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The Wall Street Bailout Plan

Aired September 26, 2008 - 19:00   ET


LOU DOBBS, HOST: Thanks, Wolf.
Tonight, House Republicans are challenging the White House and Congressional Democratic leadership to protect American taxpayers, instead of turning over nearly a trillion dollars to bail out Wall Street.

And tonight, four members of Congress, just four, will determine whether that bailout goes forward. We'll tell you whether those lawmakers will continue selling out to Wall Street and special interests.

And, tonight, Senator McCain will take part in the presidential debate. It begins in just about two hours. We'll have the best analysis you can expect anywhere. All of that, all the day's news and much more tonight from an independent perspective, straight ahead.

ANNOUNCER: This is LOU DOBBS TONIGHT: news, debate, and opinion for Friday September 26th. Live from New York, Lou Dobbs.

DOBBS: Good evening, everybody.

House Republican leader John Boehner today declared no one will roll over him in the negotiations on that bailout of Wall Street. Boehner's warning comes as four leading members of Congress, two from each party, prepare to hammer out a deal over the weekend to save that bailout.

The Bush White House and Congressional Democratic leadership, working together, trying to stop what is a House Republican revolt. Senator McCain today left Washington to take part in tonight's debate with Senator Obama in Oxford, Mississippi. McCain said there's been enough progress in his view in those bailout talks for him to be able to participate in the debate after all.

We have extensive coverage. And we begin tonight with Jessica Yellin on Capitol Hill -- Jessica.

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Hi, Lou. Well the latest news is that a meeting of the top negotiators here on the Capitol is not going to take place on this bailout until tomorrow. Right now, they're having staff-level discussions. Their staffs are working out details.

They want to work through a draft, even if it takes all night, and say they will present that to their members, who will then sit down with Secretary Paulson at some point tomorrow. That meeting still not scheduled.

Now as you can imagine, there's been an enormous amount of tension on both sides here on the Capitol today. Democrats are firing back at John McCain, insisting he slowed things down and things only got going after he left town. Let's listen.


REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: I believe that the -- good progress is being made. As I have said before, we will not leave until legislation is passed that will be signed by the president and we will be working through the weekend to achieve that end.

REP. BARNEY FRANK (D), FINANCIAL SVCS. CHMN.: We're back on the progress track. As the speaker said, we had a little bit of a glitch yesterday, but now that Senator McCain is safely in Mississippi, we can get back to serious work.


YELLIN: Now as you can imagine, the House Republicans have a different view of things. They say that they had reservations all along and they are glad that their concerns are now being heard. John Boehner, the leader of the House Republicans, fired back aggressively today with this comment.


REP. JOHN BOEHNER (R-OH), MAJORITY LEADER: I've been in conversations with the administration and the speaker of the House all week. I don't know what games were being played at the White House yesterday. A gang up on Boehner, but they thought they were rolling me, they were kidding themselves.


YELLIN: I'll tell you, Lou, the attitude here is, you know, nobody can really explain what went wrong yesterday but now they're back on track. Somebody described it as plodding, but progress -- Lou.

DOBBS: Progress toward what? This is incredible. The national media has bought into this theater around this bailout that apparently about three-fourths of the American people want nothing to do with. What is going on here?

YELLIN: Well, I'll tell you, a lot of the House members say that their calls are 50-1 against any kind of bailout deal, but they are under enormous pressure, and I cannot overstate that, by the administration, and by even outside experts who are telling them if they don't act fast, crisis could hit our financial markets.

DOBBS: This is truly extraordinary. I hope that those members of Congress, the president and the Senate, of course, of course will all join and watch this broadcast tonight. Because they will -- we're going to introduce them to two leading economists who will explain in detail why this is a terrible idea to turn over a trillion dollars, almost a trillion dollars, of taxpayer money, to do something that's undefined, indescribable, and at this point, certainly not worthy of even consideration as to what its impact might be because it's all so amorphous.

Jessica, thank you very much. We'll be coming to you throughout for updates.

Thank you very much -- Jessica Yellin from Capitol Hill.

Well Senate Republicans who support the massive $700 billion bailout of Wall Street today blocked a new $56 billion stimulus package that the Democrats wanted to pass. The Democrats wanted this so-called second stimulus package to extend unemployment benefits, increase spending on food stamps and fund new construction projects. But the Republicans and the White House said the increased spending would lead to higher taxes and deficits.

No explanation as to why that's not a consideration in the $700 billion bailout of Wall Street. Well, tonight, the House of Representatives passed its own stimulus proposal, for $61 billion, in additional spending, but that legislation, we are told reliably, has no chance of ever becoming law.

President Bush today declared he is -- are you ready -- optimistic that Congress will pass this bailout. It is the latest in a series of efforts by President Bush to persuade members of his own party to support the Wall Street bailout.

But many Republicans now are simply refusing to follow the president on this or any other issue.

Ed Henry has our report from the White House.


ED HENRY, CNN WHITE HOUSE CORRESPONDENT (voice-over): Call it "take six," the sixth time in a week the president has tried to show he's got the juice to sway his fellow Republicans.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We will rise to the occasion. Republicans and Democrats will come together and pass a substantial rescue plan.

HENRY: But, all around him, signs the White House is on bended knee, literally. Two Democratic sources say in a closed door meeting Thursday night, Treasury Secretary Henry Paulson got down on one knee to half-jokingly beg Speaker Pelosi not to use the TV cameras on the White House driveway to blast the stalled talks.

Paulson said he was worried it would further rattle the markets. But Democrats say the real problem is House Republicans balking at the president's $700 billion bailout.

SEN CHUCK SCHUMER (D), NEW YORK: This is a plea to President Bush, for the sake of America, please get your party in line. HENRY: Last Friday, the president began his case.

BUSH: This is a pivotal moment for America's economy.

HENRY: Saturday, more promises.

BUSH: And we'll work to get something done as quickly and as big as possible...

HENRY: Monday, a written statement warning, "a failure to act would have broad consequences." Tuesday, Vice President Cheney is dispatched to the Hill to twist arms. Wednesday, a primetime address.

BUSH: ... warn that without immediate action by Congress, America could slip into a financial panic.

HENRY: Thursday, the president's attempt to jump-start talks by inviting Barack Obama and John McCain to the White House ended badly. Sparking Paulson's plea to Pelosi. A week of lobbying has still not won over Republicans. So White House aides have fallen back on a familiar refrain. The president is willing to take on bold fights, even if it's not always popular with fellow Republicans.

DANA PERINO, WHITE HOUSE PRESS SECRETARY: He has led on important issues like Social Security, immigration, and now this one where we try to help drive to a conclusion.


HENRY: Now, of course, on those other previous tough fights, as the White House calls them, Social Security reform, immigration reform, the president lost -- Lou.

DOBBS: Yes, he lost, and he lost badly. There is still from this White House no explanation whatsoever as to why this is necessary, what the money would be used for, and precisely what the results of its expenditure would be. I mean this is an -- these politics of fear, in which both President Bush and Nancy Pelosi, the Speaker of the House, and Harry Reid are indulging, this is now beneath contempt as far as most Americans are concerned. Don't they understand that?

HENRY: Well, the president has said why he thinks it's needed. He says, at least, that the thinks there could be further economic and financial...

DOBBS: Oh, no, no, no, no, no, no, no...

HENRY: ... so he has laid that out...

DOBBS: No, no, Ed, let me be clear. He said that he wants it because the sky will fall. He hasn't said what this will do to stop the sky from falling. That's my intent in that expression. Can you think of anything he has said that would illuminate such a causal relationship?

HENRY: Well, he has specifically said that the government would be buying up bad debt to try to clear up credit and make sure that...


HENRY: ... that does not tie up people -- you know affect 401(k)s, affect auto loans, college loans. That's the case he's made, Lou.

DOBBS: Very well. Ed, thank you very much. Ed Henry, from the White House.

Well, the White House and the presidential candidates tonight are watching the impact of the collapse, the biggest collapse, of a bank in American history, the collapse of Washington Mutual. It was the largest savings and loan in the country. The federal government yesterday, last evening, seizing Washington Mutual and selling its assets to JPMorgan Chase for the bargain basement price of just under $2 billion.

Reacting to the collapse of Washington Mutual, Senator Obama said quote, "this is the time to rise above politics for the good of the country, adding, we cannot risk an economic catastrophe."

For his part Senator McCain said quote, "it's our obligation to restore the confidence of Americans in these valuable institutions", end quote. I think it's important for Senator Obama and Senator McCain to know something. The CEO of Washington Mutual, Alan Fishman, who's been on the job for less than three weeks, well, he will receive just about $18 million in severance and bonus pay -- that's right, for less than three weeks' work.

Some reports say that he could have received as little as 13 million. I've chosen to go with the higher estimate, so let's compromise. Somewhere between 13 and $18 million for three -- well, just under three weeks' work. Fishman replaced the previous CEO on the 7th of September.

That's why there's some concern in some quarters, including in my own, my own modest mind, some concern about continuing the nonsense of excess and greed that has dominated Wall Street for many years now and which would be reinforced again in my mere opinion by this ridiculous and absurd bailout. The worsening financial crisis in this country is likely to be an issue in tonight's presidential debate between Senators Obama and McCain, even though the debate is supposed to focus on foreign policy.

But moderator Jim Lehrer of PBS says he won't be constrained by any previous agreements with the campaigns. Candy Crowley has our report from Oxford, Mississippi, where that debate begins now in less than two hours. Candy, what are these candidates thinking about tonight?

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Well, they're thinking about, A, not making a huge mistake, and, B, staying on message. I hate to say that, but the fact of the matter is when you look at these two candidates, when you look at their campaigns and when you look at the debates they've been having from afar, John McCain is about saying Barack Obama is not experienced enough to be president of the United States. And Barack Obama is about saying John McCain is George Bush, do you want the same old thing, well there you go.

So nearly everything they talk about, I think, will have that umbrella to it. I mean those are the two main themes of these campaigns. You're right, they will talk about the economy. We have seen that play out on the campaign trail. Basically, they both are in the same place, at least they were before yesterday at that White House meeting about some of the things they wanted, caps on CEO pay, for instance, some kind of oversight for that $700 billion expenditure, and we have seen them argue about whose idea it was and who thought of it first, that kind of thing.

So I think that you will see a nice discussion, a substantial discussion, of this economic package, but I still think the bulk of it will be on foreign policy, which everyone presumes is John McCain's strength. So we'll see.

DOBBS: His strength, but "The New York Times" and several other institutional wags saying that they believe Obama's favored in tonight's debate. What's the best reading from there?

CROWLEY: Boy, you know, I can tell you this, both sides are beginning to do that whole expectations thing. Got a lengthy memo from the Obama campaign today, saying, well, if he doesn't have a game changer, it's a serious blow to his campaign.

Clearly, John McCain has gotten the most negative press over the past week, the most criticism that he's been show-boating about this whole economic crisis. Barack Obama, you know, has tried to remain cool and calm and sort of above the fray.

Now, he's gotten his hits in and he actually doesn't have to do anything too direct because he's got all those Democrats on Capitol Hill to complain about McCain. But the fact is that both of them are kind of setting expectations. The McCain camp saying, listen, Barack Obama's so fluent and eloquent, we understand what a great debater he is, et cetera.

DOBBS: Et cetera, et cetera. All right, thank you very much, Candy, look forward to it.

CROWLEY: All right.

DOBBS: Candy Crowley from -- well, I guess you could call it the scene of the crime, the upcoming debate in less than two hours, the presidential debate there in Oxford, Mississippi.

Time now for our poll. The question is: Do you believe it is time to tell President Bush and the Democratic leadership to shut up and end the politics of fear and declare no bailout?

Yes or no? Slight editorial cast here tonight. Please vote at We'll have the results for you coming up here next. Still ahead, you won't believe the close ties between members of Congress negotiating this so-called Wall Street bailout and the firms that could benefit from this deal, appearing tight relationship it turns out. I know you're shocked, but we're going to be telling you all about the details.

And an unlikely alliance in Washington between President Bush and the Democratic leadership on Capitol Hill. What in the world is going on in our nation's capital? We'll tell you all about it next and a great deal more straight ahead.


DOBBS: Just four members of Congress will lead the negotiations of what President Bush and Nancy Pelosi and Harry Reid want to be the largest government bailout in history. Democrats, Senator Dodd, Chairman of the Senate Banking Committee, Congressman Frank, Chairman, House Financial Services Committee. Republicans Senator Judd Gregg, ranking member of the Senate Banking Committee, Congressman Roy Blunt, House Minority Whip.

That's your lineup, folks and over the past two decades, those four men have accepted almost $20 million in donations from finance, insurance and real estate firms. Yes, the very same firms that stand to benefit from that almost trillion dollar federal bailout.

We have two reports tonight. We begin with Louise Schiavone and the Democrats.


LOUISE SCHIAVONE, CNN CORRESPONDENT (voice-over): As the financial world awaits a lifeline from Washington, they're looking to friends in Congress whom they've helped over the years. Friends who have stood by in key committees as debts bloomed and regulation waned.

DANIEL CLIFTON, STRATEGAS RESEARCH PARTNERS: They had politicians on both sides of the aisle that were pushing for easier credit. Chairman Frank and Chairman Dodd have been the facilitators of that on the committees. And moving forward legislation that has created a lot of this systematic risk that we are facing.

SCHIAVONE: According to, the Web site for the Center for Responsive Politics, on the Democratic side from 1989 to present, Senate Banking Committee Chairman Chris Dodd has accepted a total of $13,205,556 in campaign contributions, both in PAC and individual money, from the finance, insurance of real estate sectors.

MASSIE RITSCH, CENTER FOR RESPONSIVE POLITICS: The last time that Congress took out the structure of the financial industry, Senator Dodd supported letting banks get even larger and get into new lines of riskier businesses.

SCHIAVONE: House Financial Services Committee Chairman Barney Frank has accepted a total of $2,494,611 in campaign contributions from the same sectors. In Frank's case, top donors include employees from the American Bankers Association, the company that's just bought Washington Mutual, JPMorgan Chase, and the National Association of Realtors. In the case of Senator Dodd, top donors include Citigroup, Bear Stearns and JPMorgan Chase. Dodd and Frank now play key roles in bailout talks.

JD FOSTER, THE HERITAGE FOUNDATION: Certainly Congress bears some responsibility for this coming to pass. There are a lot of federal policies that contributed to the current situation.

SCHIAVONE: House Financial Services Committee Chairman Frank told LOU DOBBS TONIGHT quote, "specifically, I have been a consistent supporter of strong consumer protection, support for adequately funded affordable housing, and support for efficient functioning of financial institutions in our economy, and I find no contradiction in working for all three objectives."


SCHIAVONE: Lou, Senate Banking Committee Chairman Dodd had no comment for us. But in this instance, the three objectives outlined by Frank appear to have been at cross-purposes, with homeowners threatened by institutions near collapse, the economy in shambles and consumers on the hook for a massive bailout -- Lou.

DOBBS: Louise, thank you very much. Louise Schiavone. Well let's turn our attention now to the Republicans, represented by Senator Greg and Congressman Blunt, the second ranking Republican in the House.

Kitty Pilgrim now with the Republicans.


KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Congressman Roy Blunt and Senator Judd Gregg are no strangers to the banking industry. According to, the Web site for the Center for Responsive Politics, Congressman Roy Blunt's top political donors are in securities, investment, real estate and commercial banks, contributing an estimated $2 million over the course of his career.

And this year alone, employees and political action committees from financial and securities firms gave $144,000. Commercial banks contributed $83,000. And real estate contributed $107,000. Blunt, who is up for re-election this year, has a history of supporting business and has given a 93 percent approval rating by the U.S. Chamber of Commerce for voting in their interest. Bill Allison is with the Sunlight Foundation, a nonpartisan group that advocates greater government transparency.

BILL ALLISON, SUNLIGHT FOUNDATION: He's also been somebody who's been very much, again, a creature of Kay Street (ph) and very much -- lobbyists have had his ear and he's been very much kind of an insider in terms of how he's run his or how he's you know functioned in Washington.

PILGRIM: Blunt also voted back in 1999 to roll back banking regulations and sided with the banking industry on overhauling the bankruptcy code in 2005 to make consumers repay more of their debt during bankruptcy. Senator Judd Gregg's top funding sources this election year are the securities and insurance industries which provide 21 percent of its funding.

RITSCH: Since Senator Gregg has been in Congress, he's collected about $1 million from the financial sector and the industries that are most interested in this bailout. The insurance industry is his number one contributor.

PILGRIM: Citigroup is listed as the number four top contributor in this election year. Senator Judd Gregg has a Chamber of Commerce ranking voting 88 percent of the time pro business.


PILGRIM: Now, public advocacy and watchdog groups say because of the deep ties to business and banking, members of Congress involved in crafting the bailout should not be allowed to negotiate behind closed doors without the knowledge of the public -- Lou.

DOBBS: Well in point of fact, and Judd Gregg, how much has he taken from...


DOBBS: $1 million.



DOBBS: Well he and -- I mean that's sort of shocking. He and Blunt are pikers (ph). I mean Christopher Dodd and Barney Frank have been making them look silly. I mean you're talking tremendous sums of money on the Democratic side. I'm a little embarrassed for the Republicans. They're supposed to be the party of business and they're not getting their fair share of the business.

But it looks like they're going to be giving the business to the American taxpayer if these four folks go ahead and press through this bailout. And by the way, we're going to be talking about why this bailout is such a ridiculous idea. We're going to be talking with two of the country's leading -- leading economists here next.

Kitty, thank you very much. I mean this -- you and Louise Schiavone putting your reportorial skills to work. I hope everyone appreciates that because that's something that no one else is reporting and I wonder why. Anyway, you wouldn't think somebody's greasing the skids for this bailout, would you? No.

Kitty thanks -- Kitty Pilgrim.

Up next here, President Bush in an unlikely alliance -- unlikely alliance with the Democratic leadership? How about a cold day in hell first? We'll be talking about that as he works against his own party. And will the federal government's most successful immigration enforcement program be allowed to survive the Democratic leadership of this Congress? Well we'll be reporting on that and tell you what the odds are, as some of the most powerful interests in the country are working to kill it because it turns out it actually works. We'll be right back.


DOBBS: Well the Congressional Democratic leadership, Democrats from both the House and the Senate supporting President Bush's request for $700 billion of taxpayer money to bail out Wall Street. But key Republicans, some of them once President Bush's staunchest supporters, have simply revolted against the idea of a federal bailout for Wall Street. Lisa Sylvester now reports on what is at least an unlikely alliance between Democratic leadership and a very unpopular president.


LISA SYLVESTER, CNN CORRESPONDENT (voice-over): The Bush administration wants quick action on this $700 billion bailout. But House Republicans are saying hold on, give us more time.

REP. JEB HENSARLING (R), TEXAS: House Republicans believe that we need more taxpayer protections. We need a workout, not a bailout.

SYLVESTER: While members of President Bush's own party are opposing the administration's plan, it's the Democrats who are siding with the Republican president. A strange political dynamic. Fiscal conservatives say the country is racking up too much debt and has no way to pay for it.

THOMAS MANN, BROOKINGS INSTITUTIONS: The Republican Party is philosophically against government regulation and they're very suspicious of putting up huge amounts of federal dollars in the form of guarantees.

SYLVESTER: This has tied the Democrats to an unpopular president. It's not the first time that Democrats have done the heavy lifting for President Bush while GOP members have resisted. With comprehensive immigration reform, a similar scenario with bipartisan leadership facing revolt and ultimately defeat by Republican rebellion. On both issues, the public has strong feelings and members of both parties are hearing it.

MIKE FRANC, THE HERITAGE FOUNDATION: The phones ring off the hook, the e-mail system is overburdened right now with people back home who are very, very angry. Every office you talk to tells you that it's 100-1, 95-1, from constituents against what seems to be developing. That has put the fear of God into all these members of Congress.

SYLVESTER: Democratic leaders say of any deal that goes through Congress it won't be done just with Democratic support and that Republican lawmakers will have to come on board.


SYLVESTER: Of course, many of those Republicans are listening to their constituents and saying they are not going to support a deal that includes billions of taxpayer money. On the House side, all of those members will have to go before the voters on Election Day -- Lou.

DOBBS: This is insane. I mean and you're right, it's exactly resonant of the comprehensive immigration fight. A Republican president, an unpopular Republican president, I won't mention his name, and the Democratic leadership, particularly in the Senate, fighting the will of the people and the House Republicans.

Is there a possibility here, dare we -- dare we hope -- that the will of the majority might be asserted in Washington, D.C. over these fools who want to give away taxpayer money to bail out Wall Street?

SYLVESTER: Well I can tell you that the phones are ringing on Capitol Hill and so are those e-mails flying. People are definitely calling in and letting their lawmakers know what they think about this unpopular proposal.

DOBBS: And you know what? We've got some folks that I think -- all those people making those phone calls and sending those e-mails -- and I would hope that everyone would let this Congress know what they think of this -- what I think is a monstrous, monstrously stupid and irresponsible idea, this bailout of Wall Street. We're going to introduce you to two economists -- two of the country's leading economists, who are going to explain exactly why this is a very bad idea.

You might -- should we call up Roy Blunt, Judd Gregg, Chris Dodd, Barney Frank and maybe they should get on the -- they should be watching. Let them know, they need to tune in. They're next as we continue, we'll be talking about economics and what we can expect in the debate tonight with three of best political analysts in the whole galaxy. Stay with us, we'll be right back.


ANNOUNCER: This is LOU DOBBS TONIGHT, news, debate and opinion. Here is again, Mr. Independent, Lou Dobbs.

DOBBS: As we often like to do on this broadcast, we'd like to inject knowledge, facts and some pragmatic non-ideological perspectives, and joining me now, three people who do just that. In our Washington, D.C. studio is Kathleen Day of the Center for Responsible Lending. Kathleen, good to have you with us.

Professor Peter Morici, he's professor at the Robert H. Smith School of Business at the University of Maryland. Professor Morici, good to have you with us.

And from Boston tonight, Professor Jeffrey Miron, he is the economics professor at Harvard University. Let me start with you, Professor Miron. This $700 billion bailout, I know you've been following this, do you have any way in which to tell us what they're going to use there money for? Is there any specificity, any -- at all?

JEFFREY MIRON, PROF, HARVARD UNIVERSITY: There is not a lot of specificity, there's some general principles. The idea is to buy assets from these banks, investment bank, that are likely to be poor quality, that are likely have value well below their face values, but the details of exactly how that will be accomplished, exactly which assets or institutions will be eligible and how those prices will be set, all that seems to be still up for grabs.

DOBBS: Well, I'm taken by the fact that we used two-and-a-half to ask this Congress to approve $700 billion in taxpayer money to be used at the will of the Treasury secretary -- he would be beyond Tsar, he would have been almost god-like, had that been approved. Is -- and they keep talking -- Democratic leadership in Congress, this president, Henry Paulson, about the sky will fall and the world will end if we don't put this up, this $700 billion in taxpayer money. Professor, what do you think is the result?

MIRON: I think that this is an extreme exaggeration. There's no doubt that there will be more bankruptcy, there will be more defaults and there will be some distress on Wall Street if the federal government just stood by and let the market work its way out of this situation. But, the notion it's going to be Armageddon, it will be catastrophic, is completely unsubstantiated by common sense or the evidence. So, it doesn't call for -- it's not a situation that calls for a dramatic or draconian enormous intervention and indeed the bankruptcy process works incredibly well. What people sometimes forget is when a company goes bankrupt, it's still there. It's owned by somebody else, but it's still there, doing most of what it did before.

DOBBS: The market actually went up today, was very stable, even as the talks were collapsing and this country recorded its largest bank failure in history, Professor Morici -- and without disruption to the markets, $300 billion, almost triple, well, it is triple the next largest bank failure in American history. What is going on here?

PETER MORICI, PROF, UNIVERSITY OF MARYLAND: Well, Washington Mutual is the poster boy for all the corrupt banking practices. You saw in the last segment how well they pay their executives, but yet they made many, many bad loans.

The trouble with the bailout package is it gives money largely to the New York City banks, but doesn't compel them to get back in the business of banking, making good loans, which they haven't been willing to do since last December or February -- or excuse me, last December or November, even though Ben Bernanke's almost advanced them $400 billion. So, we've given them $400 billion, what makes us think they'll do better?

And the other half of it, of course, is it does really not much about the compensation scheme. The wording of the compromise that we saw last evening or last afternoon was very vague, as vague as the authorization for the money. DOBBS: And we're watching this political theater, Kathleen Day in which there's this process underway of negotiation, and we've got our television cameras and reporters are covering them, and none of this really goes to the heart of this crisis, does it -- Kathleen.

KATHLEEN DAY, CTR FOR RESPONSIBLE LENDING: No, you are exactly right. All this would do, if, indeed it does what the administration says, it would stem the panic. And I do think there is some question about how great that is. But let's assume there is something going on in the market that might require some intervention. This is going to stem the panic but doesn't get at the root of the problem that caused the panic, that's declining home prices, they're in a death spiral. And the only way to stop this is to stop this wave, this tsunami, of foreclosures, that is the result of all these bad banking practices.

Ten million-plus bankruptcies, I mean, foreclosures are going to ensue in the next coming years and that's not just going to impact the people that losing their homes. All their neighbors, 40 million American families that live near their properties will see their property value go down by about $350 billion and this package doesn't even -- if the administration had its way it wouldn't even address that. Helping stem foreclosures should not be an afterthought, it should have been a centerpiece of this.

DOBBS: We're going to continue with Professors Miron, Professor Morici, Kathleen Day, here in just one moment. Isn't it refreshing to hear intelligent people talking about the real issue, the real causal relationships and the facts, instead of the sort of breathless nonsense in the political theater that's taking place in Washington, D.C.? We'll continue with our panel. We'll continue with the day's news as this broadcast goes on on the other side of this commercial break. Stay with us, please.


DOBBS: I want to turn to Professor Miron for -- the idea that this, the arrogance, the hubris involved in asking the taxpayers for another almost trillion dollars. Give us your thoughts about what should be done, where are we right now in this crisis.

MIRON: I think we're at a point where there's going -- there's still more pain to come, but, in fact, a lot of the pain has already come. The crucial lesson to be learned is that if you put the government in the position of guaranteeing all sorts of risky lending, which the government did by creating and then subsidizing Fannie and Freddie and encouraging Fannie and Freddie to take on huge amounts of incredibly risky debt and subprime loans, then you're going to have this problem. And so, government contributed a huge amount to the current situation. This bailout does nothing to fix that.

DOBBS: Kathleen Day, from your perspective from the Center for Responsible Lending, is this bailout dealing with the issues as far as you're concerned?

DAY: No, it doesn't. Again, I keep going back to this, it doesn't do anything about real estate price, which are affecting -- and at the heart of this and it's hurting all the taxpayers that would be paying this. It's depleting the tax base across the country. There was a county in Maryland recently that had...

DOBBS: People have suggested that this is an analog to the savings and loan crisis.

DAY: It's the opposite. In the savings and loan crisis, real estate, homes and commercial property was taken off the market, precisely so it wouldn't flood the market. Here, they're silent. You're saying turn over, taxpayers, $700 billion, and in addition you'll see your home value go down, not because you're in foreclosure, but because we're not stopping it.

DOBBS: Professor Morici, you're going to get the final thought here.

MORICI: Well, there's a shortage of conventional mortgages out there in business lending because the banks in New York have abandoned this. This package would give them lots of money, but there's nothing to guarantee they would reenter that kind of lending. They've ignored it for the last nine months despite federal...

DOBBS: Wait a minute, and we've been talking about the fact that the Federal Reserve has put almost half a trillion dollars into the banking system already...

DAY: Yeah.

MORICI: And yet you can't get a mortgage, you can't get a business loan, because these guys aren't interested in using the money we give them to do that, so it's ludicrous to give them any more.

DOBBS: Professor Morici, thank you very much, Peter Morici. Kathleen Day, thank you very much.

DAY: Thank you.

DOBBS: And Professor Miron, Jeffrey Miron from Harvard University, thank you all, we appreciate it.

MIRON: My pleasure.

DOBBS: Well, government can, believe it or not, work to protect the interests of the American people when the will is present. The most successful government program to stop illegal immigration and to stop illegal aliens from taking jobs from Americans and legal workers was saved this week, but it's only temporary.

E-Verify has been scheduled for targeting by the U.S. Chamber of Commerce every ethnocentric interest group in the country, it is scheduled to expire in November, but the House has voted to extend it until next year, then E-Verify's future will be in the hands of a new president, a new Congress, and the powerful lobbying groups and ethnocentric special interests group would make a concerted effort to kill the E-Verify system because it does work. And those efforts to kill it led by none other than Democratic senator, Robert Menendez. Tell the key officials in Washington how you feel about E-Verify and it's future and its role in our society. Please go to our Web site,, there you'll find phone and e-mail contacts for House Speaker Pelosi, Senate Majority Leader Reid and of course Senator Bob Mendez, President Bush and Security Secretary Michael Chertoff, they need to know how you feel about E-Verify. You might let them know how you feel about this bailout, too.

Well, San Francisco's illegal alien sanctuary policy leading to a confrontation yesterday between two groups of demonstrators. One group supporting enforcement of U.S. immigration laws rallying to protest the city's sanctuary policy. That group confronted by a large group of counter-protesters supporting illegal aliens and the sanctuary policy and open borders. San Francisco officials, under significant fire recently after three members of one family were killed, allegedly by an illegal alien who had been shielded from federal authorities by, yes, city officials.

Up next here, strange bedfellows, probably not, Democratic leaders joining forces with President Bush -- we've seen this movie before and guess what, they're a raid (ph) against the will of the American people.

And the candidates' strategy for tonight's presidential debate? Who's got the advantage? Who's going to win? Three of the best political analysts join me here, next. Stay with us, we're ready for that debate. We'll be right back.


DOBBS: Welcome back. Before I turn to our distinguished panel, I just want to bring you up to date. As we just reported, Senator Ted Kennedy, taken to a Cape Cod hospital just a couple of hours ago. We did not know the circumstances or his condition, but we are able to tell you -- we're pleased to be able to tell you that he is expected now to be leaving the hospital shortly, is the way we are being told, will be, by his staff. Apparently the senator suffered a seizure. As you know, he underwent a brain surgery for a tumor, and has been convalescing at Cape Cod, at the residence there, and had to go to the hospital because of a change of medication, that's what we're told, but he is expected to leave the hospital shortly. So, that's good news.

Let me turn now to Ed Rollins, Republican strategist, former White House political director, formerly the chairman of Mike Huckabee's presidential campaign. Good to have you with us.

Michael Goodwin, Pulitzer Prize winning columnist, "New York Daily News." And Democratic national committeeman, Robert Zimmerman.

Let's turn to this debate, tonight. Your candidate, Barack Obama, has immense advantages over -- under -- over Senator McCain. One wonders why he bothered to show up because he is going to be dwarfed by the awesome realthetorical power of Senator Obama. What do you think, it'll be over in the first 10 or 15 minutes? ROBERT ZIMMERMAN, DEMOCRATIC NAT'L COMMITTEEMAN: I think we'll need Dramamine from both campaigns spins, quite honestly. The reality is, we now have a situation where both campaigns are putting out advisories praising the other one's debating skills. Trying to lower expectations for each other.

DOBBS: You would think, you would think listening to the campaigns that suddenly the entire Obama campaign had decided to vote for Senator McCain because...

ZIMMERMAN: Exactly. Bottom line is, this is such a significant debate. First of all, historically the first presidential debate gets the biggest audience.

DOBBS: And defines the outcome.

ZIMMERMAN: It plays a role. I don't think it necessarily defines the outcome.

DOBBS: I just was going to see how much you were going to manage those expectations.

ZIMMERMAN: No, I think it plays a role. But, I think what's going to be most important now is to see who can really show the stature or the presence at a time of great crisis in America, show the stature and be most presidential in their presentation. That'll be the test.

DOBBS: You know, that's scary when you think about what you just said because it's probably true. We're not talking about knowledge or...

ZIMMERMAN: It is scary that I told the truth?

DOBBS: No, no, no. But we are not talking about necessarily the capacity to run a crisis or to run the government or move the levers of diplomacy and if necessary our military to engage conceptually the world, but to look presidential. I mean, you're probably right, to act and to sound presidential. I mean, that's what we're down to, isn't it?

MICHAEL GOODWIN, NEW YORK DAILY NEWS: Right, well, this is the television age and I think it's unfortunate that this could have been actually a much more, I think, substantive debate before the last couple of days. I think this kind of scattered all of the energies now and it's a little crazy as to what will happen tonight, whether any one topic will get enough time to really go beyond the platitudes.

DOBBS: Who wins?

GOODWIN: I don't know yet.

DOBBS: You don't? Your candor is breathtaking.


ED ROLLINS, REPUBLICAN STRATEGIST: He is the reporter, he can be neutral. Without putting a spin on it, this should be...

DOBBS: Now, wait a minute.

ROLLINS: Without putting a spin on it.

DOBBS: All right.

ROLLINS: This should be John McCain's forum. I mean, obviously, he has more foreign policy experience. He believes very deeply in the surge and other things, he's certainly traveled more places than Obama, so this should be his night. He's had a terrible, terrible week, so if he doesn't have a good night tonight, then I think the momentum will basically continue, and all that Obama's doing, very much like Reagan in 1980, he has to show that there's a substance there and it's sort of a presidential gravitas, which is exactly what we're talking about here. Because you're not going to move the partisan or the ideological voters, they're in one camp or the other. You've got the swing voter to basically make some judgment and they're I like 'em, I don't like 'em, I think he looks good, I think he sounds good and I think Obama should do well on the forum, but the substance, John should do better.

DOBBS: As we were talking, historically, the first debate in 2000, the first debate of 2004 between this president John Kerry seem to have some direction for the way in which the vote ultimately went. Do you see any difference in likelihood this year?

ZIMMERMAN: Well, I think -- you know, I was at the 2000 and 2004 debates and sitting in the audience in 2000 and watching the polls immediately afterwards, Al Gore won that debate. Four days later, he had lost because the Republican very effectively, spin Machine turned it around and made his...


No, I'm saying that's part of the process and what we all have to be careful about is watching the spin that takes place after the debate.

DOBBS: There won't be any spin after this one.

GOODWIN: No, not at all. Just one room. But, I think that this year is different though, Lou, potentially, because I think there have been so many surprises in this race and fundamentally you do have still two unconventional candidates and events outside are shaping this race in ways we don't always see.

DOBBS: And unconventional is where we pick up when we continue in a moment. I want to ask Ed Rollins if he feels a little bit, well, set aside because the Democratic leadership and Congress has allied with his party's leader, the president of the United States on that bailout. We'll see if we can comfort Ed Rollins when we continue. We'll be right back.


DOBBS: We're back with Ed Rollins, Michael Goodwin and Robert Zimmerman.

Ed, let me turn to you, we were trying to comfort you in the fact that George Bush is again aligned himself not with the Republican Party, but with the Democratic leadership of Congress, and excluded, well, those the great unwashed amongst those Republicans in the House who actually want to represent the will of the people.


DOBBS: Well, I mean, doesn't that make you feel badly? The Republican Party...

ROLLINS: You know, no, what I have to tell you, I'm proud of the House Republicans. I mean, obviously, I'm more sentimental towards them anyways and I think they're trying to represent their constituents and they're trying to say, wait a minute, let's look at this thing. Why do we have to throw tax dollars -- Democrats like throwing tax dollars, but Republicans don't like throwing tax dollars at problems. And I think to a certain extent they've been battered and bruised because of the financial policies of this president and I think to a certain extent, you know, think'd like to get back to be fiscal conservatives, again.

ZIMMERMAN: When you looking at the Clinton administration's record surplus and record deficits of the Bush administration has produced, I don't think that standard of Democrats throwing tax dollars applies anymore.

ROLLINS: Well, you have to remember, you raise taxes pretty dramatically after...

ZIMMERMAN: And if you asked America what economy they would prefer to live under, the Bush administration or Clinton's, I think we both agree the Clinton's years provided that, but that's...

DOBBS: That's unfair. That was unfair. That was just really unfair.

ROLLINS: That was 12 years of Republican leadership that basically left you in a period where you could sort of glide for a while.

ZIMMERMAN: We can just bring...


DOBBS: Yes. Right. All right, good instincts. Let's bring it to this moment. Why do you Democrats want to sell out the American people to Wall Street and George Bush?

ZIMMERMAN: Quite the contrary, what you see Democrats working on is trying to protect the retirement 401(k)s for Americas, protect small business, protect the...

DOBBS: So, why do we have to put that money -- why do we have to go through Wall Street to do that? We just had two of the most respected economists in the country sit here and say, point blank, one, they have no idea what the specificity of the details of the proposal are. Two, it won't work. Three, the underlying causes that brought us to this level are not even addressed by what will be at least a trillion dollar if not trillion-and-a-half or $2 trillion adventure, here.

ZIMMERMAN: And you have Mark Zandi of Moody's saying if we don't put this plan in place, we face severe consequences...

DOBBS: Mark Zandi of Moody's -- Moody's is one of the rating agencies, is it now, that is behind this entire disaster along with Standard & Poor's and the others. I mean, I don't want to hear, frankly, from a rating agency on this issue.

ZIMMERMAN: You can look at Andrew Lo from MIT who advocated putting this plan in place or Warren Buffett who said it would be an economic Pearl Harbor if we didn't take action. So, I think there are many reliable and credible sources that recognize the need to protect Main Street America, which is this program's intention.

DOBBS: I tell you what I'd like. I would like from all of you, and I have great respect of Warren Buffett, but I'd like Warren to come on here...

ZIMMERMAN: One for three.

DOBBS: Well, no. To come on and maybe, you know, do that unseemly thing and explain it actually to the American people, because I'm tired of the so-called elites telling American taxpayers what they're going to go with our money and, and turning it over to Wall Street.

This little period, out of all of this, I hope that one thing happens and that's an end to excess and greed on Wall Street an end to these executive compensation packages that are obscene and perhaps a return to responsibility and prudence. Wouldn't that be nice? Maybe they'll negotiate around that. They've got poor folks there, they can talk about the real issues instead of our money.

Ed, thank you very much, appreciate it. Michael, thank you. Robert, I know you want to talk more, we will later.

I want to bring you up to date on our poll -- 91 percent of you say it's time to tell President Bush and the Democratic leadership to shut up and end the politics of fear and declare no bailout.

We thank you for being with us, we thank you for voting. We'll pall the message along.

For all of us here, good night from New York, the ELECTION CENTER begins now with Campbell Brown and Anderson Cooper -- Campbell.