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Undoing the Damage: FBI Looks for Mortgage Fraud; Selling the Bailout; Interview With Donald Trump

Aired September 24, 2008 - 13:59   ET

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

KYRA PHILLIPS, CNN ANCHOR: Congress may be cold to the Bush administration's $700 billion big bank bailout plans, but President Bush plans to go over lawmakers heads. He'll speak to the nation in a televised speech at 9:00 Eastern tonight, and of course you'll see it live right here on CNN.
Overseas, four more central banks are joining forces with the Fed to pump another $30 billion into the world's credit market.

And Warren Buffett sees gold in Goldman Sachs. The "Oracle of Omaha" is sinking $5 billion into the now tarnished investment bank and may sink $5 billion more.

The treasury secretary tells Congress there's plenty of blame to go around for all that's gone wrong. Now the FBI wants to know whether anybody broke any laws. Sources tell CNN that Fannie Mae, Freddie Mac, Lehman Brothers, and the insurance giant AIG, as well as their executives, are being investigated for possible mortgage fraud.

Joining me now with more about that is Evan Perez of "The Wall Street Journal."

Evan, good to see you.

EVAN PEREZ, "WALL STREET JOURNAL": Good to see you.

PHILLIPS: Well, give us a little Investigations 101. How will this go down? What exactly is the FBI looking at?

PEREZ: Well, one of the things they're trying to figure out is whether fraud was at the basis of some of these problems, these financial problems that these companies ran into before they had to seek government help. And so what they are going to look for essentially is to see whether or not there was accounting fraud, whether there were executives who were perhaps selling stock behind closed doors as they were telling investors that everything was fine.

That's the basic place where they always start with these investigations. And then from there on, they will start looking at the more complex part of these securities to see whether there was crimes -- there were crimes committed there.

PHILLIPS: So Evan, let's go back to the bottom line here, and that is the lack of oversight. I mean, where was the SEC as this was going on? PEREZ: Well, I mean, that's one of the things -- I mean, as you know, as this bailout is being talked about here in Washington, one of the things people are asking is, you know, how did this come to pass? And so, one of the things they are looking at is, well, could the FBI have looked at this earlier, could the Justice Department have looked at this earlier? And, you know, invariably they go to the regulators, and, you know, there's a lot of blame, apparently, that's being passed around.

Everybody is pointing at the other. And the question of whether or not regulators could have acted earlier is certainly being brought.

I mean, some of the things that they are talking about doing with regard to restricting some of the activities on Wall Street and some of the activities of hedge funds certainly were being talked about for years. So, you know, it's something that they have talked about and discussed for years and just never did.

PHILLIPS: Well, shouldn't the regulators be held accountable as well? I mean, you can see wealthy people, OK, I can take advantage of something here because nobody is monitoring me. And what the heck? More fraud, more money, whatever. I mean, it seems like there should be others in the blame game as well like regulators.

PEREZ: Well, yes, and then you already see some of that. I think Senator McCain last week was one of the first to call for the head of -- Chris Cox, the SEC chairman.

It's probably unfair to put this at the feet of any one person. And certainly, you know, there is certainly multiple regulatory agencies that should have been and could have been doing more.

You also have to look at Congress and the administration. I mean, we're talking about not only this administration, but the Clinton administration, also, which, they both pursued this policy that, you know, getting rid of a lot of regulation, getting out of the way of business was the best way to do things.

PHILLIPS: Evan Perez, good to see you. Thanks for talking with us.

PEREZ: Thank you.

PHILLIPS: Well, as we mentioned, President Bush is working on a primetime speech to try to sell his bailout to the nation.

CNN White House Correspondent Elaine Quijano joins me now.

Elaine, how did this speech come about?

ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Well, Kyra, a number of factors going into this decision. We should tell you, discussions taking place really in earnest this morning, but one of the factors being, of course, the fact that the president of the United States, anything he says, has the power to move markets.

Ultimately, the White House decided to move ahead, the president deciding to make this primetime address just after 9:00 Eastern Time, trying to sell this $700 billion financial rescue plan. The speech, we're told, will be about 12 to 14 minutes long. Just minutes before the White House made this announcement about the primetime address, Senate Majority Leader Harry Reid, on the Senate floor, sharply criticized President Bush, saying that he needs to do more to explain his plan to the American people.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D), MAJORITY LEADER: I think the president should be available. He has given two brief statements to the press and a press release admonishing the Congress to accept his bailout plan immediately. Other than that, President Bush has been silent. We must not forget, President Bush is still the president of the United States, and it's time for him to focus on the issues and tell the American people where he is.

(END VIDEO CLIP)

QUIJANO: Now, White House Press Secretary Dana Perino, in a conference call with reporters just a short time ago, saying that the president believes it is important for Americans to fully understand the depth of the crisis and says that the White House and Congress, she says, are closer, are getting closer to locking in a solution.

Now, since this plan came out over to weekend, as you know, the administration really has been blasted by both Democrats and Republicans for a number of reasons. And conservatives within the president's own party in particular have been looking at the $700 billion price tag, saying it is simply too much, too much for the American taxpayer to bear. They have been questioning why this is necessary, public funds being used to bailout private firms.

President Bush clearly has some convincing to do. He's got his work cut out for him. That address taking place, again, 9:00 p.m. Eastern Time. We expect to get some excerpts, by the way, around 5:00 Eastern -- Kyra.

PHILLIPS: Sounds good, Elaine. Thanks so much.

We're going to go to Capitol Hill later this hour also for the latest prospects for a bailout breakthrough.

And in his battle with Barack Obama, John McCain has accused his Democratic rival of profiting from Freddie Mac and Fannie Mae, the huge mortgage lenders caught up in the credit crisis. Now "The New York Times" reports that Freddie Mac paid a firm owned by McCain campaign manager Rick Davis tens of thousands of dollars until it was taken over by the government.

Now, the McCain campaign has used the financial crisis in attack ads against Obama, and the Arizona senator had this to say Friday at a campaign stop in Wisconsin.

(BEGIN VIDEO CLIP) SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: While Freddie and Fannie were working to keep Congress away from their house of cards, Senator Obama was taking their money. He got more, in fact, than any other member of Congress, except for the Democratic chairman of the committee that oversees them. People like Senator Obama have been too busy gaming the system and haven't ever done a thing to actually challenge the system.

(END VIDEO CLIP)

PHILLIPS: Now, a McCain campaign spokeswoman doesn't dispute the payments to the Davis-owned firm, but she said that Davis stopped taking a salary from the company two years ago, and his work did not affect McCain's position on policy matters.

Well, from Senator Joe Biden, a strong attack today on John McCain over national security. At a campaign stop in Cincinnati, Barack Obama's running mate slammed McCain for his support of the war in Iraq and he said that the real front in the war on terror should be the Afghan/Pakistani border.

Well, Biden is known for his foreign policy experience. He's also making a name for himself with a series of verbal miscues.

For instance, he told CBS News, "When the stock market crashed, Franklin D. Roosevelt got on the television and didn't just talk about the, you know, princes of greed. He said, 'Look, here's what happened.'"

Well, the trouble is, Herbert Hoover was president during the 1929 crash, and that was before television.

Barack Obama's slight lead over John McCain is a bit wider today in our latest national Poll of Polls. Forty-nine percent say they back Obama, 45 percent support McCain, 6 percent still haven't made up their minds. And that Poll of Polls is an average of five different surveys, by the way.

Now, yesterday, Obama had a three-point lead.

First Lady Laura Bush has some definite thoughts on the race for the White House and on John McCain's running mate, Sarah Palin, too. We're going to hear what Mrs. Bush told our own Zain Verjee.

And where some people see calamity, Warren Buffett sees opportunity. We're going to tell you about his $5 billion lifeline for Goldman Sachs.

But first, "The Donald" joins me next, live. He'll talk about the economy, the $700 billion bailout, and, of course, his endorsement of Senator John McCain.

We'll hash it all out, right here in the CNN NEWSROOM.

(COMMERCIAL BREAK)

PHILLIPS: Straight to Dunedin, Florida. Barack Obama speaking live. Let's listen in.

(JOINED IN PROGRESS)

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: ... when I am in the White House for energy independence, free ourselves from dependence on Middle Eastern oil.

(APPLAUSE)

And now, now is the time to finally meet our moral obligation to provide every child world class education. Every child, because it will take nothing less to compete in the global economy. Countries that out-teach us today will outcompete us tomorrow. So I'm going to invest in early childhood education to close the achievement gap, and we're going to recruit an army of new teachers, and we'll pay them higher salaries and give them more support.

(APPLAUSE)

In exchange, we'll ask for higher standards and more accountability, but we will not have our teachers just teaching to the test. Because I want our kids learning art and music and science and all of the things that make an education worthwhile.

(APPLAUSE)

And we will keep our promise to every young American, if you are willing to invest in America, if you are willing to serve in the military, serve in the Peace Corps, work in a veterans' home, or work in an underserved hospital or an underserved school, if you are participating in national service or community service, then we will provide you with a $4,000 tuition credit, we will make a commitment ever year that you can afford to go to college. That is a good investment for America, and we will meet it when I am president of the United States of America.

(APPLAUSE)

This is the kind of change that we need, Florida, the kind of bottom- up growth and innovation that will advance the American economy by advancing the dreams of all Americans.

Understand, times are hard. I will not pretend that the change we need is going to come easy. I will not pretend that it's going to come without a cost. And I have presented how we can make these investments and achieve these changes in a fiscally responsible way, and it's going to be harder now because of all of the irresponsibility that's taking place on Wall Street.

So we're going to have to work hard and we're going to have to make good choices. We're going to have to prioritize how we spend our money. We're going to have to go through the federal budget line by line, and if programs don't work, we should cut them. If they are doing things that need to be done, we should make them work better and cheaper. So, we are going to have our job ahead of us. But I know also that we're going to have to overcome our doubts. We're going to have to overcome our cynicism. We're going to have to overcome our divisions.

All of us are going to have to work together -- black, white, Hispanic, Asian, Native American, young, old, rich, poor, gay, straight, Democrat, Republican, Independent. All of us will have to come together.

(APPLAUSE)

The American people -- the American people will have to rise up and take on those special interests before we can truly reform a broken economy and advance opportunity. But I am running for president because we simply cannot afford four more years of an economic philosophy that works for Wall Street instead of Main Street and ends up devastating both.

PHILLIPS: Well, Barack Obama isn't the only one talking about Wall Street today. Donald Trump isn't mincing any words. He has got a lot to say about the financial mess and the government bailout, and throw in some politics to the mix, too. He's a supporter of John McCain for president, by the way.

Donald Trump joins me now live from Chicago.

Donald, good to see you.

DONALD TRUMP, REAL ESTATE TYCOON: Nice to see you.

PHILLIPS: Well, let me ask you first about Barack Obama. Is it true at one point you would have thrown your support behind him? I was hearing possibly if he would have picked Hillary Clinton, you would have been right there with him.

TRUMP: Well, I'm a big fan of Hillary's. She's a terrific woman, s he's a friend of mine. I think she was treated very poorly, and I think it's hurt Barack Obama quite badly. But she is a terrific woman.

PHILLIPS: Well, let's talk about the situation that we are in right now. I mean, who better to talk to than you, who has obviously done very well with money.

Who do we blame for this mess?

TRUMP: Well, I think it all starts with our president, wouldn't you say? I mean, he certainly has not done an outstanding job, he will never go down as one of our outstanding presidents, and it has to all start with George Bush.

PHILLIPS: There is a lot of concern though that John McCain is another George Bush. Why do you disagree with that?

TRUMP: I don't think so at all. I know John McCain very well. He is not another George Bush. He's very different than George Bush, and I really think he will be a great president.

I think he's going to do a really good job. He is a tough guy, he's a smart guy, he's a very, very bright guy. He is a very, very -- he's just a quality human being. I think he will be a great president.

PHILLIPS: So what is it about him that makes him different from George Bush, Donald, with regard to economic plans, regard to fiscal policy?

TRUMP: Well, I think more than anything else, it is the man's solidity. People respect him when they see him.

I don't think they respect George Bush, but they respect John McCain. When they see him, they respect him.

He is a man worthy of respect. And this country no longer has respect. What we need more than anything else is just that word, "respect."

PHILLIPS: All right. Let's talk about the issue of the economy right now.

Warren Buffett coming forward, saying, hey, I believe in Goldman Sachs; therefore, I'm going to sink $5 billion into the now-tarnished investment bank, and possibly sink in another $5 billion more. Would you consider doing anything like that with your money?

TRUMP: Well, I do it in the form of real estate. I'm buying a lot of real estate right now, and that's my business, that's what I love, that's what I know the best. And I'm buying a lot of real estate, and I'm buying it, frankly, at very good prices. This is a great time for people to go out and buy real estate, better than maybe any time in the last 30 years.

PHILLIPS: Now, I've looked at some of your properties before. It ain't cheap, my friend. So when you look at the average American who is desperately trying to keep afloat and to afford a mortgage, yes, you are building real estate, but it's for those that can afford it.

TRUMP: But this is a great time. When you say the average American, this is a great time.

You go to the bank, they have thousands and thousands of houses each bank. Pick the one you like and make a deal.

They will finance it for you, they'll do everything for you. They want you to take it off of their hands.

This is an unbelievable time for people to buy real estate. It's a great time for people to go out the buy a house.

I just bought something, a big club in Colts Neck, New Jersey. It cost $109 million to build it, and I bought it for a fraction of that. Colts Neck, New Jersey, is one of the best locations in the country.

There are so many great opportunities right now. Go out and buy real estate and make a good, tough deal.

PHILLIPS: Donald, the average person can't even fill up a tank of gas right now, and you're talking about getting a good deal on a cool $109 million.

TRUMP: No. What I'm saying is, you go to the bank. You want a house, you go to the bank, you make a deal with the bank. You buy a house and you pay some interest on the loan.

They'll give you the money. They've already put the money in, so they don't have to create a new loan. This is a great time for somebody to go out and buy a really nice house.

PHILLIPS: Are you saying that we can trust banks right now? There are lenders we can trust that if you are making, say, $45,000 a year, you could go ahead and buy a house at this point?

TRUMP: We have some great banks and some great bankers. I know many of them. I also know some very bad bankers, to be honest with you. But we really do have some great institutions, and what really this country should be doing liquefying.

They should make those institutions liquid. In other words, give them -- get money into those banks so they can loan money to people to go out to do deals, to buy houses, to build buildings, to do office buildings, and get the country back on track. Right now the banks are out of business.

PHILLIPS: All right. Let me ask you this question, because you obviously know these institutions and know money very well.

The bottom line is there was a lack of oversight, and a lot of people were allowed to do a lot of things that were fraudulent and corrupt. And a lot of it, you know, hard-working people are suffering for it now, Donald.

You know, should these regulators be held accountable for what they didn't do, and is it easy to cheat the system?

TRUMP: Well, I don't say the regulators. I think you had some very bad people and you had some very greedy people. And as I said before, you had some very bad bankers. But you also have great bankers. You have people that really love the country and they do a good, fair, honest job, and really -- and they're good at it.

PHILLIPS: Well, where are they when we are in the tank right now?

TRUMP: Well, part of the reason you are in the tank is because of the bad ones. They had some very bad people. And hopefully they are under investigation right now, they'll be and they will be put into the clinker, because there were some bad dudes out there.

PHILLIPS: Donald Trump, live from Chicago.

Good to see you.

TRUMP: Thank you.

PHILLIPS: And it looks like something's brewing between Bermuda and the Carolinas. Chad Myers is keeping an eye on it for us. He'll talk to us in just a second.

(WEATHER REPORT)

(COMMERCIAL BREAK)

PHILLIPS: Well, it's 2:29 Eastern Time right now. Here are some of the stories we are working on in the CNN NEWSROOM.

President Bush trying to light a fire under lawmakers by reaching out to you. CNN has learned that he's going to deliver a primetime speech to the nation tonight aimed at pushing Congress to pass a $700 billion Wall Street bailout plan. Some lawmakers, including Republicans, remain skeptical and want more oversight of any bailout.

And some of the giant companies that triggered the plan are now to target of an investigation. Sources tell CNN the FBI is looking into possible mortgage fraud at Fannie Mae, Freddie Mac, Lehman Brothers and other firms.

So, is North Korea getting back into the nuke business? The chief U.N. nuke inspector says the North plans to restart a reactor in a week or so after previous pledges to disable it.

As lawmakers debate how to bail out crashing financial firms, should rich executives be rewarded for driving the ship into the abyss? Well, at our morning meeting, we starting talking about how to make this multibillion dollar story to resonate with you and the discussion kept coming back to golden parachutes.

(BEGIN VIDEOTAPE)

TENISHA, CNN EXECUTIVE PRODUCER: Bring it down from beyond the companies to making it more personable, really the story that Chris Lawrence did on this woman who put all of her money into the Silver State Bank.

SONYA, CNN PRODUCER: Well, she put in $120,000.

(CROSSTALK)

PHILLIPS: Right, over $100,000 that is insured.

SONYA: And the reason she had to put it all in her name instead of her spouse's name too is because his identity had been stolen and so she was trying to protect against that, and then, ironically, the bank is what takes her money because it goes belly up.

TENISHA: We had this conversation last night, how safe is your money and where do you put your money?

PHILLIPS: And did you guys see this one about the AIG's CEO said he is going to reject his $22 million parachute, will other people follow? Are we still trying to book him?

I think if anything, we could do something today with this, you know, challenging these other loaded dudes to, you know, pass up on the parachute.

(END VIDEOTAPE)

PHILLIPS: Well, pass up on the parachutes. Some of those former titans of Wall Street may not have a choice. If lawmakers agree on anything, it is the outrage factor in profiting off failure.

Now as we all mentioned there in the meeting, Robert Willumstad of the insurance giant AIG is voluntarily giving up $22 million in severance pay. John Thain of Merrill Lynch, which was just bought out by Bank of America, is said to be eligible for at least $9 million in company stock. He has not collected because he has not left the company, at least not yet.

And then Kerry Killinger is out of Washington Mutual and reportedly took with him a parachute worth $22 million. So is this just business as usual or will deals like these be a casualty of the meltdown? Paul LaMonica joins me now from CNNMoney with some insights on this.

So, Paul. Let's start with Willumstad. And he's saying, look, I'm not going to take the golden parachute. It's $22 million. Don't need it. I mean, he is rich anyway, right? So it doesn't really matter.

PAUL LAMONICA, CNNMONEY.COM: Yes, that is a good point. Obviously, in his case, it was certainly a very smart move for him to reject the severance package. I mean, on the one hand, since he was only hired in the summer to take over AIG, he is not really the blame for the collapse, because that is something that has been years in the making, the bad bets that they made on subprime mortgage-related investments.

However, since he has only been there for a few months, why should he be compensated for at least being there while they completely fell apart and went under? So I think he wisely realized that it would have just been a nightmare for him on a public relations standpoint to take this severance package for essentially being at the helm during the company's demise.

PHILLIPS: OK. So that kind of puts it more into perspective, whereas some people are sort of praising him as a hero, there is more behind his move. What about John Thain, Kerry Killinger, should they be the same -- should we be calling them all out, saying, hey, you guys don't need this money, why are you taking a golden parachute when the average Joe can't top off the tank?

LAMONICA: Yes, I think we probably should be calling out the CEOs of many of the financial firms that at the very least are guilty of gross incompetence and making extremely greedy bets during the real estate bubble that got them into the mess. I think why it might be tougher unless Congress really does step in and demands that this become part of the bailout bill, because Willumstad was only at AIG for such a short period of time, I think it was easier for him to make the decision to reject the severance package.

The CEOs that have been long time executives, they may feel that it is their entitlement, their right to get this severance even though any sane person would reject the notion that these people should be compensated for leaving when these firms are in disarray.

PHILLIPS: Yes, sure. I mean, look at how many people are getting hosed and they feel good about taking millions and millions of dollars while these people that worked hard underneath them?

You know, Paul, these boards, they approved huge golden parachutes though, so why did they do that? Why not just say, pssh, we are not going to give you such a great deal when you take us into the tank?

LAMONICA: Yes, I think we are going to see probably a bit of a change in the way boards work going forward, hopefully. Maybe I am being naive, but I think that one result of this amazing colossal disaster that we have seen in just the past few weeks and months with regards to financial firms is that boards will realize that, hey, we do need to have a more reasonable pay structure and that you cannot be rewarding failure to the extent that these executives are being rewarded.

PHILLIPS: Exactly. And how about capping CEO pay?

LAMONICA: That is a little bit of a thornier issue. A lot of people would argue that that is really against what the free market is about. But hey, if we are bailing out, to the tune of $700 billion, firms that many people -- many CNN watchers think deserve to fail, that's also against the free market. So I think...

PHILLIPS: Oh, there's a whole ethical discussion to be had.

LAMONICA: Yes. Oh, definitely. I think any part of a bailout will probably include some discussion of capping the CEO pay. It probably does make sense.

PHILLIPS: Cnnmoney.com, Paul LaMonica, the humble man that we know you are. Thanks, Paul.

LAMONICA: Thank you.

PHILLIPS: Need to fill 'er up? Better line her up. Finding gas is still something of a treasure hunt for drivers in the Southeast. And once you find it, buckle up for a good wait, because there is no relief for the Atlanta and Nashville areas hit particularly hard by the post hurricane shortages. Lots of people have had to take mini road trips just to fuel up.

(BEGIN VIDEO CLIP) UNIDENTIFIED MALE: I drove -- well, my house is 21 miles from the Kentucky line to Roberts County.

UNIDENTIFIED FEMALE: About eight to 10.

UNIDENTIFIED MALE: Eighty or 90, 90 miles.

UNIDENTIFIED MALE: I am just glad I can find gas in Kentucky, because I would be down there sitting at home watching TV if I couldn't.

UNIDENTIFIED MALE: Those folks have been out of gas in Nashville, and they are coming here, so they very easily could run our supply out.

(END VIDEO CLIP)

PHILLIPS: Well, Georgia has just gotten a waiver from the Environmental Protection Agency to sell gas with a higher sulfur content. Normally it is banned to help fight smog, analysts are mixed though on whether that will be any short-term help.

Well, stubbornly high gas prices are shaking up the lives of many Americans, even some who are not old enough to drive a car. Poppy Harlow went to Minnesota to find out about one school district's energy fix.

What did you find out, Poppy?

POPPY HARLOW, CNNMONEY.COM: I found out a lot. And I wish I had this when I was in elementary school. It is really every kid's fantasy, a three-day weekend every single week. A grade school district in Minnesota, they have canceled class on Mondays. The savings are impressive. Check it out.

(BEGIN VIDEOTAPE)

RICK MERSBERGEN, PARENT: Hey bud, time to get up.

HARLOW (voice-over): Zack Mersbergen and his father Rick are heading out to work on their farm in rural Minnesota. A few miles away, 11-year-old Natalie Rosen is practicing before her piano lesson.

And at the local school, not a student in sight.

MATT ROSEN, PARENT: It hasn't fully hit us that today is actually a Monday.

HARLOW: A Monday, like most Mondays this school year, where the kids won't be in school.

GREG SCHMIDT, SUPT., MACCRAY SCHOOL DISTRICT: The decision was we either reduce our expenses somehow or we cut teachers.

HARLOW: Superintendent Greg Schmidt says that choice prompted many parents to lobby for a four-day school week to cut expenses.

R. MERSBERGEN: It's important to me, because now my kids are still allowed to earn some of their college credits in the high school program.

HARLOW (on camera): It all comes to down to this: the price of fuel. It's not cheap to fill a 65-gallon bus.

SCHMIDT: Last year we spent $120,000 more than we had the year before on fuel oil and diesel for buses.

HARLOW (voice-over): The district hopes to save $100,000 a year with the new plan.

SCHMIDT: And the price for busing kids on our routes for 172 days was this amount: $563,000. When we went to a modified schedule, 149 days, the amount was $497,000.

HARLOW (on camera): From the classrooms to the hallways, the lights are out on Mondays. The question remains, of course, will the students be left in the dark when it comes to their education?

SCHMIDT: In other situations where schools have done this, they haven't seen any drop in academics.

HARLOW (voice-over): There are dozens of schools around the country that have four-day weeks. At MACCRAY, school days are now about an hour longer.

ZACHARY MERSBERGEN, 10TH GRADER: The teachers don't know how it's going to go, so they're trying to put five days in four days.

NATALIE ROSEN, 6TH GRADER: The first day was really long because you didn't know how long it would be.

HARLOW: Childcare is another concern. But on this first Monday off, Greg Schmidt says he hasn't heard of any problems, and the families we spoke to are embracing the change.

M. ROSEN: Our jobs do allow us to have a little bit of flexibility, so, and our daughter is getting old enough now to where she can keep track of her little brother on Mondays if something comes up where we can't be here.

HARLOW: And while it's an energy fix for MACCRAY, it will only get an A if students continue to make the grade.

(END VIDEOTAPE)

HARLOW: Now the idea of a four-day school week is not a new idea. It was actually first used in the 1970s in response to the energy crisis we saw then. Well, now in 2008, we are seeing it across 17 states, everywhere, Kyra, from Arizona to Michigan. Some lucky kids out there, huh?

PHILLIPS: No doubt. Thank you so much, Poppy. Well, the good book is going green. According to TIME magazine, Harper Collins is publishing an environmentally friendly version of the Bible. It uses recyclable papers, soy-based ink, and the cover is a cotton linen blend. Now scriptures dealing with the environment will be printed in forest green, but Jesus' words remain in their traditional red.

The Supreme Court buys Troy Davis a few more days at least, with less than two hours until the needle, the convicted cop killer gets a stay of execution. The victim's family, furious.

(COMMERCIAL BREAK)

PHILLIPS: Well, Troy Davis' time was all but up when he got the word. The death row inmate's date with the executioner delayed until at least next week. The Supreme Court has agreed to consider if Davis deserves a retrial in the murder of a Georgia police officer. The stay delighted Davis' family, but disappointed the slain policeman's.

Our Rusty Dornin reports.

(BEGIN VIDEOTAPE)

RUSTY DORNIN, CNN CORRESPONDENT (voice-over): Less than two hours before he was scheduled to die for murder, the family of Troy Davis stunned the crowd outside of the prison.

MARTINA CORREIA, SISTER OF TROY DAVIS: We just found out that my brother was granted cert. and at least for one week until the courts can review his case.

(CHEERING AND APPLAUSE)

DORNIN: Davis was convicted of killing Savannah, Georgia, police officer Mark MacPhail in 1989 when he was just 19. Witnesses claim Davis and two others were harassing a homeless man in a parking lot. MacPhail, who was off-duty, stepped in to help the man. That is when some witnesses say that Davis shot MacPhail twice, and fled.

Here you can see a fellow officer desperately trying to save MacPhail's life in the ambulance. After Davis was convicted in '91, seven of the nine witnesses changed their minds and said the shooter was not Davis, it was another man. Davis's life was spared last year hours before his execution by the Georgia Pardons and Parole Board.

The board held closed hearings and re-interviewed all of the witnesses and Davis himself, but then decided clemency was not warranted. Mark MacPhail's mother told CNN the family has been through hell for 19 years. Outside the prison, his sister agreed.

ANNELIE REAVES, SISTER OF MARK MACPHAIL: Very angry. It has been a long time and it is not going fast as I read somewhere. It has been 19 years, I think that is a long time. So we are ready for justice to be done.

DORNIN: Davis told CNN by phone from death row he only found out by watching TV in his cell that his execution had been stayed. He said he had accepted his fate and now was praying for MacPhail's family.

Reverend Al Sharpton, who came to hold a prayer vigil with Davis supporters says there was no physical evidence or weapon found and the case needs further review.

REV. AL SHARPTON, CIVIL RIGHTS ACTIVIST: If the only evidence that convicted him was not physical evidence, it was the evidence of witnesses who have now, seven of the nine, recanted, then how can you say that is enough to take a life?

DORNIN: The Georgia Supreme Court had already turned down an appeal for a new trial. The reprieve for Davis is for one week until the U.S. Supreme Court decides whether to hear his case. If it decides not to, the execution will be rescheduled.

Rusty Dornin, CNN, Jackson, Georgia.

(END VIDEOTAPE)

PHILLIPS: So have you been helped by a guardian angel, and if you answered yes, you are not alone. According the TIME magazine, a new Baylor University poll shows that more than half of all Americans believe that they have had a nudge from one. Researchers say the angel poll is one of several that indicate Americans live in an enchanted world and that they share a broader range of religious experiences than expected.

Laura Bush will be the nation's first lady just a few more months. So what does she think about the battle for the White House and about Sarah Palin? We are going to find out, because she sat down with our Zain Verjee.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

MILES O'BRIEN, CNN CORRESPONDENT (voice-over): San Francisco's Luscious Garage is no ordinary car repair shop. You won't find oily spills on the floor. You will find solar panels on the roof. It is a place where already green hybrid cars like the Toyota Prius turn even greener.

CAROLYN COQUILLETTE, OWNER, LUSCIOUS GARARGE: The regular Prius is a gasoline-dependent car, it doesn't get energy from anywhere but the gas tank. What this allows you to do is to get energy through a 110 outlet, so this is like my electric gas tank.

O'BRIEN: Owner Carolyn Coquillette still works on engines, tires, and brakes. But these days more customers want plug-in conversions for the option of driving an all-electric vehicle.

COQUILLETTE: I get about three or four calls, e-mails a day, people asking about this particular conversion. O'BRIEN: The cost is $7,500 to add and to date the batteries in currently available gas-electric hybrids. But the range for an all- electric journey is still pretty limited, about 25 miles to a charge. But call it a California mindset, it is empowering.

COQUILLETTE: Gas is not required to move this car anymore. It gives you the flexibility to not have to burn gas if you don't want to, and that is very liberating.

O'BRIEN: So who are the converting clients?

COQUILLETTE: There are some people who are die-hard environmentalists, but there are some customers who come in and they just want to burn less gas.

O'BRIEN: Miles O'Brien, CNN, San Francisco.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

PHILLIPS: Laura Bush has just a few months left in her role as first lady, so what does she think about the race to replace her husband? And what about Sarah Palin as John McCain's running mate? Mrs. Bush sat down with our own Zain Verjee who joins us now live from New York.

So what stands out, Zain?

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Hey there, Kyra. Well, the first lady said essentially that she has a lot of confidence in Governor Sarah Palin. She said that she had some good common sense and has experience as governor and mayor.

But this is what she said that struck me the most in our conversation, here is a part of it.

(BEGIN VIDEOTAPE)

LAURA BUSH, FIRST LADY: I have a lot of confidence in Sarah Palin. She has got a lot of really good common sense. And I think that is very important. She also has executive experience from being a governor and a mayor, and I am thrilled to have the chance to vote for Sarah Palin on the Republican ticket.

VERJEE: But do you think she has the kind of foreign policy experience that everyone...

(CROSSTALK)

L. BUSH: Well, obviously, of course, she does not have that. She had -- you know, that has not been her role, but I think that she is a very quick study, and fortunately, John McCain does have that sort of experience.

VERJEE: There have been a lot of attacks on her, people say she has been treated unfairly and it is a little bit sexist, you know, frankly, a lot of critics are saying too. Do you think that? Do you think that there is a little bit of that going on?

L. BUSH: I do think there is a little bit of that going on. And I think it is to be expected. But I do think there is a little bit of that going on.

VERJEE: What would your message be?

L. BUSH: My message be to?

VERJEE: Those critics.

L. BUSH: Oh, to those critics? I think that Sarah Palin is plenty tough, and I think that is what we will find out. And she brings a perspective that no other vice presidential candidate has ever brought. And I think that is terrific.

(END VIDEOTAPE)

VERJEE: Kyra, though the first lady weighed in on the race there, she was also here in New York to promote some of the issues that were important to her, so that is what we joined her about and talked to her a little bit about.

PHILLIPS: Well, tell me about those other issues.

VERJEE: Well, she's very, very -- she puts Burma at center stage in what she is trying to promote and do. It is a country that is run essentially by a military junta that has a really oppressive human rights record and has put its pro-democracy leader, Aung San Suu Kyi, under house arrest. And what she wants is international pressure to be ratcheted up and get countries like India and China, who prop up the regime, to really crack down on them, because the U.S. doesn't really have a lot of influence in that region on Burma specifically.

The other thing, too, Kyra, she is here to promote global literacy and says that education around the world in developing countries is really key -- Kyra.

PHILLIPS: Zain Verjee, live from New York. Thanks, Zain.

All right. Let's get back to Capitol Hill now where the lawmakers are still in sticker shock over an economic rescue plan. CNN's Kate Bolduan is there.

Kate, any signs of a breakthrough?

KATE BOLDUAN, CNN CORRESPONDENT: Well, when we ask about that, I have to tell you, Kyra, they say they are making progress. They are making progress. And that seems -- what we hear from both Democratic and lawmakers and leaders. That is what they are saying right now.

The day two of all of this, all eyes on Capitol Hill, continues. Treasury Secretary Henry Paulson and Fed Chair Ben Bernanke on Capitol Hill once again, now facing tough questioning from the House Financial Services Committee. And Paulson seemed to sum it up pretty well. He said just a little while ago, it has been a long couple of days and it definitely is not over yet.

Negotiations, we do hear, continue, as we are all waiting for a breakthrough and an agreement, people say they are really still working on some of the detail. There seems to be a growing consensus from Democrats and Republicans that they agree something needs to be done quickly, but as a keep hearing, they need it to be done quickly but also right, and that is where the growing skepticism is of the Treasury's plan.

Some other things the lawmakers are talking about they want included, we've have been talking about all day is the inclusion of an oversight board, but also assurances, guarantees for help for struggling homeowners and what has been described as the sticking point, limitations on executive pay.

I know we have been talking about that on air quite a bit today. I also talked about that topic with Democratic Congressman Rahm Emanuel moments ago. Listen here.

(BEGIN VIDEO CLIP)

REP. RAHM EMANUEL (D), ILLINOIS: And they believe on the compensation that everybody should have skin in the game, and that if they are going to be asked to put up $700 billion, those who run these institutions should be asked to also have some skin in the game. That is what shared responsibility is. And it is a legitimate point by our constituents, represented by both Democrats and Republicans.

(END VIDEO CLIP)

BOLDUAN: Now we also are hearing that once Paulson leaves this hearing, he will be stopping by a meeting of the Senate Democratic Caucus. So as you can see, the talks continue, but still no guarantees or firm assurances from the leaders on when they will get this done. They still hope to get something passed by the end of the week -- Kyra.

PHILLIPS: All right. Kate Bolduan, thanks so much.

Apparently, we're getting an e-mail that's coming across to CNN right now, coming from John McCain's camp. It looks like he is saying he is going to stop his campaigning and head back to Washington, D.C. McCain saying he wants to cut short the campaigning to work on the economic crisis, get back to D.C. and put more effort into what is happening on Wall Street. He is urging Barack Obama to do the same.

He is also suggesting that the debate scheduled for this Friday night be delayed. So John McCain right now in an e-mail circulating from his camp headed back to D.C., putting a stop to his campaigning, urging Obama to do the same, to deal with the economic crisis, also making the suggestion that the debate Friday night be delayed.

We will bring more with Rick Sanchez coming up at the top of the hour. (COMMERCIAL BREAK)

PHILLIPS: Just to update you again. Breaking news coming in here to the CNN NEWSROOM, John McCain, and urging Barack Obama to do the same, is halting his campaigning, headed back to Washington to deal with the financial crisis. He is also suggesting that Friday night's debate should be delayed. We are working more information for you. Of course, we will have that in the next hour.

Meanwhile, we want to turn the corner on a bit of a lighter note. Don't know if you heard about this, but your favorite Ben & Jerry's flavor, Chubby Hubby, Chunky Monkey, Cherry Garcia, OK, you know those, now imagine this, "Nipple Ripple," Nipple-politan," "Vanilla Suckle," "Mother's Milk Chocolate Nut Crunch."

Yes, People for the Ethical Treatment of Animals want Ben & Jerry's to put human breast milk in their ice cream, because it would be less suffering for dairy cows, it says, and be healthier ingredient for humans. Ew.

(BEGIN VIDEO CLIP)

SAGE BLAKOSH, ICE CREAM LOVER: I have been a vegetarian for probably 13 years now, I have no desire to eat human breast milk of any way, shape or form.

(END VIDEO CLIP)

PHILLIPS: What he said. Ben & Jerry's issued a polite response, saying it applauds PETA's creative way of drawing attention, but we'll stick with cow's milk.

Rick Sanchez, can I interest you in ice cream?