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THE SITUATION ROOM
$700 Billion Bailout: White House, Congress Make New Progress; John McCain Seeks Oversight for Federal Bailout; Barack Obama Lays out Economic Reform Proposals
Aired September 22, 2008 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, CNN ANCHOR: Happening now, Wall Street's relief gives way to anxiety, deep anxiety, as Congress tries to put its stamp on the $700 billion bank bailout. This hour, the breaking news from the markets and from Capitol Hill.
John McCain demands more oversight of the government's financial rescue operation, and Barack Obama counts the ways he tried to bring about economic change.
And your money and your vote. We have new evidence that the economic crisis is making an impression on Americans' presidential choices. We'll tell you how.
I'm Wolf Blitzer. You're in THE SITUATION ROOM.
We're reporting today from the CNN Election Center in New York. This hour, three epicenters of America's financial crisis: Wall Street, Washington, and the presidential campaign trail.
There's breaking news here in New York, a volatile day for the markets as investors anxiously wait to see a final version of the $700 billion bank bailout plan. The Dow Jones Industrials closing just seconds ago, about 370 points down.
Only moments ago -- we're watching this -- at one point, oil prices spiked more than $25 a barrel in trading today. That was a record. We're going to have more on that coming up. Ali Velshi is standing by.
And we'll also hear from the presidential candidates. The bailout is issue #1 for them right now, as well.
In the nation's capital, there's new progress apparently in the negotiations on that massive financial rescue plan.
CNN's Kathleen Koch is joining us now. She's watching what's happening on Capitol Hill. Kathleen, where exactly does this sensitive and very important negotiation stand?
KATHLEEN KOCH, CNN CORRESPONDENT: Wolf, they have made some progress. You know, it's very interesting. This morning, President Bush, in a statement, had said the world is watching. He urged Congress, pass this government plan to buy up bad debt from investment banks without adding new provisions, unnecessary provisions. But now it appears that the administration is bowing to the inevitable. (BEGIN VIDEOTAPE)
KOCH (voice-over): After tough negotiations on the massive $700 billion rescue plan, Chairman of the House Financial Services Committee Barney Frank says the administration is giving ground. Frank says it has agreed the government should get shares in the companies it helps rescue.
The administration has also signed on to an emergency board to oversee the program, and to devise a systemic approach to prevent foreclosures on the bad mortgages it buys. No deal yet though on requiring those companies to limit their executives' bonuses and pay packages.
REP. BARNEY FRANK (D-MA), FINANCIAL SERVICES CHAIRMAN: The notion that while they're getting help from the government we can't tell them not to have golden parachutes, we can't tell them to pay millions of dollars to some of the very people who made the bad decisions as a retirement gift, is just unacceptable to us.
KOCH: Another sticking point, allowing judges to rewrite mortgages to lower the monthly payments of bankrupt homeowners. Despite the revamping, some fiscal conservatives are in all-out revolt, urging their colleagues to reject the plan.
REP. MIKE PENCE (R), INDIANA: We should not move in haste. Many of us conservatives are concerned that the cure of a massive transfer of money from the Treasury to Wall Street could ultimately be worse than the disease that we're facing in our financial markets.
REP. CLIFF STEARNS (R), FLORIDA: I stress to my colleagues today, this is not a case of partisan politics. Our constituents' 401s are at risk. The nationalization of private assets is inherently un-American.
KOCH: So one big question now is, if Congress does eventually reach an agreement, when are they going to vote on this rescue plan? Well, some optimists have been saying as soon as Wednesday night, but most are now looking at the end of the week before Congress heads home to campaign, saying, Wolf, that's a safer bet.
BLITZER: All right. We'll watch with you. Stand by, Kathleen.
Seven hundred billion dollars is certainly a lot of money, even for the federal government. By way of comparison, Congress has approved almost that much, $653 billion, for the war in Iraq since the 2003 invasion.
Seven hundred billion dollars is 10 times as much as the Bush administration has requested for the Department of Health and Human Services in fiscal year 2009, and about 100 times bigger than the budget requests for the Environmental Protection Agency. Just some comparisons. Let's get to the presidential candidates right now. Republican John McCain is pushing for greater oversight of the government's rescue plan. He says it's not enough for the Treasury secretary to say, "Trust me."
Let's go to CNN's Dana Bash. She's working the story in Media, Pennsylvania, where McCain will be campaigning today.
Dana, after stumbles on this issue last week, he seems to be finding his voice, to a certain degree. Is he?
DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, yes. You know, it was a week ago today, Wolf, that McCain uttered that phrase, "The fundamentals of the economy are strong." Today he said the country is in financial crisis. And that is part of a political course correction in his rhetoric for what the -- for the issue that his advisors know is undoubtedly the biggest right now on the campaign trail.
BASH (voice-over): With twin goals of burnishing his reformer credentials and distancing himself from the unpopular president, John McCain announced great concern about giving Bush Treasury Secretary Henry Paulson control of a $700 billion bailout.
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: This arrangement makes me deep uncomfortable. And when we're talking about trillion dollars of taxpayer money, "trust me" just isn't good enough.
BASH: Instead, McCain is proposing a bipartisan oversight board to supervise the rescue, suggesting three people for it: his former Republican rival and former businessman, Mitt Romney; Obama supporter and Wall Street heavyweight, Warren Buffett; and Independent New York City mayor and billionaire businessman, Michael Bloomberg.
MCCAIN: We won't solved a problem poor oversight with a plan that has no oversight.
BASH: And the senator who spent much of his two decades in Congress pushing deregulation continued his election year migration towards more government control.
MCCAIN: We can't have taxpayers footing the bill for bloated golden parachutes.
BASH: Siding with Democrats in demanding a cap in compensation for CEOs the government rescues. No more than $400,000, what the president makes.
MCCAIN: The senior executives of any firm that's bailed out by the Treasury should not be making more money than the highest paid government official.
BASH: And McCain's cry for accountability comes with an increasingly populist pitch. MCCAIN: We need to put our country first and focus what's best for Main Street. It's the excess and greed of Washington and Wall Street that got us in this situation to start with.
BASH: Now, that kind of rhetoric makes some of John McCain's fellow Republicans, fellow fiscal conservatives, a little bit uncomfortable. And Wolf, McCain aides say that's just fine by them because they really say that they have one overriding political objective right now, and it's obviously a huge challenge for John McCain, and that is convincing voters in battleground states like this one in Pennsylvania that he understands their anxiety and their anger and that he has a connection to it, and he has some idea of what they're going through, an idea how to fix it -- Wolf.
BLITZER: Dana, thanks very much.
Barack Obama is questioning Senator McCain's push for economic change and accountability. He told voters in Wisconsin that the Republican is trying to make up for 26 years in Washington in 26 hours.
Our Senior Political Correspondent Candy Crowley is covering the Obama campaign for us.
Candy, beyond his criticism of McCain, how is Senator Obama addressing this whole bailout plan?
CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Well, you're right, Wolf. The overall aim of camp Obama at this point is to tie John McCain as tightly to this floundering economy as he possibly can. But what he's doing also has some sort of agreement with McCain that that $700 billion is an awful lot of money to put under the control of one man. So Obama wants some oversight. But by and large, what he's been trying to focus on today is what to do about making sure that this never happens again.
(BEGIN VIDEO CLIP)
SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: If we want to grow this economy and prevent a crisis like this from ever happening again, then the ways of Washington must change. We must reform our lobbyist-driven politics. We must reform the waste and abuse in our government. We must reform the rules of the road that led Wall Street run wild and sticking Main Street with the bill. We have to change Washington now.
(END VIDEO CLIP)
CROWLEY: There are a number of proposals he's put out there, most of which we have heard before. But among them are stopping that revolving door policy. That is, people who work in industry and then come in to the government.
He would make it so that people who move from industry to the government could not do anything that dealt with their former industry for two years. And that if someone leaves an Obama administration, they would not be able to lobby the Obama administration at all.
He's also calling for more transparent government. And by that, what Obama means is maybe taking some of those law-making meetings that happen on Capitol Hill and putting them on C-SPAN, making them available. He also says that before he signs any law, he'll put the entire bill up on the Internet for people to read for a five-day period before he signs it.
And finally, he wants to reform government contracts. And by that, he says he wants to look at waste and fraud and abuse and cut down on the number of government contracts that there are now by about $40 billion over the course of an Obama administration.
So again, Wolf, what he's trying to do right now is sort of watch what's going on on Capitol Hill, try not to interfere too much while kind of staking out some principles, but go straight for, what are we going to do to make sure this never happens again? But as you said at the beginning, the overarching theme here of the Obama campaign is this is John McCain's economy.
BLITZER: Thanks. Candy Crowley, thanks very much.
You're going to be hearing a lot of proposals out there over these coming days.
Let's check in with Jack. He's got "The Cafferty File" -- Jack.
JACK CAFFERTY, CNN ANCHOR: Same subject. Thanks, Wolf.
The administration wants Congress to approve $700 billion in a bailout package for troubled Wall Street firms, and they want it done now. The president said this morning the whole world is watching to see if we can act quickly.
Well, let's remember we're talking about Congress here. Senate Democrats want to put their stamp on this thing. They've sent around a plan of their own by way of a counterproposal from Senate Banking Committee chair Christopher Dodd.
Democrats are worried about protecting homeowners in the future and they're concerned about signing a blank check to the Treasury Department without any clear plan to protect the taxpayers. That's a concern that might be very well founded. They want oversight on the bailout plan, and probably are going to get some form of that.
The government's sailing into uncharted waters here. There are no guarantees that whatever the government comes up with is going to do the trick. The idea seems to be that doing nothing would have been disastrous, so doing something is better than that.
As far as how fast they get it done, well, the one thing working in their favor is Congress is scheduled to adjourn for the rest of the year on Friday, and when their vacations are threatened, they sometimes can move fairly quickly. Let's just hope that when they move, they can get it right.
The question is this: What will it take it restore confidence in the U.S. financial system? Go to CNN.com/cafferty file. You can post a comment on my blog.
That's the overriding question, given that this is a global environment that we operate in, and my guess is it's going to be a while.
BLITZER: It's going to take a lot.
CAFFERTY: And the rest of the world's going to go over this deal, whatever it turns out to be, with a fine tooth comb to see how good it is.
BLITZER: There are global ramifications. What happens here is going to affect the rest of the world.
CAFFERTY: Look what happened to oil prices today and the dollar.
BLITZER: That's right.
CAFFERTY: I mean, there's a lot of skepticism.
BLITZER: Stand by, Jack. We'll get back to you shortly.
John McCain charges Barack Obama is missing something, an economic plan. I'll speak with a top Obama advisor. I'll ask him to respond and explain exactly how the Democratic presidential nominee would fix America's financial mess.
The McCain and Obama camps are out with tough new attack ads. Our media analyst, Howard Kurtz, he's standing by. He'll tell us if the spots are actually true or false.
And we'll bring you a new snapshot of where the Obama/McCain race stands right now and how Wall Street figures into all of this.
Stay with us. You're in THE SITUATION ROOM.
BLITZER: We're following the breaking news regarding the government's $700 billion Wall Street bailout plan. The Dow Jones Industrials dropped more than 370 points today. And oil prices saw their biggest one-day price jump ever.
Let's go straight to our senior business correspondent, Ali Velshi. He's here with us in New York. So much nervousness going on.
ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: Yes.
BLITZER: I thought everybody's supposed to calm down a little bit.
VELSHI: Right. We saw the celebration on Friday with this big surge in the Dow. In fact, if you had gone away for a week and opened up the newspaper on Saturday, you would have thought nothing had happened in the markets. But that euphoria is gone now.
The Dow was down, the U.S. dollar was down. Oil had this massive surge.
Now, some of that is just concern over the U.S. economy in general, but some of it is highly specific. It's about the fact that be this bailout deal is not done, and there's some fear that it won't get done, or certainly won't get done as a clean bill that we thought was going to happen last week. And the longer they take to come to some deal, the more chance that this bill will have all sorts of provisions in it that may not be helpful.
What it is -- you've heard it. It's attacks from both sides, those who say there should be no bailout whatsoever, to those who say, where's the bailout for average Americans, mortgage holders, small business owners?
And they're going to have a hard time cobbling this together and making sense. But the longer it takes, the more you're going to see this uncertainty in the market. It looks like we're in for another week like last week. It's going to be a roller coaster.
BLITZER: All right. A roller coaster. Let's hope it goes up.
BLITZER: We'll watch it. Ali, thanks very much.
John McCain wants you to think if Barack Obama is elected president, he'll bring with you him some disturbing ties to some shady folks. And Barack Obama says if McCain is elected, you should be very worried about your health care. But those claims are front and center in two new -- both of those claims, I should say, are front and center in some new ads from the campaigns.
Are the ads true? Howard Kurtz of CNN's "RELIABLE SOURCES" has done a fact check -- Howie.
HOWARD KURTZ, HOST, "RELIABLE SOURCES": Wolf, the ad wars have taken a sharply negative turn in recent weeks, with each candidate painting the other as wrongheaded and risky. And in one of two new spots released today, John McCain is taking aim at Barack Obama's hometown.
NARRATOR: Barack Obama, born of the corrupt Chicago political machine.
KURTZ (voice-over): That's not true. While Obama has played his share of hardball in the Windy City, he started out as an Independent who ran against the Democratic establishment and challenged incumbent Congressman Bobby Rush. NARRATOR: His economic advisor William Daley, lobbyist (INAUDIBLE). His moneyman, Tony Rezko, client, patron, convicted felon. His political godfather, Emil Jones, under ethical cloud. His governor, Rob Blagojevich, a legacy of federal and state investigations.
KURTZ: Rezko is a political albatross for Obama. The Chicago businessman raised money for the Illinois senator and sold him a strip of land adjacent to Obama's home, which even Obama admits was a bone- headed mistake. But Rezko was not under investigation at the time. He was convicted of corruption in June.
As for the other Illinois figures, so what? Advisor Bill Daley is a former commerce secretary. State senator Emil Jones helped Obama years ago, and there's nothing tying Obama to allegations that Jones helped some of his own relatives.
And Blagojevich is everyone's governor in Illinois. He and Obama are not politically close.
Obama's latest spot accuses McCain of wanting to do to health care what the Bush/McCain policies have done to our economy. That's not quite fair since McCain has broken with the president on some issues, most recently on what to do about the banking and mortgage crisis.
NARRATOR: McCain just published an article praising Wall Street deregulation, said he'd reduce oversight of the health insurance industry, too, just as we have done over the last decade in banking.
KURTZ: That sounds damaging given the Wall Street meltdown. The McCain camp says the Arizona senator was referring to a rule change that allowed banks to operate across state lines. But since the article in the obscure journal "Contingencies" doesn't say which part of banking deregulation he's referring to, McCain leaves himself open to criticism.
(on camera): The ads are very different except in the taglines. McCain: "With friends like that, Obama is not ready to lead." Obama: "John McCain, a risk we just can't afford to take."
Neither candidate offering a reason to vote for him -- Wolf.
BLITZER: Howie, thank you.
Bill Clinton says Barack Obama will be the next president. Not just because he hopes so, but the former president lays out a list of reasons he thinks Obama will win.
And regarding the invasion of Governor Sarah Palin's private e- mail account, the search for who did it leads to Tennessee. We'll update you on that right here in THE SITUATION ROOM.
(NEWSBREAK) (COMMERCIAL BREAK)
BLITZER: To our viewers, you're in THE SITUATION ROOM.
Happening now, financial institutions flounder, Wall Street weakens and Main Street Americans are angry.
CNN's Mary Snow is standing by. She'll check out all the fireworks.
Growing sentiment that Fannie Mae and Freddie Mac hid the skids because there was no one reigning them in. Would tighter regulations fix the problem? And just how tight should they be?
And the power of prejudice in the '08 presidential race. We examine just how big or small a factor it might be in November.
I'm Wolf Blitzer. You're in THE SITUATION ROOM.
With stocks once again plunging today, many Americans are watching their money evaporate before their eyes. The presidential candidates certainly know what's going on, so they're tailoring their message it let you know one thing, they feel your pain.
Our Senior Political Analyst Bill Schneider is standing by, he's joining us.
Bill, is the financial crisis having an impact on the presidential race?
WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Well, Wolf, it is, particularly in two constituencies that used to be solid for John McCain.
SCHNEIDER (voice-over): Two weeks ago, the presidential race was tied. And now? Obama has opened up a five-point lead among all registered voters and a four-point lead among those likely to vote.
Two core McCain constituencies, men and seniors, have flipped from McCain to Obama. The financial crisis has a lot of men worried about their jobs. Obama promises...
OBAMA: ... five million new jobs that pay well and can't ever be outsourced.
SCHNEIDER: ... while McCain warns...
MCCAIN: A vote for Senator Obama will guarantee higher taxes, fewer jobs, and an even bigger federal government.
SCHNEIDER: Seniors are mostly retired. They're worried about Social Security.
OBAMA: But if my opponent had his way, millions of Americans would have had their Social Security tied to the stock market this week.
SCHNEIDER: McCain denies it.
MCCAIN: My friends, I will not privatize Social Security, and it's not true when I'm accused of that.
SCHNEIDER: The financial crisis is having a powerful effect on the vote. Two-thirds of voters say the economy is not fundamentally sound. They're voting nearly two to one for Obama.
OBAMA: They have run this economy into the ground.
SCHNEIDER: Both Obama and McCain support government intervention in the financial markets. Both blame the Bush administration for not taking action.
MCCAIN: Two years ago, I called for reform of this corruption at Fannie Mae and Freddie Mac. Congress did nothing. The administration did nothing.
SCHNEIDER: But government intervention is an issue on which Democrats have more credibility.
Sixty-two percent of voters think the federal government should intervene in the crisis. And 62 percent of those who feel that way are voting for Obama.
SCHNEIDER: Voters blame Republicans more than Democrats by nearly 2-1 for the problems facing financial institutions. And the impression is growing that McCain's policies would be the same as those of President Bush -- Wolf.
BLITZER: That's not necessarily good news for Senator McCain, obviously.
All right, Bill, thank you.
Meanwhile, as you hear more and more details about the government's $700 billion Wall Street bailout plan, many of you want to know exactly where the two presidential candidates stand on this sensitive subject.
BLITZER: And joining us now from our Chicago bureau is Austan Goolsbee. He's the chief economic adviser to Senator Obama.
Austan, thanks very much for coming in.
AUSTAN GOOLSBEE, OBAMA CAMPAIGN SENIOR ECONOMIC ADVISER: My pleasure.
BLITZER: If Senator Obama had a vote right now on Henry Paulson's plan, as submitted to Congress, how would he vote? GOOLSBEE: I don't totally know the answer to that.
He laid out a clear set of principles, that we can't just take the Paulson plan as they handed it to Congress, because it was very short and it leaves out some very important things.
Number one, given the experience we have had with this administration, there's just no way we can give a $700 billion blank check that the administration can use for whatever it wants in any way that it wants without any oversight or controls. And there's no way, as a second matter, that we can let the entities who are going to be getting rescued from the government then just turn around and play business as usual, perhaps foreclosing on everybody, pursuing excessive CEO compensation, doing things that are playing the old rules and the old game.
So, Obama has laid out some clear criteria that ought to drive the negotiations.
BLITZER: All right. Well, do you agree with Senator McCain that there should be some oversight panel? He suggested Mitt Romney, Warren Buffett, who supports Senator Obama, Michael Bloomberg, who is the mayor of New York. Do you agree in principle that that should -- that there should be some sort of oversight panel overseeing Secretary Paulson?
GOOLSBEE: Oversight for sure. Senator Obama was earlier -- I'm glad to see Senator McCain has come around to Obama's view that we can't give a blank check and we need to have oversight.
I don't know that I would necessarily want Mitt Romney. His record of job growth in the companies that he took over was not super stellar. But, clearly, there's got to be some oversight. It can't be a blank check.
BLITZER: But Bloomberg and Buffett I assume you think are good guys?
GOOLSBEE: Look, I don't know. We're way out beyond where we should be.
Where we should be is laying out the principle, how do we protect the taxpayer, how do we solve -- I mean, this is a real crisis and the key component is that Obama's been out early, diagnosing how we got here and trying to deal with this crisis right now, so that everybody's parents' retirement income is not going to go down the tubes, you know, at this critical juncture.
BLITZER: Do you also agree or disagree with Senator McCain that there should be a cap on these CEOs of these financial firms that are in trouble which the U.S. government is going to help bail out, and that they shouldn't make more than the highest paid government workers?
And, as you know, right now, the highest paid government worker is the president of the United States, who makes $400,000 a year. The vice president makes $212,000 a year, the speaker of the House $212,000. Everybody else sort of is down in the high 190s.
Is that in principle a good idea, that these CEOs should no longer be making in the millions, but should be down much further, on par with what the highest officials in the government are making?
GOOLSBEE: Look, Senator Obama has for years been out front trying to rein in excessive CEO pay and put legitimate controls on an out-of-control corporate governance system.
I am never ceasing to be amazed by the amount of reinvention John McCain is trying to do for himself and his campaign. If he really cared about tapping CEO pay, why did he put forward a tax proposal that's going to cut the average taxes for the average Fortune 500 CEO by $700,000 a year?
Why has he opposed completely reasonable bills that would have reined in excessive CEO compensation, their ability to take big severance pay packages, like the one his chief economic adviser took while laying off thousands of workers?
John McCain has a 26-year record of fighting against exactly these kind of rules of the road. And now, in the last 26 hours, he's tried to reinvent himself as something totally different.
BLITZER: When you say he's going to going to cut their -- their taxes for these wealthiest of wealthy Americans, what he wants to do is keep the Bush tax cuts in place, and not let them lapse among -- for the highest-income individuals.
GOOLSBEE: He wants to do -- well, Wolf, he wants to do significantly more than that. He's going to abolish the alternative minimum tax.
In addition to that, he wants to put in a special choice tax system, so that people could actively choose to have a flat tax, at a substantial cut in their tax rate. And he wants to give literally trillions of dollars of additional big corporate tax cuts, including more than $1 billion a year just to Exxon.
So, I don't think it's fair to say all he wants to do is preserve the Bush tax cuts.
BLITZER: He also says that Senator Obama has not presented a plan of his own.
I'm going to play this little clip. Listen to what he said today.
(BEGIN VIDEO CLIP)
MCCAIN: Senator Obama has declined to put forth a plan of his own. In a time of crisis, when leadership is needed, Senator Obama has simply not provided it.
(END VIDEO CLIP)
BLITZER: All right, quickly, if you want to respond to that.
GOOLSBEE: Well, it's getting pretty cheeky. In the words of my father, just because you said it doesn't make it so.
Senator Obama has been saying for more than a year clear ideas, that we need to reestablish oversight in the market system, just this week laid out a detailed six-point plan.
The specific plan that McCain put forward literally looks like something that came out of a Cracker Jacks box. I mean, it's 10 lines long. It wasn't a specific plan.
Senator Obama has been working with Secretary Paulson, Chairman Bernanke, leaders in the House and Senate, experts like Paul Volcker and Warren Buffett, trying to get out of the political. This is not a political event. We have a real crisis facing this country and facing the retirement savings of millions of people.
And we have got to the address this quickly. And we have got to do it in a way that isn't a blank check and that addresses the root issues facing hardworking Americans. Their problems are how we got into this mess. And so that's what we have got to do.
BLITZER: Austan Goolsbee is the senior economic adviser to Senator Obama. Austan, thanks for coming in.
GOOLSBEE: Great to see you again, Wolf.
BLITZER: John McCain says Mitt Romney would be the kind of guy he would like overseeing the government's massive bank bailout. I will ask Romney if he would accept the job and I will get his response to Senator Obama's charge that McCain is a Johnny-come-lately to the idea of economic change.
Plus, Bill Clinton revisits the heat of the primary race and African-American support for Barack Obama. What the former president would not say on TV's "The View." He was a guest earlier today.
And McCain accuses Obama of taking a hike when tough decisions had to be made. Stand by for our "Strategy Session" -- right here in THE SITUATION ROOM.
BLITZER: Bill Clinton appeared on a TV show very popular with women, "The View."
The former president talked candidly about where he sees the presidential race heading. And he looked back at his wife's presidential campaign as well.
Listen to this response. The former president was asked about some women supporting John McCain right now because of Governor Sarah Palin. He talked about some of the ways that people vote the way they do.
(BEGIN VIDEO CLIP)
BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: And so some people thought that. And Hillary never begrudged, for example, any African-American who supported Barack Obama who said, look, I want my kids to know they can grow up to be president and be whatever they wanted to.
So, you can't tell someone else that the ground on which they making their voting decision is irrational.
JOY BEHAR, CO-HOST: Even if it's against their interests?
B. CLINTON: Yes, even if it's against their economic interests, because, look, none of us define our lives primarily or exclusively in economic terms.
The purpose of having a good economy, the reason we're all tormented about what's going on now, is you want a good economy because it empowers us to define our lives in the ways that really matter.
But it's not what really matters to us, unless we don't have it. If you don't -- if you have been -- like Whoopi has, if you have been without a job, you can't feed your kids, you have been all this stuff, then it's the most important thing in the world.
Once you get to a certain threshold, then you want to create a life. You want to fashion it based on your values, your dreams, what you want for your kids. So, I think we can't tell anybody that they don't know what they're doing because they voted for X candidate, instead of Y.
(END VIDEO CLIP)
BLITZER: President Clinton also made this prediction, his prediction, that Barack Obama will win the election.
(BEGIN VIDEO CLIP)
B. CLINTON: I think Obama will win, for the following reasons.
Two-thirds of the American people are having trouble paying their bills. These are difficult times. That makes them more likely to change. The financial crisis and meltdown only makes that more likely, number one.
Number two, America is growing more diverse, racially, religiously, culturally. Demographically, the country is moving toward Democratic voters in general. Number three, registration is up for the Democrats and flat for the Republicans in 20 of the most important states.
I think that's -- you know, now, I think both of them have done -- I know you -- you all fight over the ad wars and all that, but, essentially, the debates could change the outcome.
But McCain -- you -- Barbara was telling me at break -- she reminded me that a long time, I told her...
BARBARA WALTERS, CO-HOST: Yes, you did.
B. CLINTON: I told her that McCain would be the Republican nominee.
B. CLINTON: And she said, why? And I said, because he's the only one that can win.
(END VIDEO CLIP)
BLITZER: We're going to have more on what Bill Clinton had to say later here in THE SITUATION ROOM.
Coming up in our "Strategy Session": McCain continues to pound the theme that he's no George Bush.
(BEGIN VIDEO CLIP)
MCCAIN: I have got a record of reform, of standing up against my own party, my own president, when necessary to do so, because I believe you have got to stand up and do what's right and best for America.
(CHEERING AND APPLAUSE)
(END VIDEO CLIP)
BLITZER: But with more Americans apparently trusting Senator Obama when it comes to the economy, is Senator McCain's message resonating?
And we're standing by for John McCain and Sarah Palin. They're due to speak shortly out in Pennsylvania, a key battleground state.
Stay with us. You're in THE SITUATION ROOM.
BLITZER: Senator Hillary Clinton is now reacting to the Bush administration's proposed bailout plan.
Only moments ago, this is what she said. Listen.
(BEGIN VIDEO CLIP)
SEN. HILLARY RODHAM CLINTON (D), NEW YORK: Now, for two years, I have called for action as millions of homeowners have fallen into default and the securities backed by these mortgages have plummeted in value, revealing deep cracks in the foundation of the credit markets, igniting a financial crisis, and jeopardizing the stability of the American economy.
These warnings have been ignored for too long. And the consequence of that was last week's emergency.
(END VIDEO CLIP)
BLITZER: Hillary Clinton speaking out on this bailout plan just moments ago. We will get you some more of what she's having to say. That's coming up.
In its final weeks, the presidential race appears to be coming down to the flagging U.S. economy, as well as leadership on international issues. How can McCain and Obama convince the country that they can meet both challenges with equal strength?
Let's discuss in our "Strategy Session."
Joining us, our Democratic strategist CNN contributor Donna Brazile, and conservative commentator Terry Jeffrey. He's the editor in chief of the Cybercast News Service.
I'm going to show you two polls, CNN/Opinion Research Corporation polls, on the question of who would better handle the economy. Obama clearly does better, 53 percent, to 43 percent for McCain. But it's almost a mirror reverse when it comes who would better display judgment in international affairs, McCain 54, Obama 42.
Donna, I guess the issue will be, for a lot of voters, what is more important right now, the economy or the international crises that are out there?
DONNA BRAZILE, CNN POLITICAL ANALYST: Well, in many ways, Wolf, they are tied together, because we live in a global economy.
And you heard, over the weekend, when Secretary Paulson even talked about providing some relief to those banking interests that employ Americans. So, the economy right now is the number-one word, because people are feeling it at the gas pump when they go to fill up. They're feeling it at the grocery stores.
They're feeling it in terms of their retirement savings and their jobs and their concerns overall about who will pay for this massive -- and I mean massive -- bailout of our nation's financial industry.
BLITZER: All right, Terry, if the economy is issue number one, does Barack Obama have it locked up?
TERRY JEFFREY, EDITOR IN CHIEF, CYBERCAST NEWS SERVICE: I don't know that he has it locked up, but he has a significant advantage, Wolf.
To the degree the economy is at the center of the news, people think that there's bad economic news, it's going to be against the party that's in power in the White House. That's the Republicans. McCain has the added disadvantage that he doesn't speak well about the economy. He's not comfortable speaking about it. In fact, he has a little bit of an instinct to move left when there's economic questions. He voted against both the Bush tax cuts, for example. So, it's not good. If the focus stays on the economy between now and Election Day, McCain's going to have a hard time making up the room he's lost in the last week in the polls.
BLITZER: Did you notice, Terry, today, when he was speaking in great depth and detail about the economic situation, he was at a town hall meeting, but he was reading from a prepared script, if you will. Normally, at these town hall meetings, he likes to just speak off the cuff.
He in effect was doing what Barack Obama likes to do, have a speech prepared, because, it's so sensitive, every word could have an important nuance.
JEFFREY: Well, that's a good point. I'm glad you pointed out that Obama is almost always scripted. John McCain has been confident enough to go out and speak off the cuff on most issues.
But, clearly, he is not as comfortable on this issue. And, clearly, anything he says could not only have an impact on his campaign, but the impact on how this economic crisis actually plays out. So, I'm glad they're getting -- he's doing his homework and he's getting his lines down. I'm not sure he's getting them all right, from a conservative perspective, however.
BLITZER: You know, Donna, he -- he really lashed out on at Obama on the issue of immigration.
And, at the end of this speech earlier today, he went out and reiterated his support for comprehensive immigration reform, including a pathway, eventually, for citizenship for millions of illegal immigrants, something that's very unpopular with a lot of his own members of his own party, and he said he worked with Senator Kennedy on this, at great political risk.
And then he took this swipe at Senator Obama. Listen to this.
(BEGIN VIDEO CLIP)
MCCAIN: I sometimes had to take votes which were not popular. Senator Kennedy took votes that were not popular. Senator Obama took a hike.
(END VIDEO CLIP)
BLITZER: And he got a laugh.
What do you say to that criticism, that Senator Obama was missing in action when it came to comprehensive immigration reform, which you know went down in defeat when it was up before the Congress?
BRAZILE: Well, you know, Wolf, you have to check the source, and the source right now is clearly the congressional record.
Even Senator -- Senator McCain placed in the congressional record a note of thanks to not just Kennedy and many others, but also to Barack Obama. Mel Martinez, the senator from Florida, one of McCain's top surrogates, even sent a letter to Barack Obama.
So, I don't understand why John McCain must continue to attack, when he should take a look at his own record. He was a leader, he was a principal leader on comprehensive immigration reform. And, just last year, he decided to shift his position in order to pander to the right to get votes.
So, the fact is, is that he once praised Senator Obama, before he denounced Obama.
BLITZER: All right. We have got to leave it there, guys, but we will continue down the road. Thanks very much to both of you.
Coming up: an ugly truth that could hurt Barack Obama. In a brand-new poll, some Americans honestly answer that they won't vote for Senator Obama because of his race. We will tell you what is going on.
And John McCain's former rival will be here to defend his economic plan. That would be Governor Mitt Romney. He's standing by to join us live. What does he think of Senator McCain's idea for Romney overseeing the government's massive bank bailout?
Stay with us. You're in THE SITUATION ROOM.
BLITZER: On our "Political Ticker" today, early voting begins in some states today across the United States, 43 days before Election Day. Among the first to cast ballots in person or by mail, residents of Virginia, Kentucky and Georgia. At least 34 states and the District of Columbia will allow early in-person -- in-person voting, a process that is expected to set records this year.
Barack Obama appears to be giving up hope of becoming the first Democratic presidential candidate to win North Dakota since LBJ. CNN confirms the Obama camp is pulling staffers out of North Dakota and sending them to some other battleground states not that far away, Wisconsin and Minnesota.
A quick check of some new battleground state polls. It's neck and neck in Nevada, with McCain leading Obama by one point in the Suffolk University of likely voters. It's also a squeaker in Minnesota right now. There, it's Obama who has a slight edge. He's up by one point over McCain in an ARG poll and up by two points in the Big Ten Battleground poll.
The prospective witness list for Republican Senator's Ted Stevens' corruption trial reads like a who's-who. Fellow Senators Ted Kennedy, Orrin Hatch and Pat Leahy were on the list read to the jury pool in Washington today. So was Secretary of State Colin Powell. Stevens, who's up for reelection in Alaska, has pleaded not guilty.
Remember, for the latest political news any time, check out CNNPolitics.com.
Let's go to Jack. He's got "The Cafferty File" -- Jack.
CAFFERTY: The question this hour is, what will it take to restore confidence in the U.S. financial system?
Steve writes: "Confidence in the U.S. economy can only be restored by electing a new president willing to change the disastrous policies of the last eight years. Trickle-down economics and tax cuts for the wealthy have run our economy into the ground."
Linda writes: "The first step will be that Congress exercise its duty to the American people by watching the purse strings. Congress has a constitutional duty to get it right. Getting it right could take some time, hours, maybe days. Writing a blank check to the Bush administration takes only seconds."
Nicki writes: "The only things that may restore my confidence in this government are the big-business Republicans out of office and seeing the leaders of these companies held responsible for the mess they have created."
Sherry in Iowa writes: "It would take someone to step up and say, we're sorry. We tried trickle-down theories. We were wrong. It doesn't work. We're going to stop it now. But, instead, all that will change is that the Republicans will claim they just did it wrong, or with the wrong person. This time, they will tell us it work just fine. So, vote McCain, and flush the rest away."
Elizabeth writes: "If Wall Street wants to be bailed out by the taxpayers, then they have to give us ownership of their companies, cut the pay of CEOs to more reasonable levels, and be more transparent in their dealings. The U.S. Treasury Secretary should not have such unfettered powers as President Bush is asking for."
And, finally, Thom writes from Michigan: "My guess would be about 30 years, a balanced budget, and a totally new Congress."
If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile. Look for yours there, among hundreds of others -- Wolf.
BLITZER: All right, Jack, see you in a few moments.
To our viewers, you're in THE SITUATION ROOM.
Happening now: a $700 billion bailout, no magic bullet for Wall Street, though. As markets plunge, the nominees both want to know who will be minding the store. I will speak live coming up very soon with the former Republican presidential candidate Mitt Romney.
A new poll suggests prejudice could hurt Barack Obama when it comes time for voters to cast their ballots. We're looking at the impact of race on the presidential race.
And John McCain's running mate out on the campaign trail -- we're waiting to hear live from GOP vice presidential nominee Sarah Palin. She's about to speak this hour.
I'm Wolf Blitzer. You're in THE SITUATION ROOM.