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CNN LATE EDITION WITH WOLF BLITZER

Interview With Obama, McCain Economic Advisers; Interview With Ron Paul

Aired September 21, 2008 - 11:00   ET

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


WOLF BLITZER, HOST: This is LATE EDITION, the last word in Sunday talk.
(BEGIN VIDEO CLIP)

BLITZER: A roller coaster week on Wall Street.

PRESIDENT GEORGE W. BUSH: We must act now to protect our nation's economic health from serious risk.

BLITZER: Leaders of both parties are scrambling right now to find a solution to an economy on the verge of a melt down. How much will it cost and who will pay? Two experts weigh in, former budget Rob Portman, a supporter of John McCain and former Clinton economic adviser Gene Sperling, who is backing Barack Obama.

SEN. JOHN MCCAIN, R-ARIZ.: Senator Obama did nothing and actually profited from the system.

SEN. BARACK OBAMA, D-ILL.: His big solution to this worldwide economic crisis was to blame me for it.

BLITZER: Political blame game. Presidential candidates take shots at each other, but who has a real plan for the economy? We'll put that question to the top economic advisers from both campaigns, Douglas Holtz-Eakin and Austan Goolsbee.

A pessimistic view of the bail out.

PAUL: I think it's grasping at straws. I don't think it's going to solve the problem at all.

BLITZER: We'll hear from Congressman Ron Paul, who is no longer running for president but certainly hasn't stopped speaking his mind.

SEN. JOSEPH R. BIDEN JR., D-DEL.: Wealthy people are just as patriotic as poor people. We just have not asked anything of them.

BLITZER: Is it patriotic to pay taxes? GOV. SARAH H. PALIN, R-ALASKA: Not patriotism. Raising taxes is about killing jobs and hurting small businesses and making things worse.

BLITZER: Economic troubles usually hurt the party in power, but the presidential race is tighter than ever. The inside story from the best political team on television. LATE EDITION's lineup begins right now.

(END VIDEO CLIP)

BLITZER: It's 11:00 a.m. here in Washington and 8:00 a.m. in Los Angeles and 6:00 p.m. in Baghdad. Wherever you're watching from around the world, thanks very much for joining us for LATE EDITION.

It's the worst financial crisis facing the American people since the Great Depression of the 1920s and '30s and right now Bush administration officials are working feverishly with Democrats and Republicans on Capitol Hill to come up with a $700 billion rescue plan.

For some perspective on all of what's going on, I'm joined now by two guests. In Cincinnati, the former Republican Congressman Rob Portman who served as both the director of the Office of Management and Budget and the U.S. trade representative in the current Bush administration. He's backing John McCain.

And with us here in Washington is Gene Sperling. He served in the White House under Bill Clinton. He was a senior economic adviser. He is now supporting Barack Obama. Gentlemen, thanks very much for coming in.

Let me begin with Gene Sperling. Here's what Secretary Henry Paulson said today about the urgency of passing this legislation clean without a whole lot of add-ons right now. Listen to this.

(BEGIN VIDEO CLIP)

SECRETARY OF TREASURY HENRY M. PAULSON JR.: What we need to do right now is stabilize the markets and this is for the benefit of the taxpayers we're doing this to the American public. Then once we get behind this and get this stabilized, there's a lot we can talk about in terms of reform.

(END VIDEO CLIP)

BLITZER: Is that what the Obama campaign, the Democrats are ready to do, just provide basically a rubber stamp to what the Bush administration was?

SPERLING: Well, Senator Obama does think that this is a point where we need to be serious, bipartisan and swift. So he has been talking constantly with Secretary Paulson, Chairman Ben Bernanke. He does want to work together and he doesn't want to do things that are extraneous or would hold up this bill. On the other hand, it's also important that as you're moving forward, you do learn the lessons from the past. And what he has said and what he'll be saying more about is that we need to make sure that we're not just hitting the fast forward button for Wall Street and keep hitting the pause or slow motion button for Main Street. And I think it also requires that we have.

BLITZER: Let me ask you, Gene, is it your position that there should not necessarily be a second economic stimulus package, $50 million or whatever attached to this crisis legislation?

SPERLING: Well Senator Obama believes we need to do both.

BLITZER: As part of the legislation?

SPERLING: He is going to press for both, but he is going to, as he thinks everyone should do, work in a way to make sure this is swift and serious. But, I do think there are things in the element of this bill that do need to take place and that he thinks.

One, you know, there's got to be accountability. It just can't be that this is a blank check. There needs to be serious accountability in this bill. I think there needs to be enough expanded authority so the Congress and the secretary treasury can do all the things they want. And I think he said and I think you heard Chris Dodd say this too, that you need to move swiftly but you need to move intelligently and there needs to be a degree of reciprocity. Taxpayers are stepping in now to help restore confidence. They need to know that their there are provisions in here that are looking out for them.

BLITZER: Congressman Portman, are you on board?

PORTMAN: I am on board. First of all, Hank Paulson was just quoted a moment ago and I think it's a welcome relief from the partisanship we've seen in Washington in the politics of an election year that he has been received so well on a bipartisan basis and it's a credit to him because there's credibility on Wall Street and on Capitol Hill.

But this is a time for us to pull together. It's not a time to try to make political points. I agree with Gene, we ought to move forward with this incredibly important package right now and, by the way, it is going to help Main Street and help America's families and not just Wall Street. The idea is not to help Wall Street. It's to be sure that credit continues to flow which is critical to small business job growth, which is one of the few bright spots in our economy right now and critical to American families.

BLITZER: But you've heard the criticism. Congressman, you've heard the criticism from some of your fellow Republicans. Some of these conservatives are saying this is only socializing the American economic system and this bail out, really, is going to be counterproductive in the long run. They don't believe in it. What do you say to those who are from the right who are saying this is a mistake? PORTMAN: Well, it depends how it's done. I think what you're seeing across the board on a bipartisan basis from the leadership in the House and the Senate is we need to do something, we need to do it quickly and it needs to be done to be able to stem the crisis because there's a financial crisis right now that again is tying up credit that is affecting all Americans and, particularly, job creation.

If you can't get a loan out there to expand plant equipment and jobs, it will slow our economy dramatically. So we need to move and move quickly. The question is, how do we do it, Wolf? What is the value of these mortgage backed securities? How will the government take on risk here. Who is held accountable? If you look at the saving and loan crisis and the response to that, taxpayers ended up getting back about two-thirds of the support that the government provided. I would certainly hope in this case, it is structured in a way that taxpayers don't end up holding them back.

BLITZER: You think that's realistic to think that some of the $700 billion and perhaps some of the other hundreds of millions of dollars for the other bailouts whether AIG or Fannie Mae and Freddie Mac, that some of that money could be regrouped?

PORTMAN: Absolutely.

BLITZER: Let me ask you, let me ask you -- you say that the answer is yes. But let's ask Gene Sperling.

SPERLING: I think that's what we all hope. We all hope that some of this will be restored but we don't know how much. But there's no question that it needs to be structured that way. It needs to be structured that those who are benefiting are also doing their share. That means not taking assistance and then being ruthless about throwing people out of their homes and it also means being part of the fiscal and financial responsibility.

But there really is an important lesson here, Wolf, going forward which is that when you take, and I'm afraid to say, I don't blame Senator McCain for everything that's happened, but when you take the type of deregulatory approach that less is always better, you reject common sense regulation.

What you see is that ironically when you have a go it alone type approach in these type of failures then you even have a conservative administration having no choice but to do a major government intervention. And there's a lesson going forward, we need to be pragmatic about common sense regulation. And that's the type of approach that Senator Obama is going to be pressing in the days and months to come.

BLITZER: Certainly, I want you to respond to that congressman, but listen to the point on that specific issue that Senator Obama made this week. Listen to this.

(BEGIN VIDEO CLIP)

OBAMA: When I was warning about the danger ahead on Wall Street, months ago, because of the lack of oversight, Senator McCain was telling the "Wall Street Journal" and I quote, "I am always for less regulation."

(END VIDEO CLIP)

BLITZER: All right, so was this drive to get less regulation in part responsible for this worst economic crisis facing the United States since the Great Depression?

PORTMAN: Wolf, first, the premise is flat wrong as you know probably because you looked at the context of that quote in the "Wall Street Journal." He was not talking about deregulating the financial markets. In fact, he was talking about something entirely different.

And in that same interview, he talked about the need for us to have more oversight in terms of Wall Street. Also, two years ago it John McCain, not a go it alone guy. He's a guy that does believes we ought to have smart regulation, who said we ought to get Fannie and Freddie Mac under some real oversight and increased and smarter regulation.

Senator Obama, by the way, did not join him in that proposal. So this is not a guy who has been against regulation. He has been for smarter, tougher regulation. And in fact yesterday he outlined some steps to be sure that we do have a regulatory scheme in place that makes more sense, is not antiquated, that deals with these new derivatives and these new financial instruments that we need to get control of.

BLITZER: Let me let Gene respond, but here's how Senator McCain phrased it on Friday, this specific point that Congressman Portman was making.

(BEGIN VIDEO CLIP)

MCCAIN: Two years ago, I called for reform of this corruption at Fannie Mae and Freddie Mac. Congress did nothing. The administration did nothing. Senator Obama did nothing, and actually profited from this system of abuse and scandal.

(END VIDEO CLIP)

BLITZER: All right. Go ahead, Gene. Those are strong words.

(LAUGHTER)

SPERLING: They're strong words. They're not accurate. And what Senator Obama said was absolutely accurate, and it's a quote right out of The Wall Street Journal.

I mean, as early as March -- as late as March of this year, when talking about this financial crisis we're under, his conclusion was less regulation. And he said, I'm always for less regulation.

And Wolf, this is important not only in who you're going to trust, going forward, in this area, but look at what's in The Washington Post today on health care, that he says, explicitly, in his own words, "I want to deregulate the health care market like we have the banking market."

That's in his own words. We're seeing from Health Affairs, today, that they think his plan would leave 20 million Americans to have their insurance dropped and then be put in an unregulated...

(CROSSTALK)

BLITZER: All right, Congressman Portman. I want you to respond, Congressman Portman, but on the specific point that a lot of conservatives, a lot of Republicans say that there should be less federal intervention, less federal regulations.

PORTMAN: Well, two things. One, as I said earlier, I know this is the political season and it's even the silly season. We need to stop playing politics with this particular financial crisis because it's too big and too important to America's families.

Those quotes are totally out of context. The most recent one, this health care quote, is about the ability to have banking across state lines. I don't know if Gene Sperling ever goes to an ATM outside of his state of residence. I hope he does. But that's specifically what he's talking about, in terms of health care, people being able to get health care across state lines, which will reduce the costs for all of us, in terms of the individual markets.

BLITZER: Go ahead, Gene.

PORTMAN: It's the wrong context. And it's too bad, in my view, that, particularly at this time, that the McCain campaign has to spend its time responding to these attacks that are just untrue, rather than working together to try to solve these problems.

SPERLING: Well, Congressman, you know, let's be straight about what happened on Friday. On Friday, at Secretary Paulson's request, Senator Obama chose to wait for the details of the plan, to give a serious approach and not do anything that would up-end the bill.

At 8 a.m. that morning, Senator McCain went out and gave one of the most partisan, blistering attack ads. And that was Friday morning.

I don't think there is any question in the public mind which of these candidates is taking the most serious and bipartisan approach. And that's a presidential candidate, responding to the request of a Republican secretary of Treasury.

On health care, let's just be honest. They are for proposing getting rid of the tax deduction for health care, for the first time, meaning increasing taxes on health care.

And, Wolf, you said it just right. This is an approach which people have sincerely, and maybe with good intentions, believed in, that less regulation was always better.

And now that things have turned out very poorly, a lot of people, Senator McCain included, are trying to change their tune.

BLITZER: All right. Congressman Portman, go ahead.

PORTMAN: Well, Wolf, first of all, nobody is talking about doing away with the health care tax benefit. And Gene knows that as well as anybody, because he's dealt with health care a lot over the years. So that's just not true.

What John McCain is proposing, in fact, is allowing American families to have more tax credits available to them to buy health care. So it's increasing the ability to use the tax code and tax incentives for health care. That's a fact.

Second, with regard to regulation, again, let's just be straight about it, here. John McCain has been for smarter, tougher regulation. It's a fact. Two years ago, he called for Fannie Mae and Freddie Mac to come under federal oversight, which would have helped.

It would have helped a lot, because, ultimately, the kernel of all this comes in terms of the mortgage market and the home ownership bubble which was caused largely by encouraging folks to take out mortgages they couldn't afford.

So he is for tougher, smarter regulation, always has been. He's got a reputation for it. It may be easy to try to paint these pictures during a political campaign year, but they're just not accurate, as they relate to John McCain.

BLITZER: Congressman, you know the former congressman, Republican of California, Chris Cox, who's the chairman of the Securities and Exchange Commission.

Listen to what senator McCain said, this week, about what Chris Cox and his responsibility in this crisis is all about.

(BEGIN VIDEO CLIP)

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

(END VIDEO CLIP)

BLITZER: All right, tell us how Chris Cox, and I assume you agree with Senator McCain, violated -- betrayed the public's trust.

PORTMAN: Well, first of all, the SEC does have jurisdiction over the financial markets and therefore some accountability ought to go to the SEC.

Chris Cox is a smart, competent guy. He's a former colleague of mine. I think he's doing a decent job in a very tough situation. So I do not share the fact that Chris Cox ought to go.

I do think that the SEC has been lax. And if you look at what the SEC could have done, including valuing some of these mortgage- backed securities so that there wouldn't have been some of the runs that we've seen over the last two weeks, they could have been more proactive and more aggressive. That's the larger point that John McCain is making.

BLITZER: But, just to be precise, you disagree with Senator McCain that he should be fired?

PORTMAN: You know, I think I agree with Senator McCain's general assertion, which is the SEC has accountability here. They have the ability to regulate the financial markets and the responsibility to do so. And they could have done more and should have done more.

It's also easy, I will say, for all of us to look back -- 20/20 hindsight. But my point on Chris is simply that I know him to be a competent and smart guy.

BLITZER: Do you believe he betrayed -- Gene Sperling -- that he betrayed the public's trust? SPERLING: I think he made mistakes, but I don't think that kind of -- and I think the word that was often used is, kind of, "flailing" to try to show that Senator McCain does somehow now have a different approach from his past is the way to go.

And I think, if you look at Senator Obama, what you see i a steady hand in a very difficult situation. And the reason he can be steady and serious is that he's always had a common-sense regulatory approach.

In 2006, he proposed regulation, then, on predatory practices in subprime. In 2007, he was out early when the Fed was still saying the subprime was contained.

In March of this year, when Senator McCain was saying, I'm always for less regulation, Senator Obama went to Cooper's Union and gave, I think, one of the most thoughtful speeches we've heard on common sense financial regulation that we need.

So, because he has this steady hand and has had a consistent approach, he doesn't have to flail around and try to show he's going to fire somebody in the middle of this storm. That's really not what the American public wants.

BLITZER: We've got to leave it there. Gentlemen, thank you very much.

Congressman Portman, Gene Sperling, thanks to both of you for coming in.

Still to come on "Late Edition," the two top economic advisers to the presidential campaigns give us the inside story on how their candidates will deal with this financial crisis.

And I'll also be speaking live to the former presidential candidate, Ron Paul. He has a totally different view about what's going on, some really sharp words about this week's bailout recommendations.

But up next, we'll go live to the campaign trail, get the latest on what's going on. Stay with us. "Late Edition" continues right after this.

(COMMERCIAL BREAK)

BLITZER: And welcome back to LATE EDITION, I'm Wolf Blitzer in Washington. We'll get back to our political roundtable in just a moment. But, first, let's get a live update from the campaign trail. CNN's Jim ACC is joining us live now from Lady Lake, Florida, where Republican vice presidential nominee Sarah Palin is scheduled to hold a rally later this afternoon. Is she going to be there together with Senator McCain, Jim, or by herself?

ACOSTA: She's going to be by herself, Wolf. She's coming to the villages in Florida, which is in the central part of the state. Not very far from that very critical I-4 corridor which we understand election year in and election year out is very important in terms of how things shake out in the general election campaign and she comes at a critical time for the McCain campaign. This state is dead even, according to the latest CNN polling in this state and as is usual, the case with Sarah Palin, she's already drawing a huge crowd.

People lining up to get into this event. I saw a woman just a few moments ago wearing a shirt that says "Sarah Palin's pit bulls." Sort of a hockey jersey, if you will. And so this crowd already dressing the part of a Sarah Palin event. She's also coming to this part of the state as the Obama campaign is really laying into John McCain on the issue of social security.

We have been hearing that throughout the weekend. Barack Obama going after some of John McCain's statements that he has made in the past, supporting some private -- partial privatization of the entitlement. The Obama campaign saying that had retirees placed their social security funds in the stock market, they're saying in a way that John McCain would like to see them do it, that many of those social security funds would be in jeopardy right now.

The McCain campaign is going after Obama saying that is a lie, that is not the case that John McCain is going to protect the social security funds of retirees and that he is only in favor of expanding the options for young workers to have some of their retirement go into different accounts outside of social security.

So, we're seeing that debate flair up out here on the campaign trail, Wolf. John McCain, you mentioned him - he is going to be in Baltimore at a National Guard convention. He is campaigning apart from Sarah Palin. Barack Obama is in North Carolina, which is a state that Barack Obama would like to see move back into the toss-up category. It has been leaning more and more towards John McCain since the Sarah Palin announcement. So, an interesting weekend for Sarah Palin to be coming here to central Florida and we'll be hearing from her in just a few hours from now, Wolf.

BLITZER: Some of those polls show McCain ahead in North Carolina and others show it's pretty close in North Carolina right now, which is encouraging Senator Obama to go there today, as you know. Jim, stand by, we're going to be getting back to you. Jim is in Florida, which is neck and neck right now according to all the polls down there.

Up next, three of the best political team on television. They're standing by live to preview the first head-to-head debate that's coming up this week between Barack Obama and John McCain. Stay with LATE EDITION, we'll be right back.

(COMMERCIAL BREAK) BLITZER: Welcome back. With perhaps the greatest economic meltdown here in the United States since the Great Depression looming in the future, this is a time when presidents are put to the test. It's also a time when presidential candidates are put to the test.

With us now here in Washington is our senior political analyst Gloria Borger, our senior political analyst Bill Schneider and our White House correspondent Ed Henry. Let's assess what's going on.

In the latest poll of polls, our average of what's going on, right now we have Obama at 47, McCain at 44, 9 percent unsure. Earlier in the month it was a little different, Obama 45, McCain 47, 8 percent unsure. The conventional wisdom is that at a time of economic wisdom, the party in power loses that presidential election, the Republicans being in the White House right now.

So, the question to you, Gloria, is this horrible economic news facing the American people right now automatically seen as good for Barack Obama and his chances of being elected president?

BORGER: I think that's the conventional wisdom also, Wolf. If you look at unemployment numbers in battleground states, those unemployment numbers have gone up. So one would have to say it would benefit the party out of power. But I think the American public is looking now to see how these candidates handle this crisis. And so far McCain has come out with some ideas, Obama has held back. They've both been having sessions with their economic advisers. I think this next week will tell us what the American public feels about their leadership. John McCain came out this week and said fire the head of the SEC and lot of folks, including lots of Republicans, didn't think that was too presidential a move.

BLITZER: The editorial page of the "Wall Street Journal" really blasted him.

BORGER: And you know what's really interesting, too? Normally in the olden days when you had this kind of crisis, candidates might come back to Washington to meet with the treasury secretary and the president and confer and what did they both do? They stayed out of town.

BLITZER: They were on the phone.

BORGER: They were on the phone, but they don't want to be too connected to Washington and this crisis. So, you have an interesting political situation.

BLITZER: Politically, in terms of the history, what does it say, the bad economic times and the prospects of the good or bad for Obama?

SCHNEIDER: Very good for Obama, very bad for the incumbent party, except at the moment in this campaign, everybody is pretending there is no incumbent party. George Bush isn't running, Dick Cheney isn't running and John McCain is saying what? Me incumbent? Sarah Palin's from Alaska. You can't get much farther away from that. So they're both running as non-incumbents. I don't know if McCain can get away with it, he's not supposed to, he's the president's party. At the moment, the odd thing about this election is there's no incumbent running.

BLITZER: If we look at our estimate of the CNN Electoral College map right now, take a look at this -- 233 we estimate states either leaning for or going for Barack Obama, 200 going, either leaning for or going for Senator McCain. Another, what, 115 tossups right now including in Florida and Ohio and Michigan and those have large numbers of electoral college maps.

In Florida, for example, if we take a look at the latest poll, CNN/"Time" magazine poll in Florida, McCain 48, Obama 48. It doesn't get much closer than that. In Ohio right now, Obama 49, McCain 47 percent. Very close within the sampling error. And in Michigan right now, Obama 49, McCain 45. Our latest CNN/"Time" magazine poll.

So as important as the national poll numbers are, it's these states will determine the next president of the United States.

HENRY: It is. And momentum will be key there and I think this was a reminder this week about external events affecting the campaign in these final weeks.

HENRY: The last time we had a major event like this was during the summer. The crisis in Georgia with Russia and basically there, Barack Obama looked a little flat footed while on vacation. John McCain jumped all over that and ever since then, John McCain has really had the momentum in this campaign. Barack Obama got it back slightly at the Democratic Convention, but then McCain seized it back with Sarah Palin at the Republican Convention.

This week, I think it was John McCain who looked flat footed. On Monday, saying the fundamentals of the economy are still strong. He had to walk that back immediately because within three or four days, the Republican treasury secretary is saying, we need the largest bailout, you know, in financial history to deal with this. Obviously, the fundamentals are not that strong any more. And so that doesn't mean Barack Obama is going to win this election, but I think Bill and Gloria are right that a golden opportunity has landed in Barack Obama's lap. It's now for him to see...

BLITZER: That wasn't the only blunder he made in uttering those words on Monday when he said the fundamentals of the economy are strong. The next day he opposed the bailout for AIG and then within 24 hours after they announced that there would be an $85 billion bailout of AIG, he said, well, there was no choice, they had to do that.

BORGER: And so now, as they look at this plan that's come out from Treasury and it's really pretty much bare bones, you have got lots of Republicans on Capitol Hill saying this is a blank check, we're not sure we want to do it.

You've got lots of Democrats saying you can't make it look like you're bailing out Wall Street without doing something for Main Street, say giving an economic stimulus package. So what the presidential candidates have to do is explain what's going on to the American people. And then tell them, OK, in my first 100 days, here's the economic team I would have in place, here's what I would do. Here's what I believe and here's what I believe about this plan. So, it's a lot to chew.

HENRY: Also, Barack Obama has an opportunity here to start tying John McCain to President Bush again. McCain has been pretty skillful in trying to separate himself. Let's take a look. President Bush in covering the White House, he has been talking for months and months and months about how this economy is not that bad. That there are still hopeful signs. Now all of the sudden, his administration has acknowledged it is in bad shape. And also, we're $9 trillion in debt. Now we're writing these blank checks to bail people out. The auto industry is lining up for bail outs. President Bush has another part of his legacy now, which is mountains and mountains of debt.

BLITZER: And someone else said earlier today the era of big government is back.

SCHNEIDER: Yes, it is, and big Republican government under George Bush. The government has grown hugely under this president, which makes a lot of conservatives very angry. They're not happy with what's going on here, but at the moment, they really don't see any alternative and what the Democrats are hoping is that Barack Obama can somehow come across like Bill Clinton in 1992. Remember, he promised to focus like a laser beam on the economy. He was going to put together all the smartest heads in Washington.

BORGER: Well, he put together Bill Clinton's economic team.

BLITZER: They were all there, Robert Rubin and Larry Summers and Gene Sperling, who was just on, and Laura Tyson.

And you know, in this three-page proposal that the secretary of the treasury sent up to Congress for the legislation, the $700 billion bailout that they want right now, buried in there a number, which would be $11 trillion, $315 billion. That's the new authority they'd want for the national debt as a result of this, $700 billion for this, hundreds of billions more for other stuff. Remember when the Bush administration - and you'll remember this, Ed, took office, there was a national debt of around $5 or $6 trillion. Now they want authority for $11.3 trillion. It's more than doubled, if you will, over these past eight years.

HENRY: It's growing and growing and I think although we have to also point out, we were pointing out that John McCain sort of flipped on the AIG bailout. But let's not forget that Barack Obama, it's not that he's flipped, it's just that he hasn't really come up with a clear position on these bailouts, this Treasury proposal. He did get his economic advisers together, Gene Sperling and others in the last couple of days. But then sort of punted on exactly where he comes down. I understand the Treasury plan was coming down just as they were meeting and he wanted to get the details, but Barack Obama has got to be more aggressive. We're pointing out that there's an opportunity there. But this doesn't mean he's sealing the deal. He has to be more decisive. BLITZER: All right guys, stand by, because we're going to continue this. We have a lot more to talk about, including the debates. The first presidential debate coming up this week. Stay with us, we'll be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION, I'm Wolf Blitzer in Washington and we're joined once again by three of the best political team on television, Bill Schneider, Gloria Borger and Ed Henry.

I guess, you know, in the nature of things, appropriate that the first presidential debate this coming Friday night will be on foreign policy since it coincides with so many world leaders being in New York for the opening session of the United Nations General Assembly. But, Ed, I think a lot of people would have liked to see the first debate on the economy.

HENRY: Absolutely right. We were talking before the show about the possibility that you could see this debate easily turning into an economic debate because once you start talking about globalization and trade on the international scene, it's going to very easily become a debate in large part about the economy and how the financial problems here are affecting world markets and you could see this debate being sort of partially about Iraq and Afghanistan and Iran and then being a large part about the economy anyway.

BLITZER: What about the format that they've worked out, that the two campaigns have agreed to right now? Who does that benefit, do you think, Gloria?

BORGER: It's hard to say. I mean, the fact that they worked it out means that the candidates think they that both benefit from it. I think the vice presidential debate, which --

BLITZER: Which is not going to be this week, but the following week.

BORGER: According to "The New York Times" today has a very curtailed allowance for direct confrontation between the candidates, I think that probably benefits Sarah Palin to a certain degree. Apparently the McCain campaign felt she might be at a disadvantage because she's not a practiced debater like the way Joe Biden is. But I think any exchange between the candidates at the presidential level is good for both of them.

BLITZER: There's about 10 percent, in most of the polls, Bill, that say they remain unsure or undecided right now. These three presidential debates and one vice presidential debate, I assume that is probably the single most important factor that could make up their minds.

SCHNEIDER: That's right. Debates are like a restart button in the campaign. That's where viewers say, wait a minute, I don't have to make up my mind until I see them both in an equal footing in an unscripted situation. That's what's most important. Unlike conventions and ads and rallies, debates are unscripted. They don't know what the questions are. They see them on an equal footing and most ordinary voters will say, let's be fair about this. Let me compare the two. But you know what's interesting? In 2004, John Kerry won every debate against George Bush. Every single one we polled after each debate. People thought Kerry was the better debater. But winning the debate does not give you the prize of being elected president. BLITZER: That's a good point. By the way, Friday night I will have live coverage here on CNN and CNN International of this first presidential debate. That's going to be Friday night, all night coverage debate night in America.

The following week we were saying Sarah Palin will debate Joe Biden. Joe Biden had this exchange on "Good Morning America" earlier this week when it came to taxes, raising taxes on the rich. Listen to this.

(BEGIN VIDEO CLIP)

KATE SNOW, ABC NEWS CORRESPONDENT: Anybody making over $250,000 is going to pay more.

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

(END VIDEO CLIP)

BLITZER: Now, the next day or maybe even that same day, Senator McCain said that was simply dumb, and Sarah Palin said this. I'll play this clip.

(BEGIN VIDEO CLIP)

PALIN: That's not patriotism. Raising taxes is about killing jobs and hurting small businesses and making things worse.

(END VIDEO CLIP)

BLITZER: They're both cramming for their debates, but I assume she's less experienced on these national kind of formats than a senator who has been there for 30 years. She is working hard to get ready.

HENRY: She is. In fact, this week around the U.N. meetings, she is going to be on the sidelines meeting with some world leaders like President Karzai of Afghanistan and it's a real opportunity for her I think to try to show that, kind of raise her profile on the international stage.

But I think that clip there of Senator Biden shows just because you have got maybe more experience on paper doesn't mean you might blurt something out that can backfire. We should point out thought that he was specifically talking about raising taxes on people making at least $250,000 a year. I think the McCain camp is trying to turn it into the Democrats want to raise taxes on middle class, everybody across the board. But they are talking about patriotism in terms of richer Americans. Doesn't mean that this clip will not be used again and again and again, it will.

BLITZER: Believe me, they're using a lot of clips from both sides. Guys, thanks for all of you for coming in. Senator Chris Dodd, by the way, describes the stunned reaction on Capitol Hill when the full impact of the U.S. financial crisis was laid out. We're going to bring you what he's saying and more, when we come back.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION. I'm Wolf Blitzer in Washington. Senator Chris Dodd and other key congressional legislators got a very blunt assessment of the economic crisis when they met with the Treasury Secretary Henry Paulson and the Federal Reserve Chairman Ben Bernanke on Thursday. I spoke with Senator Dodd the next day in "THE SITUATION ROOM."

(BEGIN VIDEO CLIP)

SEN. CHRISTOPHER J. DODD, D-CONN.: I can't begin to tell you. I have been here for 28 years, Wolf, been in a lot of very critical meetings involving a lot of important events over the last quarter-of- a-century. I can't recall another occasion when I was in a room where statements were made about the conditions of not only our economy, but the global economy, that caused every member in that room, the leadership of the House, the Senate, Republicans, Democrats, leaders of committees, that, when Chairman Bernanke finished his appraisal, a brief appraisal, along with Hank Paulson, there was dead silence in the room for maybe five to 10 seconds.

The oxygen went out of the room. People were stunned by what they heard. And I'm angry about this, because I think this was preventable, I will tell you, but we're not going to talk about that today, because the issue is, what do we do?

And I'm willing to step up and join with my Republican and Democratic colleagues, which we must do, 45 days before the most important national election in my lifetime, and come together, not as Republicans, Democrats, blue, red states, but as Americans responding to this. I'm willing to listen to this plan. I'm not buying into it without seeing it.

I want to make sure that we do this, that we're going to be mindful of the underlying cause of this problem, Wolf. And that is, of course, as was said last evening and again today by the secretary and the chairman of the Federal Reserve, the housing foreclosure crisis.

So, we're going to deal with the effects of this, but we need to deal with the causes as well, so we don't have to come back again with some even larger plan down the road.

(END VIDEO CLIP) BLITZER: Chris Dodd is the chairman of the Senate Banking Committee. Coming up next, we'll get a very different respective from Republican Congressman Ron Paul. He does not like this week's financial bailout recommendation, and he's certainly not afraid to say so. He's standing by live. He'll join us when LATE EDITION continues.

(COMMERCIAL BREAK)

BLITZER: Welcome back. Congressman Ron Paul did not win the Republican presidential nomination, but he did raise millions and millions of dollars and he did inspire a multitude of supporters across the country with his very blunt libertarian views. He has been no less blunt about his dislike of the multi-billion dollar bailouts happening right now on Wall Street. Congressman Paul is joining us from Houston, Texas. Congressman, thanks very much for coming in. PAUL: Thank you, Wolf.

BLITZER: I want you to listen to President Bush because he painted a very dire, dire assessment of what would happen if the Congress did nothing right now.

BLITZER: Listen to this.

(BEGIN VIDEO CLIP)

PRESIDENT GEORGE W. BUSH: This is a big price tag because it's a big problem. The risk of doing nothing far outweighs the risk of the package.

(END VIDEO CLIP)

BLITZER: All right. So, what do you say to the president, who wants you and your fellow Republicans and Democrats to quickly pass this $700 billion bailout package?

PAUL: Well, I think that's a mistake because we don't have the money. But that doesn't mean you have to do nothing. I mean, we could reform the system. We could return to sound money. We could balance our budget. We could change our foreign policy. We could take care of our people at home. We could lower taxes.

There's a lot of things that we can do. But the worst thing that we can do is perpetuate the bad policies that gave us this trouble in the first place.

And that is that we no longer, over the last quite a few decades, believed in free-market capitalism. Capital is supposed to come from savings. We're supposed to work hard and save.

As a matter of fact, the Chinese work hard, right now, and they save, and they're buying up the world.

But we borrow and spend and consume, and now it's caught up to us and it's undermining our whole system. But all we're doing now, by coming back for $700 billion -- you know, when the war started in Iraq, they said we need $50 billion. Then Larry -- Larry -- whatever -- I can't think of his name...

(LAUGHTER)

He predicted it would be $200 billion. And he lost his job over it. Now we...

BLITZER: That was Larry Lindsey.

PAUL: Larry Lindsey -- I'm sorry. So this $700 billion is not going to do it.

PAUL: He was the economic adviser to the president.

BLITZER: But what they're saying -- what the Treasury secretary, the chairman of the Federal Reserve, the president; then we heard Chris Dodd -- what they're saying is, this is no longer simply a bailout of these huge Wall Street firms. This is a bailout of Main Street, they say, because people's life savings...

PAUL: No.

BLITZER: ... and people's 401(k)s, their IRAs, their homes, everything would be lost. This would make the Great Depression, in effect, look like small potatoes, if they didn't take this immediate action right now.

PAUL: Well, you could look at it the other way. This is Wall Street in big trouble and sucking in Main Street, now, and dumping all the bills on Main Street.

Because, yes, there are a lot of those problems. There's no doubt about it. But destroying the dollar is much worse. You don't even have to have a 401(k) to be injured by the devaluation and destruction of the dollar, and that's what we're dealing with.

Sure, they should be frightened, but, boy, it's a lot different, a lot bigger than that, what they're talking about. And you can't solve the problem of inflation, which is the creation of money and credit out of thin air, by more money and credit out of thin air, and not changing policy. We have to change basic policy.

Yes, it would be painful, but it wouldn't last so long. What they're doing now, they're propping up a failed system so the agony lasts longer. They're doing exactly what we did in the Depression.

BLITZER: But what they're saying -- what they're saying, Congressman, is, even those money market funds, the stuff that's supposed to be totally, totally safe, that might not even be safe. And people who have money market funds, people who have their, kind of, sort of, secure bonds, the whole financial system, they say, would be on the verge of collapse.

You heard this dire assessment that... PAUL: Yes.

BLITZER: Are they simply exaggerating? Are they simply misleading the American people?

PAUL: Well, no. I don't think they understand it, because how could they be safe if you destroy the dollar? It will be more pervasive.

If you have no investments whatsoever and you're dependent on a Social Security check and it doesn't buy anything, that's much more damaging. So, yes, there are going to be losses, but everybody lived beyond their means when the prices of houses were going up. Nobody cared about it. They kept borrowing against it. Oh, yes, that was fine and dandy. Everybody was making money, and the owner of the home kept borrowing and living beyond their means. Now they have to live beneath their means.

What the government is doing now -- and this new program is trying to prop up prices. You want the price structure to adjust. You want the price of houses to go down. You don't want to fix the price of housing. You can't price-fix. We've had too much of that.

BLITZER: All right...

PAUL: And that is our problem. We need a market economy. We need to believe in ourselves. We need to believe and understand how the economy got us -- how the government got us into this mess.

And believe me, it wouldn't be that tough. It would be a bad year. But, this way, it's going to be a bad decade.

BLITZER: The Republican presidential nominee, John McCain, says yet another government institution needs to be created, right now, to deal with this crisis.

I'm going to play a little clip of what he has in mind, and then we'll discuss. Listen to this.

(BEGIN VIDEO CLIP)

MCCAIN: I will lead in the creation of the mortgage and financial institutions trust, the MFI. The MFI is an early intervention program to help financial institutions avoid bankruptcy, expensive bailouts and damage to their customers.

(END VIDEO CLIP)

BLITZER: All right. What do you think? Is he on to something?

PAUL: Hardly. I mean, it's just more of the same, more government, more programs, more spending, more regulations, trying to prop up a system that has been undermined.

The market is saying it's nonviable, and everything they're doing is trying to patch it up. The bubble has been blown up. It needs to deflate, and they won't allow it. So it's a contest between deflation and inflation.

Everybody in Washington wants to inflate because it's painful to get off this dependency on perpetual deficit spending and inflation.

So, no, another program, another group of people to regulate and take up all these bad debts off Wall Street and dump them on Main Street -- this means that the people who have lost on Wall Street want to dump it on Main Street. So this isn't saving Main Street. This is sticking it to Main Street and sticking it to the taxpayer. BLITZER: Here's the criticism that Senator Obama leveled on Senator McCain. Listen to this.

(BEGIN VIDEO CLIP)

OBAMA: He said he would take on the old boys' network. But he seemed to forget that he took seven of the biggest lobbyists in Washington and put that network in charge of his campaign. John McCain can't decide whether he's Barry Goldwater or Dennis Kucinich.

(END VIDEO CLIP)

BLITZER: Do you think Senator Obama has a better grasp of what's going on than Senator McCain?

PAUL: Well, he has a pretty good grasp on how to attack this politically and go after McCain. But he doesn't have any answer. He's not talking about the Federal Reserve system. He's not talking about balanced budgets. He's not talking about bringing troops home from Afghanistan.

We have to live within our means. That's why I talk about foreign policy. We spend $1 trillion a year overseas. If you want to take care of people at home, you've got to cut someplace.

But here we're adding $700 billion to the budget, the national debt going up to $11.3 trillion.

No, Obama offers no solutions, but he has some, you know, pretty accurate points making, when he criticizes McCain. I think he does that quite well.

BLITZER: Who are you going to support?

PAUL: Well, neither one of those two.

(LAUGHTER)

They don't offer any alternatives, so I will be looking at the alternatives for a vote in November.

BLITZER: Thank you very much, Congressman, for coming in.

PAUL: Thank you.

BLITZER: And there's much more ahead on "Late Edition." How are the candidates proposing to deal with the financial crisis on Wall Street? We'll talk to two key advisers to both campaigns, right after this.

(COMMERCIAL BREAK)

BLITZER: This is LATE EDITION, the last word in Sunday talk.

(BEGIN VIDEO CLIP)

BLITZER: On Wall Street, the week began with the failure of a major investment bank.

UNKNOWN: It's a terrible day for the U.S.

BLITZER: Stock markets around the globe reacted with massive losses. But the week ended with stocks coming back as the U.S. government promised an historic bailout.

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

BLITZER: But will even this be enough to stabilize the economy? We'll get analysis from the top economic advisers to both campaigns, Douglas Holtz-Eakin for McCain and Austan Goolsbee for Obama.

MCCAIN: A vote for Barack Obama will leave the country at risk.

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

BLITZER: And with only days to go before their first debate, John McCain and Barack Obama are in a dead heat. What will it take to pull away? We'll have a strategy session with four of the best political team on television. The second hour of LATE EDITION begins right now.

(END VIDEO CLIP)

BLITZER: And welcome back. This week, both presidential candidates turned all their attention to what has long been the No. 1 issue on voters' minds, the precarious state of the U.S. economy. I'm joined by the top economic advisers from both campaigns. Joining us in Chicago is Austan Goolsbee from the Obama campaign. And with us here in Washington is McCain economic adviser Douglas Holtz-Eakin. Gentlemen, thanks very much for coming in.

Austan, let me start with you and play a clip of what the secretary of the Treasury said earlier today in assessing what needs to be done, what Congress and the administration need to do right now. Listen to this.

(BEGIN VIDEO CLIP)

PAULSON: We can't determine what the cost is today. That's going to be based upon how quickly the economy recovers, what happens in the mortgage market. But I can assure you the cost won't be anything like what is put out to buy these investments - and these assets and when the assets are sold, the money will come back into the Treasury.

(END VIDEO CLIP)

BLITZER: Does Senator Obama, Austan, have confidence in the Bush administration's handling of this immediate crisis?

GOOLSBEE: Well, he hasn't had much confidence in the Bush administration's handling of the overall financial sector.

On this, he has said we ought to approach this in a bipartisan manner. And let's put some emphasis on that first part of the statement that Secretary Paulson made that, to see how this is going to work, we have to immediately strengthen the ordinary economy, the struggle facing working people. We need stimulus and housing programs in addition to anything that they're talking about here.

BLITZER: Does Senator Obama want those additional elements attached to this crisis legislation that they're trying to finalize over the next couple days?

GOOLSBEE: I don't know the answer to that. That's more of a legislative thing. I'm saying as a matter of content, it's clear that you can't just try to fix this problem by handing money to Wall Street. I mean, we've got to address the core issues of the economy. That's how we got into this problem.

BLITZER: Douglas Holtz-Eakin, does Senator McCain have confidence in the Bush administration's handling of this current economic crisis?

HOLTZ-EAKIN: Well, there are three things that have to happen. We have to have some action and action quickly. That action should minimize the taxpayers' exposure, and that action should lead to the kind of price discovery and accountability in the private sector that will be important in getting some real reforms and moving forward.

Senator McCain put out a plan on Friday that does those things. He's going to look at the details of this and hope we see something passed fast action. We've seen that. We've seen a price tag. Now we have to see the real details to see if we're going to get -- the situation where on the Lehman Brothers executives walked out with millions and millions of dollars, you can't take the public money and have that happen. We have to have some real change.

BLITZER: But does Senator McCain have confidence in what the Bush administration is doing right now? You've seen their initiative. HOLTZ-EAKIN: We've seen the first step in their initiative. We've seen no details. We'd like to see them first. Senator McCain put out a post saying, look, you have got to sell your assets but when you do and the tax payers are going to demand some real restructure in these firms and AIG, for example, has to get rid of the units that lost so much money, go back to a core insurance business. Whenever it turns to profitability, the U.S. taxpayer has warrants and gets some returns. So we'd like a structure that gets some real discipline and accountability in the private sector, some taxpayer returns for their efforts. BLITZER: Let me let Austan respond to that. Go ahead, Austan.

GOOLSBEE: Well, my only response would be it's good to see Senator McCain has suddenly become a champion of financial oversight and regulatory oversight. He, George Bush, Phil Gramm and their crew has been about burning down the rules of the road and trying to deregulate the financial environment, and it's a little strange for a guy that was cheerleader for a team of arsonists to now be coming forward and say he'd be a great fire department chief.

BLITZER: He has been quoted, as you know, Doug, as saying - we're talking about Senator McCain. He almost always wants less government regulation.

HOLTZ-EAKIN: So first, Austan, if you've got the whole econ team together in Miami and that's all he could come up with -- I'll give you a do-over. Let's look at the facts. The facts are that Senator McCain is the person who co-sponsored legislation to deal with the biggest price tag we know of so far, Fannie Mae and Freddie Mac. Senator Obama was nowhere to be found in that.

BLITZER: You say this is back in 2005 and 2006?

HOLTZ-EAKIN: 2003, 2004.

BLITZER: Let's let Austan respond. Is that right?

GOOLSBEE: No, it's not right.

BLITZER: That Senator McCain wanted legislation to deal with the excesses of Fannie Mae and Freddie Mac, but Senator Obama resisted?

GOOLSBEE: No, Senator Obama did not resist And the only reason that John McCain wanted to phase out the GSEs is they were government sponsored. He has been actively trying to push all the financial industry into the deregulated part of the industry. We need to change Fannie and Freddie's business model, but if John McCain so disliked the business model, why did he hire their strong-arm lobbyists to be his campaign manager?

BLITZER: We'll get to that in a moment. But GSEs are government-sponsored entities like Fannie Mae and Freddie Mac. Go ahead and respond to that.

HOLTZ-EAKIN: Fannie Mae and Freddie Mac were known problems. They were created problems. Washington had the problems. This is a lobbyist-driven organization. Senator McCain blew the whistle on them, asked for strong oversight and the secretary in the office of the treasury, new regulator to, you know, stop what he said at the time -- they're a risk to the taxpayer, they're a risk to financial markets. They need to be strongly regulated. You know, that's the record. It's disputable. And there's this --

BLITZER: Well, Austan, respond to that and then I want to move on and come back to this on another point. Go ahead, Austan. GOOLSBEE: I would just say look at John McCain's 26-year record and continuing record in his statement that we ought to deregulate the health industry like we did for the banking industry. The man has actively been trying to get the government out of setting the rules of the road in every other area and in every other industry.

BLITZER: All right.

HOLTZ-EAKIN: Let's be very clear with this. This is a suggestion by the Obama campaign that the problems with the banking sector is that we can go to ATMs in all 50 states. That's not the problem. The problem is an absence of oversight. The problem is too little capital. The problem is derivatives that no one can value because there's no transparency, no accountability, there's been no accountability. A lapse in business ethics. A housing mortgage.

BLITZER: OK.

HOLTZ-EAKIN: Let's solve the problem.

BLITZER: All right. Here's an issue that came up for the McCain campaign this week. On Monday, Senator McCain said this, and then we're going to discuss. Listen to this.

(BEGIN VIDEO CLIP)

MCCAIN: Our economy, I think, still the fundamentals of our economy are strong, but these are very, very difficult times.

(END VIDEO CLIP)

BLITZER: All right. Senator Obama wasted no time in pouncing. He said this. Listen to this.

(BEGIN VIDEO CLIP)

OBAMA: He said over and over again throughout this campaign, we counted it. He said it 16 times, and I quote, "the fundamentals of the economy are strong." Now, this comment, this comment was so out of touch that even George Bush's White House couldn't agree when they were asked about it.

(END VIDEO CLIP)

BLITZER: All right. We know what his explanation was, Senator McCain later in the day, that he was referring to the American workers, that they are the fundamentals and they are strong. Is that your point?

HOLTZ-EAKIN: American workers get out of bed every day. They go into the finest factories in the world. They have the best technologies, the finest innovations. We can compete anywhere in the globe. That hasn't gone away. It's now obscured by a Wall Street credit problem. They're getting crushed and they have a great deal of difficult. Senator McCain has a problem for the Wall Street problem, short-term and long-term. Senator Obama has been missing in action on that. He's got a plan for the American workers so that they are going to have a job, access to health care, energy at reasonable prices, be able to sell around the globe. He's telling the truth to the American people, and he should.

BLITZER: All right, Austan, go ahead.

GOOLSBEE: Six hundred thousand workers have lost the jobs that Doug is talking about in the last eight months. We had the biggest, most turbulent week in decades on Wall Street, and now we have a $700 billion price tag that's need just to shore up the economy. What I shudder to think is what would have to happen for John McCain to think the fundamentals were looking a little iffy?

HOLTZ-EAKIN: So my question to you, Austan, what, then, would Senator Obama do? He's said nothing about the Wall Street crisis.

GOOLSBEE: I absolutely disagree. One year ago, Senator Obama went to Wall Street and outlined two critical points to prevent financial crisis. No. 1, we must re-establish public oversight of our financial pockets. Number two, we must immediately address the squeeze on middle-class Americans.

Six months ago, he outlined a clear six-point plan of how we could re-establish oversight of financial markets, and he has expanded and reiterated that. John McCain at that same time six months ago was saying we ought to start removing regulatory barriers. So he has been way out front and way foresighted on these issues. It's completely inaccurate to say he's nowhere to be found.

HOLTZ-EAKIN: But on Friday with the Wall Street melting down and the American economy at risk, Senator Obama basically said, look, Henry Paulson and Congress, you guys go figure it out. John McCain said, "Look, we have to have a short-term transition that's orderly, that protects the taxpayers, that gets us away from reactive responses to crises and the Fed bailing everybody out. Here's my proposal for it. It pairs up nicely with my long-term regulatory initiative and my plan to get the mainstream economy going." That's a package that's comprehensive, Austan. And I'd like to hear what you guys are going to do about the crisis.

GOOLSBEE: OK. To be clear, you evidently did not see Senator Obama's speech two days before Friday in which he laid out the clear six-point plan of what we needed to do right away, and I would simply refer anyone viewing, who is interested in the detailed McCain plan, that Doug is referring to, go look on the Web site. It is literally the details are 10 sentences long.

BLITZER: All right.

GOOLSBEE: There is more information on the back of a box of Froot Loops than on what they've presented.

BLITZER: All right, guys. I want you both to stand by because we're only getting started. We have a lot more to talk about, including Fannie Mae and Freddie Mac. Also we'll be talking act taxes and this trillion-dollar bailout. Will there be a tax cut if this bailout goes forward?

And later, we'll be speaking with CNN's top political contributors for an economic strategy session. James Carville, Alex Castellanos, Hilary Rosen and Leslie Sanchez, they are standing by live. LATE EDITION continues right after this.

(COMMERCIAL BREAK)

BLITZER: Welcome back. We're talking about the troubled U.S. economy with Douglas Holtz-Eakin of the McCain campaign and Austan Goolsbee of the Obama campaign. There's Austan. Austan, I'm going to play for you a McCain ad that was released on Thursday. I want you to respond because it makes a very serious charge. Listen to this.

(BEGIN VIDEO CLIP)

UNKNOWN: Meet Jim Johnson, former Fannie Mae CEO. Fannie cooked the books, and Johnson made millions. Then Obama asked him to pick his VP and raise thousands for his campaign.

(END VIDEO CLIP)

BLITZER: All right. And they also had another ad referring to Franklin Raines, another Fannie Mae CEO who supposedly was advising Senator Obama. Go ahead and respond.

GOOLSBEE: OK. I'd say you didn't show the Frank Raines ad, which was widely condemned by every fact-checking organization, which it wasn't even true. Jim Johnson stepped down as the head of the VP search. And the contrast with the McCain campaign, I think, is interesting since if John McCain objected so much to the lobbying behavior of Fannie Mae and Freddie Mac as opposed to the content, why did he hire their strong-arm lobbyist as his campaign manager? It doesn't make any sense.

BLITZER: He's referring to Rick Davis, who was a lobbyist for Fannie Mae, right?

HOLTZ-EAKIN: Years ago, yes.

BLITZER: And Charlie Black, another senior adviser to the McCain campaign, who was a lobbyist for Fannie Mae also.

HOLTZ-EAKIN: And the track record is clear. Fannie Mae and Freddie Mac have a track record that is really quite disgraceful. They made money at the taxpayers' expense. It was the implicit backing of the taxpayer that allowed them to borrow cheaply, invest in risky assets. They did, in fact, inflate their earnings so that the CEOs would get bonuses. There has been absolutely no dispute about that.

And John McCain tried to stop it. John McCain introduced legislation not once but twice. He said clearly that it was unacceptable. He said it clearly needed to be change. We had to put in place strong regulation. He has since said once we get done with this mess, they need to go away. Never again do we put ourselves in this position. BLITZER: It raises a question. Why, then, did John McCain hire Fannie Mae and Freddie Mac lobbyists to run his campaign?

HOLTZ-EAKIN: John McCain, I think has been made clear, he makes his decisions and he knows what he wants to do with these institutions. Regardless of what their work histories may have been, Fannie Mae and Freddie Mac need to go away.

They're a threat. They're not serving a public function. I think Senator Obama should say he'd eliminate them as well. We don't need them for low, affordable housing. We have programs and housing in urban development. We don't need to get money into the housing market. Our problem has been we've got too much money in and look where we are. It's important to have a vision for the future that solves these problems.

BLITZER: Does that answer satisfy you? GOOLSBEE: Well, look, I agree with Doug and Senator Obama's been clear on condemning a business model that is about privatizing profits and socializing losses. But what Senator McCain -- and the reason he was opposed to the government-sponsored entities previously, and you can hear in Doug's words that they want to abolish them, is they wanted to get the government out of the business of setting the rules of the road or trying to create or help foster a stable mortgage market, period.

This is the only example that they can cite. If you look at his 26-year track record, John McCain has been about dismantling with Bush, Gramm and others, regulatory oversight. We agree on the business model point, but Obama thinks that there is a viable role of the government.

BLITZER: I think it's fair to say both campaigns have had ties one way or another to Fannie Mae and Freddie Mac.

HOLTZ-EAKIN: There's Republican and Democratic blame alike. That's a bad situation.

BLITZER: Let's move on and talk about the bailout of AIG, the largest insurance company in the United States. On Tuesday, when he was asked on the "Today" show about bailing out AIG, Senator McCain said this.

(BEGIN VIDEO CLIP)

MCCAIN: We cannot have the taxpayers bail out AIG or anybody else.

(END VIDEO CLIP)

BLITZER: Now, a few hours later, the government announced they were going to bail out AIG and the next day John McCain clarified his position and said this.

(BEGIN VIDEO CLIP)

MCCAIN: There were literally millions of people whose retirement, whose investments, whose insurance were at risk here, and they were going to have their lives destroyed because of the greed and excess and corruption.

(END VIDEO CLIP)

BLITZER: All right. That sounds like a flip-flop. Is it?

HOLTZ-EAKIN: His first choice is never to put taxpayer money into these private entities. That's not anybody's idea of how business should work. They get the money in the good times, they face the losses in the bad times. AIG had extensive interlinkages with construction, with workmen's compensation, that had they gone into bankruptcy, we'd have seen construction sites close all over.

BLITZER: Why did he say that to begin with on the "Today" show instead of waiting until the next day?

HOLTZ-EAKIN: It gets truncated in the moment. It's hard to get everything in in these interviews. The way that was done is actually I think very interesting. We didn't just write a check to AIG. They got a bridge loan. They are forced to get rid of the units that failed them. It's the credit default swaps that need to be fixed that did them in. When they come out of their problems, the taxpayers have warrants, they have essentially a claim on future profits. They get something back. That's what we need to see, not just writing checks.

BLITZER: It wasn't just John McCain who flip-flopped on this issue, Austan. It was your vice presidential nominee Joe Biden.

BLITZER: Because he was on the Today Show that morning. He opposed the bailout of AIG. And then the Obama campaign, the next day, said there was no choice.

Did Joe Biden make the same mistake that John McCain made?

GOOLSBEE: Well, I would -- we don't have the transcript here, but I have read it, and I would disagree, a little bit, with -- it was clear from the entire paragraph that Joe Biden was not saying he was opposing a bailout.

What he was saying was that it's not their first choice, along the lines of where John McCain ended up and where Senator Obama was all along.

BLITZER: It was a pretty clear -- I watched it that morning. It was pretty clear he opposed the bailout, too, although, as you say, the position of the Obama campaign seemed to change, based -- assuming that Joe Biden speaks for the Obama campaign, it changed the next day, as well.

So both of these candidates, obviously, had a change of heart, as a result of the government's stepping in.

I want both of you to respond to some controversial things that you both said over the -- and I'll start with you, on the BlackBerry, because I want you to clarify exactly what you meant. (LAUGHTER)

Douglas Holtz-Eakin...

GOOLSBEE: Boy, they're coming after us, Doug. They're coming after us.

(LAUGHTER)

BLITZER: This is your chance -- this is your chance to explain what you said. Because, on Tuesday, you said this, Doug. You said, "He did this" -- referring to John McCain. "The premier innovation, in the past 15 years, comes right through the Commerce Committee. You're looking at the miracle that John McCain helped create, and that's what he did."

And you held up your BlackBerry. I'll hold up my BlackBerry, right now, for viewers to know what we're talking about. This is a BlackBerry.

This is a real reenactment...

(LAUGHTER)

(CROSSTALK)

BLITZER: All right. You didn't really mean to say that, you know, as Al Gore was misquoted as saying he invented the Internet, you didn't mean to say he invented the BlackBerry?

HOLTZ-EAKIN: Many lessons here. Number one, no sense of humor on the campaign trail. I swear off telling any jokes. No more history of technology.

And the serious point is that it was a discussion in a press briefing about what was his history in regulatory situations; you know, where can we learn about the things that both have happened on his watch and the approaches he took?

And as, you know, chairman of the Commerce Committee, he has jurisdiction over regulation in transportation, the airlines, trucking, railways, and then telecommunications.

BLITZER: So what you're saying, basically, it was a bad joke...

(CROSSTALK)

BLITZER: ... it was a badly told joke?

HOLTZ-EAKIN: It was not just badly told. It was ill-timed.

(LAUGHTER)

But, you know, these things happen.

(LAUGHTER) BLITZER: All right. Austan, I want you to clarify, now. A few months ago, you got in trouble for apparently suggesting one thing to the Canadians about NAFTA, the North America Free Trade Agreement, and another thing publicly.

The New York Times, on March 4th, said, "Goolsbee had assured the Canadians that Mr. Obama's language should be viewed as more about political positioning than a clear articulation of policy plans."

All right, go ahead and clarify.

GOOLSBEE: OK, now, I will simply point out, the BlackBerry is Canadian, so there's something -- the Canadians are out to get both of us, here.

(LAUGHTER)

That didn't happen. This was a thing that was dropped the day before an election. I've been through this a whole lot of times. There was a retraction issued by the Canadians the day after the Ohio primary. And the prime minister since apologized to me and to the campaign.

I did not tell them in any way that they should ignore Senator Obama's NAFTA position.

BLITZER: Austan Goolsbee and Douglas Holtz-Eakin, good discussion. Thanks to both of you for joining us. And we'll certainly have both of you back.

GOOLSBEE: Great to be here.

HOLTZ-EAKIN: Thank you.

BLITZER: And in just a moment, we'll get a live report on what we know about the massive truck bombing in Islamabad, Pakistan, the casualty count growing.

And later, a preview of Friday's presidential debate from our CNN strategists. "Late Edition" continues right after this.

(COMMERCIAL BREAK)

BLITZER: Welcome back to "Late Edition." We'll get to our political roundtable in just a moment, but first, new video has given some crucial clues to what really happened when a truck bomb hit the Marriott Hotel in Islamabad, Pakistan.

Let's go to Islamabad. CNN's Reza Sayah is standing by with the latest.

What do we know, Reza?

REZA SAYAH, CNN CORRESPONDENT: Wolf, we now know what this truck bomb looks like. Dramatic surveillance video released on Sunday gives us the first glimpse of this massive suicide truck bomb that killed 50 people on Saturday night.

Among the dead, two U.S. citizens, both of them in active military duty, assigned to the U.S. embassy. Also among the dead, the Czech ambassador.

This blast also injured more than 250 people and brought down an Islamabad landmark, the Marriott in downtown Islamabad.

Let's walk you through the video that came from hotel surveillance cameras. It was released today in a press conference led by Pakistan's head of the interior ministry.

The video shows the truck bomb coming into and crashing into the steel gate at the Marriott. When it couldn't get through, you see a fire start at the engine block. That fire quickly spreads to the truck. And then what you see is apparent confusion and perhaps some panic among the security guards there. Keep in mind, these security guards do not know, at this point, that this truck is packed with 600 kilograms, 1,500 pounds of explosives. You see some of these guards running back and forth to the truck. You see one guard trying to put out the fire with a fire extinguisher. He doesn't succeed. He gives up.

At one point, the video stops, and that's when government officials and investigators say the blast happened, knocking out the cameras.

This explosion was huge, leaving an astonishing crater in front of the hotel, more than 59 feet in diameter and 24 feet deep.

And the death toll, once again, Wolf, standing at 50 people on Sunday, more than 50 on Sunday.

No one has claimed responsibility, but the government believes this was planned in Pakistan's tribal area, home of the Taliban, and many groups linked to Al Qaida. Wolf?

BLITZER: Wow. What a horrible, horrible tragedy this bombing is.

All right, Reza, stand by, because we're going to be checking back with you on that video. It's very, very dramatic.

Coming up next on "Late Edition," how are the presidential candidates here in the United States handling the economic crisis? Is either displaying the kind of leadership voters are really asking for?

Our political pros will take those questions and a lot more, when "Late Edition" continues.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION, I'm Wolf Blitzer in Washington. The Bush administration and the Congress are trying to work right now on a temporary fix to the worst financial crisis to hit the United States since the Great Depression. but can a bitterly divided Congress known for gridlock pull it off within a matter of only a few days? The stakes right now are enormous. Let's discuss all of this with our CNN political contributors. Joining us from San Francisco, the Democratic strategist James Carville. And joining us here in Washington, Republican strategist Leslie Sanchez, Hilary Rosen, the political director of thehuffingtonpost.com and a supporter of Barack Obama. Finally, Republican strategist Alex Castellanos. Gentlemen and ladies, thanks very much for coming in. Let's talk about the political stakes right now.

James, give us your assessment. How huge for both of these candidates are these stakes right now?

CARVILLE: Well, I think it's driven the stakes in the election to an unbelievably high place. And I think people are in a very somber mood out in the country. There was an 80 percent wrong track move before that, and I think people are very appropriately very concerned about what happening and looking at the government having to intervene many money market accounts now. You're looking at, you know, bailout after bailout after bailout. Hopefully, all this will work, but I suspect in the next three or four days, our eyes are going to be focused on the Congress to see what they do with this.

BLITZER: But even as the eyes are focused, Alex, on the Congress and the legislation that's about to get through we assume one way or another, the political fallout is enormous.

CASTELLANOS: The political fallout is tremendous. It is going to affect both these candidates. You know, Barack Obama is going to have one challenge for him, is that his economic plan that he's put forward so far has just really almost been stepped on by Treasury. Treasury's plan is, hey, we've got to help American business, we've got to help these people lighten the load. The Obama plan has been, hey, we've got to take money from business, and that's -- tax increases. That's the only place he's really raising taxes. That's going to be a challenge for Obama to explain in the next few days.

BLITZER: I hear James laughing. I want to bring the women in, but I have to let James react to that. Go ahead, James. CARVILLE: Never let a somber moment get in the way of a political attack. First of all, I think what's interesting is in making a point, Senator McCain this week in contingency said that he wanted to model the health care system after the banking system. I don't think that's what people want to do. And I do think -- by the way, since Obama wants to cut taxes with people making under $250,000 a year.

But having said that, I think what you're going to see is an enormous shift in young voters. Alex knows when this administration took over President Clinton, there was a protected surplus of $5 trillion. I don't know how much debt that we have burdened the next generation with, but I think tat Obama will get somewhere between 65 and 70 percent of the 18-39. So I think we've seen a massive shift in generational politics.

BLITZER: Hold on, James. I want to play a clip of what Senator McCain said on Friday, and I'll let Hilary respond to this. go ahead and roll the tape. (BEGIN VIDEO CLIP)

MCCAIN: I made up my plan to solve these problems and grow our economy about the same time Senator Obama said that he isn't going to offer a plan.

(END VIDEO CLIP)

BLITZER: All right, Hilary. go ahead.

ROSEN: Well first of all, let's figure out the week. John McCain started the week with everything's fine, no big problem. when that didn't work, he hastily put together a plan that was essentially already created by Paul Volcker, an Obama adviser. And nobody is listening to the McCain plan. There is no plan. The plan is the secretary of the Treasury asked the candidates to hold off while he met with the Congress to take a serious approach to this.

Senator Obama laid out a series of principles that ought to be in that plan. We ought to protect Main Street, not just Wall Street. We ought to have regulatory authority, which he has been calling for if the last two years. And John McCain's been silent. Instead, John McCain went out on Friday and made up a plan that he had never talked about before. And all of a sudden he thinks he's at the table? I don't see that. That's not leadership.

BLITZER: He did call for the creation of a new trust fund to deal with this --

ROSEN: But he didn't create that idea. It wasn't his idea.

SANCHEZ: But the bottom line, I don't think either of these candidates, in all fairness to, you know, most voters out there, have instilled a tremendous amount of confidence because of the back and forth. That being said, McCain was out there two years ago talking about the regulation and the fact that we needed to look at Fannie Mae and Freddie Mac. McCain this week aggressively is now putting forth a plan that's talking about the trust fund and some of these efforts to protect taxpayers and our savings and investments.

But I think what's interesting and very much to this point, very rarely do you get a real-life situation, a crisis where you can see how these candidates are going to react and people are able to make up their mind as decision makers. I think it's going to come to the three Ps -- pressure, the press, and the public. Can they deal with those three elements? And I think many of those 10 percent of independent voters are going to make their decision this week.

BLITZER: I think they have three presidential debates to assess, as well, and one vice presidential debate. but let me play a clip from Senator Obama in Coral Gables, Florida, on Friday. Listen to this.

(BEGIN VIDEO CLIP)

OBAMA: Senator McCain gave a speech in which his big solution to this worldwide economic crisis was to blame me for it. After spending the entire campaign saying I haven't been in Washington long enough, he apparently now is willing to assign me the responsibility for all of Washington's failures.

(END VIDEO CLIP)

BLITZER: All right, Alex. What was Senator McCain talking about? Because as you know, you can blame Senator Obama for something, certainly cannot blame him for this financial crisis, can you?

CASTELLANOS: That - I don't think that's going to fly, blaming Obama. But I don't think that's necessarily what Senator McCain was trying to do. You know, this thing didn't start, this financial crisis didn't start on Wall Street.

This started in the Carter and Clinton administrations when people decided, hey, you know what, we're going to have affordable housing even for people who can't afford it. And so, they loosened the rules and created candy, home loans, dangling in front of people who couldn't afford them. It was poisoned candy because it was things people couldn't pay back. So it was actually the regulation of the banking industry. That's the point that I think Senator McCain was trying to make.

BLITZER: Hold on and I'll let James respond. James, go ahead because you've got something.

CARVILLE: Of course I do. I knew it wouldn't be long after Clinton leaves a $5 trillion surplus and the cronies and in places like the SEC and the Treasury Department, Alberto Gonzales, as attorney general, to completely had to switch the controls of government for something like six years. And then their answer is to -- the answer to everything is, gee, let's just off all the debt on the next generation.

The truth of the matter is, any number of people -- Senator Hillary Clinton wrote a letter back in March, I think it was, of 2007, urging them to do something about this sub prime thing. By the way, I would remind you that President Bush and Senator McCain wanted legislation to allow people to put their social security into sub prime mortgages and campaigned on that in 2004. So, I --

BLITZER: I just want to press Alex. Alex, weren't the Republicans the driving force in deregulating the financial sector? Senator Phil Gramm when he was chairman of the banking committee, weren't they the ones who were leading this push, not the Democrats?

CASTELLANOS: You can make an argument that Republicans' lack of oversight and lack of regulation on the banking industry, that's a fair debate to have. They exploited a bubble. But the other side that's not getting discussed is who created the bubble? Who let Americans go out there and borrow money without equity, without putting anything in the bank? Who created institutions like Countrywide and allowed that to happen that was exploited?

CASTELLANOS: And that, frankly was the Community Redevelopment Act that (inaudible) Clinton...

BLITZER: Let's let Hilary respond to that. Go ahead.

ROSEN: Well, I think that's just factually inaccurate. Really, the subprime crisis started when multiple...

CASTELLANOS: Bear Stearns was the first to securitize those loans in 1997.

ROSEN: ... multiple Wall Street firms were creating paper based on bad mortgages and bad assets. And that's what...

CASTELLANOS: But it started the bad mortgages. That's what I'm saying.

ROSEN: And there was ample authority within the last eight years within the SEC and within the Treasury Department and within the Fed Reserve to do something about it, and they didn't.

CASTELLANOS: The point on this is...

ROSEN: No. This is just not going to be credible.

CASTELLANOS: ... Washington has part of the fault here too...

ROSEN: This is not going to be credible...

CASTELLANOS: ... some Republicans and Democrats.

ROSEN: ... for Republicans to say, oh, sorry, it wasn't the last eight years; it was the prior eight years.

(CROSSTALK)

SANCHEZ: The people that are concerned -- let's bring it back, kind of ground this a little bit. For the people who are concerned about paying their mortgages and who's going to be the best economic steward of this economy, I think they're listening to the back and forth, they are saying, you know, the house is on fire, we don't really care who lit the match. Who is going to be most prepared to fix this? I think in that case, I think Senator McCain has come across strong, somebody putting forth ideas, and people need to (inaudible)... BLITZER: Hold on, I hear James, he's snickering. Hold on, James. When you say he's come across strong, Leslie, now he says the fundamentals of the economy are strong one day, then he has to correct that. One day he says the government shouldn't bail out American International Group, the large insurance company. The next day when the government decides to do that, he says, well, they had no choice to do it. Why do you say he's come out strong?

SANCHEZ: I think the strongest point of that argument is that he's putting forth ideas. He's talking about what we can do to ride through this crisis, versus Barack Obama, who had not taken positions. He's voting present on both the AIG bailout, the Fannie Mae, Freddie Mac. We still don't know where he's going to stand in that sense. And I think it's interesting also, if you look at the first debate that's coming up, the Obama campaign was pushing to put the economy for the third debate as opposed to the first debate.

BLITZER: We'll get to the debates in a moment. James, go ahead and then I'll take a break. Go ahead.

CARVILLE: First of all, if somebody's sitting at home, what are they talking about -- let's be clear. Senator Obama was meeting with Paul Volcker, Bob Rubin, Larry Summers. You know what Senator McCain was doing? He said, well, we ought to have a commission to look at this thing, which might be the single stupidest idea in presidential campaign history.

So let's be very clear here. Let's be very clear about who was in charge of this government for the last seven and a half years. Let's be very clear that President William Jefferson Clinton left this country with a $5 trillion surplus.

So everybody knows what the problem is. Everybody knows McCain has 177 lobbyists associated with his campaign -- 19 of them, count them, 19 -- who have lobbied for Fannie or Freddie. So we were not going to let -- I hope the Obama people doesn't let all this noise and chatter distract them from the real true message, and that's a fact.

Whether he wants the first or the third debate on the economy, what difference does it make? He probably wants the last one...

(CROSSTALK)

BLITZER: Hold on, guys. We're going to pick up that thought. I'll let everybody weigh in. We have a lot more to talk about with our political roundtable. Only getting started.

Also coming up, we're going to tell you what the Treasury Secretary Henry Paulson had to say this morning about this multibillion-dollar bailout that he's working on desperately with Congress right now. We'll be right back.

(COMMERCIAL BREAK)

BLITZER: We'll get back to our political panel in a moment, but first, "In Case You Missed It," let's check some of the highlights from the other Sunday morning talk shows here in the United States.

On NBC, the Treasury Secretary Henry Paulson spoke about how the taxpayers could be affected by a crisis in the credit markets.

(BEGIN VIDEO CLIP)

PAULSON: When companies can't borrow money, and this has a big impact on everyone, it's difficult to get jobs. It hurts people's budgets, retirement savings. This is a serious situation, and we need to avoid this.

(END VIDEO CLIP)

BLITZER: On ABC, Democratic Senator Chris Dodd and House Minority Leader John Boehner spoke about the pressures Congress is under right now to get this bailout right.

(BEGIN VIDEO CLIP)

REP. JOHN A. BOEHNER, R-OHIO: This is not a time for ideological purity. I'm a free market noninterventionist, but we face a crisis. And if we don't act and we don't act quickly, we're going to jeopardize our economy.

SEN. CHRISTOPHER J. DODD, D-CONN.: We're going to be talking about this for decades, and while we need to act quickly on this, there is an expectation as well that we'll act intelligently about this.

(END VIDEO CLIP)

BLITZER: And on CBS, the ranking member of the Senate Banking Committee, Richard Shelby, was critical of the administration's leadership on the financial crisis.

(BEGIN VIDEO CLIP)

SEN. RICHARD C. SHELBY, R-ALA.: What bothers me about this, that I believe that the chairman of the Fed and the Treasury Secretary Paulson, with all due respect to them, they've been staggering from crisis to crisis, and they haven't even said today that this will end the crisis.

(END VIDEO CLIP)

BLITZER: The House Banking Committee Chairman Barney Frank said he personally wanted to see higher taxes for the rich.

(BEGIN VIDEO CLIP)

REP. BARNEY FRANK, D-MASS.: I do think at this point the people who are making over $1 million a year, a surtax on their incomes, that's one way to get the people who made these mistakes to contribute to the cost of undoing it.

(END VIDEO CLIP) BLITZER: Highlights from the other Sunday morning talk shows here on "Late Edition," the last word in Sunday talk.

Don't forget, coming up right after "Late Edition," 1:00 p.m. Eastern, "Fareed Zakaria: GPS." He will sit down with Congressman Barney Frank to get his take on the economic crisis. Stay tuned, "Fareed Zakaria: GPS" right at the top of the hour.

Our political panel and more will be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: When you hear John McCain talk about taking on the old boys' network in Washington. Know this, on the McCain campaign, that is called a staff meeting.

(END VIDEO CLIP)

BLITZER: Welcome back to LATE EDITION. We're continuing our conversation with James Carville, Leslie Sanchez, Hilary Rosen and Alex Castellanos. Alex, that's a popular line. He gets a big laugh when he says it. What do you think?

CASTELLANOS: I think Barack Obama has discovered there's gambling going on in the casino. Next thing you know, these candidates are going to be accusing each other of doing negative ads and have having a political campaign.

Look, Obama's campaign has got lobbyists all over, Freddie Mac and Fannie Mae and the housing crisis, so it certainly doesn't -- the McCain campaign, that's not really what voters are interested about on either side, especially the moment of crisis, like Leslie was saying.

They want to see how you're going to get us out of this hole? And that's where I think Obama's big challenge is and I'll say it again. The Treasury is running to the fire and saying hit with water. And Obama is running to the fire with fire. He is taking money from the people that the Treasury is giving money to. That is going to be something that is hard for him to square in the next few weeks.

BLITZER: Go ahead.

ROSEN: I don't think that's true. I think Obama is being reasonable. He's saying if we're going to bail out big Wall Street firms, we ought to do something about compensation and making sure that Main Street is protected, too. But I want to step back for a minute because we saw really interesting "New York Times"/CBS poll this week that talked about change and who voters believe will be sort of the same old politics and who brings change.

Obama wins that hands down. I think Obama's challenge over the next couple of weeks is to connect for voters that this change is something they can trust, that it's leadership in stressful times. I think an economic bailout is going to be controlled by the Congress, not by John McCain or Barack Obama. And so, really, it's how you layer on top of that that will matter.

BLITZER: Hold on. Who would bring real change to Washington? Obama, 65 percent, McCain, 37 percent. So, it's clear that, as far as this poll is concerned, the American public thinks that Obama stands for real change, not necessarily John McCain.

SANCHEZ: It didn't say good change. We don't really know. There was not a qualifier about what kind of change.

ROSEN: We know voters want change.

SANCHEZ: We know voters want change. We also know voters historically like to see that government works and functions. And it's interesting. Going back to this financial crisis, this is a real-life situation where you see in terms of how presidential these candidates can be. I think there's a great opportunity for both of these candidates. Ending with the debate on Friday, this is five critical days of every move people are really going to be looking to...

BLITZER: It's very interesting, even astute political analyst Bill Clinton, James -- you know Bill Clinton, I believe -- he said this on CNBC this week. Listen to this.

(BEGIN VIDEO CLIP)

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: I've never concealed my affection and admiration for Senator McCain. I think he's a great man. But I think on the issues that matter to our future, the Obama/Biden team is more right. That's what I believe. And I believe they're going to win. But I think that it will be competitive until the end.

(END VIDEO CLIP)

BLITZER: I think you agree with him on that. But on the notion of John McCain, in his words, "I have affection for him, I think he's a great man," how did you interpret that because that's caused some controversy out there.

CARVILLE: You know what? Until this campaign and some of the things I've seen I probably, I certainly have had admiration for things in Senator McCain's past. I have to tell you, what's happened in this campaign has really shaken me. What I think that President Clinton said -- he likes Obama better on the issues, and anything like that, I think that's what you would expect an ex-president to say.

And he, like I, likes McCain fine. I'm just stunned at some of the stuff that -- you know, I'm told he knew about it, which sort of shakes my faith that I had in him. But the exit polls in this is horrific. The tragic thing is if Senator McCain is lucky enough to win this race, I don't know if he could get anything done.

BLITZER: Go ahead, Alex.

CASTELLANOS: In politics, there's an old strategy, if you really want to harm your opponent, the first thing you do is get close to them, put your arm around him. It's the et tu Brute strategy. You put your arm around them and say something nice and then you put in the knife. Bill Clinton's an old pro.

BLITZER: Here's what Chuck Hagel said this week, the Republican senator from Nebraska and I'm going to let Leslie weigh in, referring to Sarah Palin, the Republican vice presidential nominee. "She doesn't have any foreign policy credentials," Hagel said. "You get a passport for the first time in your life last year? In a world that is so complicated, so interconnected and so combustible, you really got to have some people in charge that have some sense of the bigger scope of the world. I think that's just a requirement."

Is Sarah Palin losing some of her luster less than weeks after she came out of the blue and became the Republican nominee? SANCHEZ: I don't think so. I believe if anything, she's continuing to galvanize, especially independent voters and women. People like the common sense approach. I think there's a degree of familiarity in that. And more importantly, there's tremendous interest in this debate coming up. People want to see her when she's not so much prepared and how she has this dialogue. More than anything, they want to know that she can also facilitate some reasonable discussion.

BLITZER: Guys, we've got to leave it right there. On that note, let me thank everyone for coming in. Appreciate it. By the way, if you'd like a recap of today's program, get highlights on our LATE EDITION podcast. Simply go to CNN.com/podcast. LATE EDITION will be right back.

(COMMERCIAL BREAK)

BLITZER: And that's your LATE EDITION for this Sunday, September 21st. Please be sure to join me next Sunday and every Sunday at 11:00 a.m. Eastern for the last word in Sunday talk. And remember, I'm here in "THE SITUATION ROOM" Monday through Friday 4:00 to 7:00 p.m. Eastern. Don't forget Friday night it's debate night in America, the first of the presidential debates. I'll be anchoring our coverage from the CNN Election Center. Until then, thanks very much for watching. I'm Wolf Blitzer in Washington. "FAREED ZAKARIA GPS" starts right now.

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