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THE SITUATION ROOM

McCain Puts Campaign on Hold-Obama Reacts; Biden Takes on McCain; Shifting Battlegrounds: Why Obama is Gaining

Aired September 24, 2008 - 17:00   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, breaking news -- John McCain suspending his campaign to return here to Washington to focus in on the financial crisis, calling for Friday's first presidential debate to be postponed.
And Barack Obama -- you heard him live here just moments ago -- responding, saying presidents have to multitask. He wants the debate to go on; the campaign to go on, as well.

Also, Democratic vice presidential nominee, Joe Biden, his evolving role in this Obama campaign. He's attacking John McCain today. We'll tell you what he's saying.

And Laura Bush -- what she thinks of Republican vice presidential nominee, Sarah Palin. The first lady sits down one-on-one with our own Zain Verjee.

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

We're following the breaking news -- unprecedented developments in this American presidential campaign. Republican nominee John McCain announcing he's suspending his campaign, returning here to Washington to focus in on the country's financial crisis. He called for Friday night's debate in Mississippi with Barack Obama to be postponed.

Here's what Senator McCain said within the past hour or so.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: We must pass legislation to address this crisis. If we do not, credit will dry up, with devastating consequences for our economy. People will no longer be able to buy homes and their life-savings will be at stake. Businesses will not have enough money to pay their employees.

If we do not act, every corner of our country will be impacted.

We cannot allow this to happen. It's time for both parties to come together to solve this problem. We must meet as Americans, not as Democrats or Republicans. And we must meet until this crisis is resolved.

I'm directing my campaign to work with the Obama campaign and the Commission on Presidential Debates to delay Friday night's debate until we have taken action to address this crisis.

(END VIDEO CLIP)

BLITZER: And only moments ago, Senator Barack Obama responded. You saw it and heard it live here in THE SITUATION ROOM. He said Friday night's debate should go on as scheduled, saying the financial crisis makes it even more important than ever.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: It's my belief that this is exactly the time when the American people need to hear from the person who, in approximately 40 days, will be responsible for dealing with this mess. And I think that it is -- it is going to be part of the president's job to deal with more than one thing at once.

I think there's no reason why we can't be constructive in helping to solve this problem and also tell the American people what we believe and where we stand and where we want to take the country.

So, in my mind, actually, it's more important than ever that we present ourselves to the American people and try to describe where we want to take the country and where we want to take the economy, as well as dealing with some of the issues of foreign policy that we were initially the subject of the debate.

(END VIDEO CLIP)

BLITZER: We have the best political team on television standing by to assess what we've just heard.

John King is joining us from Montana. Mary Snow is in New York. Gloria Borger is here in Washington. Candy Crowley is in Clearwater Beach, Florida. That's where Senator Obama is.

Let's go to Mary Snow first. The response we heard -- the statement we heard from Senator McCain today was tough and unexpected, Mary. But give our viewers the sense of what's going on.

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, leading up to that announcement, there was a perception from both sides of the aisle on Capitol Hill that John McCain could be the deciding factor on the bailout plan. And when asked about it this morning here in New York, whether he would support the Treasury secretary's proposal, he hadn't committed.

(BEGIN VIDEOTAPE)

SNOW (voice-over): It was an unexpected move. John McCain will return to Washington tomorrow morning to focus on the government's bailout plan.

MCCAIN: It has become clear that no consensus has developed to support the administration's proposal. I do not believe that the plan on the table will pass as it currently stands and we are running out of time.

SNOW: McCain's announcement coincides with mounting pressure from both sides of the aisle. Political observers say Congressional Republicans are looking to McCain for direction.

When conservatives started to balk at the bailout, Democratic Senate Majority Leader Harry Reid turned to McCain.

SEN. HARRY REID (D-NV), MAJORITY LEADER: So we need now the Republicans to start producing some votes for us. We need the Republican nominee for president to let us know where he stands on what we should do.

SNOW: And there's pressure from Republicans, like former House Speaker Newt Gingrich, who painted it this way.

NEWT GINGRICH (R), FORMER HOUSE SPEAKER: Either McCain will reluctantly will go along -- and I think Obama is clearly going to go along -- or you're going to see McCain decide, much the way he did with picking Palin, that, in fact, he's a genuine maverick, that he genuinely defends the taxpayer and this is a terrible bill.

SNOW: A "Washington Times" editorial concluded: "If McCain supports it, he can kiss any credible claim to be a reform candidate goodbye."

For a Republican candidate trying to distance himself from the Bush administration, it's a balancing act.

MARTIN KADY II, POLITICO.COM: McCain has sort of a tightrope to walk here because if he -- you know, he doesn't want to be held on responsible for the failures of this administration. At the same time, he doesn't want to be the guy who kills this bill. And if things go south with the economy, then he'll take the blame. So it's a real pickle. And it's also a problem for Democrats, too.

(END VIDEOTAPE)

SNOW: And it became a challenge for the Democrats that could have put them in a position where if Republicans rejected it and it appeared to be a Democratic bill, they'd be siding with an unpopular Republican president at a time when taxpayers are outraged -- Wolf.

BLITZER: All right. What a story. All right, Mary, stand by.

I want to bring John King in right now -- John, this is a real dilemma facing Senator McCain. He's got to decide does he go against the president of the United States, who's going to be on television tonight, 9:00 p.m. Eastern, addressing the American people, outlining dire circumstances for everyone -- not just Wall Street, but everyone -- if this negotiation collapses on Capitol Hill.

Does he go against his own Republican president or does he make a deal, together with the Democrats, and go forward? The political stakes are enormous for him.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Well, the political stakes are enormous for him, Wolf. But I also think there's a bigger question here that we need to try to get our arms around. The country, if we believe the president, the Fed chairman, the Treasury secretary -- and there's no reason not to believe them -- but the country is on the verge of a financial meltdown. And yet we are also in the middle of this political season, where there is clearly deep distrust -- here in Montana we see it and all across the country -- that the politicians will do the right thing.

That is why you have a lack of consensus on Capitol Hill. That is why President Bush feels compelled to go on television tonight and address the nation, even though his popularity is pretty low right now. And that is why you see President Mc -- Senator McCain, excuse me -- and Senator Obama trying to figure out how do they deal with this political dynamic and this financial situation, 41 days before the country picks its next president.

So we are in the middle of a serious, hugely significant policy crisis, as well as a political environment in which the people clearly don't trust the politicians -- not just the president. But I would put Senator McCain and Senator Obama and the entire Congress in that, as well.

They hear words like $700 billion bailout and I can tell you from my travels, Wolf, they think, in the end, the rich people are going to get bailed out and they're going to get stuck paying the bill. That is the bigger political environment that all the politicians, from the president on down, including the presidential candidates, need to deal with. And it is a very difficult one.

BLITZER: All right, John, stand by.

Candy Crowley is down in Florida with Senator Obama.

We heard his response to all of this today. It was very different than what Senator McCain had to say. Walk us through some of the delicate thinking he was going through, because he says the campaign must go on and the debate must go on, as well -- Candy.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: But he also left open the possibility that he would return to Washington if it was needed. Look, here's what he tried to do in this press conference, to say I'm talking to Democratic leaders all the time. I'm talking to Secretary Paulson nearly every day. So I am on top of this.

The debate seemed to be a nonnegotiable thing. He believes the debate should go forward. Again, he left room open for maybe returning to Washington if the leadership thought it was helpful.

Now, Obama doesn't have as big a dilemma as McCain does. McCain is looking at the possibility that Republicans will deep six this bill. And everybody kind of believes that this bill might be necessary, but they don't exactly want to own the plan as it now stands.

So it's John McCain who is walking a far tighter rope than Barack Obama is. But again, Obama said he would go back if it was necessary. And right now, there's some one-upmanship going on here. Obama's camp wanting to get out the word that it was his idea to come out with a joint statement. Obama saying I was a little surprised when I saw John McCain on TV talking about going back, but, nonetheless, we should have some bipartisanship here.

So, yes, some differences, but they are still working on that joint statement. And, again, Obama does say if he needs to go back to Washington, he will.

BLITZER: It was interesting, Candy, that Senator Obama really gave credit to Senator Tom Coburn of Oklahoma for reaching out to him. He's a conservative Republican, as you know. Coburn and Obama worked together on that ethics legislation in the Senate. They became friends. It was really Tom Coburn's idea, wanting to reach out to Senator McCain and work up a joint statement. And maybe that will help this process go forward.

I found that intriguing. I assume did you, as well.

CROWLEY: Absolutely. And it puts the bipartisan nature on this that Obama says it really needs, and, in fact, that McCain says it really needs.

But, you know, it is hard to take the campaign out of this crisis at this point. And that's the line both of them are walking. Clearly, those outside -- other than Obama -- have been suggesting hey, McCain is using this and is trying to make himself look like he's taking a leadership position.

Clearly, the Obama camp didn't want that impression left out there. But Obama himself stuck to the bipartisan message for the most part -- some subtle digs at McCain. But for the most part said look, this is bipartisan. I'll work with whoever I can. And the Tom Coburn thing obviously does put that patina of bipartisanship on top of it.

BLITZER: And, Gloria, it seems to me -- and you can correct me if you think I'm wrong -- that President Bush has bigger problems with his own base, with Republicans in the House and the Senate...

BORGER: Oh, yes.

BLITZER: ...right now going along with this $700 billion bailout, or rescue plan, as some are now calling it -- than he might have with Democrats.

BORGER: Absolutely.

BLITZER: You heard Chuck Schumer say on those 4 points that Senator Obama laid out as preconditions for going forward, it seems on most of them, they're pretty close to a deal.

BORGER: Well, it's interesting. He's got more problems with his own party. The vice president came up to Capitol Hill yesterday and got an earful from Republicans telling him that there was no way they we were going to go along with this bailout package that, as John says, they want to call a rescue package, (INAUDIBLE) bailouts.

And they have been complaining to the White House that, in fact, the president has not made the case dramatically enough to the American people about what's at stake here.

What's also interesting, though, Wolf, is that the president doesn't have the leverage that you might think an incumbent would have. He's below 30 percent in the polls. He's a lame duck. You've got a very heated presidential race going on right now. And by the president taking the stage front and center, this is not great news for John McCain, because John McCain doesn't want to remind people that, yes, George W. Bush has been in the White House for eight years.

And so I guess the question everybody is asking is, when John McCain comes back to Washington, what is he going to do?

Some folks have called this an establishment bailout.

If John McCain is a reformer, as "The Washington Times" piece said, will he go along with it? And we just don't the answer to that.

But, also, by the way, the objections that John McCain has to it -- the things he thinks needs to be added onto it are very similar to the things that Barack Obama thinks need to be added on to it, such as, you know, keeping CEO pay low, making sure that there's something in it for Americans who could lose their homes.

BLITZER: All right. I want everyone to stand by because we're going to continue to follow the breaking news.

We're also going to check in with Jack Cafferty for The Cafferty File.

But the story of the moment right now, John McCain putting his campaign on hold because of this financial crisis. Barack Obama saying he's going forward. President Bush, meanwhile, set to address the nation tonight with a dire warning.

And Joe Biden stepping up attacks on John McCain -- his evolving role in the Obama campaign. We're watching that.

Plus, we have some brand new polls in important battleground states. A definite new trend seems to be taking shape. We'll bring you the results and a lot more on this important day right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: A big news day here in Washington, around the country. Senator McCain announcing he's suspending his campaign and wants the first presidential debate Friday night postponed. Senator Obama saying he's not suspending his campaign. He wants that debate to go forward. Both of these presidential candidates insisting that they want to try to resolve this huge financial crisis.

Let's check in with Jack Cafferty. He's got "The Cafferty File." You know, it's pretty impressive what's going on. It's a surprising day -- Jack.

JACK CAFFERTY, CNN ANCHOR: You know what's ironic -- and we'll get to the e-mails and the rest of the stuff. But to me, it's very ironic. I was reading a thing the other day that this presidential election could cost a billion dollars with a B. We've never spent that kind of money on one of these things before. And the machines behind both candidates, with all the ads and the spin and the P.R. and the daily maneuvering for advantage might be rendered moot, might be rendered meaningless.

Events unfolding as they are threaten to strip both these guys of all of the trappings of a presidential campaign and leave them standing sort of naked in front of the American public and forced to confront -- because if they want to be president, they're going to have to deal with it -- forced to confront honestly and openly for all of us what they're going to do to lead this country forward in the face of, arguably, the worst financial crisis since the Great Depression.

I think it's going to be very interesting to see how both these men react. They're starting to do it already. But in the next day or two, we're going to find out a lot more.

At 4:00, I had asked a question, because of the photo-op silliness at the U.N. yesterday with Sarah Palin and Hamid Karzai and the fact that they wouldn't let the press near her or ask any questions, why wouldn't John McCain allow reporters more access to Sarah Palin?

The stories unfolding this afternoon render that sort of unimportant.

If you're interested in the responses -- and we got a lot of them -- you can go to the blog, CNN.com/caffertyfile, and read about that there.

The question we want to address this hour is this. John McCain announcing suddenly, out of the clear blue this afternoon, suspending his campaign, rushing back to Washington to try to lend a hand on a search for a solution to the nation's deepening financial crisis.

President Bush set to address the country tonight, 9:00 Eastern, try to convince Americans the situation is so dire that Congress must pass the proposed $700 billion bailout bill.

The trouble is the public isn't so sure it wants to hand the government another blank check for that much money.

McCain also has called for the postponement of the first presidential debate, scheduled for this Friday night in Mississippi.

Barack Obama says the debate should go on as scheduled.

It might be helpful, especially to undecided voters who haven't made up their mind yet, to hear these two men, who want to lead this country for the next four years, discuss their ideas for solving what is, arguably, the worst financial crisis to hit this country since the Great Depression.

The question then is this: In light of the financial crisis, should the first presidential debate be postponed?

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

The computer servers are laboring under a tremendous load, Wolf. We've gone over 10,000 e-mails in just the last hour and 20 minutes or so. This is a big, big story and there's a lot of interest in it.

BLITZER: There's huge interest out there, as there should be, because the stakes, indeed, for all of us, are enormous right now. Jack, stand by.

The Democratic vice presidential nominee, Joe Biden's, role has evolved over these past several days. The senator is increasingly playing the role that a lot of vice presidential nominees play -- that role being one of attack dog -- with John McCain right now as his main target.

Brian Todd is looking at this story for us -- Brian, so what is the Obama camp saying about all this?

BRIAN TODD, CNN CORRESPONDENT: Wolf, they're saying that this is what Joe Biden is uniquely suited to do in this campaign -- fact check John McCain's record in the Senate and call him out on it.

(BEGIN VIDEOTAPE)

TODD (voice-over): In one breath he says John McCain's been his friend for 32 years.

SEN. JOSEPH BIDEN (D-DE), VICE PRESIDENTIAL CANDIDATE: It's a friendship that goes beyond politics.

TODD: In another, he'll say his so-called friend is divorced from reality, dangerously wrong on the issues, not the same John McCain he supported when McCain was attacked by Bush followers in 2000.

This is Joe Biden's new role -- what one aide called being McCain's truth-teller on the campaign trail. Others say he's the attack dog in chief.

Either way, it will be Biden paging back 21 plus years he's served with McCain in the Senate to pin McCain down on his positions and slice apart his votes.

BIDEN: He voted against funding the cops and firefighters, our first responders -- against interoperable communications gear for our first responders to be able to talk with one another in a moment of disaster or in a moment of national security problems.

TODD: To back it up, Biden's aides sent us a list of 21 votes McCain cast against funding first responders.

McCain's team calls that a complete distortion and says those were amendments that had a lot of pork barrel spending attached to them. They say McCain himself has sponsored several pieces of legislation to help first responders and they point out that he helped create the 9/11 Commission.

Get ready for a lot of this back and forth. Observers say this is a key reason Obama picked Biden.

A.B. STODDARD, "THE HILL" NEWSPAPER: Unfortunately for Barack Obama, he is inexperienced and was in the statehouse or somewhere else when a lot of these big debates were going on that Joe Biden is going to be talking about in John McCain's record, from the crime bill to Kosovo. They we were there. Barack Obama was not.

(END VIDEOTAPE)

TODD: But analysts point out there are pitfalls here for Biden, too. He'd better get his facts straight and he has to avoid public misstatement. That's been a problem for him recently. He could come across as too negative and he could be accused of hypocrisy and have his own votes picked apart -- Wolf.

BLITZER: They're really going back and forth on Iraq, aren't they?

TODD: They are. Biden today -- and he's probably doing it as we speak this afternoon -- he's attacking McCain for wanting to spend billions of dollars a month in Iraq, for other positions that McCain has taken on the war.

The McCain campaign shoots right back, pointing out that Biden voted to support the invasion and that Biden had previously said Iraq has weapons of mass destruction.

So they're going to be going back and forth on this a lot.

BLITZER: Thanks, Brian Todd, for that.

The financial crisis prompting unprecedented developments in this presidential campaign. McCain putting his campaign on hold right now. Barack Obama rejecting that idea. And President Bush getting ready to address the nation tonight. We're going to talk about all that. That's coming up in our Strategy Session.

Plus, the new poll numbers show some changes in key battleground states that could tip the election.

We're watching all of this unfold right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

CAROL COSTELLO, CNN CORRESPONDENT: I'm Carol Costello with a look at the stories incoming to THE SITUATION ROOM. The Bush administration is warning North Korea it will face international isolation if it reactivates its main nuclear plant. Today, there we were more signs that may be happening.

The U.N. nuclear agency says it removed surveillance equipment and seals from the Yongbyon nuclear facility following a request from North Korea. The chief U.N. inspector says Pyongyang is planning to reactivate the plant in a week.

Sources tell CNN the FBI is investigating Fannie Mae, Freddie Mac, Lehman Brothers, AIG and their executives for possible mortgage fraud. Those companies are at the center of the country's ongoing financial crisis. An FBI spokesman isn't commenting on the report, but does say there are currently 26 FBI fraud investigations involving corporate subprime lenders.

And more signs of the slumping economy -- sales of existing homes fell in August, down just over 2 percent from the previous month. Home prices also continued their slide, falling 9.5 percent last month. That's the biggest decline on record.

Two popular penguins are waddling their way into the hearts of hospitalized kids in San Diego. There they are, Pete and Penny. They're from SeaWorld. They visited Rady's Children's Hospital yesterday. Their mission -- to get -- to give the kids a much needed pick-me-up and to call attention to a SeaWorld family walk that will benefit the hospital. More than half of these children have little or no private medical insurance.

That's a look at the headlines right now -- back to you, Wolf.

BLITZER: All right, Carol. Thanks very much.

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

Happening now, breaking news in the race for the White House. John McCain suspends his campaign to focus on resolving the nation's financial crisis. And he's calling on Barack Obama to do the same thing. We're going to update you on Senator Obama's reaction and give you the latest on whether the two men will actually go ahead with Friday night's first presidential debate.

Also, battleground polling -- new you numbers show one of the presidential candidates picking up some momentum in key swing states. Bill Schneider is standing by live to break it all down.

And Laura Bush is weighing in on Sarah Palin's vice presidential candidacy -- does she feel that Palin has enough foreign policy experience for the job?

Zain Verjee spoke with the first lady. Her interview -- that's coming up shortly.

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

Potentially critical shifts in some key battleground states -- our senior political analyst, Bill Schneider, is standing by to show us some new numbers and the reasons behind them -- Bill, what's going on?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, we have new polls in five battleground states this week. Different outcomes, but all five states moving the same way.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Battleground Colorado, where it looks like the Democratic Convention helped Obama.

Our new CNN/"TIME"/Opinion Research poll of likely Colorado voters shows Barack Obama leading John McCain by 4 points. That's a shift from before the convention, when McCain was leading, and from 2004, when George W. Bush won Colorado.

Battleground Michigan, Obama is leading by five points -- not a significant lead, but a little wider than John Kerry's margin in Michigan four years ago.

Montana was once thought to be a battleground, what with its colorful Democratic governor.

UNIDENTIFIED MALE: Can we afford for more years?

UNIDENTIFIED SUPPORTERS: No!

SCHNEIDER: But McCain leads by 11 points in Montana. That's about half the size of Bush's margin in Montana four years ago.

Battleground Pennsylvania -- the state where McCain is running hard.

MCCAIN: Pennsylvania will be a battleground state.

SCHNEIDER: But McCain has been losing ground in Pennsylvania. He's now nine points behind. In 2004, Bush lost Pennsylvania by less than three. Battleground West Virginia? Maybe. McCain is only four points up in West Virginia. Bush carried West Virginia by 13. What's behind Obama's gains?

MCCAIN: Times are tough. For our economy and I expect more tough economic news before the election.

SCHNEIDER: Obama is also seizing the issue.

OBAMA: I have repeatedly called on President Bush and Republican and Democratic leadership to join me in supporting an economic stimulus plan for working families.

SCHNEIDER: Among voters nationwide whose top concern is the economy, Obama has a 17-point lead.

(END VIDEOTAPE) SCHNEIDER: McCain may not be the incumbent president or vice president, but he does represent the party in power. And that is not a good place to be right knew -- Wolf?

BLITZER: Bill Schneider, thank you.

Let's continue more on our top story right now. June McCain calling for a suspension of the presidential campaign so that he and Barack Obama can focus in on helping to resolve the nation's financial crisis. Barack Obama, however, saying the debate should go on saying presidents must be able to do more than one thing at a time.

Let's get to our strategy session. Joining us, Democratic strategist Peter Fenn and Republican strategist John Feehery.

All right. What do you think about the strategy of these two presidential candidates right now in the midst of this crisis? Very different attitudes at least what they're saying in public.

PETER FENN, FORMER ADVISER TO GORE 2000 PRESIDENTIAL CAMPAIGN: I think when you look at Barack Obama, Wolf, you see someone who's calm, cool, selected who called McCain early in the morning, said let's have had joint statement. I think when you see John McCain, you sort of see a fish out of water, someone flipping, flopping on the deck. I hate to say it, but I think it's a real tough time for John McCain now. He's worried about his campaign and he thinks that he's going to get a gimmick going and a photo op, and I think it's going to hurt him in the long run.

BLITZER: John, what do you think?

JOHN FEEHERY, BLOGS FOR THEFEEHERYTHEORY.COM: I think it's a perfect example of John McCain putting the country first. The fact of the matter is Harry Reid says he wants John McCain's vote but doesn't want his vote. Everybody knows John McCain is a critical vote on this a person that can come in and save the day and get this package passed. Harry Reid says they need his vote. They need to come in and I think it's smart of him to do this. I think it's important for the country.

FENN: John, don't you think it would be smarter not to make a big statement in the middle of the day how you're going to suspend the campaign and big deal it? Why not do what exactly Barack Obama is doing which is to say call these folks every day, be there when needed and not try to play a big grandstand move.

FEEHERY: This is really important for the future of the countries. Everyone recognizes what a big deal this is and he needs -- Harry Reid said he needed him there.

BLITZER: Would it be smart for John McCain to go against the president of the United States and vote nay when it comes up for roll call? What's politically smarter for him, to go with a lot of Republicans who say this is a bailout of Wall Street, or would it be smarter for him to say I'm going to go along with Barack Obama, President Bush and what Paulson wants? FEEHERY: Politically the stock market goes down, the economy goes down, it's a disaster for John McCain. The smartest thing is to get the economy fixed.

BLITZER: Do you think that's the smartest strategy?

FENN: For both of them that was why Barack Obama said look, let's issue a joint statement. We agree on a lot of these things. Let's put it out and show nonpartisanship.

BLITZER: They still might issue that joint statement because their staffs are working according to Senator Obama on a joint statement.

FENN: There's a question of faith here, too. Six hours to return the phone call, then you have this. Instead of talking about a joint statement, you release to the press that you want to cancel a debate. John, I think it's grandstanding, I think it's a gimmick and another photo op opportunity. I hate to say it. It's not what's good for the country.

FEEHERY: I happen to be a guy that's really worried about this.

FENN: I agree.

FEEHERY: I believe John McCain can bring it together. I honestly believe that.

BLITZER: Was John McCain and his team, you believe, happy when they heard this morning that President Bush was going to address the nation tonight at 9:00 p.m. Eastern, maybe tens of millions of folks will watch his -- maybe 12 to maybe 15-minute presentation?

FEEHERY: I'm not sure. One probably not because it puts Bush in the middle of this. On the other hand, the American people need to snow the stakes on this and we have to pass this for the future of the country. So I think that they probably not a good thing but someone's got to come out and say we need to get this thing done.

FENN: I would agree with you on that. I do think he was a little worried about Bush because he wants him in the rearview mirror. Whoever wins, one of them is going to have to fund this thing.

BLITZER: Tonight the president will tell the American people the stakes involved, how dire the circumstances could be for homeowners, for people who have their life savings if the system is crippled or whatever. He's going to lay out a disaster potentially reminding people he's been in office for eight years and this is happening on his watch.

FENN: He's not going to say the fundamentals of the economy are strong I don't think.

BLITZER: This is a problem for McCain.

FEEHERY: There's no doubt about it which is why he's take a strong leadership role. You can be passive or be a leader go and fix it. This is a critical point in the campaign but also a critical point in the countries. I think it's really important that he does it.

BLITZER: You used to work on the hill. You know the house Republicans very well. A lot of them have been a little nervous when it comes to John McCain that heal, if he says I'm going to support this deal, I'm going to go along and work with the Democrats, this is what the country needs right now, will he bring along those reluctant conservatives who hate this deal?

FEEHERY: Some.

BLITZER: Most?

FEEHERY: I think he'll get more than half.

BLITZER: Does he have the influence, the cloud with those Republicans?

FEEHERY: He's the nominee and he's putting it on the line. That means they have to put it on the line. I think the majority of Republicans will follow especially if he brings Coburn and Graham and say this is extraordinarily little important for the country.

FENN: Tom Coburn called Barack Obama. That is the critical thing right now is how do you take this and move it toot next level which everybody wants to have happen. The problem I have right now is that John McCain, you know, earlier in the week, he talked about I was against the AIG bailout. Then he's for it. It's every difficult to say one day to the next.

BLITZER: He's had some stumbles right now. But you heard Senator Obama make the case, you know what? A president of the United States has to be able to multitask and not just do one thing. He says I want to be involved and try to help resolve this crisis but you know what? There's a political race and the stakes are enormous.

FEEHERY: Frankly, Barack Obama is not nearly as important to this package as John McCain. He doesn't have any of the relationships in the Senate. He's not as critical in leadership on that. John McCain needs to be in Washington.

FENN: I disagree with that because I think, look, he's running for president of the United States. He's going to have to run this thing. If he were against this, you'd have a heck of a problem.

BLITZER: I want both of you to know the bipartisan presidential commission that runs these three debates and one vice presidential debate are saying they're going ahead with their preparations for Friday night's debate in Mississippi. If in fact Obama says let's do it, the commission says let's do it, it's going to be tough I suspect support McCain to say I'm not showing up.

FEEHERY: It will be tough. No doubt about that. It's an important debate. Of course, the debate was supposed to be about national security. I guess they're going to change that too.

BLITZER: Economic security is part of national security.

FEEHERY: No doubt about it. But it was supposed to be focused on national security, war that kind of thing. I don't see any big deal why they can't move it to Monday. That's no big deal. This is important. This is the most -- legislation is the most important thing to get done so we can have --

FENN: And I think the American people want to hear from both candidates about this issue and I think if they're smarted, they'll open up this debate to economic security as well as national security.

BLITZER: I theoretically they could change the subject too if they wanted. They've been preparing for foreign policy and national security. We'll see what's going on.

Here's what the statement was from the presidential debate commission. We're moving forward with the plan for the first presidential debate at the University of Mississippi this Friday night. And, of course, if it happens, we'll be there, as well. Guys, thanks very much for that.

Laura Bush, meanwhile previously said she hoped Condoleezza Rice would wind up on the Republican presidential ticket. Now the first lady is speaking out on Sarah Palin's spot on the ticket. You're going to want to hear what she told Zain Verjee in New York today.

And both candidates say there should be a bipartisan approach to resolving the nation's financial crisis but should Friday night's first debate be postpone inside Jack and your e-mail coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Surprising day including announcement from the White House that is President Bush wants to address the American people tonight from the White House. 9:00 p.m. eastern on television, it will be right here on CNN.

Let's go to the White House, Elaine Quijano is standing by.

This was a very difficult decision I suppose for the president to make. Walk us through why did he decide that he needs to address this financial crisis tonight.

ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Well, the bottom line is, the White House feels this is an important enough situation that it deserves a primetime address to the nation.

I have to tell you I just got off the phone a minute ago with a senior administration official who had just left the oval office. The White House originally had advised that the 5 p.m. eastern hour is when they were going to try to get excerpts out. It's still going to be awhile. They want those out as fast as anyone. But we're not there yet according to the official. Now obviously all of this is taking place against a backdrop of negotiations that are taking place on the hill for the president's $700 billion financial rescue plan and on that point, a statement from press secretary Dana Perino talking first of all about John McCain's announcement that he will suspend his campaign in order to return to Washington and focus on the financial crisis saying "We welcome Senator McCain's announcement. We are making progress in negotiations on the financial market's rescue legislation but have not finished it yet. Bipartisan support from Senators McCain and Obama would be helpful in driving to a conclusion." The statement going on to say that the financial market crisis is a big problem that requires a big solution.

Now again on why this address now, the president and his team feel that the situation has reached such a crisis say the, it is now necessary for the presidents to urge Congress and to try to get the American people on board with this plan, as well. In fact, one senior official telling my colleague Ed Henry that the president tonight is really going to talk about the stakes here. In more tangible terms talking about how the administration feels that if Congress does not act this week, that it's going to have a very real world impact on things like 401(k)s, for instance, on things like college loans, auto loans.

So those are the kind of dots that the president is going to try to connect tonight. The policy arguments with the main street arguments, something that, of course, there's been a great deal of criticism on capitol hill about, lawmakers from both sides of the aisle saying the administration has not done a good enough job of explaining to the American people why this legislation is necessary.

BLITZER: Are you getting any indication, and I think I know the answer, that the president's also going to give the reasons why all of a sudden, this huge crisis with all these dire circumstances has come about? Is he going to walk back on what the failures were over the past years that allow this had crisis to develop right now?

QUIJANO: We don't have the excerpts yet but certainly the president will likely talk about how this is a situation that has developed over some time. We've heard the president say over and over again that the roots of this problem, of course, stem from the sub- prime mortgage crisis and that it is extended now not just to Wall Street, the president will try to make the argument but also to main street as well that, so-called mom and pop businesses, small businesses are going to have trouble getting their paychecks out. They're going to have trouble not just talking about business expansion but day-to-day operations. Those are the kinds of images we're likely going to hear when President Bush addresses the nation tonight.

BLITZER: 9:00 p.m. eastern. We'll have live coverage here on CNN. Thanks, Elaine for that.

The first lady, meanwhile, Laura Bush is weighing in on the Sarah Palin spot on the Republican presidential ticket. Our State Department correspondent Zain Verjee sat down earlier today for a wide-ranging interview with the first lady.

Zain, tell us what Laura Bush had to say about Governor Palin.

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Wolf, the clock's running out on the Bush administration and one woman who's become a Washington insider over the past seven years, Laura Bush, admits that she's changed. Today, Mrs. Bush talked to me about a Washington outsider and the question of Sarah Palin's experience.

(BEGIN VIDEOTAPE)

VERJEE: I spoke to you awhile back, and you said at the time that Condoleezza Rice, the secretary of state.

LAURA BUSH, FIRST LADY OF THE UNITED STATES: Was my choice?

VERJEE: Was your choice.

BUSH: For the female.

VERJEE: The vice presidential nominee or exactly or on the presidential ticket. Sarah Palin is now -- has now emerged as the choice.

BUSH: That's right.

VERJEE: Do you as much confidence in her as you did then?

BUSH: I have a lot of confidence in Sarah Palin. She's got a lot of really good common sense and I think that's very important. She also has executive experience from being a governor and a mayor and I'm thrilled to have the chance to vote for Sarah Palin on the Republican ticket.

VERJEE: Do you think she has the kinds of foreign policy experience?

BUSH: Well, obviously, of course she doesn't have that. That's not been her role but I think she is a very quick study and fortunately, John McCain John McCain does have that sort of experience.

(END VIDEOTAPE)

VERJEE: She also added that subpoena is plenty tough and would bring a new perspective to Washington, Wolf, the first lady also continues to champion things like global literacy and is working hard to push for democracy in Burma -- Wolf?

BLITZER: On that issue of Burma, Myanmar as the rulers call it, what is she saying specifically? I know this is the subject very close to her heart.

VERJEE: Exactly. A lot of people may be surprised to hear that it is a cause close to her heart. A country ruled by a brutal military regime. Here's what she says. (BEGIN VIDEO CLIP)

VERJEE: What kind of international pressure would you like to see put on Burma?

BUSH: Well, I wish every country, especially their neighbors, China and India would make a real effort to put pressure on the general.

VERJEE: How?

BUSH: I think they can do it financially and economically. They're their largest trading partners. China, because of being such a large trading partner with Burma props up the regime. The Burmese general sells gems out of Burma. Burma is a very rich country in natural resource and I think it's really important for all countries. I think that will be the best way.

(END VIDEO CLIP)

VERJEE: Mrs. Bush says even in this economic downturn, the U.S. should still continue to give other countries foreign aid and assistance for development -- Wolf?

BLITZER: Zain, thank you. Thanks for doing that.

John McCain says he's needed right now in Washington to help negotiate a plan to resolve the nation's financial crisis. Now the Senate majority leader, Harry Reid who's helping to lead negotiations is weighing in on whether he agreed with Senator McCain.

And McCain says Friday's presidential debate should be postponed. So the candidates can focus on the economy. Barack Obama says the debate should go on. Who do you agree with? Jack Cafferty and your e- mail. That's coming up. A lot more news right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Check back with Jack who has "The Cafferty File" -- Jack?

CAFFERTY: Big response to this, Wolf. The question this hour: In light of the financial crisis should the first presidential debate be postponed? That is what John McCain is suggesting and Barack Obama says, let's have the debate.

Kathleen in Oak Park, Illinois: "You are kidding, right? Senator McCain can't think that the American people and especially the all important undecided independents are naive enough to be fooled by this latest stunt," she calls it. "If McCain cannot juggle several challenges at once, what will he do in the White House? If he wants to go to Washington, locate it in D.C. study up, because America wants to know what you have to say Friday night."

David in New Jersey writes: "McCain's trying to avoid the debate because he knows he cannot handle the questions. Simple as that."

Susan writes: "Absolutely not. John McCain called off the Republican convention the day George Bush was set for the live address citing Hurricane Gustav. He chose the woefully inexperienced Sarah Palin and is now preventing the American public from hearing from her or even seeing her beyond staged photo-ops and now he wants to delay the debates out of concern for the finances of the nation? I have one question for you Senator McCain. How stupid do you think I am?"

Stan in Buffalo Gap, Texas: "Jack, absolutely the Friday night debate should take place. Under the current circumstances, the topic should be the economy and not the foreign policy. We should hear from the candidates about these dire markets and potentially affects all of us. Bring on the debates."

Eric writes: "I'm with McCain on this. There is plenty of times to debate on several days and state opinions, but now is not the time when an important crisis needs to be dealt with now. Once a plan is approved and we know what we are doing, then discuss the future."

Sam writes: "No, this is the way for McCain to sneak out of the economic issues. He knows that Obama has the lead in the polls and wants to short circuit it. Both can register their ideas for Congress without being present."

And Paul says: "Sure cancel it, but since one candidate broke and ran, it might a bit one sided. Wouldn't you say? We see now who needs the Washington comfort zone."

If you didn't see your e-mail here, you can go to the blog at CNN.com/CaffertyFile and there are hundreds posted; there are I think tens of thousands that have come in e-mails, Wolf and it is overwhelming the response.

BLITZER: Yes I know. Well, the American public is really, really involved in the story, Jack, thank you.

A dramatic development today in the presidential campaign. We want to discuss with Lou Dobbs who is standing by to give us his take on this latest developments.

And the former president of the United States, Bill Clinton, on the Republican vice presidential nominee Sarah Palin.

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

(COMMERCIAL BREAK)

BLITZER: On our "Political Ticker" today, a brand new poll of polls puts the Obama and McCain race essentially back where it was in June.

Let's look at the trend line. Obama led McCain by four points when we released the first poll of polls averaging all of the national presidential surveys. Jump ahead to September 1st, Obama led by five points just after the Democratic National Convention, but a week later McCain had a two-point edge after the Republican National Convention. By mid-September when the Dow Jones industrials plunged over 500 points, Obama and McCain were in a dead heat and now in the latest brand new poll of polls, Obama has regained an advantage and now leading McCain in the average of polls by four points. Five points that is.

John McCain is suspending his campaign as you know to return to Washington. He is also calling on Senator Obama to postpone Friday's debate, but Obama says that the debate should go on as planned.

Let's check in with Lou who has a show in an hour. What do you think about this back and forth, Lou?

LOU DOBBS, CNN ANCHOR: Well, fit, McCain has carried out a brilliant political maneuver and taken the offensive and broken through by taking on the filling the leadership void that neither the president nor these two candidates today were showing any leadership at all on this issue, and now McCain has taken it and stake it out. What is interesting is that McCain now also wants to resolve this by Monday. I hope, I hope that no one no matter what will come up with a solution by Monday, because that means that it will not be properly thought out and well considered. We are talking about, Wolf, as you understand clearly, we are talking about a decision here that could change the way that this country functions and alter the quality of life for millions and millions of Americans and there should be great deliberation.

BLITZER: What about the argument you hear from Henry Paulson and Ben Bernanke the chairman of the Federal Reserve and we will hear from President Bush in the nationally televised address at the White House to knight that you need speed right now and it has to happen in a matter of days and otherwise, who knows what will happen?

DOBBS: Well, certainly they don't know. They have demonstrated it by not being able to respond adequately to the crisis over the last year and a half. No reason to give them greater credibility now than a year ago, is there?

BLITZER: Well, that is what you say, but there are others who say, you know what, they are in a desperate situation and think have to act right now.

DOBBS: Well, they are in a desperate situation, because they have not regulated or managed the economy well to the degree that an administration can or The Fed. There is no reason to assign to them any greater understanding of this economy than anyone else who has looked at and studied this economy over the course of several decades. The reality is, this is an economy that will be altered I think irrevocably if we permit the nationalization of Wall Street.

And we have to consider what we are doing to working men and women and the quality of their life here, because they will be affected.

We have an opportunity, in my judgment, Wolf, in this crisis to return to prudence, to constraint and responsibility, and to eliminate the excess and the greed that has reached such obscene levels on Wall Street. They should not be rewarding -- this government should not be rewarding that access and that greed. They should be, in point of fact, ridding this culture, this society, and this economy of it.

BLITZER: All right. Lou, stand by, because we're going to see you in one hour.

DOBBS: You have got a deal.

BLITZER: Thanks very much.