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CNN ELECTION CENTER

Bailout Negotiations Continue; FBI Targets Wall Street Firms

Aired September 23, 2008 - 20:00   ET

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


CAMPBELL BROWN, CNN ANCHOR: Hi there, everybody.
We begin once again with breaking news on the massive Wall Street breakdown.

CNN justice correspondent Kelli Arena has just confirmed the FBI has begun a wide-ranging fraud investigation at Fannie Mae, Freddie Mac, insurance giant AIG and Lehman Brothers. We are going to have the details all coming up for you in just a moment.

Today was also filled with dire warnings that this country's financial crisis cannot wait, that it could land us in a recession or much worse. But Congress is reluctant to simply sign off on the Wall Street bailout plan.

In response, the Dow industrials dropped another 161 points today, closing below 11000. The markets are scared. Lawmakers on Capitol Hill are scared. The government's top moneymen are scared, and they say you should be scared, too.

Listen to what Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee said today and what one senator said to him.

(BEGIN VIDEO CLIP)

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: I believe if the credit markets are not functioning, that jobs will be lost, the unemployment rate will rise, more houses will be foreclosed upon.

SEN. JIM BUNNING (R), KENTUCKY: I am frightful to the point of almost panic that I don't see a solution in your plan to address this financial crisis that we're in.

(END VIDEO CLIP)

BROWN: In just a moment, we're going to have the very latest on the negotiations and how they will affect you.

But, first, bear with me for a short rant on another subject, because, frankly, I have had it. And I know a lot of other women out there are with me on this. I have had enough of the sexist treatment of Sarah Palin. It has to end.

She was here in New York City today meeting with world leaders at the U.N. And what did the McCain campaign do? They tried to ban reporters from covering those meetings. And they did ban reporters from asking Governor Palin any questions.

Tonight, I call on the McCain campaign to stop treating Sarah Palin like she is a delicate flower that will wilt at any moment. This woman is from Alaska, for crying out loud. She is strong. She is tough. She is confident. And you claim she's ready to be one heartbeat away from the presidency.

If that is the case, then end this chauvinistic treatment of her now. Allow her to show her stuff. Allow her to face down those pesky reporters, just like Barack Obama did today, just like John McCain did today, just like Joe Biden has done on numerous occasions. Let her have a real news conference with real questions.

By treating Sarah Palin different from the other candidates in this race, you're not showing her the respect she deserves. Free Sarah Palin. Free her from the chauvinistic chains you're binding her with. Sexism in this campaign must come to an end.

Sarah Palin has just as much a right to be a real candidate in this race as the men do. So, let her act like one.

We're going to have more on Palin's cloistered day coming up in just a moment.

But, first, back to the financial meltdown and the breaking news of the FBI's mortgage fraud investigation.

Ali Velshi, our senior business correspondent, is here with me now.

And, Ali, start from the top. What companies are being investigated now? What is the FBI looking for?

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Well, we have just learned that those four companies that you just mentioned, AIG, Lehman Brothers, Fannie Mae and Freddie Mac, are all under investigation. That brings to 26 the total number of companies that the FBI is investigating under a broad mortgage fraud investigation.

Now, we don't have details about specifics of these companies, but the FBI did tell us it is a broad investigation. It includes Countrywide Financial. And it is about -- it's trying to determine whether anybody at those companies, including their senior executives, had any responsibility, particularly with respect to misinformation or material misinformation, which would be an offense.

But we don't know whether there are specific allegations that they're investigating or whether they have simply added these four to the mix because of the big deal that this mess is.

BROWN: And, Ali, what about the CEOs? Are they under investigation? Are they looking at the CEOs? And if they are facing criminal charges -- or could they be facing criminal charges if the FBI finds that fraud was involved?

VELSHI: What the FBI has told us is that they are investigating those companies and their executives, so they will be part of the whole investigation.

Ever since that new rule came into the SEC after those scandals of 2001, executives are responsible for any misrepresentation that their companies make.

BROWN: OK, Ali, stand by, because we have got more to talk about on this subject.

But, tonight, some big banks still in danger because -- of failing because of all the bad mortgages they own. The Bush administration wants the government to buy up to $700 billion worth of those bad investments, as we have told you.

But, despite the urgency, Congress moving cautiously. Today, the government's top moneymen made an emergency trip to Capitol Hill, trying as hard as they could to convince skeptical lawmakers to act, and act now. The result, frustration, desperation, anger.

Just listen.

(BEGIN VIDEO CLIP)

HENRY PAULSON, U.S. TREASURY SECRETARY: I feel great urgency, and I -- I believe it's got to be done this week.

SEN. CHRISTOPHER DODD (D), CONNECTICUT: I understand speed is important. But I'm far more interested in whether or not we get this right. There is no second act to this.

PAULSON: The taxpayer is on the hook -- the taxpayer's already on the hook. The taxpayer already is going to suffer the consequences if things don't work the way they should work.

SEN. RICHARD SHELBY (R), ALABAMA: I don't believe Congress should just ratify what's been thrown up to it. I understand this -- the situation is dire.

PAULSON: Every American employer depends on money flowing through our financial system every day, not just to -- 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 -- to make this work.

BUNNING: You're not going to be here after January 20 of 2009. And I'm going to have to answer to the 4. 2 million people in Kentucky, and all these other senators up here are going to have to answer to their constituents, if this plan does not work.

SEN. SHERROD BROWN (D), OHIO: I don't think a single call to my office on this proposal has been positive.

SEN. MEL MARTINEZ (R), FLORIDA: And, Mr. Chairman, while you're on that, you do agree that this is the best and the only way forward that you know of at this time?

BUNNING: This massive bailout is not a solution. It is a financial socialism and it's un-American.

SEN. JON TESTER (D), MONTANA: I don't feel a lot of confidence. I mean, I'm not sure we got the whole sentence written, much less I.'s dotted and the T.'s crossed.

SHELBY: I think we need better answers.

(END VIDEO CLIP)

BROWN: So, do we really have to have a bailout deal signed, sealed and delivered in a matter of days? And what happens if the deal isn't done? Nobody explains this better to us than our moneyman, Ali Velshi.

And, Ali, you heard it, a lot of hesitancy there coming from those members of Congress. Are they making any progress?

VELSHI: Yes, they were talking tougher than they have talked in the last few days. We had Chris Dodd saying this is unacceptable. We had other senators saying no chance of this being done by the weekend or maybe even in a week.

One doesn't know whether they were talking tough for the cameras or they are really concerned. This is a very confusing issue. I wouldn't say we have made great progress today, but even after those statements you heard, there were some conciliatory noises coming out of some of those senators on the Democratic side. On the far right side with people who say that we shouldn't have a bailout deal anyway, no movement.

BROWN: And, Ali, I know anybody -- you have said this a number of times now -- anybody who thinks is this is just a Wall Street issue or a Wall Street crisis is kidding themselves. We're all going to feel this in some way.

VELSHI: We're under a credit freeze at this moment. At this point, there are not deals being done.

Now, we're not talking about major American companies going overseas and acquiring another company or making deals. We're talking about companies that borrow money to meet their operating costs. And there are some major American publicly traded companies that do that. If they find it difficult to raise that money, it could be their rent, it could be their utilities, it could be your salary. So, this Wall Street problem becomes a Main Street problem very quickly.

BROWN: Pretty scary stuff. And how much time are we talking about? How much time do they have to get this done before that happens, what you said, layoffs, before we're not getting our paychecks?

VELSHI: Well, we don't know because we have never seen this before. I have been on the phone with people who worked in the credit markets, and they say deals are not getting done. And those ones that are getting done, anybody who needs to borrow money in the corporate world is paying a very high interest rate for it. How long can we sustain that for? Unclear.

We have heard anything from days to maybe a couple of weeks. But it cannot be indefinite. That much, we know, Campbell.

BROWN: Ali Velshi for us.

Ali, you're going to back in a bit, I know, to talk about a lot more, because the financial crisis, both Barack -- because of the financial crisis, both Barack Obama and John McCain did something today that they haven't done in weeks. They took reporters' questions, defending their own ideas about the bailout. We are going to hear that next.

And, if they can do it, why can't Sarah Palin? Why was she only permitted to pose for pictures at the U.N. today? That's still ahead.

(COMMERCIAL BREAK)

BROWN: In the middle of the worst financial crisis in decades, Barack Obama today held his first news conference in 23 days. John McCain also met with reporters for the first time in 40 days.

Dana Bash is covering the McCain campaign in Middleburg, Ohio. She's joining us now.

And, Dana, after maybe fumbling a little bit at the start of this crisis, McCain seems to be getting his footing back. Let's listen to some of what he said today.

(BEGIN VIDEO CLIP)

MCCAIN: What this plan requires is a $10,000 contribution per household in America -- $700 billion, for example, could rebuild the crumbling infrastructure in every town, county, and state in this country.

We cannot address a crisis caused in part by insufficient accountability, transparency and oversight, which -- that has at this point insufficient accountability, transparency and oversight.

(END VIDEO CLIP)

BROWN: And, Dana, McCain has been playing a little bit of a catchup game on the economy. But this week, we are seeing a sharper message, aren't we?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: They're certainly trying, Campbell.

McCain aides fully admit that what they need to do is break any kind of narrative that McCain is out of touch on this crisis, one that they do admit that he actually promoted last week by talking about the fundamentals of the economy not being strong.

So, the way that they're trying to sharpen is with an incredibly populist tone that we have heard from John McCain, in fact, in his words and in the images we saw today. In his words, he said at pretty much every stop here in Ohio that it's not just about Wall Street. I promise you, I will push for Main Street.

And where he did it was fascinating. You see there he was at a construction site here in Ohio. He came here to where I am to a factory to talk to workers and be seen with and talk to sort of the blue-collar voters that he understands he has to, has to connect with, especially in battleground states like this, in order to sort of rise above the problems that are going on in Washington and make clear that he really does get things that are going on out here in these battleground states.

BROWN: And, Dana, though, for all of the outrage we're seeing for John McCain, he's not willing to come out and say whether he's going to actually vote for this bailout deal, is he?

BASH: No, he's not. And, frankly, Barack Obama hasn't said that either. Neither of them is saying which way they're going to go.

From the perspective of John McCain, he's definitely trying to keep his powder dry, trying to really walk a fine line by showing that he has some principles, that he's trying to separate himself from the president, separate himself from the treasury secretary, but trying not to get too close to these negotiations, that he would get potentially burned by them or too close to this problem that's going on inside Washington -- Campbell.

BROWN: All right, Dana Bash -- Dana, thanks.

Today, Barack Obama laid out four conditions he said should be included in the Wall Street bailout, but he also refused to say if he would vote no if those conditions are not met.

Candy Crowley traveling with the Obama campaign today, she's in Clearwater, Florida, for us tonight.

And, Candy, before today, Obama hadn't released a blueprint outlining what he thought the bailout should look like. Today, he finally did lay out somewhat of a plan, didn't he?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Well, he but some details on some of the principles, saying, listen, I'm not wedded to some of the ways to go about this, but I think these are the four things we need to do.

And, again, it's limit CEO pay, those of failing institutions. He also wants to make sure that there is some oversight and accountability as to how that $700 billion is spent. In addition, he wants a plan that will help homeowners and those who have the value of their homes go down. He said, there has to be something along those lines within this bailout plan.

And he also wants to make sure that, if the government makes money off this, as he put it, every penny goes back to the taxpayers. Now, he put some ideas in there about how to go about this, but also said, you know, I'm willing to work with anybody that wants to help figure this out.

BROWN: Let's also listen, Candy, to a little bit of what Obama had to say at this news conference earlier today.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: If the plan that emerges does not address the principles that I have discussed, then I will strongly recommend to Secretary Paulson that we go back to the drawing board and find an approach that does address them.

But it strikes me that these are basic principles that would make sense to all Americans, Republican, independent -- independent, or Democrat. And I think that there's got to be a spirit on the part of the administration that says, let's work together to try to get this right.

(END VIDEO CLIP)

BROWN: And, Candy, just like McCain, Obama willing to take it to the edge, but he's not going to say how he would vote, will he? Talk us through sort of the politics of this.

CROWLEY: No.

Well, listen, here you have this huge crisis on Wall Street and all of these economic brains saying, listen, if we don't do something, the place is going to fall apart, and there will be no credit, and people will lose jobs, and more homes will be foreclosed. And, on the other hand, you have these Main Street people that both McCain and Obama are talking about endlessly who look at this and go, wait a second. You know, I have got this mortgage. I have got -- you know, everything cost more. What about me?

So, they're trying to walk that line between the politics of the voters and the politics of what's going on, on Wall Street and what seems to be the reality of needing to help.

BROWN: All right, Candy Crowley for us tonight with the Obama campaign -- Candy, thanks.

Coming up next: the McCain campaign's sexist treatment of Sarah Palin, why they have felt the need to protect her from reporters. We're going to dig into that when we come back.

(COMMERCIAL BREAK)

BROWN: From the way the McCain campaign has been treating Sarah Palin, you would think she's not able to fend for herself at all, not the governor of Alaska, running for an office that would put her one step away from the presidency.

Well, today, McCain officials actually tried to ban reporters from Palin's photo-ops at the U.N. with heavy hitters like Afghanistan President Hamid Karzai and Henry Kissinger. Why? What are they so afraid of? Our Ed Henry is joining us now with all the details. And, Ed, we spoke to you about this yesterday and we talked about how these meetings were very low-risk. They're very friendly photo-ops at the U.N. And, then, yet the McCain campaign came in and they tried to rein in access even more. What happened?

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: They wanted to go from low risk to no risk, basically.

And what they were basically saying is that TV cameras could come into these photo-ops, but there could be no reporters there. And the networks, including CNN, the five U.S. networks, said no way, because that is essentially a campaign commercial. You will get pictures of everything, but you won't actually be able to ask questions, be journalists. So, what's the point of that?

When the networks said, look, we're not going to actually use this video, the McCain campaign backed down. They realized they had gone too far. And in the end, reporters were allowed in. She didn't end up really taking any questions.

And what happened was sort of funny, because, with Henry Kissinger, you had him there in his very distinctive accent talking about the situation in Georgia with Russia and Sarah Palin said something like, I definitely want more insight on that from you.

And then she met with President Karzai, and they talked about his son and how his son's name means light of the house. And, so, this was pretty light stuff. This was not exactly heavy-hitting stuff. And, so, you have got to wonder, why did the McCain campaign originally not want reporters in? It's not like it was heavy on substance.

BROWN: And they do think, though, from what we're hearing, that this was a good thing for them to do, that it went well for her today, and that generally this was a positive experience, right?

HENRY: Yes, absolutely, because the bottom line is, what they're saying is, she was in listening mode, McCain aides are saying.

BROWN: Right.

HENRY: She didn't come up with any big policy proposals. That's code for there wasn't a lot of heavy lifting. It was just a little back and forth.

They are trying to get her feet wet is the bottom line, show her on the international stage. They also brought in the director of the national intelligence today to give her an intelligence briefing behind closed doors. The point here is that they want to show that she can be a heavy hitter on the big international stage. But they undercut that message a little bit by initially saying, reporters couldn't come in.

BROWN: Right. Ed Henry for us -- Ed, thanks.

HENRY: Thank you.

BROWN: So, with Sarah Palin so tightly scripted by the campaign, will voters buy her as a foreign policy expert in her own right?

Joining me to talk about that, some of the smartest people in politics, CNN senior analyst Gloria Borger, CNN contributor Dana Milbank, national political correspondent for "The Washington Post," and CNN chief national correspondent John King also with us tonight.

And, Gloria, you just heard from Ed, foreign policy advisers, also gave reporters a little bit of a readout on her meetings today. She got her first national security briefing, spent an hour chatting it up with Henry Kissinger, this of course coming from her adviser, the campaign apparently not even trusting Palin to tell us all of that herself.

How are voters going to view this trip? Is it bolstering her foreign policy credentials in any way?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, I don't think sequestering Sarah Palin is going to bolster her foreign policy credentials.

And that's essentially what they're doing, because they're letting her be available for pictures, putting her in a town hall setting with John McCain, doing one major network interview, and then keeping her away from the traveling press.

And, in fact, Campbell, I think in a way that does her a disservice, because then every word she utters is really dissected, whereas, if she were meeting with reporters informally, she might be able to develop a rapport with reporters. Viewers would get to see her more and get to see what John McCain likes so much about her.

So, in a way, I'm not so sure they're doing her any favors.

BROWN: Well, Dana, do you agree with that? Because, obviously, it's annoying to reporters that she's being kept under lock and key, that she's so highly scripted and stage-managed.

But what are voters thinking? Do they feel like they're getting a mannequin when they see her now?

DANA MILBANK, CNN POLITICAL CONTRIBUTOR: Or at least a delicate flower. You're right. There's absolutely nothing wrong with annoying reporters. In fact, there's nothing but good politics in annoying reporters.

(LAUGHTER)

MILBANK: But it does seem that her favorable numbers have been slipping after this initial sort of burst of enthusiasm there.

And part of it is because people have not been able to see Sarah Palin at all. Now, that doesn't mean she has to, you know, go out there and have a public discussion with Henry Kissinger on Georgia. But, you know, invite Henry Kissinger into skin a moose with you or something. You know, let's have it out there.

(LAUGHTER)

BROWN: John, you have been traveling around the battleground states. What are voters telling about you her?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Well, I will tell you one thing, Campbell. We were at an Obama phone bank just last night here in Colorado, and they're a little nervous about Sarah Palin. They have a pot luck dinner in here for women supporters of Barack Obama. And one of the phone bankers was inviting a woman, saying we need all the women we can to turn out and help us, because we have a new dynamic on the other side, the other side being Sarah Palin, a woman on the Republican ticket.

One point of context. Yes, Sarah Palin's under a lot of scrutiny, and a lot of that scrutiny is absolutely fair. We need to know her record. Voters need to know her record.

But, Campbell, you know this all too well. I have been to foreign capitals with President Bill Clinton, Vice President Al Gore, President George W. Bush, and Vice President Dick Cheney, and they tried the same thing. So, Sarah Palin is not unique in trying to have these meetings and keeping reporters out. It's a legitimate question.

BROWN: But unique for a candidate, though, John. That's different, though. Once you're president, yes, they do try to rein you in, but generally candidates want to have as much access to the media as possible to try to get their message out.

KING: Generally, but not this late in the campaign. Remember, John McCain used to be the most accessible candidate for president ever. And now he hardly ever meets with reporters.

And Barack Obama and Joe Biden are not going to win any First Amendment prizes either in this campaign.

BROWN: All right.

BORGER: But it's clear, Campbell, that they're afraid that, this late in the campaign, as John is saying, they're afraid she's going to make a mistake. And they don't want that to happen, because right now she's doing exactly what she has to do for John McCain.

MILBANK: And the comparison is also quite a difficult one.

Joe Biden decided this would be the day he would release eight pages of papers showing all the world leaders he's met over the years, including a now deceased pope and four leaders of the Soviet Union. She is going to have a very difficult time keeping up with that.

BROWN: All right, guys, stand by, more to talk about. In fact, we are going to talk about Joe Biden. While we're considering running mates, we will look at why Biden has turned into a bit of a mixed blessing for the Obama campaign.

Stay with us. We will be back in a moment.

(COMMERCIAL BREAK)

BROWN: It is the golden rule for VP running mates, first, do no harm. Well, Joe Biden has been breaking that rule a little bit lately. One gaffe after another and it's got to be giving Barack Obama a bit of a headache. Joe Johns has the story from Washington.

(BEGIN VIDEOTAPE)

JOE JOHNS, CNN SENIOR CORRESPONDENT (voice-over): Last night on CBS, Biden took a shot at his own guys, complaining that an Obama campaign ad ridiculing John McCain for his computer skills was out of bounds.

(BEGIN VIDEO CLIP, FROM "CBS EVENING NEWS")

SEN. JOE BIDEN (D), VICE PRESIDENTIAL NOMINEE: I thought that was terrible.

KATIE COURIC, CBS ANCHOR: Why did you do it then?

BIDEN: I didn't know we did it. And if I'd have anything to do with it, we would have never done it.

(END VIDEO CLIP)

JOHNS: Realizing the political error of his ways, Biden himself tried to control the damage saying he never saw the commercial and was responding to a spot he hadn't seen air. Last week, as we were all riveted to details of the unfolding financial meltdown, an insurance giant AIG was on the brink of bankruptcy. Biden came out against a government bailout saying, the Fed must not be allowed shareholders or management of AIG.

Strong position but exactly the opposite of Barack Obama's position on AIG. So this morning on NBC, Barack Obama himself was forced to refute his running mate.

(BEGIN VIDEO CLIP, FROM NBC'S "TODAY")

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: I think that in that situation I think Joe should have waited as well.

(END VIDEO CLIP)

JOHNS: For Republicans, the disconnect between Obama and Biden was an easy target, even though for the record, John McCain also came out against the bailout of AIG before his campaign said he was for it. But in his most surprising foot-in-mouth incident, in a New Hampshire town hall meeting, Biden made what may have sounded to some like an admission about his qualifications.

BIDEN: Make no mistake about this, Hillary Clinton is as qualified or more qualified than I am to be vice president of the United States of America. Let's get that straight. JOHNS: The McCain camp jumped on this one quickly, and the Obama campaign had to explain Biden was just giving Hillary Clinton a compliment. But in an environment where the other guys are spending good money to keep you off balance, the question was whether Biden's old habits are coming back to haunt him.

JOHN BRESNAHAN, "POLITICO": Senator Biden has been around for a long time. He is one of the most verbose senators you're going to see. He talks a lot. And it's a great thing as a reporter covering him but it's also -- Senator Biden could put his foot in his mouth and he'll do it with surprising regularity, for a guy as sharp as he is.

(END VIDEOTAPE)

JOHNS: So, is he hurting the ticket? Pew Research did a poll. They asked people for one word answers. What do you think of this guy? Most people came back with the word experienced.

Of course, people don't know him that well. They say all of that, of course, could change. The vice presidential debate is coming up and there will be plenty of time for both candidates to talk and talk and talk, Campbell.

BROWN: All right. Joe Johns for us tonight. Joe, thanks.

So, let's talk to Gloria Borger, Dana Milbank and John King about that if Biden is a harm at all to Obama.

And Gloria, we all saw this coming, I think in many ways. People talked about Joe Biden being a bit of a gaffe machine.

But I have to say, I was surprised to see him trash his own campaign ads. I mean, the Obama people had to be pretty angry about that. How much do comments like this undercut the overall campaign message?

BORGER: Well, I think you -- you know, you first have to ask the question, why is he commenting on an ad that he hasn't even seen? You know, the first rule in politics is don't do that. And he's experienced, as the public says, he should know better than this. But he's also Joe Biden. And they knew this when they took him on.

And now if you talk to the Obama campaign about Joe Biden, what they will say to you is, he is authentic, he is honest. You're getting the real deal when you get Joe Biden. And, by the way, you're not hearing much from Sarah Palin, are you? So they're making that distinction, too.

BROWN: Probably a fair point there. Dana, though, another example in Joe's story is Obama had to publicly refute Biden this morning for trashing the idea of a government bailout of AIG. Obama saying that Biden should have waited on that. Should these guys be talking more, making sure they're on the same page?

MILBANK: Well, you started out the show with free Sarah Palin. I think the Obama campaign is going to have to come up with muzzle Joe Biden.

(LAUGHTER)

But as Gloria said, it's absolutely correct. They knew exactly what they were getting into. I remember sitting through the Sam Alito confirmation hearing with this guy. He starts talking about Dianne Feinstein's eyeglasses. Another delightful Bidenism recently was when he asked a man in a wheelchair at one of his events to stand up and take a bow.

Obama knew exactly what he was getting into here, and that's the beauty of what is Joe Biden. You could talk to him, but you're not going to control him. And what you see is what you get.

BROWN: And, John, what the Obama campaign has argued another point, in addition to what Gloria was saying, was that he does bring a lot to the table, not the least of which is a connection with blue collar America. And you're out there on the battleground. How is he playing with those voters? Is he winning working class converts for Obama?

KING: He is being very well received, especially among the key Democratic constituents, which is where Barack Obama has a problem, small town blue collar, some older union, industrial union America, without a doubt. In terms of his talking a lot, you know, it simply is what it is. But, Campbell, in the end, voters are going to decide between John McCain and Barack Obama.

How this hurts Barack Obama is that we're having this conversation. He is giving fodder for stories and conversations like this. And we're talking about Joe Biden and his missteps, not about what would Barack Obama do about the economy. That is what people want to hear about right now because they're looking at two senators.

Governors win presidential elections normally because they have their hands on the economy in their states and they're closer to the people. They communicate in a more commanding way. Any conversation that's not about Barack Obama hurts the campaign, period.

BROWN: And guys, let Dana comment on this. VP debate coming up. We're going to be talking about it a lot, next Thursday. Challenge for Biden, a lot different than the challenge for Sarah Palin.

MILBANK: Right. One needs to keep the mouth open. The other needs to keep it closed. In a way, it's just as difficult for Biden because that is going against what his sort of congenital abilities are there. Sarah Palin has a lot to demonstrate there, and Biden's going to be very careful not to be perpetually jumping all over her.

BORGER: Well, but the bar is set so low in a way for Sarah Palin that, you know, everyone might be surprised, Campbell. Biden has to go out of his way not to be condescending to a woman, particularly since he has so much more foreign policy experience.

BROWN: Right. BORGER: And again, people aren't quite sure what to expect from Sarah Palin. So, maybe she'll surprise them in a positive way because we haven't heard much from her, as we're talking about tonight.

BROWN: All right. John, thanks to you. Gloria and Dana, we're going to see you a little bit later.

Coming up, that infamous bridge to nowhere in Alaska. Well, you know that it never got built. But guess what did? Up next, the road to nowhere and how it's connected to Sarah Palin.

We'll be back right after this.

(COMMERCIAL BREAK)

BROWN: Even before Sarah Palin became John McCain's running mate, nearly everyone had heard of Alaska's infamous bridge to nowhere. It was a symbol of costly, wasteful government spending. The money for it was tucked away in a massive 2005 transportation spending bill, 1,231 pages long. It would have looked a little bit like this.

So when lawmakers finally killed the bridge project, nobody noticed in this big pile a couple of small lines that were still tucked away in all those pages. Here they are, on the wall. Thanks to those three little lines, CNN special investigations correspondent Abbie Boudreau can report tonight from a brand new road built on Governor Palin's watch to the bridge that was never built.

(BEGIN VIDEOTAPE)

ABBIE BOUDREAU, CNN SPECIAL INVESTIGATIONS UNIT CORRESPONDENT (voice-over): Take a look down there. That's the city of Ketchikan. And over there across the Tongass Narrows, that's Gravina Island, and that's where the local airport sits. To get there from Ketchikan, you have to take the ferry. It takes about 10 minutes.

So that brings us first to the plans for the notorious expensive bridge to nowhere. It would have crossed the narrows here, but to get to the airport, they needed a road. But here's what happened. When the political outcry about the bridge got so loud and they killed it, well, it was too late. They'd already signed a contract for the road project, so they built it.

(on camera): This is Gravina Island highway. It runs about three miles long at $8 million per mile paid for by your tax dollars. But there's no one on this road. Many locals call it the road to nowhere.

(voice-over): The Democratic mayor of Ketchikan calls it Governor Palin's road to nowhere.

MAYOR BOB WEINSTEIN (D), KETCHIKAN, ALASKA: She's been saying, "I told Congress thanks, but no thanks. I stopped that bridge to nowhere project." In fact, she didn't tell Congress, thanks, but no thanks, and spent $26 million out of a federal earmark for the Gravina access, aka, bridge to nowhere project, on this road that will not go to a bridge.

BOUDREAU: Weinstein says, of course, a road would have made sense if a bridge had been built, considering how now locals and tourists have to take a ferry to the airport. While we were on the road, we met PJ Murphy, who works on the island.

PJ MURPHY, TOLL BOOTH COLLECTOR: How many people are coming out yet?

BOUDREAU (on camera): No. Why did you call?

MURPHY: Well, I'm the toll collector down there and I wanted to see where it went and what it looked like.

BOUDREAU: What do you think?

MUPRHY: It's a nice road. It's a nice road. It's a lot better than the road I drive on to go home.

BOUDREAU: And what do you think about where it ends?

MURPHY: Well, it's the bridge to nowhere. I mean, come on.

BOUDREAU (voice-over): Mayor Weinstein came with us to see the road, too.

(on camera): I mean, who is using this road? Since we've been here we haven't --

WEINSTEIN: Currently, you and I are using the road.

BOUDREAU (voice-over): He can joke about it now, wearing a "Nowhere Alaska" t-shirt. But he says that earmark money could have been used to fix roads and sidewalks in town that people actually use.

(on camera): Simply put, what could Governor Palin have done? If she says she's against earmarks, what could Governor Palin have done in this case?

WEINSTEIN: Governor Palin could have stopped construction of this road.

BOUDREAU (voice-over): Back up in the helicopter, another reality check.

(on camera): It's much better to see it from above. Gives you a real perspective of what the road really looks like. It kind of just curves around then it just stops. That's where the bridge was supposed to pick up, right there.

(voice-over): We tried to find someone in town who actually supported the road. So we contacted Palin's former campaign coordinator, an avid Palin supporter. But even he had a hard time not laughing.

(on camera): Do you think it's a waste of taxpayer money? MIKE ELERDING, FMR. PALIN CAMPAIGN COORDINATOR: On the road?

BOUDREAU: Yes.

ELERDING: Without the bridge, yes. Yes.

BOUDREAU (voice-over): Meg Stapleton, a McCain/Palin spokesperson tells us the governor had no choice. And that's why the project moved forward.

It's hard to imagine that the governor wouldn't think that that's a waste of money, taxpayer money.

MEGHAN STAPLETON, MCCAIN-PALIN CAMPAIGN SPOKESPERSON: The governor could not change that earmark. That earmark was given. That earmark was dictated. That had to be spent on the Gravina road and nothing else. And so, the governor had no options.

BODUREAU: Could she have stopped construction?

STAPLETON: My understanding is that -- you know, I'd have to look into that for you. I don't know.

BOUDREAU: Stapleton did get back to us. And she says, under ordinary circumstances, Governor Palin would not have allowed the Gravina road project to move forward. But given the federal earmark and because the contract for the road was already signed before she got into office, the governor was left no viable alternative. So the road that no one seems to use to the nonexistent bridge was built.

MURHPY: It would be nice to see them put something over here now that they have the road. Park, picnic benches, something to get people out here. I mean, it's pretty here.

(END VIDEOTAPE)

BOUDREAU: Meg Stapleton told us that there are several bridge options that are being considered right now, but she also told us she's not even sure if there will be one of those options or proposals where the bridge connects to the road that exists. She simply just doesn't know.

And one other note, in all fairness, we actually learned Senate records show both Barack Obama and Senator Joe Biden actually tried to kill an amendment for this bridge project so that the funds would be diverted to Hurricane Katrina repairs, Campbell. So there's a lot here -- still a lot that needs to be uncovered and definitely a story that we will be keeping our eye on when we're out here in Alaska.

BROWN: I think you should, Abbie. $27 million, that's pretty unbelievable. Abbie Boudreau for us tonight. Abbie, thanks.

BROWN: Next, the never-ending Democratic drama of Bill Clinton. Stay tuned for what he is saying about Barack Obama. That's coming up next.

(COMMERCIAL BREAK)

BROWN: Some other news to tell you about tonight as well. Erica Hill with us right now for "The Briefing" -- Erica.

ERICA HILL, CNN CORRESPONDENT: And, Campbell, we start off with a major political move tonight, which means a 25-year ban on offshore oil drilling ends next week. House Democrats deciding to drop that ban after it became a major Republican issue because of high gas prices. The move could give drillers access to up to 18 billion barrels off oil off the U.S. coast.

Also tonight, California's longest budget deadlock in history now over. Governor Arnold Schwarzenegger signed the $143 billion deal after months of haggling. The battle itself, however, is not over. Voters will decide next year how some of that money will be spent, Campbell.

BROWN: All right. Erica Hill for us. Erica, thanks.

Coming up, Barack Obama and John McCain have grand plans to jumpstart the economy. Up next, Ali Velshi puts the candidates' plans to our "No Bias, No Bull" test.

(COMMERCIAL BREAK)

LARRY KING, HOST, "LARRY KING LIVE": This is Larry King. Tonight, I've got an exclusive interview with one of the most controversial players on the world stage -- the president of Iran. The U.S. election, the Iraq war, Israel and nuclear ambitions all on the agenda.

The president of Iran is just ahead on "LARRY KING LIVE."

(COMMERCIAL BREAK)

BROWN: Barack Obama and John McCain both staked out ground on the Wall Street bailout today. Take a listen and then we're going to put their big plans to our "No Bias, No Bull" test.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: The way out of this is to grow our economy, cut spending, keep taxes low, make sure that there are incentives in place for jobs and businesses to grow and flourish. For example, Ireland now has an 11 percent business tax. The United States of America has a 35 percent business tax. Where are businesses going to go?

We know where they're going to go and we know where they're going to create jobs. So it is essential for our economy to stimulate growth and grow this government. Excuse me, grow this economy, not grow the economy -- I mean, the government. We need to grow the economy. And we can grow the economy, I believe, by keeping people's taxes low and stimulating business and economic growth.

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: 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 the middle class tax cut that I've talked about, 95 percent of Americans getting a tax cut, is something that still makes sense in this kind of environment.

(END VIDEO CLIP)

BROWN: Senior business correspondent Ali Velshi back with us again to put both candidates' plans and their price tags to our "No Bias, No Bull" test. Are they going to be able to do anything they're talking about doing come January when one of them takes office?

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Absolutely, if they employ magic witchcraft and sorcery. There is no way to do this right now.

Take a look at the initiatives that they both proposed. Health care, tax cuts, both of them. Education spending, infrastructure, new roads and bridges, alternative energy -- this stuff is not free. If you add them up, both of those candidates, take a look at what they add up to.

On John McCain's side, you are looking at $302 billion because he wants to spend money without bringing in more taxes. On Barack Obama's side, it's just $14 billion but it's still $14 billion that wasn't there, and it's $14 billion that didn't count this bailout, which might be $700 billion or more.

There is no way we can keep adding the spending without cutting taxes unless -- unless we increase that deficit and we increase the dent. And that costs us all. So, no, there are going to have to be some changes.

BROWN: Ali Velshi, a one man truth squad. Ali, thanks.

Coming up next, there are new questions about Bill Clinton's enthusiasm for Barack Obama. You're going to want to see what Chris Rock has to see, when we come back.

(COMMERCIAL BREAK)

BROWN: Next week, for the first time, Bill Clinton hits the campaign trail for Barack Obama. But just listen to what Clinton told David Letterman on CBS's "Late Show" and how the next guest, Chris Rock, responded.

(BEGIN VIDEO CLIP, FROM CBS/WORLDWIDE PANTS)

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: What I think will happen is, we'll get along toward the end of this race. The country will wind up liking both of them. A lot of people will go into that polling place and, you know, I really admire Senator McCain. He gave about all he could give to this country without getting killed for it.

DAVID LETTERMAN, HOST, "LATE SHOW WITH DAVID LETTERMAN: Yes.

CLINTON: But I have to have a change and I think I'm going the other way.

CHRIS ROCK, COMEDIAN: Is it me or he didn't want to say the name Barack Obama? He did not -- he -- he went to everything he could do -- well, like, Hillary would want to do with the economy.

Hillary ain't running. I love Hillary but, you know, she lost. She's -- she lost.

DAVID LETTERMAN, HOST, "LATE SHOW WITH DAVID LETTERMAN": He mentioned --

ROCK: She got a lot of votes. She lost. She did. The Patriots got a lot of points, too.

LETTERMAN: Yes.

ROCK: But they lost.

LETTERMAN: They lost. Yes.

(END VIDEO CLIP)

BROWN: So the audience thought it was pretty funny. We want to hear what Gloria Borger and Dana Milbank thought about it.

And guys, if you're a Democratic, Gloria, are you probably saying to yourself, must Bill Clinton always temper his praise in some way for Obama?

BORGER: Yes, yes. I think you are thinking that. You know, I never thought I'd hear myself say this, but Bill Clinton is not comfortable talking about his feelings when it comes to Barack Obama. He's a political analyst first. That's what he does.

BROWN: Dana?

MILBANK: You know, you were talking about the road to nowhere before. This is an endless loop. He just can't seem to get out of this. He has to put on an Obama t-shirt and a pin and start waving a flag around one of these days.

BROWN: Is he ever going to do that, Gloria?

BORGER: I don't think so. If we haven't seen it yet, I'll tell you what? Let's see him out on the campaign trail and then I'll make a final decision.

BROWN: All right. We'll keep an open mind. We will be seeing him out on the campaign trail next week.

Gloria and Dana, many thanks to you. That is it for us tonight everybody.

"LARRY KING LIVE" starts right now.

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