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Lou Dobbs Tonight
Turmoil on Wall Street
Aired September 15, 2008 - 19:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, CNN HOST: Tonight, turmoil on Wall Street and what it means for working men and women and their families all across the country. We're joined by three of the smartest economic thinkers in the country.
And tonight, new questions about the willingness of our elected officials to protect Americans from the devastating consequences of Wall Street's greed and incompetence. We'll have that report and tonight, the presidential campaign turns nastier and nastier. Even Karl rove is starting to act like a referee, warning these candidates not to go too far. Three of the best political analysts join me.
All of that, all today's news and much more from an independent perspective, straight ahead here tonight.
ANNOUNCER: This is "Lou Dobbs Tonight." News, debate and opinion for Monday, September 15th. Live from New York, Lou Dobbs.
DOBBS: Good evening, everybody. The worst financial crisis in decades today sent political and economic shockwaves throughout the country. The former Wall street giant Lehman Brothers went bankrupt, the largest bankruptcy in our history. The brokerage firm Merrill Lynch being bought by the Bank of America for $50 billion. The crisis raising new concerns about our worsening economy and the ability of our middle class to stave off the economic pressures of this down turn. We have extensive coverage of the impact of the financial turmoil on working men and women and their families and we begin tonight with Bill Tucker reporting from New York.
(BEGIN VIDEOTAPE)
BILL TUCKER, CNN CORRESPONDENT (voice-over): Lehman Brothers for 158 years a corner stone on Wall Street. Failure to find a buyer over the weekend means it is now bankrupt. As many as 20,000 of its 26,000 work force could lose their jobs according to a leading industry expert. Merrill Lynch another former Wall Street stalwart is being sold to Bank of America. That's expected to result in massive layoffs too. Perhaps as many as half of Merrill's global work force of 60,000 employees.
Through August, financial firms have already eliminated more than 65,000 jobs according to the department of labor. It is by any measure ugly. But some argue the ugliness will have a positive impact.
BERT ELY, BANKING CONSULTANT: I would suggest that what happened with both the Bank of America acquisition, of Merrill Lynch and the Lehman failure is part of a very important and ultimately very positive cleanup of the credit situation in this country.
TUCKER: That ultimately may be true, but the mess that Wall Street made is a mess that Main Street is now feeling as banks react with a sharp tightening of credit on a highly uncertain market, making business loans harder to come by.
ROBERT KUTNNER, AUTHOR, "OBAMA'S CHALLENGER": They indulged in this crazy casino when the times were good and now they're losing their shirts. And as a consequence, they only want to invest in sure things.
ROBERT DUMONT, TOOLING, MANUF. & TECHN. ASSN.: It's a vicious downward circle and it's getting worse, not getting better.
TUCKER: The Federal Reserve takes center stage on Tuesday.
TUCKER (on-camera): It is now widely anticipated that the Feds will lower interest rates to increase the availability of money at their meeting tomorrow. Wall Street, however, is likely to soak up much of that money, tightly holding onto it, using it to salve their financial wounds. That may be good for Wall Street, Lou, But that is not necessarily good for business nor the economy.
DOBBS: Let's be clear about one aspect of the public policy issue here, for the fed, for the treasury. And that is that the lower rates will cut into the margins for commercial banks as well in this country and at the same time, without lowering those rates, the availability of credit may well be again limited.
TUCKER: It is a difficult situation and one that didn't have some very careful balancing as they go forward here, Lou.
DOBBS: And some - well, as of recently, not very apparent leadership both from the business community, Wall Street and Washington, D.C.. Bill Tucker, thank you.
Stock prices today plummeting. Investors reeling from the impact of our financial crisis. The Dow Jones Industrials falling by more than 500 points, the largest one-day point decline since the September 11th attacks seven years ago. The decline led by the insurance giant AIG, which is struggling to raise capital and stay in business. Tonight, "The Wall Street Journal" reports that the Federal Reserve is asking Goldman Sachs and JPMorgan Chase to raise $75 billion in loans for AIG, the New York state insurance commissioner has approved a $20 billion loan from AIG subsidiaries in order to permit the company to continue.
Many investors are blaming the collapse of Lehman Brothers on the firm's CEO Richard Fuld. Fuld received a $22 million bonus back in March for his performance in 2007. Then in April, Fault declared the worst of the credit crisis had passed. The former CEO of Bear Stearns Jimmy Cayne also facing charges he lost touch with reality before his firm collapsed in March. As the crisis has intensified, Cayne simply lost contact and was not taking messages and reportedly at a bridge tournament in Detroit.
The turmoil on Wall Street raises questions about the lack of effective oversight of the financial industry and transparency. Congress and the Bush administration simply failing to modernize the country's financial regulators, regulations and oversight. Henry Paulson today said the regulatory structures are out of date. Kitty Pilgrim has out report.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): No one in Washington seemed to be aware of what was happening with the balance sheets on Wall Street. But they should have been. Today, the Treasury Secretary blamed Wall Street excess and obsolete regulatory structures.
HENRY PAULSON, TREASURY SECRETARY: First of all, we have excesses that have built up for a long period of time, number one. Number two, we have an archaic financial regulatory structure that came in place a long time ago, after the depression. It really needs to be rebuilt.
PILGRIM: but the huge losses were hiding in plain sight. Lehman has more than $60 billion in mortgage related assets on its balance sheet. Fannie Mae and Freddie Mac owned or guaranteed half of the $12 trillion mortgage market. Today, the chairman of the S.E.C. said accounting practices hid the housing problem.
CHRIS COX, SEC CHAIRMAN: Some of them booked balance sheet. A lot of it missed and rated AAA by the credit rating agencies has created a perfect storm for our markets. Each part of that system where it failed and failed and failed again.
PILGRIM: Last summer, regulators called Bear Stearns well capitalized, even as it was on the verge of collapse. Barry Barbash was formally the head of the S.E.C. division investment management.
BARRY BARBASH, FMR. SEC. DIR. INVEST. MGMNT. DIV.: There's going to be a lot of auditing autopsies done, and it's not just going to be a Fannie and Freddie, there's going to be a lot of close evaluation of what was going on at Lehman and for that matter, probably some of the other banks to get a sense of what kind of instruments were being held and how they were being valued.
(END VIDEOTAPE)
PILGRIM (on-camera): Barbash says the regulators had a sense of what was going on but simply did not have enough detail.
Now Paulson today said the Fed, the FDIC, the Treasury and the S.E.C. are all working together to protect the financial system with "the tools that they have," but he called those tools archaic. Well, archaic or not, those tools were not used to prevent the problems we're seeing today. Lou.
DOBBS: In my judgment, what is archaic about those tools that Paulson refers to are the really, the (inaudible) mentalities that the Bush administration economic team bring to the responsibilities. The S.E.C. has been frankly nonexistent here. The FDIC responding only late in commercial banking. The Federal Reserve with Ben Bernanke at the helm, taking the lead early. And without his leadership, Henry Paulson would be walking around and just sort of wringing his hands.
So we are very fortunate Bernanke was there. Has he been perfect in his response? No. But he's certainly been singularly in the initiative early on. This is to suggest that the tools are archaic is to really misplace what's happening here. What has been happening here is a movement on the part of Wall Street, the business community led by the business round table and the U.S. Chamber of Commerce who rollbacks our banks, Oxley and to resist regulation and the compliance of the S.E.C. to that administration viewpoint that transparency is not required and that Mr. Market as long as he has smiley face, everything is all right.
This has put a lie to nearly all the fundamental precepts of this administration's views on markets and regulation. And hopefully we won't see it resurrected for decades to come. Thank you very much. Kitty Pilgrim.
On the campaign trail, Senators McCain and Obama today declaring our financial crisis, emphasized what they see is a need for change in Washington. But neither candidate is offering new ideas how to improve our economy nor how to help our working men and women and their families. Bill Schneider has our report.
(BEGIN VIDEOTAPE)
BILL SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Anything that raises economic anxiety should help the out party, in this case, the democrats. All they have to say is look who's been in charge for eight years.
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: I certainly don't fault Senator John McCain for these problems. But I do fault the economic philosophy he subscribes to, because it's the same philosophy we've had for the last eight years.
SCHNEIDER: McCain fell into the trap when he said -
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Our economy I think still, the fundamentals of our economy are strong, but these are very, very difficult times.
SCHNEIDER: Obama pounced.
OBAMA: Senator McCain, what economy are you talking about?
SCHNEIDER: McCain was forced to explain.
MCCAIN: My opponents may disagree, but those fundamentals, the American worker and their innovation, their entrepreneurship, the small business, those are the fundamentals of America and I think they're strong. But they are being threatened today. SCHNEIDER: McCain may be the candidate of the incumbent party but he refuses to take ownership of that party's record.
MCCAIN: There's too much debt and there's not enough regulation and there's not enough oversight.
SCHNEIDER: Of course Washington is at fault, the Republican candidates say, but that doesn't mean us.
GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: Guys and gals, our regulatory system needs a complete overhaul. Washington has ignored this. Washington has been asleep at the switch.
SCHNEIDER: The Republicans are doing everything they can to say, we want change just as much as they do.
ANNOUNCER: Our economy in crisis. Only proven reformers John McCain and Sarah Palin can fix it. Tougher rules on Wall Street to protect your life savings.
(END VIDEOTAPE)
SCHNEIDER: It's like an election where nobody represents the incumbent party. Everybody is an outsider. Everybody wants change. And a lot of democrats are asking, how can the republicans get away with that? Lou.
DOBBS: Well, let's sort of explore that question, Bill. How can the democrats then negate their legacy, which is the 1994 passage of the World Trade Organization, NAFTA under Bill Clinton, the rollback of the investment act in 1993 and '97, the investment act and the public holding act, which led to Enron and a lot of the excesses we see today. I mean, this seems to be borderline madness to try to play this game. It looks to me like we have to take the candidates based on both their platforms and their individual records.
SCHNEIDER: Yes, you do. And the point is that deregulation has been the philosophy really in both political parties for quite sometime now.
DOBBS: Absolutely. It started in 1978 under Jimmy Carter's administration and we are living with the disaster that has resulted in certainly on Wall Street and the benefits seem to be a little worn and tattered at this point.
SCHNEIDER: That's right. And we're not hearing yet, of course the crisis is just new this weekend, but we haven't heard yet exactly what the candidates are proposing to do about it.
DOBBS: There you go. And that is what should make every American, whether you call yourself a republican or a democrat, a conservative, liberal, just want to slap the table because I mean, and the national media. The national media is permitting these candidates and their campaigns to avoid our questions, to avoid being on the record and responding to reporter questions as to what in the world do you think? This is a shabby performance on my opinion, Bill Schneider, on the part of the national media. It is a shabby performance both on the part of Obama and McCain. Thank you, sir, I appreciate it. Bill Schneider.
That brings us to the subject of our poll tonight. Do you believe either presidential candidate has any idea how to help working men and women survive this worsening financial crisis in our country? Yes or no. Cast your vote at loudobbs.com. We'll have the result up coming.
Next, Governor Palin hits the campaign trail, without Senator McCain. She's solo. We'll have the report.
And distortions, half truths, outright lies on the campaign trail. Which candidate is lying? Which candidate is distorting? There are two answers to that question. We'll have both of them, next.
(COMMERCIAL BREAK)
DOBBS: Governor Palin this week is campaigning without Senator McCain for the first time, speaking today in Colorado. Governor Palin slammed the leadership in Washington, took a slide at Senator Obama's tax plan and outlined what she would do as vice president. Dana Bash reports from Golden, Colorado.
(BEGIN VIDEOTAPE)
DANA BASH, CNN CORRESPONDENT: Sarah Palin didn't hesitate to point fingers at a town run by a republican president.
GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: Our regulatory system is outdated. Washington has ignored this. Washington has been asleep at the switch and ineffective.
BASH: A taste of the reform message McCain advisers call the key to winning and the biggest bonus of adding a Washington outsider to the ticket. Especially in the anti-establishment mountain west. Her first foray at campaigning alone.
PALIN: We got a lot in common, these western states, you know, we hold together and we hold together.
BASH: Here, Palin added a few new lines to her stump speech like what she would do in the White House.
PALIN: My mission is going to be energy, security, and government reform.
BASH: And got a big response for a new swipe at Barack Obama.
PALIN: Our opponent wants to raise income taxes and raise payroll taxes. And raise investment income taxes.
BASH: But independent groups say that's not true. Most Americans would get a tax cut under Obama's plan. And Palin is still repeating another claim that doesn't tell the whole story. PALIN: And that infamous bridge to nowhere, I did tell Congress thanks but no thanks.
BASH: The reality, she originally supported federal dollars for Alaska's infamous bridge. But McCain aides won't drop the line, because those stories are drawing these crowds. Newly enthusiastic GOP voters and even some conservative democrats like Gayle Loughridge.
GAYLE LOYGHRIDGE, PALIN SUPPORTER: I have been political my whole life, and Palin just has got me energized, up at 3:30 this morning to come see what she has got to say.
BASH: And what she has to say is still carefully scripted and her events tightly controlled. Even these home made looking yellow signs were distributed by the campaign.
(END VIDEOTAPE)
BASH (on-camera): Now Palin at her two rallies spent as much if not more time signing autographs furiously for voters as she did speaking to them and she stayed far away from those us in the press corps traveling with her and she also hasn't taken questions from voters yet as she's been campaigning but that is going to change this week. In fact, on Wednesday she's going to have a joint town hall meeting with her running mate John McCain in the state of Michigan. Lou.
DOBBS: I have to ask you, that's a terrific report. But you said she was tightly scripted and the event controlled. In what ways does that, for example, depart from the scripting and the control of say Senator McCain or Senator Obama?
BASH: Well, Senator Obama, that's an excellent point. In fact, we looked into this. Senator Obama used a teleprompter today as well as he has in the past. So in that sense it is not that different from candidates in general. But in terms of the difference from Senator McCain, it's probably best to look at how that difference is from Senator McCain say a month ago. Because basically about a month ago, he stopped doing press conferences.
In fact, he hasn't done one for those of us in the press corps for about a month. And he didn't do a town hall meeting until today. Again, in about a month. So his events have changed dramatically and Sarah Palin's events are basically mirroring the change in Senator McCain's events. Lou.
DOBBS: So just to be clear so that I understand you, Senator Obama is on teleprompter. His events are also tightly controlled, is that correct?
BASH: That's right. He has teleprompters at some of his events. I can tell you by way of comparison, though, and this is probably an important point as well. I looked into this as well, Joe Biden, Barack Obama's running mate, the very first day he was out campaigning alone, he had two press conferences with reporters and he does that quite often - DOBBS: -- you brought up press conferences, when is the last time both of these candidates, McCain and I'm really getting to a point here, both Obama and McCain, when is the last time they each had a press conference and were accessible to the press?
BASH: I don't know the answer to that with regard to Obama, because I don't cover him on a day to day basis. But with regard to Senator McCain, August 13th in the state of Ohio. So, it was a month and a day now.
DOBBS: I think you'll find just about the same on both of these candidates and I think you'll find that we're watching the same amount of control and scripting on the part of both of these campaigns. Thank you very much. Dana Bash, appreciate it.
Well, both the Obama and McCain campaigns are being accused of failing the truth test in campaign ads and their rhetoric. Republican strategist Karl Rove, whom I consider not to be the most likely ombudsman or referee of ethics on the campaign trail says the two campaigns have well, have got some problems and that the McCain campaign's ads are going too far. Both campaigns need to be careful with their attacks on one another. Now there's a thought.
Candy Crowley with a live report for us from Pueblo, Colorado tonight with the Obama campaign. Candy, whatever happened to running a campaign without the attacks and the distortions? Was there ever such a thing?
CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: I was just going to say, I've been doing this for sometime and we always run into this at some point. It seems to reach a crescendo and hopefully we're there now with this campaign, meaning both Obama and McCain. I remember spending a lot of time in 2000 when democrats complained loudly that an ad that George Bush put out was calling democrats rats and we spent an awful lot of time with that. We did an awful lot about Al Gore sighing, things like that. So it always tends to come up. But we do have one thing coming up, Wolf -- Wolf, I'm sorry, we do have one thing coming up, Lou, and that is we had these debates. There are three debates coming up. These are going to be - I'm sorry.
DOBBS: I said I'm excited about the prospects of those debates.
CROWLEY: I bet you are. Because I think you know, now, particularly in the fall, there is 50 days left. I think what you will find is that these debates will press very hard on issues and I think what voters are going to find is there is a difference between these two candidates, Lou.
DOBBS: All right, we're going to take your word for that for tonight. By the way -
CROWLEY: Well, I'm just saying there's the promise.
DOBBS: OK. We're going to take your word for it and we're going to join you in that audacious hope, if I may, with Senator Obama talking behind you. Let me ask you, do you know the last time Senator Obama had a press conference? We were just trying to figure that out?
CROWLEY: Actually, he had one last Tuesday. That's when George Bush said he was going to draw down about 8,000 troops between now and early next year. He took a few questions. It wasn't a full fledged but he did take some questions.
DOBBS: How many questions did he take?
CROWLEY: Oh, boy. Now you're pressing me. Let me just ask really quick, how many questions - I'm asking my producer, (Audrey) Johnson, how many questions? About four.
DOBBS: Four questions.
CROWLEY: About four, she says.
DOBBS: And when was the last press conference before that, can you recall?
CROWLEY: Wow.
DOBBS: The reason I'm asking this, Candy -
CROWLEY: I don't know for sure. I'm going to start a calendar but they are fewer and fewer. Absolutely.
DOBBS: I think it's really important, and I'm asking you, I'm asking Dana Bash, all of our reporters, to start being straightforward about this. Because people need to know that these two candidates are not making themselves available to the national press corps and in a month, there are those who say we are not holding their feet to the fire, that we are not keeping them honest in any way.
And by the way, there is a great deal of reality to that, which I believe personally, Candy, I don't know about you, and I know you can't deal with opinion, but I personally believe it's important to our audience to understand how tightly scripted, tightly controlled and how inaccessible these candidates have become.
CROWLEY: No, I think you're absolutely right. I will say, however, because I was talking to someone about this today. And I said you know, I went through it with Al Gore, you know, a month and a half. With George Bush, we went almost two months without a press conference.
DOBBS: We see how that worked out.
CROWLEY: With John Kerry and I remembered - yes, exactly. But you know, the problem is that there isn't always a lot of traction. The press corps looks like it's whining when they do this and we get this very negative reaction. That doesn't mean we don't keep pressing because we do but I think you're right, there have been fewer and fewer press conferences as we get closer to November.
DOBBS: Yes. I believe, and by the way, I'm accused of a lot of things but whining I don't do. The fact of the matter is, these two candidates have responsibilities to make themselves available to the American people. This is nonsense. This theatrics.
And you know, as Colin Powell put it today, enough of this lipstick on a pig nonsense. All right. Candy, thank you very much. Candy Crowley as always, outstanding reporter. And We appreciate it. Up next, pandering politics, both of these campaigns, well, they're trying to woo Hispanic voters in the race for the White House. We'll have a special report on their efforts. How are they doing?
And another spectacular collapse to tell you about on Wall Street. What it may mean for all of us. Three of the best economic thinkers in the country join me to assess what's happening and what you and I can expect. All of that and more up next.
(COMMERCIAL BREAK)
DOBBS: Well, both presidential campaigns have stepped up their pandering to ethnocentric special interests. The McCain campaign is now accusing Senator Obama and other democrats of killing amnesty legislation, even though Obama and McCain both voted the same way on the comprehensive immigration reform legislation when Congress killed it a year ago.
And the democrats have decided to spend millions and millions of dollars trying to sway Latino voters in key states. Both candidates apparently right now at least more concerned with winning the Hispanic voters than actually solving our illegal immigration crisis or a broader appeal to the American public. Casey Wian has our report.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): The nation's illegal immigration and border security crisis returned to the presidential campaign at a McCain town hall meeting in Orlando. Florida Senator Mel Martinez speaking almost exclusively in Spanish introduced McCain. McCain acknowledged the start of Hispanic heritage month, then promised immigration reform as president.
MCCAIN: We will secure our borders and we will make sure that there's a temporary worker program that works and that we will also address the issue of those people who have come to this country illegally and broken our laws by doing so, but we will also do it in a humane and compassionate fashion. That's what America is about.
[ speaking Spanish ]
WIAN: McCain is running ads criticizing Senator Obama for not being on the side of Hispanics, blocking comprehensive immigration reform.
MCCAIN: The fact is that Senator Obama proposed amendments that would have killed the legislation. I fought for it.
WIAN: But in 2006, McCain praised Obama's efforts.
MCCAIN: I also want to thank Senators Brownback and Lieberman, Graham, Martinez, Obama and DeWine for their shared commitment to this issue.
WIAN: Obama didn't mention illegal immigration or border security at a campaign event Monday in Colorado. He's already on the record supporting a pass to citizenship for illegal aliens. Finding them and putting them at the back of the line if they haven't committed crimes and opposing more frequent workplace raids by customs enforcement.
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: When communities are terrorized by I.C.E., when nursing mothers are torn from their babies, when children come home from schools to find their parents missing, when people are detained without access to legal counsel, when all that's happening, the system just isn't working.
WIAN: Obama and the Democratic Party plan to spend $20 million on Latino voter outreach in four key states; Nevada, New Mexico, Colorado and Florida.
(END VIDEOTAPE)
WIAN: So it's no coincidence the candidates were in two of those states today. Polls show Obama with a substantial lead over McCain along Latino voters. McCain is clearly trying to cut into that advantage. Lou?
LOU DOBBS, CNN ANCHOR: And to what effect we won't know for some time. But for Senator Obama to accuse Immigration and Customs Enforcement of terrorizing those people when -- I mean, you know those agents of that organization. We have reported on them. I mean, the suggestion, it's like this idiot congressman in California, who called them basically Gestapo. This is ignorance. And for him to say such a thing is frankly despicable to refer to federal agents, law enforcement agents in that way. I mean, it's disgusting.
WIAN: And he's buying into the arguments made by those pro illegal alien groups who say I.C.E. should not be enforcing immigration law at work sites. The fact is I.C.E. officials go to extreme lengths to make sure they don't separate mothers from young children when they're raiding these work sites. They release these people when they've got family situations like that. So these accusations really are not true that Senator Obama has made.
DOBBS: Well, his record on this issue is abysmal. His attitudes are, to me, frankly extraordinarily disappointing for anyone who says he wants to hold the highest office in this land. By the way, he would be the chief law enforcement officer of the land as well. Not exactly accommodation for that office in my judgment to say such things about the men and women who are serving this nation. Thank you very much, Casey.
Coming up next, the crisis on Wall Street. How it could affect our working men and women and their families. Three of the best economic thinkers join me.
And does Senator Obama want to delay the withdrawal of combat troops from Iraq? What's going on? And utter devastation after Hurricane Ike, officials warning of a health crisis along the gulf coast in Texas and Louisiana. We'll have the very latest for you. We'll be right back.
(COMMERCIAL BREAK)
DOBBS: Welcome back.
And tonight, unfortunately we report to you that the death toll from Hurricane Ike has risen to 27. In Texas, officials there say the hurricane battered island of Galveston is simply now unhealthy and unsafe and they're telling all evacuees from Galveston simply do not return at this time, that it is simply unlivable.
In Houston, more than 150,000 people were evacuated. Those residents still not being allowed to return home. A curfew there remains in effect. More than 2 million people in Texas tonight we're told are without electricity and there's little, little guidance as to when that electricity will be restored.
There was less damage than expected to oil rigs and facilities out in the gulf. And that led to a large drop in the price of crude oil today. Crude oil today closing just under $96 for the first time in six months.
And today's Lehman Brothers bankruptcy and the forced sale of Merrill Lynch rocking Wall Street and indeed the nation and this nation's investors, large and small.
Joining me now are Joseph Stiglitz, he's professor of economics at Columbia University, winner of the Nobel Prize for economics, the co-author of "The $3 Trillion War," out in paperback today by the way. And Paul Muolo, he's executive editor of National Mortgage News and the author of "Chain of Blame, How Wall Street Caused The Mortgage And Credit Crisis." And Professor Peter Morici, he's professor at the Robert H. Smith School of Business at the University of Maryland. Thank you all for being here.
Let me turn to you first, Professor Stiglitz. This is, obviously, a nightmare that we're going through on Wall Street. But that nightmare extends across the country. When, in your judgment, will we see the Wall Street component of this at least stabilize and the bankruptcies and the desperate need for capital infusions end?
PROF. JOSEPH STIGLITZ, COLUMBIA UNIVERSITY: I think it's going to go on for a considerable length of time. There's a dynamic in place and it takes a while. You know, people have said there's a light at the end of the tunnel, but what really is going on, it's a light of a freight train coming at us. And what is going on is the house prices are falling, more bankruptcies, more defaults, more foreclosures.
DOBBS: Are you talking about Wall Street foreclosures?
STIGLITZ: House foreclosures, but those are many of the assets wall street firms have. So when those foreclosures occur, that weakens the asset base or the balance sheet of the banks. And so you have accumulative process going on.
DOBBS: Professor Morici, are you at least encouraged that Secretary Paulson decided not, and presumably the president and Fed Chief Bernanke, decided not to put anymore taxpayer capital and backed capital forward in the case of Lehman Brothers and ostensibly at this point, AIG?
PROF. PETER MORICI, UNIVERSITY OF MARYLAND: Absolutely. Since December, they've been putting taxpayer money in the discount window, getting good U.S. treasury securities and dollars in exchange. The whole idea was these were commercial banks and they were vital to the economy. But our reward was these bankers stopped doing commercial banking.
So credit has been drying up around the country. When Lehman Brothers dissolved yesterday, we didn't have a commercial bank dissolve. We had something quite different. It was the old merchant bank and the securities firm and so forth going forward. We need to have more bankruptcies so they get away from the business model causing them to abandon conventional banking, make sound loans and do the right thing.
DOBBS: When you say bankruptcies, Professor, you're referring to bankruptcies on Wall Street whether it be investment banks or whether it be in commercial banks?
MORICI: Absolutely. We need the exit of more Lehman Brothers and hopefully some of the regional banks which are better run will percolate up, they'll expand and take their place and start to do the right things for American capitalism and get the economy going again by getting credit rolling again. But it's going to take some time, as Joe said, because it takes time to shutter these places.
DOBBS: Shattering these places, and we were seeing first the subprime mortgage meltdown. Now we're seeing those credits that are of far higher standing being affected.
Paul Muolo, this mortgage crisis, this housing crisis is going on and seemingly going on unabated as house prices continue to fall, foreclosures continue at a historical rate.
PAUL MUOLO, EXEC. ED., NATL. MORTGAGE NEWS: Indeed. I mean, I don't know when this is going to end. What the government is trying to do, they keep praying they're -- they keep making these moves to calm the markets, calm consumers that they're in charge. That eventually they're trying to get consumers to buy houses again. But when unemployment keeps going out, why could a consumer buy a house? It's a very bad situation and a lot more pain to go through. It could take up to ten years.
DOBBS: Ten years to recover in housing?
MUOLO: Up to ten years. That's worst case scenario. That was a year ago we wrote that. It's bad. This is going to trickle down to the working guys you mentioned earlier. There's a lot of people employed indirectly through wall street, janitors, cops, there's a lot of blue collar jobs that will go away.
DOBBS: If I have to take my pick, I'll side up with the working man and woman, because the middle class is the foundation of what we do, not Lehman Brothers, not Merrill Lynch, and not AIG.
MUOLO: Right.
DOBBS: Let me turn to you and ask you this. Why, and I raised this issues a year ago, why have we not been able to see this government respond to where the crisis is? And that is in those homes where foreclosures taking place? Why are we watching the same idiotic free trade policies that put them in competition with the cheapest labor in the world, why are we not watching some bailout, if there's going to be one, for people who work in this country?
STIGLITZ: I agree. The problem should have begun at the base, which is the foreclosure of homes. And we should have made it more affordable. The interesting thing is we gave a big tax deduction to wealthy Americans in some states effectively 50 percent of interest and real estate taxes paid by the federal government. But poor people, the subprime mortgage people, get nothing. And if we reform that, that would at least provide a basis of more people staying in their homes.
DOBBS: But, again, you have an issue you how much income can be set aside through a tax exemption of some sort.
STIGLITZ: But we redirected some of that money that's going to upper income people and put it to ordinary Americans, it would make a big difference and make more homes affordable.
DOBBS: But where are these two presidential candidates on this, Professor Morici?
MORICI: Well, they're no place is where they're at. Neither has a plan to clean up wall street and what they offer to shore up the working men and women won't solve the fundamental problems. The most significant thing they can do is to do something about, I know it's off the subject, but better jobs to afford the houses. But in the meantime, what they've got to do is get these New York banks securitizing loans again. There's little conventional money out there. That's why it's all on the back of Fannie Mae and Freddie Mac.
DOBBS: Paul Muolo, last word here.
MUOLO: Wall Street is not going to go back to securitizing anything that's not a prime loan. Fannie Mae and Freddie Mac are the only game in town. You got bad credit, you're not buying a house. Those days are over. Cash is king.
DOBBS: Paul Muolo, thank you very much; Professor Morici, thank you very much; Professor Stiglitz, thank you.
Up next here, fact or fiction, should the American public believe anything these candidates say on the presidential campaign trail or how about just their ads? Three of the country's best political analysts join me. Stay with us.
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DOBBS: The Obama campaign tonight dismissing a published report that Senator Obama made delay plans to withdraw our troops from Iraq if he were to become president. Obama has said repeatedly he wants to withdraw our combat troops from Iraq within 16 months or so. "The New York Post" today reporting Obama privately tried to dissuade Iraqi leaders to delay that withdrawal agreement during his visit in Baghdad in July. The Obama campaign today said Obama never urged such a delay or a delay in the drawdown in our combat brigades.
Joining me now, three of the best political analysts in the country; Republican strategist, CNN contributor, Ed Rollins, Ed, white house political director in the Reagan years, chair of the Mike Huckabee presidential campaign; Ed, good to have you here. Democratic strategist, CNN contributor, Robert Zimmerman, national democratic committeeman, Barack Obama supporter. I don't even know why that's necessary to say but I said it. Robert, good to have you here. And Pulitzer Prize winning columnist, "New York Daily News," CNN contributor, Michael Goodwin. Michael, good to see you.
Let's start with what in the world are these campaigns doing? Both of them, I had two pieces of paper with all of the lies, forgive me for not saying distortions or mistruths or something, they're lying from their campaign ads. These two are putting on -- it's just a lie fest.
MICHAEL GOODWIN, NEW YORK DAILY NEWS: Whatever they've been doing, I think they're going to have to stop doing it now because of what happened on Wall Street today. It's unacceptable for them to pretend the world didn't change.
DOBBS: Do you think either of these guys has a sense of what happened on Wall Street today?
GOODWIN: I think it should scare them into finding out.
DOBBS: What do you think, Robert?
ROBERT ZIMMERMAN, DEMOCRATIC STRATEGIST: No question, unless they do start focusing on the fundamental issues driving the electorate, I really do believe they understand what's happening on Wall Street. The issue is, who's going to be focusing on a plan bold enough to grab the public's attention? John McCain did not do that today when he talked about the fundamentals of the economy being strong, parroting what George Bush said.
ED ROLLINS, REPUBLICAN STRATEGIST: Both of these candidates began without economics being --
DOBBS: Just a second. I've got to give Robert absolution for that one. Go ahead.
ROLLINS: This is a very close election and that's saying the obvious. Neither of these candidates has a clue about, a, what's going on in the country or how to get us out of it. Robert's point is valid. They both put out economic plans that were sort of the litmus test of the democrats and the litmus test of the republicans. We are in a very serious crisis and unless they address it, whoever if I was running either one of the campaigns which I'm not, I would get the best economic minds and say let's analyze the problem and then try to find some solutions to move forward.
DOBBS: One of the best economic minds here is Joe Stiglitz. Barack Obama has a ready-made genius quotient economist at the disposal. And, you know, I'm not sure who -- I don't think John McCain should call on Gregory Mankiw who I asked the president to fire years ago. They have the sense to understand what makes the country work is the middle class. Don't they understand that?
GOODWIN: Absolutely. Lou, as we were discussing Friday night at the high school in Virginia, freedom high school, about why aren't they talking about the urgency in education. It is too complicated. The same with Wall Street. It doesn't fit into a sound bite or a catchy slogan or make a good ad. All they can do is attack the other side. I think that is where you're right where the media has to stop letting them get away with that.
DOBBS: Dana Bash and Candy Crowley today on the campaign trail, the reality is -- not just CNN. We do I think a terrific job. Candy and Dana are superb reporters as are all of my political reporters but we are not getting access to the candidates. These -- I will clean up my language for the purpose of civil discourse. These two candidates for the presidency of the United States aren't talking to the American people. They're not putting themselves up for interaction with the national press corps. It makes no sense.
ZIMMERMAN: I think they're underestimating the American people because when a candidate whether Ronald Reagan in 1980 or Bill Clinton in 1992, addressed or obviously the best example is Roosevelt in '32, addressed a nation in crisis and laid out a bold vision, took ownership, the country responded.
DOBBS: Neither one of the candidates will talk with me because they know I won't play the dance. I will ask the questions I want answered which I believe the American people want answered. I won't sit here and do a little nuisance nonsense dance. It's ridiculous. We'll be back.
Michael Goodwin will have that full thought with us in a moment when we return with our panel.
A reminder, if you would, to vote in our poll tonight. The question is do you believe either of these presidential candidates has any idea how to help working men and women survive the worsening financial crisis in this country? We'd like to hear from you. Cast your vote, please at LouDobbs.com. We'll be back in just a moment.
And a reminder to please join me on the radio Monday through Fridays, Arizona state representative Russell Pierce, he's no longer waiting for the federal government to do something about illegal immigration. He'll be joining me tomorrow. Monday through Friday, the Lou Dobbs Show. Please join us. Go to LouDobbsRadio.com to get your local listings for the Lou Dobbs Show on the radio, one of my favorite places, on the radio. We'll be back in just a minute.
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CAMPBELL BROWN, CNN ANCHOR: I'm Campbell Brown. Today's history making mess on Wall Street is hitting just about all of us. In our pocketbooks or 401(k)s. We'll listen to how the candidates promising to fix our economy from wall street to your street.
And also, beginning tonight, we are going to get more aggressive about putting what they are saying to our no bias, no bull test. There's bull out there on the trail. We are going to bring you the facts at the top of the hour. LOU DOBBS TONIGHT will be right back.
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DOBBS: We are back with Ed Rollins, Robert Zimmerman and Michael Goodwin.
Robert, as Casey Wian was reporting, I mean, your candidate basically saying that I.C.E., Immigration and Customs Enforcement, terrorizing in workplace raids illegal aliens in this country which is absolute blather.
ZIMMERMAN: It's an ignorant, divisive comment and I was very disappointed to hear him say that because I know many officials in I.C.E. and they're very sensitive to the difficult job they have and they try to work effectively with the community to get the job done and I think, ultimately, also frustrates me is it's another distraction of issues of people in their everyday lives trying to build a better life for their family.
DOBBS: And Senator McCain pandering again to the Hispanic community because he thinks that every Hispanic-American wants those borders open.
ROLLINS: It's totally contrary to what he said in the primaries. If he made the speech in the primary, he wouldn't be the nominee today. He made it very clear that his amnesty bill before wasn't what he was going to do.
DOBBS: It was a mistake. He learned the lesson.
ROLLINS: He's basically out there to build the fences and let everybody stay in and I think he should be challenged on it. If he can't fix it, it going to affect people enthusiastic about him today.
DOBBS: What is on with these two candidates? I mean first of all, the ridiculous ad about the Obama campaign mocking McCain because he can't use a keyboard because of the injuries sustained while he was a P.O.W. for crying out loud. These ads attacking Obama suggesting that he have sex education for kindergartners. These two candidates, I'd hate to say Karl Rove is right about anything but as an arbiter of ethics in campaigns, he isn't my first choice but he is exactly right here. GOODWIN: What's happened too Lou is don't forget. Now we have both campaigns using the Internet in ways that never happened before.
DOBBS: And that somehow affects their ethics?
GOODWIN: I think it has given them another outlet where they're not challenged. Just as they've been doing for TV for many years, they've now used the Internet in the same way. So we have yet another forum where the candidates can kind of reach the voters without any filter, without being challenged. And so when they are not having the press conferences, they're not being -- not having these town halls where they're together, then there's no chance to really ask them and get them off their prescribed messages.
DOBBS: Let me ask you the question that I asked both Candy Crowley and Dana Bash. Why put up with these two candidates not permitting access from the national media? Why not make sure that every night -- and we are going to on this broadcast -- every night that those candidates do not provide access, we are reporting it right here. Why are we letting these guys get away with this nonsense?
ZIMMERMAN: You know, it's a political culture of soundbite and Youtube that seems to be dominating the strategy of these campaign. And Obama only does better when he faces scrutiny by the press.
ROLLINS: Well, you can effect it. If you basically -- if the media basically says we are not going to cover your rally, we're not going to have Candy out there looking like she's really covering it when she basically is reading a script and reporting here -- she wants to ask questions, the rest of them want to ask questions, they have got to demand it. And very quickly, if you saw a bunch of reporters not following them for a week, they would have a press conference.
GOODWIN: I agree. They will not change until they feel pain. The problem right now is it's a polarized country. Both of them are kind of fighting for every last voter. So it's a very close election. If one of them really started to feel pain from this process, that's the one who would change first, and then the other one would have to.
ZIMMERMAN: But you know, Mike, it's that...
GOODWIN: No pain, no gain.
ZIMMERMAN: It's that polarized nature of the country that's going to demand answers and demand accountability from these guys.
DOBBS: Polarized or not, the American people deserve answers, and the national media has to do more than act like a bunch of, you know, sops to this nonsense.
ROLLINS: The president went on today on his economic message, took two seconds...
(CROSSTALK)
DOBBS: For crying out loud. I thought that was about the appropriate time for the president on the economy. Thank you very much, Ed.
(LAUGHTER)
DOBBS: Michael, thank you. Robert.
Tonight's poll results -- 69 percent of you say neither the presidential candidate has any idea how to help working men and women survive this worsening crisis in our country and the financial markets and economy.
We thank you for being with us here tonight. Join us here tomorrow. Good night from New York. "The Election Center" with Campbell Brown begins right now. Campbell.
