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Monster Rebound on Wall Street; Barack Obama, John McCain Pulling Out All Stops

Aired October 13, 2008 - 16:00   ET

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


WOLF BLITZER, CNN ANCHOR: Happening now, the breaking news, history being made on Wall Street. A monster rebound. The markets finally upbeat, at least on this day, after new moves by the U.S. and other nations around the world to ease the financial crisis.
So here's the question. Why now? And is this the start of a real turnaround?

Also, John McCain warns Barack Obama not to measure the drapes over at the White House, not just yet. Both candidates get their fight on with Election Day around the corner.

And it's all happening in the battlegrounds. CNN kicks off special coverage of the states where the presidential race most likely will be decided.

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

It's the biggest one-day point gain ever for the Dow Jones industrials. Take a look right now, 962 points up, and that number could go up as the final sales and tallies are being tabulated. It's a welcome jolt of relief after last week's historic losses.

Let's begin our coverage with our White House correspondent, Elaine Quijano.

Elaine, a lot of people have been very frustrated, very concerned about the direction of the markets today. A stunning turnaround, almost twice the point gain, the previous largest point gain ever in U.S. history. Take a look at this. What are they saying at the White House?

ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Well, you know, officials, even on day like this, are continuing to insist, Wolf, that they will not comment on day-to-day market fluctuation, but clearly what happened today is the kind of result President Bush had hoped to see.

(BEGIN VIDEOTAPE)

QUIJANO (voice-over): Standings next to his staunch ally, Italian Prime Minister Silvio Berlusconi, President Bush repeated the message he wants jittery investors to hear.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES OF AMERICA: America will continue to work closely with the other nations to coordinate our response to this global financial crisis.

QUIJANO: The president's comments come on the heels of his emergency weekend meetings with finance ministers from around the world, meetings meant to convey solidarity in tackling the crisis. And in another move meant to allay investors' fears, Neel Kashkari, the 35-year-old engineering and MBA whiz tapped by Treasury Secretary Henry Paulson, broadly outlined the rescue plan for the first time since being put in charge of it a week ago.

NEEL KASHIKARI, INTERIM ASST. TREASURY SECRETARY: We are designing a standardized program to purchase equity in a broad array of financial institutions. As with the other programs, the equity program will be voluntary.

QUIJANO: And as European leaders move to bolster their financial systems, the Federal Reserve announced it would provide unlimited dollars to three other central banks in Europe, a move meant to thaw those frozen credit markets as well.

PAUL LAMONICA, CNNMONEY.COM: Right now the scope of this crisis is so unprecedented, that the Federal Reserve and other central banks are going to do just about anything necessary.

(END VIDEOTAPE)

QUIJANO: Treasury Secretary Henry Paulson this afternoon is meeting with top executives from financial institutions to talk about the government's efforts to stabilize the credit market -- Wolf.

BLITZER: All right. Thanks very much, Elaine.

Stock prices also rallied in markets around the world today as major governments took further steps to support the global banking system. Hong Kong's Hang Seng Index closed up just more than 10 percent. Australia's ASX declined more than 5 percent. Germany's DAX Index rose more than 11 percent. And Britain's FTSE, 100, closed up more than 8 percent.

Let's go to Susan Lisovicz. She's up on Wall Street. She's at the New York Stock Exchange right now.

Susan, these numbers are pretty amazing. Right now, and it's not over with yet, 946-point rise in one day. The previous record for a single-day point increase was 499 points back in March of 2000. Earlier it was 488 points in 2002. This almost doubles, this more than doubles -- almost doubles, I should say, the previous record for a single day.

Walk our viewers through what happened.

SUSAN LISOVICZ, CNN BUSINESS CORRESPONDENT: Well, I mean, as Elaine just told us, I mean, there has just been a big coordinated response from governments around the world, instead of this sort of piecemeal attempts to shore up troubled financial institutions. This was really what the market wanted to hear. It got it. But let's also be honest here. I mean, the market has been knocked down coming after the worst week ever for the Dow industrials. You know, veterans said they had never seen anything like this before, but they said there will come a point when greed will come back into the marketplace. So the combination of these efforts, this coordinated effort, G7, G20, the IMF, the president, Neel Kashkari talking -- and this was a rally that just built.

So the question really now, Wolf is, is this a relief rally to be believed? Is this really a bottom now? Or is this something that's called a bear market rally?

And so we really won't know. Today was a banking holiday, so the volume was a little bit lighter. But an extraordinary day, the biggest point gain, as you mentioned, by far, and the fourth biggest percentage gain, which is more telling, Wolf. The biggest point percentage gains ever for the Dow industrials came either after the crash of '29 or the crash of '87 -- Wolf.

BLITZER: All right. Stand by, Susan.

Allan Chernoff is watching this for us as well. And I guess people are wondering, Allan, is this just a one-day wonder? What's going to happen tomorrow? Is it time to take that cash that people have been holding on the sidelines and start buying some of these stocks which are really at bargain basement prices right now?

What are the experts telling you?

ALLAN CHERNOFF, CNN SR. CORRESPONDENT: Wolf, you know we often talk about how the stock market is run by fear and greed. Well, last week, it was fear of being in the market. People were panicking, just saying, get me out, get me out at any price.

Today, it was fear of not being in the market. Get me back in. I don't want to miss these incredible bargains.

Wolf, the analogy is a rubber band. The market had been stretched to the limit. Today, it bounced back. That's what we are seeing right now.

This is just a gut reaction, emotion once again, driving the stock market. We very well may see a follow-through tomorrow, but let's not feel that all the trouble is past us. At some point, we are going to have a little bit of a test, as they say on Wall Street. A test to see whether or not we actually set a bottom on Friday -- Wolf.

BLITZER: Because there will be some -- Susan, there will be some buyers tomorrow who will be anxious to sell and make a quick profit in the jump that went from this morning until 4:00 p.m. Eastern.

LISOVICZ: No question about it, Wolf. Volatility, I think it's a safe bet, is going to be with us for a while.

Don't forget, we're getting a lot of data this week. Today was a holiday, we really didn't have a -- a banking holiday. We had no economic reports.

We start getting all sorts of economic reports -- housing, inflation and earnings, earnings from lots of different companies this week, including big financial companies such as Citigroup. So there could be lots of -- even during "normal times," it would be volatile. But this one, you can just, well, magnify it.

BLITZER: And so I guess the question people are asking, Allan, out there right now, is it time to jump in, to sort of dip your fingers in, or jump full body back into this market?

CHERNOFF: Wolf, unless you are a professional trader, you have to consider that this is a dangerous environment. If you are putting money into the stock market, it should be money that you don't need for five years at least. That's really the way to play this, not jump in, jump out.

I mean, yes, you could make a quick buck. You could also get hit over here. So let's not urge our viewers to think like short-term traders. Best to think of this long term. On a long-term basis, a lot of investment professionals say yes, this is a good time to put money to work for the long term.

BLITZER: A 936-point increase, it's pretty amazing, Susan, when you think about it right now, given where it was only on Friday after what, a week, a week or two of amazing, amazing losses. They made up a nice chunk of that today, but everybody is still wondering, is this just a one-day wonder or is it going to go forward?

I don't know if you have had a chance to look at some specific blue chip stocks and the increases that they went up today, but there have been some dramatic increases today. I don't know if you've had a chance to look at them, but if you have, tell us.

LISOVICZ: Well, for instance, I mean -- well, let's go right to a financial company. Morgan Stanley was just crushed last week. There were concerns that one of Japan's biggest banks, Mitsubishi, would not take a stake in it.

Morgan Stanley shares on one day, up 85 percent. Now, having said that, it closed under $18 a share. So it's way, way off. It's about a third -- if my memory serves me correctly, it's about a third of its 52-week high.

GM shares were up 33 percent in one day. We saw huge influx into stocks. That certainly is a stock that was trading last week under $5. You know, at a level we hadn't seen since the early 1950s.

GM had some good sales reported in Latin America and other of its overseas markets. And, you know, today it was a glass half full, not glass half empty. We'll see if that's...

BLITZER: So if you were smart enough to buy Morgan Stanley early this morning, you made 85 percent on your investment. Not bad for one day.

Ali Velshi is joining us on the phone right now, our senior business correspondent. What do you make of this, Ali?

ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: Well, this is pent- up demand for stocks. You know, investors have been sitting with their money. These are professional investors who buy 401(k)s. You know, buy your investments and your 401(k)s.

They don't get paid to sit around and complain about the market. So they have been looking for something, some reason for them to get invested into the market. And that's what happened.

A very forceful rally on good volume. Some of these names, I mean, it's unbelievable the gain you have seen, almost 20 percent in companies like Alcoa. As you mentioned -- Susan and you were just talking about General Motors, up 33 percent.

I mean, this is -- what this is saying is that these coordinated worldwide efforts in coordination with what the U.S. federal government is doing are convincing investors that we will muddle through this recession. This is not the idea that we are not going to have a recession or that things are not going to get worse. There's a real sense that the world governments are going to come together to ensure that banks are able to lend to other banks and businesses going to be able to go on as usual.

Now, you have to remember, Wolf, this rally has got more to do with how ferociously this market sold off in the prior week and a half. So, we are still, you know, low, when you think about it.

We're still at 9,387, where some people thought 9,500 was the floor for this market. So it's a big improvement because of how much we had dropped off, but this should be an encouraging sign to those people with 401(k)s who had held on after seeing more than a 40 percent loss over the last year, that there is confidence in this market by professionals, Wolf. Professionals are getting in and saying there is a reason to buy these stocks.

BLITZER: It gives a new meaning, Ali, to the words "herd mentality," because when they are running away, they're running away in a herd, but when they're running toward the market, they're running in a herd as well. And we're going to be hearing a lot more of this.

Ali, stand by for a moment.

Carrie Lee is with us here in Washington. She's one of our financial news correspondents as well. Carrie, walk us through this process today, because it was oh so dramatic in how it started to build immediately at 9:30 a.m. Eastern, once the markets opened, given the good news that the G7 leaders had come together and the G20 leaders, if you will, with a real significant program, working hard over the weekend.

CARRIE LEE, CNN FINANCIAL CORRESPONDENT: And you know, dramatic is really an understatement, Wolf, for the market swings. The point swings that we have seen lately just unprecedented. Of course, point records, percentage terms not close to records, but still, I think the real difference in what we are seeing now is enthusiasm for these plans, enthusiasm that the central banks, that the Treasury Department have a working plan that's going to get things done.

What this buying effort shows today, I think, is that people now have a switch in confidence. They feel like we are going to see some action.

Remember, up until this week it was all about, well, all of these plans maybe sound great, but when are we going to start to see banks lending again? It's not that banks don't have the money, they have just been rather tight-fisted. Right?

And also, even today the credit markets haven't loosened up a lot. So people sort of switching their enthusiasm levels, maybe even their trust levels, if you will, in the government. And we'll see what happens.

You know, there are some people out there who say investors are buying in, they are switching their sentiment, but that we have been so oversold that we are due for a bounce. And you know, as we've seen, Wolf, these huge point swings, tomorrow is a another day. It doesn't mean we are out of the woods just yet.

BLITZER: Obviously it's just one day, but it's 936 point, and that's amazing given the fact that the previous -- the previous record for a single day point increase was 499 points. So this isn't even close to 936 points right now. That may not be the final number. They're still calculating final sales.

Poppy Harlow is over at the New York Stock Exchange as well. Poppy, are they corking champagne bottles? What are they doing over there? You're at the Nasdaq, I take it?

POPPY HARLOW, CNNMONEY.COM: Yes, I'm at the Nasdaq. Just a sigh of relief here, really.

You hear all the financial reporters around me just sort of breathing and cheering and everyone smiling because it's just such a huge rally. The Nasdaq was the biggest loser this year, the biggest loser last week. It is the biggest winner today, up 11.8 percent.

Microsoft up 18 percent. Intel up 10 percent. Cisco up 12 percent. I mean, really, across the board, all these big-name tech stocks rallying. The regional banks that are traded here seeing some relief from the horrifying few weeks that they have really had. Names like Dell recovering in a big way.

But again, I want to reiterate what Carrie Lee said, and Ali and Susan, everyone is saying it. It's just one day. Tomorrow the bond markets open. Tomorrow everyone is back at the banks.

We'll see what tomorrow brings. The credit markets have a big part in this, too. And we will see where they stand tomorrow -- Wolf.

BLITZER: Let me go back to Ali for a second. Stand by, Poppy.

Ali, when the bond markets open tomorrow, what are we likely to see? VELSHI: Well, Wolf, this is all dependent on whether or not the banks, as Poppy said, are prepared to lend each other money. You would think that all of these reactions would encourage banks to lend each other money.

If I were going to lend you money and a third party were to guarantee you, you were going to get paid, you are going to feel a lot happier about lending me that money. So this response is in advance of the bond markets, but those really are the credit markets. That's where we are going to see if this credit is unfreezing.

But the indications from all the activities of the U.S. government and world governments over the course of weekend, in the World Bank, at the IMF meetings, and in European bank actions today, suggest that this should lead to credit market freezing, which is why the stock traders are getting in ahead of the news. So I think what you're going to find is short-term loans are going to be become cheaper tomorrow when the bond market opens.

I would be surprised to see a reaction that was other than that. And so would all these traders who are in there. They are betting on American companies that are able to raise money in the short term. That's been this credit market freeze, and the stock market is betting that that's going to change tomorrow morning.

BLITZER: And let me go back to Allan Chernoff for a moment.

Allan, there's still plenty of excellent stocks out there that are really almost record lows for those stocks right now. They jumped up somewhat today, obviously, pretty dramatically, but there are still bargains out there that investors are going to be looking for, especially the professionals.

CHERNOFF: Yes, on a historical basis, there's no doubt that many stocks remain extremely cheap. The issue is, once we move behind this reflexive rally, this almost a snap-back that we've had today, that we may have tomorrow, then maybe some of the fundamental issues start to really matter.

Investors are, number one, going to consider, are the banks willing to lend for more than just a day or two? Will that credit freeze actually thaw? That's the most critical issue.

Then we have to deal with the recession. No doubt things are going to be getting tough economically. So how severe will that recession be? And that's going to determine which stocks keep on climbing and which stocks get hit.

Some of the stocks that depend on a stronger economy, they could be hit a little bit down the road. But for now, this was a day where people said, just get me in, buy those stocks.

BLITZER: And we'll see what happens obviously tomorrow. I want everybody to stand by, because we're not going to leave this story.

An historic day on Wall Street. A record. The single largest point raise ever on Wall Street -- what, 936 points as of right now. The earlier record was 499 points. Stand by. We're watching this story.

Jack Cafferty is off today, but we are hearing very strong words on this day from John McCain. He is defending angry supporters at his recent campaign rallies.

Our own Dana Bash, she just spoke one-on-one with Senator McCain. We're going to tell you what he's saying.

And McCain is likening Barack Obama to Herbert Hoover. The president often blamed for the Great Depression. I'll ask Obama senior adviser Robert Gibbs to respond. He's standing by live.

And House Democrats are back at work on a plan to spend billions more to try to stimulate the economy. Will it work?

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

(COMMERCIAL BREAK)

BLITZER: The breaking news from Wall Street today, an historic day, the Dow Jones industrials going up more than ever on a single day as far as a point spread is concerned, 936 points on this one day alone. The previous record back in 2000 was 499 points, almost double that previous record.

We're staying on top of this story, what it means for you. Is this the time now for you to get back into the stock market, or wait it out to see what happens tomorrow and the days to come?

Stand by. We're following this story.

And at the same time, remember this, we are only 22 days from choosing a new president. Barack Obama and John McCain are pulling out all the stops. McCain is putting more fight and new energy into his campaign message after losing ground in the polls. And Obama is rolling out some fresh economic proposals.

Ed Henry is with the McCain campaign in Virginia, but let's go to CNN's Jessica Yellin. She's covering the Obama campaign in the battleground state of Ohio right now.

He's focused on the economy, Senator Obama, and he is unveiling some new ideas. Update our viewers.

JESSICA YELLIN, CNN CORRESPONDENT: Wolf, voters here in Ohio are among those who have been hardest hit by this financial crisis. They are the Main Street Americans politicians keep talking about. So it's no accident Barack Obama came to Ohio both to do his debate prep, but also to unveil an economic plan that he says could have on a immediate effect on improving the conditions for many middle class Americans.

(BEGIN VIDEOTAPE)

YELLIN (voice-over): In Toledo, Ohio, Barack Obama took a swipe at John McCain.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: Senator McCain may be worried about losing an election, but I'm worried about you losing your jobs. I'm worried about you losing your homes. I'm worried about you losing your life savings.

YELLIN: Then he told an audience in this economically strapped city, the government needs to act now.

OBAMA: Right now, we face an immediate economic emergency, and that requires urgent action. We can't wait to help workers and families in communities who are struggling right now, who don't know if their job or their retirement will be there tomorrow.

YELLIN: And he said he has a plan that will help Main Street.

OBAMA: It's a plan that begins with one word that's on everybody's mind. And it's easy to spell: J-O-B-S, jobs.

YELLIN: Among the proposals the senator outlined, a tax credit for businesses that create new jobs in the U.S., $3,000 per job; allowing cash-strapped American to withdraw up to $10,000 from their 401(k) and IRA plans with no penalty; creating a 90-day moratorium on foreclosures for good faith homeowners who need more time to restructure their mortgages; and temporarily eliminating taxes on unemployment insurance.

Obama is calling on Congress and the Bush administration to adopt his plans in a matter of weeks.

OBAMA: If Washington can move quickly to pass a rescue plan for our financial system, there's no reason we can't move just as quickly to pass a rescue plan for our middle class.

(END VIDEOTAPE)

YELLIN: Now, Wolf, the McCain campaign reacted swiftly to Obama's proposal, denouncing him for failing to enact tax cuts. They say that his failure to cut more taxes would have a devastating effect on the economy. But the Obama campaign does point out his new plan includes $40 billion in additional tax cuts. So all in all, Obama is proposing $105 billion in tax cuts for his total economic plan -- Wolf?

BLITZER: All right, Jessica. Stand by.

While Obama is in the tossup state of Ohio, his running mate, Joe Biden, is campaigning in New Hampshire, which is considered leaning toward the Democrats on CNN's electoral map.

John McCain and Sarah Palin held a joint event earlier today in Virginia, and then McCain moved on to North Carolina. Polls suggest McCain has lost ground in both of those traditionally red states. Now they are both considered by us to be tossups.

Let's go to CNN's Ed Henry. He's in Richmond, Virginia watching all of this unfold.

They are trying to turn things around, and he gave a new stump speech today. And he had some new lines in there, Ed. Tell us what he said.

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: That's right, Wolf. Part of the Republican frustration is there has not been a consistent message. It started out with Barack Obama being inexperienced, then it was McCain as a maverick. Then in recent days we've heard Barack Obama is very risky. Now under pressure, another change in course.

(BEGIN VIDEOTAPE)

HENRY (voice-over): Call it John McCain's 4.0, another shift in message. The maverick morphing back into the fighter he talked about at the convention.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Fight for what's right for America.

HENRY: His closing argument to Independent voters so the tone is less harsh on Barack Obama being risky and inexperienced. More about McCain as happy warrior.

MCCAIN: America is worth fighting for. Nothing is inevitable here. We never give up. We never quit. We never hide from history. We make history.

Now, let's go win this election and get this country moving again.

HENRY: The new message getting unveiled in Virginia, a state Democrats have not carried in 44 years, shows how difficult the race is. Influential conservative William Kristol declared McCain has been totally overmatched by Obama, writing in "The New York Times," "The McCain campaign, once merely problematic, is now close to being out- and-out dysfunctional."

Kristol's fix? Let McCain be McCain, try to recapture some of the magic of his 2000 campaign, a tact the candidate seems to be taking.

MCCAIN: I have been fighting for this country since I was 17 years old, and I have the scars to prove it. But if you elect me president, I will fight to take America in a new direction from my first day in office until my last. I'm not afraid of the fight, I'm ready for it.

HENRY: But McCain offered nothing new substantively to fix the financial crisis. Instead, criticizing the bailout he voted for.

MCCAIN: I'm not going to spend $700 billion of your money just bailing out the Wall Street bankers and brokers who got us into this mess. I'm going to make sure we take care of the people who are devastated by the excesses of Wall Street and Washington.

(END VIDEOTAPE)

HENRY: Now, after leaving Virginia, John McCain headed to North Carolina. On Friday, Sarah Palin is going to be going to Indiana. Two more battlegrounds that Republicans were supposed to have locked down a long time ago but they have not. One of the big problems they are facing right now -- Wolf.

BLITZER: Ed, I don't know if you know the answer to this, but yesterday, Lindsey Graham, the senator from South Carolina, one of Senator McCain's closest friends and advisers, said that he was, that McCain was going to unveil some new economic plans today or tomorrow or soon. What happened?

HENRY: Well, McCain aides say, look, he was looking at various options, but they didn't want to get ahead of what the Treasury Department, what other officials are talking about doing to sort of adjust the bailout plan, move forward on this international financial rescue. They didn't want to step on that. But frankly, also, the McCain camp hasn't quite figured out exactly what they want to do next. So anything they were thinking about doing, they have held back for now -- Wolf.

BLITZER: Ed Henry in Richmond. Stand by.

As Election Day gets closer and closer, there are growing questions and concerns about how much of a factor race will be in choosing the next president of the United States.

Let's go out to our chief national correspondent, John King. He's in the battleground state of Missouri right now.

We see that arch right behind you, John. I know you are talking to a lot of folks in St. Louis. What are they saying about the sensitive issue of race in this campaign?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Well, Wolf, you'll remember we spoke on Friday -- I was in Ohio then -- about Barack Obama's continuing problems winning over some blue collar and rural whites. Well, we have moved on now to Missouri, and here in St. Louis, you see the flip side of the race debate. There is remarkable intensity and enthusiasm among African-American.

(BEGIN VIDEOTAPE)

KING (voice-over): The Leonard Missionary Baptist Church in downtown St. Louis. The choir is always energetic, and Pastor Steven Thompson always upbeat, even in these trying economic times.

REV. STEVEN THOMPSON, LEONARD MISSIONARY BATPIST CHURCH: My house got foreclosed on.

KING: No politics from this pulpit. Thompson draws a firm line, imploring his congregants to vote, but no preaching for or against any specific candidate.

THOMPSON: When it gets bad... KING: But this is an overwhelmingly pro-Obama crowd, and three weeks to Election Day, Pastor Thompson says the excitement is unprecedented.

THOMPSON: The energy comes from the fact that it is historical. And we have got a lot of first-time voters and many, like myself, who have been through a few. And it still has that pumped-up energy in it.

KING: Increased African-American turnout is an Obama campaign imperative, a potential game -changer in a half-dozen or more key battleground states. Missouri among them.

All the more important because of the flip side of the race issue. This roadside billboard is in the Missouri Ozarks, in a predominately white, rural part of the state.

Show Pastor Thompson the billboard and he keeps his trademark calm.

THOMPSON: If I spend my time getting angry about the things that people do, then I can't do what I effectively do here. Those people who do stuff like that, you know, the only thing I can say, we pray for them.

KING: Rochelle Shipman says no one here is surprised some of the scrutiny has taken a nasty turn.

ROCHELLE SHIPMAN, MISSOURI VOTER: I think black people have always known there's a divide. I don't think we ever live in a false sense of we're always accepted. I think that we are always judged first by our color, then by the way we speak, and then by what we look like.

KING: Fredrick Lemons II says, after months of doubt, he believes America is ready to elect a black president. But also made a point of complimenting John McCain for trying to calm the mood at an event last week where a woman wrongly called Obama Arab.

FREDRICK LEMONS II, MISSOURI VOTER: It's gotten a little nasty. But I think that John McCain really showed some integrity and some character when -- when he was at the last town hall meeting, and some people said some discouraging remarks, and he corrected them. And that shows that he does have integrity.

(END VIDEOTAPE)

KING: African-American turnout traditionally runs well below the percentage of white turnout. And one goal of the Obama campaign is to narrow that margin. Another key goal, Wolf, is to win by overwhelming margins.

Back in 2004, George W. Bush won 11 percent of the African- American vote in nationwide. But, in, say, the battleground state of Ohio, Bush won 16 percent of the African-American vote. And, in that state, he eked out a narrow victory and won reelection. So, it's not about getting more African-Americans to turn out; it's to keep them in the Democratic column in all the big battleground states -- Wolf.

BLITZER: And our Dana Bash just spoke with John McCain. That interview is coming up. John, thanks very much. John is in Saint Louis.

And, to our viewers, you are in THE SITUATION ROOM.

Happening now: the biggest one-day point gain ever -- ever -- for the Dow Jones, stocks continuing their wild roller-coaster ride. What's really causing this reversal?

Sarah Palin is cleared of criminal wrongdoing in a high-profile investigation, but a report says she did abuse her power as governor. And it raises questions about Todd Palin's influence on state affairs. So, why is Governor Palin hailing the report? Stand by.

And one passenger described it as -- quote -- "the worst experience of my life," as he thought he was about to die. A Qantas airplane recently plunged into a nosedive. Could something virtually all of us carry on board have caused it?

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

As we mentioned, just a short while ago, Senator Barack Obama unveiled new proposals to help the struggling middle class and to fix -- at least try to help fix the nation's struggling economy. But Senator John McCain's campaign suggests Obama is being a bit presumptuous.

Here to talk about that and other issues is Obama campaign senior adviser Robert Gibbs. Robert, thanks very much for coming in.

ROBERT GIBBS, OBAMA CAMPAIGN COMMUNICATIONS DIRECTOR: Wolf, how are you?

BLITZER: Good.

Here's -- here's what Senator McCain said today. And I'm going to play the clip, and then we will discuss. Listen to this.

(BEGIN VIDEO CLIP)

MCCAIN: Senator Obama is measuring the drapes and -- and planning, with Speaker Pelosi and Senator Reid, to raise taxes, increase spending...

(BOOS)

MCCAIN: ... take away your -- your right to vote by secret ballot in labor elections....

(BOOS)

MCCAIN: ... and concede defeat -- defeat in Iraq.

(END VIDEO CLIP) BLITZER: All right, are you measuring the drapes already in the Oval Office, Robert?

GIBBS: No, absolutely not Wolf.

I think there was a report out today that Barack Obama, Joe Biden have done 40 more events in battleground states since the beginning of fall campaign than the McCain/Palin campaign. I think that is certainly one measure.

Yesterday, right outside of where I'm standing, in Toledo, Barack Obama was in a neighborhood knocking on doors, asking for votes. We are not taking anything for granted in this election. We are going to work hard right through the last vote being cast and the last vote being counted.

This is just too important to give up on. And we are going to work hard to do it. I think what you heard in that clip from John McCain is a little bit of what hasn't worked for John McCain for almost a month now, negative attack after negative attack, none of it being true.

I think that's why you have seen him struggle in the polls. And that's why people lack confidence in his ability to turn this economy around.

BLITZER: He spent -- he went -- he was more specific in comparing the policies advanced or advocated by Senator Obama to an earlier American president. I will play this little clip.

(BEGIN VIDEO CLIP)

MCCAIN: The last president to do what Senator -- Senator Obama wants to do, raise taxes and restrict trade in a bad economy was Herbert Hoover.

(BOOS)

MCCAIN: That didn't -- that didn't turn out too well.

(END VIDEO CLIP)

BLITZER: All right, Herbert Hoover, and -- and I guess the -- the argument that he makes is that Senator Obama wants to restrict free trade. Senator McCain wants to expand free trade. Senator Obama wants to increase taxes on corporations, even at a time of economic recession. Senator McCain wants to cut taxes on corporations at a time of -- of recession. How do you respond?

GIBBS: Well, first of all, I -- I think the Republican Party knows pretty well about Herbert Hoover, because Herbert Hoover was a Republican. We have seen a little bit of what Herbert Hoover has done right now in the last eight years.

We have seen thousands -- hundreds of thousands of people lose their jobs. Barack Obama wants free and fair trade in this country. We rolled out a plan today, Senator Obama did, to cut taxes for large and small businesses that create jobs by pumping money into this economy, giving them an incentive to increase their work force, helping families stay in their homes, helping families get help with the rising cost of grocery and gas these days, helping states borrow money, so that we don't have to cut services or raise property taxes.

You know, Barack Obama is out every day talking about solutions to get this economy on track. John McCain seems every day to go out and unleash yet again negative false attacks, which, best I can tell, doesn't give anybody a new job or keep them in their home, Wolf. I think that's what people are concerned about. I think that's why people are increasingly turned off by what John McCain is trying to sell.

(CROSSTALK)

BLITZER: Robert, these new proposals that Senator Obama unveiled today, they are not going to be cheap. And, at a time when the deficit is growing, when the national debt has doubled over the past eight years to more than $10 billion -- $10 trillion -- excuse me -- right now...

GIBBS: Right.

BLITZER: ... where is this money for all of these new initiatives that Senator Obama is recommending, where is it going to come from? Is the U.S. going to have to go further into debt and borrow more money from China and other countries?

GIBBS: Well, look, you hit the nail on the head. Our national debt has exploded.

John McCain voted for four out of the five Bush budgets, which -- which have taken a national debt of $4 trillion to $5 trillion, and made it $10 trillion to $11 trillion. But, right now, Wolf, if we don't get this economy moving again, it won't matter what we do, because people will be out of work, and they will be struggling for help.

This proposal costs about $60 billion over two years. Again, it gives the -- an incentive for jobs to hire new workers, to help people stay in their homes. And, sure, we are going to have to borrow some of this money to get this economy moving again, and, therefore, bring revenue -- I'm sorry -- bring the deficit down.

That's the only way we are going to do this, is to be able to work our way out of this. That's what Barack Obama proposed today.

BLITZER: Robert Gibbs, thanks very much for coming in.

GIBBS: Wolf, thanks for having me.

BLITZER: John McCain is rejecting charges that his campaign is fueling angry crowds. Listen to this.

(BEGIN VIDEO CLIP) MCCAIN: I won't accept that insult. I will tell you right now, I'm proud of my supporters. I'm proud of the people that come. I'm proud of those veterans who have served their country that come to my rallies and fire me up.

(END VIDEO CLIP)

BLITZER: And he gets even more animated -- Senator McCain in a one-on-one interview with our own Dana Bash. Stand by. You will see it and hear it right here in THE SITUATION ROOM.

An historic rebound for stock prices today. Why now? Will it last? We will have much more on the breaking news, historic news -- the largest single-point gain ever on Wall Street.

And the Democrats' new push for another economic stimulus package, is it simply election politics, or is it good fiscal policy?

Stick around -- lots of news happening today right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The Obama campaign seems to be unveiling a new line against John McCain. Today, the vice presidential candidate, Joe Biden, said that, while McCain wants to attack Obama, Obama wants to attack problems facing the United States.

Controversial wisdom suggests the political attacks will intensify in these, the final two -- 22 days left.

Let's go to our senior political analyst, Bill Schneider. He's working the story for us. All right, Bill, what are you hearing? Are McCain's attacks on Barack Obama, first of all, working?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, actually, no. There is some evidence of blowback against McCain.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Events, much more than the campaign, are what's driving this election. The financial crisis is a big event, and it's giving Barack Obama the edge.

The "Washington Post"/ABC News poll asked voters which candidate better understands their economic problems. Obama led John McCain by 30 points.

OBAMA: I have got news for John McCain. He better stop worrying about losing a campaign, because he should be worried about all these folks out here losing their jobs and losing their homes and losing their life savings.

(APPLAUSE)

SCHNEIDER: McCain's aim has been to discredit Obama. MCCAIN: They say those who don't learn the lessons of history are doomed to repeat them. Well, my friends, I know my history lessons, and I sure won't make the mistakes that Senator Obama will.

(APPLAUSE)

SCHNEIDER: The voters have noticed. They name McCain by better than 2-1 as the candidate who has mainly been attacking his opponent. They name Obama by nearly 2-1 as the candidate who has mainly been addressing the issues.

McCain is portraying Obama as a risky choice.

OBAMA: What they are saying is, well, we know we are not very good, but you can't risk electing Obama. You know, he is new. He's -- he doesn't look like the other presidents on the currency.

(LAUGHTER)

SCHNEIDER: Most voters reject the idea that Obama is a risky choice. The candidate they are not sure about is McCain.

Voters do give McCain the advantage on personal qualities, like experience and leadership ability. But, when it comes the issues, Obama has an even bigger advantage.

(END VIDEOTAPE)

SCHNEIDER: And, in this election, more voters say their vote is being driven by the issues than by the personal qualities of the candidates. In troubled times, big issues have big impact -- Wolf.

BLITZER: Bill Schneider, he is on the campus of Hofstra University in Hempstead, Long Island, getting ready for Wednesday night's third and final presidential debate. Bill, stand by.

Here in Washington, on Capitol Hill, a new partisan fight over the economy a little over three weeks before the election. House Democrats now are drafting a new $150 billion stimulus package that House Republicans don't seem to like at all.

Let's go to Kate Bolduan. She is working the story for us. What kind of movement are we seeing today, Kate?

KATE BOLDUAN, CNN CORRESPONDENT: Well, we're seeing a lot of people talking about what they think should happen, Wolf.

House Democratic leaders met today with a group of economists to discuss a possible, another stimulus. A top Democratic aide says it is likely the House will be brought back shortly after the election to take up a possible stimulus. But, already, Democrats and Republicans are tossing out very different ideas of what they think will work this time around.

(BEGIN VIDEOTAPE) BOLDUAN (voice-over): In a move to show Americans Congress is trying to recharge the economy, House Democrats returned to Washington Monday to push another stimulus package.

REP. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE: As we go into survival mode, which we must do if we are going to strengthen our economy, we have to make some decisions that I think the American people see in a fresh new perspective.

BOLDUAN: The focus, spurring job creation and help for state and local governments. The cost? As much as $150 billion. Iowa's Democratic governor, Chet Culver, says his state and others need a hand.

GOV. CHET CULVER (D), IOWA: We are all focused on helping families stay in their homes and also helping families have more disposable income.

BOLDUAN: According to the Center For Budget and Policy Priorities, 29 states and the District of Columbia have faced serious budget shortfalls this fiscal year, totaling more than $48 billion. The Democratic stimulus plan includes funding for state Medicaid programs and infrastructure projects, like roads and bridges, individual rebate checks or some form of tax credit, also an extension of unemployment insurance.

REP. BARNEY FRANK (D), MASSACHUSETTS: If we do not go to the aid of state and local governments now, they will now become an added factor to the job loss, rather than a -- a -- something of a mitigating factor.

BOLDUAN: House Republican leaders are critical of the Democratic plan.

In a letter to House Speaker Nancy Pelosi Monday, House Republican leader John Boehner said, "Nothing currently being discussed by the majority as -- quote -- 'stimulus' will stabilize the economy long-term."

Republicans are now pushing their own stimulus package, calling for capital gains and corporate tax cuts, as well as expanded domestic drilling for oil, among other proposals.

The number-two House Republican, Roy Blunt, spoke on ABC's "This Week."

(BEGIN VIDEO CLIP)

REP. ROY BLUNT (R-MO), HOUSE MINORITY WHIP: Let's not use the stimulus package as an excuse to do what Democrats have wanted from day one of this Congress, which is a huge public works plan.

(END VIDEO CLIP)

(END VIDEOTAPE)

BOLDUAN: So, lawmakers are talking stimulus, but how is the idea playing outside the political arena?

Well, we talked to a number of economists and analysts. Some say it won't work, describing it as little more than a sugar high. But other say, some stimulus, if done right, will be effective in turning around and boosting this economy, Wolf. But that's the challenge.

BLITZER: Kate Bolduan, on the Hill, thank you.

Twenty-two days until Americans cast their votes for president, and John McCain is trying to reclaim his image.

(BEGIN VIDEO CLIP)

MCCAIN: What America needs in this hour is a fighter, someone who puts...

(CHEERING AND APPLAUSE)

MCCAIN: ... who puts all his cards on the table and trusts the judgment of the American people.

(END VIDEO CLIP)

BLITZER: But, with Barack Obama possibly on track to spend more than $85 million through Election Day, how does Senator McCain compete? That's coming up in our "Strategy Session."

And McCain says he knows how to fix the nation's economy. So, why does he think he is falling in the polls? You're going to hear his answer in a one-on-one interview he granted to CNN's Dana Bash just moments ago.

Stand by. You are in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's get right to our "Strategy Session."

Joining us, our political contributor and Democratic strategist Donna Brazile and conservative commentator Terry Jeffrey, editor in chief of the Cybercast News Service.

Terry, Bill Kristol, writing in "The New York Times" today, says this -- he is a well-known conservative, editor of "The Weekly Standard" -- "It is time for John McCain to fire his campaign. He has nothing to lose. His campaign is totally overmatched by Obama's. The McCain campaign, once merely problematic, is now close to being out- and-out dysfunctional."

Is Bill Kristol right?

TERRY JEFFREY, EDITOR IN CHIEF, CYBERCAST NEWS SERVICE: Wolf, what I take Bill Kristol as saying there is not, fire his staff, but fire his campaign as a strategic enterprise.

And I -- I think, on that level, I agree with him. Look, John McCain is swimming upstream right now. In a time of economic crisis, like we have right now, it is very difficult, not impossible, but very difficult for the power party in power in the White House to retain it.

John McCain is a member of the party in the White House, that has power in the White House. He has got to paint a campaign right now that shows people in very, very dark -- bright colors why an Obama administration would take us in a direction that is bad for the country in areas other than the economy. He has got to talk about culture. He has got to talk about national security in ways that are dramatic and compelling.

BLITZER: But he has been doing that, Donna. It doesn't seem to be working, at least not the last couple weeks.

DONNA BRAZILE, CNN POLITICAL ANALYST: Well, I just saw a survey that showed that 100 percent of his advertisements, John McCain has been negative.

The problem is not with his staff. The problem is with John McCain. John McCain offered real leadership, yet he cannot get his campaign and staff on the same page. It's about a consistency in message, a consistency in approach. And he has not settled, even as of today, on a consistent message in attacking his opponents.

BLITZER: But these poll numbers show that, when it comes to issue number one, the economy, most Americans think Senator Obama is doing a much better job.

JEFFREY: Sure. You know, John McCain has this reputation as a maverick. But what that really means, practically, is, in the United States Congress, when there's a fight over a major policy issue, instead of siding with the conservatives and the Republicans, he went across the aisle and effectively worked with the Democrats.

Wolf, we saw that again when we had the bailout. John McCain came back to Washington. It was a very dramatic move. But, rather than side with the conservatives in the House and go into battle against George Bush and Barack Obama and Nancy Pelosi and Harry Reid, and put Obama in that camp, he basically joined hands with them. He basically surrendered that issue.

BLITZER: Because that's what he believed.

JEFFREY: Well, if that's what he believed, fine. He believes other things than Barack Obama on fundamental cultural issues and on national security. And he has got to be able to drive a message that shows people where Barack Obama will take us in those areas so dramatically different than where you want...

(CROSSTALK)

BLITZER: But his speech today tried to do exactly that.

JEFFREY: I agree. BRAZILE: And he will drive those voters into Barack Obama's corner, because voters are not looking at this late hour in the campaign for more false attacks. They are looking for real solutions on the economy. And what Barack Obama offered today was a plan for the middle class and bailing...

(CROSSTALK)

BLITZER: See, the argument was, Terry, that Sarah Palin would energize that conservative base...

JEFFREY: Right.

BLITZER: ... freeing up John McCain to win over those moderate independent undecided voters, Democrats and Republicans.

JEFFREY: Well, I agree that's what they thought, Wolf. But I have argued on this show before -- and I truly believe it -- that it a miscalculation about who the swing vote is in American presidential elections when Republicans win it.

I think there was a reason Jimmy Carter and Bill Clinton are the only two Democrats to win the White House since 1968. The swing vote is culturally conservative. Economic bad times may trump that for Obama in this election. But, if McCain can't get the Sarah Palin voters, culturally conservative...

(CROSSTALK)

JEFFREY: ... Democrat...

(CROSSTALK)

BLITZER: You know, Donna, in these final 22 days, Evan Tracey of Campaign Media Analysis Group, he estimates that Obama has some $85 million ready to spend. How -- how should he best spend that money? Because it's a lot more money than Senator McCain has left.

BRAZILE: Yes, once again, I peaked too soon. I had a little less than $30 million. But I think he needs to...

BLITZER: Back in 2000...

BRAZILE: Absolutely.

BLITZER: ... when you were running Al Gore's campaign.

BRAZILE: Absolutely.

So, look, and they have done a great job in running a campaign that has a consistent message. But he needs to spend money on advertisement to counter some of the cultural stuff that is going on out there. But he also needs to spend it on the ground. His strength right now is that he has a big organization. You got to feed that in the closing days of the campaign. You saw Obama walking door-to-door. Well, guess what? That's how he will this campaign. BLITZER: The ground game is going to be decisive. Is that what you think?

JEFFREY: Well, it was in Ohio in 2004. It's not clear that the McCain campaign is the way -- organized the way Karl Rove organized the Bush campaign.

McCain has got to have a dramatic message. He's got to use alternative media, including talk radio, to go out and talk about where he differs on these issues from Barack Obama.

BLITZER: Guys...

BRAZILE: And he is going to end up with just 40 percent of vote if he goes -- he goes into that strategy.

BLITZER: All right, guys, thanks very much.

Here are some stories we are working on in THE SITUATION ROOM.

Voter registration run amok in Indiana? The secretary of state there is now calling on the state attorney general to investigate. Stand by.

And a midair emergency aboard a passenger jet, could a cell phone or a laptop be responsible? This story will have you looking at your electronics in a whole new way -- Miles O'Brien standing by with that.

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

(COMMERCIAL BREAK)

BLITZER: On our "Political Ticker": The Reform Party is endorsing Republican presidential candidate John McCain, calling him the true reformer in the race.

Reform Party representatives from 27 states voted to back McCain. None voted to endorse Obama. The Reform Party was founded by supporters of Ross Perot's presidential bid back in 1992.

A new endorsement for Barack Obama and Joe Biden from the leading gun control group -- the Brady Campaign to Prevent Gun Violence says the Democrats would strengthen background checks on gun purchasers, gets assault weapons off the streets, and give law enforcement more tools to stop illegal gun trafficking. The group says that John McCain once led on gun control, but has -- quote -- "since pandered to the gun lobby."

Sarah Palin now scheduled to campaign in Indiana on Friday, her first appearance there as the vice presidential nominee. It's a new sign that the once solidly Republican state may be up for grabs this election year. The Obama camp has been making a strong play for Indiana, as you know.

And making up could be hard to do. John McCain is set to appear on David Letterman's show on Thursday. It will be his first time on that program since he canceled an appearance late last month. That was when McCain suspended his campaign to help push for a financial bailout package here in Washington. But that cancellation angered the "Late Show" host -- Letterman calling -- causing -- calling McCain some -- making the McCain butt of some tough jokes on his program, as you probably know.

Remember, for the latest political news any time, you can check out CNNPolitics.com. That's where you can also download our new screen saver and get a whole lot of other useful information.

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