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Obama Speaks About the Financial Crisis in Florida Today; $700 Billion Questions; Treasury Secretary Makes his Mark; The Facts & Fiction: McCain, Obama Under the Microscope

Aired September 23, 2008 - 14:00   ET

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

KYRA PHILLIPS, CNN ANCHOR: Seven hundred billion dollars, no questions asked? No chance.
The questions are flying on Capitol Hill today from senators in both parties who can all find something to hate about a monumental economic bailout. In return, Treasury Secretary Henry Paulson warning of more foreclosures, more lost jobs, scarce credit, and a shrinking GDP if Congress does nothing.

If you don't think this is a global crisis, you must have missed President Bush before the U.N. General Assembly today. He promised the other world leaders a robust plan to solve serious problems.

Let's get straight to Capitol Hill,

Kathleen Koch, I get the impression that a lot of lawmakers will be holding their noses when it comes time to vote.

KATHLEEN KOCH, CNN CORRESPONDENT: That they will be, Kyra. And they have been sitting here for more than three hours hearing these direst of warnings that basically, the economy will not recover without this massive $700 billion rescue plan.

The senators, we're told by the Fed Reserve board chairman himself, Ben Bernanke, that there would be "significant adverse consequences" for the average American if they don't go forward. And many lawmakers are still quite unconvinced that this plan is really necessary and that it will work.

(BEGIN VIDEO CLIP)

SEN. JIM BUNNING (R), BANKING COMMITTEE: The Paulson proposal is an attempt to do what we so often tend to do in Washington, D.C., throw money at a problem. We cannot make bad mortgages go away. We cannot make the losses that our financial institutions are facing go away. Someone must take those losses.

(END VIDEO CLIP)

KOCH: The Treasury secretary, Henry Paulson, however, urged lawmakers to act and act quickly on this plan, and he, like the Fed chairman, insisted that lawmakers are wrong to believe that this is all about bailing out Wall Street.

(BEGIN VIDEO CLIP) HENRY PAULSON, TREASURY SECRETARY: This is not about big financial institutions. Every American employer depends on money flowing through our financial system every day, not just to create new jobs, but to sustain and keep existing jobs. What we're playing with here is very important. And again, give us the tools we need to make this work.

(END VIDEO CLIP)

KOCH: The question right now is just what tools will they get? So there is agreement on a couple of matters that there should be some sort of oversight board to make sure that this massive program works well, that the money is being spent prudently and properly. Also, most agree that there should be some sort of way to make sure that these troubled mortgages that the government spends all of this money on, that they don't go into foreclosure.

Now, Republicans have started coming up with some of their own ideas, not so clear how these are going to fly with all of Congress. But one of them would be to eliminate the capital gains tax for a period of two years, also take some new measures to stabilize the dollar. All that to pump more money into the U.S. economy to again help strengthen it, to help stabilize it. Democrats, for their part, want to see some limitations on the executive salaries, the bonuses of the men and women who are running these massive financial companies that are going to get this multimillion-dollar bailout.

So a lot of different ideas. And Kyra, this is going to take a while.

PHILLIPS: No doubt. Kathleen, thanks.

And whatever Congress does or doesn't do to rescue the banking system, Henry Paulson probably won't be there to oversee it. A new administration, as you know, takes over in January, but "King Henry," as some now call him, has already made his mark on the U.S. Treasury and U.S. history.

CNN's Allan Chernoff shows us how.

(BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN SR. CORRESPONDENT (voice-over): Henry "Hank" Paulson was reluctant to become treasury secretary when the job was first offered two years ago, because he feared he wouldn't have enough influence. Only after a lengthy meeting with President Bush was he convinced. Now Paulson appears likened to go down in history as one of the most powerful treasury secretaries ever.

HENRY PAULSON, U.S. TREASURY SECRETARY: I am convinced that this bold approach will cost American families far less than the alternative.

CHERNOFF: From his college days as an all-Ivy offensive tackle football star at Dartmouth, Paulson, then called "The Hammer," has been driven to win. After earning an MBA from Harvard, he began his career at the Pentagon, then moved to the Nixon White House as a staff assistant to the president. Hank Paulson then started climbing the ladder at Goldman Sachs, impressing colleagues.

ROY SMITH, NYU STERN SCHOOL OF BUSINESS: I knew him to be an extremely hardworking, very dedicated, determined guy, who, you know, would set his mind on something, and he would stay at it until he achieved it.

CHERNOFF: Paulson climbed all the way to the top of the prestigious firm, winning a power struggle with former CEO Jon Corzine, who is now governor of New Jersey.

SMITH: Nobody can be CEO of Goldman Sachs without being a pretty strong leader, who is not only capable in all respects of himself, but also is able to persuade and lead others who are as capable.

CHERNOFF: Paulson is now the administration's financial crisis leader. "Newsweek" has dubbed him "King Henry." To some Democrats and Republicans in Congress, Paulson seems to be operating too much like an all-powerful CEO.

REP. PETER DEFAZIO (D), OREGON: Secretary Paulson gets the key to the treasury, going to start off by borrowing $700 billion in the name of the American people, maybe more later. And it waves all laws, all laws, no oversight, no one looking over his shoulder.

REP. CLIFF STEARNS (R), FLORIDA: Well, I'm worried about this weekend's comprehensive bailout plan that gives the secretary of treasury unprecedented authority and virtually no oversight.

(END VIDEOTAPE)

PHILLIPS: Well, Allan joins us now live from New York.

Allan, do people think that Paulson is the right man to actually handle a potential blank check for $700 billion? I mean, what's the vibe?

CHERNOFF: Kyra, it depends who you ask. Obviously some members of Congress think not. And Secretary Paulson is really getting some very tough questions right now as we speak. That hearing is still going on.

On the other hand, in the private sector, on Wall Street, Paulson has tremendous admiration. A lot of economists are saying we're lucky to have a guy like Paulson at the helm of Treasury right now, someone who really understands the markets, understands the crisis that the nation is confronting right now.

PHILLIPS: Well, bottom line, reality check, is this bailout really going to solve the crisis?

CHERNOFF: What the bailout is intended to do is just to prevent things from getting much worse, to just carry us over. Kyra, this bailout is not going to prevent a downturn in the economy. Indeed, economists say that things are likely to get worse than they are right now even if this bailout gets approval from Congress. Worse in terms of an economic recession and job cuts, and probably a prolonged slump. That's what they are talking about right now even with this package.

PHILLIPS: We've got to turn that around. Allan Chernoff, we need some good news. Thank you.

Well, if you're not feeling the financial crisis now, just wait. That's the expectation reflected in a grim new CNN/Opinion Research poll also. Not just Allan's report.

Fewer than one in 10 of us expect not to be affected by the downturn sooner or later. More than eight in 10 consider the economy in poor shape, and just as many are somewhat or very worried that things will get worse if government leaders do not act.

So, what are you giving up in this struggling economy? Well, we asked you that question. Your iReports came pouring in.

Amanda Scott from Oklahoma, she said she's struggling with rising day care costs and no raise at work. This is what her family gave up. This is what she writes...

"We got an estimate to build a fence for our two Basset Hounds and it was outrageous. Plus the cost of the dog food and treats was one thing that always seemed to put us a little out of our budget. Well, it broke our hearts, but we decided we had to give up our dogs."

And on a lighter note, this is Oscar Sweeney from Oklahoma as well. He built this gas-saving contraption using a tricycle and a battery from a fishing boat. He says it takes him all over town and people used to make fun of him, but not anymore.

And then meet the sons of Rebecca Stokes, a single mom from Liverpool, New York, who has been laid off of work. Rebecca had to sell the car that she bought for her older son there to use in college. She says that her son barely has any money at school and she is barely paying the bills.

Well, we appreciate your e-mails. We hope you'll share your stories with us. What are you giving up? Send us your photos, your video at ireport.com, or just e-mail us at cnnnewsroom@cnn.com.

It's been issue #1 for months, and it still is. We've got the latest on what John McCain and Barack Obama are saying about the economy.

And the truth and nothing but the truth. We'll check out some ads and claims by Senators Obama and McCain and try to separate fact from fiction for you.

(COMMERCIAL BREAK)

PHILLIPS: Three days before their first debate, John McCain and Barack Obama are sticking with the issues that voters want to hear about, the economic mess. McCain is in two big battleground states today, and a short time ago the Republican candidate toured a factory in Ohio. And then a bit later, he will do the same in Michigan.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: I know that a lot of eyes have been on Wall Street and Washington in the past week, as we all process the credit crisis that has hit our economy in such a devastating fashion. But I want the people in Ohio here to know that I have not forgotten the economy on Main Street. Not Wall Street, not Washington, D.C., but Main Street is the focus of our attention and our efforts.

(END VIDEO CLIP)

PHILLIPS: Now, right now, Obama is in Clearwater, Florida, where we're expecting him to make a brief statement and taking some questions. We'll have live coverage when it gets under way.

Now, before his Florida trip, Obama had this to say at a stop in Wisconsin...

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: Senator McCain has fought time and time again against the common sense rules of the road that could have prevented this crisis. His economic plan was written by Phil Gramm, the architect in the United States Senate of the deregulatory steps that helped cause this mess.

(END VIDEO CLIP)

PHILLIPS: Can you believe we're just 42 days away from the presidential election? It's reaching us fast, and so we are researching statements and ads from the campaigns, trying to sort the fact from fiction.

CNN's Alina Cho is looking into health care and the economy.

(BEGIN VIDEOTAPE)

ALINA CHO, CNN CORRESPONDENT: We start with a hot topic right now, deregulation. Hot, of course, because of what is happening on Wall Street right now. But recently, Barack Obama has been tying it to John McCain's position on health care. Here is Obama Sunday in Charlotte, North Carolina.

OBAMA: Now this deregulator wants to turn his attention to health care. John McCain says he wants to do to the health care system what Washington has done to the banking system. The radical idea that government has no role to play in protecting ordinary Americans has wreaked havoc on our economy.

CHO: So, is it true? Well, it is true that McCain has frequently supported deregulation, and some aspects of that deregulation, of course, are widely blamed for the current problems on Wall Street. During the same speech on Sunday, Obama quoted from something that McCain wrote for the insurance magazine "Contingencies." McCain said, "Opening up the health insurance markets to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation."

Now, at first it sounds like Obama might be right on this one, but if you look a bit deeper, you find that what McCain is calling for, state deregulation, is only part of the deregulation that reshaped the banking industry. McCain has not proposed reshaping the health care industry in all the same ways as banking. And while a frequent fan of deregulation, McCain has called for a high level oversight board to deal with the problems on Wall Street.

So implying, as Obama did, that McCain believes the government has no role to play in protecting ordinary Americans is at best a reach. So the verdict from the truth squad on this one, misleading.

(END VIDEOTAPE)

PHILLIPS: And of course, as always, we are checking up on both sides. McCain claims that Obama has no plan to deal with the economy. We're going to take a look at the facts later this hour.

No-fuss voting. Millions of Americans are expected to skip the lines and the long waits and vote early this year. We're going to hear what Atlanta Mayor Shirley Franklin has to say about that.

(BUSINESS REPORT)

(COMMERCIAL BREAK)

PHILLIPS: Well, Texas shelters are getting more empty every day as hurricane evacuees get the all-clear to head home toward the Gulf Coast. The Red Cross believes about 7,500 evacuees are still in shelters, down from 40,000-plus earlier. People will start arriving in Galveston tomorrow, but what will they come home? There's no guarantee of power, water or ambulance service, even if their homes are livable.

Officials from Texas and Louisiana are in Washington, asking lawmakers to fast-track funds for recovery.

Some serious L.L. Bean catalogue weather this week. A good time to check out all the fall colors in the Northeast.

(WEATHER REPORT)

PHILLIPS: Well, oil prices jumped yesterday by the largest amount ever, $16. So what prompted the surge and what does it mean for gas prices?

CNNMoney.com's Poppy Harlow has our "Energy Fix" from New York.

Hey, Poppy. POPPY HARLOW, CNNMONEY.COM: Hi there, Kyra.

It was pretty astonishing what we saw yesterday afternoon. We have actually never seen anything like it.

At one point Monday afternoon, oil prices jumped as much as $25 a barrel. A big factor in that, of course, the $700 billion bailout that Congress is debating right now. If it does what it's supposed to do, it will support the economy, and that should mean oil demand will tick up.

But there are a lot of other factors at play here that really had nothing to do with market fundamentals. Some people are saying the unusual trading was tied to the expiration of the October contract. That's what happened yesterday. Today, we are trading on the November contract.

Some analysts say there was some illegal manipulation going on possibly by a big player like an oil company or a hedge fund. And Kyra, you know our regulators are investigating that. We've talked about that quite a lot this year.

PHILLIPS: All right. Poppy Harlow, thank you so much.

Actually, we were getting a little bit of breaking news. So I'm still getting more information. Let me just follow up with you real quickly about oil prices. You know, obviously been in turmoil not just yesterday, but the whole year we have been dealing with this, right?

HARLOW: You're exactly right, Kyra. It has been an unbelievably volatile year.

To give you some perspective, we started the year at $95 a barrel. In July, prices went above $147 a barrel. Just last week prices went to $91 a barrel on Tuesday.

In the past week, we've seen another stunning event. Take a look at this chart here. It's, up, down, and back up again this week. Oil jumping 33 percent in just four days.

Right now, we are on the November contract. It's down. Oil is down more than $3 right now, Kyra, so hugely volatile. And you can bet that will affect gas prices -- Kyra.

PHILLIPS: All right. Poppy Harlow, thank you so much.

Well, a sign of the times in the Southeast, where drivers are full of angst over to finding somewhere to fill up.

And he probably will die tonight, but is he guilty? Questions about a convicted killer's trial after most of the key witnesses recant.

(COMMERCIAL BREAK)

PHILLIPS: Live to Clearwater, Florida. Barack Obama talking about the $700 billion financial bailout plan.

(JOINED IN PROGRESS)

OBAMA: ... that some CEOs may refuse to cooperate with this plan if they have to forgo multimillion-dollar salaries. I cannot imagine a position that's more selfish and more greedy at a time of national crisis. And I'd like to speak directly to those CEOs right now.

Do not make that mistake. You are stewards, and not only of your companies, but of workers and communities all across the country who have put their trust in you.

With the enormous rewards that you have reaped come certain responsibilities, and we expect and demand that you live up to those responsibilities. This plan cannot be a welfare program for Wall Street executives.

Second, the power to spend $700 billion of taxpayer money cannot be left to the discretion of one man, no matter who is he is or which party he is from. I have great respect for Secretary Paulson, but he cannot act alone.

We should set up some sort of independent board that includes some of the most respected figures in our country chosen by Democrats and Republicans to provide oversight and accountability at every step of the way. I'm heartened that Secretary Paulson appeared to be softening on the position in his testimony this morning.

Third, if taxpayers are being asked to underwrite hundreds of billions of dollars to solve of this crisis, they must be treated like investors. The American people should share in the upside as Wall Street recovers.

Now, there are different ways to accomplish this, including putting equity into those firms instead of buying their troubled assets. But regardless of how we structure the plan, if the government makes any kind of profit on the deal, we must give back every single penny to the taxpayers who put up the money in the first place.

And after the economy recovers, we should institute a financial stability fee on the entire financial services industry to repay any losses to the American people and make sure we are never asked again to foot the bill for Wall Street's mistakes. We can ask taxpayers to make an investment in the stability of our economy, but we cannot ask them to hand their money over to Wall Street without some expectation of being made whole.

Fourth, the final plan must provide help to families who are struggling to stay in their homes. We can't simply bail out Wall Street without helping the millions of innocent homeowners who are facing foreclosure or, for that matter, are seeing their home values decline.

Now, there are a number of ways we can accomplish this. For example, we should consider giving the government the authority to purchase mortgages directly instead of simply purchasing mortgage- backed securities.

In the past, such an approach has allowed taxpayers to profit as the housing market recovered. This is not simply a question of looking out for homeowners. It's doubtful that the economy as a whole can recover without the restoration of our housing sector, including a rebound in the the home values that have suffered dramatically in recent months.

Finally, the American people need to know that we feel as great a sense of urgency about the emergency on Main Street, as we do about the problems on Wall Street. I have repeatedly called on President Bush and Republican and Democratic leadership to join me in supporting an economic stimulus plan for working families. A plan that would help folks cope with rising food and gas prices, save one million jobs by rebuilding our schools and our roads. Help states and cities avoid painful budget cuts and tax increases and help homeowners stay in their homes.

Now, let me be clear. I do not believe that we should include this stimulus package in the emergency legislation that's being negotiated. But as we solve the immediate crisis on Wall Street, we do need to move with speed and dispatch with the same sense of urgency to help Main Street. It is absolutely wrong to suggest that we cannot protect American tax payers while still stabilizing our market and saving our financial system from collapse. I believe we can and we must do both.

In summary, there's no doubt that negotiations over the next few days will be difficult. I will continue to stay in close contact with Secretary Paulson and Chairman Bernanke, as well as the leaders of Congress, to ensure that we can work in a bipartisan manner to get this done as quickly as possible. Our country is being tested by a very serious crisis. We are all in this together and we must come together as Democrats and Republicans, on Wall Street and on Main Street to solve it. And with the proper spirit of cooperation I am certain that we can.

With that, let me open it up -- Dee (ph).

QUESTION: Senator, will you vote against a recovery plan that does not include these protections for homeowners and taxpayers that you just outlined?

OBAMA: The principles I outlined are principles that I believe any package needs to contain for me to support it. And there are a number of ways of accomplishing it. I'm not trying to dictate one particular way for example, to protect taxpayers. There are a number of ideas out that are out there. But I need to be convinced that taxpayers are going to get an upside on this thing and can be made whole when the economy recovers.

I am not trying to dictate a particular way that we assure CEOs don't walk out of the door after taxpayer bailout with multimillion dollar bonuses. But I'm going to want assurances that in fact, that will not happen. So, the answer to your question is these principles for me are clear. They are designed to make sure that the taxpayers are protected. But they're also designed to make sure that this system works. We're trying to deal with an emergency situation and we don't have a lot of bullets left. And if we do not get this right, then not only are we going to have some immediate problems, but the next administration is not going to have the resources or the capacity to deal with other emergencies that may come up. And so it's critical from my perspective to make sure that this is done properly.

QUESTION: You mentioned this morning a possibility of phasing in some of the programs you talked about during the campaign,. Can you give us any better idea of how much of a delay you think that this crisis might force on some of your plans if you're elected?

OBAMA: Chris, I think it's very hard to say right now, what the economy's going to look like in January of 2009, or March of 2009.

But recall what I said this morning. Because I want to make sure that everybody is clear on this. When it comes to the middle-class tax cuts that I've called for, that is something that I believe is absolutely necessary to strengthen the economy that is going to be sliding probably into a deeper recession.

We are going to have to make sure that ordinary folks have money in their pockets. That they are able to pay gas and food costs, that retail sales are bolstered. And so I think that it is important for us to make sure that we are shoring up the economy at this time. And I think that the middle-class tax cut as I have talked about, 95 percent of the Americans getting a tax cut, is something that still makes sense in this kind of environment.

I -- let me finish. I'm going to answer the question. When it comes to energy, I think we still have an urgent problem. We saw the biggest spike in oil prices on record yesterday. And so, that problem's not going to go away. And the investments that I've been talking about in solar and wind and biodiesel remain, I think, absolutely critical. Our health care system is still going to be a drag. And I think it is important for us, at a time when huge portion of bankruptcies are weakening family balance sheets arise out of the fact that they don't have medical care. We're going to have to make sure that we deal with those issue. And on education, the investments that we make in education right now are ones that are going to determine the competiveness over the long term.

So there are some key structural problems in our economy that I believe have to be dealt with. And, you know, contrary to what Senator McCain suggested earlier, I don't think actually the fundamental of the economy right now, are where they need to be. And the plans I've put forward are designed to bolster those fundamentals even as we are also dealing with the immediate crisis -- yes.

QUESTION: Question. Do you believe this bailout should cover other endangered loans dealing with automobiles, school loans and credit cards? Secretary Paulson suggested that later in this afternoon that they ought to. Secondarily, there are some on Capitol Hill who believe $700 billion is a large amount and maybe what should be leading the divide is something less than that with an assurance later that that amount could be there mid-bill. If the first $200 billion works. Will you evaluate those two ideas, please?

OBAMA: Given the problems in the financial markets, not all the troubled assets that are out there and all the problems that we're seeing are related to housing. The bulk of them have to do with mortgages, but not all of them.

And I think that it is important for us to evaluate whether or not other underlying assets or securities that relate to underlying assets, also pose significant risks to the financial system. If they do, then it would make sense for us to examine those, as well. And for the government to take appropriate action.

To try to simplify my answer, I want to make sure that we are dealing with the problem of liquidity and the credit markets freezing up, regardless of the source. And you know, I think the Secretary of the Treasury, the Chairman of the Federal Reserve would have to evaluate how big of a problem, for example, are student loans, relative to solving the liquidity problem.

And they haven't answered that question definitively. When it comes to phasing in the bailout, or phasing in a program, I do think that it's important to recognize that we've got a short term problem of keeping the markets functioning and making sure that the small businessman wakes up in the morning, or the young woman who wants to go to college and who's expecting loans, that that money is still there. And that requires some short term intervention. How much of the request that Secretary Paulson's made deals with that short term problem. Or, how much is required to deal with that short term problem, hasn't been made clear. And it's something that I think that Secretary Paulson should answer.

If it is enough for us to look at $100 billion, or $200 billion to cover that immediate emergency. And there's an understanding that we're going to have to set up some institutional structures over the long term, to deal with for example, purchasing mortgage, which might take some time to set up. I think that that is something worth exploring.

The key is, making sure though that however we structure this authority, that we're actually dealing with the immediate crisis. And I think that it's going to be important for Congress to recognize that we don't want to do something too small that doesn't solve the problem and then just gets us back in the same fix later on.

QUESTION: Can that be handled in so short a period of time?

OBAMA: Well, here's what I believe. That however this plan is structured, what we should be looking at is a menu of things that are going to need to be done. There's not going to be a one-size-fits-all approach to every aspect of the financial crisis.

There may be some circumstances where purchasing troubled assets was appropriate. There may be some circumstances where purchasing an equity stake in the company and helping it recapitalize might be appropriate. There might be some other situations in which it makes sense for us to purchase mortgages, rather than the mortgage-backed securities. Because that gets at the underlying weaknesses of the housing market.

Some of those can be done quicker. Some of those would require setting up a structure that would take more time. And I think what we -- the way we need to think about it is, is that we've got a leaky boat. We need to make sure that we get that boat into harbor. And then we're going to have to do a lot of repairs.

And right now, the most urgent step that has to be taken is restoring some confidence in the market, making sure that liquidity is there, making sure that credit is flowing and that the markets are functioning. And then, making sure that we do right these larger institutions fixes that may be required.

QUESTION: (INAUDIBLE)

OBAMA: Look, here's what I'm saying. First of all, all these spending priorities that I had are paid for. And I've laid out the ways in which I would pay for them. So, for example on the middle class tax cut, that is in part, paid for by rolling by tax savings and offshore loopholes that I don't think are helping the economy grow, but are given some sweet hard deals to certain companies.

So, I think we need to reform our tax code in favor of nurses, bus drivers, teachers, folks who are working for a paycheck everyday and haven't been able to keep up because their incomes have been going down. And so I will move forward on that initiative. In part because they are paid for.

When it comes to energy, for example, I've talked about the need to use a cap and trade system that would help generate money that would then be reinvested in clean and renewable energy. Again, that pays for itself. So, on a lot of these items, I'm not looking at outlays out of the budget that aren't offset with other spending priorities.

Now, it would be irresponsible of me to say I am not going to take into account what things look like should I take office. And one of the big question marks, at least a big of a question mark as how this Treasury plan ends up being set up, is whether we have an economic recovery, or that we slide deeper into a recession. That will have a big impact on what Federal revenues are and what a budget looks like.

So, all those things are going to have to be taken into account. The point I'm making though is that these priorities that I've laid out, no only have I identified ways of paying for them, but they are also priorities that we have to move on in order to strengthen the underlying economy and get us out of the mess that we're in.

UNIDENTIFIED MALE: Last question. QUESTION: Senator, just to be very clear on this four principles that you outlined that deal specifically with this bill. If the legislation does not address all four of those principles in the way that deem adequate, will you vote against the legislation?

OBAMA: If the plan that emerges does not address the principles that I've discussed, then I will strongly recommend to Secretary Paulson that we go back to the drawing board and find an approach that does stress them.

And again, this goes back to my earlier point, Sheila (ph), which is this is not one of those circumstances where the president can come out and simply say, you do it my way or nothing's going to happen. The president has had oversight over this economy for the last eight years. We now find ourselves in an enormous mess. We should be working in a bipartisan fashion to figure out how to get us out of this mess.

But, what the American people and tax payers rightly expect is there's going to be accountability, that this is not a welfare program for corporate CEOs, that they are going to, in some fashion, be made whole or at least that the criteria and the structure of these programs protect them as much as possible. And that homeowners who have seen their home values plummet, often times through no fault of their own, that they're getting some help as well.

PHILLIPS: We don't have enough bullets left so says Barack Obama. But he's still cautious about that $700 billion financial bailout plan that Treasury Secretary Henry Paulson has been talking about. Pretty blunt message to Congress that he gave, saying that it must act now. Critics of course, in Congress are looking for more oversight and assurances the big corporations won't get a free pass.

Barack Obama also making that point in his speech there in Clearwater, Florida. He said he wants to be convinced that a higher level that what this plan is, will be best for the taxpayers. And that CEOs will not get multimillion dollar bonuses as the taxpayers continue to suffer through the financial crisis right now.

Bottom line, lack of oversight. That's what has gotten the economy to this point now. You can see more on CNN.com. Also, John McCain talking in Freeland, Michigan. That's coming up at 4:00 p.m. Eastern time for the sake of balance. Meanwhile, we're going to take a quick break. We're going to be right back.

(COMMERCIAL BREAK)

PHILLIPS: Cars are running on fumes, drivers fuming in Atlanta, Nashville and in other spots in the southeast, there's no gas at many gas stations. And the reason? Production delays at Gulf Coast oil refineries hit by hurricanes like Ike and Gustav.

But we didn't have to go very far for first hand accounts of the has shortage. It happened among all of us this morning. It was a big topic conversation at our morning meeting, as we decided how we were going to attack this story today. (BEGIN VIDEO CLIP)

JULIAN, ASSOCIATE PRODUCER: There's lot of gas. No gas. There's no gas. There's lots of no gas.

TENISHA, EXECUTIVE PRODUCER: So did we get to the answer yesterday of why no gas?

PHILLIPS: No, we never did.

SONYA, SEGMENT PRODUCER: Something about the pipeline because of the hurricane.

UNIDENTIFIED FEMALE: Well, I would have done that, too.

SONYA: And they haven't caught up.

TENISHA: Do we need somebody to -- I mean -- yes, we have to explain it.

UNIDENTIFIED FEMALE: Yes. You need to explain.

TENISHA: Yes. Why? I mean, we ran the coal laughing piece yesterday. And it kind of explained the colonial timeline for --

UNIDENTIFIED MALE: Well, it is like, ha, ha, toward the end. And it's kind of like, not funny. Like, literally we're a third world nation. And everyone's just kind of oh well --

VALERIE, PRODUCER: Well, they're fighting for it now. Because people are fighting at the pump. So that's the other thing that they brought out. People are starting to fight because they're pissed --

(CROSSTALK)

UNIDENTIFIED MALE: This is one of those drill, baby, drill, kind of issues. You know -- or whatever, but I mean, this is --

(CROSSTALK)

UNIDENTIFIED FEMALE: But is it fear or is it really --

UNIDENTIFIED MALE: No, there's really no gas because the refinery --the main refineries that came to us shutdown -- and they just, they are like days behind on production.

PHILLIPS: So we need to book someone from the refinery --

(CROSSTALK)

UNIDENTIFIED FEMALE: -- the refineries to explain it.

PHILLIPS: Well let's book someone from the refinery explaining why there is a holdup and how long it's going to be.

(END VIDEO CLIP)

PHILLIPS: Well there you go. And that's where Steve comes in. Steve Baker is the public affairs manager for Colonial Pipeline. Wonderful idea we got from our writer, Bosker (ph), in there. You talked to us over the weekend as well.

Let's get right to it. What is causing the shortage? You heard a lot of our writers saying, is it because the refineries had to be shutdown during the hurricanes?

STEVE BAKER, SPOKESMAN, COLONIAL PIPELINE: That's exactly right. It's -- this is all due to the hurricanes.

First Gustav hit Louisiana and knocked those refineries out. And then about 10 or 11 days later, Hurricane Ike knocked out the refineries in Texas before Louisiana refineries could get back up and operating.

PHILLIPS: So what does it take to get them back up and operating? Is it -- that's what's causing the slowdown -- because it is very detailed?

BAKER: It is very complex. First of all, a lot of the employees had to evacuate the area to be safe. And then as they come back in they had power problems. And then it takes 10 or 14 days to get a refinery up, if it's undamaged. So that's what's causing the shortage we're seeing today.

PHILLIPS: So when is it going to get better? When are we going to be able to pull up to the gas stations without a worry and no long lines?

BAKER: Well, we can't wait.

The pipelines are undamaged and ready to go. It is all pointing towards the refineries. We're anxious for them to get back up. And when they are operating full, the pipelines are ready to go, and we'll be operating full and we'll get back to normal.

PHILLIPS: So were the pipelines damaged?

BAKER: The pipelines were not damaged. They're underground almost entirely. They start in Houston and go through Atlanta, up the East Coast to New York. So they are undamaged and we're in good shape and we're ready to go.

PHILLIPS: Now how much is the fear playing into it this? Because a lot of people are going to top off and they're scared there's going to be a long-time shortage. Is that affecting this whole situation?

BAKER: It makes people nervous. But this is a temporary situation. It may last a week longer, until the market works itself through. But then we'll be back to normal soon I hope.

PHILLIPS: All right. We're going to be holding you accountable, Steve Baker.

BAKER: I'm ready.

PHILLIPS: OK, appreciate your time.

BAKER: Thanks, Kyra.

PHILLIPS: Thanks so much.

All right. We're going to take a quick break. We'll be right back. (COMMERCIAL BREAK)

PHILLIPS: Well, unless the Supreme Court intervenes, a Georgia death row inmate has less than five hours to live. Troy Davis is to be executed for 1989 murder off an off-duty policeman. Since Davis' conviction, seven of nine key witnesses have recanted their testimony. Prosecutors say that they're still confident of his guilt, but a number of protesters are calling for clemency, or a new trial. Among them, former President Jimmy Carter, Nobel laureate Desmond Tutu, and Pope Benedict XVI.

CNN's Rusty Dornin joins us now live from the state prison in Jackson, Georgia.

Are they expecting a lot of protesters in light of the fact that former President Jimmy Carter and others have called for his clemency, Rusty?

RUSTY DORNIN, CNN CORRESPONDENT: Absolutely, Kyra.

But apparently the protesters here are not expected for another could of hours. Again, they are waiting to see if the U.S. Supreme Court will step in and grant clemency at the last minute for Troy Davis. Nothing has been heard so far.

I did speak to Troy Davis' sister this morning. She said that she and the family are in with him visiting now. They are hoping and praying that there will be clemency, of course. And this case has really made headlines over the last year. We were at this same spot a year ago when they granted a stay of his execution to take a closer look. In the meantime, there have been rallies and marches and worldwide attention asking for clemency for Troy Davis in the case. Let's listen.

(BEGIN VIDEO CLIP)

REV. RAPHAEL WARNOCK, EBENEZER BAPTIST CHURCH: We are aware that the board has already delivered a decision in this case. But the time is always right to do right. And given all we now know regarding the testimony surrounding this case, that time is right now.

(END VIDEO CLIP)

DORNIN: Now, no new trial was granted in this case, and the Georgia Supreme Court turned down an appeal for a new trial, as well as a stay of execution. So again, it is in the hands of the U.S. Supreme Court.

In the meantime, the family of the victim, the policeman Mark Macphail -- I spoke to his mother this morning. She said the family has been through hell for 19 years, they feel that justice will be done. She has no doubt that Troy Davis was the man who shot her son. Meantime, the son of the man who was killed plans to be at this execution. He says he, too, believes justice will be done. Let's listen.

(BEGIN VIDEO CLIP)

MARK MACPHAIL JR., VICTIM'S SON: I probably won't get closure for it (ph). The only thing that helps is that -- knowing it is over. That for 19 years this has been raging on and off, trials and appeals, people constantly want to talk to my mother, and us being shuffled out this, no, no, don't talk to them, don't videotape them. And knowing that that is going to be over, and that he -- you know, the trial is done, retribution was done, and the law was upheld.

(END VIDEO CLIP)

DORNIN: Security is very tight at this prison where death row is located south of Atlanta. Again, the protesters have not yet arrived. And the family of the man to be executed is hoping and praying perhaps that the U.S. Supreme Court will step in -- Kyra.

PHILLIPS: Rusty, do we know why any of the witnesses recanted? Did they give reasons why they changed their story 19 years later?

DORNIN: They claim that they were coerced by local police and they were afraid to give their testimony.

Now I did speak to Troy Davis last year by telephone when he was on death row, and I said him, why didn't you come forward and point your finger at the man who claim now did it? And he told me -- he claimed at that point he was very young, he didn't want to be a snitch. And if you look at the people, some of the witnesses that were involved, one was a homeless man, another woman had been on parole for a number of crimes. They were people that many of the people who are asking that Davis' life be spared -- they're saying, look, they were afraid of police, that's why they gave that testimony.

And later, they said, look, we were coerced, he didn't do it. But they have yet to say that in a court of law, although they did testify before the Georgia Pardon and Parole Board. And they decided that clemency was not warranted in this case.

PHILLIPS: My guess is it's going to be a hard time for a lot of people to get to sleep after this case, especially if he is innocent.

Rusty Dornin, thanks so much.

Stay with us. The 3:00 p.m. edition of NEWSROOM starts right now with Rick Sanchez.