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ANDERSON COOPER 360 DEGREES

No Presidential Do-Over in Florida?; America's Economic Crisis

Aired March 17, 2008 - 22:00   ET

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


SOLEDAD O'BRIEN, CNN ANCHOR: Tonight, get ready for another fight over votes no Florida. Democratic Party leaders today gave up on holding another primary.
So, now, with 210 delegates at stake, nobody knows exactly what's going to happen next, except that there will be a fight and things could get ugly.

We have got the best political team on TV helping us sort it out tonight. We will get to them in just a moment.

Later, a look at the government taking action not seen since the Great Depression, helping bail out a big investment day bank. It seems like every day brings more troubling economic news. CNN's Tom Foreman on the mind-boggling payouts that CEOs are getting for driving their companies and economy right into the ground. Lou Dobbs will join us as well, talking about why people who made the mortgage mess get a pass, but homeowners don't.

Also, we're talking about Iraq tonight, another massive bombing today. John McCain, Dick Cheney says things are better. Democrats are promising to change policy.

John King is on the ground with Senator McCain. He's got a fact check for us. Michael Ware joins us, too, along with Peter Bergen and Gloria Borger.

First, though, we start in Florida. We can't really make this stuff up, I got to tell you. Florida state Democratic leaders said just hours ago, they're giving up on holding a do-over primary. You will recall they broke the rules by holding the first one early -- lots of finger-pointing now about just who's to blame for that between Florida Democrats and Republicans.

But the big question remains, what do you do about those 210 Democratic delegates? And which campaign is loving this mess?

Here's CNN's Joe Johns.

(BEGIN VIDEOTAPE)

JOE JOHNS, CNN CONGRESSIONAL CORRESPONDENT (voice-over): It's like a walk through a mine field. One wrong step could be devastating -- hanging in the balance, the will of the record 1.7 million Florida Democrats who voted in the state's primary, you know, the one that didn't count.

After exhausting various options, including a mail-in primary, the Florida Democratic Party threw up the white flag and surrendered.

KAREN THURMAN, FLORIDA DEMOCRATIC COMMITTEE CHAIRWOMAN: What we did was put it on the table and said, look, you know, here is the last party option that we have. Anything after this, I'm -- I don't know what it is.

JOHNS: Indeed, several voters we spoke with in Tallahassee last week said they had little appetite for a redo.

JORGE LOPEZ, FLORIDA VOTER: We have voted already. The energy, time and money have been invested. This is a great lesson for the national Democratic Party to learn.

JOHNS: The Clinton campaign sounded unhappy with the decision not to hold a do-over -- quote -- "Today's announcement brings us no closer to counting the votes cast in the Democratic primary."

The Obama campaign said it hoped the decision would lead to a fair seating of the Florida delegates at the convention, though what's fair for Obama might not be viewed that way by the Clinton campaign. Clinton won the January primary, though neither candidate really campaigned in the state.

(on camera): It's the Democratic National Committee, of course, that took away Florida's delegates in the first place, punishing the state for moving up its primary date. And now Florida is telling the DNC to figure a way out of this mess.

For Floridians like writer Dianne Roberts, this whole drama is more like a recurring nightmare.

DIANNE ROBERTS, FLORIDA WRITER: Now we're looking at yet another set of disenfranchised Florida voters. And, you know, that leaves a bitter taste in the mouth. We don't want to go back there; 2000 might seem like a long time ago to some people, but it isn't around here.

JOHNS (on camera): So now what? It's back to the original problem. Either the party accepts the results of the botched primary, and Hillary Clinton picks up valuable delegates, or it sticks with the punishment, and the nominee is chosen without any input from the 1.7 million Democrats who turned out in January.

Joe Johns, CNN, Washington.

(END VIDEOTAPE)

O'BRIEN: No surprise that there's a lawsuit brewing, as well as a whole lot of political backroom dealing going on right now.

With us this evening, CNN' senior legal analyst Jeff Toobin and also senior political correspondent Candy Crowley and senior political analyst Gloria Borger.

Gloria, let's start with you.

So, who do you think at this point is -- is leading in -- in this mess? Is it the Clinton campaign or the Obama campaign?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, I think, clearly, the Clinton campaign is very unhappy about this, because they believe that, if there were a redo in Florida, that the demographics of the voters down there would really accrue to their benefit. And they believe that they could win the state of Florida.

They also say that they already won the state of Florida. The Obama campaign says, no.

And now I think you're sort of back to square one. There could be a deal cut. The Hillary Clinton campaign could go to the Obama campaign and say, let's apportion these delegates 55-45, which is the way she says she won the state, even though the DNC says it was an illegal election. And the Obama campaign could come back -- I spoke to somebody with the campaign today -- could come back and say, let's proportion these delegates in the exact same proportion in which delegates enter the convention, so it wouldn't really change the math at all, so, back to square one.

O'BRIEN: Well, maybe math wasn't my greatest subject, exactly, but that sounds kind of messy.

BORGER: Me neither.

O'BRIEN: All right, Jeff, let me ask you a question. Howard Dean says it's very unlikely he believes that they are going to be seated, in fact, based on those earlier results. So, what could -- I mean, do you agree with -- with the math equations that Gloria has come up with?

JEFFREY TOOBIN, CNN SENIOR ANALYST: Yes. I think the bottom line is, the status quo favors Obama. He's ahead by pushing almost 200 pledged delegates at the moment. And unless Hillary Clinton can do something to change the way delegates are allocated, a freezing of the situation in Florida hurts her.

O'BRIEN: All right. But, Howard Dean, you know, he -- he -- everyone has said they think he's going so play a more pivotal role. And this actually could be one of those circumstances where he sort of rises to the fore. Do you think that's true?

TOOBIN: Well, no, I really don't think so, because it's so obvious here that this is a zero sum game. However you divide these delegates is going to help one candidate and hurt the other.

And neither one is going to give in to a situation that will hurt. So, I think, by far, the most likely outcome is some sort of very close to even allocation of the delegates, where it doesn't affect the overall race, and the earlier vote by the Florida voters just doesn't count, because everybody knew it didn't count, and nobody campaigned.

O'BRIEN: Candy, there are lots of people -- you heard, in fact, in Joe Johns' piece that woman who talked about disenfranchised Florida voters again. How big of a problem is that, really? CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Well, come the general election, I know a lot of people in the Democratic Party said, oh, we can't -- we can't disenfranchise Florida. Florida is a very important state. The Democratic Party needs to win it.

I can't see Florida voting against the Democratic nominee because this is such a mess. It's a problem for the party, because it has the potential to rip it apart in so many ways. I think one of the things is, if you listen to the party leaders, many of them at this point are saying, no matter what happens, we cannot seat delegates from Florida and Michigan that change the results in a way that turn them over.

So, in other words, if they go into this convention -- which I think is highly unlikely -- and we still don't have a nominee, I think they will find some way to work this out. But if -- let's say they go to the convention in Denver, there still isn't a nominee, there's just no way they are going to seat Florida and Michigan in a way that would change the results by -- from whoever is leading.

So, it's a problem. I think they will get it solved. I think this is just another -- another, you know, upheaval in it. And, at some point, they will come to some solution, because, frankly, otherwise, the Democratic Party implodes.

O'BRIEN: You know...

TOOBIN: But the only way for Hillary Clinton to get back ahead, it seems, is to seat Florida and Michigan in a way that gives her an advantage.

O'BRIEN: Right.

TOOBIN: So, I think Candy's analysis is exactly right, which means that the -- the messy status quo helps Obama.

BORGER: I do think, also, that Howard Dean holds a few cards here, because...

O'BRIEN: You do? Why?

(CROSSTALK)

BORGER: If -- well, if this were to go to the convention, he appoints 25 people to some key committees that could determine what happens with Florida and Michigan.

And I would also say that, on the credentials committee, each state gets three delegates. That's big states and small states. That's Idaho gets three and California gets three. So, how would that work out?

O'BRIEN: He would be in charge of all the political maneuvering, potentially.

Let me ask you a question. I mean, legally, Jeffrey, are there options for voters? And are there -- is there a big enough group of organized voters who could say, legally, here's what we're doing; we want to sue?

TOOBIN: Well, there has been a suit already, and it's been thrown out of court. And the appeal was actually argued today. Almost certainly, this is not a case that should -- that will wind up in the courts, because the Supreme Court has held for a very long time that political parties are entitled to run their own affairs, without interference from the courts.

Now, the one thing they can't do is, they can't, say, discriminate on the basis of race. A Democratic Party can't hold a whites-only primary or a blacks-only primary. But, if they want to organize which state goes first, that's not discrimination against any racial or ethnic group. That's just a political choice they make.

And I don't see any court in the country getting involved in that. I think, unfortunately, the Democrats are going to have to settle this themselves.

(LAUGHTER)

O'BRIEN: Let's talk about something significantly less complicated, race in America.

(LAUGHTER)

O'BRIEN: Sarcasm.

All right, Candy, you know Senator Obama announced plans that he's going to deliver this major address about race because of this whole brouhaha over his -- his pastor.

Let's listen, first, to a clip of what he said.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: The statements that were the source of controversy from Reverend Wright were wrong, and I strongly condemn them. I think the caricature that's being painted of him is not accurate.

And, so, part of what I will do tomorrow is to talk a little bit about how some of these issues are perceived from within the black church community, for example, which I think views this very differently.

(END VIDEO CLIP)

O'BRIEN: OK. So, that's what he said today about what we can expect tomorrow.

How important do you think this speech is going to be?

CROWLEY: I think it's very important. I think this is something that, somehow, Barack Obama has to get behind him.

And I think what's really interesting, what he said there -- and I don't know about your e-mail box, but my e-mail box has been full for days from African-Americans saying, you know, you aren't looking at this -- meaning the media is not looking at this -- in the same way that African-American churches, many of them, are seeing those who preach the social justice gospel, and that this was part of what this is.

Obama is in a very difficult position here, because he cannot come out and go, "I strongly condemn this man" -- he's been friends with him for 20 years -- he calls him his spiritual adviser -- because the fact of the matter is the -- Reverend Wright has a lot of support in the black community, which obviously has been supportive of Barack Obama.

So, he's walking a fine line, frankly, as he has through this entire campaign when the issue of race has bubbled up. I think it's important because they have got to move on.

O'BRIEN: Gloria Borger, we will give you the final word tonight.

BORGER: Well, I...

O'BRIEN: Candy talks about a fine line. I mean, how -- you know...

BORGER: It is.

O'BRIEN: Yes. This could be a -- you make a mistake here, could that be it?

BORGER: You know, it's -- I agree with Candy. It's a major speech for Barack Obama.

But -- but I believe also that he -- he can't only do the -- you know, fly at a high altitude and talk about the problems of race in this country, which -- which he has done very well in this campaign, and I'm sure he will do it well tomorrow.

But I also believe that he has to personalize it, because the question of who Barack Obama is, is a very unsettled question for many Americans. And he does have to talk about his relationship with Reverend Wright, who was his spiritual mentor. This isn't just some pastor at a church he goes to once in a while. This is the man who married him and who baptized his children.

So, I do think he has to explain that and -- and use that in a way as an opportunity to say, the anger that you may have seen in some of these tapes is in fact an anger that Barack Obama doesn't share, or doesn't agree with, or -- you know, so, I do think it's an opportunity for him, but I think he has to personalize it.

O'BRIEN: Yes. The pressure is on.

All right, Gloria Borger and Jeff Toobin and Candy Crowley, thanks, guys. I appreciate it.

And I should also mention, we're live blogging. As if there's not enough to do, we're also live blogging about all of this tonight.

(LAUGHTER)

O'BRIEN: So, feel free to join in on our conversation at CNN.com/360.

Coming up next: a breathtaking meltdown on Wall Street and why you should be concerned.

(BEGIN VIDEOTAPE)

O'BRIEN (voice-over): Gas prices rising, employment falling, foreclosures soaring, and, insult to injury, your tax dollars are bailing out Wall Street.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The Federal Reserve has moved quickly to bring order to the financial markets.

O'BRIEN: Good for the markets, but what about you? And is there a lot more bad news waiting to come out? We're "Keeping Them Honest."

Also, presidential politics or the truth?

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: The surge is working.

O'BRIEN: He says it. The other candidates disagree. But is it true? And, if so, is it enough? We're cutting through the spin and checking the facts -- tonight on 360.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

(APPLAUSE)

(BELL RINGING)

(END VIDEO CLIP)

O'BRIEN: Stocks were mixed today. And, despite another interest rate cut, people are losing faith in the economy.

In a new CNN poll, nearly 75 percent of Americans believe we are in a recession. How bad is it? Well, the former Federal Reserve Chairman Alan Greenspan says we are facing the worst financial crisis since World War II.

And, today, we learned that the government is helping bail out Bear Stearns, after the investment bank became the latest casualty in the mortgage crisis. It's the collapse of Bear Stearns that has many people angry, angry, in fact, that CEOs who run companies like it get rich, while millions struggle to make ends meet.

"Keeping Them Honest" tonight, here's CNN's Tom Foreman.

(BEGIN VIDEOTAPE)

TOM FOREMAN, CNN CORRESPONDENT (voice-over): Who's afraid of the big, bad mortgage crisis? Financial analysts say, Bear Stearns executives shouldn't be. They could well walk away with millions, even as their company collapses.

ROBERT WEISS, SECURITIES ATTORNEY: There's no accountability at the top.

FOREMAN: Robert Weiss is a securities attorney.

WEISS: You know, they could make the claim that, had they been successful, they would have made many more, tens of millions of dollars more. But, by any objective standard, they wound up getting paid a fortune for failing.

FOREMAN: "Keeping Them Honest," plenty of folks knee-deep in the mortgage mess are still wading in money, according to congressional researchers, who say Countrywide's boss took $120 million in stock options last year. Citigroup's CEO? Almost $40 million when he left the job. Merrill Lynch's former top man? One hundred and sixty one million, leaving after Merrill posted an $8 billion loss subprime market.

REP. HENRY WAXMAN (D-CA), GOVERNMENT REFORM COMMITTEE CHAIRMAN: It cost people their homes. It cost other people their jobs. It seems like everyone is hurting, except for you.

FOREMAN: CEOs and their defenders recently said, those are just the going rates for the best execs, and their pay packages are overstated, not overpriced.

ANGELO MOZILO, CEO, COUNTRYWIDE FINANCIAL: As our company, I did well, as did our shareholders. But, when our company did not do well, like in 2007, my direct compensation and the value of my holdings declined materially.

FOREMAN (on camera): At Bear Stearns, where the link between pay and stock performance was emphasized, the top men undoubtedly lost many millions.

(voice-over): So have many other big bosses in the mortgage business.

ALI VELSHI, CNN CORRESPONDENT: But, even when these guys get kicked out, even when they leave, even when things don't work out, on their worst day, they earn more than most Americans will ever see in their entire lives.

FOREMAN: That's because contracts written in better days often guaranteed them some personal protection, even as they preside over the mortgage meltdown.

Tom Foreman, CNN, Washington. (END VIDEOTAPE)

O'BRIEN: John McCain goes to Iraq, while other candidates cry politics.

That's coming up. But, first, Erica Hill joins us. She's got a 360 bulletin.

Good evening.

ERICA HILL, HEADLINE NEWS CORRESPONDENT: Hey, Soledad. Nice to see you.

Workers have recovered the last of seven bodies from the rubble of a collapsed crane here in New York City. That crane toppled from a high-rise on Saturday, demolishing a townhouse and damaging several other buildings.

David Paterson is officially New York's 55th governor, the first African-American to hold that office. He was sworn in today, and replaces Eliot Spitzer, who resigned amid a prostitution scandal. Paterson promised to help New York move forward.

And the soon-to-be-ex-wife of former New York Governor Jim McGreevey today denying allegations she took place in three-way trysts with her husband and his former driver and aide. That former aide described the alleged encounters in two local papers. McGreevey resigned almost four years ago, after revealing he was having an affair with a man -- Soledad.

O'BRIEN: Yes, that was kind of shocking news today.

Just ahead, Erica, he was caught on tape in the buff in a grocery store.

(LAUGHTER)

O'BRIEN: Yes. That's the half we can show you. Yes, no kidding. We are going to tell you what he did in the store. That will surprise you.

Plus, Senator John McCain back in Iraq, this time, though, as the presumptive Republican presidential nominee. Are the headlines from Iraq helping him?

We will take a look at that -- up next on 360.

(COMMERCIAL BREAK)

O'BRIEN: All right, Erica, now our segment "What Were They Thinking?" although, in this case, the "they" is actually a "he." What was he thinking?

Twenty-eight-year-old guy, allegedly -- well, not so allegedly -- there he is on the videotape.

(LAUGHTER)

HILL: It's a video, but it's still allegedly.

(LAUGHTER)

O'BRIEN: Technically, yes. But, come on. You're looking at him. He's bare naked. This is a Pennsylvania market. He caused, seriously, 10,000 -- tens of thousands of dollars in damage, buck naked at the time.

HILL: Wow.

O'BRIEN: Security tape caught him doing some of these things. They said that the nude vandal threw chairs, damaged a $90,000 meat- wrapping machine...

HILL: What?

O'BRIEN: ... tossed a pizza oven to the floor...

(LAUGHTER)

O'BRIEN: ... then stole a forklift, and, yes, naked as a jaybird, drove up from a hotel into -- into a wall...

HILL: OK.

O'BRIEN: ... before he then ran naked into the market.

HILL: How about that.

And we don't know why he was naked?

O'BRIEN: Unclear why -- unclear why the naked thing.

(LAUGHTER)

HILL: Apparently just didn't feel like wearing clothes that day.

O'BRIEN: Unclear why he was knocking stuff off the wall, yes.

He's being held at a local prison for $200,000, facing charges of criminal mischief, assault and -- this might explain it -- public drunkenness.

HILL: Yes.

O'BRIEN: Ah.

HILL: Probably also why he didn't feel the cold.

O'BRIEN: Yes. Yes. See, I forgot all about that.

(LAUGHTER)

O'BRIEN: That, too. (LAUGHTER)

O'BRIEN: Oh, lordy.

All right, moving on, still ahead, Lou Dobbs takes a look at the money mess for us. And typical Lou, he's not holding back anything.

And Senator John McCain in Iraq, he says the situation is improving there. His Democratic opponents, though, have a different take. We will get a reality check for you straight ahead.

And then here's tonight's "Beat 360."

Irish Prime Minister Bertie Ahern giving President Bush a bowl of shamrocks for Saint Patrick's Day. Here is the captain from our staff winner, Leah, says" "Wow, thanks. I always wanted a Chia Pet."

Oh, wait. That was kind of cute.

Think you can do better, though? Go to CNN.com/360. Send us your best. We will announce the winner at the end of the program.

(COMMERCIAL BREAK)

O'BRIEN: It's pretty clear that, when November comes along, people will be voting their pocketbooks. They're also going to be passing judgment, though, on Iraq and how the mission is going, five years after it began.

Bush today applauded the federally-backed Bear Stearns buyout. The president called the move strong and decisive. As we said earlier, others are wondering why Wall Street gets federal help and ordinary people don't.

We're pretty sure Lou Dobbs has his own opinion on how Washington, D.C., Wall Street, and Main Street are doing.

That's why he's here for us.

Lou, nice to see you.

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Good to be with you.

O'BRIEN: Let's begin with the rationale behind this -- this bailout. Why?

DOBBS: Well, the bailout is obviously to stave off problems for other institutions.

But, as you imply, it is not a recourse that's available to millions of homeowners in this country who are facing the prospect of foreclosure.

O'BRIEN: So, this doesn't help homeowners at all? There's no sort of trickle effect? DOBBS: Absolutely not. And anyone who suggests it does is misleading the American people. This helps Wall Street. This helps Bear Stearns.

O'BRIEN: Isn't there an argument, though, that staving off any kind of domino effect, this $30 billion, actually has, though, a worthwhile -- is a worthwhile thing to do?

DOBBS: It may be in the minds of some people, but the reality is, there's something calmed moral hazard, which requires...

O'BRIEN: What does that mean?

DOBBS: ... consequence for imprudent and irresponsible actions on the part of institutions. And this administration is insisting that moral hazard be applied to homeowners facing foreclosure, but not institutions that are collapsing, as did Bear Stearns on last Friday.

O'BRIEN: OK. So, are taxpayers literally on the line for this bailout?

DOBBS: Of course they are. And they're indemnifying what will be a -- a windfall for J.P. Morgan Chase. It's that simple. And it's, in my opinion, an irresponsible way to go about shoring up this -- Wall Street and the mortgage market in this country.

O'BRIEN: I thought it was curious to see Alan Schwartz, the CEO of Bear Stearns, on CNBC. And he said this statement: "The markets have certainly gotten worse" -- I'm quoting him now -- but our liquidity position has not changed at all. Our balance sheet has not weakened at all."

This is pretty much 48 hours before the disaster.

DOBBS: Correct.

O'BRIEN: Was he lying?

DOBBS: Absolutely. He was lying, I'm sure he thinks, with good intent, to avoid complications for what was already going on.

But the people -- my sources tell me that it was very clear what was happening with a number of the counter-parties, in the debt obligations that Bear Stearns had to other institutions, that it was very clear that they had a liquidity problem well in advance of Friday.

O'BRIEN: OK.

But, you know, you look at a company like Bear Stearns, which has a reputation of operating on the edge, what my mother would call sort of being fast and loose with the facts kind of thing. To some degree, because of that, I think the moral outrage is even greater. I mean, here, they're pushing the envelope...

DOBBS: Well, they're... O'BRIEN: ... bragging, frankly, about the risk-taking that they did.

DOBBS: Well, they are -- risk-taking is what Wall Street is all about at a certain level and with certain firms.

O'BRIEN: But they were the worst of the worst, some people have said.

DOBBS: Well, in this case, they may have been.

But the worst of the worst is a very difficult application when you -- when it comes to these firms dealing with derivatives, which is what was the source of the problems for all of these firms.

We may see that there are more worst of the worst in the days and weeks ahead. The reality is that Bear Stearns took an imprudent and irresponsible position on derivatives. And there are other institutions that have done so as well.

Now the question is, how many of them will have to be shored up by the federal government? And that, it will take a number of days to find out.

O'BRIEN: So, outside of moral outrage, realistically, is there anything anybody can do? I mean, we're on the hook, you say.

DOBBS: Well, there's nothing that individuals can do, other than let their congressmen know. And I would hope that everyone watching and listening to us, Soledad, let their congressmen and their senators know that they're quite aware of the outrage that is being committed in the name of something called moral hazard, which should properly be styled a moral outrage, given what's happening to millions of Americans in this country who are being denied the same advantage as are the -- the barons of Wall Street.

O'BRIEN: Lou Dobbs, always nice to talk to. Thanks.

DOBBS: Good to be with you.

O'BRIEN: Coming up next: Iraq and the politics behind it. John McCain traveled there. He says things have improved. Surprise -- other candidates disagree. We have got a fact check with John King, Michael Ware, and Peter Bergen. Plus, Gloria Borger joins us, too.

(COMMERCIAL BREAK)

O'BRIEN: In Iraq today, a suicide bombing near a mosque in Karbala killed at least 40 people and wounded dozens more. As the war heads into its sixth year this week, it remains a white-hot issue in the presidential election.

A new CNN/Opinion Research poll asked registered voters who they thought would do a better job of handling Iraq as president. Given the choice between Barack Obama, Hillary Clinton, 53 percent said Obama, 42 percent said Clinton. If the choice was Clinton or John McCain, people preferred McCain, 55-42. In a McCain/Obama match-up, 54 said McCain; 45 percent said Obama.

Senator McCain, a member of the armed forces committee, was in Iraq today, his first visit since becoming the presumptive Republican nominee.

CNN's John King has a closer look for us.

(BEGIN VIDEOTAPE)

JOHN KING, CNN CORRESPONDENT (voice-over): Play time on a road that just months ago was off limits. Traffic jams. Bustling markets. Proof, John McCain tells CNN, he was right and the Democrats dead wrong.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: The surge is working.

KING: On the balcony of what was Saddam Hussein's presidential palace, the Senator made clear he came to Baghdad with many complaints.

MCCAIN: Among them are the failure to prepare for provincial actions and oil revenue sharing. There's still corruption in areas, particularly among Shiite parts of the government.

KING: But overall, upbeat. His eight visit to Iraq comes eight months before election day back home, and McCain is convinced the war that nearly doomed his candidacy is turning for the better.

MCCAIN: We are succeeding, and we can succeed. And American casualties overall are way down. That is a direct contradiction to the predictions made by the Democrats and particularly Senator Obama and Senator Clinton.

KING: A drive through Baghdad now is different.

(on camera) Six to eight months ago here in Baghdad's Karata neighborhood, car bombings were still quite frequent. But as you can see now, the markets are open. The streets are quite busy, and the security situation is dramatically better.

(voice-over) But critics call it mostly a mirage and say, absent political reconciliation, U.S. troops would have to stay for decades, in large numbers, just to keep today's relative calm.

And security improvements are hardly universal.

(on camera) Senator McCain visited the Surja (ph) market just up the road a bit -- a year ago, as part of a high-profile effort to suggest security already was dramatically improving. But it took more than 100 troops to escort him and provide security for the visit.

And a year later, the neighborhood remains highly volatile, unsafe for an American to visit, and under the control of radical cleric Muqtada al-Sadr's Mehdi Army. MCCAIN: All I can say is that, yet, there are other neighborhoods of Baghdad where kids are out playing soccer and people are in the street.

KING (voice-over): What next is the new dividing line. Extra troops sent for the surge are rotating home. U.S. troop levels will drop to about 145,000 by July. The Democrats say withdraw more quickly. McCain says, not so fast.

MCCAIN: We probably should hold with 15 brigades for a while and see how the progress goes.

(END VIDEOTAPE)

O'BRIEN: John, let me ask you a question. If you take a look at the political debate over Iraq here in the United States, what do you think is the biggest obstacle for John McCain?

KING: The biggest obstacle for John McCain is if he loses the debate he's trying to frame, which is he wants to view the Iraq debate from here forward. If this is a debate about why did George W. Bush go to war, why do the American people think the war is a disaster, how fast can you get the troops home, John McCain will lose that debate. And he knows it.

If he can make it about a debate that, look, Iraq is broken. There's no purpose served looking backwards and having a debate about how he got into the war, but let's look, McCain will argue, at the judgment and the experience and who is best to get out of Iraq and at what pace.

He needs to make it a debate about who do you trust to get out of Iraq and protect the United States' interests in doing so and convince the American people that, even if you oppose the war, even if you think George Bush made a fundamental, galactic mistake coming into Iraq, if the Democrats pull the troops out so fast, this country will collapse into even greater chaos. And there will be another war, or wars, plural.

That is the case he has to make. And he does it at a time when 60-something percent of the American people have already reached the conclusion they want this war to end.

So it is a very steep Hill for John McCain. But Soledad, he said that, if he doesn't make it up that Hill, he won't be president.

O'BRIEN: If he can frame it in a way people will buy it, then he can do well on that issue.

All right. John King for us tonight. Thank you, John.

While John McCain was talking to reporters in Baghdad, Hillary Clinton and Barack Obama were taking jabs at each other over Iraq.

(BEGIN VIDEO CLIP) SEN. HILLARY CLINTON (D-NY), PRESIDENTIAL CANDIDATE: Senator Obama holds up his original opposition to the war on the campaign trail. But he didn't start working aggressively to end the war until he started running for president. So when he had a chance to act on his speech, he chose silence instead.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: With all due respect, she spoke about Iraq today, and she tried to suggest that, well, my opposition was just a speech in 2002, and since that time I've been inconsistent. Let me be absolutely clear here. I opposed this war in 2002. I opposed it in 2003, '04, '05, '06 and '07.

(END VIDEO CLIP)

O'BRIEN: Barack Obama, in fact, an Illinois Senator, was against authorizing the war back in 2002. Senator Clinton supported the bill.

Now, both senators have said the surge in troops last fall has helped reduce violence in Iraq, and both have outlined plans to withdraw U.S. troops as soon as possible.

Joining us this evening to discuss all that, CNN's Michael Ware and CNN terrorism analyst Peter Bergen. Also, CNN senior political analyst Gloria Borger is joining us.

Let's begin with you, Peter. John McCain has said that he thinks, in fact, that al Qaeda might increase the number of attacks to tilt the election against him. First of all, do you think that that is a realistic scenario?

PETER BERGEN, CNN TERRORISM ANALYST: Al Qaeda doesn't care who wins the presidential election. Al Qaeda wants to change American foreign policy in the Middle East, and there is bipartisan consensus about that foreign policy. All candidates envisage a strong U.S. presence in the Middle East going forward, strong support for Israel. Al Qaeda wants to change all that.

So if bin Laden himself came out with a videotape before the last presidential election, in which he made it clear that "I don't care if it's -- who wins the presidency. I want the American people to change American foreign policy." Obviously, that call did not work very well.

But the notion that al Qaeda wants to swing the election for or against John McCain, I'm afraid, is simply ludicrous. That is not the way these people think.

O'BRIEN: Michael, let me ask you a question about the surge. If the position is the surge is working, and John McCain has said that before, one, would you agree with it? And, two, does it did not continue to work if those troops are moved?

MICHAEL WARE, CNN CORRESPONDENT: Well, Soledad, in a sense, yes, the surge is working. But one thing I'd be very keen to do is ask Senator McCain just what exactly does he think the surge is? Violence is currently down. Back to levels of about 2005. Now, that still means a lot of Iraqis are dying every month. It still means 30 or 40 or more Americans are dying every month. That's completely unacceptable.

But this thing called the surge has brought those levels of horrific violence down from last year. But the surge isn't just about 30,000 troops sitting here in Baghdad. That's not what's really done this. What's really done this is cutting a deal with the Ba'athist nationalist insurgency.

What's done this is Muqtada al-Sadr calling a truce. What's done this is segregating this country into Sunni and Shia enclaves, walling them off with massive blast barriers, and arming local militias to protect themselves.

Now will this survive if 30,000 troops go? Those troops are just in Baghdad. What this is happening and the levels of violence is across the country. So there's much greater things at play here than just 30,000 troops. And in many ways, America is mortgaging the future of this country and America's interests to bring these numbers down by building these militias -- Soledad.

O'BRIEN: Gloria, let me ask you a political question here, and I think John King kind of raised it for us the first time, where he said if you ask the question in the polls about who's better off, you know, handling Iraq, John McCain does well.

But if the public spins from that and starts connecting him to sort of supporting a war that the country doesn't necessarily support, that could be problematic for him. How big of a risk do you think that really is?

GLORIA BORGER, CNN POLITICAL ANALYST: I think it -- I think is difficult for John McCain. But, you know, if John McCain has been anything, he's been consistent about the war in Iraq. He's always supported it. He was for the surge in Iraq before President Bush was for the surge in Iraq, and so he's being completely consistent here.

And what you see is John McCain acting as a commander in chief.

And I think he was careful to point out to John King in John's piece that there are things he does not like about what's going on in Iraq, just as General Petraeus pointed out last week to the "Washington Post."

So both of them, and they're very close, are saying, "Look, there are things we don't like. But here's what we can take credit for." And as you know, politicians are pretty good about taking credit for things when they're going well.

O'BRIEN: Really? I'm shocked to hear that, Gloria. You're absolutely surprising me.

BORGER: I know. O'BRIEN: Let me give the final question to Michael Ware tonight. Michael, a year ago when you and I spoke, you told me that the Iraqi troops were a disaster. I mean, they were just -- it was just a mess. Do you see improvement there or do you see improvement, but slowly, or no improvement at all?

WARE: Well, look, on an ad hoc local level, depending on which American unit you're dealing with, they may be dealing with a much better Iraqi counterpart than you'll find elsewhere.

But I have to tell you, overall, the numbers of Iraqi troops, the numbers of Iraqi police are growing. But the building blocks of these forces are still essentially militias or the insurgents. There really is no national coming together, certainly within the police. Absolutely fractured. Riddled with Iranian-backed militias.

And now America is putting Sunni insurgents in police uniforms to counterbalance that. You cannot walk away from this country and leave it to anything like the Iraqi security forces, and that's the sad reality.

America broke this place. This place is on its knees, yet America cannot walk away without enormous cost to itself and its own interests -- Soledad.

O'BRIEN: Michael Ware joining us tonight. Also, Peter Gergen and Gloria Borger. Guys, thank you very much. I appreciate it.

Coming up on Wednesday night, a 360 special. Anderson Cooper will take you right to the front lines. "Shock and Awe: Five Years Later." AC 360 special. That's Wednesday night at 11 p.m. Eastern.

Coming up next on 360, on the campaign trail with a former president, Bill Clinton. He's popular, he's polarizing, he's unplugged. Our Gary Tuchman goes along for the ride.

(COMMERCIAL BREAK)

O'BRIEN: Up close tonight, Bill Clinton on the stump. Right now it's clear that he's both an asset and a liability for his wife's campaign. He's also quite a bit of a rock star.

Up close tonight, CNN's Gary Tuchman went behind the scenes as Bill Clinton made stops in Pennsylvania and Mississippi. Call it a backstage pass with an ex-president.

(BEGIN VIDEOTAPE)

GARY TUCHMAN, CNN CORRESPONDENT (voice-over): Backstage at a high-school gymnasium in Erie, Pennsylvania, William Jefferson Clinton gets ready to whip the crowd into a frenzy over his wife.

Hundreds of people line up to get in on still another cold, snowy Northwestern Pennsylvania day. Most are here because they support Hillary. But they want to hear Bill. The 42nd president of the United States has the flu, but being the center of attention on behalf of his wife seems to ramp up his energy.

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATS: I implore you. You say yes to Hillary, and you won't have to worry about your future.

TUCHMAN: The former president's aides say he loves campaigning for his wife. But the negative press he received earlier when he criticized Barack Obama and downplayed Obama's success has possibly softened his edge.

B. CLINTON: I love this election, because I didn't have to be against anybody in this election. I liked all the Democrats that ran. I liked the ones that aren't running anymore. I miss them in the debates.

TUCHMAN: He and his daughter, Chelsea, both barnstormed in Mississippi in an effort to make an anticipated loss there more respectable.

B. CLINTON: Hillary believes in the promise of this country. She doesn't believe there's a single problem we have that we can't overcome. And I'm telling you, she is the best change maker I have ever known.

TUCHMAN: But Pennsylvania will now be the center of the American political world for weeks to come.

B. CLINTON: Raise your hand if you know somebody without health care coverage.

TUCHMAN: Even though his purpose is to promote his wife -- when a rambling heckler starts criticizing him personally, Bill Clinton sounds like he is the candidate.

B. CLINTON: America did a lot better when I was president than they have in this decade, and that's the truth. Now, good-bye.

TUCHMAN: His life on the road is fairly lonely. He usually travels with two aides and plays a lot of cards, including, we're told, a game called "Oh, Hell," which is sort of a combination of Spades and Bridge. Clinton sleeps very little as he travels to rallies, which for many are trips down 1990s memory lane.

(on camera) Bill Clinton's campaigning has a surreal quality to it. If his wife wins, it means the only Democratic presidents over the last 28 years would be a husband and wife named Clinton. It means that Bill and Hillary Clinton would spend more than eight years living in the White House, the first people since Franklin and Eleanor Roosevelt to do so, when he could be president for more than two terms.

And it means that Bill Clinton would have new historical peers. George Washington might be his presidential peer, but Martha Washington would become his first spouse peer.

(voice-over) This potential first husband closes a long campaigning day with a nighttime fundraiser in Philadelphia. He's going back home to New York to rest up for another week as America's best-known presidential surrogate.

(END VIDEOTAPE)

O'BRIEN: Gary, you know, we talked about asset or liability. I'm curious to know what you think. Do you think the former president is more on guard with what he's saying since he kind of dipped into that liability category more than the asset category for a while?

TUCHMAN: Well, Soledad, Bill Clinton feels the criticism against him is unfair. However, it is fair to say that he's being more careful with his rhetoric right now.

The stakes are very high. The race is very close. It's almost like a World Series game in the bottom of the 9th inning. The star player comes up, the slugger. He's not going to swing very hard, because he has to protect the plate. And in essence, Bill Clinton is protecting the plate for Hillary Clinton.

O'BRIEN: Love the sports metaphors. Gary Tuchman for us tonight. Thanks, Gary.

Still ahead, the government's next move to try to fix the struggling economy.

Plus, the major cleanup effort right after the tornado that tore through downtown Atlanta. Take a look at those pictures.

And a settlement in the bitter Paul McCartney/Heather Mills divorce battle. The price tag comes to almost 50 million bucks.

(COMMERCIAL BREAK)

O'BRIEN: "The Shot of the Day" is coming up. Tonight, it's the tale of an extraordinary lobster and his date with a very big pot of boiling water.

First, though, Erica Hill joins us once again with the "360 News and Business Bulletin."

Hey, Erica.

ERICA HILL, HEADLINE NEWS ANCHOR: Hey, Soledad.

Atlanta trying to get back to normal after Friday's tornado. A number of buildings, including the CNN Center in downtown, reopened to the public today. But police are asking people just to stay home if they can. And for commuters, they ask them to avoid that downtown area so the crews can continue their cleanup. It will take a while.

The Federal Reserve expected to cut a key interest rate tomorrow, some say by as much as a full percentage point. That could bring it to its lowest level since 2004. And for you, that could mean a drop in your home equity or credit card rates. And Heather Mills got nearly $50 million in her divorce from Paul McCartney. That settlement is a fraction of what she asked for, but Mills says she's happy with the outcome.

I would hope so, because $50 million.

O'BRIEN: That's a lot of dough for a short marriage, man.

HILL: Indeed.

O'BRIEN: I've got to do some math (ph).

It's time now for the "Beat 360." You know the rules. We put a picture on the 360 blog, ask the viewers to come up with a caption that's better -- that's better than ours. Some nights, that's actually very easy to do. But not tonight.

Tonight's selection shows President Bush receiving a bowl of shamrocks from the Irish prime minister, Bertie Ahern.

OK. Our staff winner was Leah. Her caption was this: "Wow, thanks. I always wanted a Chia pet."

Very tough to beat. That's good.

Tonight's winner, though, is Alicia from Washington. Here's what she sends in: "Ha ha, yes, George, the 'They're after me Lucky Charms' line is hilarious, the first hundred times."

HILL: Good. Spoken like a true O'Brien there.

O'BRIEN: Well, you know. You like my accent, right?

HILL: Good stuff. I liked it.

O'BRIEN: I'm better with Spanish.

Visit CNN.com/360. Feel free to play along. Some nights, we really desperately need you.

Just ahead tonight, a Super Bowl raffle that could have been the end of Goliath, a giant lobster. Roll the video tape. There he is: 20 pounds of him. Twenty pounds. Instead, though, he won the equivalent of the lobster lottery. You know what that means. Our explanation, straight ahead.

HILL: We all know...

(COMMERCIAL BREAK)

O'BRIEN: Guess what, Erica? It's time for "The Shot." In honor of St. Paddy's Day, it is the story of a lobster with the luck of the Irish.

This is Goliath. That's not Goliath. The other guy, bigger. Yes, that's Goliath. Twenty-pound lobster. Huge. He was raffled off to hungry football fans on Super Bowl Sunday.

HILL: Poor guy.

O'BRIEN: They're comparing him to that little redder thing. That's a regular-sized lobster.

HILL: It's enormous.

O'BRIEN: Can you imagine? A 20-pound lobster wouldn't taste so great. Anyway, luckily for Goliath, the winner didn't see him as dinner, but saw him as a priceless specimen, and she donated the lobster, who's estimated to be 50 years old, to an aquarium in Montreal.

HILL: I love that.

It helps because I feel like it helps, because I killed a lot of lobsters over the years. That was my job in high school and college.

O'BRIEN: You killed them?

HILL: I did.

O'BRIEN: That was your job?

HILL: It was. I worked at a seafood restaurant. But before we killed them sometimes, I'd bring them out for the kids to play with. Very exciting. We never had one that big.

O'BRIEN: I've heard -- I've heard so many troubling things about you in 45 seconds.

HILL: It doesn't take much.

O'BRIEN: No, it doesn't.

If you see some amazing video, you can tell us about it at CNN.com/360.

And just ahead, a political bombshell. Florida drops its plans for a do -over primary. Two hundred ten delegates are at stake. Which campaign stands to lose the most? Where does the fight to seat the delegates go next? All the angles, straight ahead on 360.

(COMMERCIAL BREAK)

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