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AMERICAN MORNING

Financial Crisis Deepens; Changing Grades in Texas; Candidates Argue for Their Economic Plans

Aired September 18, 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: "Not only is his legislative record scant on issues that make a difference in their lives, but his current campaign is based mainly on an assumption of his transcendence." How is he elitist?
LYNN FORESTER DE ROTHSCHILD, FORMER HILLARY CLINTON FUND-RAISER: An elitist is someone whose state of mind is that they're better than the rest of us. And my point in that piece was that while Barack Obama wants crowds and he is the one, he's calmed it down because the polls show people don't like it. But he's going to resort to mean if he's ever made president. And as president, he will be very full of himself.

So what is -- so that is elitist, OK. To be privileged is not elitist is the point I make in that piece. John McCain grew up in a privileged background, family of admirals. As a prisoner of war --

ROBERTS: Because some Democrats on Capitol Hill suggested that it's kind of ironic that somebody with the last name of "de Rothschild" is accusing Barack Obama of being elitist.

DE ROTHSCHILD: I know, I know. Let's get beyond the label. I am a girl from New Jersey, a middle class family. My father worked two jobs, four kids, went to college, law school. I earned a good part of the fortune that we have.

ROBERTS: Certainly.

DE ROTHSCHILD: I know the American dream.

ROBERTS: You are certainly making a lot of noise out there in the political world. Lynn Forester de Rothschild, good to see you again. Thanks for coming in.

DE ROTHSCHILD: Thanks.

ROBERTS: All right.

DE ROTHSCHILD: It's great to see you.

ROBERTS: Kiran?

KIRAN CHETRY, CNN ANCHOR: Well, coming up in about 20 minutes, we're going to talk to Susan Eisenhower. She was a long time Republican who made the switch the other way and is supporting Barack Obama. So it will be very interesting to get her take as well. Meanwhile, breaking this morning, millions concerned about their financial futures. President Bush will be holding an emergency meeting with his economic advisers today. He cancelled a trip to Alabama and Florida after the Dow plummeted 450 points, the second huge dive this week.

The Secret Service requesting copies of e-mails from Governor Sarah Palin's hacked Yahoo account. A Web site posted screen captures of it and even some private family photos. The McCain campaign calls it a shocking invasion of privacy. The e-mails raised new question about Palin's use of a private e-mail account for state business, official state business.

And the first morning commute on the new I-35W Bridge in Minneapolis is under way. It opened about an hour ago. The bridge was rebuilt stronger with new sensors after the old one collapsed into the Mississippi River a year ago. Thirteen people were killed in that catastrophe.

A warning that we're going to need more airports is coming from the acting head of the FAA. He says the number of air travelers could double to one billion annually over the next decade. Two major airports in Chicago may not be enough to handle that. Also, New York and Atlanta may need new airports or major expansions of the old ones.

ROBERTS: 449 points, Wall Street sinking us deeper into a financial crisis. An $85 billion government bailout actually ended up worrying investors yesterday. This morning more pressure on the markets, more worries about your retirement, and more banks possibly looking for buyers.

Our Ali Velshi live with us this morning from the New York Stock Exchange. What's it's looking like today, Ali, because people are waking up this morning and saying what's next?

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Yes. You know, what it's looking like, John, is a very different thing than what may end up being the case. But we do have futures a little bit higher right now. Not as high as they were earlier. We had a very rough night overnight. But really, the story is what happened yesterday.

When you woke up yesterday, you would have had the impression that the previous day the U.S. government had extended a loan of $85 billion to insurance giant AIG and things might be a little calmer. Let me show a picture of what was happening.

Our cameras were stationed on the big board through the course of the day and look at what was going on. It was rough all day but then all of a sudden it just became a lot rougher. Finally ending the day, 449 points lower on the Dow. That is a drop of four percent, a little over four percent. The Nasdaq saw a drop of 4.96 percent, and the S&P 500 4.7 percent.

I don't mean to throw all these numbers at you in the morning, but it's just to understand when you look at your own 401(k) and its performance, that is in line with a lot of stuff that's going on. So there are a lot of other people sharing your pain this morning.

Now, there are some reasons that things are looking a little better this morning. One of them is that overnight a number of central banks in the world have decided to inject $247 billion into the banking system and that is so that banks can borrow money on an overnight basis to make sure that they have the reserves that the law requires them to have. The U.S. Federal Reserve, the Bank of Canada, Bank of England, European Central Banks, Swiss National Bank, Bank of Japan -- all part of this concerted global effort to try to make things better for you.

What does it mean to you? It means right now that if you were to sell your stocks, you lock in the losses that you would have taken. That's not advice not to sell them. It just means to say that this is a very volatile market and there are a number of people who expect that at some point when prices go low enough, there might be some sort of a snap-back rally and people will start to reinvest in stocks. Maybe we're closer to the bottom than the top but there's still probably more to come -- John.

ROBERTS: Ali Velshi for us this morning at the New York Stock Exchange "Minding Your Business" and watching out for you this morning. Thanks, Ali.

CHETRY: You know, there's been a worldwide financial ripple effect in response to the U.S. crisis. European markets rebounding slightly. London's index was in the red most of the night before hitting positive territory. Spain also down most of the night.

Further East stocks struggled to break even. Japan's index taking a huge hit, and the same story in Indonesia. But there was an amazing late day comeback in Hong Kong. We're using the worldwide resources of CNN to check in on markets across the globe, and we start with Kyung Lah in Tokyo.

KYUNG LAH, CNN TOKYO CORRESPONDENT: John and Kiran, there is a typhoon approaching Tokyo but that pales in comparison to the financial typhoon in the market. The Nikkei closed out 2.2 percent. That is a three-year low. The slide bounce from yesterday erased.

Investors here in Japan remain unconvinced that the AIG rescue will do little to stop the hemorrhaging on Wall Street. There is a persistent concern here in Japan that the U.S. economy may be fundamentally sick. Traders now are just trying to get through this week without another massive blow.

The pain was felt across the region. In Hong Kong, they also took a beating. Our colleague Andrew Stevens continues our global coverage -- Andrew.

ANDREW STEVENS, CNN CORRESPONDENT: An extraordinary day of trading here in Hong Kong. At one stage, the Hang Seng index was down more than seven percent as the fear and the crisis of confidence in Wall Street rolled across trading desk of Hong Kong.

But just before the close, a complete turn around. News that central banks around the world were combining to pump money into the financial system sent buyers on a spree. The Hang Seng finishing at just about breakeven point after being down seven percent, a truly extraordinary day. Now, let's go over to Jim Boulden in London.

JIM BOULDEN, CNN LONDON CORRESPONDENT: Now, European shares this lunch hour up about one percent across the board. They are being buoyed by this interjection of all these billions of dollars of cash by the U.S. Federal Reserve going to the banks like the Bank of England and the European Central Bank. That's helping to calm fears over after these last few very rough days. Also helping a huge merger here in the U.K. between two commercial banks, a merger unthinkable even a week ago. However, the failure of Lehman Brothers has changed all the rules and they are allowing this merger to go ahead. John, Kiran, back to you.

ROBERTS: Forty-seven days to go now until Election Day. And the brand new CNN poll of polls showing that there is not any breathing room. For the first time since September 7th, Senator Barack Obama is ahead of Senator John McCain, 46 to 45 percent. Nine percent of voters say they still aren't sure who to vote for.

And with the nation in a financial tailspin, Barack Obama sees an opening. He blasted John McCain in front of a big crowd in Las Vegas, ground zero for the mortgage meltdown.

Suzanne Malveaux is live on the campaign trail for us there this morning. What do people want to know and are they listening, Suzanne?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: John, they're definitely listening. I mean, this is really a full-court press by the Obama campaign. You've got e-mails, you've got rallies. There is this new ad that's really blitzing the air waves in these key battleground states.

What Barack Obama is doing is using this Wall Street crisis really as a rallying cry, calling for change but change with the economy. Obama is pushing for greater regulation and oversight of these financial institutions to restore confidence in the market. Now he says this is something that John McCain would be reticent to do. And Obama says that he doesn't blame John McCain necessarily for the financial crisis, but what he does say is that John McCain has spent 26 years in Washington, so why would voters expect anything different? Why would they not expect more of the same? Take a listen.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: This is somebody who has been in Congress for 26 years, who put seven of the most powerful Washington lobbyists in charge of his campaign. And now he tells us that he is the one who's going to take on the old boys' network. The old boys' network in the McCain campaign, that's called a staff meeting.

(END VIDEO CLIP)

MALVEAUX: Now, John, that is actually a new line that's he's testing out. These zingers really, what they are about is trying to get voter's attention, trying to reach out and trying to relate to people here saying essentially that he's got the plan that is going to work, that is superior to John McCain and that John McCain is out of touch.

You should know here that at least in Las Vegas things are really pretty tight for folks here, especially retirees, looking at their nest eggs disappearing. The government of Nevada has even asked for some money, a grant from the Housing Department to try to help out folks here -- John.

ROBERTS: So he made a couple of stops there in Nevada not just in Las Vegas where he was on pretty friendly territory but also in Elko, Nevada, where folks, well, really aren't convinced let's say about a Barack Obama candidacy. Can he really make some headway with that crowd?

MALVEAUX: You know, the strategy here is obviously to push for in those Democratic counties like Las Vegas but try to flip, try to turn some of those other Republican strongholds. One of them is Elko County.

And, John, this is amazing, because really it's a two-to-one Republican to Democrats. And most Republican candidates there, they win by 80 percent of the vote. But they believe that if he visits and that if he puts forward this message, this kind of populist message that he's going to break through, they think that's a winning strategy to win Nevada -- John.

ROBERTS: Suzanne Malveaux for us this morning, up early in Las Vegas covering all the politics in the morning. Suzanne, thanks so much.

CHETRY: Senator John McCain tried to sell his economic plan in the battleground state of Michigan. It's a place that has the highest jobless rate in the nation. And running mate Sarah Palin also faced her first town hall.

Dana Bash is live for us in Grand Rapids this morning. Was it a mostly friendly crowd, or did she get any hardball questions from voters there?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: You know, Kiran, I've been to several, more than my share of McCain town halls. I've seen them get some tough zingers, but it didn't happen last night. For Sarah Palin's first town hall, she got -- she had an audience that was basically encouraging her at many points to answer some of her criticism as she tried to show that she's just fine outside of what had been largely controlled venues.

(BEGIN VIDEOTAPE)

BASH (voice-over): He was wrapping up his answer to the first voter question about confronting radical Islamic terrorism and she jumped in.

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: But I know a great deal about it. I know how to handle it, and I know how to defeat it. But it's not going to be a short struggle. Thank you.

GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: I want to add something to that.

MCCAIN: Always.

PALIN: Sometimes my running mate is a bit too humble. We need to remember who it was who pushed for and supported and risked much for the strategy that is working in Iraq and that is --

BASH: Sarah Palin playing character witness for John McCain. But her first town hall meeting was as much about beefing up her chops as his. And McCain carefully deferred to Palin on issues he wants her to take on, like energy.

PALIN: We have hundreds of trillions of cubic feet of clean green natural gas onshore and offshore. It's a matter of Congress allowing these lands to be tapped --

BASH: And this from a former Hillary Clinton supporter.

UNIDENTIFIED FEMALE: My question is, equality for women begins with economic empowerment. Can you give us some details?

PALIN: I'm a product of Title Nine in our schools where equal education and equal opportunities in sports really helped propel me into, I guess into the position that I'm in today, where --

MCCAIN: Could I mention, she was point guard on a state championship basketball team.

BASH: The first question specifically directed at Palin was the seventh one asked -- what she says to those who want to know if she can balance it all.

UNIDENTIFIED FEMALE: I'm a mother. I just wanted to hear your response to the people out there that have said that you can't be a mother and the vice president, which of course you can.

PALIN: Well, let's prove them wrong. And just I'm very, very blessed to have this opportunity.

BASH: Palin was asked about one issue where the running mates disagree.

UNIDENTIFIED MALE: Have you been able to convince the senator on drilling in ANWR.

PALIN: I'm still working on it.

UNIDENTIFIED MALE: And the next question is --

MCCAIN: This town hall meeting is adjourned.

(END VIDEOTAPE) BASH: And Palin was also asked by a clearly friendly questioner what she says to those who don't think she has enough foreign policy experience. That person even asked her to give some specifics.

Her answer, she said, Kiran, that she's ready and then she even offered to play what she called stump the candidate. But it didn't happen. McCain kind of stepped in and gave some points on her resume like the fact that she helped negotiate with oil companies to build a natural gas pipeline in her state and after that they moved on.

CHETRY: And, Dana, you know as well as everyone, we always analyze every single movement and every single nuance of the candidates. But it really seem -- for two people that didn't know each other that well, let's say a month or two ago, they really seem to have chemistry. He seems to be almost a different person when she's around.

BASH: You know, that is an excellent point. It's a very, very good point because it's something that we have been definitely noticing on the campaign trail. It's one of the reasons why she is around much more than probably any vice presidential and presidential team in history, the two of them are campaigning together.

But the way that they had the banter last night, it was almost like, at some point, it was almost like a little bit of a comedy team. But you know, it definitely showed the reason why he likes to have her by his side when he's campaigning. He definitely is a lot looser, no question about it.

CHETRY: All right. Dana Bash for us in Grand Rapids, Michigan this morning. Thanks.

Here's a look at what we're working for you this morning as well. We have an A.M. reality check, Barack Obama's claim that President Bush and John McCain are one and the same. Has McCain really voted with the president 90 percent of the time? We're going to talk about that.

ROBERTS: The Wasilla Sports Complex. Sarah Palin's legacy in Wasilla, Alaska. But some people are saying that she mishandled her biggest project. You're watching the "Most News in the Morning."

(COMMERCIAL BREAK)

CHETRY: It's 18 minutes past 7:00 here in New York City and the same in Atlanta where Rob Marciano is checking on the weather. You guys had a really nice day yesterday...

ROB MARCIANO, AMS METEOROLOGIST: Yes.

CHETRY: ... down in Atlanta enjoying some 70s?

MARCIANO: Yes, that's a rare event. I mean, we're trying to get into fall here and we're getting some fall-like weather across the eastern third of the country. It will be cool everywhere, the northeastern third and then dropping again down to the south. Meanwhile, blazing hot out west in through the Pacific Northwest where some temperatures got into the 90s and even up over 100 degrees. It's been hot and dry. Low humidity and fires have been a problem.

Some video out of Mount Hood, Oregon, where there is a fire there in the northeastern flanks of that mountain. About 18 homes were evacuated. It's near the Cooper Spur Ski Resort there, and they had the planes dropping the fire retardant. There is also a fire down near Bend, Oregon, where 120 evacuees are hoping to get back to their homes here in the next day or two.

It will be a little bit less hot today, but look at these numbers from yesterday. 102 in Monument, Oregon; Madras, Oregon, 94; 93 degrees in Bend; and Colville, Washington, 92 degrees.

Some high temperatures today might cool. 72 in Chicago. It will be 74 degrees in New York. Oh, oh, warming up to 81 degrees in Atlanta. That's a heat wave.

You know, in the weather-geek world, Kiran, we just specifically think of September as being the start of fall, even though it really officially doesn't begin until September 22nd. So enjoy the cool air that's rolling your way.

CHETRY: That's right because you weather geeks may feel that way, but we broke out our turtlenecks anyway because, hey, it's down right chilly.

MARCIANO: You know, fall is the stylish time of the year, you can't help yourself.

CHETRY: It certainly is. One more week and the boots come out. Rob, thanks.

MARCIANO: See you.

ROBERTS: Sarah Palin's pet project.

(BEGIN VIDEO CLIP)

BRUCE URBAN, WASILLA, ALASKA RECREATION MANAGER: She really was very, very passionate about this.

(END VIDEO CLIP)

ROBERTS: Building Wasilla's sports complex.

Randi Kaye talks to critics who are crying foul.

(BEGIN VIDEO CLIP)

PATRICIA FAYE-BRAZEL, WASILLA RESIDENT: It wasn't done correctly. And now we have more debt and more legal fees, more problems.

(END VIDEO CLIP)

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

(COMMERCIAL BREAK)

ROBERTS: Twenty-three minutes after the hour now. Welcome back to the "Most News in the Morning."

There has been a lot of focus on Sarah Palin's experience as a small town mayor. And as our Randi Kaye reports for us now, not all residents of Wasilla, Alaska, are pleased with Palin's most lasting accomplishment.

(BEGIN VIDEOTAPE)

RANDI KAYE, CNN CORRESPONDENT (voice-over): The big attraction in the small town of Wasilla, Alaska, is this sports complex. It has a soccer field, a running track, an indoor hockey ring with heated seats. It was Sarah Palin who pushed to build it when she was mayor here from 1996 to 2002. Supporters call it her lasting legacy, her crowning achievement.

BRUCE URBAN, WASILLA, ALASKA RECREATION MANAGER: She was very, very passionate about this right from the start.

KAYE: But Palin's passion, some residents say, clouded her vision. Missteps left the town paying a much higher price for the land and huge legal bills.

PATRICIA FAYE-BRAZEL, WASILLA RESIDENT: She did leave it with debt. It wasn't done correctly. And now we have more debt and more legal fees, more problems.

KAYE: In 2002, Palin urged residents to approve a 25 percent sales tax increase to cover the $14.7 million bond to build this place. They did by fewer than 20 votes. The problem? Not all the land belonged to Wasilla and it would cost a bundle to get it.

UNIDENTIFIED FEMALE: I really think that there was probably quite a bit of money wasted there.

KAYE: Diane Woodruff (ph) has been a long-time critic of Sarah Palin.

UNIDENTIFIED FEMALE: I'm curious as to why somebody in the previous administration didn't make sure that we had clear title before they started building. Because certainly once we started building, we were over a barrel.

KAYE: Over a barrel because someone else said the land was his. This man, Gary Lundgren. We tracked him down in Central America. Turns out, in 1999, the Nature Conservancy was negotiating to sell the land to both Wasilla and to Gary Lundgren. The difference was the town hadn't signed a purchase agreement for all the land it need. Lundgren had.

GARY LUNDGREN, FIGHTING WASILLA FOR LAND: We were the successful bidder.

KAYE: The town immediately sued. A federal court finally sided with Lundgren saying the city had never signed the proper papers.

(on camera): By then, construction was underway. That's right. Even though the title to the land was being challenged in court, Mayor Palin gave the go ahead to break ground.

LUNDGREN: Oh, when they started building, the title to the land was in my name. Really the city never had clear title to the property underneath the sports complex until this year, 2008.

KAYE (voice-over): After Palin left office, Wasilla sued once more under Mayor Dianne Keller. But getting the land would prove expensive.

(on camera): With construction underway, Wasilla really had no choice but to cut a deal. So it agreed to pay Lundgren over $800,000 and that's just for the land. The town also had to pay Lundgren's attorneys fees and interest on the land, another $700,000.

(voice-over): Lundgren also says at least twice he offered to give the city some of the disputed land free if they just stopped suing.

LUNDGREN: They turned the offer down. They said they needed more than 20 acres.

KAYE: Wasilla's former lawyer tells CNN he has no recollection of an acceptable offer from Lundgren. The rub for residents, records show the city originally paid $145,000 for part of the land. With a settlement and all those fees, Wasilla's bill so far is more than $1.5 million.

UNIDENTIFIED FEMALE: She inherited the city with pretty much no debt, and all of a sudden we have a lot of debt. I don't think that that labels her as a true fiscal conservative.

MAYOR DIANNE KELLER (R), WASILLA, ALASKA: I think that this is a community dream. It may have been a part of Sarah Palin's dream, but it was not her, only her dream.

KAYE: Mayor Dianne Keller sees Palin's signature project as a boom because it's brought in more than $3 million for local businesses. Others agree.

LANEVA WILKES, WASILLA RESIDENT: Oh, yes, it's worth it. It's going to make it back. I mean, it's a place for us to come and use, and for us to enjoy for many years.

KAYE (on camera): While the complex is getting plenty of use, Wasilla may have to open up its checkbook again. Gary Lundgren has appealed to the Alaska Supreme Court challenging the value of the land.

Randi Kaye, CNN, Anchorage, Alaska.

(END VIDEOTAPE)

CHETRY: Broken schools.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I need to have guidelines and a little bit of pressure. I mean it's tough out there.

(END VIDEO CLIP)

CHETRY: A kid's dream come true. The city where students get a do- over if they fail a test and homework doesn't count.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: They seem to be wanting to lower the bar.

(END VIDEO CLIP)

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

(COMMERCIAL BREAK)

JOHN ROBERTS, CNN, ANCHOR: 30 minutes past the hour now. And here are this morning's top stories. The Secret Service is requesting copies of emails from Governor Sarah Palin's hacked yahoo! account. The website posted screen grabs of it and even some private family photos. The McCain calls it a shocking invasion of privacy. The emails raised question of Palin's use of a private email account for official state business.

The first morning commute on the new I-35 W Bridge in Minneapolis. It opened about an hour and a half ago. The bridge was rebuilt stronger and with new sensors after the old one collapsed into the Mississippi River a year ago killing 13 people.

And America deeper in financial crisis this morning after the Dow drops 450 points yesterday. More banks may be looking for buyers. Ali Velshi, "Minding your Business" is live at the New York Stock Exchange for us this morning. How is today looking, Ali?

ALI VELSHI, CNN, SENIOR BUSINESS CORRESPONDENT: Well, it's starting to look, the day is mixed. We don't know where things are going. We're digesting two pieces of information. First the news yesterday about a massive fall on the Dow, again for the second time this week. Take a look at the numbers. The Dow falling 449 points. That's a little more than four percent. The Nasdaq falling almost five percent. The S&P 500 falling 4.7 percent. That's the bad news.

It started to trickle over into Asia overnight. But then recovered on the news that several Central Banks are getting together to try and infuse about $250 billion into world financial systems and try and prop up banks that might be getting into trouble. So we're trying to figure out which way things are going to go today.

I should tell you there were some people buying things yesterday and those things were oil and gold and other commodities. Oil jumped about $6 yesterday and gold had its single biggest one day gain ever, gaining $70. So, there are people moving their money into some places where they can make money. I'm going to be answering questions today, John, because people have a lot of questions at 11:00 Eastern time on "Issue #1" on CNN Radio. The number is there on the screen. 877- 266-4189. We invite your phone calls. We invite your emails. I know it's hard to make sense of this. We'll work through it together, John.

ROBERTS: All right. Looking forward to it. Ali, thanks so much for that. People looking for as much information as they can possibly get. You're helping us out this morning. Appreciate it.

KIRAN CHETRY, CNN, ANCHOR: Well, a life long republican whose name is synonymous with the party switches sides. Not only is she voting for Barack Obama, she even spoke at the democratic convention. Susan Eisenhower, the granddaughter of President Dwight Eisenhower and also the president of the Eisenhower Group, Inc., joins me now from Washington. Thanks for being with us this morning, Susan.

SUSAN EISENHOWER, OBAMA SUPPORTER: Nice to be with you, Kiran.

CHETRY: First explain to us a little bit about why you were a republican? What were the ideals and the values that you found attractive that brought to you the republican party?

EISENHOWER: Well, actually I sort of was raised in the republican party. My grandfather brought the republican party back from the abyss after the great depression. Won election in 1952. And I've been a life long republican ever since until about a month ago.

CHETRY: And why do you think Barack Obama better represents those values or possesses those values to make you choose to vote for him?

EISENHOWER: Well, first of all, he's got a great grasp of the global strategic picture and America's place in that. This is critically important during this crisis. We have many issues that we're dealing with here in this country and it's going to bring somebody with great intellect, agility, knowledge and the capacity to bring people together to prioritize the various problems we're facing.

CHETRY: We just spoke with a democrat, Lynn Forester Rothschild she was one of Hillary Clinton's top fund raiser. She has now decided to vote for John McCain. Let's listen to a little bit as to what she said about why.

(BEGIN VIDEO CLIP)

LYNN FORESTER DE ROTHSCHILD, FORMER CLINTON SUPPORTER VOTING FOR MCCAIN: Who knows how to lead. Who will reach across party lines. And who will take on special interests. And John McCain has a record of doing that. And Barack Obama has the rhetoric of doing it.

(END VIDEO CLIP)

CHETRY: What's your response to democrats who are now throwing their support behind John McCain?

EISENHOWER: Well, I would like to make two points. First of all, I can imagine why Hillary Clinton supporter would support John McCain. They bear no resemblance to each other in terms of policy issues. Let me just say this thing about reaching across party aisles. John McCain never reached in my direction at all.

And yet it was Barack Obama who called me a year and a half ago seeking my expertise in the area of Russia and energy which is my specialty. The truth of the matter is that John McCain reaches across party aisles when he finds somebody who agrees with him. Barack Obama has had, I think, a remarkable capacity to bring people of differing views together. He's a great synthesizer. And I think he knows where he wants to take this country.

CHETRY: She always said she changed her support because she believes, this is De Rothschild again, that she believes Obama is an elitist. On Tuesday night he attended a Hollywood fundraiser, Barbara Streisand through that where donors paid $28,500 per plate. Does he risk being seen as out of touch with the voters?

EISENHOWER: Well, I don't know how he could be out of touch from voters. He comes from the humblest of circumstances and I think it's rather remarkable. He goes to a fundraiser like the one in California and everybody there is going to be paying higher taxes. 90 percent of the American public is not going will not have their tax raised. But people like Barbara Streisand again will pay more taxes.

Listen, I think Barack Obama here is the man to lead us through this crisis, John McCain has been a long time advocate of deregulation and finally the republican party is going have to be held accountable, really for this financial crisis. This is a very, very serious thing and I think we have to stop this name calling because the American people want to know how we're going to get through this crisis.

CHETRY: And when it comes from that we're hearing from both candidates talking about more regulation, more checks, more transparency. Essentially they are really talking about trying to do the same thing, what makes you believe Barack Obama is going to be able to do it and John McCain will not?

EISENHOWER: I think we need to put this into perspective. You know what we did actually. We dismantled the safeguards that had been established after the Great Depression. So when we're talking about regulation, we're talking about reinstating safe guards that are forbearers understood were critical for bringing about transparency and checks and balances in a system that is by definition, you know, prone towards profit taking and in some cases irrational exuberance. We need to have those checks back in place. We need those safe guards. And the American people are going to suffer from that dismantlement. That's very clear.

CHETRY: Susan Eisenhower, Obama supporter. Thanks so much for being with us this morning.

EISENHOWER: Thank you.

ROBERTS: 37 minutes after the hour. An "AM Reality Check" now. A new ad from Barack Obama repeating a popular campaign line, John McCain votes with President Bush 90 percent of the time. We find out if that is the truth.

CHETRY: Also is it cold in here or is it just your social life? There's new research shows giving somebody a cold shoulder can literally give them the cold shoulder.

(COMMERCIAL BREAK)

ROBERTS: Sorting fact from fiction is not always an easy thing to do on the campaign trail. And by the way, we're running the traps on something that Lynn Forester said about regarding pay equity in the Obama and McCain operations and the number of women that each respective Senate office and campaign has working for them.

Meantime, sometimes statements are ads by the candidates can be misleading or taken out of context. Other times they are just plain wrong. Our Alina Cho is here with another "A.M. Reality Check." And good morning to you.

ALINA CHO, CNN, CORRESPONDENT: Hey, good morning, John. You call it the truth squad, right? A really useful tool for voters. And good morning, everybody. We are starting today with an ad from Barack Obama. It's called honor. And the campaign released it on Monday. The ad repeats a claim we've heard many times before, linking John McCain to President Bush. Take a listen.

(BEGIN VIDEO CLIP)

ANNOUNCER: Truth be damned, a disgraceful, dishonorable campaign. After voting with Bush 90 percent of the time proposing the same disastrous economic policies it seems deception is all that he has left.

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Several weeks ago I received --

(END VIDEO CLIP)

CHO: That 90 percent number. We heard a lot about it. The reality check is that we looked into this with "Congressional Quarterly," the non-partisan publication has been analyzing congressional voting records for more than half a century and they say it is true. Since President Bush took office McCain has voted for bills the President supported 90 percent of the time. But what many of you may not know is that they also look at the records of Barack Obama and Joe Biden and some of you may be surprised to hear as you see there on your screen, that Biden sided with Bush 52 percent of the time, Obama 40 percent. Of course as you see there, McCain 90 percent. That's something the ad doesn't tell you. 90 percent claim does pass our reality check, of course, because we're keeping an eye on both sides of the aisle.

Next hour we're going to have a reality check on something that McCain is saying about Obama, the comments about nuclear power and whether Obama is truly against it. Energy policy, of course, another hot button issue, John. We're going to be looking at it in the next hour.

ROBERTS: It's always important to do reality checks in a lot of statements because some things are just kind of thrown out there and -

CHO: Yes, as we've been saying. You know, a lot of things sound outrageous and too good to be true. The truth is sometimes they are true, sometimes not. And that's why we're keeping an eye on it.

ROBERTS: Well, typically in commerce if something sounds too good to be true it usually is.

CHO: It usually is.

ROBERTS: Alina, thanks so much for that. 42 minutes after the hour. You're watching "the most news in the morning."

(BEGIN VIDEOTAPE)

CHETRY (voice-over): Feeling left out? How social pressure at work might make you feel more than just alone. And might even have you craving soup for lunch. You're watching the most news in the morning.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

CHETRY: Welcome back to "the most news in the morning." It's time now for our series of special reports on broken schools. The Dallas school system unveils a new grading policy. So will it help kids learn or is it actually go too easy on them. Our Ed Lavandera is looking at the debate and he joins us live in Texas this morning. Hi, Ed.

ED LAVANDERA, CNN CORRESPONDENT: Good morning, Kiran. You know just a few weeks before the school year started Dallas school officials announced this new policy and it has sparked widespread criticism from teachers and parents as well. Dallas school officials say it will help students succeed. Critics say it's just dumbing down the education system.

(BEGIN VIDEOTAPE)

LAVANDERA (voice-over): Dallas school officials announced a new controversial policy this year outlining how teachers will award grades on tests and homework. Some of the changes, two in particular have left many parents and teachers baffled as to how the new policy will help students succeed.

First Dallas students who fail a test can now retake it and get the higher grade. Secondly, homework scores can only be used to raise the grades of elementary and middle school students. Bad scores are essentially thrown out. However for high school students the homework scores are left to the teacher's discretion. It all seems unreal to some parents.

BOBBIE WILHITE, PARENT: I think it's ridiculous. I really don't - they need to have guidelines and a little bit of pressure. I mean it's tough out there once you get out of high school. We're already nancy pansy enough for our kids. LAVANDERA: For those who helped write the new policy say the new grading system will make sure students don't fall behind.

JEROME GARZA, DISD TRUSTEE: What we're really interested in are the children learning? And if they're not we need intervention immediately. This system does that.

LAVANDERA: The new policy also limits the number of homework hours that can be assigned to students and in many cases also requires teachers to call parents before giving their children a zero on a test or assignment. The idea is to focus more on learning rather than consequences for behavior.

JON DAHLANDER, DALLAS INDEPENDENT SCHOOL DISTRICT: This is not about giving anybody any sort of free ride. What this is about is giving students a second chance to be successful.

LAVANDERA: But critics say getting work done right and on time and accurately should be the measure of success and this new policy doesn't push students to work harder.

DALE KAISER, TEACHER'S UNION: Instead of setting the high expectation and the high standards and holding them to that, we seem to be wanting to lower the bar and give them an excuse not to succeed.

(END VIDEOTAPE)

LAVANDERA (on-camera): And school officials have said that what is driving this is the extraordinarily high dropout rate here in the Dallas school district, one of the highest in the state of Texas, so supporters of this was program hope that this will keep kids in school, help them succeed. As you've heard these critics just worry that they will take the easy road and not challenge themselves. Kiran.

CHETRY: Ed Lavandera for us, thank you.

ROBERTS: Sometimes dangerous relationships. That's how one top diplomat calls our dealings with Russia. His boss, Secretary of State Condoleezza Rice is there this morning getting ready to deliver a major speech. And newly released 911 calls this morning from the deadly California train crash. The frantic calls from survivors just seconds after the collision. You're watching "the most news in the morning.".

(COMMERCIAL BREAK)

ROBERTS: Coming up on 10 minutes now to the top of the hour. The cold shoulder. It may be more than just a metaphor. There is new proof that social isolation can actually make you feel cold and even make you want something warm to eat. Our medical correspondent Elizabeth Cohen joins us now from the CNN center. I guess that's why they call it comfort food, Elizabeth.

ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: That's right. There's a reason why for the most part comfort foods are warm, John. All these expressions like he's a cold person, I feel cold and lonely, there may be biological underpinnings to it. Researchers did a fascinating experiment. They had people play a game and they made sure that someone was excluded. And then after that, they offered the excluded person snacks.

And here are the snacks that they offered them. They offered them coffee and soup, apples, crackers, soda. And they chose the warm ones. The excluded people wanted coffee and they wanted soup. Folks who were not excluded from the game had no preference. Warm, cold, didn't matter to them.

Now, what are those biological underpinnings that I was talking about? You know what would be behind all this? What would be behind all this is that there is an area of the brain called the insula. And that area controls both - it's going to light up in yellow in a second. That area controls both physical and emotional aspects of temperature. So socially, physically, a lot of that is happening right there in the insula. John.

ROBERTS: Fascinating stuff. Elizabeth, thanks so much for that.

COHEN: Thanks.

(BEGIN VIDEOTAPE)

CHETRY (voice-over): Unscripted. Governor Sarah Palin faces her first town hall.

GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: I'll be ready. You can even play stump the candidate if you want to.

CHETRY: With a tag team partner.

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Governor Palin and I will not raise anyone's taxes.

CHETRY: And passing the buck.

UNIDENTIFIED MALE: We're borrowing more money every time we do one of these bailouts.

CHETRY: How China and the Middle East are literally owning us as the bottom falls out on Wall Street.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JAY LENO, HOST, "THE LATE NIGHT SHOW": The stock market crashed this week. But market analysts are not calling it a crash. They're calling it a correction. Oh, shut up, a correction. You never hear that at Nascar. We had a fiery correction on turn three. Four men are dead.

(END VIDEO CLIP)

ROBERTS: The markets and the economy are the talk of the late night shows this week, trying to make some humor out of the situation there.

As Wall Street makes a second major nose dive in three days. That happened yesterday down almost 450 points. Both John McCain and Barack Obama making the statement that they are the better candidate to take over the tumultuous economy. Well, are they?

Joining me now to talk about that CNN political contributor and republican analyst Leslie Sanchez and CNN political contributor and democratic strategist Robert Zimmermann. So the question that hasn't really been fully answered - let me throw it out there, do either one of these candidates have a plan to handle what's happening right now.

LESLIE SANCHEZ, REPUBLICAN ANALYST: It's a great point. I think what John McCain is trying to do is show solutions in terms of taking on not only Wall Street but taking on K Street. He's talking about keeping tax rates low, what he can do to eliminate the fraud in the system and be -

ROBERTS: Long term, though?

SANCHEZ: Well -

ROBERT ZIMMERMAN, DEMOCRATIC STRATEGIST: Leslie, you got more specifics than the McCain campaign has. Douglas Holtz-Eakin, who is the senior economic adviser for John McCain said in the "Washington Post" yesterday, we don't need to get into specifics. It's about leadership. Rick Davis, the campaign manager for John McCain said this is about personalities. It's not. It's about trying to find solutions for a middle class that's facing its greatest economic crisis in a generation.

John and you have a philosophical difference. John McCain has been a champion of deregulation and, in fact, Senator Barack Obama has been for two years now warning economic leaders about this crisis in the foreclosure market.

(CROSSTALK)

SANCHEZ: I think that - John, that's an exaggeration. I mean, if you really want to look at the fundamentals, here's Barack Obama. The problem is you can't understand how raising taxes is going to help people in a tough economic crisis.

(CROSSTALK)

ROBERTS: Hang on. He's only raising taxes on those that make more than $250,000.

SANCHEZ: I'm really glad you said that. He's raising it on dividend income. He's raising it on small business owners. You think of the fact that 34 million small business owners can claim their earnings as personal income taxes. If I can, Robert - I mean, those are people who are significantly going to be -

ZIMMERMAN: No more caffeine for you this morning. That's it.

SANCHEZ: - affected. He's not talking about reducing deficits. He's not talking about balancing the budget.

ZIMMERMAN: Excuse me, Leslie -

SANCHEZ: Everybody has to deal with the problem.

ZIMMERMAN: I think it's important to remember that John McCain has not yet defined how his economic program in any way differs from the Bush policies for the past eight years. And that is really the issue here.

ROBERTS: Let me interject this question if I could, regarding John McCain, he was a champion of deregulation. Can he suddenly turn around and say now I am in favor of regulation, I am the person to fix this problem?

SANCHEZ: You know, I think in that approach you're looking fundamentally at whose going to have - and I go back to judgment and leadership and finding the right solution here. I don't think there's any kind of easy way through that process and I don't think that even John McCain can move away from that. But I think fundamentally people are trying to say who's got the right solution, who's going to balance this budget -

ZIMMERMAN: No, Leslie. It's about oversight and regulation. And John McCain, if he had the character and leadership he claims he does, he would step up and say, you know, I pursued, I was a champion of deregulation. We have different times and need different standards. He still refuses to address his own record which means there's not much credibility going forward. When in doubt, you -

(CROSSTALK)

ZIMMERMAN: Socialism -

SANCHEZ: No -

ROBERTS: What about experience here, Robert? Does Barack Obama have the depth of experience regarding the economy to instill the confidence in people that they need to vote democratic this November even though the democrats historically had an edge on the economy?

ZIMMERMAN: He does clearly by showing the right type of judgment. I mean, think about it two years ago -

ROBERTS: Where's the track record?

ZIMMERMAN: The track record is two years ago he introduced legislation to take on the foreclosure crisis. He called for the economic leadership of the White House to come together with the key stakeholders to address the collapse of home mortgage -

ROBERTS: But didn't a lot of democrats also stand in the way of regulatory reform for Fannie Mae and Freddie Mac?

ZIMMERMAN: Let's be realistic. This went back to Lyndon Johnson when he tried, when he tried to - ROBERTS: Finance five or six years.

(CROSSTALK)

ZIMMERMAN: We had many democrats. Barack Obama is not one of them. And we have a difference here where we've seen John McCain -

ROBERTS: Major contributors to his campaign, though.

ZIMMERMAN: Well, let's put it in perspective. Even though he received contributions as has John McCain, look at their positions. John McCain still insists upon championing the deregulation process.

SANCHEZ: You know, the bottom line is, in many cases Barack Obama overstates his significance, his resume. I mean, did you see when he was talking about he was responsible in a large part to the economic stimulus package. That was basically -

ROBERTS: John McCain invented the blackberry, I heard.

SANCHEZ: No, he did not. That is not fair.

ZIMMERMAN: John McCain -

SANCHEZ: Look at the bottom line. Whose plan makes the most sense? Barack Obama has all these great ideas for social programs, you know, more federal money but he doesn't talk about how he's going to pay for it. Everybody else has to live in a budget, why can't he?

ZIMMERMAN: You know how John McCain is going to do it?

ROBERTS: All right.

ZIMMERMAN: We've seen eight years of the Bush administration. Let's look at McCain's record.

ROBERTS: Let's look at the overall picture. 80 percent of people in this country think that the country is going in the wrong direction. What we're seeing in the financial markets in the past few days, is that going to reinforce that notion and will that put more pressure on the party in power? Because economic times are bad, party in power doesn't typically do very well.

SANCHEZ: That is exactly correct. People want to punish the party in power. All indications there John, this should be a democratic year. Why is this race 50/50? A lot of it has to do with the fact that people aren't yet convinced that Barack Obama is the right steward of our economy and our security.

ZIMMERMAN: Leslie makes a very important point here. And that is clearly, the country wants to move in a new direction. And these debates are really going to define which type of leadership each party represents in terms of moving the country in a new direction. So I think it's fair these debates are going to be very telling and, in fact the American people are still making their decision. ROBERTS: We're going to have to stop there. You got the first word, Robert got the last word. Thanks for being with us this morning, Robert Zimmermann, Leslie Sanchez. Always great to see you both.

ZIMMERMAN: Thank you.

ROBERTS: Kiran.

CHETRY: We have breaking news this morning. Dow futures up more than 100 points right now after three days of turmoil on Wall Street. What will come this morning? European markets also trading up right now. In Asia, the Hang Seng was flat, the Nikkei down about two percent.

The White House is changing the way it describes the economy labeling it resilient enough to withstand shocks to the system. Up until now, the administration had said that the fundamentals of the economy were strong. President Bush meantime is canceling trips to Alabama and Florida today. He's going to be staying in Washington to consult with economic advisers.

Also, new this morning, 911 tapes just released from inside of that Metrolink train seconds after that deadly crash just north of Los Angeles Friday.

(BEGIN AUDIO TAPE)

CALLER: We just collided with something. I don't know what... we have a lot of... I've got several people who are injured and bleeding.

OPERATOR: Can you tell me how many people are hurt?

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