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THE SITUATION ROOM

Election Continues With the Focus on The Economy; President Bush Tries to Ease Fear of Economic Hardships

Aired September 18, 2008 - 16:00   ET

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


WOLF BLITZER, CNN ANCHOR: Thanks very much, Rick. Happening now, the Republican's one-two punch at the economy. John McCain and Sarah Palin get tough, they're hammering Barack Obama's response to the AIG bailout. We're about to hear live from Senator Obama, he's speaking. We're going to hear his response to those tough words.
Also, President Bush tries to ease America's growing financial jitters and show he understands that times are tough but Democrats and even McCain suggest Mr. Bush still is part of the problem.

They're the new it group of voters, that would be Wal-Mart women. Are they buying Sarah Palin's regular folks' appeal? I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Stocks rebounded big-time today, the Dow Jones industrials ending just up more than 380 points only a minute ago. Prices pushing up near the closing bell by a report that the federal government is considering creating a repository for bank's bad debts. We'll have much more on this breaking sorry that's coming up.

But fears still run deep that another big name financial firm will need propping up or could go belly up. John McCain is trying to discourage voters from taking their economic pain out on him and the Republicans. So he and his running mate Sarah Palin are sharpening their criticism of Barack Obama and Joe Biden. Listen to this.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R-AZ) PRESIDENTIAL CANDIDATE: Today, Senator Obama's running mate said that raising taxes is patriotic. [ Shouts of no ] Raising taxes in a tough economy isn't patriotic. It's not a badge of honor. It's just plain dumb.

(END VIDEO CLIP)

BLITZER: All right. Senator Obama is speaking now in New Mexico. He's thanking a lot of people for showing up. We're going to go there. Let's listen in to Senator Obama right now.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: -- most serious financial crisis in a generation. Perhaps the worst since the great depression. Three of America's five largest investment banks have failed or been sold off in distress. Our housing market is in shambles. Monday brought the worst losses on Wall Street since the day after September 11th. And the fed has had to take unprecedented action to prevent the failure of one of the largest insurance companies in the world from causing an even larger crisis.

Just this morning, we learned that the fed had to act with central banks around the world to maintain the functioning of our financial system. So everywhere you look, the economic news is troubling. But here's the thing for so many of you here in northern New Mexico and for so many Americans. This isn't really news at all because you've been going through hardships for a lot longer than Wall Street has. You know, 600,000 workers have lost their jobs just since January. Home values are falling. Your paycheck doesn't go as far as it used to.

It's never been harder to save or to retire. To buy gas or groceries. And if you put it on a credit card, they've probably raised your rates. In so many cities and towns across America, it feels as if the dream that so many generations have fought for is slowly slipping away. So I know these are difficult days, New Mexico. And I know there are a lot of families out there that are feeling anxiety right now about their jobs, about their homes, about their savings, about their retirement. But here's what I also know, this is not a time for fear, it's not a time for panic. This is a time for resolve and it is a time for leadership.

(APPLAUSE)

OBAMA: I know that we can steer ourselves out of this crisis. That's who we are. That's what we've always done as Americans. Our nation has faced difficult times before, and at each of those moments, we've risen to meet the challenge because we've never forgotten that fundamental truth, that here in America, our destiny is not written for us, it's written by us. That's who we are as Americans. But here's another thing that I know. We can't steer ourselves out of this crisis by heading in the same disastrous direction. We can't change direction with a new driver who wants to follow the same man. And that's what this election is all about. John McCain, my opponent, his first reaction --

(BOOS)

His first reaction to this crisis on Monday was to stand up and repeat the line that he said over and over again throughout this campaign. We counted it, he said it 16 times and I quote, "The fundamentals of the economy are strong." Now, this comment, this comment was so out of touch that even George Bush's White House couldn't agree with it when they were asked about it. They had to distance their self from John McCain.

But -- but the truth is, John McCain's attitude is nothing new. It reflects the same economic philosophy that he's held for 26 years, all the time that he's been in Washington. It's the same philosophy he shares with George Bush. It's the philosophy that says, we should give more and more to those with the most. And hope that prosperity trickles down like rain on top of us. It's the philosophy that says even common sense regulations are unnecessary and unwise.

We can't mess with the marketplace. It's a philosophy that lets Washington lobbyists shred consumer protections and distort our economy so it works for the special interests instead of working people. That's the philosophy John McCain believes in. He's always believed in it. He spent decades in Washington talking about it, supporting financial institutions who have promoted this philosophy instead of their customers. Phil Gramm, one of the leading architects of deregulation in Washington that led directly to this mess on Wall Street also happens to be the architect of John McCain's economic plan.

There was talk that John McCain wanted to put him in charge of the treasury department if John McCain was elected. Now, you may remember Phil Gramm. He's the guy who said that we're going through a mental recession. It's all in your head. And he's also the same man who called -- who called the United States of America a nation of whiners. That's who John McCain listens to. He's consistently opposed the sorts of common sense regulations that might have set out some rules for the road for these financial institutions and lessened the current crisis. When I was warning about the danger ahead on Wall Street months ago, because of the lack of oversight, Senator McCain was telling "The Wall Street Journal" and I quote, "I am always for less regulation." This is what he said just a few months ago.

Except now, with the magnitude of the crisis apparent even to the Bush White House, John McCain wants to reverse himself. He wants to reverse course. Now all of a sudden, he has become a populist. Now he's unleashed an angry tirade against all the insiders and lobbyists who happen to have supported him for the last 26 years. The same folks who are running his campaign right now.

So, on Monday, he said the economy was fundamentally sound and he was fundamentally wrong. On Tuesday, he said the government should stand aside and allow one of the nation's largest insurers, AIG, to collapse. He said this in three different interviews. Despite the possibilities that it would put millions of Americans at risk. But by Wednesday, he said he had changed his mind. And today, he accused me of not supporting what the treasury and the federal reserve bank did with AIG despite no evidence whatsoever that that's what I had said. He said he would take on the old boys' network.

But he seemed to forget that he took seven of the biggest lobbyists in Washington and put that network in charge of his campaign. You know, when those seven lobbyists are getting together, that's what's called a McCain staff meeting. John McCain can't decide whether he's Barry Goldwater or Dennis Kucinich.

(APPLAUSE)

OBAMA: He's not clear about what he thinks or what he believes. Well, i have a message for Senator McCain. You cannot just run away from your long-held views or your lifelong record. You can't erase 26 years of support for the very policies and people who helped to bring in some of the problems that we're seeing. You can't just erase all that with one week worth of rants.

What we need is honest talk and real solutions. Now, Senator McCain's first answer to this economic crisis was, get ready for this, a commission. That's Washington speak for we'll get back to you later. Folks, we don't need a commission to spend a few years and a lot of taxpayer money to tell us what's going on in our economy. We don't need a commission to tell us gas prices are high or that you can't pay your bills. We don't need a commission to tell us that you're losing your jobs. We don't need a commission to study this crisis. You don't need somebody to write a report to tell you that unemployment is tough up here in northern New Mexico. Or that unemployment is bad on Indian country. You don't need a report for that. What you need is a president who will solve it, and that's the kind of president I intend to be!

(APPLAUSE)

OBAMA: Now -- now, you know, I think even McCain's people realize this commission thing, that dog wasn't going to hunt. So, instead today, he said that he is calling for the firing of the securities and exchange commissioner. Well, I think that's all fine and good. But here's what I say. In the next 47 days, you can fire the whole trickle down on your own look the other way crowd in Washington who has led us down this disastrous path. Don't just get rid of one guy, get rid of this administration, get rid of this philosophy, get rid of the do nothing approach to our economic problems, and put somebody in there who's going to fight for you! Now, let's be clear. Let's be clear. What we have seen in the last few days is nothing less than the final verdict on an economic philosophy that has completely failed.

It is George Bush's philosophy, it is John McCain's philosophy, and I am running for president of the United States because the dreams of the American people can't be endangered anymore. It's time to put an end to a broken system and a failed philosophy that's breaking the American economy. It's time for change that makes a real difference in your lives. By the way, you notice that John McCain also has been stealing my lines. Have you noticed that? I've been talking about change for two years now. Talking about change when we were up, talked about change when we were down. John McCain I thought he was running on experience. Right? You remember all that? Suddenly he's got, on his ad he's got the change we need. He's starting to talk about turn the page. I guess imitation is the best form of flattery, but you know what? I don't want him stealing my lines. I want him to steal some of my ideas. Change isn't just a slogan. Change is actually having some ideas to move the country forward.

You know, it was two years ago that I introduced legislation to stop mortgage transactions that promoted fraud risk or abuse. It was one year ago that I called on the treasury secretary and our fed chairman to bring every stakeholder together and find a solution to the subprime mortgage meltdown before it got worse. It was in March when John McCain was saying I'm always for less regulation that I called for a new 21st century regulatory framework to restore accountability and transparency and trust in our financial markets.

You know, the events of the past few days have made clear that we need to do more. We don't have time for commissions. We can't afford to lurch back and forth between positions depending on the latest news of the day when dealing with an economic crisis the way John McCain has. We can't be lurching around. We need some clear and steady leadership and that's why I was ahead of the curve in calling for regulation and that's why I'm calling on the treasury and the federal reserve to use their emergency authorities to maintain the flow of credit, to support the availability of mortgages and to insure that our financial system is well capitalized.

Tomorrow, I'll be convening a meeting with my top economic advisers. Former secretary of the treasury, former heads of the federal reserve bank to discuss a plan based on the ideas I've been talking about with former Fed Chairman Paul Volcker and other advisers of mine. And then I'll call for the passage of a homeowner and financial support act that would establish a more stable and permanent solution than the daily improvisations that have characterized policy making over the last year. Now, specifically here's what we need to do. Three primary goals we need to accomplish.

First, we will provide capital to the financial system. Second, we will provide liquidity to enable our financial markets to function. And third, we will do what I've been calling for since I supported legislation on in early last spring which is to get serious about helping struggling families to restructure their mortgages on affordable terms so they can stay in their homes. We've made a good start. But we need to do much, much more. We cannot forget that there are many homeowners who are in crisis through no fault of their own and a solution that does not have them at its core is no solution at all.

Now, that's just in terms of dealing with the immediate financial crisis, but we've had a longer running crisis for a very long time before this latest problem on Wall Street. You know it in your own lives. Your wages and your incomes haven't gone up. Jobs have been shipped overseas. Millions of people across the country don't have health care. Young people can't afford to go to college. So we need to strengthen our economy overall from the bottom up. To jump start, to jump start this process, to get job creation going. I've proposed a $50 billion emergency economic plan that would save 1 million jobs by rebuilding our infrastructure, repairing our schools, helping our states, helping our local communities avoid damaging budget cuts. To help people stay in their homes, I'll change our bankruptcy laws because you know what, right now, if you have one house that you own and you get into financial trouble, a judge cannot modify your mortgage in bankruptcy.

But get this, if you have seven homes, then the judge can modify your second home, your third home, your fourth, your fifth, your sixth and your seventh. Why is it that folks with seven homes get more of a break than folks with one? That doesn't make any sense and we're going to change that when I get to Washington as president of the United States.

The same is true on interest on your mortgage. You know right now, if you've got a big house and you itemize your deductions, you get to take your interest off your taxes but if you take a standard deduction because you just have a regular old house then you don't. That's going to change. What I'm going to do is I'm going to offer a tax credit to struggling families that will take 10 percent off your mortgage interest rate whether you are filing a standardized deduction or an itemized deduction, you're going to get a break. I'm going to institute a home score system that will help every consumer figure out whether they'll be able to make their mortgage payments before they buy their house, and I will crack down on predatory lenders who all too often have been targeting the Hispanic community with tough new penalties that will treat mortgage fraud like the crime that it is.

But the most important thing I'll do as president is restore opportunity for all Americans. To get our economy growing, we need to recapture that fundamental American promise that if you work hard, you can pay your bills. If you get sick, you won't go bankrupt. That you can send your child to get a great education at a public school and that you can go to college even if you're not wealthy and that you can have a legacy of greater opportunity for future generations. That's the American promise, that's the change the American people need. And that's what I will provide when I'm president of the United States.

BLITZER: So there you have it, Barack Obama delivering his response to John McCain and Sarah Palin earlier today. They went full force against him and Joe Biden. You saw their remarks live here on CNN, and now Barack Obama has responded in kind. Lots to digest and we're about to do that digesting that's coming up. Ed Henry is standing by, he's covering the McCain campaign.

The former secretary of defense, William Cohen, is here as well let's go to Jack Cafferty right now, Jack's got "The Cafferty File." He came out swinging today, too, as did McCain earlier in the day -- Jack?

JACK CAFFERTY, CNN ANCHOR: Well, it's unfortunate but this calamity that has befallen Wall Street and these investment banks in the last week or so has handed Barack Obama and the Democrats a golden opportunity to stand up and say this is what eight years of Republican economic policy has gotten the country. And if you vote for McCain, you can have some more.

So I mean, it's a stroke of good fortune if you're running for president as a Democrat, it's really rotten luck for most of the rest of the country. But those of you keeping score at home, so far this year, the U.S. government has agreed to shell out about $800 billion in loans and bailout packages. That includes everything from a $300 billion handout to help struggling homeowners refinance mortgages they never should have gotten in the first place to the $85 billion loan Uncle Sam is extending to the insurance company AIG. Not exactly chump change.

On Tuesday, John McCain said he opposed the taxpayer bailout of AIG. A day later, he changed his mind saying the government had no choice but to come to the rescue. Barack Obama has not directly addressed the bailout question but Obama contends the anti-regulatory stance of Republicans in the White House and congress is the reason that we're in this mess. And while his vice presidential candidate Joe Biden said on Tuesday he did not think the government should rescue AIG, the Obama/Biden camp acknowledged a day later as well it had to be done to protect the economy.

So here's the question: Has the growing financial crisis changed your mind about who to vote for, for president? Go to cnn.com/caffertyfile. You can post a comment on my blog -- Wolf?

BLITZER: See you in a few moments, Jack. Thanks very much. Remember, CNN carried the McCain speeches and the Palin speeches earlier today. That's why we decided to bring you what Barack Obama had to say, as well. And we're also standing by to hear from Joe Biden. He's going to be speaking out later today, as well.

President Bush meanwhile is changing his tone when it comes to talking about the economy. We'll take a much closer look at what he's saying about the crisis on Wall Street and how much weight his own words will carry.

And Sarah Palin, you know, she's out on the campaign trail, she's taking questions, but she's had a -- she had a time answering one question a little bit of tough time answering one question in an area of her expertise. We'll assess that.

And stand by for my interview with Donald Trump. He'll be live here in THE SITUATION ROOM. We'll talk about Wall Street's meltdown and his new endorsement in the presidential race. Lots coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

All right. So now we've heard from John McCain and Sarah Palin earlier and today we just heard a tough response from Senator Barack Obama. We're standing by to hear from Joe Biden, as well.

But let's go to Ed Henry, he's covering the McCain for us. He's out in Cedar Rapids, Iowa, right now. Earlier in the day both McCain and Palin they came out swinging and at one point Senator McCain said that Joe Biden's tax policies in his words were dumb. Strong words from a supposed friend of Joe Biden.

ED HENRY, CNN CORRESPONDENT: You're absolutely right, Wolf. It's interesting, I think Senator McCain realizes he may pay a political price for this economic crisis so he came out much tougher today, much more focused in pushing back against both Senator Obama and Joe Biden calling the idea what Joe Biden had said it would be patriotic for wealthy Americans to pay more in taxes, McCain said that would be a dumb idea but also that it would further hurt an already damaged economy.

He also lashed out at Senator Obama for being indecisive and not giving a clear position on where he stands on the AIG bailout. Finally, McCain was tough and unexpectedly came out and sort of lashed out at one of President Bush's advisers to sort of separate himself from the White House. Take a listen to this.

(BEGIN VIDEO CLIP)

MCCAIN: The chairman of the SEC serves at the appointment of the president and in my view has betrayed the public trust. If I were president today, I would fire him.

(END VIDEO CLIP) HENRY: Now, one potential problem though, Democrats pointing out that because of a mid-1930 supreme court decision, it doesn't appear necessarily that the president has the technical power to fire the head of the SEC. What legal experts are basically saying is look, it appears that the president could in fact remove someone like Chris Cox as chairman of the SEC, but not remove him from the actual securities and exchange commission. Sort of a complex legal thing. The bottom line is what John McCain is trying to do there is to try and separate himself from an unpopular White House over the economy -- Wolf?

BLITZER: Ed Henry, stand by. We're going to be getting back to you, as well thank you.

And to our viewers, you're in THE SITUATION ROOM. Happening now, lots. The Wall Street investigation among other things, is the Dow's roller coaster ride being manipulated? New York's attorney general is looking into whether some traders are trying to drastically drive down the stock price of top companies like Goldman Sachs and AIG.

The great depression of 2008? Some economists were warning we may be in the worst financial crisis since the 1920s. But there may be a big difference that could head off economic disaster. We're working the story.

And John McCain making waves in Spain. And it's not just what he said, it's what he didn't say.

I'm Wolf Blitzer, you're in THE SITUATION ROOM.

Many Democrats are blaming President Bush for steering the U.S. economy into dangerous territory. And even John McCain is pointing a finger directly at the White House as you just heard in Ed Henry's live report. Today, the president tried to tamp down the nation's financial jitters and in turn, the criticism of his leadership.

Let's go live to our White House correspondent Elaine Quijano, she's working this story for us. He came out early in the morning, he made a statement it seemed a change in tone, but tell us what he said Elaine?

ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Well, a slight change in tone certainly Wolf. President Bush dampening down -- the pep talk, if you will.

We should tell you that he just wrapped up a meeting this afternoon -- it lasted about 40 minutes -- with his treasury secretary, Henry Paulson. Also attending that meeting were the Fed Reserve chair, Ben Bernanke, and SEC Chair Chris Cox.

Now, no readout given, but, clearly, the administration is trying to figure out its next steps in dealing with the financial crisis.

(BEGIN VIDEOTAPE)

QUIJANO (voice-over): There was no pep talk from President Bush, instead, measured tones, with just four months left in office. GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The American people are concerned about the situation in our financial markets and our economy. And I share their concerns.

QUIJANO: Canceling a trip to Alabama and Florida, the president monitored the markets from Washington, and huddled with his treasury secretary, Henry Paulson. In the wake of the Fed's rescue of insurance giant AIG, the president defended the government's response.

BUSH: These actions are necessary, and they're important.

QUIJANO: But justifying government intervention marks a radical departure from only a year ago.

(BEGIN VIDEO CLIP)

BUSH: The government's got a role to play, but it is limited. It's not the government's job to bail out speculators.

(END VIDEO CLIP)

QUIJANO: Now the sunny outlook the president projected just this summer...

(BEGIN VIDEO CLIP)

BUSH: I believe the foundations of this economy are strong.

(END VIDEO CLIP)

QUIJANO: ... has given way to a grim reality...

BUSH: Our financial markets continue to deal with serious challenges.

QUIJANO: ... and unanswered questions about what's next.

QUESTION: Is the economy still sound, Mr. President?

QUIJANO: To that question, some analysts say, the bottom won't come until Washington puts together broader plans to tackle underlying issues.

DESMOND LACHMAN, RESIDENT FELLOW, AMERICAN ENTERPRISE INSTITUTE: That's not going to happen before around about March of 2009.

(END VIDEOTAPE)

QUIJANO: Meantime, fellow Republicans are blasting the Bush administration, questioning why taxpayer dollars are being used to bail out private firms, and they say officials did not consult with them ahead of time. But the White House says, officials did the best that they could amid the fast-moving crisis -- Wolf.

BLITZER: All right, Elaine, thanks very much. Let's assess what's going on with the former Defense Secretary William Cohen, a former U.S. senator. He's chairman and CEO of the Cohen Group here in Washington.

First of all, you were a Republican member of the House, a member of the Senate a long time. We're seeing these Republicans, including Republican leaders, now coming out pretty -- pretty critical of the president himself.

WILLIAM COHEN, CNN WORLD AFFAIRS ANALYST: Well, Wolf, I said for many, many years, government is always the enemy, until you need a friend.

And I think that has been the posture, I think, of too many political leadership, always pointing the finger, saying, get government off our backs. You're nothing but a bunch of bureaucrats.

Well, bureaucrats are public servants, civil servants. The government is necessary. You can't have a totally unlimited free market economy without the government having some regulatory responsibility.

(CROSSTALK)

BLITZER: So, what you're saying is, all this deregulation in recent years, some of it may have been counterproductive.

COHEN: What you need is a Goldilocks solution, not too heavy, not too light, not too hot, not too cold, something in which there is a regulatory scheme which in fact does oversee the responsibilities of the Congress and also the administration, to make sure that you don't have cowboys, basically, ignoring the fundamentals of our economy.

We also have to get back to something called self-discipline. We have lost that sense of self-discipline at the local level, at the national level, in the financial markets. Where is the sense of we have a need for a balanced budget? We have had our vice president in the past say, deficits don't matter.

I'm from Maine. We believe that deficits do matter at the state level. I think they matter at the federal level. So, we have sort of taken our foot really off the brake and said anything goes. And what we have got to get back to is a rational policy of self-discipline, self-respect for the fundamentals of what has made this country strong.

BLITZER: You know, it's interesting. Earlier in the week, here in THE SITUATION ROOM, Carly Fiorina, former chairman of Hewlett- Packard, now a top adviser, economic adviser, to John McCain, she pinned a lot of the blame on what's going on with the SEC and its chairman, the former Republican Congressman Chris Cox of California.

And, today, John McCain went one step further -- further, in saying, Chris Cox, he should be dumped. He should be fired. He's no good.

The White House later issuing a statement, they have confidence in the chairman of the SEC.

This is pretty extraordinary stuff.

COHEN: Well, of course, the president appointed Chris Cox for the very reason he felt that he was someone that the president had confidence in that could in fact carry out his responsibilities. So, for those turning against Chris Cox now, I think it's much broader. I think it goes to the fundamental philosophy we need to reexamine, saying, we need a free economy -- free market economy, but there's got to be the hand of regulation involved as well.

That applies to the environment. It applies to virtually everything that affects our lives.

BLITZER: Well, you just heard Barack Obama's response to all of this. Basically, he said, yes, fire this guy, but fire them all. All of these Bush administration officials, they are no good. Get a new -- clean house, in other words, elect him and Joe Biden.

What did you think of his solutions that he outlined in -- in that speech?

COHEN: Well, I haven't had a chance to really study the solutions. I heard them as they were being delivered.

But I think it was probably for the first time he's given some real specifics in terms of what he would do, not waiting until next year, but rather putting his economic team together. I think that Senator McCain has to the same thing, saying, here are the specific things that I would do, not just reform, but tell me what you do in the way of reform...

(CROSSTALK)

BLITZER: Because I think the American public right now is nervous, and they're hungry for specific details. They want to -- and they want to weigh these two guys and see who's going to be a better steward of our money of, of our tax dollars, if you will.

COHEN: They want two things. They want a solution to be found. They also don't want to see it politicized too much. What they want is an answer now. How do we put a tourniquet on in the immediate term?

We will sort this out by election time. The debates will help, other issues. But, in the meantime, we have got to stop the bleeding right now. And, so, they're going to look for temporary solutions, and then the politics will sort itself out.

BLITZER: Secretary Cohen, thanks for coming in.

COHEN: Pleasure to be here.

BLITZER: As governor of Alaska, Sarah Palin prides herself in knowing about energy issues. We're on the ground in Alaska. We're checking her record against the remarks she made that's raising some eyebrows.

And, later, he knows money, and he knows politics. That would be Donald Trump. He's standing by live to talk to us about the presidential candidates. Who's best prepared to repair the economy? My interview with Donald Trump, that's coming up later -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Time and time again, the McCain campaign has claimed that the Alaska governor, Sarah Palin, is a leading expert on energy issues, since Alaska is an important oil-producing state.

But, when asked a specific question from a friendly audience at a town hall meeting yesterday in Michigan, Governor Palin gave what some consider to be a rather clumsy answer.

Listen to this.

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL NOMINEE: Oil, of course, it's a fungible commodity, and they don't flag, you know, the molecules where it's going and where it's not.

But, in the sense of the Congress today, they know that there are very, very hungry domestic marks that need that oil first. So, I believe that what Congress going to do also is not to allow the export bans to such a degree that it's American who's get stuck holding the bag, without the energy source that is produced here, pumped here. It's got to flow into our domestic marks first.

(END VIDEO CLIP)

BLITZER: All right, not exactly easy to understand what she was saying, but the question would be, would there be some sort of ban on exporting new drilled U.S. oil, if that were to take place? And she gave that answer that a lot of people see as rather clumsy or convoluted.

Let's go out to Anchorage, Alaska, right now.

Jessica Yellin is standing by.

Jessica, you heard her answer to that question, hard to understand. There were some nuggets in there. But, when people say that she is an expert -- McCain says she's one of the world's leading experts on energy -- what do they base that on?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Wolf, they base it on the fact that Alaska is a major contributor to the U.S.'s oil supply.

But I have to point out, Sarah Palin has had a few bloopers even on that point. On her two TV interviews, the two TV interviews she's granted, she's overstated Alaska's contribution to the U.S.' energy supply.

The bottom line, Alaska is a leading producer of crude oil, but very little natural gas. Almost no coal or nuclear power comes from here. The Independent Energy Information Administration says that Alaska is the ninth largest energy contributor to the United States, after states like Texas, Louisiana, and others.

Now, Sarah Palin's record here on energy is this. She has focused very intently on developing a natural gas pipeline here in Alaska. She's worked on negotiating contracts for that. That pipeline is not yet a reality, but it's something she would like to see happen, and she's devoted a lot of energy to it.

She's also focused a lot of energy on a windfall profits tax on oil companies. That's returned money to Alaskans and has made her very popular here. She has done some work in the field of what she calls climate change, with some subcommittees examining what climate change is really doing and how she can help.

And, of course, she wants to drill in ANWR. Her clear intention there is to increase the amount of production of oil Alaska produces. And she defers -- differs with McCain on whether ANWR should be developed -- Wolf.

BLITZER: And, Jessica, I know you're also looking into the latest developments on that investigation into the firing of her public safety commissioner over the -- her former -- her former -- brother-in-law, the state trooper, the fact that he wasn't fired. What's -- what's the latest developments today?

YELLIN: A legislative committee is going to meet on that tomorrow to decide the next steps are, because the attorney general has said the people they subpoenaed just aren't going to cooperate. The legislators say they are shocked by this. They thought they had an agreement to cooperate.

The big question is, Todd Palin, the governor's husband, will he participate with the inquiry, because he's not a state employee? And, so, the campaign says they're still deciding what Todd Palin will do. We will have to wait and see -- Wolf.

BLITZER: Jessica is in Anchorage, Alaska, for us, working these stories.

We heard live, as you all saw at the top of the hour, from Barack Obama. That was just a few moments ago. We're also standing by to hear from John McCain, in his own words, offering some tougher criticism of his Democratic rival and his stand on the troubled economy, what he is saying today.

And a politically charged question: Is it patriotic to raise taxes? The new point of contention between the McCain/Palin and Obama/Biden camps.

And Sarah Palin has brought some new energy to the McCain ticket, but has she lost her bounce? We're assessing right here in THE SITUATION ROOM.

And John McCain says he's the man to fix what's wrong with the nation's economy. As he talks about his plans for reform, he also says why he thinks Barack Obama is not the person to do it.

(BEGIN VIDEO CLIP)

MCCAIN: Senator Obama has never made the kind of tough reform we need today. His idea of reform is what his party leaders in Congress order him to do.

You know, we tried for bipartisan ethics reform, and he walked away from it because his bosses didn't want real change. I know how to make the change that Senator Obama and this Congress is afraid of. And I fought both parties. I fought both parties to shake up Washington. And I'm going to do it as president.

(APPLAUSE)

AUDIENCE: John McCain! John McCain! John McCain! John McCain! John McCain! John McCain! John McCain! John McCain! John McCain! John McCain!

MCCAIN: You know, my friends, those same congressional leaders who give Senator Obama his marching orders are now saying, incredibly, that this mess isn't their fault, and they aren't going to take any action on this crisis until after the election.

(BOOS)

MCCAIN: Senator Obama's own advisers are saying that the crisis will benefit him politically.

My friends, that's the kind of me-first, country-second politics that are broken in Washington.

(APPLAUSE)

MCCAIN: My opponent -- my opponent sees an...

AUDIENCE: John McCain! John McCain!

MCCAIN: My opponent sees an economic crisis as a political opportunity, instead of a time to lead.

Senator Obama isn't change. He's part of the problem in Washington.

(APPLAUSE)

MCCAIN: When AIG was bailed out, I didn't like it, but I understood it needed to be done to protect hardworking Americans with insurance policies and annuities.

Senator Obama didn't take a position. On the biggest issue of the day, he didn't know what to think. He may not realize it, but you don't get to vote present as president of the United States.

(APPLAUSE)

(END VIDEO CLIP)

BLITZER: In the "Strategy Session," Donna Brazile and Kevin Madden assess the blame game.

(BEGIN VIDEO CLIP)

PALIN: Back to our opponent. He likes to point the finger of blame. But has he ever really has he lifted a finger to help?

(BOOS)

(END VIDEO CLIP)

BLITZER: But, as the markets face a meltdown of historic proportions, does either side have a real plan?

And Hurricane Ike's wrath is still being felt in Texas. Our Barbara Starr is back from the hurricane zone with a firsthand account.

All that and a lot more coming up, including Donald Trump -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: As the U.S. economy reels from the subprime mortgage and the credit crisis, John McCain and Joe Biden are arguing over taxes -- McCain responding to Biden's comments earlier today on "Good Morning America."

Take -- take a listen to this.

(BEGIN VIDEO CLIP)

KATE SNOW, ABC NEWS: Anybody making over $250,000...

SEN. JOSEPH BIDEN (D-DE), VICE PRESIDENTIAL NOMINEE: Is going to pay more.

SNOW: ... is going to pay more.

BIDEN: You got it. It's time to be patriotic, Kate, time to jump in, time to be part of the deal, time to help get America out of the rut.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MCCAIN: Raising taxes in a tough economy isn't patriotic. It's not a badge of honor. It's just plain dumb.

(END VIDEO CLIP)

BLITZER: All right, let's discuss in our "Strategy Session." Joining us, the Democratic strategist and CNN contributor Donna Brazile, and the Republican strategist, former Mitt Romney spokesman Kevin Madden.

Guys, thanks very much for coming in.

(CROSSTALK)

BLITZER: It's getting tough out there. It's getting a little personal, McCain responding, saying, just plain dumb. What do you think?

DONNA BRAZILE, CNN POLITICAL ANALYST: Well, first of all, John McCain said back in 2001 that not only would these tax cuts be irresponsible. He said, in all good conscience, he couldn't support them.

BLITZER: That's when he opposed the Bush tax cuts in 2001 and 2003.

BRAZILE: That's when he opposed.

(CROSSTALK)

BLITZER: But, just to make it clear, he now says make those tax cuts permanent.

BRAZILE: But, when he opposed it, Wolf, he said, in a time of war, we should all be prepared to make sacrifices.

What Joe Biden was saying today is that we all have to do our part. The wheels have come off our economy. And what Joe Biden tried to say today is that this is -- this should be about shared sacrifice, not just the middle class, but everyone.

BLITZER: Because you did hear McCain company out swinging today, a more aggressive, more assertive McCain, responding specifically to some of the statements, not only from Biden, but from Obama as well.

(CROSSTALK)

KEVIN MADDEN, FORMER ROMNEY CAMPAIGN NATIONAL PRESS SECRETARY: First of all, I can't believe that Joe Biden attacked the patriotism of Charlie Rangel, who didn't pay his taxes on his -- on his home down in Punta Cana.

So, I mean, that what -- what we're seeing today from Joe Biden is that he's -- he's out here today now doing exactly what it was that a lot of people worried about when he was picked for vice president. He's saying things that are going to cause people to wonder what it is that he's actually doing on the campaign trail. He's shifting it away from an actual, real debate.

BLITZER: Well, do you think it was a real stupid thing he said? MADDEN: Well, sure, I think it was a stupid thing. I don't think people think that paying taxes is something that is patriotic.

I think people -- people look at this crisis right now, and they want to see long-term solutions. One of the reasons that this -- the economy is actually -- that the stock market is up today is because there's even rumors of a long-term, confident solution on -- coming from Hank Paulson.

That's why -- that's what people want to see. They want to see solutions.

BLITZER: All right, Donna, what do you think?

BRAZILE: Well, first of all, you -- you mentioned Charlie Rangel. I didn't mention Ted Stevens and whether or not the -- the taxpayers should be paying for his renovations.

(LAUGHTER)

BRAZILE: This is not personalized.

We keep making this election about small things. This is serious. I was down in Louisiana for two days, Wolf. People are standing in line for ice and water and food stamps. And, when they get the food stamps, they can't activate them for two or three days. This is serious. People are hurting.

And we should -- we should tell these politicians, you know what, guys? A lot has happened over the last month. Why don't you take a breather, and, next week, at the debate, give us a real plan that will help the middle class?

BLITZER: Why do you think that John McCain, Republican senator from Arizona, hates Chris Cox, the former Republican congressman from California, who is the chairman of the Securities and Exchange Commission? He said, the president should dump this guy, should fire him today. Why do you think he hates him?

MADDEN: I think what he is trying to do -- I don't think he hates him. I think what he's trying to do is tell the voters that there's a new sheriff in town, that the people that are in charge of the regulatory regimes in Washington, that, when John McCain gets there, it's not going to be business as usual, and that Washington needs a whole new mind-set.

They need to strip away a lot of the regulations that are there now and start over, offer more transparency, make sure that the -- the markets are working in the way they should for the taxpayer, for the -- for the -- the health of the market, rather than in a way that's been -- that has hurt the market and that has led to us this turmoil right now.

BLITZER: Because, when -- when he does that, when McCain goes after a fellow Republican, I assume he believes that's going to reinforce this notion that he's willing to take on his own party. BRAZILE: Well, you know, if we start firing people in Washington, D.C., pretty soon, it will be me and my dog Chip (ph), because I tell you, there's a lot of blame to go around.

(LAUGHTER)

BRAZILE: And people are hurting. People really want change. And, you know, some people once talk about deregulation, and that that was good for our economy. It's time that we have oversight, so we can protect consumers in the middle class.

BLITZER: We have got to leave it there, guys. Thanks very much.

What should do you in this volatile market? Donald Trump, he is standing by to join us live here in THE SITUATION ROOM. We will get his advice. We will talk to him about why he's decided also to endorse John McCain. And we will talk about what's happening on Wall Street.

Also, the campaign ads, they are getting nastier by the day. Are they misleading you? We're doing a fact-check. Howard Kurtz is standing by for that -- lots of news happening today, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: On our "Political Ticker" today: Two longtime Bush White House insiders weigh in on Sarah Palin. Dick Cheney's wife, Lynne, says she was surprised by Palin's vice presidential nomination. In a TV interview, Lynne Cheney called Palin a breath of fresh air, said the attacks on her are "over the top" -- direct quote.

Meantime, Republican strategist Karl Rove says McCain's choice of Palin was -- quote -- "political." And Rove tells the AP, the excitement Palin is generating will soon wear off.

Remember, for all the latest political news any time, check out CNNPolitics.com.

Let's go back to Jack. He's got "The Cafferty File" -- Jack.

CAFFERTY: The question this hour is, has the growing financial crisis changed your mind about who you're going to vote for, for president?

Bob writes: "I don't think so. I'm not going to panic. I think the worst thing a voter could do right now is vote the financial crisis. I'm going to vote the future, not the present. I hope that makes sense."

It makes sense to me.

Michael in Bedford, New York, writes: "In 2004, when Bush ran against Kerry, he always made a special point of celebrating new homeownership. Being a realtor at that time, I saw the 'NINJA' loans -- no income, no job, no assets -- being given out, and I wondered how the inevitable failures would be spun. Yesterday, I saw McCain, who has always been against strong government oversight for the lending business, has now changed his mind and is railing against the greed. What a clown."

Alexia writes from Seattle: "McCain doesn't know how many houses he owns. He wouldn't know a financial crisis if it hit him in the face. Trump endorsed him, which makes complete sense, because what they have in common is, neither one of them knows how many houses they own. Because of the financial crisis, I couldn't buy a house right now if my life depended on it."

Bob writes: "No, it won't change my vote. I'm voting third party. Both McCain and Obama are a part of the problem. My vote means too much to me to give it to either of them. Nor do I intend to vote for any incumbents. At some point, we need to clean the rascals out."

Shannon writes: "No, the financial crisis has made me more sure than ever to vote for Obama. And, just for the record, I am a 54 year-old white female, from south Alabama who has voted Republican since my 18th birthday. Thank God I have finally seen the light."

And Mark in Pennsylvania says: "Yes. Now I want to vote for Obama twice."

If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile, and look for yours there, among the hundreds that are posted -- Wolf.

BLITZER: All right, Jack, thank you.

And, to our viewers, you're in THE SITUATION ROOM.

Happening now: the breaking news we're following, a powerful Wall Street rebound today, following word the government may be planning yet another dramatic move to confront a spiraling economic crisis head on. We're covering all the angles. Stand by.

Also, controversy over Barack Obama's new Spanish-language ad and what it says about John McCain.

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