans from the devastating consequences of Wall Street's greed. We'll have that special report.

And this presidential campaign gets nastier and nastier. Even Karl Rove is warning these candidates not to go too far. How about that? We'll be examining the role of lies, half-truths and distortions in this campaign with three of the best political analysts anywhere. Join us for all of that and more at the top of the hour right here on CNN. We'll have all of the day's news and much more with an independent perspective.

Wolf, back to you.

BLITZER: All right, Lou. Thanks, very much. Senator Barack Obama has just started speaking in Pueblo, Colorado. He's simply going through some thank yous right now. We'll take a quick break. When we come back, we'll hear what he's saying on this crisis that's going on. >

Also, we're real happy that Jack Cafferty is back with the "Cafferty File". He's going through your e-mails. How confident are you about the future of our country? That's his question. We'll be right back.

(COMMERCIAL BREAK)

BLITZER: Senator Obama's blasting John McCain for suggesting the fundamentals of the economy remain strong. Let's listen.

(BEGIN LIVE FEED, IN PROGRESS)

(APPLAUSE, CHEERING)

OBAMA: Because, Pueblo, I don't know about you, but I don't think there's anything more fundamental than it the ability to find a job that pays the bills. What's more fundamental than knowing that your life savings is secure? And that you can retire with dignity and respect? What's more fundamental than knowing that you'll have a roof over your head at the end of the day? What's more fundamental than making sure that you can send your child to college and that they can live out their American dream? There's nothing more fundamental than that. That's the measure of whether the economy is strong.

(APPLAUSE, CHEERING)

Now, Pueblo, I just want you to know, a few hours later after he said this -- this morning he said this. The economy -- the fundamentals are still strong. A few hours later, John McCain's campaign sent him back out to clean up these remarks because they thought well, maybe, that's not going to work out too well. So he explained that what he really meant to say was that American workers are strong. Now, come on, Senator McCain. We know what you meant when you said it the first time because you've said it before. You said it just a few weeks ago.

And your chief economic adviser, the man who wrote your economic plan, said that we are in a, quote, "mental recession". That this is all in our heads, that we're a nation of whiners. That's what he called you, a nation of whiners. This is the guy who has been advising McCain's campaign. And who, by the way, was the head of the Banking Committee and helped us get rid some of the deregulation on Wall Street.

Now, don't get me wrong. When Senator McCain says that American workers are the backbone of our economy, and that they aren't getting a fair shake from Washington, he'll get no argument from me. In fact, my attitude is it's about time he figured that out, because I've been making the case for 19 months.

(END LIVE FEED, IN PROGRESS) BLITZER: All right, so there you hear some of what Senator Obama is doing. He's railing against John McCain on this whole economic policymaking the point that John McCain has been in Washington - what, for some 26 years. And he says he hasn't done anything to strengthen the economy.

We'll continue to monitor Senator Obama's message. Jack Cafferty has got the "Cafferty Files." And he's back, as I've been saying.

Jack, tough words going back and forth from these candidates.

JACK CAFFERTY, CNN ANCHOR, THE SITUATION ROOM: The differences are so clear and yet the polls are so close. Makes no sense at all, to me.

The question this hour: How confident are you about the future of our country? Makes no sense to a lot of people that wrote to us either.

Cindy in North Carolina, "I'm scared to death. I'm so scared that my children will not have a real prosperous future. I'm saving for college but will my kids be able to get a job in the United States? I have them studying French and Spanish, because I don't know if my kids will be able to survive in the place where they were born and raised."

Beverly writes: "I will not be confident about the future of this country until after the election. I'm so afraid that the racism that permeates this election will make people vote for McCain just to keep an African-American out. You news people seem to be afraid to say this out loud. I as an African-American female know the signs. As bad as this economy is if a white man was running against McCain, it would be all over."

Kevin in Alaska writes: "If America's dumb enough to elect another "conservative", hands off, no regulation Republican who abuses the power of the presidency, we're screwed.

Mary in Maryland: "Americans are not as stupid as Washington seems to believe. Our economy is in grave dangers putting the global economy in dire straits. We can thank the greedy corrupt, got-to-have more corporate hogs and the politicians they lobby and buy."

Jane writes: "I've never been so frightened for myself, my family and my country. Bush just skates along and doesn't seem to understand what he's done or caused by his non-compliance with any of our rules or regulations. He's absurdly ignorant and has no conscience, whatsoever."

Ellison writes: "I'm very confident. Stop whining."

If you didn't see your email here, you can go to my blog at CNN.com/caffertyfile and look for yours there among hundreds of others.

BLITZER: All right, Jack, thanks very much. See you back here tomorrow.

Coming up, the hairdo, the eyewear, the accent. For those who just can't get enough of Governor Sarah Palin, here come the impersonators.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: She's a lady moose hunter, she will shoot a wolf from a helicopter What's up? Who got you, wolfy? That makes me think about Mr. Wolf Blitzer.

(END VIDEO CLIP)

BLITZER: Most unusual. That's coming up next. >

And candid pictures from the campaign trail. The theme of our "Hot Shots" for the Day. We'll be right back.

(COMMERCIAL BREAK)

BLITZER: Here's a look at some of the "Hot Shots" coming in from our friends at the Associated Press, pictures likely to be in your newspapers tomorrow.

In Golden, Colorado, Sarah Palin signs a photo for a supporter. In Grand Junction, Obama reaches through a chain-link fence to greet his supporters. Also in Colorado, a woman holds up her lipstick to show her support for Palin. And in Michigan, Joe Biden checks out a Ford Mustang at a Ford assembly plant.

Some of this hour's "Hot Shots". Pictures worth a thousand words.

If imitation is the sincerest form of flattery, Sarah Palin should be very pleased. John McCain's running mate has inspired all kinds of impersonators. Jeanne Moos has a "Moost Unusual" look at who's playing who.

(BEGIN VIDETAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice over): Try to pick out the real Sarah Palin amongst the imposters.

UNIDENTIFIED FEMALE: I'm Governor Sarah Palin.

UNIDENTIFIED FEMALE: I'm president of the world. We hope you'll mistake me for Hillary

GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: Tanks, but no thanks.

MOOS: Palin aides say that the real Sarah found the Tina Fey Sarah funny.

AMY POHLER, COMEDIAN: I don't agree with the Bush Doctrine.

TINA FEY, COMEDIAN: I don't know what that is. MOOS: The campaign said Sarah once dressed up as Tina Fey for Halloween. But no one needs a holiday to dress up as Palin, these days.

UNIDENTIFIED MALE: Susan, do you want to be my VP?

UNIDENTIFIED FEMALE: Yes, I'll be your VP.

MOOS: There are amateurs.

UNIDENTIFIED FEMALE: I'm Sarah Palin.

MOOS: And professionals, like actress Gina Gershon.

GINA GERSHON, ACTRESS: Like so many of you, I went to five colleges in six years to get my journalism degree. Barack Obama only went to one.

MOOS: There's gangster rap.

UNIDENTIFIED FEMALE (Singing) I'm a tough cookie, no one messes with me

MOOS: There's even a guy in drag.

UNIDENTIFIED MALE: No, I'm not running with the young black one. I'm running with the old one, Don McCain. We met twice.

MOOS: They mock the interview Governor Palin did on ABC.

UNIDENTIFIED FEMALE: Ahmadinejad is the president of Iran.

UNIDENTIFIED MALE: Do you have a cheat sheet on your hand?

UNIDENTIFIED FEMALE: This? This, Charlie, is the hand that has shaken John McCain's hand.

MOOS: They even mix in some of the real interview.

CHARLIE GIBSON, ABC NEWS: 70 percent of this country supports a ban on semi automatic assault weapons?

(UNIDENTIFIED FEMALE HOLDS UP A GUN.)

MOOS: Comedian Sarah Benincasa has done video blog after video blog pretending to be Sarah Palin.

BENINCASA: I just want to shoot a moose! I would so much less nervous if I could just kill something - not a baby.

MOOS (on camera): Is she easy to do?

BENINCASA: Yes.

MOOS: Why?

BENINCASA: I think it's because she's so distinctive.

I am a mother of -- five. Five!

UNIDENTIFIED FEMALE: She's like an interesting flavor of ice cream, like ham ice cream.

MOOS: Someone has even updated (INAUDIBLE) the "leave Britney alone rant"

UNIDENTIFIED MALE: Leave Sarah Palin alone!

MOOS: Don't hold your breath.

UNIDENTIFIED FEMALE: I'm Sarah Palin, and I approve this message.

MOOS: At least if you're going to be impersonated, it pays to be decked out in red, white and blue.

UNIDENTIFIED FEMALE: I've got some hunting to do.

MOOS: Jeanne Moos, CNN, New York.

UNIDENTIFIED MALE: Sarah Palin, if she shoots you in the face, it's because she was aiming for it.

MOOS: New York.

(END VIDEOTAPE)

BLITZER: People are going to have a lot of fun with this.

You can always check out our THE SITUATION ROOM screen saver and you can stay up to date on all the latest political news. Here's what you need to do. You can download it at cnn.com/situationroom. See you back here tomorrow. I'm Wolf Blitzer in THE SITUATION ROOM.

Up next, "Lou Dobbs Tonight"

DOBBS: Wolf, tonight, turmoil on Wall Street and what it means for working men and women and their families all across the country. We're joined by three of the smartest economic thinkers in the country.