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THE SITUATION ROOM

Massive Bailout Proposed; Candidates Focussing on the Economy

Aired September 19, 2008 - 16:00   ET

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


SUSAN LISOVICZ: Have a great weekend, Rick.
RICK SANCHEZ, CNN ANCHOR: All right thanks so much Susan and what a week it's been. Let's turn things over to Wolf Blitzer now in THE SITUATION ROOM to close things out for us. Wolf?

WOLF BLITZER, CNN ANCHOR: Have a great weekend, Rick. Thanks very much. Happening now, we're following breaking news. Stocks surge as the federal government hammers out details of a massive financial rescue plan. This hour, the multibillion maybe even trillion dollar question, will it work?

The presidential candidates respond to the newest effort to bail out Wall Street and your money. Are they calming voices in a time of economic crisis or are they going on the attack?

And it's your money at stake. Americans express their views on corporate rescues and regulation. And you can bet John McCain and Barack Obama are listening very, very closely. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

It's the most far-reaching financial rescue plan since the great depression. And it just got a big thumbs up from investors. As you just saw, the Dow Jones industrials closing up about 350 points just a few seconds ago. Today President Bush and his economic team announced a broad new plan to ease the widening crisis rocking the markets and the banking systems in all of our portfolios. It's likely to cost hundreds of billions of dollars. Details will be fleshed out in the immediate days ahead. The treasury secretary Henry Paulson says a bold approach is needed to rescue banks from billions of dollars in bad debt, much of it from the mortgage crisis. Emergency moves include temporary insurance for money market funds and a ban on so- called short selling, a trading method that bets on stocks going down. Let's begin our breaking news coverage this hour over at the White House. CNN's Elaine Quijano is standing by with more. We saw the president emerge from the oval office with his top advisers, Elaine. Give us the details of this new plan.

ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Wolf, as you know, first of all, the idea of more government intervention runs absolutely contrary to the core GOP principle of limited government. But today President Bush laid out in dire terms why he believes it's essential.

(BEGIN VIDEOTAPE)

QUIJANO (voice-over): The president bluntly spelled out how America's financial crisis could get even worse.

BUSH: Further stress on our financial markets would cause massive job losses, devastate retirement accounts and further erode housing values as well as dry up loans for new homes and cars and college tuitions.

QUIJANO: With top economic officials at his side, the president grimly conceded, confidence a critical ingredient in a healthy economy had been shaken.

BUSH: Investors should know that the United States government is taking action to restore confidence in America's financial markets so they can thrive again.

QUIJANO: Earlier treasury secretary Henry Paulson described the mammoth cost of that action, in what's expected to be an unprecedented bailout.

HENRY PAULSON, TREASURY SECRETARY: We're talking hundreds of billions. This needs to be big enough to make a real difference.

QUIJANO: The details have yet to be hammered out with congress but the aim is to soak up bad debt allowing banks to freely lend money once again.

BUSH: We will weather this challenge, too. And we must do so together.

QUIJANO: Just weeks away from the election, and amid criticism that his administration didn't do more to head off the crisis, President Bush urged congress to set aside partisanship.

BUSH: There will be ample opportunity to debate the origins of this problem. Now is the time to solve it.

(END OF VIDEOTAPE)

QUIJANO: Now aides here say the goal is to negotiate the administration's proposal that details of it with members of congress over the weekend. All of it, Wolf, of course, with an eye towards the markets reopening on Monday. Wolf?

BLITZER: Yeah, they'd like to hammer it out by Monday morning if possible. Elaine stand by, we're going to have a lot more on this plan that is emerging. Certainly the financial crisis is putting the presidential candidates and their economic policies to the test right now. John McCain focusing again today on corporate greed and abuse. Let's go to Dana Bash, she's covering the McCain campaign for us. What exactly did the republican nominee say about this crisis and his recommendations about what needs to be done?

DANA BASH, CNN CORRESPONDENT: You know, Wolf, remember an the beginning of the week McCain and even his advisers admit he kind of stumbled when this financial crisis exploded on Wall Street and obviously around the country and around the world. The name of the game for them today at the end of the week was for him to get back on his feet and that meant presenting his specific plan. (BEGIN VIDEOTAPE)

SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: I have proposed and will sign into law.

BASH (voice-over): A take-charge tone as John McCain tried to show what he would do as president to prevent another financial meltdown.

MCCAIN: Government has a clear responsibility to act and to defend the public interests. That's exactly what I intend to do.

BASH: At this hastily arranged address at a Wisconsin chamber of commerce, McCain called for a new government trust designed to step in before financial institutions reach crisis.

MCCAIN: An early intervention program to help financial institutions avoid bankruptcy, expensive bailouts and damage to their customers.

BASH: With a few exceptions, McCain spent most of his two decades in congress pushing for deregulation. Now, he wants the government to force financial firms to open their books.

MCCAIN: Americans have a right to know when their jobs, pensions, IRAs, investments and our whole economy are being put at risk by the recklessness of Wall Street.

BASH: Both here and later in Minnesota, McCain's strategy was as much about discrediting Barack Obama's credentials on the economy as presenting his own.

MCCAIN: Maybe just this once he could spare us a lecture and admit to his own poor judgment in contributing to these problems.

BASH: He started both speeches with blistering attacks on Obama for taking more than $100,000 from Fannie Mae and Freddie Mac and taking advice from two of Fannie's former CEOs, Franklin Raines and Jim Johnson.

MCCAIN: While Fannie Mae was betraying the public trust, somehow its former CEO had managed to gain my opponent's trust to the point that Senator Obama actually put him in charge of his vice presidential search.

(END OF VIDEOTAPE)

BASH: Now, the Obama campaign insists Raines is not and has not been an adviser to Barack Obama. McCain advisers insist that he has been. But regardless, Wolf, the fact that McCain actually spent as much if not more time hitting Obama and trying to tie him to the players in Washington that have been involved in this crisis really seems to be proof that they are worried inside the McCain campaign that as the economy gets worse, as news of this financial crisis really seems to take hold, that the American people and the voters will want that change that Obama has been talking about and not another republican in the White House.

BLITZER: But Dana, the Obama people point out that some of McCain's closest advisers are former lobbyists themselves for Fannie Mae and Freddie Mac. Is that true?

BASH: That is an accusation that the Obama campaign is putting forward. I think they put out a list of 16 or 17 people who are involved with the McCain campaign who had lobbied for Fannie Mae. But the McCain campaign says it's one thing to be a lobbyist for Fannie Mae, there are lots and lots of those in and around Washington, but it's another thing to be the CEO of that organization and that's what Jim Johnson and Franklin Raines were.

BLITZER: All right, thanks very much. Seems both of these candidates have close ties at least some of their advisers do to the Fannie Mae and Freddie Mac operations. Barack Obama took a cautious tone about the federal government's financial rescue plan and he warned everyone against pressing the panic button. Let's go to Suzanne Malveaux, she traveled with Obama to Coral Gables, Florida today where he was on the offense. What did he have to say about this crisis that's underway right now, Suzanne, and what needs to be done? His reaction to what the Bush administration is proposing?

SUZANNE MALVEAUX, CNN CORRESPONDENT: Well, Wolf, he emerged from this 90-minute meeting really with an economic brain trust, we're talking about former treasury secretaries Robert Rubin, Paul O'Neal, Lawrence Summer, the former fed chair Paul Volcker and many others, even billionaire Warren Buffett was on the phone. But when he finished his meeting, he did not emerge with some specific economic plan or even a reaction to what we saw from the Bush administration. I talked to several members of his economic team and he said they advised him against it. They said that there are more questions than answers at this time. So what we heard from Barack Obama today was about principles and this general need for greater economic stimulus.

(BEGIN VIDEOTAPE)

SEN. BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: This isn't a time for fear or panic. It's a time for resolve and it's a time for leadership.

MALVEAUX (voice-over): Barack Obama's rallying cry responding to the financial crisis. In Coral Gables, Florida, he continues to present himself as the optimist. His opponent John McCain as spooked.

OBAMA: I think it's pretty clear that Senator McCain's a little panicked right now.

MALVEAUX: Seven weeks before the election. Obama is supportive but cautious of the federal government's huge proposed intervention to save the financial markets.

OBAMA: What we're looking at right now is to provide the treasury and the Federal Reserve with as broad authority as is necessary to stabilize markets and to maintain credit. MALVEAUX: But Obama refused to provide more than that saying he needed more details about the government's plan. Casting his response as staying above the political fray.

OBAMA: I think it's critical at this point that the markets and the public have confidence that their work will be unimpeded bipartisan wrangling.

MALVEAUX: Surrounded by his team of economic advisors who he huddled with earlier in the day. Obama rebuffed the notion that while McCain was providing specific solutions, he was sitting on the sidelines during this financial crisis.

OBAMA: You don't do it in a day. We've got to do it in an intelligent systemic thoughtful fashion.

MALVEAUX: Obama reiterated that under any bailout plan of his, he would push for tougher regulation and government oversight of financial institutions, expand the middle class and work with other industrialized nations to restore confidence in the markets. It's estimated the current financial crisis could initially cost taxpayers a trillion dollars.

If you were president, would you set a limit, a cap per se on the kind of burden that taxpayers would have in bailing out these financial institutions?

OBAMA: As president I would say to Secretary Paulson and Chairman Bernanke, do what's required to make sure that people's money market accounts are protected.

(END OF VIDEOTAPE)

MALVEAUX: Wolf, he also said do what's required to make sure that small businesses have a credit line, to make sure that the economy is running, that people are working and can support their families. Obviously Wolf, the big question is what is required? They just don't have that answer just quite yet. Wolf?

BLITZER: Suzanne is in Coral Gables, Florida, that's a key battleground state for us. Stand by, Suzanne.

Obama's speech in Coral Gables was interrupted at one point by a group of African-American protesters in the upper deck of the basketball arena. They chanted and waved signs including some that said "Blacks against Obama." Listen to this.

(BEGIN VIDEO CLIP)

OBAMA: Hold on, hold on, hold on, everybody. Hey, young people out there, it's no problem for you to put your signs up, but let everybody -- let me finish what I have to say. All right? Come on, guys. All right.

(END OF VIDEO CLIP) BLITZER: After Senator Obama said the demonstrators could stand and hold their signs, they still didn't stop yelling. So they were escorted out of the arena. Let's go to Jack Cafferty, he's got to the Cafferty file. Not exactly sure why they were protesting but they were protesting and it ended peacefully. Go ahead, Jack.

JACK CAFFERTY: I guess they didn't like him. When you graduate 894 in a class of 899, eventually it will show up. And John McCain's mediocre performance at the naval academy is showing up big-time this week. It is total lack of understanding of the nation's financial crisis. He told us he didn't know much about the economy. Now he's proving it. So much so that "The Wall Street Journal" perhaps America's leading financial publication is blasting McCain in an editorial, the editorial board sees as inaccurate and "un presidential comments that McCain has made about the crisis in America's financial system." If you're a republican running for president of the United States and "The Wall Street Journal" basically characterizes you as an incompetent buffoon, you're in serious trouble. Specifically, "The Journal" pointed to comments McCain made yesterday about SEC chair Christopher Cox. McCain pointed the finger of blame at Cox, said if he were president quote, "He would fire him for betraying the public's trust." "The Wall Street Journal" called that assault "both false and deeply unfair." The "Journal" also said, quoting again, "In a crisis, voters want steady, calm leadership. Not easy misleading answers that will do nothing to help." Unquote.

Here's the question. What does it mean when "The Wall Street Journal" slams John McCain on the economy? Go to cnn.com/caffertyfile. You can post a comment on my blog. It's probably worth noting "The Wall Street Journal" is owned by Rupert Murdoch, who has been a long- time republican supporter in almost all of the media outlets he controls. So this is particularly I think significant.

BLITZER: Yeah that's true. But it's also true that that editorial page for a long time has really been a strong bastion of conservative economic thought. And you're absolutely right, for them to blast McCain as they did today, that's pretty significant, Jack.

CAFFERTY: I think it is.

BLITZER: Thanks very much, Jack Cafferty will be back.

The economy is issue number one in some of the newest presidential campaign ads, as well our own Howie Kurtz is checking the spots and whether the candidates are getting their facts straight.

And the senate banking committee chairman Senator Chris Dodd is standing by live. I'll get his reaction to the massive new financial rescue plan and whether he and his fellow democrats share the blame for the current crisis. I'll ask him if he supports what the Bush administration is now doing.

And John McCain isn't necessarily known for his online expertise, but he has a supporter who is and he's going viral. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: More on the breaking news we're following right now in the wake of the financial turmoil that's seizing Wall Street and Main Street, the economy, of course, remains issue number one and it's center stage in the campaign ads from both the Obama and McCain campaigns. Howard Kurtz of CNN's "Reliable Sources" is fact checking the latest accusations being hurled about. Howie?

HOWARD KURTZ, CNN'S RELIABLE SOURCES: Wolf, as they tar and feather each other on the struggling economy, John McCain and Barack Obama are now taking aim at each other's advisors.

(BEGIN VIDEOTAPE)

KURTZ (voice-over): Obama now has two juicy targets, close McCain aides who have stepped out of the spotlight because of controversy.

OBAMA CAMPAIGN AD: Carly Fiorina, the fired CEO who got a $42 million golden parachute, Phil Gramm, the ex-senator who pushed through deregulation and called Americans hurt by this economy whiners.

KURTZ: That's true. Fiorina was forced to resign at Hewlett- Packard and got a huge severance package. Gramm championed a law loosening barriers between banks and insurance companies that was also believed signed by President Clinton. Gramm did recently call America a nation of whiners complaining about a mental recession. But one line in Obama's ad distorts something that McCain said this week.

OBAMA CAMPAIGN AD: They think the economy's fundamentally strong.

KURTZ: What McCain actually said was.

SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: The fundamentals of our economy are strong.

KURTZ: That's a key distinction since the underlying system can be strong even as Wall Street is reeling. A McCain ad, meanwhile, tries to link Obama to a former chief executive of the mortgage giant Fannie Mae.

MCCAIN CAMPAIGN AD: Who advises him? The post says it's Franklin Raines for advice on mortgage and housing policy. Shocking. Under Raines Fannie Mae committed extensive financial fraud. Raines made millions. Fannie Mae collapsed.

KURTZ: Raines did tell "The Washington Post" in April that he was offering some advice to the Obama campaign. Now he and the campaign are denying any such role. So today McCain unveiled a new ad aimed at another former CEO of Fannie Mae, Jim Johnson.

MCCAIN CAMPAIGN AD: Fannie cooked the books and Johnson made millions. Then Obama asked him to pick his VP and raised thousands for his campaign.

KURTZ: That's true and Johnson gave up his role vetting vice presidential nominees over controversy about his own home loans.

(END OF VIDEOTAPE)

KURTZ: It's the age-old tactic of guilt by association. Whether the voters really care about advisers who are hardly household names remains to be seen. Wolf?

BLITZER: Howie, thanks very much. Howie's going to have a lot more on all the latest political news in the news media on "Reliable Sources" that airs Sunday morning 10:00 a.m. eastern right before "Late Edition."

An online video from a John McCain supporter is getting a huge amount of views on YouTube. Our internet reporter Abbi Tatton is joining us now with more. It's sort of extraordinary isn't it Abbi?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, we've gotten so used to these videos supporting Barack Obama getting millions of views on YouTube, well now they've got some competition. This video is called dear Mr. Obama featuring a young veteran spelling out why he supports the Iraq war and the republican ticket.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I'm supporting Senator John McCain for president. He too made a huge sacrifice promoting freedom because he understands the fundamental truth. Freedom is always worth the price.

(END OF VIDEO CLIP)

TATTON: That's army specialist Joe Cook from Illinois who lost his lower leg in Iraq as you can see when he walks away from the camera. He appeared in this video after being approached by a local filmmaker Michael Brown, a registered republican who says he made this separately from the McCain campaign with no contact with them. I spoke to Joe's father earlier today. He said he was surprised when this got 600 views. Now it's at more than 8 million pushed on republican conservative blogs and conservative talk radio. The website that tracks this kind of things wonders if this is the GOP's first viral video. Wolf?

BLITZER: Thanks very much Abbi for that. Amazing what's going on on YouTube right now. We're making some significant changes to CNN's Electoral College map . Between McCain and Obama you're about to find out who might benefit and who should start worrying right now.

As Washington prepares a Wall Street bailout, what's Main Street thinking about throwing them a lifeline? Lots of news happening today right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Carol Costello is monitoring some other important stories incoming to THE SITUATION ROOM right now. Carol, what's going on? CAROL COSTELLO: Wolf, U.S. negotiators are headed to Iraq to try to draft the terms of an agreement for American troops to remain in Iraq once the U.N. mandate expires. The U.S. and Iraq are unable to agree on whether U.S. troops and contractors would be subject to Iraqi law while in the country. Washington wants immunity.

North Korea says it's preparing to restart a key nuclear reactor. It had dismantled most of the reactor but stopped after six nation talks stalled last month. The U.S. wants North Korea to effect a plan to verify claims about its nuclear program before it takes the country off a list of states that sponsor terrorism. North Korea says this amounts to forced inspections.

A week after hurricane Ike, power is still out in more than half of Houston as thousands are still unable to return to Galveston where water and power are spotty at best. 20,500 people remain in shelters. Authorities blame 57 deaths on Ike, 23 in Texas. That's a look at the headlines right now. Wolf?

BLITZER: All right Carol, stand by. We're going to get back to you shortly.

It's going to cost all of us billions and billions and billions of dollars, maybe a trillion dollars when all is said and done. But will the federal government's financial rescue plan do what it's supposed to do, namely ease all the pain and the panic that's out there?

The taxpayers are of course preparing to foot the bill. How is the Wall Street rescue playing on Main Street? What it means for all of us. Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM. Happening now, Senator McCain's running mate takes a direct swipe at democrats saying some of them are putting politics over country. But is Sarah Palin also in the process taking a direct swipe at Hillary Clinton? You're going to hear what Governor Palin said and then you'll be able to decide. Some people in Alaska say Governor Palin's husband has a lot more power and influence in state affairs than people know about. Is that true? We'll go there.

And Saudi Arabia's top cleric wants death to the cartoon character Mickey Mouse. Why? And why is he calling for death to some satellite station owners in the Middle East. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

It's the largest proposed financial market intervention by the federal government since the great depression. More now on our breaking news story. The Bush administration proposing a plan to ease the current financial crisis. The Treasury Secretary Henry Paulson saying a bold approach is needed right now to rescue banks from billions and billions of dollars in bad debt.

Emergency moves include temporary insurance for money market funds and a ban on so-called short selling. Administration officials will huddle all weekend to try to come up with a plan.

Let's go to our Christine Romans. She's working this story for us, watching it.

A lot of people are hoping this plan, and assuming it's done and Congress approves it, will restore confidence, and we can all go back to sort of business as usual.

What are you hearing? What are you seeing, Christine?

CHRISTINE ROMANS, CNN CORRESPONDENT: Well, a lot of folks are saying they are hoping this is the seminal moment of this entire crisis, that this is the thing that's going to turn things around, rebuilding confidence in the American financial system.

Make no mistake, Wolf. This is a sweeping rescue, a bailout that surpasses anything we have seen. We need to know more of the details. We will hear more about the details in the next coming days. But so far Wall Street seems to like it, and many are cautiously calling it the beginning of the beginning of the end.

BLITZER: It doesn't necessarily mean that the economy...

(BEGIN VIDEO CLIP)

DIANE SWONK, SENIOR MANAGING DIRECTOR AND CHIEF ECONOMIST, MESIROW FINANCIAL HOLDINGS, INC.: (AUDIO GAP) ... much better in 2009. And there is a light at the end of the tunnel, and it's no longer a train.

(END VIDEO CLIP)

(LAUGHTER)

ROMANS: No longer a train. We need to know more, but the idea of taking the toxic investments off the books of the banking system is a purge that many are saying, Wolf, is -- is just critical to restoring confidence.

And you mentioned banning short selling and protecting money market mutual funds. Those two also moves help -- Wolf.

BLITZER: Diane Swonk, among other economists, says it's going to get worse, though, before it starts getting better. I'm referring to the economy.

ROMANS: Sure.

BLITZER: Is that right?

ROMANS: That's right.

And there is little doubt that there are job losses ahead and there will be some difficulty to get through. A lot of folks saying don't expect a quick turnaround in the housing market either. Housing prices will still keep going lower for the near term. And this sweeping deal might not even prevent more bank failures.

(BEGIN VIDEO CLIP)

MARK ZANDI, MOODY'S ECONOMY.COM: This has three innings to go. It's going to be painful. We have got, I think, a tough economy ahead of us. But I think the worst in the financial markets is over.

(END VIDEO CLIP)

ROMANS: In the financial markets, but not necessarily the economy.

Now, the federal government is using everything in its power. And, frankly, Wolf, the federal government is inventing some new powers to blunt this crisis. The Treasury and the Fed simply must get confidence back into the banking system to unfreeze lending and get the oxygen flowing back to the American economy.

BLITZER: Easier said than done.

ROMANS: Right.

BLITZER: But they're trying.

Christine, thanks very much.

Amid the bailout and after the bailout, the cost to American taxpayers rapidly going up and up and up. With the government rescuing everything from investment banks to government-sponsored mortgage giants, to an insurance giant -- giant, to private companies, the tally could cost about $1 trillion. Let me repeat that, $1 trillion.

So, what do you think about that?

Our senior political analyst, Bill Schneider, is joining us now. He's looking into this.

How are the presidential candidates responding to all of this, Bill?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, they're trying to keep up with fast-changing events.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Barack Obama and John McCain agree; the problem is greed.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: We're going to reform the way Wall Street does business and put an end to the greed that has driven our markets into chaos.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: CEOS got greedy. Lobbyists got their way. Politicians sat on their hands until it was too late. SCHNEIDER: What can the government do about greed? Not much. But it can try to curb bad behavior. How? Regulation.

By nearly 2-1, the public favors significantly increased regulation of Wall Street. So, guess what? Both candidates favor it, too.

OBAMA: It's time to get serious about oversight. It's time to get serious about real regulations that are going to prevent the kind of mess we're seeing right now.

MCCAIN: Our regulatory system must protect consumers and investors by punishing individuals who engage in fraud, break contracts, or lie to customers.

SCHNEIDER: Obama argues, he has a stronger record on regulation than McCain does.

OBAMA: When I was warning about the danger ahead on Wall Street, months ago, because of the lack of oversight, Senator McCain was telling "The Wall Street Journal" -- and I quote -- "I am always for less regulation."

SCHNEIDER: Oh, yes, says McCain?

MCCAIN: Two years ago, I warned this administration and Congress that regulations for our home loan agencies that you know of and barely heard of, Fannie Mae and Freddie Mac, needed to be fixed.

SCHNEIDER: So, which candidate do voters believe would do a better job handling the problems on Wall Street? They don't know. They can't see a lot of difference.

(END VIDEOTAPE)

SCHNEIDER: And when asked whether they favor or oppose the government rescue of the American Insurance Group, voters are split right down the middle over that as well -- Wolf.

BLITZER: Bill Schneider with the numbers for us -- thank you, Bill.

The chairman of the Senate Banking Committee, Democrat Chris Dodd, he is standing by live. We're going to be speaking with him in just a moment. Does he expect to sign off on this financial rescue plan sketched out by the administration today? Guess what. I will ask him. Stand by for that.

And, in these tough economic times, Senator Barack Obama is turning to former members of Bill Clinton's presidential economic team. The wisdom of that, we will assess in our "Strategy Session."

And later, anger after Hurricane Ike in Texas. People in Houston are still suffering, and a lot of people, including a U.S. congressman, are very, very angry right now.

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

(COMMERCIAL BREAK)

BLITZER: President Bush says the federal government must act now, has no choice but to act right now, to protect the nation's economic health from serious risk.

But the plan is likely to cost -- could cost hundreds of billions of dollars. That's the estimate we heard from the treasury secretary, Henry Paulson, earlier today. A lot of people are eager to see all the fine print, especially the chairman of the Senate Banking Committee, Democrat Chris Dodd of Connecticut.

He's joining us live.

Senator, you have got your hands full right now. Before we get into the specifics, describe the mood last night when you heard the potential dire consequences of what we're talking about now, if the federal government were just not to do anything. What were you told would happen?

SEN. CHRISTOPHER DODD (D), CONNECTICUT: Well, I'm going to be reluctant to repeat exactly the words, not because I can't remember them, but, because, if you were to repeat them exactly, I'm fearful it might cause even more concern.

I can't begin to tell you. I have been here for 28 years, Wolf, been in a lot of very critical meetings involving a lot of important events over the last quarter-of-a-century. I can't recall another occasion when I was in a room where statements were made about the conditions of not only our economy, but the global economy, that caused every member in that room, the leadership of the House, the Senate, Republicans, Democrats, leaders of committees, that, when Chairman Bernanke finished his appraisal, a brief appraisal, along with Hank Paulson, there was dead silence in the room for maybe five to 10 seconds.

The oxygen went out of the room. People were stunned by what they heard. And I'm angry about this, because I think this was preventable, I will tell you, but we're not going to talk about that today, because the issue is, what do we do?

And I'm willing to step up and join with my Republican and Democratic colleagues, which we must do, 45 days before the most important national election in my lifetime, and come together, not as Republicans, Democrats, blue, red states, but as Americans responding to this. I'm willing to listen to this plan. I'm not buying into it without seeing it.

I want to make sure that we do this, that we're going to be mindful of the underlying cause of this problem, Wolf. And that is, of course, as was said last evening and again today by the secretary and the chairman of the Federal Reserve, the housing foreclosure crisis.

BLITZER: All right. DODD: So, we're going to deal with the effects of this, but we need to deal with the causes as well, so we don't have to come back again with some even larger plan down the road.

BLITZER: This is going to cost hundreds of billions of dollars, maybe even a trillion dollars. Who knows what it's going to cost.

Don't you think the American people have the right to know what you and your fellow members of Congress were told last night about the dire consequences of doing nothing?

DODD: Well, again, I'm telling you how dire it was without, without getting into the specific wording.

Let me also tell you this, Wolf. You know, I think America, I wish they, in a sense, could have been in the room, in many ways, not only to hear the dire consequences, but to also hear members of Congress, Republicans and Democrats, putting aside differences.

And whatever else was raised about the specifics of it, virtually every member in that room said they wanted to help, they wanted to be part of this. They realized too much was at stake not to work together.

BLITZER: So...

DODD: And I know that's not often said about us here, but that was the case.

BLITZER: Well, let me -- let me -- so, do you think, within the next few days, maybe even by Monday morning, you, the Democrats, the Republicans, and the Bush administration, working with Henry Paulson, you will have a package ready to be approved?

DODD: Yes, I do.

And we will have -- I -- on Tuesday morning, I had already scheduled -- and I think you were aware -- a hearing with Hank Paulson, Ben Bernanke, and Chris Cox before my committee, the banking committee. My committee has already met today, this morning, early this morning. Democrats and Republicans came together on our committee to talk about all of us being on the deck here over the weekend to do whatever we can to work, to listen to these ideas, make our own suggestions to this plan, to try and make it as strong a plan as we can to do the job it needs to do, have our public hearing on Tuesday, and then follow the leadership of Harry Reid, as he will try and move this matter along during the week, before we adjourn at the end of next week.

BLITZER: Do you have confidence, Senator, in the leadership of the Bush administration, specifically the president, Henry Paulson, Ben Bernanke, the chairman of the Federal Reserve, Chris Cox, the chairman of the SEC? Do you believe in them right now?

DODD: Well, I have -- pay great deference to the presidency of the United States. Let me say that I have confidence in Ben Bernanke. I have confidence in Hank Paulson. I have got to be honest with you, Wolf. I have been disappointed by the lack of presidential leadership on this. We were meeting up here last night.

Why weren't we meeting at the White House? Why didn't the president call down the leadership and take ownership of this problem in many ways? He's been the president for eight years. I'm told that the economic advisory panel hasn't met once since March, on March 16, when Bear Stearns broke down. Where has the president been on this issue?

Hank Paulson and Ben Bernanke and Chris Cox -- I have had arguments with Chris over the naked short selling issue, but, by and large, I think the secretary of the treasury and Ben Bernanke are doing the best they can under the circumstances.

BLITZER: Here's what Senator McCain said, because he pins a lot of the blame on Congress. And I want you to listen to what he said earlier. Listen to this.

(BEGIN VIDEO CLIP)

MCCAIN: Two years ago, I called for reform of this corruption at Fannie Mae and Freddie Mac. Congress did nothing. The administration did nothing. Senator Obama did nothing, and actually profited from this system of abuse and scandal.

(END VIDEO CLIP)

BLITZER: All right. Those are pretty strong words from your friend, John McCain.

DODD: Yes.

BLITZER: Go ahead and respond.

DODD: Well, you know, Wolf, I feel badly for John, in a way.

He's been up here for 22 years, and not on the committee of jurisdiction in these matters. But, as I'm sure he will recall, Mike Oxley, Republican member of the House, he and Barney Frank wrote a very good bill on Fannie and Freddie back in '05, which Paul Sarbanes, the former Democratic leader of the Banking Committee, offered, which we supported, the administration opposed. We never could bring it up.

Now, John McCain has got selective memory when it comes to these issues. But let me pause there, because, look, this is too big a crisis. You ought to have a good show one day and go back. I have got some strong feelings on how this happened over the last eight years. John was a part of the majority for the last 14 years up here. But we ought to talk about what we need to do now.

I'm grateful Barack Obama has come out with a very responsible statement and endorsing and supporting the idea that we need to do something this week on this issue. That's where our attention needs to be. Put the politics aside for a few days. America's future is at risk by the actions we take or don't take in the next -- in the next week or so. And we don't need to go back and to listen to the acrimonious talk of John McCain right now.

BLITZER: Senator Chris Dodd is the chairman of the Banking Committee.

Good luck, Senator. A lot of people are counting on you and your colleagues and everyone else to get the job done. Appreciate it.

DODD: We're going to get it done, Wolf. I have a lot of confidence in my colleagues.

BLITZER: All right, thanks very much, Chris Dodd joining us from Capitol Hill.

Up next, we're going to get, later here in THE SITUATION ROOM, a different perspective on the financial crisis and its impact on the presidential race. Republican Senator Jon Kyl of Arizona, he is the minority whip, the number-two Republican in the U.S. Senate. He will be here. He will be joining us with his perspective on what is going on.

Also, in our "Strategy Session," McCain is calling out Obama over the mess on Wall Street.

(BEGIN VIDEO CLIP)

MCCAIN: This morning, I laid out my plan to solve these problems and grow our economy. About the same time, Senator Obama said that he isn't going to offer a plan.

(END VIDEO CLIP)

BLITZER: But as both sides trade jabs, is now the time for politics as usual?

And we have new polls from key battleground states we're about to share with you. We're only moments away from updating the CNN Electoral College map. There have been some changes.

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

(COMMERCIAL BREAK)

BLITZER: With so many Americans hurting in this economy, a lot of people are stressing a bipartisan effort to try to ease the crisis. And, while the presidential candidates certainly echo the same, their campaigns continue to slam each other over the economy.

Let's get to our "Strategy Session" right now.

Joining us, our CNN political contributor Donna Brazile. She's a Democratic strategist. And former Newt Gingrich spokesman Tony Blankley, he's also with Edelman P.R., a public relations firm.

Guys, thanks very much for coming in.

Is it smart, Tony, for Barack Obama to say, you know what, I'm going to wait and see where this settles before coming up with a specific plan, because McCain is sort of hammering him for not coming up with a plan, whereas McCain came up with some specific details right now? In other words, what should these two presidential candidates be doing?

TONY BLANKLEY, FORMER NEWT GINGRICH SPOKESMAN: Well, it may in fact be substantively reasonable to wait, and not leap out of the box.

On the other hand, he doesn't look too decisive. McCain, on the other hand, after starting out with his faux pas about the economy...

BLITZER: The fundamentals of the economy.

BLANKLEY: The fundamentals, or at least as it was quoted, he then, I think, in recovering from that, looked very decisive, had his plan out.

And, so, I have to say, I think both of them looked smaller than Paulson and Bernanke this week. But I think that, between the two of them, having a plan and seeming to be decisive probably is more useful than not.

BLITZER: Is that the better political strategy? What do you think, Donna?

DONNA BRAZILE, CNN POLITICAL ANALYST: Well, first of all, Senator Obama has a plan. He outlined it yesterday, when he talked how his economic plan will improve the lives of working people. I can give you all of the details.

But I thought what Senator Obama today did was set the right tone. He's trying to elevate the discussion, so that we can really come up with a bipartisan solution. We have a lot of blame to go around, Wolf, but I think what Senator Obama tried to do today, in speaking after he heard from the president and Secretary Paulson, was to elevate this conversation, and tell the American people that, once the treasury secretary put out a plan...

BLITZER: All right.

DODD: ... it goes on Capitol Hill, he will respond.

BLITZER: And Jim Acosta is working this story. He's going to have more on it.

But I want to show -- put up on the screen right now some videotape from Senator Obama earlier today. He was announcing his reaction to all this economic turmoil. And take a look at who -- who was surrounding him. If you -- if you know who those people are, it's -- it's very clear that all of -- almost all of those people -- there's Larry Summers, Laura Tyson -- there, you see Obama. That's Bob Rubin, the former treasury secretary. Gene Sperling is standing next to them. Tony Blankley, what do those people have in common?

BLANKLEY: Well, they're all Clinton economic advisers and appointees.

I think what -- what comes out of this week, interestingly, is probably that experience counts, whether it's the experienced Paulson or the experienced Bernanke, or whether it's Obama turning to the experienced Clinton team. Experience, see, we can now -- this week, we notice, gee, it's nice to have people around who have worked at these problems for years and have some sense of how to get things done, as opposed to change.

So, in a weird way, the nastier things are, the more the idea of experience, which is, of course, McCain's general advantage, not particularly on the economy...

BLITZER: Because -- Donna, because when I saw all those Clinton officials, whether it was Gene Sperling or Laura Tyson or Larry Summers, the former treasury secretary, Bob Rubin, I said, you know what? He wants people to remember the good economic times in the '90s, when Bill Clinton was president. There was a budget surplus. The economy was booming, 25 million new jobs created.

And, so, he brings in all the Clinton folks, and basically indicates, you know what? If you elect me, they're coming back with me.

Is that -- was what you thought?

BRAZILE: Absolutely.

(CROSSTALK)

BRAZILE: Look, I -- first of all, they're the architects of one of the best decades we had in memory, 22 million jobs created, a record number of people employed in this country, a record number of Americans leaving the poverty line. So, there's nothing wrong with surrounding yourself with people like that.

But he also had on the Paul Volcker, Warren Buffett, Paul O'Neill. It was bipartisan. Senator Obama is willing to listen to everybody.

(CROSSTALK)

BLITZER: But, as they say, a picture is worth 1,000 words.

BRAZILE: And that's a good picture...

(LAUGHTER)

BLITZER: Yes.

BRAZILE: ... because that's about jobs and -- and listening to people who know their way around Washington as well. BLITZER: Thanks, guys. Thanks for coming in.

BLANKLEY: Thanks.

BRAZILE: Thank you.

BLITZER: Some stories we're working on in THE SITUATION ROOM right now: Sarah Palin delivers a tough message to Iran. But why is she no longer welcome at an anti-Ahmadinejad rally in New York on Monday? This is a little complicated, but we will explain and you will hear from her.

And how did video of Bill Maher end up on the Web site of one of the most influential Muslim leaders? Abbi Tatton has that story. I think you're going to want to see it -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: And this just coming in on our "Political Ticker" into THE SITUATION ROOM: big changes in CNN's Electoral College map that suggest this presidential race is tightening.

Based on the latest state-by-state polling, CNN is now moving Missouri and its 11 electoral votes from a yellow tossup state to light red. That would mean leaning McCain. And Wisconsin and its 10 votes moved from light blue, leaning Obama, that is, to a tossup, plus for Obama, changing Oregon from leaning Obama to solid blue, safe for Obama.

The changes in Wisconsin and Missouri cut Obama's electoral lead almost in half. If the election were held today, CNN estimates that Obama would get 223 electoral votes to 200 for McCain. Remember, 270 are needed to win the White House.

Remember, for all the latest political news any time, check out CNNPolitics.com.

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

JACK CAFFERTY, CNN ANCHOR: The question this hour is, what does it mean when "The Wall Street Journal" slams John McCain on the economy? A blistering editorial in one of America's leading financial publications excoriating Mr. McCain for, among other things, making unpresidential statements during a time of financial crisis.

Marty writes: "It means that traditional Republican organizations are trying to separate themselves from McCain, just as McCain is trying to separate himself from Bush. The only question that leaves is, why? My guess is because they are smart enough to look down the tracks and see the train wreck that is coming."

Marjorie in New York says: "I will get back to you, Jack, after I am finished jumping up and down. 'The Wall Street Journal,' and then Obama looking so presidential today at the press conference, I can't stop screaming for joy. McCain's goose is so cooked."

Tiffany writes: "It means 'The Wall Street Journal' is sick of McCain's off-the-cuff meaningless remarks. McCain has no ideas of his own. He hijacked Obama's change theme. Now he's trying to hijack his economic plan. His slogan ought to be 'What Obama said.'"

Joe in Florida writes: "It means someone's mask is coming off over a month before Halloween, instead of a few hours afterwards. Thanks to 'The Journal' for ringing some bells that hopefully will wake up voters before November 4."

John in Colorado writes: "When the conservative 'Wall Street Journal' takes a Republican presidential candidate to the woodshed over his economic comments, he has to be mired pretty deep in the mud. It is unbelievable any candidate running for president of the United States could be this ill-informed or this poorly-advised."

And Jan writes, "It means they are not going to be referred to as 'my friends' anytime soon."

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

BLITZER: Thanks, Jack.

And, to our viewers, you're in THE SITUATION ROOM.

Happening now: the plan for a massive government bailout of Wall Street the hot topic out on the campaign trail. The candidates discuss their plans. And we're looking at how much all of this is likely to cost us.

Also, some call him Alaska's shadow governor. That would be Todd Palin. The surprising role and tremendous influence in his wife's administration, we're looking into that.

And Mickey Mouse, would you believe some are calling him Satan's agent? A Muslim cleric puts a death sentence on America's most beloved Disney character.

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