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Wall Street & Your Wallet; Mutual Attraction; To Drill or Not; Palin by Comparison

Aired September 16, 2008 - 12:00   ET

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


T.J. HOLMES, CNN, ANCHOR: Wall Street and the credit crisis. Investors calming down a bit, looking ahead to a possible interest rate cut two hours from now. We'll be all over that. Also, as we were just talking here about. President Bush is touring the devastated scene that is left behind by Hurricane Ike. He's urging Texans as well to stay away from the hard hit area of Galveston.
Also, election year politics collide with hurricane season. Congress today, considering lifting the federal moratorium on offshore drilling.

All right. There we go. Let's get this thing started here. A day after the market meltdown, nervous investors look to the Federal Reserve for possible relief. New developments unfolding today on "Issue number one," and that issue is, of course, the economy. We expect an announcement in about two hours from the Federal Reserve.

Before yesterday's brutal stock market sell-off though, the Central Bank was expected to leave interest rates alone. Leave them unchanged. Now some analysts believe a rate cut is possible. Problems persist for the insurance giant AIG. Several credit rating agencies have downgraded the company as it struggles to raise some cash.

Now we do have something on the upside today. A positive note to pass along. We got new numbers about the consumer prices, bit of a drop here. Fell 0.1 of one percent last month. That was mostly due to the lower energy crisis. Now our CNN Money team is tracking all of today's developments, and there the ladies are. Christine Romans has the big picture including the fed meetings. Susan Lisovicz there watching the markets, Allan Chernoff, not shown, is following AIG. Of course our Gerri Willis there in the middle. We'll be talking about your mutual funds.

Now, investors still reeling from the turmoil on Wall Street, they're hoping the Federal Reserve will step in to steady the markets. Christine Romans live for us from New York, hoping that they can steady the markets. It seems that nothing can steady us right about now.

CHRISTINE ROMANS, CNN CORRESPONDENT: Earlier you said freaked out. I think that's a technical financial term that you just coined there. A little bit freaked is what you said. And you're right, T.J., let me just set the stage for you a little bit. Because a lot of moving parts here. A lot of things the Fed is going to have to consider when it meets, makes its decision later today. We're watching AIG, Allan Chernoff is going to have a lot more for you on that. He's exclusively following that today.

This is the nation's largest insurer. It has fingers in all kinds of different industries and banks. This is, as Allan likes to say, is big important domino and all eyes are on whether this company can manage to raise the money that it needs to keep operating as it does. The Fed is also watching the stock market presumably. It's watching all of these other things that we're talking about in terms of what's going on in Wall Street.

And the banking sector, there have been hundreds of billions of dollars of losses in the banking sector. And when those banks are hurting, when they are hobbled, these are the, the people who provide the oxygen to the rest of the economy in the form of credit. It means it's harder for you to get a student loan. It's harder for you to get a car loan. It's harder for you to get a house loan. It's even harder even on your credit card, and all but small businesses, so it really, really matters what's happening on Wall Street right now and a lot of people in terms of the Fed.

Sometimes you can go into a Fed meeting, T.J., and you pretty much, you got an idea what the Fed is going to do. They don't like to surprise people, really. You know, they kind of telegraph after every meeting what kind of where they're headed. This time around there are a few folks who were saying, well, we just after all of this past weekend, we just don't know what the Fed will do.

HOLMES: Can this move provide some real, some practical some real world help? Or is this kind of just a moral pick-me-up if they did decide to cut interest rates?

ROMANS: Well, you know, that's a really interesting question. Because I've been asking a lot of people, what happens if the Fed cuts prices? Is that a little bit of relief? As Heidi Collins called it earlier, a little bit of sweetness in a sour market. But some are worried that a cut might signal that things are pretty bad. They've been cutting for some time and it's only two percent, that important key rate that they can control. So if they cut it, does that send a signal maybe that you know, things are really tough or if they cut it, does it show that they're really on top of things and they're going to head off any problems and that they can cut because they're not so concerned about inflation anymore because oil prices have come down? So you can, it depends on how the market's going read it, quite frankly. And that's why going into the meeting some people really just don't know what the Fed is going to do.

HOLMES: We really don't know a lot of stuff right about now. Christine Romans, we appreciate you. We'll be talking to you again. And as you were just mentioning, the markets there. The Fed keeping an eye on that roller coaster ride. You see there up just slightly today. We're going turn it over to Susan Lisovicz who's been watching these markets. We see there up a little bit there, fairly stagnant, if will but still is that how we started the day? Take us through the morning so far?

SUSAN LISOVICZ, CNN CORRESPONDENT: This is what volatility is all about, T.J. But you know, this is a day when you would expect some volatility given the fluidity of the situation. No. We had triple digit decline and we have a lot of uncertainty about the fate of AIG, which as Christine mentioned, Allan will mention, is a huge company. So it's not only, it's business not only near it, it's all around the world. I mean, it's got property insurance, life insurance, casualty insurance.

You know, it got some very valuable businesses and its shares are dropping 36 percent. But you know, the market is seeing some stability right about now. It actually rallied back to just about flat right now. Why is that? Well, we do get a Fed decision in a couple of hours. Markets typically get very cautious right before it, and today there's more uncertainty what the fed will do because of the sudden and traumatic changes that have happened in the marketplace over the last few days. The Fed fund futures rate, which is something that a lot of folks here watch, indicates that a Fed intervention in terms of a rate cut is likely. Whereas a week ago, unlikely. And that is because, a couple things.

One is the trauma that we still see in the banking system, but the other is that inflation is easing. Oil prices are down another $3 today. They dropped $4 yesterday. And trading at $92.50. Remember, a couple months ago, $147 a barrel. Big drop, and it's affecting consumer prices, because we got that report earlier today, as you mentioned.

HOLMES: Yes. Now finally we see a drop in oil prices amidst all this. All right. Thank you so much. Susan Lisovicz, we'll be talking to you plenty here in the next couple of hours. Although worried investors, listen up here, Gerri Willis looking at some of the top mutual funds and how they're faring in these troubled times. That is coming up at the bottom of the hour.

Meanwhile, President Bush in the hurricane zone today. He's taking a tour right now of Houston and Galveston. Later he will meet with storm victims. More than 30,000 evacuees still in shelters and more than two million in Texas alone are without power still and they're being told it could be weeks before the electricity is back on in several areas. Damage caused in the Houston area alone expected to run into the billions of dollars. More than a dozen Texas refinery, meanwhile, still days away from restarting, and gas, as you know, no matter where you are pretty much, certainly in areas of the southeast, it's pretty scarce right now. A lot of long lines at those gas stations that do have it, and in some places just don't have it.

Well, the remnants of Hurricane Ike blamed for flooding in the midwest as well. Rescuers had to get a bit creative. This is showing people being brought into safety in Morris, Illinois, on a tractor. Do what you got to do. People are being evacuated in Chicago as well. Seven Illinois counties have been declared disaster areas. Also we got a picture here from a Detroit neighborhood to show you. Inundated after a weekend of torrential rain. Jacqui Jeras, seems like I have been on the air with you for - for the past week straight, almost. Not quite, but still, we've been seeing the same pictures and the same just horrible weather situation. We have - are we OK? I don't like it when you have that map. Is something else churning out there?

JACQUI JERAS, CNN METEOROLOGIST: It's just showing you that everything's good, T.J.

HOLMES: Every thing's good.

JERAS: It's all good. In fact, you know in the National Hurricane Center everyday we'll issue a tropical outlook highlighting maybe some waves out there that have a potential for development and today is the first day when they don't even have a low probability on anything out there. So, yes. It's all good news. But you know, it's going to be a real long time before we're going to, you know - not be dealing with the bad news.

Unfortunately, we're continuing to get pictures in, and just is the damage, you know, each and every day we get into a new area and we see more damage and more destruction, and it never ceases to shock me. It's so amazing, and the power of water and what it does. It's got some very incredible before and after pictures now that we want to show you, and this is from Gilchrist, Texas, which is right down there on the Bolivar Peninsula. This will zoom in and show you from the street level all the buildings there. You can see the streets and the ocean's on your right. This is what it looks like now. They can just see that one house that remains standing. Some incredible, incredible pictures and just the power of what water does. It's not even the winds we're talking about there, T.J., one house.

HOLMES: Those pictures are amazing. Sorry for jumping to conclusions there. You were just trying to show me something positive on the map. Sorry but thank you for that.

JERAS: Sure.

HOLMES: We're going to turn to politics now. We're going to head now live to Tampa where John McCain is holding an event, a rally there. He is just now stepping up to the mike, and as we've been seeing, it's been pretty customary here that his wife often times introduces him. So there she is, Cindy McCain on the microphone. We'll go ahead and take a listen in and take a listen to him.

CINDY MCCAIN, WIFE OF SEN. JOHN MCCAIN: -- John McCain.

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Thank you. Thank you, Cindy. Thank you. Thank you all. Thank you. Thank you. Thank you. Thank you. Thank you.

ALL: U.S.A.! U.S.A.! U.S.A.!

MCCAIN: Thank you. Could I introduce to you the former mayor of Tampa and great governor of the state of Florida, Bob Martinez, a man (inaudible), my friend and comrade for many years. A great congressman, a great secretary and my friend, Jack Kemp who's here with us today. And thank you Mel Martinez for your great job in the United States Senate. Thank you all very much.

It's a pleasure to join you today, and if Governor Palin and I are elected in 49 days, we're - [cheers and applause] we're not going to waste a moment in changing the way Washington does business. And we're going to start with a need for reform is greatest. In short order we're going to put an end to the reckless conduct, corruption and unbridled greed that has caused a crisis on Wall Street. We're going to put a stop to it.

The working people of the state of Florida and this nation are the most innovative, the hardest working, the best skilled, most productive, most competitive in the world. And this - this foundation of our economy, the American worker, strong. But it's been put at great risk by the greed and mismanagement of Wall Street and Washington. I'll give you some straight talk, my friends.

The top - the top of our economy is broken. We've seen self- interest, greed, irresponsibility and corruption undermine the hard work of the American people. It's time to set things right, and I promise to get the job done as your president. You know, Americans put a lot of trust in the bankers and brokerage firms of Wall Street. They depend on the financial service sector to protect their savings, I.R.A.s, 401ks and pension accounts, but many leaders in finance have proven unworthy of that trust.

Government has a clear responsibility to act in defense of the public interests and that's exactly what I intend to do. We're going to make sure that Americans' accounts are protected. I pledge that the FDIC and the SBIC will have all the support they need to fully back the savings of the American people. Too many people on Wall Street have been recklessly wagering, instead of making the sound investments we expected of them, and when their companies collapse, seems only the CEOs escape the consequences.

Well, employee shareholders and other victims are left with nothing but trouble and debt, the people who helped cause the collapse make off with tens of millions in severance packages. Disgraceful. I've spoken out against the excessive corporate executives, and I can assure you that if I'm president, we're not going to tolerate that anymore. In my administration, we're going to hold people on Wall Street responsible, and we're going to enact and enforce reforms that make sure that these outrageous, and they are outrageous, never happen in the first place.

Too many people -- too many people on Wall Street have forgotten or disregarded the basic rules of sound finance. In an endless quest for easy money they dreamed up investment schemes that they themselves don't even understand. While their derivatives, credit default swaps and mortgage bank security, they try to make their own rules but they could only avoid the basic rules of economics for so long. Now as their schemes unravel and bankruptcy are in collapse, it's once again - once again - the public was left to bear the cost, and I promise you that on my watch, we are never going to let these kinds of abuses go uncorrected or untouched. Too many - too many practices on Wall Street have been kept hidden from public view to buy time.

HOLMES: All right. Been looking in there to John McCain there on the left side of your screen. He's at an event there in Tampa. Let's listen in now to Barack Obama who's at an event in Golden, Colorado.

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: ...another financial institution in the latest in a wave of crises that have generated enormous uncertainty about the future of our financial markets. This is serious. This is a major threat to our economy and its ability to create good paying jobs and help working Americans pay their bills, to help Americans save for their future, and make their mortgage payments.

Since this turmoil began over a year ago, the housing market has all but collapsed. Fannie Mae and Freddie Mac had to be effectively taken over by the government. Three of America's five largest investment banks failed or have been sold off in distress. Yesterday Wall Street suffered its worse losses since just after 9/11. We are in the most serious financial crisis in generations, yet Senator McCain stood up yesterday and said that the fundamentals of the economy are strong. That's what he said.

Now, a few hours later, his campaign sent him back out to clean up his remarks. And he tried to explain himself again this morning, by saying that what he meant to say was that the American workers are strong, but we know that Senator McCain meant what he said the first time, because he has said it over and over again throughout his campaign. No fewer than 16 times, according to one independent count.

Now, I raise this not because I fault Senator McCain for all the problems we're facing right now. But I do fault the economic philosophy that Senator McCain subscribes to, because - because the truth is, what Senator McCain said yesterday fits with the same economic philosophy that he's had for the last 26 years. It's the philosophy that says, we should give more and more to those with the most and hope that prosperity trickles down.

It's the philosophy that says even common sense regulations are unnecessary and unwise. It's a philosophy that let's Washington lobbyists shred consumer protections and distort our economy so it works for the special interests instead of working people. We've had this philosophy for eight years. They call it the ownership society. But what it really means is that you're on your own.

And we know the results. You feel it in your own lives. Jobs have disappeared. People's life savings have been put at risk. Millions of families face foreclosure and millions more have seen their home values plunge. The cost of everything from gas to grocery, to health care, has gone up. While the dream of a college education for our kids and a secure and dignified retirement for our seniors feels like it's slowly slipping away. These are the struggles that Americans are facing. This is the pain that has now trickled up.

So let's be clear. What we've seen in the last few days is nothing less than the final verdict on an economic philosophy that has completely failed, and I am running for president of the United States, because the dream of the American people must not be endangered anymore. It is time - it is time to put an end to the broken system in Washington that is breaking the American economy. It's time for change that makes real difference in your lives. It's time for a government that is fighting for you, not ignoring you or fighting against you. We need leadership like the governor in Colorado is providing to build - a new energy economy. We need leadership like the mayor's providing, investing in infrastructure and education. That's the kind of leadership we need in Washington and in the White House. That's what I intend to provide. We need - we need common sense, practical leadership and economic stewardship that focuses on the American people.

And if you want to understand the difference between how Senator McCain and I would govern as president, you can start by taking a look at how we've responded to this crisis, because Senator McCain's approach was the same as the Bush administration's. Support ideological policies that made the crisis more likely. Do nothing, as the crisis hits, and then scramble as the whole thing unravels.

Now, my approach has been to prevent, to try to prevent this turmoil from occurring in the first place. In February of 2006 I introduced legislation to stop mortgage transactions that promoted fraud, risk or abuse. A year later -- a year later, before the crisis hit, I warned Secretary Paulson at the Treasury and Chairman Bernanke of the Fed about the risks of mounting foreclosures, and urged them to bring together all the stake holds to find solutions to the subprime mortgage meltdown.

Senator McCain did nothing. Last - last September I stood up at Nasdaq and said it's time to realize that we are in this together, that there is no dividing line between Wall Street and Main Street, and warned of a growing loss of trust in our capital markets. Months later, Senator McCain told the newspaper that he would love to give them a solution to the mortgage crisis, but, and I quote, "I don't know one."

In January, I outlined a plan to help revive our faltering economy, which formed the basis for a bipartisan stimulus package that passed in the Congress. Senator McCain used the crisis as an excuse to push a so-called stimulus plan that offered another huge and permanent corporate tax cut, including $4 billion for the big oil companies, but no immediate help for workers.

This March in the wake of the Bear Stearns bailout I called for a new 21st century regulatory framework to restore accountability, transparency and trust in our financial markets. Just at few weeks earlier, Senator McCain made it clear where he stands. "I'm always for less regulation." And referred to himself as, "fundamentally a deregulator." Now, this is what happens when you confuse the free market with a free license to let special interests take whatever they get. However they can get it.

This is what happens when you see seven years of incomes falling for the average worker while Wall Street is booming and declare as Senator McCain did earlier this year that we've made great economic progress under George Bush. This is how can you reach the conclusion as late as yesterday that the fundamentals of the economy are strong. Well, we have a different way of measuring the fundamentals of our economy. We know that the fundamental that we use to measure economic strength or whether we're living up to that fundamental promise that has made this country great. That America is a place where can you make it if you try.

Americans have always pursued our dreams within a free market has been the engine of our progress. It's a market that's created a prosperity that is the envy of the world and rewarded the innovators and risk takers who made America a beacon of science and technology and discovery. But the American economy has worked in large part because we have guided the markets invisible hand with a higher principle. That America prospers when all Americans can prosper. That's what we believe.

That's why we have put in place rules for the road to make competition fair and honest and open, and too often over the last quarter century we have lost this sense of shared prosperity. This has not happened by accident. It's because of decisions made in board rooms, on trading floors and in Washington. We failed to guard against practices that all too often rewarded financial manipulation instead of productivity and sound business practices.

We let the special interests put their thumbs on the economic scales. The result has been a distorted market that creates bubbles instead of steady, sustainable growth. A market that favors Wall Street over Main Street but ends up hurting both. Let me be clear. The American economy does not stand still and neither should the rules that govern it.

The evolution - the evolution of new financial instruments often warrants regulatory reform to foster competition and lower prices, or to replace outdated and old institutions can not adequately oversee new practices. Old rules may not fit the roads where our economy is leading, but instead of sensible reform that rewarded success and freed the creative forces of the market, too often we've refused an epic of brief, quarter cutting and inside dealing that threatens the long term stability of our economic system.

Now - remember, we've seen this before. It happened in the 1980s when we loosened restrictions on savings and loans and appointed regulators who ignored even these weaker rules. Too many S&L's took advantage of the latch rules set by Washington, to gamble they could make big money in speculative real estate. Confident of their clout in Washington they made hundreds of billions in bad loans, knowing that if they lost money, the government will bail them out, and they were right.

The gamble did not pay off. Our economy went into recession and the taxpayers ended up footing the bill. Does that sound familiar? It happened again during this decade, in part because of how we deregulated the financial services sector. After we repealed out motored rules instead of updating them we were left overseeing 21st century innovation with 20th century regulations.

When subprime mortgage lending took a reckless turn a patchwork of regulators systematically and deliberately eliminated the regulations protecting the American people and they failed to raise warning flags that could have protected investors and pensions and American workers'(inaudible). This was not the invisible hand of the market as work. These cycles of bubbles and bust were symptoms of an ideology that my opponent is running to continue.

John McCain has spent decades in Washington supporting financial institutions instead of their customers. In fact, one of the biggest proponents of deregulation in the financial sector is Phil Gramm. This is the man who helped right John McCain's economic plan. The same man who said that we're going through a mental recession. The same man who called the United States of America a nation of whiners.

So it's hard to understand how Senator McCain is going to get us out of this crisis by doing the same things with the same old players. Make no mistake, my opponent is running for four more years of policies that will throw the economy further out of balance. His outrage at Wall Street would be more convincing if he wasn't offering them more tax cuts. His call for fiscal responsibility would be believable if he wasn't for more tax cuts for the wealthiest Americans and more of a trillion dollar war in Iraq paid for with deficit spending and borrowing from foreign creditors like China.

HOLMES: All right. Well, he got the word, and the complaint out for people on the campaign trail that he should get tougher. Well, maybe game on here for Barack Obama now. They're at an event in Golden, Colorado. Certainly, one of the battleground state speaking to a group of miners there, and going after, John McCain and going after him hard on the economy. The economy, right now certainly "Issue number one," with all we've seen in the financial markets over the past couple of days, over the weekend with the turmoil on Wall Street.

So the economy is back on the forefront. And there it is, we're looking at the big board here. The Dow again, investors kind of calmed down a bit today. Up, like, what you see there, about 42 points. So still all eyes on the markets today. A lot more to talk about in that. We will certainly get into it and also you did see John McCain as well. We took some of his live event, that's happening out in Tampa right now.

Well, stay here. We're going to be talking to our Gerri Willis about a mutual attraction if will you. Looks at some of the top mutual funds and how they're doing in these troubled times. Stay here.

(COMMERCIAL BREAK)

HOLMES: All right. Let's take a look again. Anything with a plus next to it is all good. Plus one point, we'll take at this point. But the markets, all eyes on them right now. Started a little low, but, still, have bounced back a bit. Investor, like we've been saying, maybe calmed down just a tad. But we're keeping an eye on the market, which have been in turmoil over the past couple of days.

Well, the overseas markets not doing to well either. Took another hit today. Investors worried about Wall Street's financial crisis are now concerned that the worst may be over -- may not be over, actually. That would be a concern.

Stocks tumbled across Europe. Earlier, Australia plummeted as well. As well as the Asian markets. This was the first reaction to the meltdown on Wall Street. For markets in Tokyo and Hong Kong, because have been closed for a holiday on Monday.

Well, Lehman Brothers has been the talk here. It's toppled. Now insurance giant AIG is just trying to hold on. We're watching Wall Street. Also watching your wallet. Senior correspondent Allan Chernoff live from New York with the latest on both companies.

You were out there at Lehman Brothers just yesterday. Hopefully we won't have to see you out in front of AIG anytime soon, because they had the same fate.

ALLAN CHERNOFF, CNN CORRESPONDENT: Well, it is a real tough credit crunch for both companies. And I should point out that negotiations are continuing also for both companies. Lehman Brothers, even though the parent company declared bankruptcy, they are still trying to sell off divisions of Lehman Brothers. They should be able to achieve that. So a lot of people over there will still be able to hold on to their jobs.

AIG, over there, they are desperately, desperately, trying to raise cash. They are facing a major cash crunch. And we understand that federal officials are putting lots of pressure on major banking institutions to get together, lend money to AIG so it can get through this cash crunch.

We should keep in mind, almost everybody has some stake in this because all the major financial institutions, they're all intertwined. AIG has insurance -- represents insurance for so many of these firms that made investments in risky mortgages.

Now we should also talk briefly about what it means to policyholders, like you and me. AIG has lots of assets. The word is that life insurance, auto insurance policies, they should be just fine.

HOLMES: Well, that's good to know and good to hear. You talk about the money there that they're trying to get together and trying to save this company. Is there a confidence out there? What have you heard, at least? How much is needed, for one thing, to get them through this? And are we sure that's all they need? A one-time thing? We're going to get them through this and then they can start making their way back or maybe it's a thing we have to keep dumping money into this company?

CHERNOFF: Right. Well, T.J., you hit on the key word -- confidence, right? This is all about confidence. There was a loss of confidence in the stock. It had plummeted. It's been trading recently at $2 and change, down 60 percent yesterday. Wildly fluctuating today. It's getting hammered there.

So confidence has to come back. For confidence to come back, they need at least short-term loans. And they reportedly need at least $15 billion as a result of the credit downgrades yesterday. But it's more like $70 billion or $75 billion that they need to carry them through. Those are big bucks. It's not that it can't be done.

HOLMES: Well, it sure sounds improbable. Some of those numbers, just hard for people to fathom. We can't even get our heads around that $75 billion, just trying to get to a loan for a company.

Allan, we appreciate you.

We want to turn now to talk about mutual funds, which are long considered among the safer investments, especially in some volatile times. So let's get a reality check here, see how those mutual funds are faring. Some of the top ones. We bring in personal finance editor Gerri Willis in New York.

So, please, give us a reality check right about now. We sure need one.

GERRI WILLIS, CNN CORRESPONDENT: Yes, no kidding. Hey there, T.J., good to see you.

You know, it's hard to get away from this financial stock meltdown. I want you to check out some of the biggest mutual funds out there. You may hold one of these. American Funds Growth of America, Pimco Total Return, Vanguard Total Return Stock Market Index, the Vanguard 500 Index. Everybody owns that. America Funds Euro Pacific.

These are the most widely held funds out there. And guess what? If you own them, you are probably feeling the pain this week. You know, you wonder, what does the turmoil in the financial markets have to do with your 401(k)?

Well, in terms of financials, five of the 10 largest mutual funds own Bank of America and Citigroup. And four out of 10 owns AIG. So they are getting hit big time by this meltdown this week.

If the top 10 largest mutual funds were mushed together, T.J., if you took them in a pot and stirred them all together, 14 percent of that portfolio would be, guess what, financial services. That's banks, thrifts, S&Ls, insurers, you name it.

T.J.

HOLMES: Can you put it in a different perspective for us in terms of dollar maybe even. We're talking about -- saying that the big hits they're taking. How big are the hits? How big are the losses we're talking about here?

WILLIS: Check this out, T.J. This is amazing. American Funds Euro Pacific, down almost 22 percent. American Funds Capital World down almost 19 percent. Fidelity Contrafund, a very popular fund, down 16 percent. American Funds Growth of America and, remember, these are all really big funds, lots of Americans invested in them -- that one down 14 percent. The old Vanguard 500 Index down almost 14 percent. You know, the Dow's been down all year. And what's going on right now, just on top of that, of course, now's not the time to start selling all your mutual funds. At the end of the day, if you're confidence that you picked a good fund to begin with, it should battle its way back.

The real key here, think diversification. You've got to make sure you've got all of your money spread around. One way to find out, if all of your mutual funds own the same stocks, check out morningstar.com's x-ray tool. You just plug in the ticker for your mutual fund there and you can find out what it holds. Sometimes you find out that you have very different funds, they all own the same stocks. So check that out. Try to diversify. And we'll bring you all the news of this market day as it continues.

T.J.

HOLMES: All right. Gerri Willis, telling us that we're losing money as we speak in a lot of ways. No, but some good advice people need to know. And people need to, like you said, diversify.

Gerri, we appreciate you. We will be talking to you again plenty on all these money matters. Some practical advice there from Gerri Willis. We'll have some more practical advice. I've got a gentlemen coming on, Tim Hansen (ph). Going to be with us in about an hour. We'll be talking to him in a little while.

Here is the other story we're following (ph) today. That's President Bush. Just saw him there giving a live wave to the people in Houston there. It looks like he's hopping back aboard Air Force One and going to be heading possibly back to D.C.

He got to the area there today to take a visit, to lend his support, met with some victims, also got an update about the recovery on Hurricane Ike. He's been taking an aerial tour of that area. Houston and Galveston, of course, devastated. A lot of those people still without power, will be without power, we're told, maybe up to another two weeks.

The president, again, this is an earlier picture we're showing you of the president there. But he did get a briefing. We heard from him a little earlier. Lending, certainly, his support to the people. Letting them know the federal government will be there as well.

Our Jacqui Jeras, I'll bring her in on this weather situation. We've been talking about Ike a whole lot and rightly so. Now we're talking about the cleanup and recovery. But there was a lot of rain and a lot of weather. A lot of stuff moving through. And the pictures we're seeing now have just been remarkable.

JACQUI JERAS, CNN METEOROLOGIST: Right. You know, yes, that complicating things certainly. You know, you had landfall, you had the surge, you had the winds and you had all the damage. But then on top of that, on Sunday, we had a lot of showers and thunderstorms, which has kind of aggravated this situation and now President Bush has been up there flying and taking a look and assessing the damage. And take a look at this. You know, these are the kind of pictures that he's been seeing. And we got these images from the USGS. And these are the before photos. And there can you see all the houses. And what I want to you pay attention to is this red arrow here and also this water tower up here. Now I'm going to fade and show you what things look like as we speak.

Yes, not much left. We've got one house here. Another one down here. And there you can see the water tower. So the water has just watched away and destroyed all of those houses.

Here's another look that's also from the Crystal Beach area. A little bit more of a populated area. Watch the red arrow again. Take a look at that. Everything here wiped away. And then you can see just a few of those more well-built houses which are still standing.

It's been a very active season so far. In fact, so far in 2008, we've seen 10 named storms, five hurricanes and three major hurricanes. And you can see, we're just below the average for the entire year. We're halfway through the season. That's it, T.J. So we could certainly see a lot more activity in the months to come. Hurricane season ends November 30th. But the good news is, we don't expect anything, at least not for the next couple of days.

HOLMES: Well, that is good news. Those pictures are amazing. And again, those houses we saw, they're gone now?

JERAS: Yes, absolutely gone.

HOLMES: They're gone.

JERAS: There's nothing but debris in there.

HOLMES: Wow. All right. Tough time for those folks down there.

Jacqui, we appreciate you.

And many national and local organizations stepping in to help people affected by this hurricane. If you need their services or would like to get involved, you can visit our Impact Your World page. You can find out a whole lot more about these organizations. Find out how you can help and get help. Again, that's cnn.com/impact.

Drilling, all right, been a hot topic this political season. Well, to drill or not to drill? Could that long awaited vote on whether to allow more offshore drilling finally happen on The Hill?

(COMMERCIAL BREAK)

HOLMES: A witness in the O.J. Simpson robbery trial, who became light-head and dizzy on the stand yesterday, may be questioned again today. This is Bruce Fromong we're talking about. He fell ill while Simpson's attorneys were cross-examining him and the trial was suspended for the day. Simpson is accused of armed robbery, kidnapping and assault with a deadly weapon. Prosecutors say he busted into a Los Vegas hotel room to steal memorabilia. That memorabilia, he says, belonged to him. Now the witnesses told the jury that he heard somebody in the room say, "put the gun down." One of the key questions in the trial is whether Simpson knew weapons were in that room.

Well, 25 people killed in that horrible commuter train crash in California and a cell phone may have play a role in the crash. Today, California's top rail safety regulator said he wants to ban train operators from using cell phones. A federal investigation is looking into whether the engineer was text messaging with two teen (ph) train bus just seconds before that crash. The commuter train rolled past stop signals and into the path of a freight train.

Well, it has been a popular question. To drill or not to drill? And that is the question again today as Congress opens debate over lifting the federal ban on offshore drilling. CNN's Brianna Keilar live on Capitol Hill with more on this political arm wrestling.

Brianna, hope you're not getting in the middle of all this arm wrestling. That can get ugly.

BRIANNA KEILAR, CNN CORRESPONDENT: Of course I'm not, T.J.

So what we have today is, there is debate going on over an energy -- over energy legislation being proposed in the House. And this is a Democratic proposed energy legislation by House Speaker Nancy Pelosi and it includes offshore oil drilling in it. This is something the speaker has been vehemently opposed to but facing a lot of pressure from Republicans over the past weeks and also increasing public opinion that favors offshore oil drilling. This is an election year and so Democrats have really been painted into a corner here, having to propose offshore oil drilling in this energy legislation. They're pointing the finger, though, at Republicans and at the Bush administration's energy policy for this situation with energy. Take a listen.

(BEGIN VIDEO CLIP)

REP. ANTHONY WEINER, (D) NEW YORK: When they controlled Congress, passed their own energy bill, signed into law by the president, we got into this mess. This is the president whose idea of an energy policy is holding hands with the crown prince of Saudi Arabia, embracing him with a big smooch.

(END VIDEO CLIP)

KEILAR: So let's talk about this bill being proposed by House Speaker Nancy Pelosi on offshore oil drilling. What it proposes is to open up offshore drilling on the Atlantic and Pacific coasts at 100 miles or more offshore. At 50 miles or more offshore, if governors of state and state legislatures give the go ahead for that. It would maintain a ban on offshore oil drilling that exists off of Florida's Gulf Coast.

And some serious Republican objections to this. The first one being Republicans say, look, 100 or 50 miles offshore isn't enough. We need to take it all the way to even three miles offshore so that we can get as much oil as we can. That really it's kind of a waste of time to be at 50 or 100 or more miles offshore drilling.

The other objection coming from the fact that Pelosi's plan would take new royalties that oil companies would pay to drill in these new areas and put them towards tax breaks for renewable energy sources. Say companies that are developing solar and wind. That kind of thing. And Republicans say some of those royalties should go to states where there aren't going to be any incentives for states to allow oil drilling off of their shores. Let's listen now to Congressman Jim Jordan, a Republican from Ohio.

(BEGIN VIDEO CLIP)

REP. JIM JORDAN, (R) OHIO: No real offshore drilling. No drilling in ANWR. No new nuclear power. No lawsuit abuse reform. No revenue sharing with the states. But you know what's in the plan? Tax increases. Think about that.

(END VIDEO CLIP)

KEILAR: And that is another big objection from Republicans, specifically Republican leadership in the Senate, on the other side of the Capitol. They are objecting to any tax increases on oil companies or natural gas companies preparing, perhaps, to even block legislation because of that. But here on the House side, Democratic leaders say they do expect to pass this bill tonight.

T.J.

HOLMES: Wow. All right. You aren't kidding when we were talking about arm wrestling.

Brianna Keilar, there on Capitol Hill for us. We shall see. Thank you so much.

Well, turning back to Biden and Palin. They are on message these days. You will hear from both vice presidential candidates on the economy. It is, of course, issue number one.

(COMMERCIAL BREAK)

HOLMES: Well, just because they're number two on the ticket doesn't mean they can't talk about issue number one, which is, of course, the economy. Palin and Biden talk about it. Well, first, here, we'll let you hear from the Democratic vice presidential nominee, Joe Biden. He's attacking his Republican opponent as out of touch. Here he is on CNN's "American Morning" this morning.

(BEGIN VIDEO CLIP)

SEN. JOE BIDEN, (D) VICE PRESIDENTIAL CANDIDATE: This is the same guy who wants to continue to spend $10 billion a month on the war on Iraq where the Iraqis have $80 billion stashed away from oil prices. This is the same fellow who's been a part of an administration view he shares, that's going to hand the next president a $400 billion deficit for that year. This is the same guy who watched and presided over -- not presided over but supported Bush, says the economy's strong, and we lost 604,000 jobs this year?

(END VIDEO CLIP)

HOLMES: Well, the Republican vice presidential hopeful, Sarah Palin, blaming the credit crisis on the powerful in Washington and the greedy on Wall Street.

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN, (R) VICE PRESIDENTIAL CANDIDATE: Our regulatory system is outdated and it needs a complete overhaul. Washington has ignored this. Washington has been asleep at the switch and ineffective. And management on Wall Street has not run these institutions responsibly and has put companies and markets at risk.

(END VIDEO CLIP)

HOLMES: And there you have it from the man and woman who would like to be vice president, two viewing of a struggling economy from them both.

Well, we'll stick with Sarah Palin here for a second. There's a parade of Palins out there, impersonators all over the Internet with their own version of the Alaska governor. Let's figure -- OK, I just wanted to listen to this one for a second. Sorry. We'll find out which Palin wins your vote. Stay here.

(COMMERCIAL BREAK)

HOLMES: All right. You know the old saying, imitation is the sincerest form of flattery. Well, we don't know how Sarah Palin feels about that. Let's check in with all the countless impersonators now from who else but CNN's Jeanne Moos.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT, (voice over): Try to pick out the real Sarah Palin amongst the impostors.

UNIDENTIFIED FEMALE: I'm Governor Sarah Palin.

UNIDENTIFIED FEMALE: Vice president of the world!

UNIDENTIFIED FEMALE: We hope you'll mistake me for Hillary.

UNIDENTIFIED MALE: (INAUDIBLE).

GOV. SARAH PALIN, (R) VICE PRESIDENTIAL CANDIDATE: Thanks, but no thanks.

MOOS: A Palin aide say the real Sarah found the Tina Fey Sarah funny.

AMY POEHLER, "SATURDAY NIGHT LIVE": I don't agree with the Bush doctrine. TINA FEY, SATURDAY NIGHT LIVE: And I don't know what that is. MOOS: The campaign said Sarah once dressed up as Tina Fey for Halloween. But no one needs a holiday to dress up as Palin these days.

UNIDENTIFIED MALE: Susan.

UNIDENTIFIED FEMALE: Sarah.

UNIDENTIFIED MALE: Paulin (ph).

UNIDENTIFIED FEMALE: Palin.

UNIDENTIFIED MALE: Do you want to be my VP?

UNIDENTIFIED FEMALE: Yes, I'll be your VP.

MOOS: There are amateurs.

UNIDENTIFIED FEMALE: I'm Sarah Palin.

MOOS: And professionals like actress Gina Gershon.

GINA GERSHON, ACTRESS: Like so many of you, I went to five colleges in six years to get my journalism degree. Barack Obama only went to one.

MOOS: There's gangster rap.

UNIDENTIFIED FEMALE: I'm a tough cookie, no one messes with me.

MOOS: There's even a guy in drag.

UNIDENTIFIED MALE: No, I'm not running with the young black one, I'm running with the old one, Don McCain. We've met twice.

MOOS: They mock the interview Governor Palin did on ABC.

UNIDENTIFIED FEMALE: Ahmadinejad is the president of Iran.

MOOS: Do you have a cheat sheet on your hand?

UNIDENTIFIED FEMALE: This -- this, Charlie, is the hand that's shaken John McCain's hand.

MOOS: Even mix in some of the real interview.

CHARLES GIBSON, ABC NEWS: Seventy percent of this country supports of ban on semi-automatic assault weapons. Do you?

MOOS: A New York comedian, Sarah Benencosa (ph), has done video blog after video blog pretending to be Sarah Palin.

SARAH BENENCOSA, COMEDIAN: I just want to shoot a moose. I would be so much less nervous if I could just kill something. Not a baby.

MOOS: Is she easy to do?

BENENCOSA: Yes.

MOOS: Why?

BENENCOSA: I think it's because she's so distinctive.

I am a mother of ...

UNIDENTIFIED FEMALE: It's five.

BENENCOSA: Five. I'm a mother of five.

She's like an interesting flavor of ice cream. Like ham ice cream.

MOOS: Someone's even updated the old leave Britney alone rant.

UNIDENTIFIED MALE: Leave Sarah Palin alone.

MOOS: Don't hold your breath.

UNIDENTIFIED FEMALE: I'm Sarah Palin, and I approve this message.

MOOS: At least if you're going to be impersonated, it's nice to be decked out in red, white and blue.

GINA GERSHON, ACTRESS: I've got some hunting to do.

MOOS: Jeanne Moos, CNN.

UNIDENTIFIED MALE: Sarah Palin. If she shoots you in the face, it's because she was aiming for it.

(END VIDEOTAPE)

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