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American Morning

Federal Reserve Pumping Another $30 Billion in Money Markets Overseas; FBI Investigating Four Major Financial Firms

Aired September 24, 2008 - 08:00   ET

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


JOHN ROBERTS, CNN ANCHOR: It's coming up on the top of the hour. Here are some of the stories that we're following for you right now. The United Nations warning that North Korea is making good on a threat to restart its nuclear program. The International Atomic Energy Agency says the communist nation plans to refuel its reactor at Yongbyon within a week.
The Federal Reserve pumping another $30 billion in the money markets overseas in an effort to boost global financial markets. The Fed announcing reciprocal currency deals with Central Banks of Australia, Denmark, Norway and Sweden. It follows a similar agreement last week with five other foreign Central Banks.

The FBI is investigating four major financial firms at the center of the crisis on Wall Street. It focuses on whether executives at Fannie Mae, Freddie Mac, Lehman Brothers and AIG misled investors about the financial strength of their institutions. The FBI currently has 26 pending corporate fraud investigations involving subprime lenders.

As Congress battles over the details of the $700 billion bailout proposal, business correspondent Christine Romans joins us now with a look at how much we really could pay and why it's causing such a holdup up on Capitol Hill.

And I think, Christine, one of the reasons why the figure is unknown is because you just don't know how to value these mortgage- backed securities.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: That's absolutely right, and we don't know how much taxpayers could get back in the end either. I mean, there are some hopes that this could actually make money if it goes well. But the Treasury Secretary and the Fed Chairman, they are urgently pushing to bail out Wall Street and avert a crisis they say for every American, and on Capitol Hill they are pushing back.

(BEGIN VIDEOTAPE)

ROMANS (voice-over): It's so much money, it's hard to comprehend. A monster Wall Street bailout. Some $700 billion. Think of it this way -- that's $2,333 for every single person in America. At the first public hearing aimed at understanding and solving the crisis, pushback from all sides.

SEN. MIKE ENZI (R), WYOMING: The Treasury and the Federal Reserve have asked to us cut them the biggest bailout check in history and that money will be handed out to the same banks that put us in the mess to begin with.

ROMANS: From Republicans who want government out of business and who detest the taxpayer bailout for Wall Street's bad behavior.

SEN. JIM BUNNING (R), KENTUCKY: This massive bailout is not a solution. It is a financial socialism and it's un-American.

ROMANS: To Democrats who want more homeowner protections and like Senator Jon Tester who called for more times, deliberate what is the most important financial overhaul since the Great Depression.

SEN. JON TESTER (D), MONTANA: Why do we have one week to determine $700 billion that has to be appropriated or this country's financial systems go down the pipes?

ROMANS: And on the House floor, a burst of outrage at the Bush administration.

REP. JIM MCDERMOTT (D), WASHINGTON: They used fear to go to war. They used fear to take away your civil rights and spy on you. And now they're using fear of financial collapse. And they are just trying to scare you into getting them to do whatever they want.

ROMANS: The Treasury Secretary is urging quick and clean passage of the bailout. Without it, he says, this is what's at stake.

HENRY PAULSON, TREASURY SECRETARY: The American family's financial well-being, the viability of businesses both small and large, and the very health of our economy.

(END VIDEOTAPE)

ROMANS: There is no doubt this is an historic moment. It is the largest government involvement in the private sector since the catastrophe of the Great Depression. The bailout could push our national debt to the highest levels since the mid-1950s. That's when this country was digging out from all that debt after World War II. Consider that, John, our mile markers here are the Great Depression and World War II. That's the kind of time we're in right now.

ROBERTS: You know, those are not exactly the events that you want to be compared to with the current crisis that we're in. But I guess it's very accurate. Christine Romans for us.

Christine, thanks.

KIRAN CHETRY, CNN ANCHOR: And it is issue #1. Hundreds of questions coming in about what the bailout means for your money. Ali Velshi is "Minding Your Business" and answering questions about the economy.

A lot of people writing in, Ali.

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Remarkable. We are really, really getting a ton of e-mails. Some excellent, excellent questions and opinions on things. Ken in Hawaii is asking, "The bulk of my 401(k) is in my previous employer's plan. If that goes under, will my money be safe?" Ken, that's an excellent question. Your money is invested on behalf of your employer or your former employer through an investment company in stocks and mutual funds.

So, the bottom line is if the company that you worked for goes under that, it doesn't affect your 401(k). It will be transferred to somewhere else. Even if the holding company, the investment firm that your previous employer used to buy that 401(k) were to go under. That 401(k) still exists as a separate entity. You are not protected however if the underlying stocks that 401(k) is invested in, lose value.

So the value of your 401(k) still goes up and down, but whether your former employer goes bankrupt or not, they can't use that money for their operations. Debbie in Michigan says, "Why can't they rewrite these mortgages for 40 years? So people can keep their houses." That is an excellent question and it's a suggestion that's come up time and time again. That of course is for the banks to decide because they are the ones that hold those mortgages. The government could encourage that sort of thing.

And we have actually seen some proposals where the government is suggesting give people a 40-year term. Let them refinance that mortgage, pay a little less over a longer term. Not necessarily a great idea for your own long-term investment in your house but if it saves you from being kicked out of your house or being foreclosed upon, not a bad idea.

Keep the questions coming. Those that we don't get to on air, we're going to try and responses on the blog as much as possible. But the response of course had been much greater than we anticipated. So thank you for your patience on this -- Kiran.

CHETRY: That's why we call it issue #1, right, Ali?

VELSHI: Yes.

CHETRY: All right, thanks. Well, keep those questions coming. Head to CNN.com/am. And Ali will answer as many as possible right at the half hour.

Debate preps. Will the crisis on Wall Street take center stage? John McCain and Barack Obama getting ready for their first high-stakes presidential debate, it's this Friday.

You're watching the "Most News in the Morning."

(COMMERCIAL BREAK)

WILLIAM JEFFERSON CLINTON, FORMER PRESIDENT OF THE UNITED STATES: I think that the economy is in trouble. Two-thirds of the American people are having trouble paying their bills. Demographically, the country is moving toward us in greater diversity. Enthusiastically, there are more Democratic new voters than Republican ones. And he's very well-organized as we've seen and as I saw in the primary. So, I think --

(END VIDEO CLIP)

ROBERTS: Bill Clinton telling Jon Stewart on "The Daily Show" why Barack Obama should win the election. Tonight, the Former President talks with Larry King, 9:00 p.m. Eastern right here on CNN.

41 days now until the election as John McCain and Barack Obama prepare for their first debate on Friday. The candidates are sharpening their messages on the economy and what's wrong with the President's plan to bail out Wall Street. CNN's Suzanne Malveaux is live in my old home of Miami for us this morning.

Good morning, Suzanne.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Hey, good morning, John.

Well, obviously, both of these candidates are really pushing very hard. These stipulations, these conditions, they believe that are required for a successful bailout plan. But at the same time what is happening here is that they don't want to be perceived as the one perhaps who would get in the way of a successful plan. And so you see them kind of a little bit cautious here. It's really very obvious with both of these candidates it's a very delicate balancing act. Take a listen.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: There's been some talk that some CEOs may refuse to cooperate with this plan if they have to forego multimillion dollar salaries. I cannot imagine a position that's more selfish and more greedy at a time of national crisis.

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: The senior leaders of any firm that is bailed out should not be making more than the highest-paid government official.

(END VIDEO CLIP)

MALVEAUX: So, John, what are we seeing? We're actually hearing some similarities between these two candidates, both of them calling for taxpayers to get some of that money back for the bailout plan. A bipartisan board overseeing this plan that Wall Street executives get a limited amount of compensation and both of them are saying that an economic stimulus package should be put on hold, that it shouldn't be linked with this legislation. And interestingly enough, neither one of these candidates is saying what is a deal breaker when it comes to these conditions, putting it on the legislation.

Neither one of them also saying they're going to commit to go back to Washington and actually vote for this when it happens. They're going to kind of wait and see if that vote is necessary. Because it could swallow up some very significant and important campaign time -- John.

ROBERTS: And Suzanne, John McCain who just locked up the base placated conservatives with his pick of Sarah Palin as his running mate now running slightly afoul of conservatives on this bailout plans. Some conservatives saying that if he signs it, he is betraying them.

MALVEAUX: He is in a very difficult position here, obviously, because a lot of folks on both sides, but specifically especially the Republicans, say this is not a philosophy that we've signed up for. This is certainly not what we had bargained for, so take a stand here. They're looking for something that's a lot stronger from John McCain.

So, he is in a very difficult position here. Both of these candidates, they want to appear that they're out in front on this issue but at the same time not too far out in front. They want either George Bush or somebody else to take responsibility for this.

ROBERTS: All right. I should say signs on to it as well. He can't sign it, he's not the president. Suzanne Malveaux for us from Miami.

Suzanne, good to see you. Thanks very much.

Barack Obama and John McCain face off for their first debate on Friday. It takes place at the University of Mississippi, 9:00 Eastern. Join the best political team on television for your front row seats.

The White House is facing strong opposition from members of both parties over the $700 billion bailout. But what do third party candidates Bob Barr and Ralph Nader have to say about it? We'll ask them coming up live.

And more fury from the bailout plan from the ranking Republican on the Senate Banking Committee, Senator Richard Shelby. He's here to tell us what he thinks is wrong with it.

You're watching the "Most News in the Morning."

(COMMERCIAL BREAK)

CHETRY: It's 12 minutes past 8:00 here on the East Coast. Our Rob Marciano is tracking extreme weather for us this morning.

It's been relatively quiet at least for the past week and a half when it comes to the Atlantic. Is that changing?

ROB MARCIANO, CNN METEOROLOGIST: Yes, a little bit. We mentioned a couple of things yesterday. And this thing over the Dominican Republic doesn't look very impressive right now, but the National Hurricane Center still thinks it has the potential to develop into something more serious.

Obviously, Ike was a serious situation. Check out some of the lines of people now trying to get back into Galveston. Just miles of them backed up, trying to get back into the area that was devastated by Hurricane Ike. Still without power down there.

But slowly but surely people at least allowed to get back to check out their homes and to start that rebuilding process. That is a scary thought. It's an island that just devastated for the most part. Really, the only spot that wasn't affected was right along that seawall which did a very good job of protecting it. But the island has four sides to it and the three unprotected sides really got hammered that quickly.

(CROSSTALK)

CHETRY: Yes, you're showing us these pictures -- is that Interstate-45 that we're looking at there? They're saying that traffic's backed up for 10 miles as people are trying to get back in there. So --

MARCIANO: That's a live picture.

CHETRY: Headache after headache. A lot of these people don't know what they're coming back to.

MARCIANO: Yes, and that's, you know, that's got to be an uneasy feeling for sure. Just seeing the pictures that we've showed them over the last couple of weeks. And I can't even imagine having to make that drive stuck in traffic and the anxiety and the anticipation of seeing what you have to go back to.

One other mention, Kiran, this thing just off the Carolina coast, the National Hurricane Center has put an alert on this. This is just a generic kind of false storm but it may morph into something more serious and it's very close towards the North Carolina coastline.

So, shouldn't have too much time at the Gulf (ph) but we're watching it carefully and folks along the Carolina coast should keep an eye on the sky for sure. Back to you.

CHETRY: All right. We'll be watching you. Thanks, Rob.

MARCIANO: You got it.

CHETRY: Well, everyone heard of Sarah Palin saying thanks but no thanks to that "bridge to nowhere." But get this, as governor she was involved also in a "road to nowhere." We have more on that. Check it out.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Up in the helicopter, another reality check.

UNIDENTIFIED FEMALE: It just curves around and then it just stops. And that's where the bridge was supposed to pick up right there.

(END VIDEO CLIP)

CHETRY: Wait until you hear how much it cost per mile to build.

(COMMERCIAL BREAK)

ROBERTS: 17-and-a-half minutes now after the hour. So, who hasn't heard Governor Sarah Palin say that she told Congress thanks but no thanks on that "bridge to nowhere"? Most people have heard that. But did you know that leading up to the nonexistent bridge that she was for before she was against is the little-known "road to nowhere" and it is very real.

Our special investigations unit correspondent Abbie Boudreau found it, drove it, and reports now on how it came to be.

(BEGIN VIDEOTAPE)

ABBIE BOUDREAU, CNN INVESTIGATIVE 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, a.k.a. 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?

MURPHY: 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: Well, 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 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.

BOUDREAU: 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.

Abbie Boudreau, CNN, Anchorage, Alaska.

(END VIDEOTAPE)

ROBERTS: But it is a lovely road.

As the presidential race tightens, presidential candidates Ralph Nader and Bob Barr could play the role of spoiler. Siphoning votes from Barack Obama and John McCain. We'll talk to them about it live coming up next.

And issue number one is the economy. Thousands of questions coming in this morning about what the bailout means for your money. Ali Velshi has been blogging all morning and he joins us now.

Ali, what are you hearing? What are you saying?

VELSHI: We are literally getting hundreds and hundreds of e- mails from people with some really good questions about their investments. We're being asked about money market, 401(k)s and things like that. We're going to answer those questions as soon as we come back on AMERICAN MORNING. Stay with us.

(COMMERCIAL BREAK)

CHETRY: The president's top money men, Treasury Secretary Henry Paulson and Fed Chair Ben Bernanke back on Capitol Hill today in an attempt to convince skeptical House lawmakers to approve the $700 billion bailout. And this morning congressional leaders say that the plan will pass but not without some changes first. So, for more reaction to the bailout plan, let's go to London. Our Becky Anderson tracking the stock market in Europe for us.

Hi, Becky.

BECKY ANDERSON, CNN INTERNATIONAL CORRESPONDENT: Hello, there.

And the fine prints of this Paulson bailout plan just couldn't come quickly enough as far as investors across the world are concerned. We are looking at the markets today. We're looking at around one percent to 1.5 percent higher. But it's very much the devil in the detail as far as investors here are concerned to what extent will Congress weigh down the details of this $700 billion plan. It's what investors want to see here, and how banks around the world will be affected as well as those that are based in the U.S. So, it's one eye on Paulson and his mark in Washington. The other eye is going to be said for investors here in Europe. He is on the currency market. And don't forget the dollar really weathered this storm well last week but it's not been like that this week at all.

Investors beginning to look at this U.S. economy and say what is going on with it and where does it go from here? And oops, there goes the proverbial banana skin for the Greenback and the Euro at its highest level ever against the dollar at this point. It's expensive coming this way. It's much cheaper for us guys to come to you at present -- Kiran.

CHETRY: Yes. And you know, there's been a lot of excitement when the Republican Party introduced Sarah Palin as the VP pick to much fanfare last month. Now we hear that U.K.'s Labor Party is excited about their own Sarah, if you will?

ANDERSON: That's right, it is Sarah Brown. She is the wife of the Prime Minister, the embattled prime minister, let's say, in the U.K. She introduced him for the first time ever, a spouse introducing a prime minister at the Labor Party Conference in Manchester yesterday.

She didn't quite say stop picking on my husband, but she might as well have done. He's really having a hard time of it. Talked about the economy yesterday. (INAUDIBLE). I reminded you yesterday and I'll remind you again, he ran the U.K. economy, of course, for ten years. He thought it was a safe pair of hands that he was using to run that economy we've seen since things have really gone awry.

So, Gordon Brown very much under pressure. Yes, Sarah Brown trying to play the sort of Sarah Palin card. I think it may be going awry somewhat just as it seems to be doing though in the U.S. at present. So Gordon Brown, it's up to him at this point to really say something that investors here are going to feel is useful to them in going forward.

But we are, again, got to be said when all is said and done. We're back to that Paulson story. Paulson and Ben Bernanke, that's what we want to hear. We want to hear what they've got to say after Congress speaks again today -- guys.

CHETRY: All right. Becky Anderson for us this morning in London. Thank you.

And it's issue #1. Hundreds of questions coming in about what the bailout means for your money. Ali Velshi is "Minding Your Business," and he's answering your questions about the economy.

A lot of people e-mailing in, Ali.

VELSHI: Yes. Great questions.

CHETRY: What's the biggest -- what seems to be the prevailing question people want to know about?

VELSHI: Two themes. One is people want to know about sort of the broader implications of this bailout package on the economy, and debt, and things like that. And then other people want specific information about their investments. And this is one of those. An e- mailer from White Plains, New York, asking, "In light of the current financial crisis, is it safe to put your money in a money market account or should you strictly keep your short-term savings in a savings account which has FDIC protection?" Excellent question.

Money market deposit accounts are covered like bank accounts, up to $100,000 in a bank. That's a money market deposit account. There are also money market mutual funds and the government has just announced that it will insure those as well.

So, I would still be sure by checking your bank, but money market deposit accounts, and money market mutual accounts are both insured right now. They won't necessarily have the same interest rate, so you might want to put your money where you get a better rate.

In Orchard Park, New York, we've got an e-mail. It says, "Would it be wise to put my U.S. currency into Canadian currency. Their future certainly looks a lot more stable and with the oil development and more promising, I like their business ethics. What's your feeling?"

The Canadian currency like the pound and the Euro has done very well against the U.S. dollar in the last year, but it's not entirely practical for consumers to be changing their money around. You never get the exchange rate that traders get. You pay a commission on it, and frankly if you live in the United States, you need to use U.S. dollars. So using the currency of another country doesn't actually make sense. We've got lots and lots of these kinds of e-mails. We're going to try and get to as many of you and post those responses on the blog when we can. But thank you for sending all those e-mails in. There are a lot of concerns out there, Kiran.

CHETRY: Absolutely, no doubt. Ali Velshi for us. Thanks.

ROBERTS: Crossing the half hour now and here are some of the top stories that we're following for you this Wednesday morning. North Korea taking another step toward its threat to restart its nuclear program. The International Atomic Energy agency says North Korea will refuel its main nuclear reactor at Yongbyon within a week.

Iran's president, Mahmoud Ahmadinejad, refusing to take sides in the presidential election, but he told CNN's Larry King that he would like a three-way debate with both presidential candidates Barack Obama and John McCain.

(BEGIN VIDEO CLIP)

PRES. MAHMOUD AHMADINEJAD, IRAN (through translator): I am ready to speak with presidential candidates before the press, with the presence of the members of the press and the media, and discuss world issues and to face them together. (END VIDEO CLIP)

ROBERTS: The Secret Service says a man arrested with a gun near Barack Obama's Chicago home never posed a real threat to the candidate. Officers took the suspect into custody, after he drove up to a checkpoint with a gun and a bullet-proof vest in his car. Obama was reportedly home at the time, but his house sits about a block away from that checkpoint.

Well, we are hearing an awful lot about the Wall Street bailout today and the $700 billion price tag that goes along with it. But what does this financial crisis really mean for your money. The money you have invested? More people are tapping into their nest egg these days and others may have stopped contributing altogether.

Our personal finance editor Gerri Willis is here with why you need to keep investing even now. So, why is it a bad idea, Gerri, to stop contributing?

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: You know, you can't time the market, John. That's the real problem. And if you look back in history, it's clear Americans pull their money out at exactly the wrong time. Let me show you some statistics that we got from Edward Jones. Now, this chart will take a look at when people put money into the stock mutual funds and when they took it out.

So if you look at the far left corner of this particular chart, it looks at '88 and '89. People were selling. That's why that chart dips below the median line there. They were selling right in advance of the biggest stock market boom in our history. Look again, a little further right down that line 2002, 2003, again people pulling their money out mostly because they were afraid. The market doubled in the years after that. You just can't predict these turns and unfortunately you find folks are pulling their money out at exactly the wrong time, John.

ROBERTS: So, you know, on that point, Gerri, if somebody says, look, I'm just not comfortable leaving my money and if the Dow is just below 11,000 now, maybe it could go down to 8,000, I'll just pull it out and ride it out for a little while and then get back in the market. Why is that a bad idea?

WILLIS: Well, let me show you some more numbers here, also from Edward Jones. Let's say you had $10,000 invested in the market for a period of 10 years. OK. Let's look what happens if you leave it invested the entire time, you end up with $13,000, a little more than that actually after the period, after the decade. But if you're pulling your money in and out of the market, if you miss the best 20 days of the market, you lose money. 43 percent of your money. You end up with a little less than $6,000 as you see right there, $5,700 dollars.

So pulling your money in and out of the market does you no favors here. You've got to be completely invested the whole time. Now, I'm not saying the market is going to turn around tomorrow. That's not the point of the exercise. The exercise is if you have a long-term horizon, if you're 10, 20 years away from retirement, now is probably not the time looking at history to pull your money out of the stock market.

ROBERTS: Gerri Willis with some good advice for us this morning. Gerri, thanks so much.

WILLIS: My pleasure.

ROBERTS: As the wrangling over the $700 billion bailout intensifies on Capitol Hill, the top Senate Banking Committee Republican is here with us. Why he says the mega bailout just will not work.

You're watching the "Most News in the Morning."

(COMMERCIAL BREAK)

ROBERTS: President Bush's top economic team headed back for a second day of grilling on Capitol Hill. They are there to urge a reluctant Congress to sign off on the Wall Street bailout. There's growing concern about saddling taxpayers with the monstrous bill of $700 billion. Joining me to talk more about this in Washington independent presidential candidate Ralph Nader and we hope to be joined in just a couple of minutes as well from Gainesville, Florida, with libertarian presidential candidate Bob Barr.

First of all, Mr. Nader, what's your take on this thing?

RALPH NADER, INDEPENDENT PRESIDENTIAL CANDIDATE: My take is huge public outrage is pouring in, you should have heard the calls on CSPAN on Congress. If they go back for elections, they're going to face a furious population. This is a three-page bill that Bush sent to Congress, a $700 billion blank check to the Treasury. No public review of his decisions. This is dictatorial power. It doesn't have comprehensive regulation. It doesn't have shareholder power to control the bosses and their executive compensation. It doesn't have taxpayer stakes so if these companies recover the taxpayer can be paid back. And above all it doesn't have power to the investors. So, it's not going to work.

ROBERTS: So I've seen the literature from your campaign saying that Ralph Nader was pressured about all of this, you've been warning about this for 15 years.

NADER: Exactly.

ROBERTS: All right. What would you do if you were president?

NADER: Well, it's very clear that what has to be done is to reinstate law and order. The deregulation by Clinton in 1999 opened the floodgates for these speculative casino capitalists on Wall Street. So, we reinstate Glass-Stiegel, which eliminates all these conflicts of interest. We have regulations to protect the investors, right. We have the kind of, the situation they have in Europe where if a mortgage lender lends money, they can't pass it on to someone else, someone else, someone else. They are held on the hook. That makes for more prudent investment. We got to do something about homeowner foreclosures. I think they should be able to rent their home until this thing stabilizes rather than lose their home.

ROBERTS: Nobody at this point is talking about reinstating Glass-Stiegel which was the depression act that regulated the bank and investment bank industries. But certainly, there are a lot of people on Capitol Hill who are talking about a lot of the things you just outlined, by protecting investors oversight, that's sort of -

NADER: Taxpayer's stake.

ROBERTS: Yes. Taxpayer stakes in it. What's wrong with just supporting the actions are on Capitol Hill?

NADER: Yes but will they hold against the stampede mentality coming out of the Bush White House. In other words, Senator Dodd and Congressman Barney Frank who are the two key figures. One the taxpayers' stake, they want executive compensation controlled which is at the bottom of inflating profits and cooking the books. But are they going to cave again? The Democrats keep caving and caving. Just one reason why Nader-Gonzalez is running for the presidency, because they are cowards and the White House wins again and again. More details on their Web site votenader.org.

ROBERTS: What we're seeing on Capitol Hill yesterday in the Senate Banking Committee, what we are expecting to see this afternoon in the House Financial Services. Do you think that's just a lot of posturing? That eventually they will give the administration as they have so often everything they want?

NADER: It looks like it. It looks like it. Nancy Pelosi, the Speaker said this bill will pass and fast, and she says it's up to the Republicans, it's their bill. But the Democrats are in charge. So this is happening. It is posturing. They ask tough questions and then they cave and they go back and say, well, our hands were tied. You know, the Bush administration was giving us an ultimatum.

ROBERTS: One quick question about the campaign, it looks - according to your campaign like you will be on the ballot in most if not all states.

NADER: Yes.

ROBERTS: The latest poll that we have seen in the independent research corporation, you are polling at 4 percent, you add in Bob Barr who again we hope to talk to at six percent, not enough for either one of you to win but certainly could make the deference in some states. And there are many analysts who say that with you the victim will be Barack Obama, much as it was Al Gore in 2000. Well, according to them.

NADER: Yes. well, according to them but Al Gore won but it was stolen from him in Florida. Very interesting. Five straight national polls show that when I'm in the poll with Obama and McCain, McCain goes down. For example, 48-48, CNN poll in Florida a few days ago, McCain-Obama, I'm put in the poll. McCain goes down four points and Obama stays the same. Completely counterintuitive, but you never get it through those lunkhead democrats.

ROBERTS: On a national level though, if you draw just about evenly from both, it goes from 51-47 to 48-44, I believe.

NADER: Our concern is to give the American people a choice based on the record of accomplishment and the break up the corrupt two-party system and get on the debate and really have a robust public discussion. Our positions are majority supported on the table or off the table for McCain, control health insurance, living wage. All these things, just look in our Web site, votenader.org.

ROBERTS: Ralph Nader, good to see you this morning. Thank you. Thanks for coming in.

NADER: Barack Obama and John McCain they do face off for their first debate on Friday. I tell you it takes three days to get on that.

It takes place at the University of Mississippi, 9:00 Eastern. Join the best political team on television for your front-row seat.

As the wrangling over this massive bailout bill intensifies on Capitol Hill. The top Senate Banking Committee Republican is here with us. Why he says the mega-bailout, "just won't work."

You're watching the "Most News in the Morning."

(COMMERCIAL BREAK)

CHETRY: Welcome back to AMERICAN MORNING. The nation's financial leaders continue their campaign on Capitol Hill today, trying to convince lawmakers to pass a $700 billion bailout plan, they face some tough questions though from senators yesterday, both democrats and republicans for different reasons, blasting the plan.

(BEGIN VIDEO CLIP)

SEN. JIM BUNNING (R), KENTUCKY: This massive bailout is not a solution. It is financial socialism, and it's un-American.

(END VIDEOTAPE)

CHETRY: That was Senator Bunning. I'm joined now by Senator Richard Shelby. He's a ranking member on the Senate Banking Committee live from Capitol Hill this morning.

Thanks for being with us, Senator Shelby. You know they are calling you the chief Republican skeptic in chief, if you will about this plan. So five hours of hearings yesterday, did you come away with a clearer picture of what this plan would entail and what the end game would be if it is indeed passed?

SEN. RICHARD SHELBY, RANKING MEMBER, BANKING CMTE.: Well, I tell you what it's going to entail. It's going to entail borrowing of another $700 billion, to layer that on our national debt, for our children and grandchildren. And it will total, after that a trillion dollars. They've already put about $300 billion into different financial institutions. So, you - and what bothers me is have they considered other alternatives? I asked the Fed chairman that. I got no satisfactory answer. I asked him about financing foreign banks, had they ever known of any nation in the world bailing out banks other than their own. No answer.

I think there are a lot of unanswered questions here. We've got to look at this closely and maybe reconfigure it. I think that to send a three-page proposal to the Congress and try to pressure us into doing something real fast, I think that's nonsense. I hope that the majority of the Senate and the House feel that way. But I don't know that.

CHETRY: All right. Senator Shelby, let me just ask you to pause for one moment. We're hearing that the president is speaking right now about the economy. We're going to listen to him and we're going to come back to you in one moment.

(JOINED IN PROGRESS)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: ... free trade agreements pending in the congress today. South Korea, Panama, and Colombia. Obviously two of those are with nations that are in our own hemisphere. Colombia free trade agreement will be good for Colombia. It will be good for America. The President and I have worked diligently to make sure this is a fair agreement. Congress needs to pass it. The Panamanian agreement, it's good for Panama. It's good for America.

CHETRY: All right, so we're listening just to a little bit there of President Bush speaking live at the United Nations, tackling issues like the economy and trade. But I'd like to get back right now to Senator Richard Shelby, the ranking member of the Senate Banking Committee. As we continue to hammer out this plan. Another question, I know, as you said, there were many unanswered questions. One of them, did you get a satisfactory answer about whether or not this will work if it is approved?

SHELBY: Absolutely not. I did not get a satisfactory answer. And that's one of the concerns we both heard last week that after the AIG deal that things were going to be OK. 48 hours later, the Treasury Secretary and the Fed Chairman summoned us to the Speaker's office to tell us that the sky was falling. Now, let's be honest with each other. There's stress and strain in our financial markets. But do we want to reward some of the same people who caused this problem? And bail them out and let our children pay for it over years? I say no.

CHETRY: The other question, though, that seems to be on the mind of many of our viewers who have been writing is this anger about not understanding why this administration pushed for deregulation, the Congress has passed deregulation. This is the industry that wanted the government to be hands off and now we're in this morass and there's asking for the largest bailout in our nation's history. How - how do you explain that to the American public who seems to be extremely angry about this? SHELBY: Well, I'm not trying to explain it. Because I didn't create the mess. But I can tell you this, we've got to look very seriously at the next Congress, how to reconfigure our whole regulatory structure. Because our regulatory - our regulatory bodies obviously they don't know what's going on in some of our banks, a lot of our state insurance agents. Look at AIG, they didn't know what was going on at AIG. So, we've got a real problem here. And we - we've got to do better. We can do better.

CHETRY: All right, you believe the bill is going to pass? You think that this $700 billion -

SHELBY: You mean the bailout?

CHETRY: Yes. Is it going to pass in some shape or form this week?

SHELBY: I don't know. It could pass because, you know, they - the Fed and the Treasury Secretary, the administration, they've got - they're going to scare a lot of people. But, you know, the best disciplinarian of us is the marketplace. I believe we didn't do anything. The market will correct it all.

CHETRY: All right, a lot of differences of opinion about that situation. And still a lot to tackle, as we - as they stand in front of the House. They talked to you yesterday and now we're going to hear from Ben Bernanke and Henry Paulson as they make the case to the house as well today. Richard Shelby, great to see you. Thanks for being with us.

SHELBY: Thank you.

CHETRY: And we're going to take a quick break. When we come back, we're going to talk about illusionist's David Blaine's latest feat. He is dangling by his feet for the cameras. And our Jeanne Moos shows as that this may seem easy, not, how do you interview a man with his face in the wrong place? Jeanne Moos takes a look. Coming up.

(COMMERCIAL BREAK)

ROBERTS: Eight minutes now to the top of the hour. We're back to talk more about this massive bailout plan. We'd hoped to have him on with Ralph Nader but we had some technical difficulties. But joining us from Gainesville, Florida, former Republican congressman and now the libertarian presidential candidate Bob Barr is with us.

Congressman Bob Bar, good to see you. Got lots of literature from your campaign about this whole thing and your take on this bailout plan seems to be a big I told you so.

BOB BARR, LIBERTARIAN PRESIDENTIAL CANDIDATE: Well, those of us who have been following what's going on in Washington, the ups and downs and the cost and efforts by the federal government under the Democrats and Republicans to interfere in the marketplace tells us once again here they go again, except this time they're spending an awful lot of more money at it than previously.

ROBERTS: All right. So you said interfere in the market I thought the problem was deregulation and nobody was watching them.

BARR: Well, the problem is the market's have been and these companies have been operating with no oversight. It isn't that we need more regulation, more oversight. For heaven's sakes we have reams and reams of regulations and laws already on the books, but what has been sorely lacking is anybody in this administration with the interest in backing those up. I mean, where has the Department of Justice been? There has to be massive fraud involved here. And just now they're starting to maybe look into this? Where have they been for the last several years?

ROBERTS: So, when a candidate like Senator John McCain says, who was a deregulator, prided himself in being a deregulator, says the answer to this crisis here is we need more regulation of the financial markets. Is he right or is he wrong?

BARR: He's absolutely wrong. But the fact of the matter is that this is another illustration of how the Republicans are just as much in the pocket of big government as the Democrats are. What we need is we need better enforcement of existing laws to prevent fraud and bring transparency to the markets so the average investor knows what's going on. We don't need more government. That's just going to muck some - muck things up even more.

ROBERTS: OK. So that's for the future. But right now, you're running for president. So, if you were sitting there in the Oval Office, what would you be doing about what's going on right now?

BARR: I'd bring a new team in, for one thing. I'd bring in folks who have at least an appreciation, a passing understanding of the free market out there and who are not so wedded to government that they are constantly looking for ways to have the government meddle in the marketplace. I have more faith in the U.S. economy, which is much stronger and much more diverse than in past decades when we had similar problems than apparently these folks in Washington. Let the market operate.

ROBERTS: But you know what the Treasury Secretary and the Fed chairman are saying, they're saying "if you let the market operate right now, the whole system could collapse in a matter of days.

BARR: I don't believe that. I think that's more of this "Chicken Little," the sky is falling excuse to get Congress to rush through far-reaching legislation without really thinking about it. We've been there before. We did that with the Patriot Act and we're still paying the price for that several years later.

ROBERTS: Congressman Barr, it's good to talk to you this morning. I'm sorry the time was short. But with the technical difficulties and everything, we got jammed up against a wall. But we do appreciate you hanging in this morning. We'll talk with you again soon.

BARR: Absolutely. Good being with you all.

ROBERTS: All right. Five minutes now to the top of the hour.

CHETRY: Suspended animation.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: This guy's crazy.

(END VIDEO CLIP)

CHETRY: Upside down and usually five stories up. Jeannie Moos hangs out with David Blaine.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I needs to make a living somehow.

(END VIDEO CLIP)

CHETRY: You're watching the "Most News in the Morning."

(COMMERCIAL BREAK)

(MUSIC PLAYING)

CHETRY: Just when you think you've seen him do it all, illusionist David Blaine is now going to hang upside down for days. But there really is a downside to everything.

It's the most news in the morning with Jeanne Moos.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): David Blaine has survived water, ice, burial. Now, hanging around upside down? This is your view of the world now. Okay, it may not look like much, but you try hanging upside down for 2 1/2 days.

UNIDENTIFIED MALE: Five stories high.

MOOS: Actually, it was usually close to 5 feet. To pass the time dangling about Central Park, Blaine poses with fans. He signs autographs. Is he reading a newspaper?

UNIDENTIFIED FEMALE: When I saw him reading the paper, I said this guy was crazy.

MOOS: Actually that was just photo op for the paper he was holding. Blaine is constantly giving interviews upside down. Kelly Ripa had the most unusual one.

KELLY RIPA, TV SHOW HOST: How are you? Hello.

MOOS: And when they threw it back to Regis in the studio -

REGIS PHILBIN, TV SHOW HOST: Incidentally, David, check me out, this is a piece of cake. What's the problem?

MOOS: The problem say doctors could be stroke or blindness.

Your eyes are definitely bloodshot.

DAVID BLAINE, ILLUSIONIST: I think they are a little nasty.

MOOS: So, don't try this it at home. Like a Pittsburgh radio deejay known as "Bubba" (ph) did.

UNIDENTIFIED MALE: Are you an illusionist or a magician, Bubba?

UNIDENTIFIED MALE: I'm an idiot.

MOOS: Within minutes, Bubba turned red and felt dizzy and soon couldn't take it anymore.

UNIDENTIFIED FEMALE: He's done. Now.

UNIDENTIFIED MALE: He's out. How long did he last?

MOOS: A mere 16 minutes. Now imagine 2 1/2 days. So Blaine does get to be upright for bathroom breaks to attend to his catheter. He stopped eating solids ten days ago to eliminate elimination. There he hangs night and day. Still sharp enough to try and steal my watch as he held my arm to stay steady. You've undone my watch, you're trying to steal it, aren't you?

BLAINE: I need to make a living somehow.

MOOS: Yes. He does crunches to get his head upright and moves his legs around to help the circulation. Houdini sometimes worked upside down but he was trying to get out of a straitjacket as fast as possible. Watching a guy dangle for hours, not quite so riveting. At least we can ask incisive questions.

UNIDENTIFIED FEMALE: How is it hanging?

MOOS: How are they hanging?

No, no, no, that's not right. No, no, I didn't mean they, I meant no, no.

BLAINE: What's your name?

MOOS: It's Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

CHETRY: It's not nearly as hard as David Blaine's making it out to be. I feel like I could do this for hours.

ROBERTS: It's quite easy. Quite easy.

Hey, listen. Oh, I thought you were getting ready to take a nap. Oh, my bad. CHETRY: No, we're back now. It's time to say goodbye, though. Thanks so much for joining us. John, you're coming back tomorrow, to New York City.

ROBERTS: Yes. I will see you then.

Right now, here's "CNN NEWSROOM" with Heidi Collins.