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American Morning
New Surveillance Video of that Deadly Hotel Bombing in Islamabad; Administration Urges Congress to Push $700 Billion Bailout Plan; China's Tainted Milk Crisis Spreads; Diplomacy First is Key to Mennonite Students' Vote This Election Year
Aired September 22, 2008 - 06:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEO CLIP)
JOHN ROBERTS, CNN ANCHOR (voice-over: End of an era. Two giant Wall Street brokers become banks as Congress races to pass a massive billion dollar bailout.
HENRY PAULSON, TREASURY SECRETARY: We need this to be clean and quick.
ROBERTS: But could partisan politics stall the quick fix?
SEN. CHRIS DODD (D), CHAIRMAN, BANKING COMMITTEE: We make a huge mistake if we just basically write a check for $700 billion.
ROBERTS: And going public.
UNIDENTIFIED FEMALE: From $8,000 to $12,000 in today's economy. That's just too hard.
ROBERTS: Private schools get a tough lesson in economics.
(END VIDEO CLIP)
ROBERTS: And good morning. Thanks very much for being with us on this Monday, the 22nd of September. We start a brand new week with issue number one still topping the news today.
KIRAN CHETRY, CNN ANCHOR: That's right. And a lot of questions on how this huge billion-dollar, multibillion dollar bailout would actually work. And we begin with more on that.
The $700 billion Wall Street rescue package still being worked out between Congress and the Bush administration. One lawmaker calling it the "mother of all bailouts." The Fed also allowing the last two major U.S. investments banks, Goldman Sachs and Morgan Stanley, to become bank-holding companies. That means they're subject to greater regulation. Asian markets showing approval for the bailout effort trading higher overnight, but European stocks are trading lower right now.
And there are some new details about this weekend's bombing that took place at a hotel in Pakistan. Fifty-three people killed and that includes two U.S. Department of Defense employees. Less than an hour ago, officials said Pakistan's president and prime minister and other leaders were to have dinner at that hotel but then changed the venue at the last minute. Pakistani officials are rejecting the FBI's offer to investigate the bombing.
There's also some new surveillance video that shows a truck loaded with 1,300 pounds of explosives at the gate. The video shows the driver blowing himself up. Security guards tried to extinguish the blaze. They were no match, though, for the fireball. The video does not show the second explosion. That's the one that destroyed the Islamabad Marriott.
Jury selection starts today in the federal corruption trial of Alaska Senator Ted Stevens. He's charged with failing to report hundreds of thousands of dollars worth of gifts and home repair work that he received from an oil contractor. The six-term Republican plans to testify. Stevens is involved in a tight race for re- election.
ROBERTS: While the fragile U.S. economy begins the week in unchartered territory, lawmakers considering the Bush administration's $700 billion plan to rescue financial companies that are drowning in bad mortgage debt. And the Fed allowing the country's last two major investment banks, Goldman Sachs and Morgan Stanley to become bank holding companies to improve their finances.
Asian markets sharply higher overnight. Dow futures pointing to a lower open today. U.S. Treasury Secretary Henry Paulson making the case for the government's bailout plan on the Sunday talk shows saying Congress must act quickly.
(BEGIN VIDEO CLIP, ABC'S "THIS WEEK")
HENRY PAULSON, TREASURY SECRETARY: The biggest help we can give the American people is to stabilize our financial system right now, and to prevent the system from clogging up because if it does clog up, this is going to have an adverse effect on people's abilities to get jobs, on their budgets, on their retirement savings, on lending for small businesses. And so, that's where the first priority has got to be.
(END VIDEO CLIP)
ROBERTS: Secretary Paulson yesterday on "ABC's "This Week." CNN's Christiane -- Christiane --
(LAUGHTER)
It's early in the morning on a Monday. Christine Romans is here "Minding Your Business". So Paulson is calling for a clean bill...
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Yes.
ROBERTS: ... urging members of Congress, get this thing to me quickly. Democrats and some Republicans are saying, whoa, not so fast. We want to make sure that whatever we do it's not going to happen. ROMANS: And they move pretty quickly. Last spring with that stimulus package, remember that bipartisan, that bipartisan quick move? We'll see how quickly they can do this one, but the administration wants it clean, quick bill. Wall Street wants a clean, quick bill, as well.
You heard Paulson sort of lay out what happens if we don't get this done. And in fact, there still could be some, some tough times in the economy even if we do this quickly, John. You know, a lot of people on Friday were telling me that there is still going to be an economic problem ahead here.
There are still going to have job losses. You still could have banks going under, more banks going under. And you still could have wages be pretty stagnant and you could still -- could have people pretty worried. Consumers pulling in their purse strings.
He mentioned jobs, retirement savings. You could still see people losing their jobs going forward here. You could see retirement savings still being hit. And people keep asking me, what does this mean for the average American?
Well, there are 300 million Americans in this country and they're all in various parts of the American dream. So to boil it down what it means for one average American just isn't -- it's too simple to do it that way.
But what this all means, this crisis, not necessarily the bailout with the crisis, it means if you're close to retirement, you could be in -- you could have to work a few more years. That's what it boils down too. That's sad for some people. It means that some people are going to lose their homes no matter what. Even if the bailout comes out, some people are still going to lose their homes.
We're going to have more job losses. That's pretty much baked in the cake here. There are going to be more job losses. And for young people, for people with student loans, they could have trouble finding their first job. They could have trouble getting another student loan.
There are already banks that are pulling in their home equity lines of credit. So if you're relying on that money to go and send a kid to college, it's a different response for everyone. But what's happening right now with the banking system, the banks lend to each other and that lending is the oxygen that fuels the economy. And right now, it's starved. And so this is what they're trying to fix right now.
It's historic. They're changing the landscape of Wall Street. We say it over and over again. What does it mean for you? Depends on who you are, but there are a lot of negatives -- negative ramifications for a lot of people.
ROBERTS: Yes. And we should mention, too, that later on this hour, we're going to be talking with one of the people heavily involved in negotiations to try to fix all these, Congressman Barney Frank of Massachusetts.
ROMANS: How was it?
ROBERTS: So we'll see what his take on this is. Christine, thanks very much.
ROMANS: Sure.
CHETRY: So the $700 billion bailout for the financial market may actually get even bigger. Democratic lawmakers are rushing to add their own provisions, including more congressional oversight and also help for struggling homeowners.
(BEGIN VIDEO CLIP)
SEN. CHRIS DODD (D), CHAIRMAN, BANKING COMMITTEE: I think we make a huge mistake if we just basically write a check for $700 billion and turn it over without demanding accountability, addressing home ownership and raising major concerns about taxpayer exposure.
(END VIDEO CLIP)
CHETRY: CNN's Brianna Keilar live in Washington for us with the latest. You know, there's a lot of talk that these demands for various additions could end up stalling this bailout. What's going on?
BRIANNA KEILAR, CNN CORRESPONDENT: Well, you know, we're still hearing that the goal of Democrats and Republicans, Kiran, is to push this legislation through this week. But yes, as Democrats focus on what they say is missing from this proposal, you are hearing calls from Republicans on Capitol Hill and from the Bush administration that add-ons will slow down this process.
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER (R), MINORITY LEADER: The more strings that are put on this package as we move through it means that it's less likely to work. This bill needs to move quickly. And I'm hopeful that Congress can work in a bipartisan manner to address the concerns that the American people have and do it as quickly as possible.
(END VIDEO CLIP)
KEILAR: Democrats say they don't want taxpayers just picking up a $700 billion price tag only to find out that, yes, it propped up Wall Street, but it didn't help them -- it didn't help keep them in their homes. So Democrats, they're demanding independent oversight and accountability. They're talking about limiting executive pay. The idea that the government is essentially bailing out these corporations and then these corporations could in turn throw huge salaries at CEOs, that's not sitting well with Democrats.
They're also looking at a provision to allow the government to get involved in refinancing individual homeowners in danger of foreclosing on their homes. And you know, some Democrats, they've been talking for sometime about a second economic stimulus package and perhaps attaching that to this rescue legislation. But that's certainly an idea the Republicans are not on board with.
So obviously, a lot of negotiation ahead on Capitol Hill this week. A number of hearings. Treasury Secretary Paulson, in fact, is supposed to testify before the Senate Banking Committee tomorrow, Kiran.
CHETRY: Wow. And a lot of economists say time is of the essence that you know, it has to happen fast to try to ease some of those fears on Wall Street. So we'll see what happens.
Brianna Keilar following all of this for us this morning, thanks.
ROBERTS: The crisis on Wall Street is dominating talk on the campaign trail. Both candidates appeared on CBS' "60 Minutes" on Sunday. John McCain said the massive financial bailout cannot come at the expense of American taxpayers.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: I'm not saying this isn't going to be messy, and I'm not saying it isn't going to be expensive. But we have to stop the bleeding. We've got to fix the average citizen who is the innocent bystander that is in danger of losing their pensions, their 401(k)s, their IRAs. Their very life savings are at risk here.
(END VIDEO CLIP)
ROBERTS: Barack Obama blamed the Bush administration for letting the financial crisis develop saying it has all the earmarks of a recession.
(BEGIN VIDEO CLIP)
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: I think there's no doubt that we're going to see when the numbers come out that we are officially in recession. I think for a lot of people, they've been feeling like we've been in a recession for years now. When their wages and incomes don't go up and the cost of gas and groceries and home heating oil and prescription drugs are all going up, that feels awfully like a recession to them.
(END VIDEO CLIP)
ROBERTS: Obama says the president's massive Wall Street bailout offers only a concept with a staggering price tag, not a real plan.
Eight minutes now after the hour.
CHETRY: Tainted milk. A poisoned chemical leaves thousands of kids sick. We're live from Beijing on the deadly scam. You're watching the "Most News in the Morning."
(COMMERCIAL BREAK) ROBERTS: Welcome back to the "Most News in the Morning." The outcry growing louder in China this morning as the number of children sickened by tainted dairy products now soars to 53,000. Already four kids have died. Authorities are blaming it all on a chemical used to make plastics called melamine getting into powdered milk and baby formula.
We're following the story from China this morning. Our John Vause is in Beijing. He joins us live this morning.
And, John, first of all, it started with pet food. Now, it's involving products that are consumed by humans. And now the scare spreading beyond China's border.
JOHN VAUSE, CNN BEIJING CORRESPONDENT: Yes, that's right, John. Officials in Singapore today saying that traces of melamine have been found in White Rabbit candy that's made here in China, exported to a number of countries, including the United States. It's not known if the candy sold in the U.S. has been contaminated, but that chemical, melamine, is now showing up in a growing number of dairy products across mainland China.
(BEGIN VIDEOTAPE)
VAUSE (voice-over): Once again, China's long-suffering consumers are looking closely at what they are buying and who makes it as more dairy products test positive for contamination. "I just try and pick the safe ones. What can I say? We're helpless," this woman told me. An old saying in China says, "We should not give up eating for fear of choking," says this man.
The government has ordered a recall of tainted fresh milk and yogurt made by the country's three biggest dairy producers, including one which supplied the Olympics, another sold to Starbucks on mainland China. The U.S.-based coffee giant says, for now, soy milk will replace cow's milk.
But for worried parents, finding an alternative to infant formula will not be so easy with 22 brands contaminated. "We'll feed him egg soup now. We don't dare give him milk powder," says this man. "Maybe I'll cook for him, porridge or other food that we make," this woman says.
Tens of thousands of children have been made ill. Others have died because of an apparently widespread scam of mixing diluted milk with the industrial chemical, melamine, producing fake readings of high protein levels so the milk can pass inspection when sold to the big dairy companies. And soon, there could be a flood of lawsuits, says Li Fangping, a lawyer, who normally represents dissidents and is now taking calls from angry parents.
LI FANGPING, LAWYER (through translator): I believe this will be the biggest ever class action suit," he says.
(END VIDEOTAPE) VAUSE: And, John, you mentioned melamine in the dog food last year. They're putting it into the wheat gluten back then to try and fake those protein levels. It appears they're doing exactly the same thing this time, but now it's dairy products and it could have been going on since 2005 -- John.
ROBERTS: Unbelievable. John Vause for us with the latest from Beijing. John, thanks so much.
CHETRY: Diplomacy first. CNN continues its look at first-time voters. We're going to find out why one group of students says keeping up good foreign relation is key to their vote in November.
We're also cutting through the spin to see where John McCain and Barack Obama really stand on taxes with our "A.M. truth squad." You're watching the "Most News in the Morning."
(COMMERCIAL BREAK)
CHETRY: Well, Yankee Stadium is now really history. The final game in the 85-year-old stadium was played last night. The Yanks went out in style, by the way. They beat the Baltimore Orioles and then paid tribute to their fans.
So, Rob Marciano is off today. I'm sure that has nothing to do with the Yankees last day, but Reynolds Wolf is in the weather center for us.
I don't mean the Yankees last day. I mean bye-bye to the stadium. It's on the front page of all the local papers today.
REYNOLDS WOLF, AMS METEOROLOGIST: Yes.
CHETRY: A lot of people turning out to say goodbye. Mr. Yankee fan himself is probably in mourning as well.
WOLF: Oh, there's no doubt. I'm sure Rob is no doubt just as heartbroken this time. My thing is, I mean, why mess with tradition? Why mess with the classic, like Yankee Stadium? You can keep Fenway, you can keep Wrigley Field. I don't know. I'm always critiquing it, but I'm a minority.
Hey, let's show you something else. We've got something else to deal with down in the tropics. This is a tropical disturbance, not a depression yet. But there is every reason to believe the storm can actually strengthen. Already producing quite a bit of rainfall down in Puerto Rico and San Juan. Some places in the higher elevations, Kiran, we're talking of rainfall totals around 20 inches.
As you make your way the next couple of days, there's a good chance this storm may be a named storm. That name would be Kyle. Other than that, the system we're also watching some scattered showers and a few thunderstorms right off parts of the Atlantic Coast back in the Carolinas again. We go right off the outer banks southward of places like Charleston, splashing that showers. From Jacksonville back over to Raleigh, the rain is not particularly heavy, but parts of I-85 are certainly going to be wet this morning. So as you go out and make your way to work or school, what have you, be ready for the slick roadways. Also on parts of I-29 from Grand Forks southward of say, Sioux Falls, even in Omaha, look for the scattered showers and storms. Many of those storms moving a little bit more to the east back into the western half of the Great Lakes southward through St. Louis, even into parts of Central Mississippi.
And in terms of daytime highs, very quickly let's get to those for you today. You can expect in parts of the northeast from Boston southward to New York, your high temperatures mainly into the 60s and 70s. 81 in Kansas City, 89 in Dallas. Houston with 88, and 77 in Los Angeles.
Fall, by the way, begins today at 11:44 a.m. Eastern daylight time. Let's send it back to you.
CHETRY: Yes. See, I was going to tell you that, but, of course, you already knew. How about it?
WOLF: Yes. We, weather people, we kind of stay on top of that. It's kind of like part of the job requirement. Call me crazy.
CHETRY: I know. I'll tell you the -- I'll tell you the projected highs for today as well a little later. How about that?
WOLF: Hey, whatever it takes. We're all a team here.
CHETRY: I'm with you on Yankee Stadium, though, Reynolds, thanks.
ROBERTS: Going public --
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: We are really seeing a groundswell of parents coming to our schools.
(END VIDEO CLIP)
ROBERTS: Tough times force parents to ditch private school.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: I have a lot of anxiety. Just want to make sure that they're OK.
(END VIDEO CLIP)
ROBERTS: Why it could be a big boost for public schools. You're watching the "Most News in the Morning."
(COMMERCIAL BREAK)
ROBERTS: Nothing like the first time. Welcome back to the "Most News in the Morning."
First-time voters are a major voting bloc come November 4th. CNN's Rick Sanchez visited Goshen, Indiana, and spoke with a group of Mennonite College students. They work in foreign countries as part of their studies, and they say world diplomacy will be on their minds when they go to the polls.
(BEGIN VIDEOTAPE)
RICK SANCHEZ, CNN CORRESPONDENT: Barack Obama said when he was asked in one of our CNN debates, whether he would talk to people like Chavez and Hamas, he was called naive for having that position. Would the Mennonite position, would your position be that he was naive?
UNIDENTIFIED FEMALE: We need to talk to the people, regardless of whether or not we like them. How else do you fix the issues that you have between countries if the leaders won't even talk to each other?
UNIDENTIFIED MALE: Where is the diplomacy? Where is the creative thinking, the alternative solutions?
UNIDENTIFIED MALE: I think diplomacy and trying to find alternative solutions is something that involves a leap of faith. But if you're willing to take that risk and to have that faith, you find hope in something greater than yourself.
UNIDENTIFIED MALE: As Mennonites, we consider ourselves not unpatriotic, but more than patriotic -- citizens of both this world and of another world.
UNIDENTIFIED FEMALE: I think being patriotic is also being a neighbor to those actually in our country and those far away.
UNIDENTIFIED FEMALE: You can't just think about what you want. You have to think about other people's well-being as well. And maybe some of the choices they make aren't the greatest, but they're still human beings and they deserve the respect.
UNIDENTIFIED FEMALE: I was in Iran and the welcome I received there and the incredible warmth from Iranian people, which I've never experienced traveling anywhere else, to be welcomed as an American, was absolutely shocking. And the stereotypes coming in and the fears were just blown to pieces.
UNIDENTIFIED MALE: When you go to another culture, you learn that the way that you were raised isn't the only way and that maybe not even the correct way or the right way. And so you learn how to respect other people's views and other people's ways of thinking.
UNIDENTIFIED MALE: We're so aware of what's going on in the world and we become this interdependent world, and that's why this idea of global citizenship and becoming a part of that is so important. And people are energized by their want to connect with people and to understand our world.
(END VIDEOTAPE)
ROBERTS: You can find out more about "The League of First-time Voters" on our Web site, CNN.com/league.
CHETRY: A massive government bailout to solve Wall Street's credit crisis. Will it work? And what does it mean for you and your money? We are going to be speaking to a leading economist.
Also, Hollywood and politics. A lot of stars taking shots at VP Sarah Palin. But could all the digs actually backfire? You're watching the "Most News in the Morning."
(COMMERCIAL BREAK)
CHETRY: Welcome back to the "Most News in the Morning." The White House wants Congress to approve a $700 billion bailout for Wall Street. And Treasury Secretary Henry Paulson says it needs to be "clean and quick." But some lawmakers are being more cautious. So is the government's rescue plan the best medicine for the U.S. economy?
Mark Zandi is the chief economist for MoodysEconomy.com. He joins us now from West Chester, Pennsylvania. Thanks for being with us this morning, Mark.
MARK ZANDI, CHIEF ECONOMIST, MOODY'S: Thanks for having me.
CHETRY: So this would basically allow the treasury to purchase billions of dollars in what they're calling difficult to price assets from these financial institutions. They're saying it's really the biggest restructuring since the Great Depression. What will it mean for our economy moving forward?
ZANDI: Well, you know, I think it's absolutely necessary. It's unfortunate it's going to cost taxpayers hundreds of billions of dollars. But I think at the end of the day, it is necessary because the financial system last week came fairly close to a complete shutdown. And if it did, that would be devastating for our economy and cost taxpayers even more.
CHETRY: Critics say, hold on a minute. This basically gives the Bush administration and Henry Paulson, one man, control over more than a trillion dollars without certain safeguards that needs to be in effect. That's what some in Congress are saying. How will that work? And do you think that we need to be a little bit more cautious here?
ZANDI: Well, that is a legitimate concern. Obviously, Treasury Secretary Paulson leaves office in a couple three months and we'll have a new treasury secretary. There are some safeguards in the legislation. The new secretary will have to report to Congress every three months.
There is disclosure in the legislation so that this fund will have to disclose to everyone what it's doing. But that probably could be tightened up in the final legislation as it comes to completion.
CHETRY: There are other things some Democrats are talking about is hey, if it's this big Wall Street bailout, you know, for the banks and all of these investment banks, why can't it be a little bit of a lifeline for those who were suffering from this foreclosure crisis? The homeowner.
ZANDI: Yes, a reasonable thing. I think, though, the primary objective here is to get this done quickly because the purpose is to quell the panic in the financial system, and that the only way to do that is to get this done very, very quickly. And if other pieces of legislation are piled on top of this, then it won't get done quickly. And I do think early next year when the next president, the next Congress are in office, I think it's legitimate then to circle back and think about another piece of legislation to address those other concerns.
CHETRY: We talk about the collapse of these investment banks like Lehman Brothers, Bear Stearns. We've just learned that the country's last two major investment banks, we're talking about Goldman Sachs and Morgan Stanley, are going to be changing their status to bank-holding companies. What does the change mean for Wall Street? What does it mean for consumers?
ZANDI: Well, this is something Goldman and Morgan had to do. There was a great deal of concern about their viability. It was threatening their viability. And by doing this, they now have access to the liquidity, the cash, the Federal Reserve can provide to them, and this should stabilize their situation, which obviously is key to keeping the financial system together. These are two very, very important financial institutions and it's important that they continue to operate in an orderly way.
CHETRY: Is this the end of deregulation?
ZANDI: Well, I think the end of deregulation as we know it. The pendulum had swung too far. We need to see better regulation. And, if anything good comes out of this, it will be that we will remake our regulatory framework which needs reworking, because it was developed during the Great Depression and it feels like it.
CHETRY: Mark, before we let you go, quickly, where should people put their money right now? A lot of fears out there.
ZANDI: Yes, I think the answer is to don't do anything. Don't change a thing. People, when they are in a panic situation, make mistakes. And they'll regret it. So I think the government is on the case. I think given these -- the size of these actions, they will succeed. And if you make a big move now, you'll probably regret it.
CHETRY: Mark Zandi, chief economist and co-founder of MoodysEconomy.com, thanks for being with us this morning.
ZANDI: Thank you.
ROBERTS: Just crossing the half hour now, and here are some of the top stories that we're following for you this Monday morning.
New surveillance video of that deadly hotel bomb in Islamabad.
MARK ZANDI, CHIEF ECONOMIST, MOODYS: So, I think -- the government is on the case. I think given these -- the size of these actions, they will succeed. And if you make a big move now you'll probably regret it.
KIRAN CHETRY, CNN ANCHOR: Mark Zandi, chief economist and co- founder of moodyseconomy.com. Thanks for being with us this morning.
ZANDI: Thank you.
JOHN ROBERTS, CNN ANCHOR: Just crossing the half hour now. And here are some of the top stories that we're following for you this Monday morning.
New surveillance video of that deadly hotel bombing in Islamabad over the weekend. The video shows the truck driver blowing himself up at the gate. The cab of the truck caught fire. A security guard tried to put it out with a fire extinguisher, but shortly after, the 1300 pounds of explosive and the main bomb detonated ripping the front off the hotel. Officials say Pakistan's prime minister and other leaders were to have dinner at the Marriott that night but changed the venue at the very last minute. 53 people were killed, including two American defense contractors.
In Texas, Galveston Island is set to reopen on Wednesday. More than a week after Hurricane Ike hit. Police will enforce a 6:00 p.m. to 6:00 a.m. curfew when the island is reopened. Officials say nearly a million people are still without electricity and it could be weeks before basic service is restored in all areas.
A first at the Emmy's. "Mad Men," AMC series about an advertising agency becomes the first ever basic cable show to win the Best Drama Award. NBC's "30 Rock" picked up the Best Comedy with star Tina Fey getting nods for Best Actress in a Comedy and Best Variety. Co-star Alec Baldwin picked up the Best Actor in a comedy award.
The Bush administration and Congress continue to fine tune the $700 billion Wall Street bailout plan. The White House wants lawmakers to quickly approve the bailout, but some leaders are demanding more protections for homeowners and taxpayers, including the presidential candidates. John McCain says after the financial markets have stabilized, more regulation is needed.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: We need to more -- have more transparency. We need to take the regulatory agencies and merge them together in one effective agency. These regulatory agencies, this alphabet soup, was really designed for a different era. We're now in global transactions. We need more transparency. We need to combine the regulatory agencies and we need to give them some more authority, if necessary, to do so.
(END VIDEO CLIP)
ROBERTS: The bailout and its fallout is issue number one on the campaign trail. Our Jim Acosta is live for us in Lady Lake, Florida this morning.
Good morning, Jim.
JIM ACOSTA, CNN GENERAL ASSIGNMENT CORRESPONDENT: Good morning, John. And you heard John McCain there talking about what he'd like to see happen with the economy and with this bailout. This is sounding like a financial minority report. They are trying to stop the great depression before it starts. And so it's no surprise that the candidates, that many in Congress have some questions about this, and John McCain is talking about, as you heard there, merging all of these institutions, agencies and the federal government to one Uber agency. Sort of a Department of Homeland Security for the financial markets.
John McCain is also talking about creating an oversight board to keep an eye on what Henry Paulson is doing over at Treasury. He'd like to see somebody like a Mike Bloomberg on this oversight board, a Warren Buffett who is an Obama supporter on that oversight board.
But Barack Obama is out on the campaign trail and he is saying, hold on, John McCain. You are the guy who has been a champion of deregulation. These are Obama's words. He is calling attention to the fact that Phil Gramm, one of John McCain's former economic policy advisers used to be a big time bank deregulator. And so, Barack Obama is taking John McCain to task on just how seriously the American people should take the Arizona senator on this critical issue.
(BEGIN VIDEO CLIP)
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: Senator McCain fairly recently said, I'm a deregulator. One of his top chief economic advisers was Phil Gramm who was one of the architects of deregulation in this sector. And he's always taken great pride in believing that we have to eliminate regulations.
(END VIDEO CLIP)
ACOSTA: Now just how far John McCain is willing to go to buck his party here, he likes to say he's the Teddy Roosevelt in this race. That he's just fine with bucking the Republican Party. He is talking about putting Andrew Cuomo, the attorney general in New York in charge of the SEC, replacing Chris Cox, a Republican from California. And so John McCain trying to show out there that he is the guy who can get the job done from a bipartisan basis. And unlike the current occupant in the oval office, will not just toe the party line.
John?
ROBERTS: Although McCain did acknowledge yesterday that the president does not have the power to actually fire the SEC chairman.
ACOSTA: Right.
ROBERTS: Sarah Palin drew a huge crowd at the villages there yesterday. How much did she talk about this?
ACOSTA: Not a whole lot. And it's interesting what you just said about the SEC chairman, because you're right. He can't just do that. But I talked to an economist late last week who said Barack Obama and John McCain are essentially being held hostage to what is happening right now because they can't do very much. They're going to have to respond to events on the ground in January of 2009.
As for Sarah Palin, this was an enormous crowd out here in Florida. She is still very much on script, John. Still very much on that teleprompter talking mainly in generalities. But yesterday in front of what was an enormous crowd, tens of thousands of people here just out of Orlando, Florida in that central Florida critical I-4 corridor area, she once again said that John McCain is the real maverick in this race.
He is the guy who has bucked the Republican Party. Tried to warn Congress, warn the government about the unfolding crisis at Fannie Mae and Freddie Mac and that only he can be trusted to fix the economy.
John?
ROBERTS: All right. Jim Acosta for us in Lady Lake, Florida. Jim, thanks so much.
And AMERICAN MORNING's "Truth Squad" is on the case today. In a moment, Alina Cho is going to check where John McCain and Barack Obama really stand on taxes and social security. Stay around for that.
CHETRY: Setting the record straight.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Everybody could agree on it except Wasilla.
(END VIDEO CLIP)
CHETRY: Jessica Yellin digs up the fact on a much disputed part of Sarah Palin's record.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: That was one of the many things that they were passing on.
(END VIDEO CLIP)
CHETRY: You are watching the "Most News in the Morning."
(COMMERCIAL BREAK) CHETRY: Welcome back to AMERICAN MORNING. 38 minutes past 6:00 here in New York. Time to check in with the "Truth Squad" on statements and ads from the campaign. Our Alina Cho has been sorting fact from fiction on social security, as well as taxes this morning. Very timely issue number one, of course, and a lot of claims out there on the campaign trail.
ALINA CHO, CNN CORRESPONDENT: Yes, a lot of claims flying. Kiran, good morning. Good morning, everybody. We're going to begin this morning with where the candidates stand on tax cuts. John McCain says Barack Obama has continuously shifted his position on taxes. Here's what he said just last week on the campaign trail in Green Bay, Wisconsin.
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MCCAIN: He said he won't raise taxes for most people, but he's voted 94 times in his short Senate career for tax increases and against tax cuts.
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CHO: 94 times seems like a lot. Is it true? Well, we turned to factcheck.org. That's a nonpartisan project at the University of Pennsylvania's Annenberg Public Policy Center. Now, they pieced together records of the 94 votes. And here's what they found.
In fact, 23 votes were against proposed tax cuts. 7 were in favor of measures that would have raised taxes for what's being described as a relative few while lowering them for many. 11 votes, indeed, were for tax increases targeting people making more $1 million a year. And 53 votes on budget matters that could not, on their own, result in higher taxes. Though the consensus, FactCheck says many were, quote, "clear statements of approval for increased taxes."
So, what does this all mean? In summing up the votes, FactCheck says Obama voted consistently to restore higher tax rates on upper income taxpayers but not on middle- or low-income workers.
Does that sound familiar? Well, it should because it's consistent with what Obama has said on the campaign trail that he would do if he won the White House. So, the verdict from the "Truth Squad" on this one, misleading. Of course, we are keeping an eye on both sides.
In the next hour, we're going to have a "Truth Squad" report on the Obama campaign's ads about John McCain's views on social security. As you all know, Kiran, Obama has said if McCain had his way, millions of Americans would have had their social security tied up in the stock market and they would have seen their nest egg disappear. Sounds a bit outrageous. Is it true? We're going to give you a reality check from our "Truth Squad" in the next hour.
CHETRY: All right. Alina Cho, we look forward to it. Thanks.
CHO: You bet. ROBERTS: Going public.
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UNIDENTIFIED FEMALE: We are really seeing the groundswell of parents coming to our schools.
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ROBERTS: Tough times force parents to ditch private school.
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UNIDENTIFIED FEMALE: I have a lot of anxiety. Just want to make sure that they're OK.
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ROBERTS: Why it could be a big boost for public schools. You're watching the "Most News in the Morning."
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ROBERTS: It's 44 minutes after the hour and welcome back to the "Most News in the Morning." In our ongoing series -- "Broken Schools," we've been looking at some of the problems plaguing education in America and some of the proposed solutions.
This morning, CNN's Kara Finnstrom looks out how a tough economy has triggered new interest in California's public schools by middle- class families.
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TAMMY ENNIS, NEW PUBLIC SCHOOL PARENT: This is for Katie Scarlett (ph).
KARA FINNSTROM, CNN CORRESPONDENT (voice-over): The Ennis family never thought they would do this.
ENNIS: He's 6.
FINNSTROM: Pull all three kids out of private schools and go public.
ENNIS: I have a lot of anxiety built up and I just want to make sure that they're OK.
FINNSTROM: But when the economy began to tank, it hit the Ennis family. One cost that especially hurt, rocketing tuition.
ENNIS: From $8,000 to $12,000 in today's economy.
FINNSTROM: That's per child.
ENNIS: That's just too hard. FINNSTROM: The Ennises are part of a growing trend of middle- income families transferring their kids into Pasadena public schools. It reverses a trend that began in the '70s when a judge ordered public schools here to desegregate through bussing. That led many middle- and upper-income families to get out.
MARYBETH NOBS, PRIVATE SCHOOL PARENT: Feedback was very negative about the schools from drugs and bullying.
KRISTIN MASCHKA, PASADENA PEN: The importance of taking a look --
FINNSTROM: But public school test scores in Pasadena and across California have risen in recent years. And a grassroots public education group is showcasing that improvement to attract some parents back to the public school system.
MASCHKA: We don't do it by doing spin. We just do it by making it easier for parents to get good experiences with the schools. Get on campus, they tell their friends.
DR. KATHY ONOYE, ELEM. SCHOOLS DIR., PUSD: We are really seeing a groundswell of parents coming to our schools. And I think it's exciting.
FINNSTROM: Tammy Ennis, a teacher herself who's worked at private and public schools, looked at public school statistics --
ENNIS: And you're Grant, remember, I remember you.
FINNSTROM: And visited campuses.
ENNIS: I was very pleased and surprised.
FINNSTROM: Educational leaders say the influx of middle-income kids benefits everyone, including teachers.
RICHARD KAHLENBERG, CENTURY FOUNDATION: We know from 40 years of research that all students do better when there is a core of middle- class families in a school. And all students do worse when there are high concentrations of poverty.
FINNSTROM: The Ennises simply hope their kids won't lose out in the process.
ENNIS: It's a child. It's -- you know, you have to know that your child is getting the best education that you can.
FINNSTROM (on camera): Now, many Pasadena families say even with that increase in test scores, they still believe public schools here have a long way to go. But the interest statewide does appear to be growing. We checked with half a dozen major school districts across the state and all are reporting at least a slight increase in transfers from private schools.
Kara Finnstrom for CNN, Pasadena, California. (END VIDEOTAPE)
ROBERTS: And here's more on public versus private school in an "A.M. Extra" for you. In the last 20 years, the percentage of kids in private school has remained relatively steady at about 11 percent. That includes students from elementary through high school. It amounts to 6.2 million kids for the current school year. The National Association of Independent Schools estimates that the average median cost for a year at a non-religious day school is about $16,000 a year.
CHETRY: Stars against Sarah Palin.
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UNIDENTIFIED FEMALE: I'm not a fan.
UNIDENTIFIED MALE: She's from the Stone Ages.
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CHETRY: Hollywood heavies taking political pot shots.
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UNIDENTIFIED FEMALE: I've got some hunting to do.
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CHETRY: Why some are worried the attacks could backfire. You're watching the "Most News in the Morning."
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TINA FEY AS SARAH PALIN: What an amazing time we live in. To think that just two years ago, I was a small town mayor of Alaska's crystal meth capital. And now I am just one heartbeat away from being president of the United States. It just goes to show that anyone can be president.
AMY POEHLER AS HILLARY CLINTON: Anyone. Anyone. Anyone.
FEY: All you have to do is want it.
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CHETRY: Welcome back to the "Most News in the Morning." "Saturday Night Live" taking shots at Republican vice presidential candidate Governor Sarah Palin. And lately, more celebrities were getting vocal about Palin. And as CNN's Brooke Anderson shows us, the Tinseltown tirades might not be a bad thing for her.
Brooke?
BROOKE ANDERSON, CNN ENTERTAINMENT CORRESPONDENT: John and Kiran, Hollywood is going after Sarah Palin full board. But could their attacks actually benefit the Republican ticket?
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GINA GERSHON AS PALIN: I've got some hunting to do.
ANDERSON (voice-over): Hollywood has a new favorite pastime, taking aim at Sarah Palin. From a Gina Gershon spoof on funnyordie.com to a biting parody on "Saturday Night Live."
FEY AS PALIN: And I can see Russia from my house.
ANDERSON: The zingers are frequent and fierce.
JASON BIGGS, ACTOR: She's, you know, from the Stone Ages.
UNIDENTIFIED ACTOR: She's all flash. She has no substance.
UNIDENTIFIED ACTRESS: I am not a fan.
ANDERSON: Hollywood had mostly played it cool during this heated presidential election, but when McCain announced his running mate, restraint disappeared.
TED JOHNSON, MANAGING EDITOR, "VARIETY": There's a feeling of disbelief among a lot of people in Hollywood. They can't quite get their hands around why Sarah Palin has such an appeal.
ANDERSON: Matt Damon declared the prospect of a Palin presidency terrifying.
MATT DAMON, ACTOR: It's like a really bad Disney movie, you know? The hockey mom.
ANDERSON: Lindsay Lohan blogs that Palin is a media obsessed homophobe while Barbra Streisand wrote on her Web site, quote, "this calculated, cynical ploy to pull away a small percentage of Hillary's women voters from Barack Obama will not work. We are not that stupid."
A spokeswoman for Palin fought back telling CNN, quote, "It's not surprising that Barack Obama and his celebrity supporters continue to tear down Governor Palin with little more than blatant name-calling." Variety's Ted Johnson asserts Hollywood's vitriol could backfire.
JOHNSON: There's very much a risk of a backlash against the Obama campaign if they are seen as cavorting with celebrities.
ANDERSON: But not all celebrities are lashing out. Those backing the Republican ticket include Jon Voight, Robert Duvall, James Caan, Dean Cain, Chuck Norris and Sylvester Stallone.
UNIDENTIFIED REPORTER: What do you think of Sarah Palin?
SYLVESTER STALLONE, ACTOR: I love her.
ANDERSON: Love or hate, it's clear Hollywood, like the rest of America, stands fiercely divided.
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ANDERSON: A number of celebrities have told us they choose to keep their politics to themselves for fear of hurting their candidate of choice.
John?
Kiran?
ROBERTS: Bailout baggage. Could changes sink the billion-dollar financial lifeline? Barney Frank live on what he wants to tack on to the government's plan.
High rollers. Paying a premium to cruise past gridlock.
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UNIDENTIFIED MALE: They are buying time. They are buying speed.
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ROBERTS: But is it really congestion relief? The hot trend coming down the pike.
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ROBERTS: It's coming up on 56 minutes after the hour. Welcome back to the "Most News in the Morning." The government is ready to spend $700 billion of your tax money to bail out banks. And the Treasury secretary is urging law makers to get a deal done quickly. But some Democrats are saying not so fast. There are a lot of things to think about here.
Joining me now is the chairman of the House Financial Services Committee, Massachusetts Congressman Barney Frank in Washington. One of those people who is urging a little caution here because there are a lot of things to consider.
Congressman, you're not fully happy with what the administration is proposing. What do you think needs to change here?
REP. BARNEY FRANK, CHAIRMAN, HOUSE FINANCIAL SERVICES COMMITTEE: Well, first, let's say, you know, they give us a bill, frankly, on Saturday. I hope we can get it passed in a week. That's extraordinary speed. The notion that you would do, one of the most important things ever done in America in two days really doesn't work, I think, very well.
First of all, we want some limitations on executive compensation. The top people. In those (INAUDIBLE) which you're going to get federal help. You know, we have people who made some bad decisions. They made enough bad decisions so the system is clogged up, credit is so threatened that we have to step in and buy out some of this stuff and supply them capital. The notion that while they are getting this help from the federal government, we can't tell them not to have golden parachute. We can't tell them to pay millions of dollars to some of the very people who made bad decisions as a retirement gift is just unacceptable to us. We also want a lot more oversight.
I admire Secretary Paulson. I admire Chairman Bernanke. I think they are very able guys but no one individual or two or six individuals, unrestraint, ought to have this power. So we want to build in some oversights, some checking. Finally, the big problem here is that we've gotten foreclosure. Imagine how we got into this problem.
If the federal government is going to step in here, we want it done in a way that's going to reduce foreclosures, both to help individuals who are stressed and to begin to turn this around.
ROBERTS: Now the Treasury secretary is urging Congress to pass a clean bill, what he calls a clean bill, pass it quickly suggesting that any delay here or try to add on a bunch of other ideas may put the economy at risk. Here's what he said to George Stephanopoulos yesterday on ABC's "This Week."
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HENRY PAULSON, TREASURY SECRETARY: The biggest help we can give to the American people is to stabilize our financial system right now and to prevent the system from clogging up. Once we get the system stabilized, there are a lot of other things to be done.
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ROBERTS: He's saying first order of business, stabilize the system. Then you can work on all of those issues that you say you are concerned about. What about that idea?
FRANK: Two things. First of all, we didn't tell him he had to get the billion on a day or two days. They took several days to get the bill in. For them to take several days to work it out and then get upset if we don't pass it in a day and a half, again, doesn't understand how democracy works.
Secondly, I don't understand why it would hold it up to say what I just said. If you are the CEOs and the top people who made these decisions that are requiring the taxpayers to put money at risk, and we don't think we're going to spend -- we're certainly not going to spend $700 billion ultimately but we're putting it at risk before we know how much we'll recover.
And you are telling us, have you made those decisions that require this taxpayer money, we can't limit the outside compensation you are getting? What does that say about corporate executives that they say to us, you know, this is absolutely essential to the system? You've got to do it. But if it's going to cost me a few of the very large number of millions I have, then I'm going to try to block it. So, I don't understand why it isn't clean to make that visible. I also don't understand why it isn't clean to say, look, we got into this problem because of the heavy foreclosures. Everyone agrees with that. We're now going to own this paper. Let's own it in a way that allows us to reduce foreclosures both for the benefit of the neighborhood where the foreclosures would happen and for the economy.
ROBERTS: Congressman, you know, a lot -- big question that people asking is, how do we get to this point here. And minority leader John Boehner there in the House has pointed fingers at Senator Chris Dodd and you four years ago opposing reform of entities like Fannie Mae and Freddie Mac.
"The Wall Street Journal" says in the year 2000 when Representative Richard Baker proposed Fannie Mae and Freddie Mac reform you dismissed it. "New York Times" reports that an administration proposal in 2003 to reform Fannie Mae and Freddie Mac was met by response from you where you said, "I do not believe that we're facing any kind of crisis." Were you responsible for the delay --
FRANK: Of course not. Can I make a point here?
ROBERTS: Yes.
FRANK: In 2000 and 2003, who was in control of Congress? The Republicans -- Mr. Boehner. The Democrats were in the minority. And yes, I did not think we were facing a crisis in 2003. But that didn't mean we didn't have to have reforms. Here's the deal.
The Republics controlled Congress from 1995 through 2006. They did zero to reform Fannie Mae and Freddie Mac. The Democrats took power in January of 2007. Within three months, the committee (INAUDIBLE) had passed a bill to give the administration all the regulatory powers it wanted. In January of this year, I asked Secretary Paulson to take that new, tough regulatory bill and put it in the stimulus. He said no.
Finally, in July, the Senate acted. So, here's the results on Fannie Mae and Freddie Mac. 12 years of Republican control, zero. 19 months of Democratic control, we passed a bill that has everything the administration asked for. Beyond that, this wasn't caused by Fannie Mae and Freddie Mac. This was caused by an absence of regulation. Fannie Mae and Freddie Mac didn't cause the subprime crisis. They (INAUDIBLE) some of this.
Allen Greenspan and the other Republicans refused to regulate subprime loans. The problem was an absolute absence of any regulation on the investment banks, on the hedge funds, on private equity. Are non banks making mortgage loans? And many of us were pushing for regulation and the Republican philosophy was oh, no. Dick Armey was the majority leader during that period. His mantra was, the government is dumb and the markets are smart. Because one of the things we're saying now, and I agree with Secretary Paulson, that some things have to be put off.
Next year, we have to begin to impose the kind of regulation that the Republicans rejected that will stop this from happening again.
ROBERTS: All right Congressman Frank, we look forward to getting this done. You think it can be done by the end of the week, correct?
FRANK: Yes. If the administration will accept some changes and not think they have a unilateral say, here.
ROBERTS: Congressman Barney Frank, joining us this morning, from the Cannon Building.
Congressman Frank, thanks very much.
