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CNN NEWSROOM

Deal or No Deal? Rescuing a Financial Rescue; Interview With Ron Paul; Obama/McCain Face-Off on for Tonight

Aired September 26, 2008 - 14:00   ET

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


(BEGIN VIDEOTAPE)
KYRA PHILLIPS, CNN ANCHOR (voice-over): Deal or no deal? Negotiating or grandstanding? All or nothing? Or what?

All we know is nothing is clear on a Wall Street bailout.

UNIDENTIFIED MALE: Bonehead ideas? If dealing with generational welfare is a bonehead idea, then I guess I am boneheaded.

PHILLIPS: You heard it here first, pay the poor to tie their tubes. And did you ever sound off. This hour, your thoughts on an idea many consider unthinkable.

UNIDENTIFIED FEMALE: We asked people to buy barrettes (ph) so we can save lives in Africa.

PHILLIPS: A small girl with a big plan saves millions of people her age and younger from dying of a mosquito bite.

(END VIDEOTAPE)

PHILLIPS: Hello, everyone. I'm Kyra Phillips at the CNN world headquarters in Atlanta. And you're live in the CNN NEWSROOM.

So much happening right now. We're going to start at Ole Miss and the U.S. Congress, American institution at the center of a story that you'll your grandkids about.

Here is what we know right now.

Tonight's presidential debate is a go now that John McCain has decided he may not be needed in Washington after all. At the Capitol, lawmakers are back to square two, let's say. The financial bailout blueprint we thought was settled on this time yesterday is in tatters, but more high-level talks are set for this afternoon.

Stay tuned.

The bailout went belly up in a disastrous meeting at the White House, and this morning President Bush stepped out briefly to say he understands lawmakers' sticker shock, but he sees little alternative right now.

(BEGIN VIDEO CLIP) GEORGE. W. BUSH, PRESIDENT OF THE UNITED STATES: There are disagreements over aspects of the rescue plan, but there is no disagreement that something substantial must be done. The legislative process is sometimes not very pretty, but we are going to get a package passed. We will rise to the occasion. Republicans and Democrats will come together and pass a substantial rescue plan.

(END VIDEO CLIP)

PHILLIPS: Well, at least they are talking, and for the moment that passes for progress on Capitol Hill. And it brings us to CNN's Brianna Keilar.

Brianna, any other signs of progress?

BRIANNA KEILAR, CNN CORRESPONDENT: One of the big signs of progress here today, Kyra, is that House Republicans appointed Republican House Whip Roy Blunt...

PHILLIPS: Brianna, if you can hear me, we are having an issue with your mike. Is your mike -- do you have a mike?

Yes, we're having an issue with the mike. All right. We're going to try and fix that right now. They're working it. We're going to see if it's working right now.

Brianna, let's try once again. Can you hear me, Brianna?

Nope, now we lost it. Let's try it again. It's OK. We're still working it.

All right. We're going to try and get Brianna linked up again. Sorry about that. It's always tough there sometimes to get the mikes coordinated on the Hill.

But who best on the issues, Barack Obama or John McCain? Let's talk about that for a minute.

Americans have some very clear opinions, and we're going to show you in a new CNN/Opinion Research poll. Obama has big leads on health care and the economy; McCain on Iraq and terrorism. And when asked who will do a better job in the presidential debates, 59 percent say Obama, 34 percent say McCain.

Now, at the University of Mississippi, the countdown is on. There is no time to waste getting ready for the McCain/Obama debate.

We're going to go Suzanne Malveaux in just a second from Oxford, Mississippi. Meantime, we're going to take you back to Brianna Keilar, on the Hill.

I think we got the mike fixed, Brianna. Go ahead and bring us up to date on where the heck this decision or lack thereof on a bailout plan stands.

KEILAR: Yes, sorry about that, Kyra. PHILLIPS: That's all right.

KEILAR: Well, there are some signs of progress here on Capitol Hill; namely, that house Republicans have appointed Republican House Whip Roy Blunt to do their bidding. It seemed as of last night that House Republicans were a bit of a ship without a captain, and with Blunt at the helm, the anticipation is that that will not be the case.

We also understand here shortly, at 3:00 p.m. Eastern, Blunt will be meeting with other represents on the bailout negotiations -- Senate Republican, Senate Democrat, House Democrat, and that they will be getting together possibly with others to be talking about a negotiation. This coming after House Republicans huddled this morning to talk about an alternative proposal.

Here is what Blunt said about moving forward in negotiations.

(BEGIN VIDEO CLIP)

REP. ROY BLUNT (R), MINORITY WHIP: Clearly, the Democrats have a majority in both houses of the Congress. If they want to do this by themselves, they can do this by themselves any minute they want to. If they want to do this with us, we are prepared to have that negotiation. I am eager to be part of that negotiation.

(END VIDEO CLIP)

KEILAR: So here is what House Republicans want that they aren't seeing in this sort of consensus package between Democrats and Senate Republicans.

One of the major things they want is to see capital gains tax decreased, to infuse the financial markets with private investment dollars instead of taxpayer dollars. They feel like that allows more of a taxpayer protection.

Democrats have said that this has to be a bipartisan bill, and you may have heard the Democrats presumably have enough votes to push this thing through Congress. Democrats say they are not doing it without getting Republicans on board. And now we are hearing from Republicans -- in fact, I just ran into Congressman Jeb Hensarling, who is pushing this alternative plan in the House. And he said there has to be negotiations in good faith with the House Republicans. The bill now, this consensus bill, he said, will not pass unless there are good faith negotiations -- Kyra.

PHILLIPS: All right. Brianna Keilar from Capitol Hill there.

Thank you so much.

And just as I was listening to Brianna there, a couple of numbers that I got sent over to me from the CNN/Opinion Research Corporation poll. These are the newest poll numbers that we have received.

The most important issue to your vote, voters right now saying the economy, 56 percent. And look at this -- Iraq, 10 percent. It's interesting. About a year ago those numbers were much higher when it came to the war on terrorism and the war in Iraq. Now the economy right now at the top of the list, 56 percent.

Another Opinion poll we were getting with regard to the economy, we mentioned right now 56 percent. Back in October, it was only 22 percent. So it's interesting to see the rise obviously in light of everything that's been going on right now.

Now, one House Republican says that the government is trying to fix a problem that government created using the same ideas that actually created it. OK. He is not just any House Republican. He's Ron Paul, congressman from Texas, former candidate for president, and a giant among supporters of limited government.

Congressman, good to see you.

REP. RON PAUL (R), TEXAS: Thank you. Nice to be with you.

PHILLIPS: Boy, a lot of drama going on, wouldn't you say?

PAUL: Oh, yes, a lot of excitement. I wish it weren't so serious and we could have a little bit of fun, but it is very serious. There's no doubt about it.

PHILLIPS: Definitely. And my question to you is, this bailout plan, I mean, should the government even be stepping in? Is it lawmakers' responsibility to bear the brunt of this?

PAUL: Oh, no, it isn't. There's a responsibility of government when there are problems like this. Sort of like after Enron, there was a responsibility, but the responsibility was assumed by the state of Texas. A lot of fraud went on, and the people who committed fraud ended up in jail. And the market dealt with the rest.

The company was essentially bankrupt. They had dealt with derivatives. And the company went bankrupt and the stock went to zero. So that's a good way to handle it.

And Lehman Brothers was handled the same way, and there's still some products left in Lehman Brothers. And it's going to be bought up by stronger hands. That is the important thing, that the liquidation of that investment, bad debt, gets over with. The quicker, the better.

But when people make mistakes, it's not the responsibility of the government to go in and buy these assets that have no value. But the mistakes were made because of so many contributing factors by the government, and particularly the Federal Reserve system.

PHILLIPS: Well, let's talk about who really is at fault here. I mean, I had and a chance to interview an FBI investigator yesterday. His job basically is to investigate corruption on Wall Street. And he said look, there is no simply no oversight.

The SEC is not doing its job. Other commissions are not doing the jobs. Because when it comes to these high-powered companies, high-paid CEOs, and lots of money, that they are the ones giving big donations to the individuals that are supposed to be keeping an eye on them. And they just don't want to touch it.

PAUL: Well, it shows that the system doesn't work. So basically, the preemptive strike of a regulator essentially never works. It didn't work to protect us against Enron, but the laws against corruption did work. I mean, they committed fraud and they were convicted.

So, I'm not a regulator. I'm a regulator due to the market, but not by bureaucrats who can be bought off.

PHILLIPS: So, Congressman, what do we do? If the answer isn't regulators, how do you prevent this type of fraud and corruption, and an economic meltdown like the one we are seeing now where taxpayers are suffering tremendously?

PAUL: Well, they haven't yet. They only suffer because the government has been too much involved in devaluing their currency, and now they want to devalue their currency more. So the most important thing is not to stick it on the taxpayer.

What we want to do is to get out of the way and let the liquidation of debt occur. We are unfortunately doing the bad things we did in the early 1930s. We wouldn't allow the market to adjust.

Prior to that, we had recessions, but they were never long lasting. Now, since we've adopted this principle of regulation and trying to patch together inflated bubbles, it doesn't work. It just prolongs the agony, and this is what we're doing now. Instead of a quick correction, what we are going to do is have a situation that's going to last not a year, but maybe a whole decade.

PHILLIPS: Real quickly, will we see a bailout plan signed off on before the next president takes office? What do you think?

PAUL: Yes, I'm pretty pessimistic, so I would say they're going to pass it. Yes, they're going to pass it. They've already spent $700 billion, and that's a drop in the bucket. And they want another $700 billion.

They originally asked that it not be reviewed by any court. They're very, very bold, and they're socializing this nation and bankrupted this nation. They're going to destroy the dollar before it's all over if we don't take this in hand.

PHILLIPS: Congressman Ron Paul.

Always interesting to talk to you, sir. Appreciate it.

PAUL: Thank you.

PHILLIPS: Live pictures now. John McCain, I'm being told, arriving in Memphis, Tennessee. As you know, he's on his way to Oxford to participate in the debate with Barack Obama, as we watch these live pictures of the presidential candidate arriving there at the airport.

Back at the University of Mississippi, as you know, the countdown is on. There is no time to waste, obviously, getting ready for the Obama/McCain debate.

Suzanne Malveaux joins us now live from Oxford.

Suzanne, as we watch these live pictures of the senator's plane arriving there in Memphis, tell me what's happening there on campus. I bet a lot of relieved people that the $5.5 million that's been invested in this debate tonight now hearing it's going to go off, hopefully without a hitch. Good news to everybody there.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Oh, I mean, absolutely. I mean, this is a campus and really a community in Oxford that was turned upside down the last 24, 48 hours, really in limbo just wondering what was going to happen next.

There is a great sense of relief here. There's even a campus party that is going on. You might hear a little bit of music behind me in an area called The Grove.

And what is expected this afternoon? In about 30 minutes or so, 2:30 Eastern Time, Barack Obama is actually going to be going to the hall that is right behind me, he is going to be walking the stage, getting a sense of the floor, the format there, the podium, checking things out to his satisfaction.

And then John McCain, you saw those pictures of John McCain. He's going to be coming here as well about 4:00 p.m. Eastern, doing very much of the same. And then Jim Lehrer, who is the host from PBS, he's going to be sitting at his desk, essentially between those two podiums, getting his crew and those last-minute technical changes.

As you know, everybody was really on pins and needles the last 24 hours, and I had a chance to ask the chancellor of the university, what does this mean to campus, to the students here? It is not just a financial investment, but also an emotional one as well. Take a listen.

(BEGIN VIDEO CLIP)

ROBERT KHAYAT, CHANCELLOR, UNIVERSITY OF MISSISSIPPI: It's hard to measure the value of the debate, but the fact that all of the -- you all, the media people of the world are here, the two presidential candidates are here. The spotlight is on a Deep South university that has come from the dark past of the days in the '60s to where we are today in 2008. It gives us an opportunity to be presented to world and to the nation today. And we love that opportunity.

(END VIDEO CLIP)

MALVEAUX: So Kyra, really a sense of Ole Miss, University of Mississippi to turn the page, if you will, in history, turn the corner there and project themselves in a very optimistic way. This is going to be a unique situation tonight, this event, this debate. It's going to be eight different segments about 10 minutes a piece. And what the moderator is going to do is he's going to start off and ask each candidate a question. They get two minutes to respond. And then there's a five-minute kind of back-and-forth free- for-all, if you will. The two candidates can go after each other if they choose to during that five-minute period. Obviously, the moderator will facilitate that.

So it should be very interesting, this kind of free-forum, freewheeling format that we're going to see between these two candidates. We will see if there's any kind of sparks that are going to fly this evening. A. lot of excited people here tonight though.

PHILLIPS: All right. Suzanne Malveaux live there in Oxford, Mississippi. We definitely will be watching tonight.

Appreciate it.

In the meantime, principles and politics and the battle over a bailout. You can't judge the players by their party labels, and you can't take much of anything to the bank.

And Sarah Palin on the spot. The vice presidential nominee defends herself on the foreign policy issue before a national TV audience.

(COMMERCIAL BREAK)

PHILLIPS: Live pictures now of John McCain arriving in Memphis, Tennessee, as you know, giving way -- or preparing to head to Oxford, Mississippi, for the debate with Barack Obama tonight, 9:00 p.m. Eastern, right here on CNN, about six hours and 42 minutes away. We know that all of you are going to be staying home tonight on this Friday night to watch the debate.

You can see there John McCain and his wife Cindy loading the campaign McCain bus, headed to Oxford for that debate. A little bit of a drive ahead for them.

Well, if you thought that politics and high finance were boring, just add them together and throw in a presidential race, mix it thoroughly, if I can say that, and just stand back while we wait to see what's next in the bailout battle on Capitol Hill.

Let's check in with CNN's Gloria Borger. She's in New York.

Whew, it's hard to spit that out. Too many alliterations there, Gloria.

GLORIA BORGER, CNN SR. POLITICAL ANALYST: Hard to watch it.

PHILLIPS: I tell you.

BORGER: Hard to follow this thing.

PHILLIPS: I know. It's like things just keep changing. I mean, drama after drama after drama.

What are you thinking about right now as you just watch all of this unfold?

BORGER: You know what I am thinking about right now? I am thinking about that picture you just showed about John McCain walking down the steps, getting ready to do this debate.

Obama has been preparing for the debate for a few days. He did interrupt his preparations to fly back to D.C. for the night last night, but McCain has really not been doing a lot of preparation for this debate.

Clearly, his staff believes that on foreign policy, which is what the bulk of this debate is supposed to be about, that McCain doesn't need a lot of prep work. That's his clear area of expertise.

But I am thinking, how are they going to talk tonight about what's going on in Washington? Will John McCain say that he stepped in and will go back and be the responsible one to broker a deal, and that Barack Obama only came when called?

How are they going to play out what was going on in Washington, what went on in that meeting with the president? And will each of them commit in this debate tonight to a solution? We kind of know where Barack Obama is, but we really don't know what McCain is going to sign on to yet. He's left that very much an open question.

PHILLIPS: Interesting. So this was supposed to be about foreign policy, and that basically has been the question this afternoon. OK.

McCain is going, he's headed there. The debate will happen.

Well, will they stick to foreign policy, or will everything be turned around and they will only be talking about the economy? Probably a little bit of both, yes?

BORGER: Oh, absolutely. I mean, Jim Lehrer is a journalist. He's been quoted publicly saying look, you know, of course, you have got to be ready to do the economy at the top of this debate. And I guarantee you it's going to come in right out of the box. I can't imagine how you wouldn't have those two guys standing together and not talk about what the American public is thinking about.

PHILLIPS: Well, when you think about foreign policy, a lot of people are talking about, OK, we want to see the Joe Biden and Sarah Palin debate. Are you even hearing buzz about that at this point?

BORGER: Well, no, not yet. We will. We will next week.

Obviously, you have been showing the clip of Sarah Palin's interview with Katie Couric, and it was so interesting or the me to watch that, because when we saw Sarah Palin come out of the box at the Republican convention, she was full of energy, she was a terrific public speaker, she was full of self-confidence. And what I saw in that clip with Katie Couric was somebody who has probably been given all of the talking points she needs, somebody who is afraid to stray off of any point for fear of making a mistake.

PHILLIPS: You are talking about when Sarah Palin made speeches, Gloria, not the interview itself?

BORGER: Well, that's right.

PHILLIPS: She came across a different person, it seemed, in the interview.

BORGER: Well, she did. And she has lost whatever self- confidence I think she has had, she had to start with. Because I think, in fact, that their strategy was to keep her away from us until they got her up to speed, but they kept her away so long that they have done her a disservice, because the more you do interviews, the better you are at doing interviews. And so I don't think they really helped her out a bunch, and now the spotlight is really going to be on her at that debate.

PHILLIPS: That's interesting. That came up in our editorial meeting. One of our producers said, you know, they should have started her maybe with a smaller paper, or a smaller station, and then moved her up to the networks.

BORGER: Yes.

PHILLIPS: It's interesting to watch.

Gloria Borger, thank you.

BORGER: Yes, it is. Sure.

PHILLIPS: Well, Sarah Palin's lack of foreign policy experience, that's just one of the big issues that critics have blasted her on since she was named John McCain's running mate. In one of her few interviews with the media, Palin sat down, as you just saw there and heard -- Gloria and I were talking about it -- with "CBS Evening News" anchor Katie Couric, and the foreign policy issue was definitely a key question.

(BEGIN VIDEO CLIP)

KATIE COURIC, "CBS EVENING NEWS": You cited Alaska's proximity to Russia as part of your foreign policy experience. What did you mean by that?

GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: That Alaska has a very narrow maritime border between a foreign country, Russia, and on our other side, the land boundary that we have with Canada. It's funny that a comment like that was kind of made to -- I don't know, you know, reporters.

COURIC: Mocked?

PALIN: Yes, mocked, I guess that's word. Yes.

COURIC: Well, explain to me why that enhances your foreign policy credentials.

PALIN: Well, it certainly does, because our next-door neighbors are foreign countries. They are in the state that I am the executive of.

COURIC: Have you ever been involved with any negotiations, for example, with the Russians?

PALIN: We have trade missions back and forth. We do. It's very important when you consider even national security issues with Russia. As Putin rears his head and comes into the airspace of the United States of America, where do they go? It's Alaska. It's just right over to border.

It is from Alaska that we send those out to make sure that an eye is being kept on this very powerful nation, Russia, because they are right there. They are right next to our state.

(END VIDEO CLIP)

PHILLIPS: Now, like all politicians, Sarah Palin is fair game for the late shows and the comedians, and she is catching plenty of ribbing. Check out what Chris Rock had to say on CNN's "LARRY KING LIVE."

(BEGIN VIDEO CLIP)

CHRIS ROCK, COMEDIAN: I don't know. She has done three interviews, and she is running for vice president of the United States?

Jason Lee has done more interviews promoting, you know, "My Name is Earl." She has to run for -- I did more interviews today than she has to run for vice president of the United States. And every time they let her talk for more than four minutes, you actually start feeling sorry for her. It's kind of like Kim Kardashian on "Dancing With the Stars." It's like, all that ass and can't shake it. It's -- it's just like, so sad.

(END VIDEO CLIP)

PHILLIPS: Well, you want to be right here at CNN next Thursday night when Palin does go head-to-head with Joe Biden in the vice presidential debate. And I am not laughing about that, I promise. I am laughing at Chris Rock. He just never holds back.

Well, straight ahead, crisis. A lot of people aren't convinced that the sky will fall if a bailout doesn't pass. We're going to clear the air with Paula La Monica of CNNMoney.com.

And Washington Mutual, meet chase. Another spectacular bank collapse means another addition to the JPMorgan family. We're going to see what it means for you.

(COMMERCIAL BREAK)

(WEATHER REPORT)

PHILLIPS: Right now, 2:29 Eastern Time. Here are some other stories we're working on in the CNN NEWSROOM besides weather with Chad.

It's no longer up for debate. John McCain says he will be in Oxford, Mississippi, tonight to face off with Barack Obama. Senator McCain says enough progress has been made on the financial bailout, so he feels comfortable doing the debate now.

And that might come as a surprise to other lawmakers taking part in bailout talks. CNN's Dana Bash says that from everything she is hearing on Capitol Hill, little headway has actually been made.

Meantime, lots of folks are furious over the $700 billion proposal and they are taking it to the streets. These pictures are from Pasadena, California, protesters are also -- protest, rather, are also taking place in some of the nation's biggest cities like New York and L.A. The Reverend Jesse Jackson is helping lead a protest today in Washington, D.C.

All of this fuss over a bailout has a lot of people wondering, why? It was the talk of our morning team meeting up on the sixth floor. Here is a little inside look.

(BEGIN VIDEO CLIP)

TENISHA, EXECUTIVE PRODUCER: (INAUDIBLE) little shot out to Scotty (ph), but he had a good point yesterday. So what? So if they do not agree on the $700 billion bailout? So what? What happens?

VALERIE, PRODUCER: This is unprecedented and I don't think anybody really knows. So it is a guessing game.

JIM, LEAD WRITER: Until yesterday afternoon it was all, you know, dickering over the details. They were all in the same ballpark. Now you've got two totally different things. And the thing from the House Republicans -- nobody is quite sure what it means.

PHILLIPS: Let's say what happens if there is no deal? If there is no bailout plan, if it does not go through, what does that mean for you, what does it mean for big business, what does it mean for financial institutions?

DENNIS, ASSOCIATE PRODUCER: Would we like to bump in perhaps -- we have all of these protests from New York, we've got San Francisco and we also got Los Angeles. So I think it might be worth looking into. There is great sound from all of these.

PHILLIPS: Maybe Ed Henry and La Monica from CNNMoney.

(CROSSTALK)

TENISHA: I guess La Monica would be good on the what would happened if we don't get --

(CROSSTALK)

PHILLIPS: Ed could be the political and then La Monica could do the money side of things.

(END VIDEO CLIP)

PHILLIPS: So, there you have it. An inside look at how we came up to book our resident money man, Paul La Monica from CNNMoney.com.

Did you hear that Paul? You had lots of ooh, Paul La Monica.

PAUL LA MONICA, CNNMONEY.COM: It's very, very flattering, Kyra.

PHILLIPS: All these women talking about you.

LA MONICA: My wife will be jealous.

PHILLIPS: She is a lucky woman.

All right. So what do you think? Will the economy really fall apart without a bailout plan? Put it in perspective for us -- what does it mean for all of us, the taxpayers, not just big money business?

LA MONICA: Right. Where I think the risk of having a real, major downturn in the economy, worse than what we have had already if there is no bailout, is -- simply put -- it is getting tougher and has been tougher in the past few months for many people, even quality borrowers, to get loans. And if we don't have a bailout, banks are going to be increasingly unwilling to lend to each other, which means they'll be unwilling to lend to corporations, small businesses, big businesses and that trickles down eventually to the average consumer.

We had a story on CNNMoney.com yesterday where our main financial services reporter talked to five banks of different sizes, and they all said that, yes, they are looking a lot more closely at credit scores and income, and things of that nature before deciding whether or not to give someone a loan.

PHILLIPS: You know -- I interviewed an FBI investigator that -- we were calling it CSI Wall Street -- and it was interesting what he said, Paul, just about the SEC and oversight and the lack thereof, and that nobody wants to touch institutions with so much money, even the SEC, because it could be political backfire -- a lot of political backfire due to donations, et cetera.

Do you think this is finally the moment where things are going to have to change? That you cannot, you know, pay off your buddies and make donations and that, you know, the government is going to have to do its job with regard to oversight?

LA MONICA: I think that possibly could happen. There has been a lot of criticism of some of the regulatory agencies for being lax in the past few years. And I think the SEC has taken the brunt of that with obviously John McCain calling for the SEC head's, Christopher Cox's, job. And I think that what we will probably see, going forward, is that even though a lot of people are angry about a potential for a bailout, what is probably going to happen, bailout or no bailout, is you're going to see the government really pay even closer attention to what is going on with banks and Wall Street firms, the few Wall Street firms that still remain that is.

PHILLIPS: Yes, that's interesting that you say that again because in the meeting a lot of people were saying, you know, folks don't realize what they're really upset about. They're upset about a bailout because it is a lot of money, but they sort of fear what could happen if there is not a bailout plan.

So if there is not a bailout plan, how bad could it get?

LA MONICA: Yes, without a bailout, again, not to beat a dead horse, it will really probably work itself out in terms of banks not lending as freely as they have in the past. And when that doesn't happen, it makes it harder for businesses to expand and hire and we have already seen more than 600,000 jobs lost this year. It will get worse than that, unfortunately.

The unemployment rate at 6.1 percent is rising. And that is not a good sign. But it is still historically low. So we could see a big spike in unemployment if banks don't lend to the businesses out there that are hiring many people around the country.

PHILLIPS: Paul La Monica, thanks so much. I hope your wife is happy with the segment.

LA MONICA: I'm sure she will be. Thanks, Kyra.

PHILLIPS: All right. We'll see you next week.

LA MONICA: Thank you.

PHILLIPS: Well prosecutors say that the longest serving Republican senator had all kinds of work done to his house in Alaska. And today, the people who actually did the work are on the stand in his corruption trial. They say Ted Stevens kept them very, very busy.

He has been called an idiot, a racist and that was before he aired his controversial idea nationally with us. Tons of reaction pouring in on our interview with this state lawmaker. We're going to check your comments on the welfare sterilization plan.

(COMMERCIAL BREAK)

PHILLIPS: Well, another new extreme in the money crunch. Washington Mutual now owns the dubious title of biggest bank collapse in history, by far. The Feds took the company over last night and JPMorgan Chase promptly promptly bought it for the bargain price of $1.9 billion. WaMu, as it is called, had assets of more than $300 billion, but it lost big on bad mortgages and depositors wanted their money. As part of Chase, WaMus branches and business transactions should carry on as usual.

Well, stocks rallied yesterday on the belief that lawmakers were close to a bailout agreement. But today's session sees a new chapter in the U.S. financial crisis. Susan Lisovicz at the New York Stock Exchange with more on how the market is holding up.

Susan, we have been talking so much about what could happen if a bailout plan is signed, and what could happen if not. And both are making all of us nervous.

SUSAN LISOVICZ, CNN CORRESPONDENT: And that is exactly what we are seeing play out here. You know, we really were fearful that this could be a ferocious selloff today. The futures were indicating it was going to be a tough open. We did see stocks fall. The Dow is down triple digits, but quickly gained ground.

The president came on minutes after the opening bell saying, we get it. We know that some sort of rescue has to be crafted. And it will be crafted. And we eventually heard from congressional leaders from both sides of the aisle. And that may have been one of the factors, really, that is providing the market with some sort of grounding.

Having said that, really doing nothing right now. And I'm not only talking about the point moves; I'm talking about the volume, this astonishingly light volume. And that all points to the fact that Wall Street is waiting on Washington.

In the meantime, of course, there is big news. You mentioned the seizure of Washington Mutual, certainly reinforcing the fears about the credit crisis. Washington Mutual shares are worth 16 cents right now. And most financial stocks are down. And there are fears about others that could be in trouble very soon.

National City clearly seen as a potential victim. Right now its shares are down 28 percent. This is a Cleveland-based bank. It had a lot of exposure to real estate in Michigan and Florida and California. There have been a lot of problems in those areas.

Shares of Wachovia also getting hammered. Wachovia shares right now losing one-third of their value.

The major averages -- not nearly as bad. In fact, not a whole lot of anything. The Dow is down seven points. The Nasdaq is down 21. And we are still waiting on Washington, Kyra.

Back to you.

PHILLIPS: OK. There it is. The famous line, waiting on Washington.

Susan Lisovicz, I think we'll be waiting for a while. Talk to you soon.

LISOVICZ: You're welcome.

PHILLIPS: Well let's do a little court TV here. First up, Alaska senator, Ted Stevens. He is accused of taking hundreds of thousands of dollars worth of free stuff and home improvements and not reporting it in exchange for political favors. On the stand today, well, the employees of an oil services firm who said they spent 10 hours a day, six days a week, remodeling Stevens' home. Defense lawyers blame the head of that firm for this legal mess, saying Stevens was in the dark about the renovations.

One of the guys who packed heat during O.J. Simpson's confrontation with two memorabilia dealers is on the stand today. Michael McClinton has (ph) admitted in the past that Simpson has asked him to bring guns. Simpson and a co-defendant have pleaded not guilty to robbery, kidnapping and other charges stemming from six tense minutes last year in a Las Vegas hotel room. Prosecutors say they plan to rest their case today.

She is just a little thing trying to make a huge difference.

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KATHERINE COMMALE, 7-YEAR-OLD SAVING FAMILIES: If they don't have a bed net, the mosquitoes will get them and they will have a very bad disease -- malaria. It's called malaria.

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PHILLIPS: That's right, it's called malaria. A 7-year-old working to help other children and families an ocean away. She and mom join us next.

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PHILLIPS: Well, for only 10 bucks an entire family can be protected against a deadly disease. When a 5-year-old girl in Pennsylvania and her mom heard about that, they sprang into action. Katherine Commale and her mom Lynda went to work collecting money for mosquito nets for countries plagued by malaria. Katherine and her little brother built displays to get people to donate to the United Nations "Nothing but Nets" program. Displays just like this one. And over the past two years, the now 7-year-old Katherine and her mom have collected thousands of dollars for the cause. They join me live from New York.

Hi, Katherine. Hi, Lynda.

K. COMMALE: Hi.

LYNDA COMMALE, HELPING PREVENT MALARIA: Hello.

PHILLIPS: It is so great to see you both. Katherine, let's start with you. Tell me how you came up with this idea.

K. COMMALE: Well, my mom told me a little bit about it. She watched a program on PBS the last night and she told me all about it at breakfast time.

PHILLIPS: Wow. So what did you learn? What did you learn about Africa and malaria and how mosquito bites can kill people?

K. COMMALE: Well, every 30 seconds a child dies from malaria. And I said, mom, we need to send some bed nets.

PHILLIPS: So, how did you know that nets would help? Did you learn about that through the program and through your mom?

K. COMMALE: Yes.

PHILLIPS: OK. Very good.

All right, so, mom, what did you think when your daughter came to you and said, let's do this?

L. COMMALE: Well, I was thrilled, because after seeing the program and learning what I had learned, especially every 30 seconds a child dies from a disease, first of all, that can be prevented and that can be cured, I was thrilled that she wanted to do something.

And, she literally wanted to do something right then at the breakfast table. So, as quickly as we could, we went to our church and said, hey, we want to start teaching people about bed nets and start sending them and start saving lives. And that is just what we did.

PHILLIPS: So tell me about building this display, Katherine, with your brother. How did you create it? How did you make it? What did you make sure that it had? And how have been you using it with classmates?

K. COMMALE: Well, it is an African hut, and we made it out of cardboard and like tissue paper to make water and fire. Then we made a little bed and some of my Barbie dolls were African people, and we also had a bed net.

PHILLIPS: Wow. Katherine, why do you think it is so important to do this and to try and help people that you don't even know?

K. COMMALE: Well, it is sad that every 30 seconds a child dies, so we have to send some bed nets.

PHILLIPS: And what do your friends say to you? What do your classmates say to you?

K. COMMALE: Great job.

PHILLIPS: They are very proud. Katherine (sic), did you ever know that your daughter had it in her, that she was such an entrepreneur and such a charitable person?

K. COMMALE: No.

PHILLIPS: OK. Katherine says mom had no idea.

Mom, did you have any idea?

L. COMMALE: I definitely did. I really think that it's about leading by example. Katherine saw that I was upset about what I had learned about malaria and she knew I wanted to do something, too. And I think together, as a team, we have just been able to do just such extraordinary things. And we're just so proud that we've been able to send over 6,000 nets to families just like us, that just unfortunately cannot afford then.

So I am just so proud of her. And I really believe that anyone can do this. We need to listen to our children, especially when they say, let's do something, let's help, because they can.

PHILLIPS: They can, and look at what she is doing.

Katherine, do you have another project in mind? DO you have another idea?

K. COMMALE: We also, me and my friends, make bed net certificates that we usually sell at like holidays, and you can get it for a family member at Christmastime or Easter. So we also do that.

PHILLIPS: What a great idea.

And so, Lynda, real quickly, is there a Web site? Or, how do we do this?

L. COMMALE: Well, your best bet is to visit the -- what's the web page, Katherine?

K. COMMALE: Nothing but nets.

L. COMMALE: Nothingbutnets.net. And Katherine's picture is up there and we encourage people to buy a bed net or --

K. COMMALE: Two.

L. COMMALE: Or two.

PHILLIPS: I love it. You've got it down.

L. COMMALE: Go ahead and take a look and learn a little more.

PHILLIPS: Well we sure were impressed.

Katherine Commale and Lynda, thank you so much for your time.

Katherine, we are so proud of you.

K. COMMALE: Thank you.

PHILLIPS: You're so welcome.

L. COMMALE: Thank you for your time. Thank you.

PHILLIPS: Oh, it is our honor. Thanks, Lynda.

L. COMMALE: You're welcome.

PHILLIPS: And to find out how you can impact your world and help with programs like this, you can just click on to our Web site, that's at CNN.com/impact.

Well, cost cutting by tube tying? This lawmaker floated a controversial sterilization plan and you guys have lots to say about it.

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PHILLIPS: Well it's a story that we brought you yesterday that has drawn loads of your comments. And for anyone who missed it, there is a state lawmaker in Louisiana who floated the idea of paying poor women to have their tubes tied. Well, I had lots of questions for him when he agreed to join us live.

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PHILLIPS: John, let's get right down to it. Paying a woman $1,000 to tie her tubes, was this your idea and who else was involved in this brainstorming situation?

JOHN LABRUZZO (R), LOUISIANA STATE HOUSE: Well, in my office, of course, we are trying to deal with the problem in Louisiana, in particularly, but the problem with generational welfare where -- that is becoming a big problem. And you saw that in the evacuations of the storms where these people were totally reliant on the government to handle their issues of evacuating from an imminent storm. And that is just a snapshot of what the problem is with these people being totally reliant on government to handle every issue.

PHILLIPS: You are also getting written about from all over the country and I know you've been getting a number of calls, we've even gotten a number of calls. This quote coming from the "Times- Picayune," your local paper from September 5th, an editorial saying that you are, "... the Jessica Simpson of the Louisiana legislature, known for boneheaded ideas. There's nothing funny about resurrecting heinous ideas, the same ideas that led to forced sterilization of the poor and the mentally ill, disabled in this country. It's also an idea that Nazi Germany carried to a horrible extreme.

What do you think about the criticism that you're getting?

LABRUZZO: Well, whenever somebody has the brass to stand up and say, hey, look, this is a problem -- generational welfare is a problem -- the people on the other side, politically, they realize that that is their voting base, and they don't want anybody messing with appointing or shining the light of day on the problem of these people don't want to solve the problem on the other political side because this is their voting base. So those are the people that you're getting the criticism from.

Boneheaded ideas -- if dealing with generational welfare is a bone head idea, then I guess I'm boneheaded. I don't think this would have made it to drafting and legislation. But of course, the media wants to have ratings and this is what they want to talk about instead of talking about the issue which is how do we get fewer -- more people from welfare --

(CROSSTALK)

LABRUZZO: -- excuse me -- from welfare on to paying taxes and being productive members of society. And it is better for them and better for everybody involved. That is the point. That is the point.

PHILLIPS: But isn't that education, isn't that creating jobs, isn't that really getting into your community and trying to help the people versus saying, tie your tubes, we will pay you 1,000 bucks? Why not take these people and say, hey, we have jobs here, we got better education here, let's put money -- hey, I lived in New Orleans and worked in New Orleans and it is a shame the condition that so many of the schools are in and how much money is divided in this city. You have the power to really make change there. Instead of paying people to tie their tubes, you could put that money into incredible educational opportunities.

LABRUZZO: All of those things are on the table and we're talking about all of these opportunities. And once again, in Louisiana, we had a tremendous influx of illegal aliens, so that is bringing down the economy even more. That is another issue that some of my opponents on the other side of the aisle don't want to bring up. They don't want to talk about it.

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PHILLIPS: By the way, Labruzzo also supports paying men for vasectomies as well.

Now a lot of you got worked up about the segment and you e-mailed us. We got a lot of e-mails like this from Lisbeth: "The legislator from Louisiana represents an attitude that has cost our countries millions of dollars through the failure to fund education, job training and other programs to help move people out of poverty. I would suggest that we consider paying the legislature $1,000 to have a vasectomy."

Christopher e-mailed this: "Is he for real with his 'these people' statements? His thoughts on generational welfare are just another way of singling out one group of people and making them a target for a racist platform."

And though the majority of you who wrote us were outraged by the Louisiana representative's idea, a couple of your e-mails were positive.

Jenny wrote this: "I think it is a great idea. I live in a town where 70 percent of the people are on welfare and we have teens in high school that are getting pregnant on purpose to give the child to their mother to be able to obtain more money from the government."

Thanks to all of you for writing us.

The 3:00 p.m. edition of NEWSROOM with Rick Sanchez starts after a quick break.

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