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THE SITUATION ROOM

Wall Street Rebounds; Feds Plan Dramatic Move to Confront Financial Crisis

Aired September 18, 2008 - 17:00   ET

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


WOLF BLITZER, HOST: 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. Our political contributors Paul Begala and Bill Bennett, they're standing by live to weigh in.

Plus, he's been sitting on the sidelines, now Donald Trump is jumping in. He's making an endorsement for president. He'll join us live this hour to tell us who he's backing and what he thinks of this financial crisis.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Certainly the top story in newspapers across the country and around the world, the nightmare on Wall Street. Now the single worst financial crisis this country has faced since the Great Depression. That is a consensus that is now emerging. What a difference a day makes as stocks rebounded today from yesterday's huge 450-point selloff with the Dow Jones average soaring more than 400 points today.

Still, the market remains extremely volatile. Investors are shell shocked and now the federal government may be preparing to take some drastic action. Our Senior Business Correspondent Ali Velshi and CNN's Mary Snow, they've got a lot more on the story. Let's go to Ali, right now.

Ali, tell us why late in the afternoon, all of a sudden, the markets went wild and we saw this huge increase, more than 400-point gain, today after a 450-point loss yesterday.

ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: Yes, huge rally. The biggest one we've seen in more than five years in a single day, the biggest point gain in five years.

Here's the thing, Wolf, there are rumors -- and they are rumors -- that the Treasury Secretary Henry Paulson and the administration are working on a plan that would look a lot like the Resolution Trust Corporation that was put into place after the savings and loan crisis. And that would somehow absorb all of the bad debt that is out there. Sort of sweeping it clean, washing it clean, and giving us a clean slate to start upon. There are no details about this yet.

These were published reports, these were reports on television that caused traders to start buying stocks thinking that the worst is over. And there may be a brighter future, particularly for the financial sector. Unlike after the savings and loan crisis though, Wolf, there was a lot of property that the government was able to buy. They took that property and sort of held it aside for a few years and over the course of six years sold it off at a bit of a profit. The idea that those were value investments, they would acquire value over the course of a few years. This is a lot trickier as you know, because a lot of things that were written off were bad debt. We don't know what it is in the works, but there are rumors that's something's in the works and that is what caused this rally.

BLITZER: If these rumors, Ali, are true, will this solution actually work?

VELSHI: Well, it would be the biggest bailout you have ever seen and as a result, there would be a lot of political opposition to it. There's already opposition growing to the government loan of $85 billion to AIG. This sort of a thing would be much, much bigger than that. You can imagine those people are saying we shouldn't be bailing anybody out will be out in full force if a deal like this is announced.

Again, we're waiting on this. We are trying to find out details about whether there is some announcement coming, but it would be controversial, Wolf.

BLITZER: Is there any price tag? How big of a -- this could be the mother of all bailouts, $200 billion bailout potentially for Fannie Mae and Freddie Mac. Would it be even bigger than that.

VELSHI: I think we would be talking about numbers that start with a T. I think we'd be talking about trillions. Because we're already up to half a billion dollars in bailouts. This would be very big.

BLITZER: Ali, stand by. What a story. Thank you.

Experts say this is the most serious economic crisis the United States has faced since the Great Depression. But there are several very important differences between what happened then and what we're seeing now. Mary Snow is working this part of the story for us now.

Wow, who would have thought, Mary. Tell us what has changed over these decades.

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, one of the biggest differences is monetary policy. Economists pointed to the Federal Reserve saying they're being more proactive in lowering interest rates and providing liquidity. And really, all of this comes as Wall Street has an ear and it is turning to Washington for help.

(BEGIN VIDEOTAPE) SNOW (voice over): As the Federal Reserve pumped billions of dollars into the banking system to restore confidence in the markets, President Bush moved to calm fears.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The American people can be sure we will continue to act to strengthen and stabilize our financial markets and improve investor confidence.

SNOW: Economists say this is the worst financial crisis since the Great Depression, but with a distinction.

JAY ROSENGARD, HARVARD UNIVERSITY: I think a significant difference is that the government has learned from its failures in the Great Depression and has been much more proactive -- and we doe have stabilizers we did not have before.

SNOW: Case in point, the government's unprecedented bailout of insurance giant AIG. Another big difference, the economy. Despite its problems, the current unemployment rate stands at 6.1 percent.

BOB MCTEER, FRMR. FED. RESERVE PRESIDENT: In the Depression, there was much more spillover into the real economy and you had 25 percent unemployment, at the height of it.

SNOW: But this financial crisis, say economists, hits at a vulnerable time with housing prices falling, with banks tightening lending, it affects consumers' ability to get loans. Some say to stop the bleeding, new regulations are needed for Wall Street firms.

JEFFREY SACHS, COLUMBIA UNIVERSITY: The way to stop this from happening is through proper regulation in the first place. Through looking at bubbles and saying no, you're not going that way. To looking at bonuses of tens of billions of dollars and saying what are you doing? You can't afford that.

SNOW: New York Mayor Michael Bloomberg, a Wall Street veteran, who has been critical of too much regulation in the past, suggests some oversight agencies are out of date and says the real world has changed.

MICHAEL BLOOMBERG, (I) NEW YORK CITY: I don't know that the regulators are asleep at the switch. I just think the structure is not suitable for the real world.

(END VIDEOTAPE)

SNOW: And many different ideas are being talked about, but one thing that has surfaced some market watchers say that a law scrapped in 1999, that separated commercial and investment banking, should be reenacted for oversight -- Wolf.

BLITZER: Mary Snow, thank you for that.

Economic troubles stretching well past Wall Street, as we all know. Unemployment is up 1.4 percent from last year, now topping 6 percent. Consumer prices are up 5.6 percent in a year. And between the second quarters of 2007 and 2008, housing prices plunged 4.8 percent. All not very encouraging economic news.

Let's check back with Jack. He's got the "Cafferty File" - Jack.

JACK CAFFERTY, CNN ANCHOR, THE SITUATION ROOM: Wolf, the Republican vice presidential nominee and Alaska Governor Sarah Palin is refusing to cooperate in an investigation into the firing of Alaska public safety commission Walt Monegan.

Palin's office claims that Monegan was fired for insubordination. Monegan says it's because he wouldn't fire a state trooper named Mike Wooten. Three years ago that trooper was in the middle of an ugly divorce from Sarah Palin's sister. Monegan says Palin pressured him to fire Wooten at the time. Palin denies that. Monegan ended up losing his job.

Alaska lawmakers have been looking into this thing since July. And it's been a bipartisan investigation and Sarah Palin originally agreed to cooperate, but not anymore. The Alaska attorney general, who was appointed by Sarah Palin, said now the governor has "declined to participate in the investigation."

So here's the question: How much do you care whether Sarah Palin cooperates in the trooper investigation? Go to cnn.com/cafferty file. Post a comment on my blog --Wolf?

BLITZER: See you in a few moments. Thank you.

Donald Trump is now weighing in on the race for the White House. He's endorsing John McCain even though they have very, very different views on war in Iraq. I'll speak with Donald Trump live. We'll speak about that and the economic crisis underway right now.

Also, a NATO ally stung by what John McCain said in a radio interview about meeting with the prime minister. And Barack Obama comparing John McCain to Rush Limbaugh, we go inside his controversial new Spanish language ad. Stay with us. You're in THE SITUATION ROOM."

(COMMERCIAL BREAK)

BLITZER: John McCain making headlines right now in Spain over what he said and didn't say in an interview about meeting with the country's prime minister, a key NATO ally with troops in Afghanistan right now. Brian Todd has been working this story for us.

All right, Brian, what is this one all about?

BRIAN TODD, CNN CORRESPONDENT: It's striking when you look at it on balance. Spain, a very important ally of the U.S., with more than 800 soldiers in Afghanistan, about two dozen of them have been killed there. But the country's leader can't get a meeting with President Bush and he may not get one with John McCain if elected.

(BEGIN VIDEOTAPE)

TODD (voice over): In an interview with the Spanish language radio network, John McCain is asked four times if he would meet at the White House with Spain's Prime Minister Jose Luis Rodriguez Zapatero. Four times McCain avoids a direct answer.

JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE (voice over): I would be willing to meet with those leaders who are friends and want to work with us in a cooperative fashion.

TODD: McCain's foreign policy adviser shoots down speculation that McCain might not have known who he was talking about. Says the nominee knew exactly what he was saying and simply did not rule in or out a White House meeting with President Zapatero. For his part, Zapatero says he understands all this. Says it's logical for McCain to show what he called prudence in the election cycle.

JOSE LUIS RODRIGUEZ ZAPATERO, P.M. SPAIN (through translator): The government I lead will work with the next U.S. administration whatever the outcome of the elections.

TODD: The Spanish leader has been shunned by the Bush White House because he pulled Spanish troops out of Iraq in 2004. But Spain is a partner in Afghanistan. And the two NATO allies have inched closer since then.

And earlier this year, McCain was quoted in a Spanish newspaper saying he's interested in normalizing relations with Spain, and quote, "I would like for President Zapatero to visit the United States." The McCain campaign now says his refusal to commit to a meeting is not a flip-flop toward Spain. But is McCain leaning toward the Bush mantra, if you're not with us, you're against us?

REGGIE DALE, CENTER FOR STRATEGIC & INT'L. STUDIES: Regardless of how they feel about the prime minister of Spain in the White House, they will meet at NATO meetings - at other meetings with international leaders. So I think it would be to read too much into this to say that it's a big shift towards a neoconservative attitude.

(END VIDEOTAPE)

TODD: Now, if McCain is elected a meeting could take place within his first 18 months in office. Spain assumes the rotating presidency of the European Union in 2010. The holder of the position often hosts a summit of EU and American leaders, so McCain could find himself at the Spanish prime minister's doorstep maybe early in 2010, Wolf.

BLITZER: How does Barack Obama feel about meeting, if he were elected president, with the Spanish leader?

TODD: His as say he is willing to meet with the leader at the White House, not a stretch when you think Obama is willing to meet with Ahmadinejad and Hugo Chavez. It is not a stretch to say that he'll meet with Zapatero. But most people believe McCain is probably not going to govern under you're for us or against us mantra. He'll probably be a realist when it comes to being in office, but right now he just wants to hedge his bets a little.

BLITZER: Because his critics, as you know, are accusing him of being a long-time neoconservative.

TODD: Right.

BLITZER: Who holds to that Bush view, you're either with us or against us, and you punish a NATO ally, like Spain, for pulling troops out of Iraq.

TODD: His people are saying that he is not that way. That is not his demeanor. He's not going to govern like that.

BLITZER: Thanks very much for joining us.

With the presidential campaign taking an increasingly negative tone, it's increasingly difficult for voters to know what to believe. CNN Howard Kurtz, of our "Reliable Sources" program, has been looking at the candidates' recent advertisements.

He's here to separate fact from fiction - Howie. HOWARD KURTZ, CNN ANCHOR, RELIABLE SOURCES: Wolf, with the mess on Wall Street dominating the news, John McCain is returning to the oldest page in the GOP playbook, painting the Democrats as big spending liberals.

(BEGIN VIDEOTAPE)

ANNOUNCER, CAMPAIGN AD: Obama and his liberal congressional allies want a massive government, billions in spending increases, wasteful pork.

KURTZ (voice over): The ad doesn't offer a single detail on this charge of Obama wanting a massive government. The Illinois senator has proposed a more sweeping health care plan to cover uninsured Americans, than McCain has. But McCain has his own spending proposals such as $2 billion to develop clean coal technology. Obama did ask Congress for $330 million for Illinois projects last year. McCain opposes such earmark spending but the ad offers no evidence that these are wasteful pork.

ANNOUNCER, CAMPAIGN AD: We would pay painful income taxes, skyrocketing taxes on life savings, electricity and home heating oil.

KURTZ: McCain is selective to the point of misleading on the tax issue. Obama would raise income and Social Security taxes on those earning more than $250,000 a year. But he would cut taxes for the remaining 95 percent of taxpayers.

As for energy, Obama said last spring that he would support a windfall profit tax on oil companies cashing in on higher prices. Some of that might possibly be passed on to consumers.

Obama, meanwhile, is trying to appeal to Hispanic voters with a Spanish language TV ad that suggests McCain is anti-immigrant. The commercial talks about intolerance and making Hispanics feel marginalized in this country we love so much; putting up quotes from Rush Limbaugh about stupid and unskilled Mexicans. But the Arizona senator bucked his own party in pushing legislation to create a path to citizenship for those here illegally. And the Limbaugh comments are taken out of context.

During the NAFTA debate 15 years ago, he wasn't talking about immigrants. He was saying that uneducated and unskilled Americans would lose their jobs to stupid and unskilled Mexicans working in Mexico and Limbaugh, by the way, was one of McCain's loudest critics during the primaries.

(END VIDEOTAPE)

KURTZ: McCain's advertising was more negative than his opponents over the summer, but last week a new study says, three quarters of Obama's TV spots were negative versus just over half for McCain. At this point, the strategy is simple, tearing down the other guy -- Wolf.

BLITZER: Howard Kurtz reporting for us. Thank you.

Donald Trump, he's standing by live, right now, to tell us why he's endorsing John McCain and what he thinks of Sarah Palin, and a lot more of my interview with Donald Trump. That's coming up.

And they certainly received a significant bounce from their convention, but now new polls show the race is entering a whole new phase. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Carol Costello is monitoring other important stories incoming to THE SITUATION ROOM right now.

Carol, what's going on?

CAROL COSTELLO, CNN CORRESPONDENT: Well, Wolf, New York's Attorney General Andrew Cuomo is launching a probe into whether traders tried to illegally drive down the stock price of key firms like AIG, Morgan Stanley and Lehman Brothers. Cuomo says his office has gotten a number of significant complaints about short sellers. They're investors who hope to profit by placing bets that a company's stock will fall. That in itself is not illegal but the investigation centers on whether short sellers tried to spread rumors or bad information.

A scathing warning from Secretary of State Condoleezza Rice to Russia. She says Moscow's policies are putting Russia on a path to isolation and irrelevance. And she called on Western powers to stand up to Russian aggression following Moscow's incursion into Georgia last month.

We're seeing newly released surveillance video of last months' deadly crash of a Spanish airliner last month. It shows the Spanair jet accelerating along the runway - there you see it -- taking off slightly, and then it crashes into a cloud of thick smoke and flames. You might remember 154 people were killed. The Spanish newspaper which released the video says it was recorded by airport cameras and an investigation into the crash continues.

One of the busiest arteries in the Twin Cities open again. Police cars, fire trucks and ambulances led hundreds of vehicles across Minneapolis's new Interstate 35W Bridge this morning. Thirteen people died when the old bridge plunged into the Mississippi River on August 1st, 2007. The new $234 million smart bridge has hundreds of sensors to collect data to warn of any possible problems.

Back to you, Wolf. BLITZER: Hope they're building all new bridges like that, so- called smart bridges. That was almost exactly a year ago that bridge went down. Thanks very much.

The Palin pick gave him a bounce in the polls. Now new polls suggest there may be a new phase in the race for the White House. We're crunching the numbers for you.

And Donald Trump standing by to join us live. We'll talk about the financial crisis. I'll also ask him why he's now backing John McCain for president.

Plus, the situation in Texas. Much worse than a lot of people now realize. The struggle to survive in the wake of Hurricane Ike. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM. Happening now: Is the voters' honeymoon with Sarah Palin waning? We have some brand new poll numbers and they may be showing a shift in Barack Obama's favor. Stand by.

Plus, it's been a roller coaster week for Wall Street. It's not over yet. The real estate mogul Donald Trump, he is standing by live to tell us who he thinks should lead the United States in these financially fragile times.

And we're learning a lot more about how someone apparently hacked into Sarah Palin's personal e-mail account. We'll look at how it might have been done.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

A small but potentially critical change in the polls right now indicating the race for the White House is entering an important new phase. Let's go right to our Senior Political Analyst Bill Schneider tracking the numbers for us.

Bill are we seeing some sort of shift in these latest poll numbers?

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: We are. Since the conventions ended, Barack Obama has slowly been picking up support.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice over): The trend is getting clearer. In CNN's "Poll of Polls" immediately after the Republican convention, which averages all the national polls, John McCain was slightly ahead for the first time. A week later, the race was tied. Now, Barack Obama is 3 points ahead. "The New York Times"/CBS News Poll gives a more detailed picture. In August, before the conventions, Obama was 3 points ahead. The Democratic convention gave Obama a bounce. His lead grew to 8 points. Then the Republican convention gave McCain a bounce. He moved slightly ahead.

And now, this week's poll puts Obama back into the lead by 5 points. What's happening? Two things. The financial crisis is creating anxiety about the economy.

SEN. BARACK OBAMA (D) PRESIDENTIAL CANDIDATE: This is serious. This is a major threat to our economy and its abilities to create good-paying numbers and help working Americans pay their bills.

SCHNEIDER: In the Time/CBS news poll more and more Americans are naming the economy and jobs as the most important issue. Those who top concern is the economy are voting nearly two to one for Obama.

Second, the Republican convention bounce is fading. Specifically enthusiasm for McCain's running mate Sarah Palin. She's facing growing criticism. Republican Senator Chuck Hagel told "The Omaha World Herald", "I think it's a stretch to, in any way, to say she's got the experience to be president of the United States."

Unfavorable opinion of Palin has been growing. While unfavorable opinion of Joe Biden, her Democratic counterpart, has declined. The number of voters who say Palin is not prepared to be vice president has reached a majority.

(END VIDEOTAPE)

Polls of a dozen states have come out this week. Now in 10 of those states, the Democratic ticket is doing better than in 2004. In one state, Nevada, the margin is the same as last time. In only one state is the Republican ticket doing better and that's New Hampshire, where John McCain has a strong following and where he made crucial breakthroughs in the 2000 and 2008 primaries - Wolf.

BLITZER: All right, thanks very much, Bill Schneider. We'll assess all of this and also some ads. There's some controversy out there. Joining us right now are two political contributors, Paul Begala is a Democratic strategist, Bill Bennett is the host of the conservative national radio talk show "Morning in America."

Guys, very much for coming in.

Let me start with you, Bill. What do you think about that assessment we just heard from Bill Schneider, that there may be a shift in these poll numbers as a result of the harsh economic news we've all been hearing about these past few days.

BILL BENNETT, HOST, MORNING IN AMERICA: I was thinking we ought to pack up our cleats and just go home. It's over. We've lost this thing. You know, against this overwhelming and transcendently powerful candidate, what is our chance? (LAUGHTER)

John McCain is very much in the race. We see the bumps. If the if you look at the polls, the "Poll of Polls", you'll see it's still pretty close. And it's really quite miraculous. A lot of us wondered how we were going to be this close at this point given the polls about state of nation, right direction, wrong direction, George Bush's popularity.

You know, I imagine some critics of John McCain, some of his detractors are probably wondering like those North Vietnamese guys, why won't this guy fall apart and break? But still he moves, he walks, and this thing is a long way from over.

BLITZER: He's come back from the dead before. You have to agree with Bill, this race is far from over.

PAUL BEGALA, CHIEF STRATEGIST: I know. I was sitting here just hoping he would say something I could disagree with. He's absolutely right. No Democrats believe are measuring drapes anywhere. This is a tossup race to the end. I do think to the extent we're focused on the economy that that benefits Senator Obama more than Senator McCain, and to the extent that we're in an argument who's going to do better to regulate the excesses of Wall Street, that's Democratic turf. So I think Obama has -- I saw earlier we carried part of his speech in New Mexico and he was fiery. I mean he had the crowd excited. It was not professorial or elegant as I've criticized him for being. He was a punchy populist out there and I like that.

BLITZER: OK. Let's play new ads that are out. A Spanish language ad that the Obama campaign has put out. We're going to play it in Spanish and translate on the screen so people can read along if they don't understand Spanish and then Bill, I want you to weigh in first. So listen to this ad and read along on the screen.

All right. I saw you squinting to read along, bill. But it's a pretty terrify ad. Basically suggesting, you know what, John McCain and Rush Limbaugh, they're now partners in this anti-immigration mood out there. It's a pretty tough ad.

BENNETT: Yeah, my Spanish isn't as good. I had to lean in a little bit. I do know who the president of Spain or at least I thought did or prime minister, maybe not. You know, Jake Tapper said this was so far over the line of ABC. In the 20 minutes ago on CNN, Howie Kurtz talked about how ridiculous it was. There are two people who had diametrically opposed views on immigration, it was Rush Limbaugh and John McCain. To be linking those two, this was part of Rush Limbaugh's least favorite republican candidate. I know people hate to rush, my friend. But this is scurry louse and ridiculous.

BLITZER: You're going to have a chance to respond but I want to play a McCain ad, as well. And then we'll talk about all of these ads. Listen to this, Paul.

(BEGIN VIDEO CLIP) UNIDENTIFIED MALE: When our economy's in crisis, a big government casts a big shadow on us all. Obama and his liberal congressional allies want a massive government. Billions in spending increases wasteful pork and we would pay painful income taxes, skyrocketing taxes on life savings, electricity and home heating oil. Can your family afford that?

(END VIDEO CLIP)

BLITZER: You get the point. Let's bring back Paul for this. I want to talk about both ads. React to this McCain ad first.

BEGALA: Well, first, John McCain is saying two things. He has an ad against big government and saying he'll regulate Wall Street. He's incoherent. Because everybody has noted who's looked at the records, senator Obama proposed a tax cut for 95 percent of Americans. This other point do I disagree with bill, the most important word bill said was had. Limbaugh and McCain had opposed views and that is true, but now McCain has come round to the Limbaugh point of view. Apparently Limbaugh since the passing of Falwell is the most important in the Republican Party. He brought McCain to Limbaugh's side so much so when Janet Hook of "The New York Times" asked Senator McCain would you, senator McCain vote for the McCain immigration bill he said no, I wouldn't. He renounced his own bill. It's perfectly fair. The fact is today because of pressure from the right, and Limbaugh, McCain has the same position on immigration as Rush Limbaugh.

BENNETT: I don't think that's right. Many times John McCain's clarified this. Says he's still for comprehensive immigration plan but has said we need to seal the borders first. That's the first and essential necessity. So I think it's a very different view from Rush Limbaugh's view. Can I comment on the McCain ad?

BLITZER: Yes. Then we'll pick up on immigration because I want it make another point. Go ahead, Bill.

BENNETT: It does seem as if Barack Obama if anyone from any position takes a pencil and adds up all the things that Barack Obama is proposing to do, the global poverty act, it does sound like an enormous increase in spending. As far as regulating Wall Street and so on, we know where John McCain stood. He thinks Paulson did the right thing. Has Obama given his view yet other than to say that John McCain has got special interests?

BLITZER: On the immigration point, Paul, what McCain now says is yes, as Bill said, he wants to secure the borders first the comprehensive immigration reform package. That has to wait until the borders are secured but he says if the borders are secured, he would still support a pathway to citizenship for millions of illegal immigrants and a lot of the critics on the right they don't like that.

BEGALA: Well, I know this. That may be. And I'm sure you're right. I know this. When asked -- I never have seen a politician more humiliated than when Janet Hook asked him that question at the Reagan library. Can you imagine? Do you think Hillary Clinton would renounce her own health care plan? I don't think so. It's -- this was a signature proposal of McCain's. I thought he was largely right on the merits. Bill and others disagreed honorably on that. The fact is, that this guy on particularly on immigration but even on torture, on gay rights on a whole host of issues, tax cuts for one thing has been completely given over, given himself over to the right wing fringe of his party. I think it's fair for Obama to raise that in an ad.

BLITZER: All right guys. A good discussion. And we'll continue this. As both of you know, we've got a few weeks left before this election. Paul and Bill, always good to have you here.

If you've seen his reality TV show, you know Donald Trump has a lot of experience hiring an apprentice. I'm about to ask him to evaluate the vice presidential choices of Obama and McCain.

And John McCain is good friends with Democratic vice presidential nominee Joe Biden, but he now says one of Biden's ideas and I'm quoting now is dumb. Just plain dumb in the words of John McCain.

Stand by. We'll assess that and a lot more right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: It's been another roller coaster day on Wall Street with stocks piling up more losses early in the day, then rallying sharply before the closing be. Is the nation's deepening financial turmoil changing the face of this presidential campaign?

Let's discuss with a man who knows something about economics and politics, the real estate entrepreneur Donald Trump is joining us live.

Donald, thanks very much for coming in. I know you've decided to go with John McCain. You've endorsed him. Tell viewers why you think he would be a better president than Barack Obama.

DONALD TRUMP, CHAIRMAN & PRESIDENT, THE TRUMP ORGANIZATION: Well, I've known John for a long time, Wolf, and he's a solid person, a great man. He's a very loyal person and he's a very smart guy. And by the way, he's very, very tough, which is what you need nowadays. So you know, I just added everything up and I've been with him for quite awhile. This isn't just something that happened. I just think he would a about standing president, tough, smart, strong.

BLITZER: As you know, the last time we spoke, you were very critical of president Bush and the war in Iraq, the worst president I'm paraphrasing right now ever in terms of his policies and as far as Iraq is concerned, and I know you've been critical of the president's strategy there John McCain wants to continue that strategy.

TRUMP: I'm certainly not a big fan of President Bush. He's done a terrible job. And I've been very open about that and everybody knows it and John knows it, but John is not President Bush. John's a different man. Now in terms of the surge, I'm not a fan of the war at all. I'd like to get out as soon as possible. Most people wanted to get out right away. John's idea of the surge, he really wanted it early. He went to win it and get out. Frankly, what he did and even the Democrats are saying it, was right. So, you know, I've known June for a long time. I think he would do an outstanding job.

BLITZER: Is it smart for American taxpayers to be shelling out $10 billion a month in Iraq?

TRUMP: No, I don't think it is and I hope we get out very soon. The difference is I guess John wants to get out with strength rather than weakness. Doesn't want to just leave. He wants to win and leave but he does want to get out and very strong on the fact he wants to get out as soon as we can. But he wants to get out with victory, not with loss.

BLITZER: Would you have hired Sarah Palin to be your number two?

TRUMP: I'll tell you, she has really shaken up the party and your world of politics. She's made your world and I'm sure your ratings very much higher. Do you well anywhere in the ratings department. She's made it higher. She's done a great job. He's unified and helped unify the Republican Party. I think it's a great testament to John McCain because he chose somebody that a lot of people said what are you doing and now everybody's saying it may have been a brilliant move.

BLITZER: Politically. Do you think she's qualified to be commander in chief?

TRUMP: I do. She's very smart and obviously a very strong person. Look, Obama should have picked Hillary Clinton and they won't have picked Palin and it would have possibly been a different picture right now. Hillary should have been chose. She got at least 50 percent of the votes and for some reason didn't get the nomination. That was an obvious choice. If that choice were made, you won't have Palin and what she's done for John.

BLITZER: Because I know you're a big fan of Hillary Clinton. If she would have been Barack Obama's vice presidential running mate, you think you would have supported that ticket?

TRUMP: I think it would have been a very hard person and group to beat. I won't speculate because I've known John and John's a great friend and Hillary's a great friend. I don't have to make a decision, fortunately. I think it would have been a very, tough ticket. It would have been very hard to beat. You know, for the life of me, I just don't understand why he didn't pick Hillary. We'll see if he wins, then I guess he made a good decision because he's going to be with somebody that he can get along with perhaps better. The first thing you have to do is win.

BLITZER: What do you think of his decision to pick Joe Biden as his running mate?

TRUMP: I really don't know Senator Biden but I know one thing. He's run a number of times for president. He's gotten less than 1 percent of the vote each time. And that's a pretty tough thing. You know, he's also been involved in pretty big controversy like plagiarism in college and various other things. That's a pretty big statement. So perhaps you change over a period of time. But when you plagiarize, that's a very bad statement. That hasn't been brought up yet, but I'm sure at some point it will. I'm sure that Sarah Palin will bring it up in a debate or somebody's going to bring it up.

BLITZER: Are you talking about plagiarism when he was running for president?

TRUMP: No, I'm talking about when he was a college student as I understand it, and this was a big issue originally but he supposedly plagiarized as a college student. That's a pretty serious charge.

BLITZER: I don't remember that. We'll check it out. But maybe you obviously have a better memory about that.

TRUMP: I'm sure it will be brought up. Let's see what happens when it is. Maybe he has a fine answer and maybe it didn't take place. I think it's pretty serious and a very serious charge. More importantly, he didn't get 1 percent of the vote. Hillary got more than 50 percent of the vote. So say why isn't he picking Hillary. It just doesn't make sense.

BLITZER: We did checking on that at the time. Hillary Clinton got about 18 million votes during all of those primaries. Joe Biden got 2200 in Iowa before he dropped out. So that is a point that a lot of people have been scratching their heads on and wondering would Barack Obama have been better off with Hillary Clinton and we know obviously where you stand. Let's turn the corner now and talk about this economic crisis that's underway right now. A lot of our folks have money and they're nervous as can be right now, Donald, about what to do with their money, their 401(k)s, their IRAs, whatever investments they have. Give them some advice.

TRUMP: I think right now is amazing time. Over the years I make speeches and people ask me to speak about success and if I'm in the right moody do it. For years, I've been saying don't buy real estate. For the last couple of years because it was too high, it was too inflated. You had all of these exploding mortgages no nobody knew what meant and people were buying. And now is the time to buy. You go to the bank, the bank thousands, millions houses, and you go to the bank and you make a deal. They'll take back financing. You'll get the nicest house you dreamed of. And this is the time right now to make a deal. I mean, it's a very, very negative period of time although the market did go up 410 points today, but it's a very, very negative period of time. But it's an amazing time to make deals.

Just this week, I closed on something in Colts Neck, New Jersey, a very, very wealthy place, a great place. I bought a club for a fraction of what I would have paid two years ago, a fraction. A great club. Shadow Isle which is going to be changed to Trump National Golf Club. I bought this very big club, tremendous clubhouse, tremendous course for a fraction of what I would have paid two years ago. Great deals can be made right now. This is the time. Go to the bank, buy a house. They'll take back financing. BLITZER: You're heavily involved in the real estate market right now. I know you're building some huge buildings, condos in Miami and the Miami area and Hollywood, Florida. Elsewhere. I've seen them going up. Can you sell those rates now? Are they selling?

TRUMP: I was in there early and we sold most of them early. We're building some of our greatest successes are in New York where we finished one opposite the United Nations. I finished the Delmonico Hotel on Park Avenue and 59th and park and finished them prior to this collapse of the market. But a lot of the great jobs we're building are outside of this country, which is a pretty sad statement. I'm doing a job in Dubai, which is setting the records. There's never been anything like it in the Middle East in terms of pricing records. And we're doing other jobs outside of the United States. But it's very sad when you say you're doing your best deals outside of the United States.

BLITZER: One final question, do you have confidence, do you recommend to people out there and there are a lot of them watching as you know right now, Donald, to put money in the stock market, put it in T-bills? If they have cash lying around, where would you keep it?

TRUMP: I think right now you're going to have to think in terms of T-bills. You can make some wonderful deals in real estate but assuming you already have your house and stuck with it, I think right now you probably have to go t-bills. It's going to be a real roller coaster. There will be a time in the not too distant future, however, where the stock market will started looking good.

BLITZER: Donald Trump, thanks for joining us.

TRUMP: Thank you very much.

BLITZER: We'll see New York spending time up there between now and November 4th, election day. Always good to have Donald Trump here in THE SITUATION ROOM.

Five days after Hurricane Ike and many along the coast are still without electricity, bake services and even their homes. But a new infusion of help may be on the way.

And Bill Clinton is speaking out today on the financial crisis. He's also speaking out about Sarah Palin. We'll tell what you he's saying. Stand by to hear from Bill Clinton, all that and a lot more right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Remember, Bill Clinton is speaking out. We will hear what he has to say on a lot of stuff today. That is coming up. Let's go the Texas right now where the death toll from Hurricane Ike now stands at 22. Hundreds of thousands of people remain without electricity and basic service. Authorities say that the barrier island of Galveston is not safe to return. Hundreds of thousands of people involved and say it could be days before the city services are returned to full function. To the north and west of Houston, electricity has been restored to some 900,000 homes, but at least that many are still without power. Almost one million homes. The Homeland Security Secretary Michael Chertoff says that restoring electricity is top priority in the recovery efforts.

Our pentagon reporter Barbara Starr is here in THE SITUATION ROOM, and she was out there and just got back.

Barbara, let's talk about what you saw on the ground. You saw this devastation firsthand.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Wolf, it is all about electricity, and it is amazing that the world is talking about the stock market and politics, but on the gulf coast, people by the tens of thousands are still lining up everyday for food and water. It should be said they are trying to make progress. The USS Nassau now on the scene a week later and Texas finally asking for help from the U.S. navy who will try to help, but the situation on the ground, you have to see it to believe it.

BLITZER: I know you went in after Katrina with General Russel Honore who is the commander and CNN consultant, and how does this what you saw in the aftermath of Ike compared to what you saw in the aftermath of Katrina?

STARR: Tragically, what you see is a lot of the same. It is the people that we metal long the way who have the least economic means to help themselves.

Let me just tell you one anecdote quickly. We met three men on bicycles who had buy cycled four miles to be in line with hundreds of cars to wait for a handout of food and water, except that the national guard station had run out of food, but a so many people had lined up. It is a very grim situation on the gulf coast and tens of thousands everyday looking for food and water.

BLITZER: Thank you, Barbara, for sharing that with us, and we hope lit get better and better soon.

Sarah Palin has been winning cheers and applause, but not from everyone. We will tell you which one of John McCain's top running mates thinks she doesn't have any credentials. Palin calls herself a hockey mom, but it is the Wal-Mart moms who might make the difference in November. We are talking to them in the key battleground states. Dana Bash is standing by with a report.

Stay with us here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: If FBI and Secret Service are now investigating a report that the personal Sarah Palin Yahoo! E-mail account was hacked. The McCain campaign calls it a shocking invasion of the governor's privacy, but how could this happen? We go to the internet report Abbi Tatton who has been looking into 24. What do we know?

ABBI TATTON, CNN INTERNET REPORTER: Well, getting into Sarah Palin's e-mail account could have been as simple as answering a couple of questions about Sarah Palin. Take look at this. This is a Yahoo! Account and say you have forgotten your password or say you have and it will ask you a couple of questions to validate the identity and secret questions like what was your high school mascot or where did you meet your spouse. If you pick a question and answer that is easy for you to remember, then it is probably easy for someone impersonating you to figure it out as well, and that is especially true if you are someone as high profile as Sarah Palin with so much written about you on line. Now, there is a firsthand account circulating on hand that suggests this is how the hacker got in. We talked to cyber security expert who said that it is nothing more sophisticated than that. Yahoo! Does not comment on specific uses, but they have taken an opportunity to post security tips for the users. One of them is to not use personal information that someone could easily figure out. Wolf.

BLITZER: Thank you, Abbi.

We go back to Jack with the Cafferty file.

Jack?

JACK CAFFERTY, CNN CORRESPONDENT: The question this hour is how much do you care whether or not Sarah Palin cooperates in the trooper investigation.

Paul writes, "It is probably the most important thing in the current political race, so of course I care. If she was found guilty, it would almost spell the end of the republican ticket which has managed to lie and deceive its way into a tight race with Obama. Thanks for not dropping the story."

Lee in West Virginia says, "That Sarah Palin cannot be a reformer if she is shown to be unethical herself. She cannot claim to be an agent of change if she adopts the Bush/Cheney tactic of withholding evidence, refusing to cooperation and thumbing her nose at subpoenas."

Well, Jr. writes, "Keep digging up the trash."

Lou writes, "I care a great deal and I am reminded of the Bush's administration's firing of the CIA and the leaking of information scandal. With the current regime, this is not change. It is more of the same."

Ryan writes, "If she is such a tough cookie with taking on members of her own party in Alaska, shouldn't she be confident standing strong in accusations against her?"

And Irene in New Jersey said, "No, it doesn't matter. There are way too many more important issues to hammer out before November 4th."

If you didn't see your email here, go to my blog, cnn.com/caffertyfile. Look for yours there among hundreds of others. Wolf.

BLITZER: Thank you, Jack.

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