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LOU DOBBS TONIGHT

Massive Bailout; McCain & Obama Economic Plans; Do-Nothing Congress Prepares for Break; McCain Trust Fund Proposal; AZ Immigration Law Upheld

Aired September 19, 2008 - 19:00   ET

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


WOLF BLITZER, CNN ANCHOR, "THE SITUATION ROOM": Until then, thanks very much.
"LOU DOBBS TONIGHT" starts right now. Lisa Sylvester sitting in for Lou -- Lisa.

LISA SYLVESTER, CNN ANCHOR: Thanks, Wolf.

Tonight the Federal Government acts to stem the nation's worst financial crisis since the Great Depression. The bailout of the nation's financial institutions will cost hundreds of billions of dollars.

Also, Senators McCain and Obama work on plans of their own to deal with the crisis. We'll find out if they offer any real solutions.

And a common sense victory for opponents of illegal immigration. We'll speak to the architect of the Arizona law that punishes employers who knowingly hire illegal aliens.

All that, all the day's news, and much more straight ahead here tonight.

ANNOUNCER: This is "LOU DOBBS TONIGHT;" news, debate and opinion for Friday, September 19th. Live from New York, sitting in for Lou Dobbs, Lisa Sylvester.

SYLVESTER: Good evening, everybody, the Bush administration today laid out a plan to combat the worst financial crisis this nation has seen in decades. The plan will cost hundreds of billions of dollars. The president said the plan would put, quote, "a significant amount of taxpayers' money on the line."

We have extensive coverage tonight of the crisis and the proposed bailout. We begin with Elaine Quijano at the White House.

(BEGIN VIDEOTAPE)

ELAINE QUIJANO, CNN CORRESPONDENT: The president bluntly spelled out how America's financial crisis could get even worse.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Further stress on our financial markets would cause massive job losses, devastate retirement accounts, and further erode housing values, as well as dry up loans for new homes and cars and college tuitions. QUIJANO: With top economic officials at his side, the president grimly conceded, confidence, a critical ingredient in a healthy economy, had been shaken.

BUSH: Investors should know that the United States government is taking action to restore confidence in America's financial markets, so they can thrive again.

QUIJANO: Earlier, Treasury Secretary Henry Paulson described the mammoth cost of that action in what's expected to be an unprecedented bailout.

SEC. HENRY PAULSON, TREASURY DEPARTMENT: We're talking hundreds of billions. This needs to be big enough to make a real difference.

QUIJANO: The details have yet to be hammered out with Congress. But the aim is to soak up bad debt; allowing banks to freely lend money once again.

BUSH: We will weather this challenge, too. And we must do so together.

QUIJANO: Just weeks away from the election, and amid criticism that his administration didn't do more to head off the crisis, President Bush urged Congress to set aside partisanship.

BUSH: There will be ample opportunity to debate the origins of this problem. Now is the time to solve it.

(END VIDEOTAPE)

QUIJANO: Now a senior Treasury Department official tells CNN that right now, the administration has not yet delivered that proposal to Capitol Hill, but says officials are aiming for tonight. The goal, really, is to negotiate with members of Congress over the weekend. All of this, of course, Lisa, with an eye towards the markets opening on Monday -- Lisa.

SYLVESTER: Elaine, certainly a lot of people want to see those details.

Now you touched on the president asking Congress to put partisanship aside. What have you been hearing from Capitol Hill?

QUIJANO: Well, certainly there is caution. Lawmakers have not yet seen this proposal. They have, of course, agreed to do something. That something is needed in order to help not just Wall Street, but Main Street, as well.

At the same time, they understand that there are other issues; Democrats perhaps might want to add on things into this legislation, Republicans being cautious, questioning earlier this week the idea of putting taxpayer dollars to bail out private firms.

But, of course, Lisa no one wants to be seen as standing in the way of much needed legislation. We're more likely to see something here. Lawmakers saying that they'd like to get something pushed through perhaps by the end of next week.

SYLVESTER: Well they have an enormous job this weekend.

Elaine Quijano at the White House. Thank you very much for that report.

The stock market surged today as investors reacted positively to the administration's bailout plan. The Dow Jones Industrials climbed 368 points to close at 11,388. The Dow gained more than 700 points in the past two days. The gains all but erased massive losses earlier in the week. Those losses came in response to the failure of Lehman Brothers and the federal bailout of AIG.

The stock market rallied on the news of the bailout plan, but the details of the bailout are still not known. The one thing that we do know is that the government is putting up hundreds of billions of taxpayer dollars that are at risk.

Bill Tucker has our report.

(BEGIN VIDEOTAPE)

BILL TUCKER: Here's the bottom line of what we know about the proposed bailout measures being discussed this weekend between administration officials, and members of Congress.

BUSH: These measures will require us to put a significant amount of taxpayer dollars on the line. This action does entail risk.

TUCKER: Which may be the understatement of this century because we haven't a clue how much risk, or how many of our dollars will be required. We do know that the risk of not doing something is higher.

BOB KUTTNER, AUTHOR, "SQUANDERING OF AMERICA": The alternative right now, in the middle of a crisis, is Great Depression 2, literally.

TUCKER: But in doing what the administration has proposed, we are taking on a risk that Wall Street has been avoiding. Bad mortgage debt has been packaged with good mortgage debt and sold as debt securities.

As home foreclosures have risen, financial firms have been forced to write down hundreds of billions of dollars of that securitized debt. No one has any idea how much more losses they will have to realize, but it is possible that we, the taxpayers, could make a profit out of this rescue if properly managed.

JARET SEIBERG, STANFORD GROUP: If your view is that the housing market is going to start to recover, these assets are actually going to be worth much more than we paid. And given that our borrowing costs are so low, the treasury could actually stand to make a tidy profit off all this.

TUCKER: However, there is no guarantee of a profit which is why it's called risk.

(END VIDEOTAPE)

TUCKER: And if the housing market continues to worsen, the treasury could take it back thus explaining why the government doesn't routinely get involved in these situations. But, these are not normal times.

So the real bottom line here is where Wall Street has feared to tread, Lisa, the taxpayer has gone in with an open wallet, which should give everybody a little bit of pause, and consider carefully what they're about to do.

SYLVESTER: Absolutely. You say that there's no guarantee of a profit. There's no guarantee that the United States government will ever see this money. Is there any guarantee that they could pump all these billions that this will even work, that it will shore up the shaky financial markets?

TUCKER: No, not really. But what we saw today on Wall Street was that it did infuse the market with confidence. And confidence as you well know is a very important ingredient in the markets.

When they feel like they can move forward, they do move forward. So that's the hope, and a lot of people do believe at the very least we'll buy time which may not be the best bottom line here, but at this moment, we need some time.

SYLVESTER: It's going to cost a lot of money to buy that time.

TUCKER: Right.

SYLVESTER: All right. Thank you very much, Bill Tucker, for that report.

The federal bailout may save the nation's banks, but the nation's middle class is slipping closer and closer to financial ruin. Americans looking for mortgages and other loans will find credit remains tight, and banks will be charging more for those loans.

Kitty Pilgrim has our report.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT: Saving the U.S. financial system will help average Americans eventually.

PAULSON: The financial security of all Americans, their retirement savings, their home values, their ability to borrow for college, and the opportunities for more and higher-paying jobs, depends on our ability to restore our financial institutions to sound footing.

PILGRIM: No one argues with that. But the government is swimming in debt. It has promised more than a trillion dollars in bailouts and loans in the past few weeks; the same government that has more than doubled its budget deficit in the past year to $400 billion.

And then, there's the steadily growing national debt which does affect the average American; a legacy of debt for the next generation, tight bank credit for this one.

ROBERT MANNING, ROCHESTER INSTITUTE OF TECHNOLOGY: At the very time that the American consumer needs more credit at a cheaper rate, that credit is going to the banking system, not to the American consumer, which is the key issue if we're going to shorten the period of this recession.

PILGRIM: The impact will be felt immediately by small business owners who create three out of every four jobs in the country.

DON WILSON, SMALL BUSINESS DEVELOPMENT CENTER: Small businesses are struggling. It may limit our choices in products. It's going to mean that you have layoffs. Whether it's the service sector, the retail sector, small manufacturing, these are the people who create probably 65 percent to 70 percent of the new jobs in this country.

PILGRIM: College students are feeling the impact of tight credit. And with college costs going up about 8 percent a year, more students will be looking for credit.

RICHARD VEDDER, CENTER FOR COLLEGE AFFORDABILITY & PRODUCTIVITY: The interest rate may be higher. Banks, other financial institutions, may insist on a higher, what we call risk premium to minimize the possibility of loss.

PILGRIM: While there are federal and state grants, a quarter of student lending comes from private banks.

(END VIDEOTAPE)

PILGRIM: Now small businesses rely on credit for their day-to-day operations, and will likely begin shedding jobs very soon -- Lisa.

SYLVESTER: What will the employment picture look like moving forward?

PILGRIM: Well, as you know, the unemployment rate is above 6 percent now, which is not a great base to start from. We're seen a number of interesting trends that the number of college-educated people being laid off from jobs is equal to non-college educated people.

We're seeing another trend in that state and local governments seeing lower tax revenue had started to stop hiring and even lay off workers. And that was one of the few sectors that had growing employment. So it's not looking very good.

SYLVESTER: You know, for years people said oh, those were just blue collar jobs that were in jeopardy. And now we're seeing those white collar jobs because those jobs aren't safe either.

PILGRIM: No. We're going to see across-the-board cuts.

SYLVESTER: All right. Thank you, Kitty, for that report.

Coming up we'll have more on Washington's massive bailout of the nation's banks. Two of the nation's leading economists will join me here. Also, do the candidates have any real solutions to the nation's financial crisis? We'll talk with top economic advisers from both presidential campaigns.

And the bailout proposal now heads to Congress. Will it act on this and other critical legislation before adjourning at the end of the month? We'll have a report.

Stay with us.

(COMMERCIAL BREAK)

SYLVESTER: Senator John McCain and Senator Barack Obama today once again battled over who is best suited to deal with our economic crisis.

Senator McCain urged the government to limit taxpayer bailouts and offered up a six-point plan, including the need to streamline the federal bureaucracy.

Senator Obama, meanwhile, said he supported the government's efforts, but offered few specifics on how he would resolve the situation. The senator said he needed more time to review details of the rescue plan before presenting a blueprint.

Dana Bash is with the McCain campaign in Blaine, Minnesota, and Suzanne Malveaux is with the Obama campaign in Coral Gables, Florida.

We have extensive coverage tonight beginning with Dana Bash.

(BEGIN VIDEOTAPE)

SEN. JOHN MCCAIN, (R) PRESIDENTIAL NOMINEE: I have proposed and will sign into law --

DANA BASH, CNN CORRESPONDENT: A take-charge tone as John McCain tried to show what he would do as president to prevent another financial meltdown.

MCCAIN: Government has a clear responsibility to act, and to defend the public interest. That's exactly what I intend to do.

BASH: At this hastily arranged address at a Wisconsin Chamber of Commerce, McCain called for a new government trust, designed to step in before financial institutions reach crisis.

MCCAIN: It's an early intervention program, to help financial institutions avoid bankruptcy, expensive bailouts, and damage to their customers.

BASH: With a few exceptions, McCain spent most of his two decades in Congress pushing for deregulation. Now, he wants the government to force financial firms to open their books.

MCCAIN: Americans have a right to know when their jobs, pensions, IRAs, investments, and our whole economy, are being put at risk by the recklessness of Wall Street.

BASH: Both here and later in Minnesota, McCain's strategy was as much about discrediting Barack Obama's credentials on the economy as presenting his own.

MCCAIN: Maybe just this once he could spare us the lectures and admit to his own poor judgment in contributing to these problems.

BASH: He started both speeches with blistering attacks on Obama for taking more than $100,000 from Fannie Mae and Freddie Mac and taking advice from two of Fannie's former CEOs, Franklin Raines and Jim Johnson.

MCCAIN: While Fannie Mae was betraying the public trust, somehow, its former CEO had managed to gain my opponent's trust to the point that Senator Obama actually put him in charge of his vice presidential search.

(END VIDEOTAPE)

BASH: The reality is both candidates have ties to Fannie Mae. Two of McCain's top advisers once lobbied on its behalf. But McCain aides insist it's one thing to be a hired gun, it's another to run the institution. And it was the CEOs of Fannie Mae who worked with Obama -- Lisa.

SYLVESTER: Thank you, Dana. Dana Bash in Blaine, Minnesota.

Senator Barack Obama today took his campaign to the battleground state of Florida. Obama defended his decision to hold back on specific solutions to fix the financial crisis and he continued to hammer Senator McCain, saying McCain will do anything to win the election.

Suzanne Malveaux has our report from Coral Gables, Florida.

SEN. BARACK OBAMA, (D) PRESIDENTIAL NOMINEE: This isn't a time for fear or panic. It's a time for resolve, and it's a time for leadership.

SUZANNE MALVEAUX, CNN CORRESPONDENT: Barack Obama's rallying cry, responding to the financial crisis. In Coral Gables, Florida, he continued to present himself as the optimist; his opponent, John McCain, as spooked.

OBAMA: I think it's pretty clear that Senator McCain's a little panicked right now.

MALVEAUX: Seven weeks before the election, Obama is supportive, but cautious of the federal government's huge proposed intervention to save the financial markets.

OBAMA: What we're looking at right now is to provide the Treasury and the Federal Reserve with as broad authority as is necessary to stabilize markets, and to maintain credit.

MALVEAUX: But Obama refused to provide more than that, saying he needed more details about the government's plan; casting his response as staying above the political fray.

OBAMA: I think it's critical at this point that the markets and the public have confidence that the work will be unimpeded by partisan wrangling.

MALVEAUX: Surrounded by his team of economic advisers, who he huddled with earlier in the day, Obama rebuffed the notion that while McCain was providing specific solutions, he was sitting on the sidelines during this financial crisis.

OBAMA: You don't do it in a day. We've got to do it in an intelligent, systematic, thoughtful fashion.

MALVEAUX: Obama reiterated that under any bailout plan of his, he'd push for tougher regulations and government oversight of financial institutions. Expand the middle class. And work with other industrialized nations to restore confidence in the markets.

It's estimated the current financial crisis could initially cost taxpayers $1 trillion.

UNIDENTIFIED FEMALE: If you were president, would you set a limit, a cap, per se, on the kind of burden that taxpayers would have?

OBAMA: As president I would say to Secretary Paulson and Chairman Bernanke, do what's required to make sure that people's money market accounts are protected.

MALVEAUX: He also said do what's required to make sure that small businesses have credit, that the economy continues to run, that people have jobs and are supporting their families. The big unknown here is, what is required?

Suzanne Malveaux, CNN, Coral Gables, Florida.

(END VIDEOTAPE)

SYLVESTER: As we've been reporting here, the campaigns of both presidential candidates are tightly controlled, and highly scripted. The election is just 46 days away, and the candidates have effectively limited public access by restricting media access.

Senator Obama last held a full-scale news conference 15 days ago. Now he did answer about half a dozen reporter questions today. They all focused on the financial crisis. Senator McCain's last news conference was 37 days ago.

Both candidates have a responsibility to answer questions and address the issues most posh to the voters, and we'll continue to update you on just how they're doing that.

More on what the two presidential candidates will do to fix our financial crisis. I'll speak with their representatives just ahead.

And as our financial system is in turmoil, Congress is preparing for, what else? But another break. A closer look at our do-nothing Congress when we return.

(COMMERCIAL BREAK)

SYLVESTER: Congress has promised quick action on the federal government's proposed bailout to lift this country out of its current financial crisis. Speaker Nancy Pelosi is also calling for a second stimulus plan to help America's middle class.

But as this do-nothing Congress prepares to go on yet another break, there are serious concerns about how much it will do to help struggling Americans.

(BEGIN VIDEOTAPE)

SYLVESTER: Congress is scheduled to adjourn by the end of the month, with a very long to-do list. Lawmakers have a monumental financial crisis on their hands, but they also must pass legislation to keep the government running.

Only one of 12 appropriations bills has been passed by the House. None passed by the Senate. Then there's the stalled energy bill, still no action to address high gas prices. And looming deadlines on taxes. Unless Congress acts on the alternative minimum tax, more than 22 million middle-class families will face higher tax bills.

BRIAN DARLING, THE HERITAGE FOUNDATION: I would say the American people are not getting their money's worth in Congress. They have both Republicans and Democrats that aren't getting the job done. Americans are very dissatisfied with Washington, D.C. President Bush's approval ratings are low. Congressional approval ratings are at record lows.

SYLVESTER: This was supposed to be the new and improved congress. Democrats promised this time they would not be a do-nothing congress. Why the gridlock?

DAVID WASSERMAN, COOK POLITICAL REPORT: We have a divided government. The president and Congress can't seem to agree on drilling. They can't seem to agree on a stimulus package right now. And that's why Congress is probably going to go extra innings.

SYLVESTER: As the clock winds down, lawmakers will likely pass what's called a continuing resolution to keep the government funded past the fiscal year start of October 1st. Other issues are likely to be shoved to the back burner, as Congress tries to figure out a way to shore up the shaky financial markets.

(END VIDEOTAPE)

SYLVESTER: The American people are sick and tired of the partisan bickering. According to a CNN Opinion Research Corporation poll, 77 percent of the public disapproves of the way congress is handling its job; only 22 percent approve.

Time now for tonight's poll. Do you believe the government is ignoring the needs of middle-class Americans while providing hundreds of billions of dollars to bail out Wall Street? Yes or no, cast your vote at loudobbs.com. We'll bring you the results later in the broadcast.

And coming up, does either presidential candidate have a real solution to the nation's financial crisis? We'll hear from their economic advisers next.

Also, the massive federal bailout; hundreds of billions of taxpayer dollars at risk. Two of the nation's top economists will tell us if they think this plan is sound.

And a federal court upholds Arizona's law punishing employers of illegal aliens. The author of that law will join me here.

Stay with us.

(COMMERCIAL BREAK)

SYLVESTER: Senators McCain and Obama reacted to the government's latest bailout plan for the economy. Senator McCain called for the creation of a new trust fund that would use taxpayer money to strengthen troubled institutions before they fail. We'll talk with an adviser to the Obama campaign in just a moment.

But first Douglas Holtz-Eakin is a senior policy adviser to the McCain campaign. He explains Senator McCain's position on government bailouts.

(BEGIN VIDEOTAPE)

DOUGLAS HOLTZ-EAKIN, MCCAIN SENIOR POLICY ADVISER: The senator firmly believes that we should not be putting taxpayer money in casually. The only time it makes sense to put it in is to put money in to save the financial system, and people and businesses from greater harm.

SYLVESTER: Let me make sure I'm clear on this. Does he support putting in taxpayer money for some type of a bailout? Does he echo some of the same sentiments that Secretary Paulson outlined earlier today?

HOLTZ-EAKIN: The first choice is to not put taxpayer money in. But the reality is some institutions, AIG for example, are so large and present such a great threat to the American economy, that we would be negligent if we didn't get them through their problems, using minimal taxpayer bailouts, minimal taxpayer finances, and in this case, find a way to not put them in bankruptcy.

Find a way to get ahead of the curve, be pro-active. Give them a place to go where the workout's going to happen and they can emerge as contributors to society and our economy, not a drag on it.

SYLVESTER: All right. I want to play a sound bite for you, of Senator Obama today and what he had to say about the current situation.

OBAMA: Given the gravity of this situation, and based on conversations I've had with both Secretary Paulson, and Chairman Bernanke, I will refrain from presenting a more detailed blueprint about how an immediate plan might be structured until I can fully review the details of the plan proposed by the treasury and the Federal Reserve.

SYLVESTER: What is your reaction?

HOLTZ-EAKIN: Well, Senator McCain actually has a plan. He has a plan that minimizes the taxpayers' involvement, it gets ahead of the problem, it doesn't put the liabilities on the government books. It doesn't do what we did with Fannie Mae and Freddie Mac and take on $5.6 trillion of liabilities.

Senator Obama is just going to, you know, vote present once more in a crisis. You need some ideas. You need to be able to stand up, take some leadership.

We hope the Bush administration, we hope the Congress, gets together, and realizes that senator McCain has a plan and should adopt it and move forward.

SYLVESTER: Whoever is elected the next president will have to deal with this crisis squarely. What type of regulations will we see coming out of a McCain administration so that we are not in the same situation down the road?

DOUGLAS HOLTZ-EAKIN, MCCAIN SR POLICY ADVISER: Well, you want comprehensive regulation that treats every economic transition -- transaction exactly the same no matter where it takes place. It takes place in Chicago, in New York, on an electronic trade, it should have the same regulatory structure. What should come out of that should be regulator that has safety and soundness for every financial institution and the ability to shut id down if it's a danger to Americans, some consumer protections, no more mortgage fraud, some corporate governance reforms, so we don't see CEOs walking away from failed institutions with multimillion dollar golden parachutes. And you like to make sure the system had some stability and there was a check on that stability.

There's a path to that through the Congress, the Senator has dedicated as president to making it happen and we think this is a way forward in the 21st century to set the rules of the road right, so we can have a good financial service industry, but not see the excess and the real failures of the recent past.

SYLVESTER: Really quickly, there are a number of Democrats that are proposing some type of help or relief for middle-class families that are struggling, the idea being that as Congress gets set forth to bail out Wall Street that something should be done for the folks on Main Street. What are your thoughts there?

HOLTZ-EAKIN: I think it's imperative that we have hope for Main Street, that's why John McCain wants to make sure that Main Street doesn't get crushed by this Wall Street problem. That Main Street has a chance to create jobs, build a foundation of future prosperity and quite frankly the Senator from Illinois, Senator Obama's plans to give someone a $500 tax credit, that's not going to be much help if you're out of work. You need a plan to have jobs. John McCain is creating jobs in healthcare plans, energy plans, tax plans. It's the future for the middleclass.

SYLVESTER: All right, Douglas Holtz-Eakin is a senior policy adviser to the McCain campaign. Thank you very much for joining me.

HOLTZ-EAKIN: Thank you.

SYLVESTER: And joining me now from Chicago is Austan Goolsbee, senior economic adviser to Senator Obama.

AUSTAN GOOLSBEE, OBAMA SR ECONOMIC ADVISER: Thanks very much for joining us.

My pleasure.

SYLVESTER: First off, your reaction to this massive bailout plan, hundreds of billions of dollars will be on the line,t taxpayer money -- your thoughts?

GOOLSBEE: Well, my first thought is, what an awful situation that we got to this point. And it leads me to start wondering, who tore up the rules of the road for the last 26 years in Washington that got us here? But, then the second is, you know, there's a moment of great turmoil, the Fed, the Treasury, and everybody else has got to come together and take emergency measures to make sure that the financial system doesn't completely implode.

SYLVESTER: Now, your candidate has not put any specific details of a plan, why not? Why is he refraining from going out front and saying what he thinks on this issue?

GOOLSBEE: I do not agree with that. He put out an extremely detailed plan for financial oversight and regulation six months ago. He reiterated and expanded on those the day before yesterday. The clip that you played where he's talking about he wasn't going to provide specifics, was in response to people asking what do you specifically think about the terms of this arrangement? But, they haven't released the terms of this arrangement yet. On the ones they have released, like the insuring the money market fund deposits, he absolutely agreed with that, so that we don't have runs on the bank. It's completely normal not to judge the details of a plan until they give them to you.

SYLVESTER: But his opponent has come up with a six-point plan. And, in fact, the McCain campaign, you heard this earlier in that sound bite in that clip, in which he's saying that Obama is essentially voting present, that he is not taking a stand on this issue.

GOOLSBEE: Yes, but the six-point plan is actually Senator Obama's and I will refer you to his speech from the day before yesterday. What Senator McCain put forward that they keep saying is a specific plan, I invite you to look on their Web site. It is literally 10 lines long. It looks like it could have come out of a fortune cookie. It is not specific. It is not a specific plan. Barack Obama's organization that he has put together, this six-point program for financial oversight, was forged with the input of people like Paul Volcker, Bill Donaldson, Rob Rubin, Laura Tyson, a number of experts. We met in Miami with Senator Obama this morning to go through what the options are and it's clear that we have to take a long-term focus. We have to focus on the real problems in the economy, the job market, the industrial declines, the unemployment rate being high, and the housing crisis, and we need to do that in an institutional structure that is going to address the issues of financial crisis for the long run. Senator McCain spent the last 26 years ripping up the rules of the road...

SYLVESTER: You know, very to ask you...

GOOLSBEE: He and his economic advisers have been deregulators and now they've had an 11th hour conversion once they've seen the damage that it's done.

SYLVESTER: I have to ask you, you know, we are hearing a lot of talk, but people want specifics. What is the plan then? You're saying that Senator Obama has a plan. What is that plan?

GOOLSBEE: OK, it's outlined six basic action steps that we need to take to re-establish public trust. Step No. 1, we must immediately put in place anyone that has access to the lender of last resort feature from the fed, the sacred insurance policy that is underwritten by the American taxpayer must be subject at all times to capital and liquidity requirements the way commercial banks were in the past. The fact that we've had investment banks running up 30, 40 to one leverage ratios, when they are going to be able to turn to the government in a moment of crisis, means that they are taking risks with the taxpayers' money and that has to be changed.

No. 2, we have to immediately strengthen the enforcement and stop degrading the capabilities of our oversight agencies like the SEC and the CFTC.

SYLVESTER: OK, we have just a couple of seconds here.

GOOLSBEE: Tyson OK, I was trying to give you the specifics.

SYLVESTER: So, if you can kind of wrap up. All right, well, Austan Goolsbee, thank you very much for your time, and we appreciate it.

GOOLSBEE: My pleasure any time.

SYLVESTER: And we certainly will be hearing more from the Obama campaign. Appreciate your time.

Still ahead, much more on the massive government bailout. Two of the best economic thinkers tell us what it means for our middleclass. And a victory for opponents illegal immigration. The man behind Arizona's employer sanctions law, State Representative Russell Pearce joins us.

(COMMERCIAL BREAK) SYLVESTER: A victory tonight for local communities fighting to enforce immigration laws, a federal appeals court has upheld an Arizona law that penalizes businesses that knowingly hire illegal aliens. The law also requires employers to verify the employment status of workers. Arizona state representative, Russell Pearce is the author of that law and he joins me now from Phoenix. Were you surprised by the court's decision?

REP RUSSELL PEARCE (D), ARIZONA: No. Not at all, in fact, this is the fourth court case we've won on this. These are the same folks that sued us Prop 200 (ph), that I wrote in '04 to require proof of citizenship to vote, proof, you know, I.D. at the polls and proof that you're eligible to get taxpayer benefits. This is the same group -- you know, they started from day one, this is the ACLU in (INAUDIBLE) and the U.S. Chamber, the Profiteers over Patriotism, and then they simply will do whatever they can to try to get us not to enforce those laws.

The court, when they tried to file a restraining order, a temporary order to restrain the law from going into effect, the court told them then, forced (ph) Judge Neil (ph), the first judge judge (ph) who kind of spanked them, then they appealed to the 9th Circuit Court and when they tried to get this temporary restrain order they said, this is silly, we're not going to give you that because we don't think you won on the merits and they virtually spanked them at that time with some comments and made it pretty clear how they was going to rule.

SYLVESTER: What was this going to mean for the folks in Arizona, the businesses and such? Do you think that this will send a clear message?

PEARCE: Well, clearly it will. This is a national issue. I mean, they've attacked Hazelton, Pennsylvania, they've attacked, you know, Valley Park, Missouri, they've attacked Oklahoma, who have all tried to implement rules and laws to go after the illegal alien problem, the crisis in this country. The employers are the No. 1 lure, this is clear, they made it very clear that we're not preempting federal law. States have the inherent authority to enforce these laws. They made it clear that we can go after, first of all the best program ever devised to help employers know who they're hiring, called E-Verify, a Web-based system that verifies the identity of your employer that they're either a citizen or they have a visa and they have a right to work here, it's 99.7 percent accurate. That's what (INAUDIBLE). But, they don't want to know who they're hiring, they want to continue use the I9 process that's full of fraud. In fact these same folks are the ones that are now doing Proposition 202 here in Arizona because they knew they would lose in court and they've gone after us at the ballot with a very...

SYLVESTER: Let me just jump in here...

PEARCE: ...divisive and deceitful name, "Stop Hiring Illegal Aliens," which guts the program (INAUDIBLE), it takes away the mandatory use of E-Verify...

SYLVESTER: Let me jump in right now because I want to is I want show our viewers and share with our viewers what the ACLU had to say on this. They're saying that the appellate court essentially left the door open to future challenges. The ACLU saying about that decision: "While the decision is a setback it is important to understand that this is only one of several appellate decisions involving similar laws that we expect to be issued in the coming months. We expect those will reject state and local attempts to meddle in immigration policy."

Your thoughts, there.

PEARCE: That's absolutely not true. And again, they're the same people that love to put out myths that there's a federal issue not a state issue and that's just not true. What the courts did, they didn't leave the door open, they just said they have to make sure that there's a proper forum for a hearing if you have rebuttable information.

Well, our system is designed for that, so they didn't leave the door open at all, they just made it clear they expected that if you have rebuttable information that you don't mistakenly make that you have a chance to present that. We absolutely agree with that. We've made the bar high, you have to knowingly hire an illegal alien in order to get in trouble, you can't get into trouble by accident. But we've created the good faith clauses in there, but we also gave them a way to make sure they stay out of trouble and that's use the E-Verify system, which is the closest security system and the visa database ran by Homeland Security, that's what it's about and it will never work without it.

SYLVESTER: Russell, we love chatting with you. I think this law is going to be a model for other states, but we are out of time. We appreciate you join us.

PEARCE: We're going to win. America is going to win on this one.

SYLVESTER: A reminder now, to vote in tonight's poll: Do you believe the government is ignoring the needs for middle-class Americans while providing hundreds of billions of dollars to bailout Wall Street? Cast your vote at loudobbs.com, we'll bring you the results in just a few minutes. And please join Lou on the radio, Monday through Friday for the LOU DOBBS SHOW, go to loudobbsradio.com to find local listings for the LOU DOBBS SHOW on the radio.

So, how are McCain and Obama's economic recovery ideas playing with hard-working middle-class voters? Coming up, four of the country's most distinguished political analysts. And President Bush says he expects taxpayers to be paid back for this nearly trillion dollar bailout. Is that even possible? I'll ask some of the nation's most brilliant financial minds, next.

(COMMERCIAL BREAK)

SYLVESTER: The U.S. government, this week, proposing a massive bailout to help stem the financial crisis in this country. Joining me now, two of the nation's best economic minds, Peter Morici, business professor at the University of Maryland, and Pat Choate, Ross Perot's vice presidential running mate in 1996. He is also the author of "Dangerous Business: The Risks of Globalization for America."

Let's just start by saying, this is quite a mess, these political leaders now are asking Congress, the taxpayer, to open up their checkbooks and to write a $500 billion check here, or at least a line of credit. Your thoughts -- Peter.

PETER MORICI, UNIV OF MARYLAND: Well, I think it's going to be more than $500 billion when they're done, there's probably bad mortgages out there of a trillion dollars. Certainly, they're not going to make any money on this like the way they did with the Resolution Trust Corporation. They've heard that banted (ph) about. They're going to have a lot of trouble selling the homes that go into foreclosure for anything like what the mortgages were. This is going to be a real mess and it's going to be very costly. It's going to really hamstring the government going forward because it's going to use up a lot of its money.

SYLVESTER: Pat, do you think that this will have long-term implications, the United States taking on all of these obligations, a trillion dollars?

PAT CHOATE, AUTHOR, "DANGEROUS BUSINESS": I do. I think on the other hand, we found ourselves in a situation where something had to be done, the Great Depression was caused by the Federal Reserve when they had a financial panic, in 1929, cut the money supply. And so, in one sense this had to be done. What disturbs me is that there was not the oversight by the Federal Reserve and by Congress in these issues. They come and so all of a sudden one weekend we find out, oh, oops we need $500 billion and this may go to a trillion dollars. We've had some members of Congress, Marci Kaptur and others, calling for the creation of a special investigating committee to take a look at how this happened, to see what the lessons are. I would hope the Congress would do that immediately, create that immediately.

We also need to be thinking about the credit of the United States since we're borrowing so much money from China, Japan and other central banks. How is this going to affect the United States government's ability to finance these massive deficits that we have? I'd like to hear something from the two candidates on how they're going to deal with that issue.

SYLVESTER: Peter, we want to hear from you in just a moment. But first I want to -- we want to listen to some sound -- sound bites from Secretary Paulson, earlier today when he was talking about this issue, the idea of moving these troubled assets off the books. Let's take a listen.

(BEGIN VIDEO CLIP)

HENRY PAULSON, TREASURY SECY: When we get through this difficult period, which we will, our next task must be to improve the financial regulatory structure so that these past excesses do not reoccur. This crisis demonstrates, in vid terms, that our financial regulatory structure is suboptimal, duplicative and outdated.

(END VIDEO CLIP) SYLVESTER: You know, Peter, there are people in Washington, and elsewhere, who have been saying that for years. Now, all of a sudden we're at crisis -- in crisis mode, and suddenly it has their attention.

MORICI: Absolutely, one of the basic problems is the Congress has oversight. And whether the Republicans are in or the Democrats are in Congress, right now it's the Dems, a lot of campaign contributions go their way. Right now Senator Dodd and Chuck Schumer are collecting a lot of money on Wall Street, so it's hard to get the Congress focused on really getting tough with the banks.

At the same time, this is not really bank regulation as much as it's corporate governance difficulties. These compensation strategies they have in place, Lehman Brothers paying 49 percent of its profit to its employees for basically making bad deals, it's abominable. We're going to have to do something about the compensation structure which encourages bankers to go out and make bad mortgages, and do reckless things so they can make a big commission on the deal.

SYLVESTER: Pat, there is a lot of money on the line, here. Do you think that taxpayers will ever see this money? Will it ever be paid back?

CHOATE: The taxpayers are going to lose a great deal of money, there's no question about that. If the federal government next week creates a new corporation in which they put all of the bad paper, we need to make sure that this is managed prudently, that there's a slow sale of those assets, so we're not doing it at fire sale prices.

And I would suggest something else. That if there is money to be made there, that that money be taken and put someplace such as in the Social Security, the Medicare trust funds that we just simply not allow a bunch of scavenger capitalists or Wall Streeters to come in and buy homes for five cents on the dollar and sell them for 30 cents on the dollar. If there is to be any profit, we need to see that it goes back to the American taxpayer and putting it in a Social Security lockbox or Medicare lockbox is a way to deal with the future problem and to see that the American people get benefit from the risk that they're now being asked to take.

SYLVESTER: All right, Peter Morici, Pete Choate, thank you very much for joining us on this fairly somber day. Well, coming up at the top of the hour, the ELECTION CENTER with Campbell Brown.

Campbell, what are you working on?

CAMPBELL BROWN, ELECTION CENTER: Thanks, Lisa. Well tonight, Capitol Hill is waiting for the Bush administration's financial rescue plan. A senior official telling CNN that they are aiming for tonight, getting it to the Hill tonight. We're going to be watching at the top of the hour. We also have the presidential candidates, very different reactions to what is going on. Guess who's acting populist? Guess who's trying to stay above the fray? Plus, a panel of financial experts here to answers your questions about how this affects your home, your money, we've got all that at the top of the hour. See you in a few minutes.

SYLVESTER: Campbell Brown, thank you very much. We'll stay tuned.

And still ahead, we'll check in with some of the nation's best political minds. Stay with us.

(COMMERCIAL BREAK)

SYLVESTER: Joining me now, four of the best political analysts in the country: Republican strategist and CNN contributor, Ed Rollins. Ed served as White House political director under Ronald Reagan; he also chaired Mike Huckabee's presidential campaign.

Democratic strategist and CNN contributor, Robert Zimmerman. Robert is a Democratic national committeeman and a Barack Obama supporter.

Pulitzer Prize winning columnist for the "New York Daily News," CNN contributor, Michael Goodwin.

And founder of chairman of the Rainbow Push Coalition, the reverend, Jesse Jackson.

Thank you very much, gentlemen, for joining me.

Let me ask, Ed, starting off first. The Treasury -- you've see this plan, we heard Secretary Paulson, hundreds of billions of dollars are on the line. Your thoughts, your reaction.

ED ROLLINS, My thoughts, first of all, we don't even know what the debt is. I mean, I'm opposed to it. I think we ought to take our time and find out what's going on. I know there's somewhat of a rush to get here, but at the end of the day, you're going to take on all this debt and the taxpayers are going to be responsible, we ought to know what it is. We ought to take 30 days, the Congress ought to get involved in it, and it ought to be very well thought through and the American public ought to know what they're buying.

SYLVESTER: Yeah, Robert, your thoughts. You know, Senator McCain, he's saying that we need to stop this process of bailing out Wall Street, but at the same time, acknowledging, OK, well, we have to do it, we're in this situation. I mean, it seems like the candidates, they don't really know where they're trying to come down on this issue.

ROBERT ZIMMERMAN, DEMOCRATIC NATL COMMITTEE MEMBER: Let's be realistic, both candidates are tripping over their platitude and they're finger-painting and I think it really is diminishing their role in addressing what is truly probably the greatest crisis our country has faced and perhaps the world economically since the Great Depression. I mean, just -- it was just last week that Senator Obama was mocking Senator McCain for calling for a federal investigation, and then speaker Nancy Pelosi called for a Congressional investigation and of course Democrats praised that initiative.

And in the same way that Senator McCain was criticizing Senator Obama for not having specifics, Douglas Holtz-Eakin, who was just on with you, said to the "Washington Post" on Wednesday that we don't need specifics, it's about leadership. And the finger-pointing is ultimately diminishing -- is diminishing the important issue at hand and ultimately I think it could undermine Senator Obama's campaign.

SYLVESTER: Michael.

MICHAEL GOODWIN, NEW YORK DAILY NEWS: I thought neither Obama nor McCain distinguished themselves this weekend, in particular. I think neither one looked ready to be president. And the same in Congress, Harry Reid said, I think Wednesday, we're going to go home because nobody knows what's to do. I mean, this is a major crisis, as ever we all know, as Robert said, but the candidates acted as if they were caught off guard. And that's just inexcusable. This thing has been building for a year-and-a-half. Really smart people on Wall Street knew about it two and three years, warned about it and yet the candidates did nothing until it became a full-blown crisis. That's not leadership.

SYLVESTER: The reverend, Jesse Jackson, we want to include you in this discussion. You know, there are many hardworking middleclass families, they see these headlines of these multibillion dollar bailouts and they say where's the relief for the middleclass family? What is your thinking, there?

REV JESSE JACKSON, RAINBOW PUSH COALITION: It's not on the table, right now, the fact is that the emergency and plot triggered by being a corporate, but it's kinship to Wall Street may be corrected by the process for our national stability, we must do something with AIG. But then what about a bailout for urban America and for rural America for the poor?

What I like is what's happening at the automotive industry. Where the automotive industry cannot compete with foreign companies that are buttressed by subsidy and high tariffs and so we're getting a $25 billion loan, low interest loan, kind of like the Marsa plan (ph), to help allow the industry to retool. Why can't we do that for the American homeowner, rather than hold foreclosures why can't we have loan -- low interest loan and restructure loans and not repossess homes? That creativity is taking place for all the industry that is taking place for the American home and the Americans who don't have homes.

SYLVESTER: Ed, let me ask you this question, you know that Democrats are seeing an opportunity here for getting some kind of stimulus package, things that they have been working for some time and now they're in a situation where they could say, you want the bailout money, we want something in return. Do you think that's going to happen? Do you thinks some horse trading over the weekend?

ROLLINS: My concern is that, having been around Washington for 40 years, is every time they try and do something rushed, it ends up -- they're getting it wrong. And just exactly what you're saying, this will end up being a Christmas tree bill, they'll have no idea what it costs at the end of the day is and no one will be ronl for it for a long period of time. The way we got into this was Phil Gramm put together a 200-plus page amendment that he put into a 10,000 page reconciliation bill in December of 2000 that basically created Enron and created this mess that we're in today, signed by Clinton.

So, the bottom line is they need to stop and think about this and before they start adding other programs, they can subsidize everything, but at the end of the day, if we don't look at this hard and fast, taxpayers are going to pay a gigantic...

(COMMERCIAL BREAK)

ZIMMERMAN: Ed's point is a very important point, because Warren Buffett referred to the Phil Gramm legation as "financial weapons of mass destruction," which sowed the seeds for the crisis we're living in now. But let's remember the Homeland Security Act was adopted in a rush to judgment in December of 2002 when Democrats felt they had to compete with Republicans to show they were tough on defense.

Every time we try to -- I believe the government has to take action, I'm encouraged by the bipartisanship, but a rush to judgment is a very dangerous, dangerous environment when you're dealing with perhaps a trillion-dollar debt.

SYLVESTER: OK, the Reverend Jesse Jackson...

JACKSON: Lisa, what drives us in this is a -- is lack of regulation with oversight. Oversight was compromised because those who do the oversight are on the Wall Street payroll and their efforts to lobby and get (INAUDIBLE) and so, those Wall Street leaders must not profit from this calamity and those who have oversight must not be allowed to take money from Wall Street, let's end the corruption in the process. And then get beyond just the idea, the American homeowner who to know whether they are on facing record foreclosure need some plan, not for a gift, but for restructured loans, long-term (INAUDIBLE) as we did in (INAUDIBLE). Why not do it for the American homeowner and now for the time to address the American poor.

In Ohio, 13 (ph) percent of the people are poor, let's not leave poverty out of the agenda because...

SYLVESTER: I want to get Michael Goodwin in this discussion, as well. You've just heard the reverend, Jesse Jackson saying look, we need to -- this has been essentially going on for quite some time and now we need to rein in Wall Street in some way and we need to do something for middleclass families.

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