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CNN Late Edition with Wolf Blitzer

Interview With Senator Kyl, Governor Kaine; Interview With Senators Hutchison, Boxer

Aired September 07, 2008 - 11:00   ET

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

WOLF BLITZER, HOST: This is LATE EDITION, the last word in Sunday talk.
(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, R-ARIZ.: Change is coming.

BLITZER: With the conventions over, it's a sprint to the election. Only 58 days left.

SEN. BARACK OBAMA, D-ILL.: He is not offering you something new. He's not offering you something different. But the Democrats are.

BLITZER: John McCain and Barack Obama fight over change. We'll talk about who will really shake up Washington with McCain supporter Senator Jon Kyl and Obama supporter Governor Tim Kaine.

GOV. SARAH H. PALIN, R-ALASKA: I will be honored to accept your nomination for vice president of the United States.

BLITZER: A historic candidate revs up the Republican faithful. But can Sarah Palin tip the scales in favor of John McCain? Democratic Senator Barbara Boxer and Republican Senator Kay Bailey Hutchison weigh in on that and much more.

The U.S. unemployment rate hits a five-year high, and the government takes over two major financial institutions. How are the presidential candidates addressing the number one issue with voters? We'll hear from two key advisers to the Obama and McCain campaigns.

OBAMA: I accept your nomination for president.

BLITZER: With the Democratic and Republican tickets set, we'll assess where the campaign stands with top Republican and Democratic strategists. Plus, insight and analysis from three of the best political team on television. The first hour of LATE EDITION begins right now.

(END VIDEO CLIP)

BLITZER: It's 11:00 a.m. here in Washington and 8:00 a.m. in Los Angeles and 6:00 p.m. in Baghdad. Wherever you're watching from around the world, thanks very much for joining us for LATE EDITION.

We begin with breaking news. The Treasury secretary of the United States, Henry Paulson, he's about to hold a news conference and make it official. He's expected to announce plans for a government takeover of the troubled mortgage giants Fannie Mae and Freddie Mac. There are enormous ramifications for Americans, especially those who own homes. Let's go to our senior business correspondent Ali Velshi in New York. Ali, set the stage for this dramatic announcement. It's been in the works now for some weeks. Congress gave them the authorization to do it, but now they are actually about to do it.

VELSHI: That's right. Back on July 15th, Henry Paulson says Congress -- he wanted the authority to back up Fannie and Freddie but he said if you've got a bazooka in your pocket and everybody knows you have it, you may not have to use it. Well he's going to use it any moment now. He's about to announce that Fannie and Freddie will come under government control.

Now the issue here with Fannie and Freddie is they are the backbone of the U.S. mortgage system. They might be described as like the operating system in your computer. Wolf, you don't really need to know how it works and it's really complicated, but if it doesn't work, your computer doesn't work. If Fannie and Freddie fail, mortgages in the United States will become almost impossible to get.

Here's how it works. Banks loan people money. They turn around and sell those loans to Fannie and Freddie who then use those loans and create bonds which others invest in. And because they were thought to have the implicit guarantee and backing of the U.S. government, Fannie and Freddie bonds were like U.S. government bonds. But Russia and China and others have been dumping those bonds, thinking that Fannie and Freddie are holding a lot of bad loans and they have not been able to raise money.

The result, Wolf, is that trying to get a 30-year fixed mortgage for Americans right now is probably one to 1.5 percent higher than what it should be if Fannie and Freddie were in good health. So the idea here is the government comes in, cleans it out and gets rid of some of the executives, takes control and makes Fannie and Freddie real government-backed entities which will be able to raise money from foreign governments, from major investors in order to give mortgages to homeowners. Henry Paulson I think is stepping up right now, Wolf.

BLITZER: All right. Let's listen in to Henry Paulson.

HENRY PAULSON, TREASURY SECRETARY: New independent regulator, the Federal Housing Finance Agency, FHFA. In July, Congress granted the Treasury, the Federal Reserve and FHFA new authorities with respect to the GSEs, Fannie Mae and Freddie Mac. Since that time, we have closely monitored financial market and business conditions and have analyzed in great detail the current financial conditions of the GSEs, including the ability of the GSEs to weather a variety of market conditions going forward.

As a result of this work, we have determined that it is necessary to take action. Since this difficult period for the GSEs began, I have clearly stated three critical objectives: providing stability to the financial markets, supporting the availability of mortgage finance and protecting the taxpayers, both by minimizing the near-term cost of the taxpayer and by setting policy-makers on a course to resolve the systemic risk created by the inherent conflict in the GSE structure.

Based on what we have learned about these institutions over the last four weeks, including what we learned about their capital requirements and given the capital conditions -- excuse me, the conditions of the financial markets today, I concluded that it would not have been in the best interest of taxpayers for the Treasury to simply make an equity investment in these enterprises in their current form.

The four steps we are announcing today are the result of a detailed and thorough collaboration between FHFA, the U.S. Treasury and the Federal Reserve. We examined all options available and determined that this comprehensive and complementary set of actions best meets our three objectives of market stability, mortgage availability and taxpayer protection.

Throughout this process we've been in close communications with the GSEs themselves. I have also consulted with members of Congress for both parties, and I appreciate their support as FHFA, the Federal Reserve and Treasury have moved to address this difficult issue.

Before I turn to Jim Lockhart to discuss the action he's taking today, let me make clear that these two institutions are unique. They operate solely in the mortgage market and are, therefore, more exposed than other financial institutions to the housing correction. Their statutory capital requirements are thin and poorly defined as compared to other institutions. Nothing about our actions today in any way reflects the changed view of the housing correction or the strength of other U.S. financial institutions. Jim?

BLITZER: All right. So there you have it, the breaking news, a huge decision by the U.S. government to take over these two giant mortgage companies, Fannie Mae and Freddie Mac. Ali Velshi, he made it official. A lot of people were bracing for this and I guess what a lot of taxpayers want to know is how much is this going to cost the American taxpayers to bail out Fannie Mae and Freddie Mac?

VELSHI: Well, here's the thing. Until now because they were government-sponsored entities they had a limit as to what they can do. Now that the government is taking it over, the only limit as to how much Fannie and Freddie can get into is the debt ceiling on the United States so it is potentially much greater debt exposure.

The thing though is with the government's backing, it's thought that other investors who have been bailing out of Fannie and Freddie including Russia and China might say that now that the United States is standing behind Fannie and Freddie explicitly as opposed to implicitly, it's worth getting back into these investments. They're going to be run as tighter ships and as a result, they are likely not to fail.

Now if you have stock in Fannie or Freddie, that's a problem. That stock is probably going lower than what it is right now and it has plummeted over the last year. But for the actual company's ability to do business and offer mortgages and buy those mortgages from the banks, this is a positive step. The idea of being they probably won't fail now because the government is stepping in to take control. The result should be cheaper 30-year mortgages for people who are looking to buy homes.

BLITZER: We just got a statement from Ben Bernanke, the chairman of the Federal Reserve, welcoming this decision. But as we know he was intimately involved going forward with Henry Paulson and others to make this dramatic decision, in effect fire the leadership, all the executives, the top executives of Fannie Mae and Freddie Mac. They were making millions and millions of dollars and let the U.S. government take charge, is that right?

VELSHI: And that's what most people - it's not often that the people say the U.S. government stepping in to take charge of public companies is a good plan, but in this case most of the analysis is yes. These companies, the accounting standards have not been up to scratch in terms of accounting for all these bad loans where private banks have been writing them off, saying we're just not going to get paid for this, we have to be honest about how bad the situation is.

Fannie and Freddie seemed to have been delaying getting to that conclusion. So the bottom line is the government is going to come in and Henry Paulson is going to be the top cleanup man on this one. There are a lot of people out there saying this had to happen, it's probably going to result in lower mortgage rates for people and it's going to try at least shore up some part of this mortgage -- this housing crisis, not all of it, as he said. This doesn't fix everything. This just fixes the ability of some people with good credit to get a 30-year mortgage for a little less money.

BLITZER: Ali, stand by. We're going to continue the breaking news. We're going to get some immediate reaction now to what Henry Paulson has just announced.

Joining us now two guests, the Arizona Republican Senator Jon Kyl. He's a supporter of John McCain. He's joining us from Phoenix. And in Richmond, Virginia, Governor Tim Kaine, he's a supporter of Barack Obama.

Senator Kyl, you voted against giving the government the authorization to effectively bail out these two mortgage giants. You've seen now what Henry Paulson has just announced. Give us your reaction.

KYL: Well, first of all, I voted against the bill for other reasons, but I talked to Secretary Paulson about an hour ago, and I don't have any doubt that this is action that needs to be taken. The problem is Republicans for over three years had been saying that Fannie and Freddie are in bad financial situation and the government should have greater regulation to require greater capitalization, the precise problem that Secretary Paulson pointed out.

Democratic leaders in the Senate and House said oh, no, everything is just fine, we don't need greater regulation, they are not in bad shape. Even just a couple months ago they were saying that and so, unfortunately, this is, you know, the chickens come home to roost, but I will say this. We've got to reform the situation so taxpayers are no longer on the hook. With Fannie and Freddie investors it's basically heads we win and tails you lose and you are the taxpayers.

BLITZER: What were the other reasons that you opposed, why you voted against the legislation?

KYL: The legislation created a huge slush fund which actually Freddie and Fannie had to pay for.

KYL: In other words, even though they're in terrible financial shape, they were required to put additional money into a pot which would essentially go to local and state governments for what I believe would be basically political purposes.

And there were some other problems with the legislation. This was the so-called housing legislation. It wasn't just about Fannie and Freddie. The additional regulation in Fannie and Freddie was the one good thing in that particular bill.

BLITZER: All right. Let's get the reaction from Governor Tim Kaine.

A lot of homeowners in the Commonwealth of Virginia, Governor. What do you think -- a good administration by the Bush administration to bail out these two mortgage giants, or a bad idea?

KAINE: Well, it's an important step that they've taken, but they're way too late. During the Bush administration, there's been a complete abdication of responsibility for regulating the nation's financial markets, and so it's come to this.

States were stepping up warning the federal regulators that we were going to have problems in the mortgage industry with both private lenders and Freddie and Fannie. But there has been a laissez-faire attitude toward trying to protect homeowners and the credit markets of the nation by the Bush administration.

And so this is chickens coming home to roost. The step needed to be taken, but it's an indication of what happens when you put hands- off on the -- regulating the financial industry and then you end up having to do this kind of massive bail-out to save it.

BLITZER: Let me get this straight, Senator Kyl. You now support greater federal regulation of the private sector or the semi-private sector -- is that what you just said in that first answer, and that the Democrats oppose greater -- that the Democrats want -- oppose greater regulation?

Is that -- because I'm a little confused.

KYL: Yes.

BLITZER: The Republicans have always tried to eliminate regulation, but now you're saying more regulation is needed, and the Democrats are on the wrong side of this issue. KYL: Wolf, with all due respect to Governor Kaine, the Bush administration, and Secretary Paulson in particular, has urged greater regulation.

But there is no statutory basis, no legal basis for regulating Fannie and Freddie stronger than they had been regulated. Democrats had always opposed that.

Republicans, believing that the implicit guarantee of the United States government meant that taxpayers would be on the line if anything went wrong, and we could see that it was going wrong, were urging that there be greater regulation in terms, for example, of greater capital requirements, the same thing that we impose on other kinds of investor entities and certainly on the banks.

Fannie and Freddie and their supporters in the Congress always said, oh, no, no, they're not in trouble and they don't need greater requirements and greater regulation.

The reason that Republicans supported greater regulation is because these are unique entities where the taxpayers are on the hook if something goes wrong.

BLITZER: Let me let Governor Kaine respond.

Go ahead, Governor.

KAINE: Sure, Wolf. I think what the record will show is that Democrats, but also Republican governors around the country, were aware of these problems in the financial markets on the private side.

Remember, these loans don't begin with Freddie Mae (sic) and Fannie. They begin with private lenders. They were aware of serious problems in the private markets, went to the Bush administration to push greater regulation of the private markets, and the Bush administration was laissez-faire; you can't do it; this is a federal responsibility. But the responsibility wasn't take seriously.

That's why we're in the problem that we're in. That's why Freddie and Fannie have all these loans and paper that were really not adequately understood and the due diligence wasn't done.

And so the Democrats have always taken -- had the belief that, look, we've got to have appropriate regulation to the circumstance, not overly regulate.

But the notion of a laissez-faire attitude that leaves homeowners to, kind of, fend for themselves in this massive foreclosure crisis -- that's what we've opposed. And we're glad to see that finally, finally, there's an effort to wake up and do something about it.

BLITZER: All right, guys. Stand by. We're going to continue our discussion. We'll take a quick break. We'll turn to politics: the aftermath of the two political conventions. Now what? "Late Edition" continues right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP) GOV. SARAH H. PALIN, R-ALASKA: Listening to him speak, it's easy to forget that this is a man who has authored two memoirs but not a single major law or even a reform, not even in the state senate.

(APPLAUSE)

(END VIDEO CLIP)

BLITZER: The Republican vice presidential nominee Sarah Palin, the governor of Alaska, slamming senator Barack Obama, the Democratic presidential nominee.

Let's get some reaction from Governor Kaine of Virginia, a major supporter of Senator Obama. You want to react to what Sarah Palin told Republicans and the nation, and the world, indeed, Wednesday night at convention in St. Paul?

KAINE: Glad, to Wolf. Well, look, you can deliver a sarcastic line with a sense of humor, and she can. But the senator has authored major legislation, nuclear non-proliferation work with Senator Lugar, campaign ethics reform, reform of ethics laws in the criminal justice system, as an Illinois senator.

But that line was like a lot of her lines. I canceled the bridge to nowhere -- well, yes, but you kept all the federal money.

I sold the state plane on eBay -- well, you put it up for sale, but it didn't sell, so then you sold it -- it ended up selling to a contributor and supporter at a loss.

You know, lines can be delivered that are funny, but they don't really speak to the concerns that Americans have.

We've got to fundamentally change the direction of the economy, as is evidenced by this recent bailout of Freddie and Fannie. And we've got to change our national security policy.

And Americans understand that that's been Barack's message from day one of this campaign. Senator McCain only embraced the message at the very end, Thursday night. And now he's the change candidate. It's, kind of, like, America, if you just give me one more chance, I promise I'll change; this time, I really mean it.

BLITZER: And Senator Obama, Senator Kyl, he really went after Senator McCain and Republicans, saying, in effect, if you like the eight-year economic record of the Bush administration, you're going to love four more years of a McCain Republican administration.

Here's a little clip of what Senator Obama said.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA, D-ILL.: If you want change, it seems to me that it's hard to argue you're going to be the big change agent when your judgment is such you think George Bush is right 90 percent of the time. John McCain is looking backwards, and he has adopted the exact same policies that George Bush has adopted. He is not offering you something new. He's not offering you something different.

(END VIDEO CLIP)

BLITZER: All right. Go ahead, Senator Kyl. Let me hear you respond.

KYL: Well, if you're talking about victory in Iraq, yes, George Bush does agree with John McCain that we should have victory rather than the precipitous withdrawal that was recommended by Barack Obama.

If you're talking about wasteful Washington spending, I don't think you can argue that John McCain is not an agent of change.

While Barack Obama was requesting nearly a billion dollars in earmarks, John McCain was fighting earmarks, and so was Sarah Palin.

In fact, she used her authority as governor to wipe out about $500 million in spending. She vetoed the spending. In the first year it was about 13 percent of the budget; about 10 percent of the budget in her second year. Nobody can argue that John McCain has not tried very hard to end wasteful Washington spending.

BLITZER: But on issues like tax cuts, Senator McCain initially back in 2001 and 2003 opposed President Bush's tax cuts. He voted against them, one of only two Republicans, together with Lincoln Chafee to vote against them. But now he says the tax cuts which he opposed should be made permanent. Where is the difference between Bush and McCain when it comes to taxes?

KYL: When it comes to taxes, John McCain agrees that the Bush tax cuts have been one of the best things for the American economy in our history. And to go back to the rates that they were before, especially when the economy is not doing great right now, would be devastating.

The difference is that John McCain also believes that we should provide more capital for business so that we can keep business here in the United States and therefore get our corporate tax rate down a little bit closer to the average around the world. Right now we have the second highest corporate tax rate in the world. So with respect to the marginal tax rates, capital gains, dividends, John McCain and I and many others agree with President Bush that we need to keep those taxes as low as possible rather than Barack Obama who would increase those tax rates.

BLITZER: Here's how Senator McCain went after Senator Obama on the issue of taxes, and I want Governor Kaine to respond. Listen to this.

(BEGIN VIDEO CLIP)

MCCAIN: I will keep taxes low and cut them where I can. My opponent will raise them. I will open -- I will open new markets to our goods and services. My opponent will close them.

(END VIDEO CLIP)

BLITZER: All right, governor, go ahead.

KAINE: Wolf, if the Bush/McCain tax policies were successful as Senator Kyl just indicated, we wouldn't have gone from massive surplus to massive deficit, job growth to job loss, weak dollar, inflation creeping up dramatically and energy prices and food costs.

The economy has been managed in a disastrous way under President Bush with John McCain as his chief cheerleader. And on taxes, all you have you to do is compare these two guys and they have a different answer to the question what does economic success look like? Senator McCain, for him economic success is how the wealthiest individuals and the largest businesses are doing because that's where all his tax cuts are directed.

For Senator Obama, it's tax cuts for middle class Americans and tax cuts for small businesses so they can buy health insurance for their employees and so that they can have a zero capital gains tax rate for small and start-up businesses.

If you think that the success of the economy is with the wealthiest and the biggest businesses, then Senator McCain is going to keep up that basic strategy of President Bush. But Senator Obama is going to redirect the definition of success. How is the middle class doing? The folks that are squeezed by foreclosures, squeezed by energy costs, squeezed by food prices going up and how are the smallest businesses that are the engines of our economy, that produce most of the job growth in this nation, how are they doing?

There's a clear distinction and we really do need change. Even Senator McCain now realizes we've got to change directions but there is not one significant difference between what he proposes and what President Bush has pushed for the last eight years.

BLITZER: All right. Senator Kyl, Republicans have been in charge of Washington, both branches of government, the Executive Branch for the last eight years and the White House 12 of the last 14 years in charge of the Legislative Branch, the House and the Senate. And here is how Senator Obama is speaking about what the Republicans have managed to do and what McCain would do if he were elected.

(BEGIN VIDEO CLIP)

OBAMA: The centerpiece of his economic policy is $200 billion in additional tax breaks to some of the wealthiest corporations out there, and 100 million of you, middle class folks, would not get a dime of tax relief.

(END VIDEO CLIP)

BLITZER: All right, so a couple of questions out of there, Senator Kyl. Why should Exxon Mobil get additional tax cuts, tax breaks right now? KYL: First of all, remember that Democrats have been in charge of the United States Congress for the last two years. One of our problems is wasteful Washington spending. Democrats, John McCain doesn't like to use the phrase spend like a drunken sailor, because he thinks that denigrates his friends in the Navy, but John McCain has fought very hard against wasteful Washington spending. So his first point is it's not all about taxes, it's all about spending. And with a Democrat budget that both Joe Biden and Barack Obama supported you'd have about $1 trillion in extra spending and taxes.

BLITZER: But Senator Kyl, why does Exxon Mobil deserve more tax cuts?

KYL: John McCain is not suggesting that Exxon Mobil -- BLITZER: He's suggesting all big businesses should get a lower tax rate.

KYL: Wolf, there is a myth -- an urban myth about the land and that is that John McCain where Republicans are supporting tax breaks for the oil companies. Oil companies are corporations. Corporations are sending jobs abroad because the American corporate tax rate is more than double the average around the world.

What John McCain would like to do is the same thing that countries like Ireland and others have done, and that is to get our corporate rate structure closer to the average around the world so that people aren't going to take their jobs abroad where their taxes are lower but rather will keep their jobs here in the United States.

You can't go after American corporations on the one hand and then complain about people that don't have jobs because there are no corporations to hire them.

BLITZER: Go ahead, Governor Kaine you want to respond.

KAINE: I'll kind of stick with where I was, Wolf. The real issue is where do you direct tax policy and Senator McCain is directing it, as has President Bush, at the largest businesses and the wealthiest individuals. Senator Obama says you've got to direct it in a different place, it's got to be about middle class Americans, the middle class tax cut that he proposes. But also and this is really important, small businesses. My dad ran a five-man iron working and welding shop. Small business is the backbone of the American economy. It's where most innovation happens. It's where most job growth happens.

KYL: Barack Obama would raise taxes on small business.

KAINE: What he's going to do on small businesses is eliminate the capital gains tax.

KYL: The top marginal rate.

KAINE: Eliminate the capital gains tax for every small business and start-up business and give small businesses tax credits so that they can afford to buy health insurance for their employees. That is where he's targeted his tax cut policy. He's targeting it at the backbone of the American economy. The big businesses, I want them to do well, but they don't need government's help right now. Small businesses are the places where we ought to focus our energies.

KYL: And raising top marginal rates, which is Barack Obama wants to do, would hit small businesses most of all because 80 percent of the filers in the top bracket report small business income. You're going to kill the small business with Barack Obama tax increases.

KAINE: I'll tell you what will kill the small business, if Senator McCain's plan which would start denying businesses tax deduction for the value of health insurance and health benefits that they give to employees and taxing individual citizens for the value of the health benefits they get from their jobs. That is what's really not only going to hurt small businesses but you add to that foreclosure credit crunch, suddenly it's going to make it harder for people to have health insurance. That's no way to get this economy moving again.

BLITZER: Gentlemen, we're out of time, but a quick question to Senator Kyl and put on your hat as the number two Republican in the U.S. Senate, you're the whip. This is what Senator Specter said on Friday. He said, "I would like to see him," referring to Joe Lieberman, "vote with Republicans in September. He's practically there. That would have the consequence of giving us a Republican Senate."

He addressed the Republican Convention, Senator Lieberman did. Senator Kyl, what do you think about what Senator Specter is saying, trying to wean Senator Lieberman right now, not wait until after the elections, right now away from the Democrats to the Republicans so that the Republicans will be the majority and the remaining days of this term?

KYL: Well, it would be a great idea, and as a matter of fact it would enable us to at least do one thing which is to get some offshore drilling which is one thing we've been pushing very hard and we don't get if the democrats are in control so it would be great if Joe would join us. I know there are complicated factors as to why he might or might not but I would agree with Senator Specter, it would be a great thing if he could.

BLITZER: Have you spoken to him about it?

KYL: I have not, no.

BLITZER: But I suspect you might.

KYL: Well, I might.

BLITZER: All right. We'll leave it over there and see what happens. Senator Kyl, Governor Kaine, good discussion, thanks to both of you for coming in.

KAINE: Thanks, Wolf. BLITZER: Up next, Hurricane Ike. We'll get an update on this powerful storm that's now making its way across the Caribbean and may be heading towards the United States in the coming days. LATE EDITION continues right after this.

(COMMERCIAL BREAK)

BLITZER: We'll get back to the race for the White House in a moment, but let's keep an eye right now on Hurricane Ike as it's smashing its way through the Caribbean. It's out in the Atlantic. Karen Maginnis is at the Severe Weather Center joining us right now with the latest on this monster. What is the latest, Karen?

KAREN MAGINNIS, CNN METEOROLOGIST: It was just wicked right now. We're looking at a Category 4 Hurricane Ike. It is moving over Great Inagua as we speak. Now some of the outer bands are just whipping across coastal sections of Haiti and we think maybe overnight, it will move across the Gitmo area of Cuba.

Here are our computer models from the National Hurricane Center suggesting it is just going to cut right through Cuba and maybe brush right by the Florida Keys. We also think that this is going to get ripped apart as it interacts with land a little bit. And by the way, there are a number of hurricane watches and warnings all across the Bahamas, also Hispaniola and much of Cuba under a hurricane warning with a hurricane watch in effect for the Florida Keys.

Now this is a closer view. They are saying that on Grand Turk Island, which has about 3,700 residents, there are reports that as much as 80 percent of the island's homes have been damaged in some way by this Category 4 hurricane.

Well, we do anticipate it's going to lose some of its strength as it moves over the mountains of Cuba and then exiting, passing by the Florida Keys. It right now does not look like it will make a direct hit there, but pushing out into the Gulf of Mexico as we go towards the middle and the latter part of the work week, perhaps re-emerging as a Category 3 hurricane. Wolf, back to you.

BLITZER: So, correct me if I'm wrong, Karen. It looks like south Florida, basically, the Miami and Ft. Lauderdale area will be just fine, but this thing is moving into the Gulf of Mexico and right now those projections show it heading towards once again New Orleans, is that right?

MAGINNIS: Well, we've got this cone -- it's kind of an arrow, it could land on either side but right now the computer models are suggesting that this is the trajectory, more towards that northwestern Gulf of Mexico and, yes, I'm afraid that this probably does not make the folks of New Orleans feel very comfortable at all in that it's not turning. The computer models are not turning it just yet but keeping it more moving towards that west northwesterly direction.

BLITZER: And we think it will make landfall some place in the Gulf of Mexico, along the Gulf Coast what day? MAGINNIS: Probably late into Friday, but more than likely as we head into Saturday, possibly into Sunday, because Ike has slowed down. Earlier this morning it was moving at about 15, 16 miles-an-hour and now it's moving at about 13, 14, so it continues to slow down just a bit. And as it does, then our timing gets off just a little bit. But right now it's going to go underneath that subtropical ridge of high pressure and it's not going to move it in any particular direction but right on this very persistent course.

BLITZER: All right, Karen, stand by. We're going to constantly be checking in with you and all of our other severe weather experts, Karen Maginnis Is at the CNN Hurricane Center.

Up next with the political conventions now over, we're about to assess whether John McCain grabbed some momentum from Barack Obama. Our panel of top Republican and Democratic strategists, they are standing by to weigh in. LATE EDITION continues right after this.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION. I'm Wolf Blitzer in Washington. Let's break down the two presidential conventions and what's next in the campaign. Who has the momentum going into the home stretch? For that we turn to a panel of top Republican and Democratic strategists, all are CNN contributors, all what makes us the best political team on television.

In New Orleans, right now is James Carville. Here in Washington Donna Brazile, Alex Castellanos and Tara Wall. Guys, thanks very much for coming in.

James, before we talk politics, you're in New Orleans right now. You've just moved your family from Washington back to New Orleans where you grew up. This must be scary stuff for you.

CARVILLE: Well, I mean, we're watching it very closely. I'm a little optimistic that it's going to go west of us, but, you know, any time a storm gets in the Gulf, you have to watch it. It's a way of life here, and so we're watching it closely, but I have some reason for optimism that it's going to go to the west of us.

What kind of scares me a little bit is the storm seems to have a similar track that have 1900 storm that went through Cuba and was so devastating to Galveston, Texas, so we don't know. Any time it gets out in the Gulf, everybody along the Gulf Coast has to watch it very carefully.

BLITZER: And Donna Brazile is from Louisiana originally as well. You know, this is hard to believe that potentially, as we just saw in that forecast, this storm, Ike, could move towards Louisiana again.

BRAZILE: Look, James is absolutely right. People are very worried. They are concerned. Tens of thousands of people are still without electricity so we're praying for the best.

BLITZER: All right, let's talk about these conventions right now. Alex, which convention from the respective perspectives of the Republican Party and the Democratic Party, which convention was more successful?

CASTELLANOS: I think both conventions were tremendously successful this year. I think that's why we have such a close race. Both parties, can you imagine anything I think the Democrats could have done that would have been better? Perhaps they picked the wrong VP candidate, that may be the only thing instead of Hillary Clinton leaving the Republicans an opening. The Republicans had -- if both conventions did very well, Republicans still have had an advantage in that they came second.

BLITZER: Because the Democrats, Tara, the Democrats emerged united from their convention but interestingly the Republicans emerged pretty united from their convention as well. John McCain basically rallying the base of the party with the selection of Sarah Palin.

WALL: Well, I think the Republicans started out as a united party and continued through.

BLITZER: He was having trouble with some of that evangelical religious right.

WALL: But that gap had started to close a little bit and, of course, just nominating Sarah Palin just solidified that, closed it even more.

WALL: I heard from so many conservatives, so many evangelicals that are now on board. So absolutely it is even more unifying I think at this point. And I think that with the energy going forward, I would say, you know, right now it looks like John McCain has the momentum going forward. Now I think that's going to certainly change over the course of these next two months but he certainly has the momentum having this stellar pick, what some would say is a risky pick but he took the risky route. Barack Obama, some say, took a safer route.

BLITZER: Here, James, is how she hammered away in part at Senator Obama, we're talking about Sarah Palin. Listen to this.

(BEGIN VIDEO CLIP)

PALIN: I guess a small town mayor is sort of like a community organizer except that you have actual responsibilities.

(END VIDEO CLIP)

BLITZER: All right. James, go ahead. Tell us what you think about this.

CARVILLE: Well first of all, Senator Obama was president of Harvard Law Review. He was in the state senate where I think he co- authored something like 800 and some bills. He's been three years on the Foreign Relations Committee. He's debated Hillary Clinton something like 25 times. He showed up on god knows what and answered how many questions. So -- that town has, according to its Web site, 7,025 people. Look, I grew up in a town with one stop sign so there's nobody says how did you grow up in a small town, I didn't even grow up in a wide spot in the road. It's fair to question she goes a passport for the first time when she was governor of Alaska. So I think people are really looking at this. We know she wants to teach creationism in school.

People are going to look and take a peek back, look at this, see what this appeal is. But there's no doubt that she has brought along the right wing of the Republican Party and there's no doubt that they are more energized now and I think we're going into a very interesting general election.

BLITZER: Let me bring Donna in on the whole issue of being a community organizer. Now we know a lot of those community organizers are in the big urban areas and there are some suggesting that when they -- when the Republicans, whether Giuliani or Sarah Palin went after Obama for being a community organizer there was a racial overtone there. Do you believe that?

BRAZILE: First of all, I don't think they understand the role of a community organizer, often to help people who are in distress, they've lost their jobs, they've lost their homes, they've lost their health care. And for many of us, it's a time honored tradition to give back, especially those who have been rewarded with so much.

The Bible says to whom much is given much is required and it comes out of that tradition. So it was insulting to see both, you know, the governor as well as Mayor Giuliani criticize people. There's some on the Internet now that Jesus was a community organizer, Pontius Pilate was a governor. And perhaps they should understand the role of a community organizer, do help people in distress.

BLITZER: Did it have a racial -- Tara, did it have a racial overtone?

WALL: Absolutely not. I think that's ridiculous. I think that she was -- she particularly was making - I mean, Giuliani's probably went a little bit too far. She was making the point that I, too, was a community organizer and I have a responsibility. This is the danger and James continues to picks up on this. The danger the Democrats are doing here is this class warfare, saying she comes from a small little podunk town. If that's not in some way racist or classist, they have to be very careful to say that and to suggest this is the problem that Americans have.

And this is the distinctions that are going to be made and the moral imperative, this moral contrast, this picture that's trying to be painted because she just ran this small little community as a mayor, she's a governor of a state.

BLITZER: Let's let James respond.

CARVILLE: I'm absolutely floored that, again, I grew up in a place much, much smaller than that. I think it's very legitimate to question one's experience.

WALL: Right, and she's a governor.

CARVILLE: Excuse me for speaking while you're interrupting, OK? May I go on, please, thank you.

WALL: Continue, James.

CARVILLE: I would point out that she's been governor of Alaska which has 667,000 people which is like being mayor of Memphis, Tennessee, for less than two years.

I think it's a legitimate thing, a legitimate thing to discuss. I remember when Bill Clinton ran for president, they said that Arkansas was a small state. Well Arkansas is more than twice as big as Alaska and that was the biggest Republican talking point to add. When we get in this country where we come to a point and we say what is this person bringing, because remember, she's one heartbeat away from a 72- year-old heart and so I think it's very, very fair to look at what she's done, look at the fact that she got ear marks for $4,000 a person in that town, that's how much pork she brought into that. She's effective, but she sure not a fiscal conservative.

WALL: Ear marks have gone down.

BLITZER: Let me let Alex respond, because I know he's itching to get into this.

CASTELLANOS: A couple of things. One is that community organizer, the only point there is of course that not that it's not a noble thing, service to your fellow man, is it a qualification to be president? I think that's the point that Republicans have been made.

But you know, there's a bigger story here and there's a story that Barack Obama said his campaign started with one idea. Remember when he was on stage with Joe Biden? He said change starts from the bottom up. That's the Sarah Palin story. We all want to believe in America one of us can rise up and change this government, and Washington's broken.

Most people I think understand that. They know it's not going to change from within. Here I think the Republicans have picked this stellar pick that says new ideas are great, we've had years of them and no one has actually made change happen. We need to go do that and change this place and so I think what the Democrats are saying, hey, America, Joe Average America, you can't do it, only -- only the insiders can.

BLITZER: Sarah Palin is an outsider but John McCain has spent the last 26 years of his life in Washington.

CASTELLANOS: And now he is reaching out to all America and saying, hey, this is our campaign. This is the little guy campaign. Let's change Washington except the guy is a gal and by attacking that I think the Democrats are -- they are making her appeal. BRAZILE: But he's running with the same bread and butter issues that George Bush ran on and we've see the results, the highest unemployment in five years, median wages going down. That's the problem with the ticket, it's not a forward looking ticket.

CASTELLANOS: It is with her. We've had tons of new ideas for years and nobody has made change happen in Washington and now it's almost -- it's not just a conservative campaign, it's a populist conservative campaign.

BLITZER: James, go ahead and respond and then we'll take a break.

CARVILLE: Maybe I'm sitting somewhere else but I thought we were fighting three wars. I thought we had a looming fiscal crisis. I thought incomes had gone down $2,000. I thought we were in the biggest credit crisis that we've had since the Great Depression. I actually take a unique view. I think the job of the president of the United States is a very big job and requires people that understand that. I happen to think that Vladimir Putin is a dangerous man and it requires somebody that has been out of the country more than once to deal with it.

I think our dependence on Middle East oil has to be addressed immediately, I think global warming is real and I don't believe the earth is 5,000 years old. I don't know if that makes me an elite or what, but those are my beliefs.

BLITZER: All right, hang onto that and we understand your beliefs. All right James, stand by, everybody stand by. We're going to come back and take a look at these final 58 days of this campaign. What do Senators Obama and McCain really need to do right now in the last eight weeks to win? LATE EDITION continues right after this.

(COMMERCIAL BREAK)

BLITZER: Welcome back to "Late Edition." We're talking about the race for the White House. This is the biggest political story, obviously, of the year, the biggest story of the year.

And let me show some -- to all four of you -- some poll numbers.

Before either of the Democratic or the Republican convention, in our CNN average, our poll of polls, a few weeks -- a couple weeks ago, Obama was at 49 percent; McCain was at 43 percent; unsure, 8 percent.

It was a six-point advantage for Obama. Now, in our most recent average poll of polls, 45 percent for Obama; 42 percent for McCain, a three-point advantage. "Unsure," though, has gone from 8 percent to 13 percent.

Tara, it looks like this race is heating up and more people are now unsure, after these conventions. And the second poll was not completely done after the convention, but it looks like there's a 13 percent -- 10 percent to 13 percent, shall we say, unsure, which could be decisive in several of these battleground states like Ohio or Pennsylvania or Michigan.

WALL: Well, it could be decisive. And that's why John McCain has got to close the gap, particularly with white women voters. He's still struggling in that area.

He's closed the gap, a little bit. You've seen some increases with both of these candidates in this group. He's going to go and -- that's why you're seeing him out now, out on the road, with Sarah Palin in Michigan, in Wisconsin, in Indiana.

This is because these are the areas where he knows it is crucial, and that she is able to get through though to these voters in a way that he cannot.

When she talks about being this hockey mom, this small-town mom, the tax cuts, the tax reform, the corruption, going against the big guys, it resonates.

And I think that could spell danger for the Obama campaign. He has cut his number in half among women. So he's got some work to do as well.

BLITZER: How worried are you? BRAZILE: I'm not worried. Look, Obama needs to sharpen the contrast. You cannot give what I call 15-word answers to a ten-point question. So sharpen the contrast, focus on those battleground states, improve his numbers with some of the key demographic groups. And God knows he has to do well in the debates.

BLITZER: Do you believe, Alex, that this decision today by the Treasury secretary to go ahead and bail out Fannie Mae and Freddie Mac, these huge mortgage giants, had a political element to it?

They saw these two mortgage companies going down. They decided, you know what, better to do it now, eight weeks before the election, than closer to the election.

CASTELLANOS: I can't imagine that, when you're talking about the fate of America's economy, that you'd be making political decisions at this point, whether you're a Democrat or a Republican. So, no, I wouldn't think so.

But to your point about the polls tightening up, is Barack Obama still running?

I really haven't heard anything from the Obama campaign, now, for a week, and it's just that the media vacuum they've created, the Republicans, I think, have gained all the attention.

And to James' point, you know, I think the reason it's tightening up because most Americans, I think, believe what Republicans believe, which is you don't weaken America's economy, James, by strengthening Washington. You don't raise taxes on businesses, which is what we get paychecks from and buy things from. You don't strengthen our military by killing a missile defense shield and by declaring defeat in Iraq.

BLITZER: James, go ahead.

(CROSSTALK)

CASTELLANOS: Those are the things I believe.

CARVILLE: I would merely point out that, by every economic performance known to man, Democratic presidents have outperformed Republican presidents.

And by the way, if you believe that the economy was better under George W. Bush than it was under Bill Clinton, you've got a real clear choice here. You've got a real clear choice. If you think you incomes are going...

(CROSSTALK)

CARVILLE: Again, Senator Obama has the right prescription. There's not a single economic performance, other than a slight difference in inflation, that Republicans have beat Democrats on. There is no doubt about that.

And if you think that what American needs is another tax cut for people making over half a million dollars a year, then vote for McCain. If you think middle-class people are struggling, that their incomes are going down and they need help, vote for Obama. It's a very simple choice out there, I think.

BLITZER: And James got one governor of a small state elected twice. So he knows what he's talking about when he says, it's the economy, stupid. It was then and it probably is right now.

CASTELLANOS: Those leaders from small states -- that sounds like a pretty good idea.

(CROSSTALK)

CASTELLANOS: We should try that.

CARVILLE: Well, Arkansas is two and a half times the people of Alaska.

(LAUGHTER)

WALL: But they're people. The people of Alaska are people. They're voters. They're Americans.

BLITZER: All right, guys. We've got to leave it right there because we're out of time -- out of time. An excellent discussion.

(LAUGHTER)

All right, guys, stand by.

Barack Obama was talking about John McCain and the economy this morning. We're going to bring you what he had to say when "Late Edition" continues. (COMMERCIAL BREAK)

BLITZER: This is LATE EDITION, the last word in Sunday talk.

(BEGIN VIDEO CLIP)

OBAMA: The American people understand the seriousness of the choice before us.

MCCAIN: We're going to be the ones that wins this election.

BLITZER: With the presidential election less than two months away, what's the game plan for Barack Obama and John McCain? We'll talk with Obama campaign adviser Robert Gibbs and McCain campaign adviser Nancy Pfotenhauer.

PALIN: I love those hockey moms. You know, they say the difference between a hockey mom and a pit bull -- lipstick.

BLITZER: Governor Sarah Palin makes a splash in the Republican campaign. Will Hillary Clinton be the Democrat's weapon to counter John McCain's running mate. Democratic Senator Barbara Boxer and Republican Senator Kay Bailey Hutchison weigh in on that and more.

And we'll get insight and analysis from three of the best political team on television. LATE EDITION'S second hour begins right now.

(END VIDEO CLIP)

BLITZER: Welcome back. We'll get to the race for the White House in just a moment. But first, we're following the breaking new story that we reported on in the last hour. The Treasury secretary of the United States, Henry Paulson announcing plans for a governor takeover of the troubled mortgage giants of Fannie Mae and Freddie Mac.

Let's go back to our senior business correspondent, Ali Velshi. Ali's in New York. This story has huge ramifications for U.S. credit worthiness and for millions of Americans who either own homes or want to own a home.

VELSHI: That's right, Wolf. In fact, many people don't know that Fannie Mae and Freddie Mac together own or guarantee more than half of the U.S. mortgage market. They really are the grease in the wheels. And those wheels have become stuck recently because what would happen is that banks would make loans to individuals who would then sell those loans to Fannie and Freddie. Fannie and Freddie would repackage them and sell them as bonds to major investors.

But as those defaults continued, Fannie and Freddie got caught holding the bag. They are not government organizations. They are private corporations are called government-sponsored entities and what started to happen is investors started to lose faith.

So the Treasury secretary has announced an hour ago that they are taking over Fannie and Freddie. They are less regulated than private banks, so they don't have the same reserve requirements. But now there is a guarantee that the government will step in to back these companies so that they can continue to make loans to individual banks and those banks can continue to make loans to individuals.

The upshot of this whole thing is that the 30-year mortgage, which is then sold to Freddie and Fannie could become cheaper for the average American who's looking to buy a home. Some analysts say that that mortgage is 1 to 1.5 percentage points higher than it should be because of the bad financial health of Fannie and Freddie are in.

Don't know what the cost of this is right now. It could be upward of $100 billion, which would dwarf the Bear Stearns bailout from a few months ago. Both John McCain and Barack Obama are saying that they support this move, they just want to make sure that taxpayers don't get caught subsidizing people who were shareholders in Fannie and Freddie. Those shares have lost more than 80 percent in the last year. And Henry Paulson did say this morning that he didn't think it's likely those shareholders will see much of their money again. Wolf?

BLITZER: All right, Ali, thanks very much. Let's get some reaction to what is going on. And for that, we are joined by two guests. Robert Gibbs is with the Obama campaign. He's joining us from our studios in Chicago. Here in Washington, Nancy Pfotenhauer is an economic adviser, senior adviser to the McCain campaign. A lot of people suggesting that the Republicans really are to blame. They've been in power in Washington for the last eight years. They've moved to deregulate, get rid of some of the control over the mortgage industry, and now, potentially, just heard Ali say, a $100 billion bailout of these two mortgage giants. Tell those people who say that why they're wrong.

PFOTENHAUER: I was going to say, I haven't heard a lot of that. Fannie and Freddie are an example of crony capitalism. I mean, basically these entities were set up, they were given the upside, the return, but not the risk. The taxpayers bore the risk.

It was kind of a shameful practice that was allowed to go on and grow. If you heard about their lobbying budget, it was just obscene. Not only their lobbying budget for their on staff people, but their gun-for-hire lobbyists here in town. You were tripping over Fannie and Freddie lobbyists.

And so they would use their lobbying power to reinforce their entrenchment and what we have seen is the result of that. And so I think politicians in both parties, if they voted for entrenching these powers, have to answer to that. Senator McCain think this is a step in the right direction and we need to protect the taxpayers and need to never allow this to happen again.

BLITZER: And we heard Senator Kyl say in the last hour, the Republican senator from Arizona, the number two Republican in the Senate, the minority whip, he basically made the point that the Democrats were in the pocket of the Fannie Mae and Freddie Mac lobbyists and they're to blame for this mess. Go ahead and tell those who say that, tell Senator Kyl, in effect, why he's wrong.

GIBBS: Well, let me make two points. I think this is one more piece of bad economic news under George Bush's watch. Just on Friday, we saw another 84,000 people lose their jobs after eight years of bad economic news. Nancy said that the lobbyists have been in charge. They're in charge of John McCain's campaign and they're in charge of Washington. What we need is somebody who will take charge of Washington, kick the lobbyists and the special interests out. They don't fund Barack Obama's campaign. They won't run our White House. That's what will be different under Barack Obama's Washington.

BLITZER: He's referring to Charlie Black and Rick Davis, who were lobbyists and he says they're in charge of the McCain campaign.

PFOTENHAUER: There are lobbyists associated with Barack Obama's campaign as well. But the issue here --

GIBBS: Lobbyists don't run our campaign, Nancy.

PFOTENHAUER: Reform and change in Washington, D.C. And I think that Governor Palin had it right when she said some politicians, like Barack Obama, use change to propel their careers. Other politicians like Senator McCain use their career to propel change. He has got the record and whether you're a Republican or a Democrat or just an interested bystander in this town, you know that.

Sarah Palin has the record as well in Alaska. So they've actually put points on the board, not talked about it. And the American people are focusing on that and that's why the polls are closing.

BLITZER: Robert, go ahead.

GIBBS: Well, look, Charlie Black was lobbying inside of John McCain's bus on the road. They're in charge of that entire campaign. Sarah Palin right now -- look, she's not reform, because she's standing in the way of an investigation into her own ethics supported by the Republican legislature.

John McCain's not change because he's doubled down on George Bush's economic policy and wants more tax cuts for big corporations. That ticket isn't change. That ticket isn't reform. If you want change and reform, it's Barack Obama and Joe Biden.

PFOTENHAUER: I have to say, I couldn't disagree more. You've got Barack Obama, who votes -- he's the most liberal member of the U.S. Senate. When he was in the Senate Illinois legislature, he voted 130 times present. This is a guy that can't take a stand if it's not politically expedient. He's never done anything but carry water for his political party. Both John McCain and Sarah Palin have challenged special interests, challenged their own party. That's the test of courage. Have you challenged your own party when it was politically at risk in order to do the right thing?

BLITZER: Robert, go ahead.

GIBBS: Wolf, I noticed that Nancy doesn't want to talk about economics and lobbyists.

PFOTENHAUER: I would be happy to. I'd talk about economics all day.

GIBBS: I don't think we heard much about economics at the Republican Convention. We heard a lot of the same old rhetoric, the same old slash and burn tactics instead of trying to hear about trying to put people back to work.

BLITZER: Let me play this clip of what Rick Davis, from your campaign, said about this election and then we'll let you explain what he meant. Listen to this.

(BEGIN VIDEO CLIP)

RICK DAVIS, MCCAIN CAMPAIGN MANAGER: This election is not about issues. This election is about a composite view of what people take away from these candidates.

(END VIDEO CLIP)

BLITZER: Now, that's pretty startling when he says this election is not about issues. We thought the issues were what differentiate between these two candidates.

PFOTENHAUER: I think for many of us who do issues for a living, that's really how we react. What are you doing on taxes, what are you doing on spending, what are you doing on regulation, what are you doing on health care, what are you doing on energy?

But I think what Rick was getting at is that that most individuals who tune in view those things through a prism. And that prism is, do I trust this individual? What are his or her motives? Are they going to put the country first? I may not agree with them on everything. Maybe I only agree with seven out of 10 or eight out of 10 things, but do I think this is a principled individual who will do the tough things and help us meet the challenges facing this country at a difficult time?

What Rick is saying is that scrutiny, we welcome. Senator McCain can withstand that scrutiny. Governor Palin can withstand that scrutiny. I think the question for Barack Obama is not is he a good man or does he want the best things, it's he can deliver the best things and how good is his judgment in a pinch and I don't think we've got a track record. BLITZER: And here's what Senator McCain, Robert, said on Friday at a rally in Michigan when he hammered away at Senator Obama. Listen to this.

(BEGIN VIDEO CLIP)

MCCAIN: This ticket is the ticket to shake up Washington because Senator Obama doesn't have the strength to do it. He has never bucked his party on any issue, never.

(END VIDEO CLIP)

BLITZER: All right. Is that true?

GIBBS: No, it's not. When Democrats and Republicans stood up for weak ethics and lobbying reform, Barack Obama said no. We came back a year later and passed the strongest ethics and lobbying reform, putting special interests in their place that Washington had seen since Watergate. But let's go back to your previous questions about issues versus personalities.

GIBBS: Again, I wouldn't want to talk about issues if I had George Bush's economy to run on. I wouldn't want to talk about issues if I was in the pocket of lobbyists because they were running my campaign. I wouldn't talk about issues if we've had eight months of consecutive unemployment and eight years of bad economic news.

I don't blame the Republicans for wanting to change the subject. But the American people want to know that you've got a plan to help get them back to work, a plan to make them energy independent, a plan to make their health care more affordable. None of those things you heard at the Republican convention.

PFOTENHAUER: That is completely preposterous, Robert.

GIBBS: And you've got more tax breaks for big corporations. John McCain leaves 100 million people out, three times --

PFOTENHAUER: That is completely preposterous.

GIBBS: -- Three times the amount of tax relief than John McCain does.

BLITZER: Robert, let her finish.

PFOTENHAUER: We talked about energy and the importance for energy independence. It was mentioned in virtually every speech that we heard there. It was certainly mentioned by both Governor Palin and by John McCain. We talked about the importance of getting this economy going again. And despite what Barack Obama or his economic advisers or his communications director try to imply to the American people, that is not raising taxes in an economic downturn and that's what you do. You cut taxes in some places but you raise them other places. The burden of proof is why would you raise any taxes in an economic downturn?

BLITZER: What's the answer, Robert?

GIBBS: Here's what you do. John McCain wants to give $4 billion worth of tax breaks to Exxon Mobil. Barack Obama thinks that's wrong and we ought to raise taxes on people that make $11 billion in one quarter. That kind of stuff is crazy. Nancy, you know the answer to that. Let's have a plan to put people back to work.

PFOTENHAUER: Again, perfect example of distortion.

GIBBS: What's your plan? PFOTENHAUER: No, no. You pull out a corporate tax or business tax rate reduction when we have the second highest on the globe. It is a huge hindrance to international competitiveness.

GIBBS: Wolf --

BLITZER: Hold on one second, guys.

GIBBS: Wolf, I think you heard it right there. Nancy said they were going to raise taxes, they were going to cut taxes on...

BLITZER: Corporate rate reduction, but have an exemption for Exxon Mobil.

PFOTENHAUER: You do not create tax policy, rather positive or negative based on one company. That's exactly the type of favoritism that goes on. You need to lower the rate over all for competing against companies like Ireland.

BLITZER: Go ahead, Robert.

GIBBS: Wolf, I rest my case.

PFOTENHAUER: Good, I rest mine.

GIBBS: Nancy couldn't have said it better. We're going to cut taxes for Exxon Mobil under John McCain's administration. If you think that's a good idea, John McCain is your guy.

BLITZER: Here's another line that we heard from Senator Obama today. He was on ABC and he said this and I want you to respond, Nancy. Listen to this.

(BEGIN VIDEO CLIP)

OBAMA: He chose somebody who may be even more aligned with George Bush or Dick Cheney or the politics we've seen over the last eight years than John McCain himself is.

(END VIDEO CLIP)

BLITZER: He's referring to Sarah Palin, his running mate.

PFOTENHAUER: I think they're scared to death of Governor Palin. They're scared to death of her. She's incredibly popular and she's incredibly popular for a reason, because she's a real reformer, she brought about change, she's taken on entrenched special interests. She's got more experience than anybody else on the ticket.

BLITZER: But what Senator Obama is referring to that on several social issues, she's to the right of Senator McCain.

PFOTENHAUER: I think that she has laid out her positions and she's been very clear about them and that she'll express them to the American public and they can decide whether they support the McCain/Palin ticket or the Obama/Biden ticket. Let me tell you something. Most of American doesn't support -- or wouldn't oppose a ban on partial birth abortion the way that Senator Obama did. Most of America wouldn't be in line with the most liberal voting record in the U.S. Senate, like Senator Obama is. His positions are not close to the center. They are hard left and they're out of step with the American people.

BLITZER: I'll let you wrap it up. Go ahead, Robert.

GIBBS: Sure, let's talk about that ticket. Sarah Palin doesn't think climate change is man made. Both John McCain and Sarah Palin want to outlaw abortion, even in the case of rape and incest. I'll let you decide who you think is extreme, but you've got a candidate in Sarah Palin who says she's against the bridge for nowhere, but she campaigned on it. She says she's against lobbyists getting pork for her state when she hired a lobbyist to get pork for her state. And now she stands in the way of an ethics investigation to look into her actions that was approved by the Republican legislature. I'm telling you, Nancy, she's going to fit in just great at Washington because that's what happening right now.

PFOTENHAUER: That is a total crock, Robert, and you know it. She's been an open book on the ethics investigation.

GIBBS: If she's got nothing to hide, Nancy, then that investigation should go forward.

PFOTENHAUER: You're swinging wide and you're going to get caught on it and the American people won't stand for it.

GIBBS: There's somebody that's going to get caught on it and I have a feeling that investigation is going to catch it.

BLITZER: All right, well we'll see guys. We'll leave it right there, Robert Gibbs, Nancy Pfotenhauer, thanks to both of you for coming in.

Up next, what impact will John McCain's choice of Sarah Palin as a running mate have on women voters. Democratic Senator Barbara Boxer and Republican Senator Kay Bailey Hutchison, they're standing by live to continue this discussion. LATE EDITION continues after this break.

(COMMERCIAL BREAK)

BLITZER: John McCain's pick of Sarah Palin as his running mate has certainly generated enthusiasm among lots of Republicans, but will the Alaska governor be able to draw in Democrats who are disappointed that Hillary Clinton is not their party's presidential nominee or vice presidential nominee?

Let's talk about that with two key U.S. senators. Joining us from Los Angeles is California Democratic Senator Barbara Boxer. And joining us from Dallas is Texas Republican Senator Kay Bailey Hutchison. Senators, thanks to both of you for coming in.

Senator Boxer, let me start with you and I'll play a clip of what the former New York City Mayor Rudy Giuliani told the Republican Convention earlier in the week. Listen to this. (BEGIN VIDEO CLIP)

RUDY GIULIANI, FORMER NEW YORK CITY MAYOR: She's already had more executive experience than the entire Democratic ticket combined.

(END VIDEO CLIP)

BLITZER: All right. Go ahead and respond, Senator Boxer. Sarah Palin, more executive experience -- executive experience than Obama and Biden.

BOXER: Well, what they're basically saying, then, is that John McCain has no experience either. That's ridiculous. The question is, what have you dedicated your life to? The national issues, large state issues, or a small town mayor, which is great. Look, I started out as a county supervisor. That was great. But I wasn't yet ready to be a vice president. So the issue, really, goes beyond this. That's just foolish on its face.

The issue is, who is Sarah Palin? Why isn't she on television telling people what she believes in without a script in front of her. You know, Kay Bailey Hutchison and I are on your show and we're talking to you straight from the heart. We haven't seen her do it. And when you look at her record, it's extremist. It's more of the same. Someone who's under investigation who says she wants to shake up Washington.

BOXER: I take her at her word that she's a pit bull with lipstick, but we don't need more fights.

(LAUGHTER)

BOXER: We have gridlock in Washington. We need people who can reach across party aisles. The other thing is, she says she's a maverick; she says John McCain's a maverick, when John McCain has been a foot soldier in the Bush-Cheney revolution -- 100 percent of the time in '08.

BLITZER: Lots of points there.

Let's let Kay Bailey Hutchison, who herself was widely seen as a potential running mate for John McCain -- let's let her respond.

Go ahead, Senator.

HUTCHISON: Well, let's start with talking about Sarah Palin. She does have executive experience. She's the only one in in this race who has been a governor and a mayor. That means you have to make decisions.

And she has been able to make the decisions that makes her the most popular governor in all of the United States. Because she has shown that she's working for the people. She's made some tough decisions. She has instituted ethics reform in Alaska and she also has cut spending. She's vetoed bills to keep the budget down so that there wouldn't have to be tax increases, and in fact is giving a rebate to every person in Alaska, because she has been able to be responsible with a budget. So she does have executive experience.

BLITZER: But that -- but that line of argument -- doesn't that also undermine Senator McCain, who's been a senator and a congressman for, what, 26 years, and no executive -- it also undermines the two of you and suggests that...

HUTCHISON: Not at all.

BLITZER: ... being a United States senator means nothing.

(LAUGHTER)

HUTCHISON: No, no, it means a lot. Because of course, Senator McCain has been a powerhouse in the United States Senate. He knows foreign policy. He's very well traveled in the world, and he also has a military background that gives him a huge advantage in understanding what it takes to make the military effective.

He is the nominee for president and he does have the experience with federal issues. But I think that we're getting off track, here, when we don't just acknowledge that there are executives with state experience who do a great job. And we have elected governors to president. In the last 25 years, most of them have been governors. That's executive.

But on the other side, you've got John McCain, who is the experienced Washington person on issues, but he's also gone against the grain and he has had bipartisan coalitions.

And, Barbara, you know how well he works across the aisle with the people in the Democratic Party to effect real change and a real -- he can really make a difference.

BOXER: Well, I can speak to that. I've seen John work with others. I've seen him get very angry and hostile towards others. So I think his temperament doesn't quite match what you're saying.

But I have to say, let's look at Sarah Palin's experience. That's what everybody says we should look at. She left her city in debt. She hired a lobbyist when she became governor. And then I saw, in her own handwriting, brag about the earmarks Alaska got.

She supported the bridge to nowhere when she was running for governor. When it became unpopular, she shifted.

Her views are out of the mainstream. Her reaching across to Hillary voters makes no sense at all, and it's an insult to Hillary voters. The woman doesn't believe in birth control. She doesn't believe that a woman should have a right to choose if she's a victim of rape or incest. She doesn't believe that global warming has anything to do with human activities. And I could go on and on. She's against stem cell research. So while I believe she is activating the far right-wing base, and she is, she's also activating people across party lines who believe in stem cell research and believe in a women's right to choose.

BLITZER: I want to let -- I want to let Senator Hutchison respond. She's against embryonic stem cell research, but not other forms of stem cell research.

Go ahead, Senator Kay Bailey Hutchison.

HUTCHISON: Well, thank you, Wolf. That's exactly right. And I think that more and more is being done, now, to increase the ability to do the stem cell research with other kinds of non-embryonic stem cells. And that has a lot of promise.

But let me just go back and say that she has an incredibly good record and she has -- she has become the most popular governor in her state.

But let's talk about John McCain. You, sort of, whiffed over the fact that he has reached across the aisle.

Barbara, who doesn't have a temper in the United States Senate?

It's just ridiculous to say he doesn't have the temperament. I mean, everybody gets upset at some point, but...

BOXER: I don't agree.

HUTCHISON: ... John McCain has been effective on ethics reform. He was...

(CROSSTALK)

BLITZER: Hold on a second. I want Senator Boxer to the temperament issue. You raised it, Senator Boxer. Tell us what you meant and what it suggests.

BOXER: I raised it because John McCain said he has the temperament to be president. Just listen to what some of his Republican friends have said about him.

Thad Cochran, a Republican conservative senator from Mississippi, says, the thought of John McCain in the White House sends cold chills down his spine.

I don't agree with Kay Bailey that everybody loses their temper like that. And I think we've all seen it happen. It's not rational when it happens.

And because John McCain raised the issue -- he actually raised it and said he has the temperament, you know, I think it should be on the table.

And anyone watching, you know, Barack Obama stay as cool as a cucumber under the most unbelievable scathing attacks can see that.

And I think, look, John, once in a while -- once in a while -- has reached over on an issue. But 100 percent of the time, in '08, he voted with Bush; 90 percent since Bush came into office.

In the primary, Kay, he just tried to say, over and over again, how much he loved President Bush. He has pictures of them hugging and kissing. And he can't have it both...

HUTCHISON: Oh, Barbara.

BOXER: He can't have it both ways.

BLITZER: Go ahead, Senator Hutchison. Let's let Senator Hutchison respond.

HUTCHISON: Every Democrat has a picture of themselves with a president that's a Democrat and vice versa. Now, that's just not an issue.

Look, he believes strongly in his principles. And he has reached across the aisle, time and time and time again, on the tough issues, on making sure that we confirm judges. He put together the Gang of 12, which has allowed us to go forward and not blow up the Senate every time a judge nominee comes forward; immigration reform, one of the toughest issues. He and Ted Kennedy led the way for that.

On ethics reform, he and Russ Feingold led the way for that.

BOXER: Ten percent of the time.

HUTCHISON: He has taken on the tough issues and he has been able to forge bipartisan consensuses on those tough issues. And you cannot compare Barack Obama and John McCain in the United States Senate. You just can't do it. It's not credible.

BOXER: Well, of course you can't compare them. One has been there for his whole entire life. The other one's an agent of change and wants to change Washington. And that's what this comes down to.

Look, John McCain is a fighter. Sarah Palin, by her own description, is a pit bull with lipstick. I will give you that they are fighters, fierce fighters.

What has John McCain fought for in the Senate? Fourteen times, I've seen him, because I've served with him for 15 years...

HUTCHISON: Let's talk about what he...

BOXER: Wait a minute.

BLITZER: Hold on a minute.

HUTCHISON: Let's talk about what he fought for.

BOXER: Well, that's what I'm trying to do, Kay. HUTCHISON: He fought for military integrity.

BOXER: He's fought against the minimum...

(CROSSTALK)

BOXER: Wolf, can I finish my point?

BLITZER: Go ahead.

BOXER: He has fought against raising the minimum wage. You know how many times, Kay, since I've been there? Fourteen times.

He has voted against homeland security. He even voted against and fought against -- and this is interesting -- the water bill, which takes care of flood control. And he was so right to cancel the first day -- or modify the first day of the convention. But do you know that he voted against sending $7 million to Louisiana to fix those dikes and to fix those levees, one of the few who did it...

BLITZER: All right. There's a lot of stuff there. Senator Hutchison, go ahead.

BOXER: And he voted to send all the money to Iraq.

HUTCHISON: That's just not right, Barbara, because...

BOXER: It's true. You don't like it, but it's true.

HUTCHISON: Barbara, we have already spent double cleaning up New Orleans than we have on New York City.

BOXER: He voted against it.

HUTCHISON: No, that's not right.

BOXER: He voted...

HUTCHISON: No.

BOXER: I have the facts.

HUTCHISON: That's not true, Barbara.

BOXER: I'm the chairman of the committee.

HUTCHISON: You know that, in the underlying bill -- in the underlying bill, there was more than enough to fix the dikes in New Orleans.

BOXER: And he voted against the bill.

HUTCHISON: You're talking about an amendment an amendment that was not necessary...

BOXER: No, no. HUTCHISON: ... that the department said they already had enough to do what the Corps of Engineers was recommending. And what you're talking about is an amendment that would have added $7 billion on top of...

BOXER: No, I'm not.

HUTCHISON: ... the $15 billion.

BOXER: Kay -- Kay, I'm the chairman of the committee. He voted against the...

(CROSSTALK)

HUTCHISON: ... appropriation is not -- that's not... BLITZER: All right, we'll check the record.

(CROSSTALK)

BLITZER: Guys, we'll check the record on that and we'll report it.

(LAUGHTER)

One final question.

Senator Boxer, Senator McCain was with you on the very sensitive issue of comprehensive immigration reform, another very sensitive issue, campaign finance reform. He did cross party lines to work with you on those two important issues.

BOXER: Yes, he did. Look, he's got a 90 percent with George Bush and a 10 percent against George Bush. And, yes, there have been these moments that he's crossed over. And those two are examples of it. Great. And I'm very happy about it.

But his lifetime record on choice is zero. His lifetime record on working men and women is zero. And as the author of the water resources bill, he was one of just a few to vote no. He voted against the highway bill, and here we have 84,000 Americans lost their jobs in August.

BOXER: And yesterday, his speech is, I'm going to take my veto pen and cancel all these things out. Is he going to now say he's against the highway bill again and then we're have more people unemployed. It's unbelievable how out of sync and out of touch he is.

HUTCHISON: OK, give me a chance here.

BLITZER: I'm going to give you a chance to respond. Go ahead.

HUTCHISON: OK, first of all, he's going to have a veto pen when it's pork, not the priority spending. Number two, let's talk about the economy and taxes. John McCain has charted his own course. Barack Obama will increase taxes at a time when this country cannot afford it. It will stifle the economy. What John McCain wants to do is give double tax credits to people who have children to help them make ends meet. He wants to keep the low capital gains and dividends rate, so the stock market will stay firm. He wants to give every working family tax cuts. Let's talk about energy. What John McCain wants to do is increase supply.

BLITZER: We'd like to talk about all that, ladies, unfortunately.

HUTCHISON: While the Democrats are not allowing any increase in supply and the American people know that this is common sense.

BLITZER: Unfortunately, unfortunately, we are all out of time. We could go on and on and on, because it's a good, serious and important discussion underscoring the differences between these two presidential candidates. But we have to leave it right there. Senator Boxer, thanks to you. Senator Hutchison, thanks to you as well.

HUTCHISON: Thank you, Wolf.

BLITZER: A good debate indeed.

And still to come, we'll get an update on that powerful hurricane, it's called Hurricane Ike, and whether it's heading to the United States in the coming days. LATE EDITION continues right after this.

(COMMERCIAL BREAK)

BLITZER: Get back to the race for the White House in just a moment. But let's get an update right now on Hurricane Ike. It's a monster. It's tearing through the Caribbean right now. Karen Maginnis is over at the Severe Weather Center tracking this storm. What is the latest, Karen?

MAGINNIS: The very latest is it is beginning to exit off the coast of Great Inagua as a Category 4 hurricane and by the overnight hours and into early Tuesday, it should be making landfall along this northeastern coast of Cuba, then exiting off of the west coast of Cuba as we go in towards Tuesday afternoon or evening and then into the Gulf of Mexico and then reemerging and gaining strength over the open waters and very warm waters of the Gulf of Mexico.

Now, remember, Hanna did churn up some of the water here. This is fairly shallow. And some of the water temperatures have dropped down to around two degrees or so to keep the water temperatures generally in the mid-80s.

Now, I want to show you some of the computer models. These are 32 models from the National Hurricane Center that are plotted. And as we go out about four or five days, the computer models really start to diverge and they become less reliable. But generally speaking, you can see that Ike is going to cut through Cuba, just about over the central portions. We'll probably expect hurricane force conditions right across the Florida Keys. There is a hurricane watch for the entire Florida Keys. The Key West Airport is going to be closed to commercial traffic starting tonight at 7:00 p.m. There are currently evacuations. But then as it begins to move into the Gulf of Mexico, we pretty much keep that track moving towards the northwest. So you can better believe that the folks right around New Orleans and Boothville and Mobile Bay extending on over towards the Galveston area are really keeping an eye out on this system because right now the models do indicate it's going to continue on that track. And as it does, it looks like it's going to be reintensifying from its current Category 4 status. Wolf, back to you.

BLITZER: Our hearts go out to the folks in Cuba. It looks like it is going to slow down as it goes over Cuba, but then it will pick up steam as it heads into the Gulf. Karen, we'll check back shortly. Thank you.

Coming up next right here on LATE EDITION, did John McCain and Barack Obama get a political bounce from their conventions? We'll talk about that and more with the best political team on television. LATE EDITION will be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION. A lot to sort through in this race for the White House. Let's get right to it. Joining us, our senior political analyst, Bill Schneider. He's with the CNN Election Express in Milton, Wisconsin. That's somewhere between Madison and Milwaukee, is that right, Bill?

SCHNEIDER: That is correct. We're on the way to Milwaukee.

BLITZER: Excellent, stand by. Also joining us here in Washington is Ed Henry and Dana Bash. They both were at the conventions with me over the past few days, as was Bill Schneider. We all had a bird's eye view.

Let me play a little bite of Sarah Palin, Dana, because she obviously emerged as a rising star among the Republicans as a result of John McCain selecting her. Here's a little clip of what she said, hammering away, subtly, sometimes not so subtly, against Barack Obama.

(BEGIN VIDEO CLIP)

PALIN: In small towns, we don't quite know what to make of a candidate who lavishes praise on working people when they're listening and then talks about how bitterly they cling to their religion and guns when those people aren't listening.

(END VIDEO CLIP)

BLITZER: She was a huge hit there in St. Paul. The question is, will she be a huge hit around the country?

BASH: Exactly. That is the question. I mean, Wolf, Ed I'm sure witnessed this and felt this as well on the floor of the convention. Talk to people and they would say John McCain wasn't my first choice, wasn't my second or third, maybe fourth or fifth choice to be the Republican nominee, but boy were they excited about Sarah Palin.

People around the country may not have known her in the general public, but the conservative base, they have been tracking her for several years. She was sort of the buzz on the blogs for a very long time. When she was named and then when she gave that speech, it absolutely made everything change. And not just on the convention floor. What struck me covering John McCain afterwards, I went with him to Michigan, the energy in the crowd for John McCain because of Sarah Palin, it was night and day. I mean, there was energy like you would not see.

BLITZER: It was almost, that rally, that Dana is talking about in Michigan, it was almost like an Obama rally, if you will, except this one was for McCain and Palin.

HENRY: Well, and here's a conundrum for John McCain. That's great news in terms of rallying his base, now the conservatives who were sort of unsure.

It seems like they really are starting to come home and say, we can embrace the McCain/Palin ticket. But conversely, this really, I think, complicates the equation for John McCain moving forward in terms of reaching out to Independent swing voters that are really more likely to determine this election.

It's almost like she surprised the McCain campaign with just how much of a fire she's lit underneath the conservative community. And that's really rallying the left and some of the center now saying, whoa whoa, let's take a close look at some of her positions. She's more conservative than McCain on some of these things.

And so on one hand, there's some good things, but long-term there could be and I stress could be some bad things in terms of complicating that position, reaching across the aisle.

BLITZER: What about in Wisconsin, Bill Schneider, where you are right now with the CNN Election Express. That's clearly one of the battleground states. Both of these presidential campaigns are fighting for the votes of Wisconsin. What are you seeing, what are you feeling there?

SCHNEIDER: Well, here in Wisconsin, Minnesota, places like this, they are tilting towards Barack Obama. These are states that voted for Democrats mostly in the past and Obama expects them to remain in his column. Obama did very well in Wisconsin in the Democratic primaries. They're a little bit worried about Sarah Palin because she has a lot of appeal to rural voters. Not just here in Wisconsin and Minnesota, but also in places like Pennsylvania and Michigan, where the Obama campaign is a little bit worried, because you've got a lot of rural, small town voter who may be receptive to the kind of message that Sarah Palin is talking about.

The resentment of media elites, the resentment of Democratic Party. So there is some concern that she could open up this race once again. But I think the idea is that these states ought to be and probably still are pretty solidly Democratic. BLITZER: And they fear, the Obama folks, that she will put into play even more so Pennsylvania, maybe Michigan, Ohio. And that's what they're looking at right now. All right guys, stand by for a moment.

A quick program note for our viewers. CNN's Drew Griffin has just completed some extensive interviews with the father and sister of Sarah Palin. CNN will carry excerpts of these interviews today, but much more will be included in a special documentary entitled "Sarah Palin Revealed," which along with an in-depth biography of Democratic vice presidential nominee Joe Biden will be airing next weekend, both Saturday and Sunday at 9p.m. Eastern. That's "Sarah Palin and Joe Biden Revealed" 9 p.m. Eastern next weekend right here on CNN.

Coming up, John McCain, Barack Obama, on our very popular "In Case You Missed It" segment. Much more with our political panel and more after this.

(COMMERCIAL BREAK)

BLITZER: Now in case you missed it, let's check some of the highlights from the other Sunday morning talk shows here in the United States. On CBS, John McCain talked about how he planned to convince voters that he is the agent of change.

(BEGIN VIDEO CLIP)

MCCAIN: I think we have to show them my record. I think we have to show them that I took on the big spenders, that I did campaign finance reform, I reached across the aisle to Democrats and obviously, I was very unpopular in some parts of my own party, whether it be on the issue of climate change or against Rumsfeld's strategy and the president's strategy in Iraq or whether it be on campaign finance reform or a number of other issues that I fought against the, quote, "special interests."

(END VIDEO CLIP)

BLITZER: On ABC, Barack Obama responded to John McCain, disparaging the remarks made at the Republican National Convention by others at the convention, including Sarah Palin and Rudy Giuliani, hammering away his background as a community organizer.

(BEGIN VIDEO CLIP)

OBAMA: Understand what I did as a community organizer. When I got out of college, as a young person, 24, 25-years-old, I moved to Chicago and worked with churches who were dealing with steel plants that had closed in their neighborhoods to set up job training programs for the unemployed. I would think that's what we want all our young people to do. I would think that that's an area where Democrats and Republicans would agree. So it's curious to me that they would mock that when I, at least, think that's exactly what young people should be doing.

(END VIDEO CLIP)

BLITZER: Highlights from the other Sunday talk shows on LATE EDITION, the last word in Sunday talk.

And please make sure not to miss "FAREED ZAKARIA GPS" starts right at the top of the hour. We've got much more also here with our political panel. What we can expect from Barack Obama and John McCain in the two-month sprint to Election Day. Stay with us, we'll be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back. We're back with three of the best political team on television, Ed Henry, Dana Bash and Bill Schneider. Bill, we've heard a lot from the two presidential candidates and Sarah Palin. Not a whole lot from Joe Biden lately, but here's what he said on Friday. Listen to this.

(BEGIN VIDEO CLIP)

BIDEN: The silence of the Republican Party was deafening. It was deafening on jobs, on health care, on the environment, on all the things that matter to the people in neighborhoods I grew up in, deafening.

(END VIDEO CLIP)

BLITZER: A lot of people wondering how that debate between Joe Biden and Sarah Palin will eventually turn out, one vice presidential debate. What do you think about this match, Bill?

SCHNEIDER: Well, it will be very interesting, because no one in this race claims to have any responsibility for anything that's happened in Washington for the last eight years. Isn't that amazing? Nobody's part of the Bush administration, nobody seems to have been in Washington, nobody's responsible for what Congress did or did not do.

It's as if these candidates are all self-invented out of whole cloth. Well, somebody was responsible and we're going to hear a lot more about that and Joe Biden is beginning to talk about it right now. He's saying what was happening in the Republican Convention is nobody talked about what the Bush administration did or really did not do.

BLITZER: There was a lot of silence at the Republican Convention about President Bush and total silence about Vice President Dick Cheney, even though he's been vice president now for almost eight years. It was almost a thunderous silence.

BASH: Absolutely. I mean, they ran an entire video about 9/11 commemorating 9/11 and you didn't see one picture of George Bush. I mean, that's almost unthinkable at a Republican Convention. But, look, the reality is what they hope to do with Sarah Palin on the ticket is go back, as we were talking about, to the kind of maverick image that he was trying to portray a long time ago, but gave up on during the Republican primaries, because a lot of the issues that helped put that forward, the base doesn't like. But I think what they're trying to do right now, I think what we'll see maybe for the next week is they made a tactical change and now keeping Sarah Palin on the campaign trail with John McCain. BLITZER: They'll be going out in the next few days together?

BASH: The next few days together. She was supposed to go out on her own starting tomorrow. The last plan was for her to go to Pennsylvania. That's changed now because they see the new energy that she brings to the rallies where he's going and because they see the kinds of places they're going to go, they're going to go to rural Pennsylvania, they're going to go to rural Ohio, they're going to go to rural Missouri.

Those are the kinds of places Bill was talking about where you have those blue-collar or rural voters that may be registered Democrats, but they're conservative socially.

BLITZER: I assume they're spending a lot of time tutoring her or briefing her, getting her ready to have a news conference, go on a Sunday talk show, or the debate with Joe Biden.

BASH: The debate with Joe Biden we know is going to happen. I can tell you, don't hold your breath on the news conference. Don't hold your breath on a Sunday talk show with Sarah Palin. Yes, they are tutoring her. They have brought in some foreign policy experts from the Bush administration. That is a very, very important thing that they have to do. Nobody even privately frankly, or even publicly, will say with a straight face that they think that Sarah Palin is up to it right now on foreign policy. She does have a lot of work to do based on the fact that...

BLITZER: And one of the biggest surprises with the TV ratings, the audiences for all four of these candidates. And I'm going to put the numbers up on the screen. John McCain, when you add up all the numbers from all the networks, got 38.9 million people watching. Barack Obama, 38.4, so there's a half a million advantage for McCain. Sarah Palin almost at the top, 37.2. Poor Joe Biden, only 24 million people were watching his acceptance speech. What, if any, should we make of this?

HENRY: There's only one conclusion. John McCain is now the biggest celebrity in the world, wolf. I'm just kidding. That ad about Obama and the big crowds, it's a double edged sword for McCain because as that is pointing out, as Sarah Palin lifts up John McCain's crowds, they might regret that celebrity ad now a little bit because the fact of the matter is now all of the sudden there is some energy on the Republican side. It doesn't mean that alone is going to win it, but there is some energy.

BLITZER: All right guys, we'll leave it right there. Good discussion, we'll be working hard between now and November 4th. That's it for us. We'll take a quick break, we'll be right back.

(COMMERCIAL BREAK)

BLITZER: That's it for this LATE EDITION. I'm Wolf Blitzer in Washington. "FAREED ZAKARIA GPS" starts right now.