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AMERICAN MORNING

Wall Street Crisis: Asian Markets Plummet; Candidates Talk About Issue Number One; How to Protect Your Money; McCain on Money: How He Would Help the Economy; John McCain Interview; Joe Biden Interview

Aired September 16, 2008 - 07:00   ET

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


JOHN ROBERTS, CNN ANCHOR: The new fee will take effect on tickets purchased today for any flight that occurs after November the 10th, just in time, you got it, for the busy holiday travel season.
KIRAN CHETRY, CNN ANCHOR: Pack light, one sensible pair of black pants. Wear them all weekend.

Well, we're watching four very big stories this morning that will no doubt hit your wallet. Dow futures down, around 50 points after stocks had the worst day since the 9/11 attacks.

Meantime, more major U.S. firms are on the endangered list. Insurance giant AIG has seen its credit rating downgraded significantly by Moody's and Standard & Poor's. It has 100,000 employees. An AIG collapse could make yesterday's losses seem light.

Also, S&P downgraded Washington Mutual's credit rating to junk, a serious warning to investors. The company shares' loss close to a third of their already low value yesterday.

Then Hewlett-Packard saying it will slash 25,000 jobs in the next three years. Half of those layoffs will happen in the United States.

And we're covering it all for you this morning. We have Ali Velshi live from the New York Stock Exchange. Kyung Lah is standing by for us in Tokyo. Overseas markets also following the cues of our markets. And Christine Romans taking a look at the candidates who will inherit the economic mess.

First though, to Ali, at the New York Stock exchange.

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Where we are not fully staffed on the floor yet, Kiran, but folks are coming into news like this. I want to show you.

This is the "New York Post" headline. Perhaps a little overly dramatic, "Dow crashes 504 points" but that is the biggest drop that we have seen since the day that the trading started after the attacks of 9/11. So September 17th, 2001, was the only day in recent history where we've seen a bigger drop than we've seen right now.

The Dow was down 4.4 percent yesterday, Nasdaq down 3.6 percent, and the S&P down 4.7 percent. That's relevant because many of you invest in stocks, mutual funds, IRAs, things like that, that emulate the major market. So you will have seen a similar loss and that's because the financial service industry is such a major part of the economy.

Think back to 2000, when the Internet was that proportion of the economy. If you were heavily invested there, you lost big. Now the problem is, what do you do about that right now?

Well, it would help to know what else is going on. You pointed out some of those things. Washington Mutual stock down again in pre- market trading after being downgraded to junk. Oil is down. That's helping the market a little bit, and we're all waiting to see what the Fed does this afternoon at 2:15.

And I must tell you, one week ago, there was no speculation that the Fed would do absolutely anything at all. But now, there's some pressure on them to act or at least say something. Might we have a rate cut? Some people are talking about it this afternoon.

The other thing that we're all looking at right now is AIG. The country's largest insurer needs to come up with $75 billion to save it from the fate that Lehman Brothers has faced, but it had three downgrades by the three major credit agencies last night. That makes it harder and more expensive for that company to raise money. And there are people talking about a possible bankruptcy at AIG.

I should tell you, John, if AIG were to face the same fate as Lehman brothers, it would make Lehman Brothers look very small in comparison -- John.

ROBERTS: It certainly wouldn't be good if that happened, Ali.

VELSHI: No, not at all.

ROBERTS: All right. Thanks very much. We'll keep checking back with you.

The meltdown on Wall Street being felt around the globe this morning. Stocks on Asia tumbling. Tokyo's Nikkei falling 605 points, and the market in Hong Kong lost more than 1,000 points.

Our Kyung Lah is live for us in Tokyo this morning. And, Kyung, I guess one of the reasons why we're seeing such big drops in the Hang Seng and the Nikkei is because they were closed yesterday.

KYUNG LAH, CNN TOKYO CORRESPONDENT: They were closed, and they were certainly playing catchup, and it was a brutal day of catchup in Asia. No matter where you looked, whether it be South Korea, Hong Kong or here in Japan, which is the world's second largest economy, all were down anywhere from five to six percent. It was a reaction to what was happening that one-two punch on Wall Street.

To quote an investor here, it was "a very, very bad day." But here is the bigger concern. That bigger concern being that this fallout isn't just today that it may extend for some time.

Japan and both China are export-driven companies -- export-driven economies. Think about the number of things you buy that say "made in China" or Japanese companies like Toyota, Nissan, Nintendo, Sony, just to name a few. Well, they all rely on, both Japan and China, the appetite of the U.S. consumer. If the pain from Wall Street continues to affect Main Street, well, then, U.S. consumers will stop buying and have fewer access to loans and that, according to investors and economists here across Asia, that is a much bigger blow.

They say, yes, today, they had the wind knocked out of them. But the bigger concern is that more pain is coming, and it could be far worse and much longer -- John.

ROBERTS: So, Kyung, the drops that we're seeing today in Hong Kong and there in Tokyo, about five, six percent, which would be pretty much in line with what happened here in New York yesterday, huh?

LAH: Very much bearing what happened in New York. There is this phrase that when U.S. gets a cold, the markets here in Asia, they get very, very sick. So the concern is that whatever does happen to the U.S. certainly will be reflected back here in Asia?

ROBERTS: Yes. You know, some people who are wondering, you know, how -- just what a force in the global economy the United States still is. All you've got to do is take a look at the markets and that's an indication.

Kyung Lah for us in Tokyo. Kyung, thanks very much.

CHETRY: Well, a real world crisis has the candidates focusing on issue number one yet again. Business correspondent Christine Romans is taking a look at their economic policies and promises.

Hey, Christine.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Hi, there. You can imagine there are a lot of promises on the stump yesterday. Kiran, Obama blames eight years of Republican policies. McCain says if he was president, this would never happen again.

(BEGIN VIDEOTAPE)

ROMANS (voice-over): One of these teams inherits a Wall Street crisis. Each candidate at the top of the ticket says he's the man to fix it.

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: We've had policies that had shredded consumer protection, that have loosened oversight and regulation, and encouraged outside bonuses to CEOs while ignoring middle class Americans. The result is the most serious financial crisis since the Great Depression.

ROMANS: Barack Obama pushed his outsider credentials merging his usual criticism of Washington with Wall Street. John McCain praised the Fed and Treasury for not bailing out Lehman Brothers.

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: The McCain/Palin administration will replace the outdated, patchwork quilt of regulatory oversight and bring transparency and accountability to Wall Street. We will bring transparency and accountability, and we will reform the regulatory bodies of government.

ROMANS: No matter how detailed their dueling economic plans, the next president will have to do some old-fashioned firefighting first.

Daniel Clifton analyzes Washington for Wall Street.

DANIEL CLIFTON, STRATEGAS RESEARCH PARTNERS: We believe that this is a defining moment in the campaign. This is a crisis, and in crisis, leadership rises to the top. So both candidates have the challenge of being able to one, be a leader in time of crisis but, two, fashion a response that's going to make the American voter feel comfortable.

ROMANS: And at core, the difference in the candidates' approach to fixing the problem. How much government involvement is enough? How much is too much? A non-partisan think tank breaks down the choices this way.

ROBERT KUTTNER, DEMOS: There are two parts to how you fix this financial crisis. One is that you recapitalize a lot of these financial institutions, pump money into them. The other is that you regulate it so it doesn't happen all over again.

(END VIDEOTAPE)

ROMANS: Both candidates criticized regulators and urged reform. McCain adding that he thinks the fundamentals of the economy, including worker productivity are fine, immediately drawing fire from Democrats who say it's simply another example of McCain being out of touch. But Henry Paulson, the treasury secretary, also said the fundamentals of the economy are fine, that the banking system is fine, that there's a lot -- there's a lot of pain right now in the short term here, but that longer term, you know, don't count out the American economy.

CHETRY: And the other thing you heard a lot on the campaign trail yesterday was the talk of regulation.

ROMANS: Right.

CHETRY: There needs to be more regulation. And I was asking you in the break, is that the answer?

ROMANS: Well, smart regulation I think is the answer. And one thing is that the regulators, you know, we heard Jeffrey Sachs say this, we heard a lot of people say this over the past few days, have failed. We have watchdogs. We've all kinds of federal agencies that are supposed to watch. The Fed is responsible for consumer protection.

If you go back to the very core, if the consumer had been protected and you didn't have some of these crazy loans that the banks were buying and selling, and investment banks were packaging and trading all over the world and sticking in different portfolios, if you go back to that initial part of consumer protection, maybe we wouldn't have had this.

CHETRY: Very interesting take and we're going to talk to both John McCain and...

ROMANS: Oh, great.

CHETRY: ... vice president pick Joe Biden a little bit later. Thanks a lot, Christine.

ROMANS: Sure.

CHETRY: And Republican presidential nominee, if you're sticking around, just 10 minutes, Senator John McCain is going to be joining us at 7:20 this morning. It's about 10 minutes from now. Immediately following Senator McCain, we're going to speak to the vice presidential -- Democratic vice presidential nominee, Senator Joe Biden, at 7:30 Eastern time.

ROBERTS: Now here's what we're working on for you this morning. In addition to that, Hurricane Ike is still causing problems. Remnants of the storm soaking the Midwest.

CHETRY: Also, Wall Street, a crisis looms and it becomes Main Street's problem, whether your jobs and your savings are safe.

You're watching the "Most News in the Morning."

(COMMERCIAL BREAK)

ROBERTS: Twelve minutes after the hour. Welcome back to the "Most News in the Morning."

The remnants of Hurricane Ike creating chaos in the Midwest this morning. Record-setting rain in Illinois causing major flooding.

And here's something to think about. A Chicago -- a city official in Chicago says they were hit with more than 100 billion gallons of rain over three days.

And President Bush expected to leave for Texas any minute to survey damage from Ike. Rescuers on Monday finding 60 survivors on an isolated barrier island. Teams today will keep searching the Bolivar Peninsula looking for more survivors.

Rob Marciano is in the weather center down there in Atlanta tracking the weather today. And, Rob, I'm hopeful we don't have much on the radar screen, but what do we have?

ROB MARCIANO, AMS METEOROLOGIST: No, we do (ph). I'd say it's kind of -- or we don't -- it's kind of a quiet situation just setting up at least for now. You mentioned that flooding in Illinois and parts of the Midwest. That's not much of it from Ike actually, a little bit from Ike but a lot of it was from another tropical system that came off the pacific, Tropical Storm Lowell.

So, here we go. Let's tap into some of these river gauges. In Northern Illinois, the Illinois River here, the red is not good, the pink is record flooding. Some of these rivers are just about to peak if they already haven't done that. At LaSalle the Illinois River at about 33 feet. It's supposed to peak at 33.5 later tomorrow and then begin a slow retreat. But right now, it's at record flooding there and that again, from mostly Tropical Storm Lowell.

We are quiet out to the West Coast. For the most part, it will be warm out there and then some rain across parts of the Carolinas.

Today's temperatures will be on the cool side. Chicago, 71, 71 degrees in New York, 78 degrees in Atlanta. So that cold front that pushed and picked up Ike is giving everybody some pretty tranquil weather.

Pretty tranquil across the Atlantic at least for now. We'll certainly keep an eye on it. We are in the busy time of year for this.

Speaking of busy, '08 has been extraordinarily busy with a number of 10. Remember, John, 10 right now. We average 10 named storms for the entire year, so likely we'll surpass that with no problem.

We'll talk more about this year's hurricane season, where they all track and where they hit. We set a record with this last one, John. We'll talk more about that in about 30 minutes.

ROBERTS: All right, Rob. And here's something I'm wondering about today. Since we don't have a whole lot of weather in the United States, I was reading today that the problem -- the real problems with melting of the Arctic ice at the northeast and the northwest passages are open this year. Maybe we can look into that this morning, what do you think?

MARCIANO: Maybe we can take a ride through it.

ROBERTS: All right.

MARCIANO: That wouldn't be bad.

ROBERTS: All right. Thanks, Rob.

MARCIANO: Thanks, John.

CHETRY: Crisis on Wall Street, a look at what the financial turmoil means for your money and your investment.

You're watching the "Most News in the Morning."

(COMMERCIAL BREAK)

BEGIN VIDEO CLIP, "SATURDAY NIGHT LIVE")

TINA FEY, COMEDIENNE, PLAYING GOV. SARAH PALIN: You know, Hillary and I don't agree on everything.

AMY POEHLER, COMEDIENNE, PLAYING HILLARY CLINTON: Anything.

I believe that diplomacy should be the cornerstone of any foreign policy.

FEY: And I can see Russia from my house.

(END VIDEO CLIP)

ROBERTS: Top videos right now at CNN.com. Still number one, Tina Fey returning to NBC's "Saturday Night Live," absolutely nailing the role of Governor Palin. Fey was joined by Amy Poehler impersonating Senator Hillary Clinton.

Also, boycotting Oprah Winfrey. The Florida Federation of Republican Women launches a national boycott of her show, and "O Magazine" for refusing to have Sarah Palin on. Winfrey, who actively campaigns for Senator Obama, said she would not use her show as a platform for either candidate, but will have Palin on after the election. It's a story first brought to you here by CNN's Kareen Wynter.

And Wall Street worries. Stocks dive after Lehman Brothers filed the biggest bankruptcy in history, and Bank of America announced it will buy Merrill Lynch in an all-stock transaction worth $50 billion.

CHETRY: Well, the market freefall has many of us worrying about our savings, all of that pre-tax cash we've been dumping into our 401(k)s. Is it still safe? We asked our Mary Snow to find out.

MARY SNOW, CNN CORRESPONDENT: John and Kiran, the severity of Wall Street's crisis is certainly being felt here in New York. But many people across the country are asking how safe is my money? The FDIC says it's got double its normal call volume from worried consumers.

(BEGIN VIDEOTAPE)

SNOW (voice-over): With Wall Street's seismic jolt, Treasury Secretary Henry Paulson tried to reassure a jittery public.

HENRY PAULSON, TREASURY SECRETARY: Our banking system is a safe and a sound one.

SNOW: Paulson tried to boost confidence as fears escalated far beyond Wall Street.

ANDY SERWER, MANAGING EDITOR, "FORTUNE" MAGAZINE: I think the answer to that question right off the bat is, yes, your money is safe. But I think it's appropriate to sort of re-examine where your money is, how it's allocated.

SNOW: For money at banks, the Federal Deposit Insurance Corporation says 98 percent of banks are well capitalized. Still, after 11 banks failed this year and 117 remain on the list of troubled banks, the FDIC is making a push to educate consumers that FDIC insurance covers deposits up to $100,000 per account.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Those depositors have never lost one penny in the 75 years of the FDIC. Good to know in times like these. (END VIDEO CLIP)

SNOW: The FDIC's Sandra Thompson says the agency's consumer hotline has been flooded.

SANDRA THOMPSON, FEDERAL DEPOSIT INSURANCE CORP: We try to clarify that most people keep their money at commercial banks and those deposits, if they are in the limits, are insured by the FDIC.

SNOW: What about money in brokerage accounts and investment banks like Lehman Brothers? The Security Investor Protection Corporation or SIPC says they're safe because brokerages have to keep customers' assets separate from their own.

STEPHEN HARBECK, SECURITIES INVESTOR PROTECTION CORP: That cash and securities that belong to customers cannot be used in Lehman Brothers' business and is segregated from the assets and from the creditors of the brokerage firm itself.

SNOW: And for investments in things like retirement accounts, "Fortune" magazine's Andy Serwer says now is a good time to re-examine them.

SERWER: Know exactly what you own. Is your cash really cash? Or is it some sort of bond fund that's a hybrid that's actually more troublesome than you think?

(END VIDEOTAPE)

SNOW: Experts say much of this crisis stems from sophisticated investors getting tangled up in investments without really knowing what was in them. Bottom line, they say, don't make the same mistake with your own account -- John and Kiran.

CHETRY: Inheriting a money problem, Senators John McCain and Joe Biden push their plans to save the economy live on the "Most Politics in the Morning."

(COMMERCIAL BREAK)

CHETRY: Welcome back to AMERICAN MORNING. Wall Street waking up this morning with quite a hangover. Dow futures still in the red right now, trying to recover from its 104-point nosedive yesterday. That's the worst since the days after 9/11.

Couple that with the current housing and loan crisis and it's no surprise that the economy remains issue number one for voters. Both candidates are commenting on the economic news. Here's a little bit of what John McCain, senator from Arizona and GOP presidential candidate said yesterday.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Our economy, I think, still, the fundamentals of our economy are strong, but these are very, very, difficult times. And I promise you, we will -- (END VIDEO CLIP)

CHETRY: And Senator John McCain joins us now. Thanks so much for being with us this morning, senator. You know, your opponent Barack Obama seizing on the comments that you made yesterday. And so, I want to ask you this morning, what did you mean when you said the fundamentals of the economy are strong?

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Well, what I obviously was saying, and I believe is the American workers, the most productive, the most innovative, they are the fundamental of our economy and the strength of it and the reason why we will rebound. We will come back from this crisis. But right now, we are the victim of greed, excess and corruption in Wall Street, which is hurting them very, very badly and, unfortunately, it will in the future. But I believe in the American worker and I believe the American worker is the fundamental strength and future of America.

CHETRY: You did say that greed on Wall Street was behind this situation suggesting there should be more oversight. Throughout your record, though, you've really been somebody who pushes deregulation. Are you changing your position on that?

MCCAIN: Of course not. Ask any American citizen who has been the victim of a bureaucrat or a bureaucracy. I said two years ago that the Fannie and Freddie thing was a very serious problem and we had to work on it. And I have always opposed greed of Wall Street and I know how we can fix this.

We have to assure every American that their deposit in a bank is safe. We have to have a 9/11 commission, and we have to fix this alphabet soup of regulatory agencies that's left over from the 1930s. We can come back from this. It's a very tough crisis and we are the victim of the violation of the social contract between capitalism and the American citizen.

CHETRY: When you make -- if you make it into the White House and you're taking a look at this, it's now in your lap. What do you propose for smart regulation to make sure that businesses can still thrive and at the same time what we saw with the subprime mortgage crisis doesn't happen again?

MCCAIN: Well, first of all, we have these regulatory agencies, some of them who are asleep at the switch for the last couple of years or a few years, and they were designed for the 1930s. Now, we have an instantaneous global financial situation, and those agencies have to be consolidated and they have to be given more strength where necessary. And we have to figure out exactly how it is that we can understand a global economy where, what happens in the United States of America affects the rest of the world and vice versa. But these regulatory agencies were fine maybe in the 1930s.

Teddy Roosevelt said that unfettered capitalism leads to corruption. We are seeing that now, and the social contract has been broken. It's got to be fixed, and some of that money ought to be given back, by the way. CHETRY: I want to ask you about this though when it comes to tax policies, the non-partisan Tax Policy Center calculated the middle class would actually save significantly more under Barack Obama's tax plan than yours. How will your tax cuts, as it breaks down on income level, benefit the working class and the middle class?

MCCAIN: Well, first of all, Senator Obama wants to raise taxes. I'm not going to raise anybody's taxes and the fact is, that with my health care plan where people receive a $5,000 refundable tax credit, that will have a huge impact.

One of the greatest things that's hindering the progress of many middle-income Americans and lower income Americans is affordable and available health care. I will do that. Every child, every child in America, every family with a child will receive a $7,000 refundable tax exemption for their children, and we will continue to make sure that low-income and middle-income Americans have the tax reduction and nobody has their taxes increased.

You raise taxes in tough times and certainly I'm going to restrain spending in government, and Senator Obama has plans for increasing government spending dramatically.

CHETRY: I want to ask you --

MCCAIN: I'll restrain spending.

CHETRY: I want to ask you about that.

MCCAIN: That's the reason why our economy is in trouble today.

CHETRY: Well, most of our independent economists say that Barack Obama is actually cutting taxes for about 90 percent of Americans. Do you agree with that?

MCCAIN: No, because they are taxes -- many Americans are not paying taxes at all. But the point is, that keeping taxes low and restraining spending, he wants to increase and has voted for consistently increases in spending. He has voted for, in the Senate, raising taxes on people that make as low as $42,000 a year. So he's been all over the map on this, and he has consistently voted to raise taxes as well as payroll taxes, as well as others. And I'm not for that, and that's my record.

CHETRY: I want to ask you about the current financial crisis. We're talking about billion dollar bailouts that the government's funding. We're talking about a growing national debt. Is it realistic to even promise tax cuts right now?

MCCAIN: I think the worst thing you can do is promise tax increases. I think if you increase American's taxes right now, no matter who they are, it will be a harmful blow to an already very, very serious situation. And I am committed to keeping taxes low and restraining spending.

It's not taxes that has caused a lot of the problems. It has been out of control spending. I have fought to control spending. I have fought against earmark and pork barrel projects. Senator Obama has asked for $932 million of earmark projects and pork barrel projects --

CHETRY: Let me just as you --

MCCAIN: I never asked for one.

CHETRY: Because you have made this a centerpiece of your campaign, fighting against earmarks, pork barrel spending. But, your bottom of the ticket, Sarah Palin, the governor of Alaska, also asked for millions upon millions of dollars in earmarks, including in budgets 2008 and 2009.

So, how do you square that?

MCCAIN: Actually, she has cut and vetoed many, many bills. A half a billion dollars worth. She has cut spending, she has returned money to the tax payer. I'm proud of her record as opposing, including the Bridge to Nowhere in Alaska, and she understands very well the necessity of eliminating these earmarks and she's done a great job of vetoing these bills that have come across her desk as governor. She'll do that in Washington. We'll change things and we'll shake them up.

CHETRY: Senator John McCain, thanks for joining us today. Great talking to you.

MCCAIN: Thanks for having me on.

ROBERTS: So, what would Barack Obama and Joe Biden do to jump start the economy? Joining me now from Washington, is the Democratic vice presidential candidate Senator Joe Biden.

Senator, it's good to see you.

SEN. JOE BIDEN (D), VICE PRESIDENTIAL CANDIDATE: Hi, John.

ROBERTS: Let me ask you this question. When everything is going on in Wall Street and the economy now, DOW down 500 points below 11,000.

If you were in the administration right now, what would you be doing?

BIDEN: Create jobs, keep people in their homes and increase regulatory oversight of the very people John has refused to regulate. And by creating job, we'd spend $600 billion on going out -- $60 billion creating new infrastructure jobs, roads, highways, bridges, all the things we need. Keep people in their houses by allowing them to renegotiate not only their interest on their loans, but their principle on their loans and bankruptcy. Make sure that we're in a position where we start to deal with the debt.

Look, John talked -- I just heard John's interview, I find it absolutely fascinating. This is the same guy who wants to continue to spend $10 billion a months on the war in Iraq, when the Iraqis have $80 billion stashed away from oil prices. It's the same fellow who's going to part of his administration view he shares, it's going to hand the next president a $400 billion debt 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.

Come on! And the truth of the matter is, is what you heard in the last interview. Every economist points out that we give out tax breaks to the middle class. We're not raining total taxes. What we're doing is letting taxes expire for the very wealthy and giving the middle class a fighting chance --

ROBERTS: But, Senator, at the same time though, as you said, you are raising some taxes. You'll be raising income tax on people who make more than $250,000. You would likely also raise the FICA withholding on high interest --

BIDEN: No, no, no, no, no, no, no, no, no, not true. We would not raise the FICA withholding. We would reduce the FICA withholding.

And look, every study shows -- 95 percent of the people are going to get a tax --

ROBERTS: Are you not thinking about raising the income cap in FICA withholding?

BIDEN: Yes. But, that's for people over $250,000.

ROBERTS: Right. Sorry, that's what I said.

BIDEN: Let's get it straight though, John. We're talking about people over $250,000, who are doing very well, thank you.

ROBERTS: That was my point. You're thinking of raising taxes on people who make more than $250,000.

BIDEN: That's right.

ROBERTS: FICA withholding and income tax. With the economy the way it is right now, is this anytime to be raising taxes on anyone?

BIDEN: We are transferring the tax cut. We're raising the tax on them by letting this tax expire and flipping that tax and giving it to the people who need it. So, the total tax cut --

ROBERTS: Some people would say that's income redistribution.

BIDEN: Well, I don't care what you call it, the middle class is dying. John talks about the strength of the American worker. The American worker's been left out in cold. Look what's happened.

We accumulated a trillion dollar debt to foreign governments. We're paying the highest prices we've ever paid for oil because we have no energy policy. We have the highest unemployment rate in five years. We're in a situation where middle class people are struggling, they're hanging on. And what are they doing for them? Zero. It's been this profligate spending on the rich and Wall Street. No oversight of any consequence. And when you ask John the question a moment ago, when he was asked the question, what new regulation would you put on, he said, we'll we had a modern regulation for the modern economy. Hey, bottom line is, if you come to the federal government, to the fed to borrow money, we get to look at your books. It's my money, it's the tax payers money. We get to look at your books, John. We get to have total oversight. You want to borrow the money, you let us see the inside of your books. Up until now, John has totally opposed that. This administration has.

And I ask the rhetorical question, who's the captain (INAUDIBLE) the helm, for the last eight years has driven us into this God awful economic mess at home and abroad? It's been the Republicans. The Republican economic philosophy that John is adhered to that's driven us into this whole. And when you have a doctor who's performed malpractice on you and he's been convicted of it, you usually don't hire him to do the second operation.

ROBERTS: Senator, yesterday a couple of times, you dinged Senator McCain pretty hard for saying that the fundamentals of the economy were sound. At about the same time, Mayor Michael Bloomberg from New York, was talking with politico, and he also suggested that the fundamentals of the economy are sound.

Is he wrong, as well?

BIDEN: Well, let me -- absolutely. Let me tell you. Look, here's how we look at this stuff. I look at this stuff from the neighborhood up. Take a look at what middle class people are going through. Tell me how it's sound that we have the highest foreclosure rate since the Great Depression.

Tell me how it's sound that you have 84,000 people lose their jobs last year. Tell me how it's sound that in fact, people can't get their kids to college. Their health care costs have gone up 87 percent. Tell me how it's sound that middle class people have lost $2,000 in income on an annualized base during this administration. Tell me how it's sounds that you have one percent of the people in the United States of America, making 23,4 percent of all the income in America. That hasn't happened since 1921. It's sound if you're very wealthy. It's a disaster if you're a hard working middle class family who goes from paycheck to paycheck and worry about paying your mortgage.

ROBERTS: Let me turn to the issue of earmarks, if I could. Because we asked Senator McCain about that. He has made that a centerpiece of his campaign. You have been in the Senate for 36 years. You have only ever disclosed one year of your earmarks, that's $342 million for fiscal year '09.

Why did you not disclose the other years?

BIDEN: Because it was all open in my state. I've disclosed all the time. The earmarks of the state of Delaware has gotten every single time, everyone has seen them. And we have no wall there. We have no Lawrence Wealth museums. We have no Bridges to Nowhere in Delaware. It's all straight up. And by, let's put this in perspective. I love John. He says he's going to balance this budget by earmarks. If you eliminate every single earmark in the entire United States government, that's $18 billion a year. John, what are you going to do with the $400 billion in debt, John? John, what are you going to do with the trillion dollar additional tax cut you want to give to the wealthy?

Come on, this is time for a little truth and lending here.

ROBERTS: I've got to get to one political question here.

BIDEN: Sure.

ROBERTS: Polls in Minnesota that came out yesterday show an even up there. It's the most reliably Democratic state in the nation. There's a poll out that shows New York now within five points. John McCain is starting to peel off white women. He's also starting to attract some Independents.

Senator, what's going on?

BIDEN: What's going on is, his campaign is over. I mean, the convention is over. They got a big hit. And as every Independent news organization points out --

ROBERTS: Yes, but you didn't get a similar hit in Colorado.

BIDEN: Well, we did. We went up eight points.

ROBERTS: Not now.

BIDEN: Then it got wiped -- no, I got that, John. We went up -- look, we're right back where we were essentially before. And part of the reason --

ROBERTS: But, not in Minnesota.

BIDEN: But we are in other states. We're up I think 12 points in Iowa, for example. Another toss up state we didn't win last time. So, you want to go state by state, the bottom line is this. Look, what every Independent news agency has pointed out the ads that the McCain campaign is running since they hired the very people that went after them in 2000, in the Bush time, what happened? Where they're misrepresenting Barack Obama's record, they're misrepresenting -- for example, John had the audacity to say, when confronted with a question, isn't it true, as the economists say, that 95 percent of the people are going to get their taxes cut?

What was his answer? There's a nice, honest answer. Well, that's true under Barack Obama, that's true. But, we like our plan better. Instead, they're saying, Barack Obama is going to raise taxes on middle income people. They're saying Barack Obama supported sex education for kindergardeners, when all he said was, we should teach our kids how to avoid predators. It's very misleading and it's about -- and the public, I have confidence in them that they're going to see through this fog and remember how's been at the helm when this ship has stayed, has run aground. And it's been the philosophy of the Republican Party that John is a disciple of.

ROBERTS: Senator Biden, it's always great to talk to you. Thanks for coming on this morning.

BIDEN: Good to be with you John.

ROBERTS: We'll see you soon -- Kiran.

CHETRY: Well, right now we're going to head over Ali Velshi. He is fact checking what the candidates just said. He's going to break it all down for us, earmarks, taxes and the fundamentals of the economy.

Hey, Ali.

ALI VELSHI, CNN BUSINESS CORRESPONDENT: Hi, Kiran. Good robust discussions you had with both candidates. And they are right to know that this is the topic most Americans want to hear about.

I'm going to tell you about where they stand on things on things like taxes, on energy policy when we come back. I'm going to break that down for you and see what really is going to be the case when you vote for either John McCain or Barack Obama. Stay with us. You're watching AMERICAN MORNING.

(COMMERCIAL BREAK)

CHETRY: Welcome back to the Most News in the Morning. They're calling it Nightmare On Wall street this morning, after the DOW suffers its biggest loss since right after the 9/11 attacks. We just heard from Senator John McCain and Senator Joe Biden with their plans to fix the problem.

Our Ali Velshi has a reality check on what they said and whether or not a lot of what they said squares with what's been going on.

So, Ali what were some of the things that stood out to you as we heard from both of them?

VELSHI: Well, the first one is John McCain and Mayor Bloomberg, saying the economy is fundamentally sound. I mean the bottom line is that somebody should tell them to stop saying that. 605,000 jobs lost, all sorts of -- 25,000 jobs lost yesterday from Hewlett Packard. I think that just needs -- it doesn't matter to the average American. It's a semantics discussion, but they should probably not say that.

You ask Senator McCain about the middle class tax cut. He said, Senator Obama wants to raise taxes. I am not going to raise taxes. That is correct, he is not going to raise taxes and it is also correct that Senator Obama is going to raise taxes but, not on the middle class. You have to be making $227,000 or more before you see a tax increase under Barack Obama. And for those people in the middle class, unless you think that's the middle class, your tax cuts are going to be bigger under Senator Obama, according to a tax policy center, than they would be under John McCain.

He also talks about greater regulation. He has been part of a government in all his time in Senate that has not addressed the fact that this regulation that dates from the '30s, he is correct, needs to be changed. But I should tell you, Treasury Secretary Henry Paulson announced months ago, they are going to revamp the regulation. He's absolutely right, there's regulation for bank's, insurance companies, oil trading, it's a mess.

CHETRY: And let just me ask you about this because he went further with that and he said that what's happening right now is that it's just a hodgepodge of regulators. That they need to --

VELSHI: Yes, what did he call it? Alphabet soup.

CHETRY: Yes. How do you fix that? How do you reign that in?

VELSHI: It's a big deal that needs to be -- it's a matter of rewriting the legislation. It's a matter of not having 14 regulatory agencies that don't talk to each other. He talked about a 9/11 commission because that's the example. There were too many bodies dealing with too many things that they didn't coordinate. Same thing in the financial services. But, that is under way and will get done, probably under the next administration.

John talked to Joe Biden and his biggest criticism was of the energy policy that doesn't exist. Again, Joe Biden's been in the Senate for a long time. This has been a growing crisis for a long time. There has been no national energy policy in the United States. And Joe Biden hasn't been a leader on that side. So, you know, it's clear to understand that there are problems, but they are not the cause of this.

When they both talk about taxes a great deal, the bottom line is taxes didn't get us into this recession. It's been a lot of other things. So what they need to do is hone their messages and get on the stuff that Americans need to hear. And stop talking about whether it's a fundamentally sound economy or not -- Kiran.

CHETRY: All right. Ali Velshi, doing some fact checking for us this morning. Thanks.

(BEGIN VIDEO CLIP)

DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: Well, this may be one of the most unusual stories I've ever covered. Take a look behind me. The gentleman you see there has been in bed 79 days. For each week that he's been here, he's getting paid about $1,000 and he's lost about ten pounds in the process. I'll tell you what this is all about coming up on AMERICAN MORNING.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

ROBERTS: 12 minutes now to the top of the hour. And welcome back to the Most News in the Morning. President Bush traveling to Texas, this morning where he will visit two of the areas hardest hit by hurricane Ike, Houston and Galveston. Some Galveston residents are still waiting to get back into their homes and it could be weeks before they get electricity and running water back.

Our Rob Marciano joins me now from the CNN Weather Center. And Rob, not a whole lot happening out there today on the radar and satellite images which is great. But, boy, an awful lot of misery for those people down in south Texas.

ROB MARCIANO, AMS METEOROLOGIST: It is and the pictures that were you showing on the big board behind you, are what was along the seawall boulevard in downtown Galveston, which was protected by the 17 foot seawall and still had all that damage. So, that to me is just -- says a lot. And back away from the seawall where it's unprotected, along the bayside, even worse. Even more widespread water damage from the storm surge.

All right. I want to show you a little farther east, before and after pictures of a seaside community in Galveston County, unprotected by the seawall as well. Let's go to that on Google Earth. It's live into Gilchrist, Texas. It's about maybe about 20 miles, maybe if that, from Galveston. This is what it looked like before on Google Earth. And then, this is what it looked like after from aerial pictures. One home standing. Another angle will show similar action. You notice there's no protection, they're pretty much flat right up to the water. Before, after. Unbelievable devastation there.

Just goes to show you what a 12 to 15-foot surge and the waves were just massive. So, the media just being allowed to get in there now and certainly the pictures on the ground are spellbound. As John mentioned, nothing much going on at all. Actually, the first time we've been able to say that for weeks in the Atlantic. Just a few showers across the Carolinas. So, much of the nation. John, enjoying some tranquil weather and that includes Texas for their what's going to be a long, long cleanup and rebuilding.

ROBERTS: I'll tell you. They're going to need years worth of good weather. You know, I talked to Governor Rick Perry yesterday about what you do about Gilchrist, and the rest of the Bolivar Peninsula and he really didn't really have a good answer. But, I'll tell you, looking at those pictures, that's what I thought would happen to Ali Velshi on Grand Isle during Gustav.

Yes. Well, it's a good thing he was on a well built structure. That's certainly going to happen. And you know, it's paradise 99 percent of the time, living along the water. John. But you know, that one storm that you get every few decades certainly can be a powerful punch.

ROBERTS: As they say, the cost of living in paradise.

Rob, thanks so much.

New drama at the O.J. Simpson robbery and kidnapping trial. One of the alleged victims falls ill on the stand, complaining of chest pains. A look at what could happen today in the Las Vegas courtroom. That's ahead.

CHETRY: Dream job. GUPTA: You've been in this bed tilted like this in this room for 12 weeks.

UNIDENTIFIED MALE: For 12 weeks.

CHETRY: Meet the man being paid to live every minute of his life in bed.

GUPTA: Somebody once told me you have to be a little crazy to do something like this.

CHETRY: You're watching the Most News in the Morning.

(COMMERCIAL BREAK)

CHETRY: Welcome back to the Most News in the Morning. If you're struggling to wake up for work this morning, listen to this job description. You just stay in bed for three months straight, you can surf the internet, watch TV and you get paid $1,000 a week. It's true. It's all part of a new research project being conducted by NASA.

Joining thus morning is CNN chief medical correspondent Dr. Sanjay Gupta.

OK, what the heck is NASA studying?

GUPTA: Pretty good gig, huh? Well, you know, it's interesting. They're trying to figure out is there a reliable model of prolonged weightlessness right here on Earth. That's the question. So, they're doing the study, putting people at bed rest like you mentioned. It is expensive. Costs about $250,000 to conduct this study over a period of time but that's a lot cheaper than potentially studying this in space.

So meet Rod, the 12th patient in the study.

(BEGIN VIDEOTAPE)

RODERICK JONES, BED-REST PATIENT: All I do is lay down in bed every day.

GUPTA (voice-over): This man is getting paid $12,000. Why? To stay in bed, for 84 days.

(on camera): So, you've been in this bed tilted like this in this room for 12 weeks.

JONES: Yes. For 12 weeks.

GUPTA: That sounds insane to me. Somebody once told me you have to be a little crazy to do something like this.

(voice-over): 40-year-old Rodrick Jones, a chemist by trade was between jobs and trying to save money for a move for his family when he spotted an unusual ad on the internet. GUPTA: So, you say, you want to help space research. Do you want a little vacation and this is what they meant.

JONES: At the time I didn't know it was actually you're literally in bed for the entire study.

GUPTA: Day in, day out. He lies at this 60-degree angle with his head down. Surfs the internet, watches all the cable TV he wants. He's fed three meals a day.

(on camera): How do you position your body to be able to eat?

JONES: Normally I do one of two things. I either turn on my side and just move my tray. Or, I can actually turn on my stomach as well.

GUPTA (voice-over): He talks on the phone and, yes, he even goes to the bathroom laying in this position, head down, feet slightly up.

DR. PETER CAVANAGH, UNIV. OF WASHINGTON, SEATTLE: It allows fluids to be redistributed in the same way that fluid is redistributed in space.

GUPTA (on camera): I mean, you're saying, simply put someone on bed rest for 12 weeks, tilt their bed a little bit. Is that a good enough model of weightlessness?

DR. ANGELO LICATA, CLEVELAND CLINIC: You can actually see chemical changes that occur within the bones.

GUPTA (voice-over): You see, bone loss is a major problem for astronauts. In fact they experience 10 times greater bone loss than a post menopausal woman. 10 times!

So half the studies' participants are selected to exercise for two hours a day. The other half must stay in bed at all times. Rod is one of the exercisers. And it's that exercise that can be so effective in preventing bone loss.

After 84 days the time has finally come to get back on his feet. Rod walks up and down the hallways without a hitch. The question is, has it all been worth it.

JONES: There was never a day that I doubted the worth of what I was doing.

(END VIDEOTAPE)

GUPTA: Now, it's sort of amazing, Kiran. I learned so much when were actually visited with the NASA scientists over there. For example, there are so many chemical changes that take place in the body when someone's in space for a prolonged time, like that space station. You start to absorb calcium from your bones into your blood. Your bones start to literally break down and you get kidney stones, which can be a huge problem for someone that's up in space. So, these are the sort of things that they're studying, some nonintuitive things. They're about half-way through the study. Again, Rod was the 12th patient. CHETRY: That is just fascinating. Because on the surface it may sound good. But day in and day out, as you said for 12 weeks, that's got to be grueling.

GUPTA: Yes. Well, for Rod, he seemed like he got through it pretty well. There's been one patient who has been not able to tolerate this and had to get up. But, for the most part, either they're exercising or not exercising. They're able to get through this pretty prolonged study.

CHETRY: Fascinating. And hopefully it'll yield new clues about bone loss. Very neat. Sanjay, thanks so much.

Well, for more on this story and other health-related headlines, go to CNN.com/health.

Watching Wall Street. Waiting for answers. The DOW looks to rebound after its worst day since 9/11.

Plus, drop-out high.

UNIDENTIFIED FEMALE: My brother dropped out because we needed money.

CHETRY: A broken school and an economic burden that's forcing half the kids to quit. You're watching the Most News in the Morning.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MCCAIN: The American worker's the most productive, the most innovative. They're the fundamental of our economy and the strength of it and the reason why we will rebound.

BIDEN: It's sound if you're very wealthy. It's a disaster if you're a hard working, middle class family who goes from paycheck to paycheck and worry about paying your mortgage.

(END VIDEO CLIP)

CHETRY: Well, earlier this morning we spoke with the Republican presidential candidate John McCain and the Democratic vice presidential candidate Joe Biden. Getting their takes on the state of your money.

And joining us now with his reaction is senior political analyst for "TIME" magazine, Mark Halperin.

Mark, good to see you this morning.

Both of them talked about the economy. How will -- did they get specific enough, I guess, and how will it play with voters? What are voters wanting to hear?

MARK HALERPIN, SENIOR POLITICAL ANALYST FOR "TIME" MAGAZINE: I don't think either of them were very specific at all. They're both trying to feel the pain of the American voter. They recognize that this is a critical moment in the campaign.

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