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CNN LARRY KING LIVE

Interview With Mogul Donald Trump; Economic Experts Discuss The Impact of AIG Bailout

Aired September 17, 2008 - 21:00   ET

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


(BEGIN VIDEO CLIP)
LARRY KING, CNN ANCHOR: Tonight, breaking news. Wall Street takes another nose dive. Investors panic. Should you? Do you wait it out or do you get out while you can before your nest egg has nothing left? Before you take the money and run, let's hear what Donald Trump and other experts have to say. It's free advice from the top dogs. Plus Sarah Palin unleashed.

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL CANDIDATE: This is the maverick who would have even chosen such a candidate to partner up.

KING: Are her handlers finally letting her speak without a script? They just did in a town hall meeting.

PALIN: John, can I add something? I want to add something to that.

KING: And we'll tell you what she said right now on LARRY KING LIVE.

(END VIDEO CLIP)

KING: Good evening. By the way as we come on the air, Barack Obama is speaking in Las Vegas, Nevada. We're monitoring that and probably will show you some clips of it later in the program. Let's get right to the economy. Joining us in New York is Ali Velshi, CNN senior business correspondent. And in Nashville, Tennessee, Dave Ramsey, the financial expert and best-selling author of "The Total Money Makeover."

Gentlemen, we have the Asian markets. South Korea down 3.2 percent, Japan down 3.13 percent, a tumble in the United States. What's going on, Ali?

ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: Listen, Larry, we're trying to figure out what's going on in the financial market. The markets thought that bailout, that loan to AIG might settle things down, but it didn't. There's still fear out there that there are other banks that could be in trouble and that we haven't seen the worst of it yet.

The biggest problem and Dave will tell you more about this is that we're somewhere probably closer to the bottom than the top, but we don't know exactly where. And that makes it very tough to make a decision as to what you're supposed to do with your money because the government's probably not going to offer you a nice bridge loan.

KING: Ali said you'd tell us more, Dave, tell us more. How bad is it?

DAVE RAMSEY, AUTHOR: Well, it's certainly a week where as we were riding our bicycle, we definitely fell over and we skinned our hands and skinned our knees. It's been a painful week. We may have a scar that we get to show off in later years, but we will survive and we will be back on the bike.

KING: Ali, what's going to happen to Goldman Sachs or Morgan Stanley?

VELSHI: Well, Goldman Sachs, I suspect will be -- if there's one last man standing, it will be Goldman Sachs. If there are two, it'll be Morgan Stanley and Goldman Sachs now left as major independent investment banks.

There is some talk that Morgan Stanley is preparing itself for some tough times. If those times come, they don't want to be in a position to have to declare bankruptcy or have someone take them over. We're not close to that with Morgan Stanley, but everybody's thinking ahead right now.

What we have tonight, Larry, is that Washington Mutual may be preparing itself if it had to find a buyer. So there's more to come here. The issue is, what does it mean to your investments. For the average person watching us, you can't trade on this. You can't do much about this and frankly panic doesn't help when times get tough. You've got to make some informed decisions.

KING: Speaking of that, Dave, what do all of the people with 401(k)s do?

RAMSEY: Well right now they're screaming. And they're afraid because this news is scary. We have a 7 percent drop in one week. That turns $100,000 into $93,000 at an eye blink. And people are going, hey, Dave, my 401(k) is starting to feel like a 201-k.

It's tough out here and people like Ali and I are spending our lives standing kind of in the middle of the interstate saying, stop, don't pull your money out. This is absolutely the worst time from a consumer's perspective to liquidate something like a 401(k) or a Roth IRA or pull your kids college money. It's exactly the wrong time. When 9/11 hit, we lost 14 percent in one week. It came back completely, the Dow completely recovered in 58 days. That's how this market works. And we could see a complete recovery in 58 days. That won't be in the headlines, but we could see a complete recovery.

KING: But, Ali, if it keeps getting worse, you can advise people all you want, people are going to get panicky, aren't they?

VELSHI: Sure. But you know what we do late in the afternoon when these big sell offs start to accelerate? I make phone calls to my friends who are in the investment business. And some of them, they're in the business of investing. They're finding places to invest. Gold had the single biggest jump ever today, oil was way up. The bottom line is there are options out there.

You need to, I know it sounds like it's just a mantra we use, but if you are diversified, you're not hit by one bank going down. And the fact is, once you sell your stocks, you lock in whatever loss there was. After September 11th, that was a terrorist attack and we were fully recovered after 60 days.

This is a banking crisis. It's bad, but it's not as bad as a terrorist attack. So the fact is you have to stay the course. The danger is if you have to pull the money out because you're close to retirement. Those are the folks who are a little more worried today. If you're younger, if you've got 20 years or more to go for retirement, forget it. Don't worry about this.

KING: Dave, how do you know if your bank is in trouble?

RAMSEY: Well let's just say probably your bank's not in trouble. In 1988 and 1989, we lost 1,000 banks in about 1,000 days. In about a year and a half period of time there, we lost a bunch of banks following the S&L crisis. We've lost two or three right now. So your bank in Tennessee, your bank in Kansas, your bank in Dallas, it's not in trouble. Wamu's struggling. We've got a few of these banks that were playing this subprime market stuff and they became ill-liquid. Fancy word for meaning they had no freaking money. And they let themselves sit there with no cash and they got themselves in trouble. But your bank's probably not in trouble.

KING: Ali, was the AIG bailout right?

VELSHI: $85 billion question, Larry. Was it right? AIG, think of it not as an insurer, think of it like one of the auto companies. If an auto company were to go out of business, it's not just the auto workers. It's the tire makers. It's the seat makers. It's the windshield makers. AIG is the insurance equivalent of that. There are many, many companies tied to it. Never mind, the fact that they are not just insurer for people, they insure oil rigs when hurricanes come, they insure Hollywood movies, they insure airplanes. Business exists because they can budget for the risk that can happen.

So AIG would have had a far more substantial ripple effect if it were to go bankrupt than Lehman Brothers or Bear Stearns. Bottom line is Larry, the world can do without a couple of investment banks. But insurance is a little more crucial to our economy.

KING: Well said. Ali Velshi and Dave Ramsey will remain a little while, but thanks for joining us. Donald Trump joins us on the phone. He'll be with us in the next segment. Donald, what's your read on all this?

DONALD TRUMP, ENTREPRENEUR (on phone): Well, I think it has the chance to be the worst period of time since 1929. This is a really devastating period. When you look at AIG, when you look at Goldman Sachs and Morgan Stanley and so many others that are potentially great companies, are great companies and they're just down the tubes.

It's an incredible period. As far as was the government right with respect to AIG? I believe so. And in a sense, they bought 80 percent of the company for a guarantee. They may have actually made a great deal. So I really believe they were right.

KING: We're just getting started with Donald Trump. He'll be back right after the break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Breaking news on the American financial front.

UNIDENTIFIED MALE: A volatile day ending on a volatile note.

UNIDENTIFIED MALE: The world can exist without five investment banks, but can't take a major insurer out of place.

UNIDENTIFIED FEMALE: I think the most important part of AIG is it is the lynch pin of a lot of corporate America. You just can't let this company fail.

(END VIDEO CLIP)

KING: Donald Trump is with us, the chairman and president of the Trump Organization. Who do we blame for this, Donald?

TRUMP: Well, there's a lot of greed on Wall Street. And a lot of people are making crazy deals and you can blame everybody, even the regular consumer that went out and bought a house and got a mortgage that was ridiculous. You know, we call them exploding mortgages. But you can really blame a lot of people. And I guess you can maybe just blame the times.

KING: Do we need more regulation?

TRUMP: I would hope not, Larry. There's so much regulations. If you look at Sarbanes-Oxley, I know companies that don't move because of Sarbanes-Oxley. They can't get out of their own way. And you go to other companies and they don't have the regulation. And we're in a tremendous disadvantage in this country. You go to other countries and there isn't that same regulation.

So, it really puts this country at a competitive disadvantage. So hopefully, there'll be some type of minor regulation. But it's the times and it's greed and I'm not sure you can ever do anything about pure greed.

KING: Are you concerned about Goldman Sachs and Morgan Stanley?

TRUMP: Well, it would seem to be a great concern. John Mack of Morgan Stanley is a great, great man. He's a great friend of mine, a great businessman and you see a company like that is under trouble, I know how good a man he is. I know what a good job he does, but you look at what's happening to Morgan Stanley. It's very, very frightening. I had a friend that put a tremendous amount of money about a year ago into AIG. Smart guy, well-known, you know him very well, very rich. He said, Donald, I want security. He got wiped out, got totally wiped out. Now, not all of his money, but he lost everything he put into AIG. I called him, Larry, I gave him a very hard time, I really did laugh. He wasn't laughing, however.

KING: You enjoy that, Trump.

TRUMP: I do love it, I actually do.

KING: How worried is the average...

TRUMP: I can only love it when it's a great friend, Larry.

KING: I know, this is something you're not. So try to put yourself in their shoes, the average American family, average guy, how well --

TRUMP: Well, it's both a very tough time and a great opportunity. You have great opportunity. As an example, go out and buy a house right now from a bank, the bank will take back financing and make a great deal.

There are great opportunities right now for people when you say average family. It's an unbelievable time to buy a house and especially if a bank happens to own it because they've put the money in so it's not a question of getting financing, which you can't get.

The money is already there. Go out and make a deal. The banks want to unload their stock. They have thousands and millions of houses. Go out, see what they have, get yourself a great house, they will give you financing.

KING: Obama or McCain, who would handle this better?

TRUMP: Well, I know John McCain, and John McCain's a great guy, a tremendous guy. I've known him for a long time. And I'm with him, and I'm with him based on the fact that I have great knowledge of John McCain. Also, this is not the right time for tax increases and Obama wants to increase your taxes drastically. So this is not --

KING: In all fairness, he says he doesn't --

TRUMP: This is not the right time.

KING: Obama said 95 percent would be reduced under his plan.

TRUMP: Well, I'll tell you, the people that create the jobs and the people that really create a lot of things in the country, they're going to be taxed into oblivion. And I'm not even sure when you look really at his tax, I think everybody's going to be taxed a lot more. So I like the fact that taxes won't be raised under McCain.

KING: Are you concerned, say, about Sarah Palin or Joe Biden, who will be better suited to step into that office right now?

TRUMP: Well, I can only say that Joe Biden got less than 1 percent of the vote every time he ran for president. I mean, you know, I don't understand why Hillary wasn't chosen because she was really winning.

I have a friend that came to this country and was here for the last four weeks of that whole election. He said how did she lose? She won every election, she won every primary. He didn't understand it. The fact is that Obama went limping across the finish line. He should have chosen Hillary, it would have been a much different race, I believe. Right now, it looks to me like McCain is probably winning.

KING: Are you saying, though, that Biden would be better suited than Palin to step into that office?

TRUMP: No, I'm not saying that. I think she's made a tremendous impact. The impact that she has had on rejuvenating almost the Republican Party, it's been unbelievable. She has had a tremendous impact and frankly I didn't know who she was. Most people didn't know who she was.

As soon as we got to see her and watch her, everybody's impressed. I think that really is to John McCain's credit. What he did in this choice is amazing because nobody else would have made it. It was a courageous choice. It has really reinvigorated the party.

KING: Have you formally endorsed the ticket?

TRUMP: No, but I'm endorsing McCain. I am basically very strongly -- you have to understand, I've known him, I like him, I respect him.

KING: So you're endorsing him?

TRUMP: He's a smart guy and I think he's going to be a great president.

KING: So you're endorsing him?

TRUMP: Sure, I'll endorse him on your show, why not?

KING: You just endorsed him.

TRUMP: I endorse him.

KING: Are you pessimistic or optimistic about this financial situation?

TRUMP: Well, I'm very pessimistic. And if you remember two years ago when I was on your show, I predicted near depression. And I get a kick out of these people. They get on television, they say we don't think - I saw it just this morning. We're not in a recession yet. I'm saying where do they come from? Where are these people from? They're saying we're not even in a recession yet. Well, in many parts of the economy and frankly in parts of the world, I just sold a house in Palm Beach a month ago to a Russian for almost $100 million and today I see the Russian stock market has collapsed. It's in the process of collapsing. They closed the market. What is going on? The world, this is beyond now the United States. The one good thing is that oil, which is the life blood of an economy, oil is dropping like a rock.

KING: Yeah, Donald always great to have you with us, thank you so much.

TRUMP: Thank you very much, Larry.

KING: Donald Trump, chairman and president of the Trump Organization. There by the way you see Barack Obama in Las Vegas where he just finished speaking about the economy. Hey, two really smart guys who know what they're talking about, Ben Stein and Robert Reich. They'll probably disagree on a few things after the break.

(COMMERCIAL BREAK)

KING: Joined now by two terrific economists. In Washington, Ben Stein, the former presidential speech writer, author. His new book is "How To Ruin the United States of America." And in San Jose, California, Robert Reich, the former labor secretary in the Clinton secretary and is an economic adviser to Barack Obama.

First Ben, what are your thoughts on what is going on this week in the storm market?

BEN STEIN, ECONOMIST: First class disaster. The worst treasury regulation of the economy in my lifetime and I'm 63-years-old. Deregulation has been a disaster. Your friend Donald Trump to the contrary, not withstanding. Letting the investment banks and the commercial banks work together to wreck Wall Street has been a disaster. Not bailing out Goldman Sachs basically told the investing public that they're on their own. The effect on this on the ordinary investor and the pre-retiree trying to get going, seeing his savings being blown out of the water by short sellers is just catastrophic to the free enterprise system. I cannot think of worse stewardship of the economy than we have seen in the last few months, especially in the last few days.

KING: Robert Reich?

ROBERT REICH, ECONOMIST: Well, I'm hard pressed to disagree with Ben Stein on a lot of that. And the irony is that under Republican administration, we are seeing more intervention in the so-called free market than we have had since the Great Depression, taking over entire companies.

Now I would much rather have instead of bailouts and subsidies, I'd much rather have regulations that make sure that Wall Street is playing fair, full disclosure, capital requirements, you know, transparency. We have not had this. Instead, we now have a kind of reaping the whirlwind of a lack of oversight.

KING: Ben, here's what Obama had to say today about McCain. And we'll get your comments, watch.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: Yesterday, Senator McCain actually said if he's president, then he's going to take on, and I quote, "the old boys network in Washington." That's what he said. He's going to take them on. I'm not making this up.

Now, think about this. This is someone who has been in Congress for 26 years. This is someone who put seven of the most powerful lobbyists in Washington in charge of his campaign. And now he tells us that he's the one who will take on the old boys' network in Washington.

What's wrong with this picture? The old boys' network? You know, in the McCain campaign, that's called a staff meeting.

(END VIDEO CLIP)

KING: Ben Stein, does the handling of the economy, the Bush administration, may or may not be involved give you pause?

STEIN: It terrifies me. It terrifies me that McCain is coming up with a whole raft of any ideas. I would like to see him suggest at least a new resolution to buy the bad assets of the financial institutions that are in trouble, get them off their books, re-liquefy them so they can start making loans to the individual families and businesses of America.

I would like to see Paulson fired yesterday. It's unbelievable that after his incompetency he holds that job. It is a disgrace to the Republican Party and to this country. I would like to see him come forward with some proposals for really serious regulation. Get Chris Cox out of there. He's an incredibly nice guy, but believes in a sterile and bankrupt ideology of hands off Wall Street.

KING: Robert Reich, Obama on the other hand has very little economic experience, right?

REICH: Well, since February of 2006, Barack Obama has been sponsoring legislation to create more disclosure on Wall Street, particularly with regard to mortgage instruments right there in 2006 before anybody was saying they had to reform it, Barack Obama was on this issue.

John McCain is sort of a born again regulator, but actually he's been anti-regulation for most of his 26 years. Every time there was a regulatory alternative, he said, no, we don't want regulation, we can trust the free market on Wall Street and that has been proven very badly wrong.

Barack Obama has come out very strongly for three things that need to be done. One is full disclosure, the second is better capital requirements, the third is getting rid of a lot of the conflicts of interest on Wall Street. And John McCain, what does he stand for? Basically he is standing for more tax breaks for the very rich. I'm not surprised Donald Trump likes that. But if you look very, very closely, what is -- what is it that Barack Obama is saying? Regulate and give tax cuts not to the very rich, but to give tax cuts to average-working people.

KING: by the way in case you missed it just a little earlier, Donald Trump did officially announce his endorsement of John McCain tonight on this program. McCain, by the way, Ben, has a new ad up saying he'll reform Washington and Wall Street. Here's part of that ad. Give me your thought.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: You, the American workers are the best in the world. But your economic security has been put at risk by the greed of Wall Street. That's unacceptable. My opponent's only solutions are talk and taxes. I'll reform Wall Street and fix Washington.

(END VIDEO CLIP)

KING: Will he, Ben?

STEIN: I doubt it very much. I'd like to see some real proposals. Serious proposals, get somebody in the SEC who believes in regulating the security market. Get some teeth in the SEC, get some teeth in the Treasury Department.

We've got laws on the books against fraud. Let's enforce them. This whole mortgage thing was fraud. This whole business of deregulation was basically allowed fraud. We have got to say no more fraud. I've got a close friend who is a Holocaust survivor. He has just lost a large chunk of his savings.

This is an outrage. We're letting these short sellers and these fraudsters ruin the lives of ordinary Americans. Let's see some teeth in Senator McCain's proposal. I'm for McCain, but let's see some teeth, senator.

KING: Robert, McCain said Obama's going to raise taxes. I know you're part of his economic adviser to him. Straighten that out.

REICH: This is part of the McCain disinformation campaign, Larry. And I credit it again with Donald Trump. That is not the case. Independent groups like the Tax Policy Center that have looked at the two campaigns and looked at the two sets of proposals have been very clear.

What is going to happen, well, John McCain is going to cut taxes for the very rich, but actually raise taxes for everybody else because he wants to get rid of the employer provided that is now tax free health system. And what is Barack Obama going to do? He is going to reduce taxes for 95 percent of Americans.

And all of these independent centers looking at the proposals, say that Barack Obama's tax cuts are three times greater for the middle class and the lower middle class than our John McCain's. John McCain is simply continuing on with Bush's policies, tax cuts for the rich, tax cuts for corporations, deregulation.

And you know, it's amusing to me how these Republicans when they run for office they become populous. They rail against big corporations, rail against Wall Street. And then when they actually are elected, if they are elected, they embrace the very people they were railing against.

STEIN: To be fair, Wall Street has its hooks into both parties. The people running Wall Street, the speculators, the powerful speculative interests, the Wall Street power houses have got their hooks deep into both parties. I'm terrified by the extent of Wall Street's power.

REICH: Ben, let me agree with you in terms of Wall Street's political power. But let me disagree with you in terms of Barack Obama. I know the man, I've worked with the man. I know his policy team. I'm part of his policy team. I know he is dedicated to cleaning up the mess and he is not going to allow Wall Street to push him around.

KING: Hold it, guys. Our guys aren't finished yet. They've got a lot more to say right after the break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: We need 100 percent guarantee that things are going to change. And you're not going to get it with John McCain.

MCCAIN: Senator Obama has never taken on his party. I've taken on my party.

OBAMA: Gosh, that guy Obama's been talking about change. That seems to be working, so maybe we should try to say it too.

MCCAIN: We've got to reform. We've got to reform the way that government does business.

OBAMA: They were all saying, experience, experience, experience. Then they chose Palin and they started talking about change, change, change. What happened?

(END VIDEO CLIP)

KING: We're back with Ben Stein and Robert Reich. Ben's new book is "How to Ruin the United States of America," and there you see its cover. Gentlemen, McCain economic adviser Carly Fiorina, the former head of Hewlett-Packard, raised a lot of eyebrows yesterday. She said none of the four candidates were qualified to run a major company. Here's she's asked about Sarah Palin in a radio interview.

(BEGIN VIDEO CLIP) UNIDENTIFIED MALE: Does Sarah Palin -- John McCain obviously thinks she has the experience to become president of the United States. Do you think she has the experience to run a major company like Hewlett-Packard?

CARLY FIORINA, MCCAIN ADVISER: No, I don't. But you know what? That's not what she's running for. Running a corporation is a different set of things.

(END VIDEO CLIP)

KING: Any comment on that, Ben?

STEIN: I think Carly Fiorina is right. By the way, she's doing her hair or something different. She looks fabulous. Anyway, I think she's totally, completely 100 percent right. It's a whole different skill set. Obviously, Mrs. Palin is quite intelligent. The issue is really whether she has the experience for the job. I think she's got enough administrative experience.

But I'd like to see her locked up with somebody really smart in the world of economics like Warren Buffet, who, I'm sorry to say, is advising the other side. Maybe we could borrow him for a little while and have him explain to her just what's going on economically. I'd like to lock Mr. Buffet up with Mr. McCain too. I mean, they're getting incredibly bad advice from somebody about these tax cuts. They've got to get some sensible advice. Maybe Mr. Reich could care to meet them.

KING: Would you switch a day or two to help your country?

REICH: Well, to help my country, I certainly would. But I was going to add a suggestion to Ben Stein, who is agreeing with me on almost every issue tonight. Ben, you know I have a candidate for you. His name is Barack Obama. And it would solve many of your problems.

STEIN: No, it would not solve my problem with right to life, I'm afraid. But I'd like very much to see somebody get in the room with Mr. McCain and say, look, tax rights for corporations are not what is needed now. Tax cuts for wealthy individuals are not what is needed now.

What is needed now is crackdown on Wall Street corporations. Do something dramatic like FDR did, like we did in the Savings and Loan Crisis to restore confidence. I'd like to see the president get on TV with Mr. Obama to his left and Mr. McCain to his right and say, we are going to make sure that you Americans are going to stop be looted by Wall Street. We're going to do whatever it takes. If it takes putting them in prison, we're going to do that.

We're going to do whatever it takes to restore faith in the free market.

REICH: Ben, the president is not going to do that because he has done just the opposite for the last seven years. And McCain is not going to do that because for the last 26 years, he's been calling for deregulation. It's only Obama who is going to actually do that.

STEIN: I doubt if Mr. Obama will do it either, because it's true, they can't probably push him around, but they may be able to pay him around. These guys raise a lot of money on Wall Street. It's very hard to turn them down. Besides, you've got to really have guts to get in there. Which of the candidates has the guts to take on the power of brokers on Wall Street? Who has got the guts? It looks to me like it's McCain, but I don't know if he's got the advisers to tell him what to do.

REICH: Look, if you're you disagree -- if Ben disagrees with all of McCain's policies and all of Bush's policies and agrees with me and also, incidentally, agrees with Barack Obama and -- Ben, I still don't understand why you don't come to my side. But the fact of the matter is Barack Obama does have the guts. Barack Obama has a history of taking on some causes that many people are saying are lost causes from the beginning, when he was a community organizer, all the way through the state legislature, all the way through the Senate.

STEIN: I haven't seen it. I'd like to say name one while he was in the Senate. But anyway, time is up.

REICH: Ethics reform.

KING: Guys, Ben, that's our time.

REICH: Everything that he has done in the Illinois state senate.

KING: We're out of time. Ben Stein and Robert Reich, never dull. Sarah Palin unplugged, speaking without a script tonight. How did she do next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MCCAIN: We're going to change and reform Washington.

PALIN: That's how jobs are created.

(END VIDEO CLIP)

KING: Let's assemble the panel. In Cleveland, Paul Begala, the Democratic strategist, CNN political contributor and author of "Third Way, Why George W. Bush Loves John McCain." In Washington, Todd Harris, former McCain press secretary, a former communications director for Fred Thompson, a supporter of John McCain. Here in L.A., Stephanie Miller, host of "The Stephanie Miller Show." And in New York, Andrea Tantaros, Republican strategist, and a supporter of John McCain.

Folks, Sarah Palin is talking a little more. Tonight, she took some questions at a town hall meeting in Grand Rapids. Asked to address her foreign policy credentials. Let's listen.

(BEGIN VIDEO CLIP) UNIDENTIFIED FEMALE: Governor Palin, there has been quite a bit of discussion about your perceived lack of foreign policy experience. And I want to give you your chance. If you could please respond to that criticism and give us specific skills that you think you have to bring to the White House to rebut that or mitigate that concern.

PALIN: Well, I think because I'm a Washington outsider that opponents are going to be looking for a whole lot of things that they can criticize and they can kind of try to beat the candidates here, who chose me as his partner, to kind of tear down the ticket. But as for foreign policy, you know, I think that I am prepared and I know that on January 20th, if we are so blessed as to be sworn into office as your president and vice president, certainly we'll be ready. I'll be ready. I have that confidence. I have that readiness.

And if you want specifics with specific policy or countries, go ahead and you can ask me. You can even play stump the candidate if you want to. But we are ready to serve.

(END VIDEO CLIP

KING: Todd Harris, forgive me, was that question answered?

TODD HARRIS, REPUBLICAN STRATEGIST: Look, Larry, I'll happily take her two years of executive experience as Governor of Alaska to the year and a half that Obama was in the Senate before he ran off to --

KING: The question was, Todd, why didn't she answer the question?

HARRIS: Well, look, if you're going to compare foreign policy experience, Larry, she's got --

KING: That wasn't the question. The question was, what is your foreign policy experience? She didn't ask about Barack, she asked about her.

HARRIS: Well, and I would say compared to Barack Obama, she's got just as much experience as he does. And in terms of our entire ticket, when you've got John McCain and Sarah Palin, in terms of their foreign policy experience, in terms of their ability to keep this country safe, I feel very comfortable with where they are. But I'll tell you, if the Democrats want to make this an election about experience, I think they're making a huge mistake.

KING: OK. The question was asked, though, by a person at a town hall meeting. Paul, what did you make of the answer?

PAUL BEGALA, DEMOCRATIC STRATEGIST: You know, it was a non- answer. But that's a step up from her previous answer, which was preposterous. Her previous answer was, you know, from parts of my state, you can see Russia. Well, you know, from my backyard I can see the moon, but I'm not an astro-physicist. It's silly.

And Todd makes a good point. This is not necessarily about her qualifications. It's about John McCain. What kind of man at age 72, after four bouts of cancer, knowing he's got a 50/50 chance of being president, chooses somebody to be potentially the vice president of the United States, potentially even the president, based on one meeting two years ago and one phone call? He had no idea whether she was qualified when he chose her. And now I think we're learning perhaps she's not.

KING: Andrea, John McCain picked up the baton for her. This was part of his answer at the same place. Watch.

(BEGIN VIDEO CLIP)

MCCAIN: And I'm proud of her obvious knowledge of this nation's energy needs because that's a national security issue. I also know, if I might remind you, that she's commander of the Alaska National Guard.

(END VIDEO CLIP)

KING: Does that work, Andrea?

ANDREA TANTAROS, REPUBLICAN STRATEGIST: Larry, look, we know that Sarah Palin doesn't have as much experience as someone like John McCain on foreign affairs. We all know that. But, you know, you want to talk about policy, I think silly policy, as Paul pointed out, is meeting with terrorist leaders without any kind of precondition. So I would rather have a candidate at the top of the ticket who is stronger on foreign policy and has the right position than somebody who has the absolute wrong positions.

I mean, Democrats had the chance to nominate someone who was experienced. That was Hillary Clinton. And they didn't do so. They nominated someone who on day one has zero foreign policy experience. Like Todd said, if you want to get into this debate about foreign policy experience and experience in particular, you're on shaky ground.

KING: Of the four, Stephanie, doesn't Joe Biden have the most?

STEPHANIE MILLER, RADIO TALK SHOW HOST: Yes, I'm so scared of that clip. I would like you to hold me, Larry. I hope you don't mind. I'm terrified. Like Paul Begala said, by the way, I saw on the ocean on the way here, so I would like to be secretary of the Navy. That is terrifying. She did not answer the question and that is completely untrue. Barack Obama has been in the Senate. He has worked on loose nukes legislation with Senator Lugar. It is preposterous to say he has no foreign policy experience.

That -- what you just saw is what is terrifying to people about Sarah Palin. She is completely unqualified.

KING: Todd, is this going to get rougher?

HARRIS: Oh, I think so. We still have 50 some days left and you're already seeing -- you know, there was a shameful new Obama ad that just went on the air today. It's in Spanish, so it's not getting a lot of coverage in the mainstream media. But it accuses, you know, John McCain of walking lock step with people like Rush Limbaugh on the issue of immigration. And it's just an outright lie and they feel like they can get away with it because it's in Spanish. People aren't paying attention. They're not going to get away with it.

Yes, Larry. On both sides this is going to get really ugly.

KING: A major Hillary Clinton supporter defects to McCain. We'll discuss it next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JOE BIDEN (D), VICE PRESIDENTIAL CANDIDATE: Just as George Herbert Walker Bush was nicknamed Bush 41 and his son was known as Bush 43, John McCain, if he wins, will easily become known as Bush 44.

PALIN: Americans are tired of the old politics as usual. And that's why we need that reform to get there. We need to take the maverick of the Senate and put him in the White House.

(END VIDEO CLIP)

(NEWS BREAK)

KING: A major Hillary Clinton supporter, lady Lynn Forester de Rothschild, who was a major involvement in the Hillary campaign, has jumped ship and endorsed John McCain. Paul, what do you make of that?

BEGALA: I think McCain's lucky to have her. I think she's a very bright person. I know her. She's a very capable person. But, you know, I don't think that she's bringing a lot of people with her. In other words, for every one person who say jumps on the Democratic party, there's probably four or five or six ten Republicans who are saying, I've had enough of Bush and I don't want a third term of Bush, who say that they want somebody who has engaged in the economy and understands it.

When McCain went out the other day and said the fundamentals of the economy are strong, that was the biggest gaffe I've seen in a presidential campaign since Gerald Ford back in 1976 said the Soviet Union didn't dominate Eastern Europe. The fundamentals of the economy are strong. That's what Herbert Hoover said. I wrote it down. He said, the fundamental business of this country is on a very sound and prosperous basis. He said that after the stock market crashed in 1929.

So if you liked Herbert Hoover, you're going to love George Bush and John McCain.

KING: Andrea, do you regard this as significant?

TANTAROS: Not so much. I think a lot of women have already moved over to John McCain's side. I think one of the reasons for that is they see how Democrats are vilifying Sarah Palin the way they did Hillary Clinton. A lot of this has nothing to do with issues. A lot of women are upset and they're angry and they're connecting with Palin on a gut level. Maybe it's not even Palin. Maybe they're just tired of the way the Democrats are behaving. I can't really blame them.

But I do think -- you know, I watched her interview with Campbell Brown tonight. She didn't really offer any too compelling of a reason. I couldn't really make out why she had made the switch. She didn't really discuss issues. So for her separately, I'm not really sure why she made the move, but other women, they're moving over.

KING: Stephanie, you know?

MILLER: I know because Lady Rothschild, the billionaire, who is married to another billionaire, said that Barack Obama is an elitist.

KING: That was the reason she gave?

MILLER: She said that he's an elitist and you know it when you see it.

TANTAROS: That's my point, I'm not seeing any kind of compelling reason for her specifically. But other women, yes.

KING: All right. Todd, Obama has --

TANTAROS: It's not a not a good sign for Democrats. Come on, Stephanie, you can't defend that.

KING: Obama has a new two minute ad up offering some specifics. Let's watch it Todd, and get your reaction.

(BEGIN VIDEO CLIP)

OBAMA: Here's what I believe we need to do: reform our tax system to give 1,000 dollar tax break to the middle class, instead of showering more on oil companies and corporations that outsource our job; end the anything goes culture on Wall Street with real regulation that protect your investments and pensions; fast track a plan for energy made in America.

(END VIDEO CLIP)

KING: Todd is it going to come down to the debates?

HARRIS: Oh, I think so. Of course we all thought it was going to come down to the conventions and then the debates. Now, the conventions have come and gone and we are pretty much exactly where we were before they started. The debates are going to be critical. I think that ad is probably a smart move for Obama, because I think the economic crisis over the last several days, frankly, has thrown him off balance a little bit.

First, you had him today or yesterday taking credit for the economic stimulus package which he had nothing to do with. He didn't even show up to vote for. Then he launches this ridiculous ad on pay equality for men and women, when John McCain pays women in Senate office more on average than he pays women, and yet Barack Obama pays women, on average, 9,000 dollars a years less than he pays women.

Today, Obama says he doesn't know enough about the government rescue of AIG to really have an opinion about it. I think going up on TV with an ad like this probably a good move, saves him a little bit.

KING: Paul?

BEGALA: I can't wait for the debates. I suspect Senator Obama, probably Senator McCain too -- these two able people -- can't wait to get at it, too. I got to tell you, the harmonica never sounds so good when it is the other guy's harmonica in your mouth. In other words, every time McCain says he is for change, it is kind of preposterous. It is silly.

Let me try something here. McCain saying change is like me saying a word that has no application to, like say, Clooney. Clooney, Clooney, Clooney. Am I getting any better looking, Steph? Clooney, Clooney, Clooney.

MILLER: Yes. It's working.

BEGALA: It's sill.

MILLER: I'm hypnotized.

BEGALA: Every time McCain says it, I'm sorry, I bust out laughing. Barack Obama is real change. You may not like the change he embodies. Some right wingers won't. I think most people in America agree we need change and I they like what Obama is offering. When they see those two guys side by side, they're going to say I get who is the old guard and I get who is change. I think Obama is going to move up after the debates.

HARRIS: I don't know, Paul, I think you are a very good looking man.

BEGALA: Clooney, Clooney, Clooney.

MILLER: Keep your hands off him. He's mine.

KING: We'll have Andrea and Stephanie take that on right after this. Don't go away.

(COMMERCIAL BREAK)

KING: Andrea, do you think the debates are going to decide this?

TANTAROS: Yes. I think they're going to play a huge role in this. I think you're going to see a lot of people watch Barack Obama and see if he can actually perform without a teleprompter. I think you are going to see people watch John McCain to see how he does outside of a town hall setting. I think the big draw is going to be the vice presidential candidates, absolutely. They're going to be watching. All eyes on Sarah Palin. The stakes are high, and all eyes are going to be on Joe open mouth, insert foot Biden. I can't wait.

MILLER: I'm preparing my drinking game now for the Palin debate. I cannot wait, Larry.

TANTAROS: You are going to need a stiff drink, Stephanie.

MILLER: Come on. This clip you played earlier is the first time she has been off script. It is going to be no mas. It is going to be -- I just think it's really going to be entertaining.

KING: The vice presidential debates, few people remember them. This one will be remembered.

MILLER: This goes directly to John McCain's judgment, Larry. It also -- this is someone a heartbeat away from the presidency with a man that is 72 and has had cancer four times. And all of that is relevant. It goes right to his judgment. By the way, I can see the freeway from my house. I would also like to be secretary of transportation.

TANTAROS: I have been to Germany so I guess that makes me a foreign policy expert.

MILLER: If you are Sarah Palin.

TANTAROS: How many people did Obama speak in front of? Two hundred thousand. I guess that makes him a foreign policy expert as well. Wait, his words were -- no, Stephanie, his words were I lived in Karachi, Pakistan for three weeks. I spent a spring break there. That makes me a foreign policy expert more than Hillary Clinton and John McCain.

MILLER: He didn't say that makes me a foreign policy expert.

KING: In fairness, Andrea, speaking in Germany he didn't say now I'm a foreign policy expert. That's unfair. Just because he spoke there doesn't make him a foreign policy expert.

TANTAROS: They are making jokes about their expertise. I'm just saying, Barack Obama, he went to Germany, is he an expert now? Two years in the Senate, I don't think that constitutes -- you said earlier, Stephanie, two years in the Senate, he worked on nuke bills.

MILLER: The Foreign Relations Committee

(CROSS TALK)

BEGALA: One thing that Barack Obama did. I supported Hillary Clinton in the primaries. But when all the smart guys and gals in the Democratic party supported President Bush and John McCain's dishonest march to warm, Barack Obama had the judgment to see that it was a bad idea for America. And he took on his own party and opposed that war. Many of the leaders in my party, John Kerry, Hillary, who I love, John Edwards, many of the leaders in my party supported that war.

Where has Sarah Palin disagreed with her party on foreign policy?

TANTAROS: It is easy at the time to take a stand now and play revisionist history. BEGALA: No, he took it at the time. It was realtime in 2002.

TANTAROS: It was unpopular.

BEGALA: The war was very popular.

TANTAROS: His position has gone in all different directions.

BEGALA: I understand. When has Sarah Palin spoken out on a foreign policy issue in contraposition, in opposition to her party?

HARRIS: I'm not sure how tough it was to come out against the Iraq war when you are representing a state Senate district in the middle of Chicago. It is not exactly like you are making national security decisions.

BEGALA: When has Sarah Palin taken on her party on a matter of foreign policy?

HARRIS: In terms of taking on the Republican party, Sarah Palin took on Ted Stevens, Don Young, Frank Murkowski.

BEGALA: She chaired a PAC for Ted Stevens. She chaired a special interest group for Ted Stevens. That is not foreign policy.

HARRIS: There is a trail of bodies all through Alaska of establishment figures, many of them Republican, who have been sucking at taking at the public trough that Sarah Palin took on as governor.

HARRIS: That is foreign policy?

HARRIS: I didn't realize that was the requirement to take on your own party on foreign policy.

BEGALA: I'm just saying Barack Obama showed real prescience and real guts.

HARRIS: When has Joe Biden taken on the Democratic party on foreign policy?

MILLER: Guess what, Todd, you don't have to take on your own party when they are right on everything. John McCain has had to take on his party because they were wrong. Now he's flip flopped on everything he ever took his party on on.

KING: Thank you, group.

BEGALA: Clooney, Clooney, Clooney.

HARRIS: You are a good looking man.

MILLER: I love you.

KING: Todd Harris, Stephanie Miller, Andrea Tantaros. Thank you all. There is still time to take or vote, who will make a better vice president Palin or Biden? Go to CNN.com/LarryKing right now. Tell us. While you're there, check out our upcoming guests and sent them an email. Tomorrow, we're going to keep you on top of all the latest in the financial and political news departments. That's LARRY KING LIVE Thursday. Right now Anderson Cooper and "AC 360."

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