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CNN LARRY KING LIVE

Wall Street Giants Fall

Aired September 15, 2008 - 21:00   ET

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


(BEGIN VIDEO CLIP)
LARRY KING, CNN ANCHOR: Tonight, nightmare on Wall Street. Financial giants fall. The carnage rocked stocks around the world and millions want to know -- who will my money be safer with?

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Fundamentals of our economy are strong but these are very, very difficult times.

KING: Is this the defining moment of the presidential campaign? Does either candidate have the answer?

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: Too many folks in Washington and on Wall Street weren't minding the store.

KING: Plus, Meghan McCain talks politics, Palin and whether she's always agreeing with her dad, next on LARRY KING LIVE.

(END VIDEO CLIP)

KING: As we go on the air, stocks in Asia are tumbling and we have three outstanding guests to discuss this incredible day on Wall Street. In New York is Andy Serwer. He's managing editor of "Fortune" magazine. In Princeton, New Jersey is Paul Krugman, "New York Times" columnist, professor of economics and international affairs at Princeton. And also in New York is Stephen Moore, senior economics writer for "The Wall Street Journal," editorial page, author, the new book is "The End of Prosperity."

All right Andy, if it's possible, in a nutshell, what's going on?

ANDY SERWER, MANAGING EDITOR, FORTUNE: Well, Larry, this is a really scary and tumultuous time. There's a tremendous amount of fear out there right now. And it all stems obviously from the mortgage meltdown, the sub prime. And also, a great amount of greed and fear going on on Wall Street.

And also, ignorance of the derivative products, these are complicated financial instruments that these firms played with. It culminated in an incredible weekend of activity whereby Lehman Brothers went away and Merrill Lynch was merged into Bank of America. Unprecedented couple of days.

KING: Paul Krugman, just saying Lehman Brothers went away. How -- how incredible is that? PAUL KRUGMAN, COLUMNIST, NEW YORK TIMES: Well, I mean, this is not really -- this is not the Lehman Brothers of 150 years vintage. This is a really, it's a newly-created, it's a 15-year-old firm with 150-year-old name but still it's a big player. I mean, this is the biggest bankruptcy arguably, you know, in - I don't know, decades.

And this is a financial system that is coming apart at seams. They're trying to hold it together with chewing gum and, you know, duct tape but it's -- this is big stuff. I mean, you know, I'm glad that Ben Bernanke is a scholar of the Great Depression because we've got to worry about some of those parallels.

KING: All right, Stephen Moore, we also have Merrill Lynch being taken over by Bank of America. How do you read that one?

STEPHEN MOORE, WALL STREET JOURNAL: Well, it's part of the same pattern. You know, first we have Bear Stearns several months ago and then, of course, today we had Lehman Brothers going under. And Bank of America buying Merrill is another sign that -- and Andy is right.

The reason, Larry, that these big financial institutions are going under is that they told in their portfolios major amounts of mortgage-backed securities and this whole financial crisis really dates back to two events.

One is the crisis in the housing industry with the sub prime loans. These banks are holding huge amounts of loan that is have very little value and the other thing I think that we haven't even mentioned, Larry, is what's happened over the course of the last two, three, four years has been a decline in the value of the dollar and that has reduced the value of U.S. assets, whether it's stocks or housing or the things that we can purchase as Americans because our dollars are worth less.

KING: So Andy, who's to blame?

SERWER: There's blame enough to go around, Larry. You know, it's interesting. I think that the McCain and Obama campaigns are a little bit long on rhetoric and short on answers right now but they do talk about people being asleep at the switch on Wall Street and in Washington.

Regulators clearly did not do enough here. And the CEOs of some of these firms believed their own voodoo. They didn't have hundred-year perspective. They got to be very, very complacent in their own thinking, thinking that they created systems that could weather any storm. But they didn't see the 100-year storm coming as Alan Greenspan calls it so they're to blame and also, Washington must shoulder some responsibility.

MOORE: Let's not forget -- let's not forget the other person I think it was to blame which is Alan Greenspan. I think if you look back at where this really crisis dated from, you look back at the early 2000s and mid-2000s where we had a very loose monetary policy, essentially what was happening is the Federal Reserve Board was subsidizing banks to make loans and that was the period, Larry, where a guy could walk in and get a mortgage and I think that was -- that -- the chickens coming home to roost for that loose monetary policy.

KING: Paul, I want to find out what's the effect on the guy every day on the street. But Paul, you want to comment?

KRUGMAN: I just want to say this is a great moment in history. Stephen Moore and I agree about something. If there's one single villain, if I had to identify - there are lots of people to blame, but if there's one single villain, it would be Alan Greenspan. I would put greater emphasis on the standing in the way of any oversight on sub prime, his repeat assurances that not only didn't we have a housing bubble, but it was impossible to have a housing bubble, his urging people to take adjustable rate mortgages. Boy, if there's one guy that really did his best to get us into the mess we are in, it's Alan Greenspan. And having him as the great sage right now is pretty wrangling.

KING: Let's hear Senator Obama on the economy. He said this today. Let's watch.

(BEGIN VIDEO CLIP)

OBAMA: Today offers more evidence, Colorado, that too many folks in Washington and on Wall Street weren't minding the store. You know, for eight years, we have had policies that have shredded consumer protections. That have loosened oversight and regulation and encouraged outsized bonuses to CEOs while ignoring middle class Americans.

(END VIDEO CLIP)

KING: And now we'll have our guests comment after we show you what John McCain said today dealing with all of this crisis. Watch.

(BEGIN VIDEO CLIP)

MCCAIN: We are going to reform the way Wall Street does business and put an end to the greed that has driven our markets into chaos. We'll stop multi-million dollar payouts to CEOs that have broken the public trust. And we'll put an end as I said to running Wall Street like a casino. We'll make businesses work for the benefit of their shareholders and their employees and we'll make sure that your savings, IRAs, 401(k) and pensions are protected.

(END VIDEO CLIP)

KING: Andy, are they both right?

SERWER: Yeah. They're both right, but they're really both not saying anything. Come on now. Both of the guys are being briefed by Treasury Secretary Paulson. I expect a little bit better than that. I mean, granted it's a moving target here, Larry, but, you know, let's see some substance. We should challenge both these candidates to come up with a real plan to address the huge problems facing our country right now.

KING: Let me get a break and we'll come right back and we'll ask about the effect on everybody or rather every day people and where do the candidates stand on the whole mess, next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: This morning we woke up to some very serious and some troubling news from Wall Street.

MCCAIN: The American economy is in a crisis. It is in a crisis.

OBAMA: Too many folks in Washington and on Wall Street weren't minding the store.

MCCAIN: We're going to reform the way Wall Street does business and put an end to the greed.

OBAMA: Instead of prosperity trickled down, the pain has trickled up.

MCCAIN: We've got to fix it.

OBAMA: This country cannot afford four more years of this failed philosophy.

(END VIDEO CLIP)

KING: Paul Krugman, do you agree with Andy Serwer that neither one of these candidates are hitting the mark?

KRUGMAN: You know, there's a little -- that's a little bit of false symmetry there. I mean, Obama has been calling for increased financial regulation. He has some pretty decent-sounding proposals there. I have no idea what McCain's talking about. He's saying we're going to stop the executives from getting outsized bonuses. How are we going to do that?

SERWER: It sounds kind of partisan frankly, I mean right?

KRUGMAN: How's that supposed to happen? It's not -- you know, we are in charge. The president is in charge of drafting legislation that's going to regulate investment banks. Obama has talked about that. The president is not in charge of executive compensation. That sounds kind of socialist to me.

KING: Stephen, what do you think of their plans?

MOORE: Well I think look, one of the big problems with Washington that feeds this financial meltdown that we are experiencing is that Washington can't get his own finances under control.

We have seen over the last seven years under Republicans and Democrats the biggest spending binge virtually in American history and now you've got a $500 billion budget deficit, you've got low growth and now you also have this mentally in Washington, Larry, that I think the public is rebelling against that every time there's a financial institution or a bank or an auto company or an airline company that's in trouble, Washington is going to provide a bail-out.

I call it kind of this bail-out mania and the significance of what happened yesterday and I'll give Ben Bernanke and Paulson some credit, they did not put the taxpayers at risk for Lehman Brothers. They basically said we will let this bank fail. We are not going to bail it out. I give them a lot of kudos for that.

KING: Andy, what's the affect on a bus driver in Hialeah?

SERWER: There's a lot of stuff going on right now. First of all, the average stock investor is poor now. Obviously, the market went down. The housing market is not improving and most importantly there's a crisis of confidence, Larry, that seems to be growing in this country.

I think that's very fair to say because of what's going on. People are questioning, you know, is their money safe? How safe is my savings and loan? What about my mortgage? All these kinds of things coming into play for the first time in many, many years and, you know, it really is a kind of scary situation.

KRUGMAN: Larry --

KING: Paul, does our bus driver friend have to worry?

KRUGMAN: Well, if he's got a 401(k), he has to worry. If he's got money that is not in insured - fully insured federal bank deposit he's got to worry.

And also, he's got to worry about his job. I mean, one of the biggest effects this is going to have on a lot of ordinary working Americans is that it's throwing sand in the ears of the economic machine.

I mean, we are seeing the credit market seizing up. You know the Fed's been cutting interest rates, the interest rates it controls for the past year and credit for businesses, interest rates that actual real people have to pay have been going up, not down. That's because this financial crisis, that's going to get worse.

MOORE: Larry --

KRUGMAN: So this is, you know, already in a recession, I think, and going to get worse because of this.

KING: Stephen?

MOORE: We have been through this before. When Paul said earlier that this is like the Great Depression and I think Barack Obama said something like that, I think that's a bit too far. I mean, look. Remember in 1986, one day the stock market fell by 20 percent in value. Today it fell by about 4 or 5 percent.

In 2001, we saw the huge meltdown in the technology bubble. What we're experiencing, folks, right now is a classic bubble bursting that happened in housing. We have been through this before. Yes, it is going to cause people to lose money that have money in 401(k) accounts, but they shouldn't feel panicked. I don't think they should feel that they have to rush out and put all their money under their mattresses because I still think the financial system is still fundamentally pretty sound.

SERWER: I think that's right, Larry. Can I just jump in? I think the issue right now what kind of makes me concerned and I know a lot of people agree with me including my fellow guests here, probably is that, you know, no matter what you think about Ben Bernanke and Hank Paulson, they are pretty competent. They kind of have a grip on what's going on and so far, they haven't been able to stem this crisis and I think that's a real concern.

KRUGMAN: Yeah, I will say -- look, I'm a big fan of Ben Bernanke's, partly because he used to be my department chairman before he was demoted to running the world. But Ben and Hank Paulson is a smart guy working for a not so smart administration, but they have been doing what they can. The reason we're not going to have another Great Depression is because these guys know about the Great Depression and they're not letting things get that much out of control. But it is alarming that this is now, we're now 13 months into the crisis and the dominos just keep falling.

KING: Is it going to get worse, Stephen?

MOORE: Boy, that is a really tough question to answer because, you know, in my opinion, Larry, it is not going to turn around until we hit a bottom in that housing market. I live in area in northern Virginia where we had a big run-up in housing for 10 years where housing more than doubled, almost tripled -- but now houses just aren't selling. And so until I think we hit that housing bottom, we're not going to see a strong stock market recovery.

KING: We'll be calling on all three of you again. Andy Serwer, Paul Krugman and Stephen Moore.

When we come back, more on the political fallout of today's economic news and how it's going to impact the election. Don't go away.

(COMMERCIAL BREAK)

KING: We have an outstanding panel joining us. In Minneapolis is Ed Schultz, the radio talk show host who's supporting Obama. In Atlanta, Ralph Reed, chairman and CEO of Century Strategies, author of "Dark Horse," supporting Senator McCain. In Washington, Amanda Carpenter, national political reporter for TownHall.com, a conservative Web site. And also in Washington, Kiki McLean, former Senate adviser - senior adviser to the Hillary Clinton campaign, now supporting Senator Obama.

I don't imagine we'll get objective answers here, but here goes. Ed Schultz, which candidate is better suited to deal with this ongoing crisis?

ED SCHULTZ, TALK SHOW HOST: Well, I think Barack Obama is better to lead in this situation because he hasn't been with Bush 90 percent of the time. Larry, when does the buck stop on Bush's desk on this? We're talking record debt, record foreign deficits, record trade deficits. That's what's affecting Wall Street, the policies for Washington and what the Bush administration has done over the years.

I mean, Lehman Brothers and Merrill Lynch couldn't survive the Bush administration policies? This is serious stuff. We have got to get our fiscal house in order and we've got to start paying our bills.

KING: Ralph Reed, I want the play for you a speech that -- a portion of the speech today that Senator McCain gave on the economy and then I want you to comment. Here's Senator McCain.

(BEGIN VIDEO CLIP)

MCCAIN: You know that there's been tremendous turmoil in our financial markets and Wall Street, and it is -- it's -- people are frightened by these events. Our economy, I think, still the fundamentals of our economy are strong, but these are very, very difficult times. And I promise you we will never put America in this position again. We will clean up Wall Street. We will reform government.

(END VIDEO CLIP)

KING: Ralph Reed, is he frankly better equipped to deal with this crisis than Senator Obama?

RALPH REED, REPUBLICAN STRATEGIST: Well, I think so primarily because of the fact that his plan is so starkly differently. He understands, Senator McCain does, for example, Larry, that when you have a soft economy and the toughest housing market since at least the '70s and maybe since the '30s, the last thing you want to do is increase the capital gains tax which is what Obama has proposed.

The last thing you want to do is move towards protectionism. You know, the last time we had this kind of credit crisis in the 1930s and we raised walls that prevented free trade and prevented exports and things of that nature, we took a recession and turned it into a Great Depression.

Barack Obama is the most protectionist nominee of a major party in two generations. And finally, John McCain in his entire tenure in Congress and the U.S. Senate 26 years has never requested a single earmark for either his district or his state.

If you want somebody to shake up Washington, and you want somebody who rein in that deficit, John McCain's the one to do it.

KING: Kiki McLean, I guess you think Obama's the one, but why?

KIKI MCLEAN, FORMER SENIOR ADVISER, CLINTON CAMPAIN: Well you know, Ralph and I have known one another for a long time and he knows I'm a free trade supporter. And I will tell you that Barack Obama is as well because he wants to do it with the right protections for our workers and for the environment.

Here's what's interesting to me, Larry. We now have people talking about what's important here in the campaign and that's this economy. We're talking about one candidate who wants to cut taxes for 90 percent of working families. We have a candidate in Barack Obama who has said a couple of things are going to happen. Number one, he's been calling to clean up this regulatory mess we have got. He believes that if you borrow from the government, you ought to be regulated.

That if you want to deal with the American peoples' money, you ought to have more transparency and ultimately that we're going to pay attention to this and deal with this. Here's the challenge I have.

I don't know what John McCain wants to do and he's been around here for 26 years. And if he hasn't done it by now, if he couldn't have influence on eight years of a Bush administration and talk some sense into them and get them moving on this, when he saw it coming, I don't think he can do it as president, either.

KING: Amanda, Obama spoke today on the same topic. I want you to watch this and then I want you to comment, Amanda, watch.

(BEGIN VIDEO CLIP)

OBAMA: It's great that he now wants to talk about putting corporate lobbyists in their place, but he needs to explain why he put seven of them in charge of his campaign. Lobbyists for the insurance industry and for the oil industry and for Freddie Mac and for foreign governments. And if you think those lobbyists are working day and night for John McCain just to put themselves out of business, well, I've got a bridge to sell you up in Alaska.

(END VIDEO CLIP)

AMANDA CARPENTER, TOWNHALL.COM: Well, that was a pretty funny line but I think that what it gets down to with in terms of economic crisis is I think everyone pretty much believes that the housing problem's at the root of this. And who do you trust the most to reform the housing problem? And look traditionally at who the people have been calling for greater GSE reform in the Senate. It's been the Republicans. And who stopped them from advancing that agenda? It's been the Democrats. So just on a party line perspective, who do you trust in real housing reform to take oversight over these mutant creatures called Freddie Mac and Fannie Mae? It's not the Democrats. They're the ones who want to extend more money to these giants and all the rest so who are you going to trust to -

MCLEAN: I trust the guy that knows how many houses he has.

CARPENTER: Oh, come on. That's a silly cheap shot and it really --

MCLEAN: It is not silly. CARPENTER: Lessens the debate over this incredibly important issue where people have been over extended, there's much too much credit extended in the market and the banks that have been recklessly extended this credit need to be brought in line.

MCLEAN: I do think it goes to the issue of how in touch are you with people? And that gets to the fundamental of what we saw in the debate today where John McCain was out on the stump and said, I believe the fundamentals of this economy are strong and sound.

CARPENTER: The unemployment rate is very low. The poverty rate is low.

KING: One at a time.

MCLEAN: There was a big debate back and forth and this goes to really how connected are you to what real Americans are dealing with every day and I think that goes to the issue of who do you trust.

KING: Ed Schultz, isn't it true neither has a world of experience in economics?

SCHULTZ: Well, I'm getting disappointed in Barack Obama a little bit, Larry, from the standpoint it's the foreign debt. We can't have other countries holding our debt. You see what happened today? Gold went up $30. The people that are holding our debt, the foreign countries that is are holding our debt are now buying up precious metals. We can't back up our dollar. We're in Iraq to the tune of $12 billion a month. This is insanity.

And what does McCain want to do? Well, he wants to extend the Bush tax cuts. We have to start paying our bills. Someone has to step up in front of the American people and say, all of us, not just the top 2 percent, all of us have to sacrifice to save this financial crisis and to save this country.

KING: I'm going to pick up with Ralph Reed right after the break. Also, Ed Schultz was in Alaska over the weekend. We'll find out what he learned about Sarah Palin, next.

(COMMERCIAL BREAK)

KING: Ralph Reed, would you agree that neither candidate has a strong background in economics?

REED: Well, I don't know that I would agree with that because I think that John McCain --

KING: McCain admitted it.

REED: McCain has been involved in these matters as chairman of the Commerce Committee. He's dealt with some of the most important industries in this country, including the high-tech industry, the telecom industry and so forth. And if you want to know who's inexperienced in this matter, Larry, all you've got to do is look at Obama's tax plan. He wants to take at a time of the softest housing market we've seen in generations and increase the capital gains tax. That will hurt every single senior in Florida that has 80 or 85 percent of their wealth tied up in their home. He voted for the 2007 Democratic budget, which raised taxes on workers making as little as $42,000 a year. That would sock it to every auto worker in Ohio or Michigan. If you look at what he's proposed for small businesses, he wants to blow the tax on the payroll tax for Medicaid and Social Security. That will hurt 20 million small businesses ...

KING: Kiki, why are you laughing?

(CROSSTALK)

REED: ... that create 80 percent of the jobs in this country.

MCLEAN: I'm laughing because Ralph knows as well as I do that John McCain is going to give the tax breaks to the wealthiest among us. He's not focused on the working middle class the way Barack Obama is.

REED: That's not true.

MCLEAN: The people who have been carrying the weight of this failing economy on their back, who for the first time now, it might actually be shared with the rich guys making it on the other end. Here's the reality. It is like I said before, John McCain's had 26 years to do something about this. Let's go with something new, because the old stuff we have had, it ain't working, Larry. I think most Americans get that and I think that's why Barack Obama will win.

REED: He's proposed doubling the child tax credit from 1,000 to 2,000 dollars. That would help every middle class family in America.

MCLEAN: Barack Obama has proposed more, Ralph, and you know it. The reality we have a guy who looks up and says -- it's really simple. He says, I don't really know much about the economy. He says I'm not really sure.

KING: Amanda, do you think both have vast experience in economics?

CARPENTER: I mean, it is a mix. I think John McCain, as Ralph talked about, does have experience in oversight from his time in the Senate. Joe Biden has experience, as well, being from what's called the credit card state. Not as much as Barack Obama, who's one that really counts. I wouldn't say there's no experience on the other side of the ticket, although a lot of people wouldn't like the kind of experience that Joe Biden has had, being so close to the credit card industry.

KING: Ed Schultz, you were in Alaska. By the way, we just got this in from AP. A campaign spokesman says that Alaska Governor Palin will not speak of an investigator hired by law makers to look into the firing of her public safety commissioner. McCain campaign spokesman Callaghan told a news conference that the governor nominee for vice president will not cooperate as long as the investigation remains tainted. That's the late news break. What did you learn up there in Alaska, Ed?

SCHULTZ: Larry, let me speak to that story. Alaskans are very frustrated in Sarah Palin, because when this whole thing started, she urged everybody to comply. She said that she was going to go along with the investigation. And it was brought forward by Republicans, not by Democrats. And it's been stated on a lot of talking heads the last few days that this is some Democratic effort. It is not. It was a bipartisanship committee with more Republicans that started this whole trooper-gate investigation.

She's done a flip flop. She's done a 180 on this and it's going to be interesting to see. She is very politically powerful in Alaska. She intimidates a lot of people. She's not a barracuda. She is a great white shark off the coast of Alaska eating everybody in sight, and she keeps a list. And she's vindictive. And I'll tell you, I don't believe these polls in Alaska. I saw a demonstration after demonstration in Anchorage this weekend that was reported by the A.P. that 2,000 people showed up at rally. We counted them with our boots on the ground, 497 people including the Wasilla band in that number.

And then she goes up on stage and doesn't introduce the lady that they're honoring the facility about, Dorothy Cook. She is politically inexperienced in many regards, but she is politically vicious and that's what's carrying her through this. Alaskans are absolutely convinced that she does not have the experience and they were speaking up on the town hall meeting on Saturday night. America's not getting the full story out of Alaska.

KING: Want to comment Amanda?

CARPENTER: Yes. I want to talk about the partisan edge that this investigation has taken. Back when Sarah Palin was open about talking about what was before the investigation got hijacked by a guy named Hollis French.

SCHULTZ: It was not --

CARPENTER: Let me finish my point, Ed.

(CROSS TALK)

KING: Let her finish, Ed.

CARPENTER: French admitted during the hearing last Friday that he ceded control over his subpoena to the so-called independent investigator. I read the transcript. I listened to it. You can read my story on Townhall. He said that he didn't have full control over the subpoena, that French was in charge of it. So I think that absolutely taints the investigation. Everyone should be up in arms about that fact.

SCHULTZ: OK. So nobody should be subpoenaed? We shouldn't get to the bottom of this?

REED: They have offered to freely cooperate, Ed.

SCHULTZ: No they haven't, Ralph.

REED: All I can say is I love this witch hunt that's going on.

SCHULTZ: It is not a witch hunt. You're making it out to be a witch hunt.

REED: The Obama supporters are just upset and angry because they know that Obama should have picked Hillary Clinton. He gave up on somebody who got 18 million votes to pick somebody who got nine thousand.

KING: Isn't it true until we have a true investigation, nobody knows? We don't live there. We don't know what happened, right?

REED: Again, she has offered to freely cooperate without subpoenas.

SCHULTZ: No. She hasn't.

REED: They have already offered to do that. They have got the e-mails.

KING: We'll take a break and a breath and --

REED: There's nothing to this and everybody knows it.

SCHULTZ: You're wrong on that.

KING: Where's Hillary Clinton these days? Should she be more visible? I think she was out this past week. We'll talk about it after the break.

(COMMERCIAL BREAK)

KING: Back with our panel and then Meghan McCain. The Obama team attacking McCain for running a sleazy campaign. Watch.

(BEGIN VIDEO CLIP)

MCCAIN: I will not take the low road to the highest office in this land.

UNIDENTIFIED MALE: What's happened to John McCain? He's running the sleaziest ads ever. Truly vile. Dishonest smears that he repeats after it's been exposed as a lie. Truth be damned. A disgraceful, dishonorable campaign. After voting with Bush 90 percent of the time, proposing the same disastrous economic policies, it seems deception is all he has left.

(END VIDEO CLIP)

KING: Amanda, what's happening here?

CARPENTER: Well, I mean, both of the campaigns are trying to say that they are going to take the high road. John McCain said similar things about Barack Obama when he ran negative ads against McCain. But the fact of the matter is contrasts sharpening right now. We're getting into the tough campaign season. And I don't think John McCain has done anything that was non-factual. Yes, some of the ads are very hard edged right now, but I don't think that means they're not fair game.

KING: What do you think, Kiki?

MCLEAN: Larry, I love a good fight. I'm from Texas. I love hard politics. I have to tell you a story. My brother called me today. H was trying to fact check the concept that people might not be interested in the truth. He went to two of the major websites that are fact checking on both campaigns in their ads and statements and both were essentially crashed because too much traffic going on them. So I think people do care about the truth and I think that --

I think the Obama ad has it dead right when they say, what happened to John McCain? This is not the John McCain people expected. This is not the campaign people expected John McCain to give. And I think it's sort of sad.

KING: Ralph?

REED: I think biggest question is what happened to Barack Obama's politics of hope? He promised to give us a new kind of politics that was going to transcend red and blue states. John McCain began this general election, Larry, by offering to meet with Barack Obama in ten town hall meetings, where they would discuss the issues in a civil way. If you want to know what I think happened, I think when Barack Obama went to the Saddleback Civil Forum and had one of the worst nights he's had during this entire campaign, he made a decision that he was not going to appear on a stage with McCain again with voters until the debates and now it's slash and burn. You have already heard the smears against Sarah Palin. And I think it's sad. I know Barack. I think he is a good guy. I think it's unfortunate this has happened.

KING: Ed?

SCHULTZ: Barack Obama, Ralph, has taken the high road time and time again. You folks have attacked his preacher. You have attacked his faith. You have tried to label him as a Muslim. You have gone after drug use 30 years ago.

CARPENTER: Who is your folks?

SCHULTZ: It's been one smear after another. Here's what the American people need to know: John McCain wants to give more tax cuts. John McCain voted with Bush 90 percent of the time. And his running mate has flip flopped and is not telling the truth about her position on the bridge to nowhere, and what she actually did with the money. What the McCain camp wants to do is make this about lipstick and personality and sexism, instead of the issues.

REED: Ed, why didn't he agree to the town hall meetings?

KING: OK. We'll have all of you come back. Guys? All right. Ed, we are out of time. Ed, Ralph, Amanda, Kiki all will come back. Too sprightly to turn away from. Meghan McCain is next, sounding off on politics, Sarah Palin and her dad. She'll be right here when LARRY KING LIVE returns. There she is.

(COMMERCIAL BREAK)

KING: You're looking at Meghan McCain, the daughter of Senator John McCain and the author of the new children's book "My Dad, John McCain." We are going to meet her in a minute after Anderson Cooper, the host of "AC 360."

(NEWS BREAK)

KING: We welcome to LARRY KING LIVE, Meghan McCain, the daughter of Senator John McCain and the author of this book that I'm holding, "My Dad, John McCain." It is illustrated brilliantly, by the way, by Dan Andreassen (ph). Why a children's book, I think aimed at five to 10 year olds, about your father?

MEGHAN MCCAIN, DAUGHTER OF JOHN MCCAIN: I just thought it would be a really great way to make my father's story accessible to children. It is a really fascinating, patriotic American hero story and I had actually met a lot of people on the trail that weren't familiar with his story and --

KING: Really?

M. MCCAIN: Yes, I met 12 year olds, around that age, and they just thought he was a senator. And I was like, there's a lot leading up to his life.

KING: Kids really get involved now in campaigns, eight year olds, nine years olds. They support people.

M. MCCAIN: I was just interviewed by a 12-year-old today who knew so much about politics.

KING: What does your dad think about the idea?

M. MCCAIN: He really likes it. I think he is really pleased with it. Obviously, it's very sentimental. It has us on the cover and I'm a little girl. So he really likes it.

KING: What about your mom?

M. MCCAIN: She really likes it, too. They're very proud. I'm lucky.

KING: Do you like touring for a book?

M. MCCAIN: Yes. It is like the campaign trail a little, but I don't have, you know, all the people on the campaign around me. It is just my friends and the book people.

KING: Are you caught up in this campaign, where it's starting to affect you emotionally? M. MCCAIN: Yes. Definitely. I try to separate myself from it, but it's very difficult. And I think anyone on a campaign trail especially for as long as I have been, you can't help but get emotionally caught up in it.

KING: Were you surprised of his selection for vice president?

M. MCCAIN: I think to a degree everyone was surprised because she was an unknown. But I'm very, very pleased with it. I love her. I'm really excited about it.

KING: Did you talk to him soon after?

M. MCCAIN: Yes. Yes. And I just told him how excited I was and how proud I am of the pick. And I'm just honored to have a woman on the ticket.

KING: They had fun with her on "Saturday Night Live."

M. MCCAIN: I saw.

KING: We'll show a clip of it and have you comment. Meghan McCain's with us. Her book is "My Dad, John McCain." Watch.

(BEGIN VIDEO CLIP)

TINA FEY, "SATURDAY NIGHT LIVE": You know, Hillary and I don't agree on everything.

AMY POEHLER, "SATURDAY NIGHT LIVE": Anything. I believe that diplomacy should be the cornerstone of any foreign policy.

FEY: And I can see Russia from my house.

POEHLER: I believe global warming is caused by man.

FEY: And I believe it's just god hugging us closer.

POEHLER: I don't agree with the Bush doctrine.

FEY: And I don't know what that is.

(END VIDEO CLIP)

KING: They said she enjoyed it.

M. MCCAIN: Yes. I used to intern there.

KING: You interned at "Saturday Night Live." What was that like?

M. MCCAIN: It was incredible. I was there for the Ashley Simpson lip synching incident. It was fantastic.

KING: While you were at Colombia? M. MCCAIN: Yes, while I was at Columbia. It was such a great experience. It's legendary. I'm still big fans of Tina Fey and Amy Poehler.

KING: Are you going to be a writer?

M. MCCAIN: I don't know. I'd really love to write about the campaign trail when this is over, from a sort of satirical standpoint from the daughter perspective. But who knows.

KING: There has to be areas, especially young girl living in New York, going to Columbia, where she disagrees with her father. What are they? That's fair, open game.

M. MCCAIN: I mean, there's lots of issues that I disagree with my father, but there's a lot of issues that I agree as well. I never really feel comfortable coming out and saying what exact issues, because I'm not the one running. And I think it's important to support him and what he's doing. That's really it.

KING: One might guess you'd be for choice.

M. MCCAIN: Pardon me?

KING: Choice.

M. MCCAIN: I don't want to talk about that stuff if that's OK. I would rather stick to my book and the campaign.

KING: Do you discuss politics with your father?

M. MCCAIN: Yes.

KING: Does he know when you agree and disagree?

M. MCCAIN: Of course. Yes, of course, of course.

KING: He accepts this, right?

M. MCCAIN: Yes. My father isn't trying to mold me in his image. He is very open to other peoples' ideas and political beliefs. And I think that's my favorite part about my father and the campaign, is that not everyone thinks alike. It's not as if this campaign is based on people that all think and talk and look and act alike. Everybody's really different and has really different beliefs.

KING: What kind of father is he?

M. MCCAIN: Great. I'm really lucky. I have a really great relationship with my dad. We have always been kindred spirits. My mom calls me John McCain in a dress. We're a lot alike. We have a great relationship.

KING: It could be daddy's and daughters, right?

M. MCCAIN: Yes. KING: Are you in touch constantly?

M. MCCAIN: Yes. I just talked to him earlier. He said good luck.

KING: He knew you were coming here?

M. MCCAIN: Yes.

KING: I hear you blog, right?

M. MCCAIN: Yes. McCainBloggette.com. It's a website I've been doing for almost a year now with the campaign. And my friends are backstage that do it. Heather Brann (ph) Shannon Bay (ph), they do film for it.

KING: What do you do? You come here and you blog this coming here?

M. MCCAIN: Yes. We do everything. Sometimes it's as asinine as getting ice cream and sometimes it's as big as the debates or the -- you know, it's very intense things like primary nights and elections night. We're going to film everything, even if I'm crying or laughing, whatever. I think it's important.

KING: Will you be in Phoenix?

M. MCCAIN: Yes.

KING: What do you make of those, back to Governor Palin, who say that if you criticize her, it's sexism.

M. MCCAIN: I don't think necessarily criticizing any candidate is sexism, but I do think that sexism has played a role with the governor and with Senator Clinton as well in this election. I don't think criticizing a candidate, no matter what gender, is necessarily sexism.

KING: You think Senator Clinton was a victim of it, too?

M. MCCAIN: I do.

KING: Where will you be at the debate next week?

M. MCCAIN: Mississippi. We'll be blogging about it and I'll be with my father, probably backstage and then in the audience.

KING: Are you nervous for him?

M. MCCAIN: No. He's fantastic off-the-cuff and live and answering questions. That's why he's so good at town halls.

KING: What do you think of Senator Obama?

M. MCCAIN: I think he's a really fantastic candidate as well. I really love that there's two such historical tickets right now. I think he's been respectful. I'm just really enjoying the election.

KING: You don't see the campaign getting any dirtier?

M. MCCAIN: I think politics by its nature is pretty dirty, but I think as bad as it could be, for the most part, people are being pretty respectful.

KING: We'll talk more about the book in a minute. The book is "My Dad, John McCain." The guest is Meghan McCain. We'll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

M. MCCAIN: We're staying here in Pennsylvania the day after my father announced that Governor Sarah Palin will officially be his vice presidential running mate. And this is her sweet daughter, Piper Palin, who will be coming on the road with us from here on out.

We're here on the Straight Talk Express in Florence, South Carolina today, a day before the South Carolina primary.

Yesterday, we were in Wisconsin and we started off the day with a big rally in the hotel.

We're having the primary in Nashua. Somebody's life is about to change.

PIPER PALIN, DAUGHTER OF SARAH PALIN: Vote for my mom and John McCain.

M. MCCAIN: Vote for my dad and Governor Palin.

PALIN: Thank you, bye!

(END VIDEO CLIP)

KING: You're having fun with this?

M. MCCAIN: Yes. Those videos make me so nostalgic. That was in New Hampshire and South Carolina. That's Piper Palin, who is the sweetest, cutest little girl ever.

KING: Who could forget New Hampshire and South Carolina.

M. MCCAIN: Yes. New Hampshire's in the book. That's how important it was to me and how amazing. I miss the experience. It was so incredible. And the people of New Hampshire is why I'm sitting here at this table today, and everyone on the campaign knows it.

KING: I moderated that debate in South Carolina. It was a pretty rough night. You have blogged in support of Bristol Palin, who is with child, as we know.

M. MCCAIN: I did. KING: What made you speak out on that?

M. MCCAIN: I have grown up in politics forever. My father has been kind of pretty public. He ran for president when I was 14. I know what it's like to have children become a point of criticism or used as an example. She's 17 and she grew up in a small town in Alaska. I think people should support her and the media should lay off a little. She's very young and she's just trying to live her life. I don't think she should be an example of what to do or not to do. I just think she should be Governor Palin's daughter.

KING: I think it was quoted. Did you say you were obsessed with Governor Palin?

M. MCCAIN: Yes.

KING: What do you mean?

M. MCCAIN: What I love about Governor Palin is for so long women are told, you can do everything, but you have to do it at different time. You can have a career, but then you can have kids. She has five kids and now she's the vice presidential nominee. I love that she's doing it all at once. She's such a role model for me. I love strong women. I am a strong woman and I just love examples like that.

KING: You have been with her, right?

M. MCCAIN: Yes.

KING: What do you like about her?

M. MCCAIN: First of all, she's really chill. She's really nice, really friendly. She's really up on pop culture, which I always respect. She's very smart. She doesn't act entitled, which unfortunately sometimes you get with some politicians. She's just like your average girl, like just a mom. But she's very very, very shrewd, very smart. I've heard her talking about issues.

KING: Is there a fear that she's taken some of the play away from your dad?

M. MCCAIN: No. No. I think they're a great team. I love what she's brought to the campaign.

KING: What's the toughest part about writing a children's book?

M. MCCAIN: The illustrations were the hardest for me. How do you illustrate your father being tortured.

KING: Someone else did it?

M. MCCAIN: Yes. Dan Andreassen (ph), who is fantastic. I met him. He actually came on the road the day Governor Palin was announced as the vice presidential -- yes, I was like, what a day to be here. He's a lovely man.

KING: Isn't it tough not to write down to an eight-year-old?

M. MCCAIN: I think so, but the story is so adult in so many way that I think kids like it, especially it's an adventure story and getting shot out of your plane and fighting for your country. I don't think I talked down to any children.

KING: What are your plans the rest of the campaign?

M. MCCAIN: Continue to blog. I love the blog. It's given me so much. I really enjoy doing it. It's a way for me to show the world what it's like to be on the campaign trail as a 23-year-old woman, when your father's the president and it's been a way for me to show people what my parents are really like. I think journalists are not going to be in my mom's hotel room when she is in her pajamas. We put pictures of my mom in her pajamas on the blog. I love what it's done.

KING: Are you going to travel with your dad, campaigning?

M. MCCAIN: Yes, I have been doing that. I don't speak like Chelsea Clinton spoke for her mom at rallies. I don't do that. I just blog.

KING: Did you like Chelsea?

M. MCCAIN: Yes. I met her a while ago at the ABC debates. She's lovely, really cool. I liked her a lot.

KING: You liked Hillary, too?

M. MCCAIN: Yes, I like Jenna Bush, too. I've met her too. They're all really interesting women. Chelsea was particularly friendly.

KING: What would your life be like if he's elected? You will have Secret Service protection.

M. MCCAIN: I know. I really don't want to do that.

KING: Don't like that.

M. MCCAIN: No, I really respect what they do, because obviously they're there to protect my family, but it's really weird. There's always people there to open up a room. I went with my mom to CVS and they had to check with CVS before we went in and there were people everywhere.

KING: Do you have a boyfriend?

M. MCCAIN: No.

KING: That's not funny. You're a beautiful girl.

M. MCCAIN: Thank you. I've been on the campaign a year and three months. I'm in a different city everyday. I'm a work-aholic. It would take someone special for me to stop everything and go on a date. KING: I thank you very much.

M. MCCAIN: Thank you for having me. It's an honor.

KING: My honor. Meghan McCain, the illustrations by Dan Andreassen. The book is "My Dad, John McCain." A children's book available everywhere.

If you love movies, sports, literature, politics or just beautiful pictures, have I got a book for you, it's a celebration of great photos all from the incredible vaults of "Vanity Fair." It's a not just the 300 images. It's who took them. From Edward Steichan (ph) to Annie Leibovitz, these are the very best, the book "Vanity Fair, the Portraits of a Century of Iconic Images" is out today. You will love taking a spin through these incredible pages or stopping for a longer look.

By the way, there's still time to answer tonight's quick vote question. Do the actions of a candidate's family a matter you? Go to CNN.com/LarryKing and tell us right now. While you're there, check out our guest commentary from Academy Award winning start Reese Witherspoon. She makes a great case for early detection of breast cancer. See what she has to say at CNN.com/LarryKing. Scroll down to guest commentaries.

Tomorrow, Dr. Phil is here with a little political analysis. Right now, it's time for Anderson Cooper and "AC 360." Anderson?