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American Morning
Bailout Deal Stalls; Fed Seizes Washington Mutual; Presidential Debate in Limbo; What Happened at White House Meeting?; Sarah Palin Unscripted
Aired September 26, 2008 - 06:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEO CLIP)
JOHN ROBERTS, CNN ANCHOR (voice-over): Time is more money.
UNIDENTIFIED MALE: No agreement.
ROBERTS: As Democrats balk.
SEN. HARRY REID (D-NV), SENATE MAJORITY LEADER: We don't need presidential politics involved in this.
ROBERTS: And Republicans bicker.
REP. JOHN BOEHNER (R-OH), HOUSE MINORITY LEADER: There are no decisions yet.
ROBERTS: Over an economic cure, the country suffers its biggest bank failure ever.
And the stage is set, but will tonight's debate go on? John McCain leaves it in limbo on the "Most Politics in the Morning."
(END VIDEO CLIP)
ROBERTS: Good morning. Thanks very much for being with us on this Friday. It's the 26th of September. And back to square one on Capitol Hill, and the market's looking awfully nervous this morning.
KIRAN CHETRY, CNN ANCHOR: Yes. Usually we like to answer questions for the viewers, and today we seem to have many more questions than answers.
But we begin with breaking news and right now, the fate of our economy still in jeopardy. In just a few hours, lawmakers will be heading back to the negotiating table after an emergency meeting on the economy broke down late last night. The Democrats thought they had a deal on the Wall Street rescue plan, but House Republicans presented an alternative proposal that brought negotiations to a halt.
And the first presidential debate is in limbo this morning as well. It is set to take place at the University of Mississippi in just 15 hours. Barack Obama says he'll be there. John McCain is still reluctant to participate. He says he wants a bailout deal before he agrees to attend. The bipartisan commission on presidential debates said it is still going forward with the plan for tonight's showdown.
And one of the nation's largest savings and loans has gone belly up this morning. Federal investigators took over Washington Mutual and immediately sold its banking assets to JP Morgan Chase. WaMu, as it's called, collapse is the biggest bank failure in U.S. history. Depositors, though, will not lose a penny. At least that's what they're saying this morning.
Ali Velshi will check on that and is "Minding Your Business" in just a few minutes.
Also, breaking news out of Cologne, Germany, where police at the city's airport stormed a plane shortly before takeoff and arrested two suspected terrorists. Officers tell CNN the two wanted to carry out a holy war and that suicide notes have been found in their home. The German paper reports the two men, a 23-year-old Somalian and a 24- year-old German citizen born in Mogadishu, have been under surveillance for months. For more information, we're going to bring it to you as soon as we get it on this breaking story.
ROBERTS: Back now to our top story. We are just hours away from a high stakes financial rescue mission in Washington. The lawmakers will try to save the government's $700 billion bailout plan after a revolt by House Republicans all but derailed it. The setback left Democrats spinning.
At noon on Thursday, both parties appeared to agree on a deal that could be passed over the weekend. But by 4:00 p.m., as the presidential candidates joined congressional leaders at the White House, things fell apart. Talks broke off when Democrats say they were blindsided by a new plan from House Republicans, one they claim John McCain supported.
At 8:00 p.m., Treasury Secretary Henry Paulson convened an urgent meeting to bring House Republicans back into the fold on Capitol Hill. But Representative Spencer Bachus of Alabama was the only GOP lawmaker who showed, and he eventually walked out.
(BEGIN VIDEO CLIP)
REP. BARNEY FRANK (D), MASSACHUSETTS: We need to have support here not just for the market but for the whole country. So for the House Republicans to take a walk on what is one of the most important things President Bush has ever proposed is just appalling to me.
(END VIDEO CLIP)
ROBERTS: And we are all over the story this morning. Kate Bolduan is in our Washington bureau for us. Elaine Quijano at the White House anticipating the next moves there.
Let's begin with Kate. Kate, Friday morning at 6:02, where do we stand with all of this?
KATE BOLDUAN, CNN CORRESPONDENT: John, to be quite honest, it's very hard to say. The negotiations, they seem to be all but stalled. You talk about that dramatic late night meeting on Capitol Hill. Well, Secretary Paulson pressing to get all sides of the negotiating table back on the same page, and it seems with limited success.
House Republicans refuse to embrace the $700 billion plan that had promised to near agreement yesterday between much of Congress and the Bush administration. The issue, well, financing the bailout.
House conservatives say they now want to fund the bailout through private money, not taxpayer dollars. And this would be a very different plan than what they've been working off of so far. A plan that key players in this negotiation say could force the deal to unravel. Democratic Senator Chris Dodd says the president now needs to step in and help get things back on track. Listen here.
(BEGIN VIDEO CLIP)
SEN. CHRIS DODD (D), CONNECTICUT: And the president has got to go to work here. We're not going to come to a conclusion on a three- legged stool here, missing the fourth leg. I know my colleagues are not going to wound up and vote on something with awareness that the House Republicans aren't participating.
(END VIDEO CLIP)
BOLDUAN: Now, they are back at it again today trying to salvage this bailout plan. The key players, Democrats Congressman Barney Frank and Senator Chris Dodd, you heard right there, along with Republican Senator Judd Gregg. They're planning to sit down again later this morning to try to work out this deal. But notably absent from this group, according to Barney Frank, will be any House Republican. So we'll see where the day takes us in terms of these negotiations as lawmakers are now fighting over their competing plans. And as you already mentioned, John, we're heading into the weekend.
ROBERTS: Difficult to get any kind of a deal done when only one side is working on it. Kate Bolduan for us this morning from Washington. Kate, thanks so much.
CHETRY: So this economic crisis now turning into a political one and any hopes of a bipartisan bill shattered after lawmakers, including both presidential candidates, emerged from a meeting with President Bush to say that negotiations still have a ways to go. So what exactly happened?
CNN's Elaine Quijano is live at the White House this morning with more details on this for us. Good morning, Elaine.
ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Good morning to you, Kiran. Well, you know, going into that meeting yesterday, President Bush had expressed high hopes that the sides could come to an agreement very soon. Even aides were saying ahead of the meeting that the president felt having both presidential candidates, Senators McCain and Obama, here at the White House would help drive this process to a conclusion. That, of course, did not happen.
Well, what happened? House GOP members saying essentially we are not on board. Leader John Boehner saying, look, there are other ideas that need to be taken into account, a major monkey wrench, if you will, thrown into this entire process. And later GOP lawmakers voicing their frustration.
(BEGIN VIDEO CLIP)
REP. ERIC CANTOR (R), VIRGINIA: Most House Republicans do not want to go home and face their constituents saying that we have stuck you with a $700 billion bill and a bailout bill when you can do it by allowing the folks on Wall Street to pay premiums and to fund this bailout.
(END VIDEO CLIP)
QUIJANO: So House Republicans clearly still unhappy with the idea of taxpayer dollars being put to use to bail out private firms. Still a lot of work for this administration to do, as you heard Kate mention, probably going to be, Kiran, a very long weekend ahead.
CHETRY: Yes. And the meeting also producing some theatrical moments we're hearing, inside of the White House. What can you tell us about that?
QUIJANO: Yes, this is interesting. Two senior Democratic aides actually told my colleague, Ed Henry, that in the Roosevelt Room of the White House -- this is where Democrats had congregated after the meeting and the Cabinet Room had broken up -- really a bizarre scene is how one senior aide described it.
Treasury Secretary Henry Paulson came in and jokingly got on bended knee before House Speaker Nancy Pelosi, essentially begging her and other Democrats not to go out before the cameras and blast how these negotiations had fallen apart. Why? Because, of course, behind all the comical imagery, a very serious message here and serious concerns on the part of the treasury secretary.
He's the guy that's been working the long week, along with his staff, along with lawmakers, who's really had a stake in this, of course, driving this negotiation from the administration's perspective. He was very concerned about the markets and also the fact that it could really derail negotiations even further.
So, in the end, Democrats decided they were not going to come out before the cameras. They decided to sort of hold their fire. But certainly illustrating just how intense this whole situation really has become -- Kiran.
CHETRY: Well, if that worked, maybe he should get on bended knee and start begging the House Republicans to come up with some consensus as well.
All right. Elaine Quijano for us this morning at the White House. Thanks.
QUIJANO: Sure. CHETRY: You know, we're less than 15 hours away from what was supposed to be the first presidential debate, and we still don't know if it's actually going to happen. There are millions of dollars, lots of time and planning on the line.
Right now, the bipartisan Commission on Presidential Debates is proceeding as planned. And John McCain has said he would not attend the University of Mississippi event if there's no deal reached on the economic bailout plan. But Barack Obama last night telling CNN that he is ready to debate while continuing to monitor the negotiation.
(BEGIN VIDEO CLIP)
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: By phone, I talk to Secretary Paulson at least once a day, sometimes twice. I have been in conversations with the congressional leadership constantly. And so, my sense is is that we can do more than one thing at a time. I think that's part of what's required if you want to be president of the United States.
(END VIDEO CLIP)
CHETRY: The governor of Mississippi, Republican Haley Barbour, says that as far as he's concerned, tonight's debate will go on.
ROBERTS: Also breaking on the financial front this morning, more bloodshed on Wall Street. Washington Mutual collapsing under a mountain of bad mortgage debt. Federal regulators seized the bank last night and struck a deal to sell the bulk of its operations to JP Morgan Chase. It is the biggest bank failure in U.S. history.
What does it mean for you and your money? Ali Velshi "Minding Your Business" for you this morning. And it's interesting that this was big news last night. But not as big as it would have been.
ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: This is a sign of the times that a major breaking news story that would otherwise be the top of every newscast isn't because there's another breaking business news story on top of it. This is -- I mean, it's just really hard to get your head around.
Washington Mutual is the country's largest thrift, or savings and loan, and this would, as John said, be the biggest bank failure in history. It's very interesting how this went down, though.
It has -- actually, the number has been changing. We have a different number for the amount in deposits from the FDIC just recently. It's about $134 billion in deposits, which is still many times the next biggest failure.
JP Morgan is buying all of those deposits. There's no interruption in service. The banks will open this morning as normal. There will be the same account number. It will be seamless for you.
This doesn't even deal with the FDIC insurance limits. In other words, there is no loss to your money at all. You are absolutely safe. But the way in which this deal went down is we've been hearing for weeks that there was going to be -- you know, Washington Mutual was in trouble. There are banks trying to buy it. By yesterday afternoon, all the buyers had largely backed out. The credit rating of the bank was dropped.
That's what happened to Lehman Brothers. This is what has happened. You normally see a failure at that point. The office of Thrift Supervision, which is one of those many regulatory agencies, moved in, closed the bank, handed it over to the FDIC, which simultaneously sold it to JP Morgan Chase.
This was an instant, seamless transition and the FDIC said that what they didn't want is another session where something was driven into the ground and then there was a long weekend session involving, you know, the treasury and some type of bailout plan. So they wanted to execute this as smoothly as they could. And in fact, it looks like they did it. Will be seamless for the consumers.
ROBERTS: Is this it? Are we done?
VELSHI: This was the biggest bank that was in danger. So it may not be it for banks. It's probably it for big banks.
ROBERTS: Ali, thanks for that report.
CHETRY: Well, a big change in the CNN electoral map gives one candidate an edge in a crucial battleground state. You're going to see it only here on CNN. John has a show and tell at the magic wall for us.
Also, Sarah Palin unscripted talking about her foreign policy experience and whether the U.S. should negotiate with rogue nations.
You're watching the "Most News in the Morning."
(COMMERCIAL BREAK)
CHETRY: Welcome back to the "Most News in the Morning." Sarah Palin speaking about her foreign policy credentials talking to CBS' Katie Couric. She weighed in on whether the U.S. should negotiate with leaders like the president of Iran.
(BEGIN VIDEO CLIP, FROM "CBS EVENING NEWS")
GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: I think with Ahmadinejad personally, he is not one to negotiate with. You can't just sit down with him with no preconditions being met. Barack Obama is so off base in his proclamation that he would meet with some of these leaders around our world who would seek to destroy America and without preconditions being met. That's beyond naive, and it's beyond bad judgment. It's dangerous.
KATIE COURIC, CBS ANCHOR, "CBS EVENING NEWS": So are you saying Henry Kissinger is naive for supporting that?
PALIN: I've never heard Henry Kissinger say, yes, I'll meet with these leaders without preconditions being met.
(END VIDEO CLIP)
CHETRY: Barack Obama has said that he would be willing to meet with the leader of Iran without preconditions if he thought it would promote the national security interests of the United States.
ROBERTS: Just 39 days now until the presidential election, and a big change in one of the key battleground states. Michigan now leading Barack Obama's way, and it's going to change our magic electoral map this morning.
First of all, let's take you through what happened in the 2004 election in the state of Michigan here. John Kerry beat President Bush by three points, 51 to 48 percent. This state had been fairly close in recent polls, but we have a brand new poll out that now shows Barack Obama ahead 49 to 42 percent over John McCain.
That's quite an extension over the way that the polls had been and even further away than it was in the year 2004. We also have some recent polling data came in on the state of New Hampshire. The state of New Hampshire is a real battleground state. It only has a handful of electoral votes, but very, very, very important, and particularly during the primary season.
You can see in 2004, John Kerry beat George Bush by a single percentage point. Our latest polling -- and New Hampshire had been within one point here between Barack Obama and John McCain. We now have Barack Obama leading -- oops. That should be -- excuse me -- we now have Barack Obama leading 47-44 percent over John McCain.
And let's take a look at one other big battleground state, the state of Pennsylvania. In the state of Pennsylvania, the numbers had been about three percent apart. Barack Obama was leading by three percent.
Now in our latest polls, Barack Obama is now ahead by 50 percent to 45 percent. So there is a five-point difference now in the state of Pennsylvania. Barack Obama solidifying gains that he has made there in the last few weeks.
Now, how does that change all of the electoral college calculations that we're going to make here as we go forward? The states that are in yellow are the swing states. Currently, the electoral college count, 223 for Barack Obama, 200 for John McCain. But because Michigan is now seven points ahead for Barack Obama in these latest polls, we are going to change that on our electoral map to what we call lean Democratic. Not necessarily means that he has this locked up.
In states that are dark blue, those are states where he is leading by such a margin that he probably has those states locked up. Conversely, the dark red here for John McCain, states that he probably has locked up. But if we give Barack Obama Michigan and a lean Democratic status, that now changes the electoral vote calculation. Barack Obama would now lead 240 electoral votes to 200 electoral votes for John McCain, with, of course, 270 needed to win the White House.
So we have a big change today on our electoral vote map. Again, Michigan now going from toss-up status to yellow, to light blue, lean Democratic.
All of these moves taking place with only 39 days left until the election, and we expect a lot more to come before November the 4th.
We'll be right back. You're watching the "Most News in the Morning."
CHETRY: Separating fact from fiction.
(BEGIN VIDEO CLIP, OBAMA FOR PRESIDENT CAMPAIGN COMMERCIAL)
NARRATOR: McCain and Bush support a drilling plan that won't produce a drop of oil for seven years.
(END VIDEO CLIP)
CHETRY: Barack Obama attacks John McCain's energy policy. The truth squad digs up the facts on offshore drilling.
You're watching the "Most News in the Morning."
(COMMERCIAL BREAK)
CHETRY: Welcome back to the "Most News in the Morning." It's time to check now with the truth squad. It's part of our efforts to keep the campaigns honest and to sort fact from fiction things that are being said on the campaign trail.
This hour, Alina Cho is looking into some comments about offshore drilling.
Good morning, Alina.
ALINA CHO, CNN CORRESPONDENT: Hey there, Kiran. We covered a lot of issues this weekend. This time it is offshore drilling.
You remember drill, baby, drill, right? With all the talk about Wall Street and bank failures, gas prices might be getting pushed off the front page for the moment. But it's certainly hard for anyone filling up to forget the national average reached $4 a gallon for the first time this year.
So John McCain and Barack Obama are talking solutions in key battleground states. Here's an ad Obama is running.
(BEGIN VIDEO CLIP, OBAMA FOR PRESIDENT CAMPAIGN COMMERCIAL)
NARRATOR: McCain and Bush support a drilling plan that won't produce a drop of oil for seven years.
(END VIDEO CLIP) CHO: All right. Obama attacking McCain on offshore drilling. But is it really true that it wouldn't produce a drop of oil for seven years? We're going to answer that in just a minute.
But first, listen to McCain talk about oil exploration during the Republican National Convention.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: We'll produce more energy at home. We will drill new wells offshore, and we'll drill them now. We'll drill them now.
(END VIDEO CLIP)
CHO: A winning statement there. The delegates responded with the now popular drill, baby, drill chant. It's something you hear a lot on the campaign trail these days. So, back to that seven-year question. How long does it really take to get an offshore rig, like that one, up and running?
Well, we asked the government's Energy Information Administration, and they told us seven years is about right. Now it's also true, if a project is fast tracked under ideal conditions, it could take as little as five years, but seven is the standard.
So, when Obama says McCain and Bush support a drilling plan that won't produce a drop of oil for seven years, is he right? The verdict, according to the truth squad, is true.
Sometimes we have the sound effect, sometimes not. Economists, by the way, say it would take about seven years to get oil out of a new offshore well. And we should point out that there has been some movement on that front if you've been paying attention to the news. The House voted on Wednesday to lift the current federal ban on offshore drilling, and the Senate is expected to follow suit.
As always, we're taking a look at both sides. And coming up in our next hour, we're going to take a closer look into the so-called troop surge in Iraq. Lots of claims flying around about that.
McCain is claiming that Obama was against it from the start and even predicted it would fail. Kiran, McCain calls that a failure in judgment. But is it true? We're going to take a look at it in the next hour.
CHETRY: All right. Good stuff, Alina. Thank you.
CHO: You bet.
ROBERTS: Buried in debt.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: I've just been behind, and I cannot keep up. (END VIDEO CLIP)
ROBERTS: Homeowners looking for their own bailout.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: I have a family to feed.
(END VIDEO CLIP)
ROBERTS: Allan Chernoff looks at what would happen if the billions went to save them instead.
You're watching the "Most News in the Morning."
(COMMERCIAL BREAK)
ROBERTS: Shot of the Capitol this morning, where it is anything but a beautiful day. The rain is coming down, kind of setting the mood for negotiations that will continue on a $700 billion bailout plan as lawmakers try to salvage talks on that plan to rescue the nation's economy. Negotiations disintegrated into chaos and finger pointing late last night. So what's really behind the stalemate?
Joining us now, Patricia Murphy. She is the editor of Citizenjanepolitics.com, and John Avlon, registered independent and contributor to Politico.com.
And folks, before we get started, I just want to point out that we're playing U2 because Bono will be joining us in about an hour and 15 minutes to talk about his work at the United Nations on global poverty and AIDS and malaria eradication. So we're all looking forward to that.
Patricia, why don't you start us off here. The Democrats yesterday went into this White House meeting thinking that they had a deal. At least publicly that's the face that they were putting forward. They come out of the meeting without a deal. What happened? When Barack Obama and John McCain got together there, did presidential politics hold sway?
PATRICIA MURPHY, EDITOR, CITIZENJANEPOLITICS.COM: Well, I think that it's not just presidential politics, it's also congressional politics. This will be the last vote that lawmakers cast before they go home for re-election. They are getting inundated by callers saying that they are against this bailout almost uniformly.
If you look at the polling right now, 78 percent of Americans want Washington to act, but 77 percent say that this bailout rewards the wrong people. So I think that everybody's getting an earful of this. They're afraid to make a move in case it doesn't pull the economy out of its trouble.
ROBERTS: Well, John, what about all that? We have the president, we have Henry Paulson, we have Ben Bernanke telling the American people that if we don't do this, the economy is going to crash. We've got lawmakers coming out and saying, wait a minute, we don't necessarily believe that. Who are voters supposed to listen to here?
JOHN AVLON, CONTRIBUTOR, POLITICO.COM: Voters, you know, what voters and independent voters in particular want is a return to fiscal responsibility in Washington and to break the kind of Washington gridlock that's held our politics back. And I don't think it's just a metaphor that Washington Mutual would collapse overnight. You know, I think that the spirit of bipartisanship that a lot of folks on the Hill thought had been achieved with an agreement in principle at 4:00, that's fallen apart as well.
What to look for today is a new congressional Republican plan that's supposed to be an alternative to the Paulson-Democrat plan. We'll see what happens.
ROBERTS: Yes. You know, Ali Velshi was pointing out, too, that the collapse of Washington Mutual bought by JP Morgan Chase, on any other day would have been the lead story all morning.
AVLON: Yes.
ROBERTS: It's now relegated to at least second story, if not third story status. But, Patricia Murphy, on that point, in terms of who the electorate, who voters trust to best handle this, who's got the upper hand right now? Is it the White House? Is it the Republican Party in Congress? Is it the Democratic Party?
MURPHY: Well, it's not the Republican Party. I mean, it's very, very clear that right now voters are giving Democrats the upper hand on this, and independent voters that John was talking about give Barack Obama a significant credit for being better able to handle the economy.
So if John McCain does go into these debates tonight, he has got to turn that number around. He is not getting credit for being somebody who has distanced himself from George Bush or the Republicans enough on this subject. And so I think that is what -- is part of what you're seeing. He's distancing himself from the White House and looking for a solution that Americans are going to be happy with. It's a very, very heavy lift.
ROBERTS: John, on the topic of these debates, history has shown that many voters, undecided, independents, moderates on both sides wait until these debates, at least the very first one, to make up their mind on who to vote for. If the debate does not take place tonight, who stands to benefit? Who stands to suffer for it? And does it really happen if it happens tonight or if they push it off until next Thursday?
AVLON: I think it does matter. We're at 39 days, and every day counts. And I think increasingly voters are seeing a decision by McCain not to attend the debate as an attempt to kind of run out the clock. Overwhelmingly, the American people want to see this debate continue. And polls also show that this debate matters. That Americans are really looking to make the undecideds that are left, they're looking to make their decisions based on the content of these debates. So I think it matters for our democracy that they go forward.
ROBERTS: John Avlon, Patricia Murphy, it's always good to talk to you. Thanks for coming in this morning.
MURPHY: Thanks, John.
AVLON: Thank you.
ROBERTS: Have a great weekend.
AVLON: You, too.
CHETRY: We're just coming up on half past the hour now, and a check on some of our top stories.
Negotiations on a plan to save Wall Street resume in just a few hours on Capitol Hill today. There was pretty much a revolt by House Republicans yesterday that stalled progress toward any type of financial rescue. GOP lawmakers refusing to accept a deal that appeared near agreement, instead unveiling their own proposal. Congressional leaders are trying to work out differences on the details of a $700 billion plan.
We're counting down until the first debate of the presidential election, and there's still no word on whether John McCain will actually attend. In less than 15 hours, Barack Obama said he'll take the stage at the University of Mississippi. McCain has said if there is no bailout deal by today, he will not participate. Right now, organizers say they are moving ahead with preparations for tonight.
And another big name bank falling victim to the financial crisis. Federal regulators seizing Washington Mutual, one of the country's largest savings and loans, immediately selling its banking assets to JP Morgan Chase. It is the biggest bank failure in U.S. history.
As lawmakers return to negotiations this morning, they're facing growing outrage over funneling billions of taxpayer dollars to the undeserving Wall Street tycoons while not looking out for the struggling homeowner. CNN's Allan Chernoff joins me now.
Those are the words of many that they don't believe the big fat cats on Wall Street deserve it if the homeowners don't.
ALLAN CHERNOFF, CNN SENIOR BUSINESS CORRESPONDENT: Well, you know, Kiran, the way that capitalism is supposed to work, you take a big risk, if it doesn't pay off, then you pay the consequences. But here we have a bailout deal for bankers and big investors, but what about the homeowners struggling to pay off their mortgages?
(BEGIN VIDEOTAPE)
CHERNOFF (voice-over): Giselle James of Bronx, New York is way behind on mortgage payments, and she's now fighting foreclosure. She says she needs help far more than the banks and big investors Congress is about to bailout.
GISELLE JAMES, FACING FORECLOSURE: I've just been behind, and I cannot keep up because I do have to consider I go to work, I have a family to feed.
CHERNOFF: The mortgage squeeze gripping millions of homeowners like Giselle is a major cause of our financial crisis.
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: The downturn in the housing market has been a key factor underling both the strained condition of financial markets and the slowdown of the broader economy.
HENRY PAULSON, TREASURY SECRETARY: We must now take further decisive action to fundamentally and comprehensively address the root cause of the turmoil, and that root cause is a housing correction.
CHERNOFF: So what if Congress spent $700 billion helping struggling homeowners instead of bankers? It would give a boost to the housing market, and banks wouldn't have to worry about defaults on their mortgage investments. But finance experts say it's not practical, can't be done quickly, and wouldn't be fair to Americans who make their mortgage payments.
JORDAN GOODMAN, MONEYANSWERS.COM: People are free consumers and if they take on a loan that they can't afford, there's an argument to be made that you shouldn't bail them out either.
CHERNOFF: And economists say rescuing struggling homeowners won't solve the current crisis because banks need immediate help so they can regain the confidence to lend to companies and consumers, which is fundamental to the functioning of our economy.
(END VIDEOTAPE)
CHERNOFF: Struggling homeowners do face very tough times, and obviously, there are negotiations under way to get them some help in this bailout plan. But the bottom line is that this entire plan is designed to help the entire economy so that all of us do not suffer very tough times.
Kiran?
CHETRY: That is a tough situation for sure. Allan Chernoff for us this morning. Thanks.
JOHN ROBERTS, CNN ANCHOR: Well, the bailout plan has all of us wondering how our own money could be affected. So we're trying to help you out here. We set up a blog where you can send questions straight to our Ali Velshi. He is "Minding Your Business." And Ali has got lots of things to talk about this morning.
Good morning.
VELSHI: Good morning. We have a -- we have a lot of questions coming in as always, and lot of them about Washington Mutual this morning and the bailout that we're having. You can send those questions in by going to cnn.com/am.
I've got one from Omar in Texas here. He says, "If a large bank like Washington Mutual is to be purchased by another bank, what does that mean to the current WaMu employees? This is another unforeseen cause of stress by this crisis. My ex-wife is an employee. I don't want her to lose her job, but I'd like to be ready to help her out in addition to child support if she was to lose her job."
Well, JP Morgan Chase said that they will be closing about 10 percent of about 2,300 Washington Mutual branches. So, it does appear that there will be jobs lost there as there have been across the financial sector. Keep your questions coming in. We're coming right back to you right here on AMERICAN MORNING.
(COMMERCIAL BREAK)
ROBERTS: 37 minutes now after the hour. Ali Velshi "Minding Your Business," taking your questions today. It's a good thing that we have got a business correspondent who looks a lot like Howie Mandel because we got "deal or no deal" today.
VELSHI: "Deal or no deal." And I'm going to stop guessing because this thing just has new life to it. The best thing that you can do out there is figure out what your finances are because you've got very little that you can do to control this. You can, of course, express rage to the candidates which many of you have been doing through our blog. But listen, I'm here to answer your questions about your personal finances.
And Jaydee in Arizona has written, "I'm buying my first home. My closing is today. How will the present economic situation affect me? Is this a good time for first-time home buyers or should I wait this out?"
Jaydee, I love you all. Don't ask this question on the day that you're closing on your house. This is the problem. Know this completely before you go in. OK. Listen, is it a good time for first-time home buyers? Don't expect that home prices won't go down possibly for another year and possibly substantially.
But if you're going to live in that house for a long time, then that's not your concern about whether it goes down in the next year or not. Do you have an adequate down payment for this? Do you think you can make the payments? Are you in a fixed mortgage? Because I know there are options about taking ARMs or fixed mortgages. I don't see any particular reason today for most people in America to be taking an adjustable rate mortgage given the uncertainty of what's going on.
But please, if you don't think it's time, if you're not convinced, 100 percent convinced, boy, you're going to have some serious buyer's remorse once you're done.
Let's go to College Park, Maryland, I've got this situation (ph), "Considering how the current situation is with banks not wanting to lend to each other and to consumers, is it possible for my bank to lower my current available credit limits on my credit cards and therefore affecting my debt to credit ratio, hence my credit score? Thank you."
You are absolutely right. They are doing it. If you have a credit limit of $5000 and you have a credit card that has a $2,000 balance, we do know that many banks are reducing the available balance, the available credit to you. Same thing is happening on lines of credit.
Even American Express, which doesn't publish its credit limits, it doesn't even tell you what your credit limit is, is saying that they are extending less credit to about half of their cardholders. So, absolutely, that's a good point. That doesn't mean you should carry a big balance at an interest rate. But it does mean that don't expect that just because you have a $5,000 balance and you're not using it, that it will continue to be available.
CHETRY: It does affect your credit?
VELSHI: It does, sure, because at that point your debt-to-credit ratio is much higher. That gives you a lower credit score.
CHETRY: I'm confused about this, though. We have a new Gallup Poll out, the U.S.A. Today Gallup saying that 78 percent Americans want a bailout of some sort. They're not necessarily on board with this exact proposal.
VELSHI: Right.
CHETRY: But they want a bailout.
VELSHI: I think they want a bailout that goes a little more directly to them, either their mortgage or their small business or...
ROBERTS: That would be the Republican plan, wouldn't it?
VELSHI: ... helps out, starts at the bottom and trickles up as opposed to starts at the top, which people are identifying as Wall Street, and trickles down. This is becoming a public relations nightmare. Might be a good plan, but it's not selling as a good plan.
ROBERTS: And Hillary Clinton also proposing something similar to that.
VELSHI: Yes.
ROBERTS: Remember the Homeowners' Loan Corporation from the 1930s.
VELSHI: Right, right. But there is something to be said economically for the fact that it takes longer to trickle up than it does to trickle down. But if you start at the bottom, you start with homeowners, more people feel the benefit. If you start at the top, there's broader benefit to the economy.
ROBERTS: All right. Ali, thanks so much for following this very closely. It's coming up on 40 minutes after the hour now.
One-on-one with the man behind "The ONE Campaign."
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Don't do an ostrich. Don't stick your head in the sand.
(END VIDEO CLIP)
ROBERTS: Bono live on what he would do with $700 billion. And his take on American politics.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Whoever is president, the world will be watching.
(END VIDEO CLIP)
ROBERTS: You're watching the "Most News in the Morning."
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
JAY LENO, HOST, "THE TONIGHT SHOW WITH JAY LENO": They keep saying we have to act now. We have to act now. This is like a bad TV offer. Just ten easy payments of $70 billion each. Operators are standing by, but you have to act now.
(END VIDEO CLIP)
CHETRY: Hey, that's Jay Leno on the current economic crisis. I guess, if you don't laugh, you want to cry. It was just another casualty that happened last night. Washington Mutual, one of the largest savings and loans in the country, has collapsed. It is the biggest bank failure in history. The bank was trying to find a buyer, but the credit crisis made that impossible. So, what does that mean for you, especially if you are a Washington mutual customer?
Chrystia Freeland is the U.S. managing editor of the "Financial Times." She joins me this morning. Thanks for being with us.
CHRYSTIA FREELAND, U.S. MANAGING EDITOR, FINANCIAL TIMES My pleasure, Kiran.
CHETRY: What does -- I've had a lot of people asked me this morning if I had a mortgage through Washington Mutual, if that's where I do my banking. If I have a credit card, what happens today?
FREELAND: Everyone is going to be OK. And one of the things that is positive result of the very quick fail they did of depository base to JP Morgan is operations will continue as normal.
CHETRY: So you won't notice a difference?
FREELAND: Eventually you might. They might re-brand your bank, but you can still get your money. You still have your mortgage.
CHETRY: All right. Why did this happen?
(CROSSTALK)
FREELAND: If you're a shareholder of WaMu, though, things are not so great for you. So the equity holders had been wiped out. And they should be. They made a bad bet.
CHETRY: What happened with Washington Mutual? This is different than the investment banks.
FREELAND: Absolutely. Well, Washington Mutual had trouble on three fronts. The sort of core problem was they did have a lot of bad mortgages. They had some of these adjustable rate mortgages. That was their particular problem. So a lot of their mortgages that they had sold were going bad. And that was their core difficulty.
More specifically right now, they were running into two problems. People were getting worried about having their money in WaMu. So, they had not quite a run on the bank but lots of money being withdrawn. And as a result, their share prices was being hammered.
So, you had those two things going on. Share price falling, money being pulled out of the bank, and ultimately the government said we can't let you keep on functioning. You are not a viable bank. That's what happened yesterday.
So what are the implications of the largest bank in the country failing?
FREELAND: What it shows is this is not just a Wall Street crisis. It's not just a crisis of investment banks and sort of fancy financial instruments that normal people don't trade in. It's also a crisis now of the retail banking network, and I think we're going to see more consolidation. We're going to see more failures like this one.
CHETRY: Are we going to see more failures whether this bailout plan goes through or not, or can passing some sort of bailout stem this?
FREELAND: I think there's going to be more consolidation in the regional banking system no matter what. The question with the bailout package is will you have the credit freeze unlocked? That's the big problem in the economy right now. No one is lending anyone money. There's a real crisis of confidence, and that could have an impact much greater than the failure of WaMu.
CHETRY: Do you have any other indications? Any indications right now of what other banks could be on this danger list?
FREELAND: It's the kind of thing that it's probably not helpful for people to talk about really.
CHETRY: Because it just causes an erosion of confidence? FREELAND: It's like yelling fire in a crowded theater.
CHETRY: I got you. All right, the negotiations are stalled. We'll see what happens. We're all still waiting to hear whether or not anything is going to be passed as it relates to this bailout. Chrystia Freeland, thanks so much for being with us this morning.
FREELAND: My pleasure, Kiran.
ROBERTS: Crisis talk.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Dire --
UNIDENTIFIED MALE: Financial spiral.
UNIDENTIFIED MALE: Off the cliff.
(END VIDEO CLIP)
ROBERTS: Jeanne Moos on a most unusual struggle.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Dire straits.
(END VIDEO CLIP)
ROBERTS: To find the right words.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: This difficult period.
(END VIDEO CLIP)
ROBERTS: To describe the --
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Financial Pearl Harbor.
(END VIDEO CLIP)
ROBERTS: You're watching the "Most News in the Morning."
(COMMERCIAL BREAK)
ROBERTS: Playing some U2 this morning because Bono is going to be joining us in about 50 minutes time, our next hour here on AMERICAN MORNING to talk about the work that he's been doing all week at the United Nations General Assembly to promote an end to poverty, hunger, and more medical aid for people in developing countries. So, we look forward to that. Financial crisis, economic disaster, market catastrophe. You have probably heard the pundits and politicians use those words to describe the current economic situation. But there is one word that everybody seemed to be avoiding, well, at least until now. Here's Jeanne Moos to tell you all about it.
(BEGIN VIDEOTAPE)
JEANNE MOOS, CNN NATIONAL NEWS CORRESPONDENT (voice-over): We know we're in it even if we don't know what to call it.
UNIDENTIFIED MALE: A downward spiral.
UNIDENTIFIED MALE: Financial peril.
UNIDENTIFIED MALE: The current dire circumstances.
UNIDENTIFIED MALE: Off the cliff.
MOOS: To avoid causing a stampede off the cliff, most politicians are biting their tongues.
(on camera): The word most frequently used to describe the financial crisis has been --
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: A crisis.
A crisis of our own.
We know this is a crisis.
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: Our economy is in crisis.
UNIDENTIFIED MALE: And now we have a financial crisis.
GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: We are getting into crisis mode.
MOOS (voice-over): And what comes after a crisis?
MCCAIN: To turn crisis into a far-reaching disaster.
MOOS: Just think, only a week earlier, Jon Stewart was mocking President Bush for downplaying the situation.
JON STEWART, HOST, "THE DAILY SHOW WITH JON STEWART": How bad can it really be.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES OF AMERICA: Americans are concerned about the adjustments that are taking place in our financial markets.
MOOS: Who's scared of an adjustment?
STEWART: Something you get from a chiropractor. MOOS: It prompted Bill Maher to declare a new rule.
BILL MAHER, "REAL TIME WITH BILL MAHER": Stop calling what's happening to the financial markets an adjustment. An adjustment is something you do when your sweat pants, when your (BLEEP) falls out of your underwear.
MOOS: These guys aren't laughing. The higher up the totem poll, the more circumspect so the Treasury secretary and the head of the Fed say things like --
UNIDENTIFIED MALE: Sure dire straits.
UNIDENTIFIED MALE: This difficult period.
MOOS: These guys know the market is hanging on their every word, every escalation in word choices noticed.
UNIDENTIFIED MALE: The grave threats to financial stability.
MOOS: Doesn't quite have the same ring as --
UNIDENTIFIED MALE: A financial Pearl Harbor.
MOOS (on camera): But there is one word that practically everybody goes out of their way not to say publicly, the "P" word.
(voice-over): And who should finally say it, but the president who started out referring to adjustments. What a difference a week makes?
BUSH: America could slip into a financial panic.
MOOS: He uttered the "P" word, but so far no panic's ensued.
UNIDENTIFIED MALE: Hi, I'm Wolfe Blitzer, and this "The Situation Room."
MOOS: Maybe this mock situation room best sums up the financial situation.
UNIDENTIFIED MALE: How is the economy?
UNIDENTIFIED MALE: It's bad! It's bad!
MOOS: Jeanne Moos, CNN, New York.
(END VIDEOTAPE)
ROBERTS: One-on-one with the man behind "The ONE Campaign."
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Don't do an ostrich. Don't stick your head in the sand.
(END VIDEO CLIP)
ROBERTS: Bono live on what he would do with $700 billion. And his take on American politics.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Whoever is president, the world will be watching.
(END VIDEO CLIP)
ROBERTS: You're watching the "Most News in the Morning."
(COMMERCIAL BREAK)
ROBERTS: It's 54 minutes after the hour. Alaska lawmakers say they are being stonewalled as they investigate Governor Sarah Palin's firing of her public safety commissioner. A State Senate Committee will meet again today. Witnesses were no shows last week. The panel subpoenaed Palin's husband and top aides. The lawmakers say McCain operatives are helping witnesses avoid questioning. Palin has repeatedly denied any wrongdoing.
CHETRY: And Governor Palin sat down for just her third one-on- one interview since being named VP nominee with CBS News' Katie Couric. Again, Palin said living near Russia counts.
(BEGIN VIDEO CLIP)
KATIE COURIC, CBS EVENING NEWS ANCHOR: You've cited Alaska's proximity to Russia as part of your foreign policy experience. What did you mean by that?
PALIN: That Alaska has a very narrow maritime border between a foreign country, Russia, and on our other side, the land -- boundary that we have with Canada. It's funny that a comment like that was kind of made to -- car-- I don't know, you know? Reporters --
COURIC: Mocked?
PALIN: Yes, mocked, I guess that's the word, yes.
COURIC: Explain to me why that enhances your foreign policy credentials.
PALIN: Well, it certainly does because our -- our next door neighbors are foreign countries. They're in the state that I am the executive of. And there in Russia --
COURIC: Have you ever been involved with any negotiations, for example, with the Russians?
PALIN: We have trade missions back and forth. We -- we do-- it's very important when you consider even national security issues with Russia as Putin rears his head and comes into the air space of the United States of America, where -- where do they go? It's Alaska. It's just right over the border. It is -- from Alaska that we send those out to make sure that an eye is being kept on this very powerful nation, Russia, because they are right there. They are right next to -- to our state.
(END VIDEO CLIP)
CHETRY: Governor Palin has never actually visited Russia. She said she did meet her first foreign heads of state this week, though, in New York, including leaders of Afghanistan, Pakistan, Georgia, and Ukraine.
Well, comedian Chris Rock didn't have anything politically correct to say about Sarah Palin last night on "LARRY KING LIVE." Here's his take.
(BEGIN VIDEOTAPE)
CHRIS ROCK, COMEDIAN: I don't know. She's done three interviews, and she's running for vice president of the United States? Jason Lee has done more interviews promoting, you know, "My Name is Earl." Yet, she's running for vice -- I did more interviews today. Then she has to run for vice president of the United States.
And every time they let her talk for more than four minutes, you actually start feeling sorry for her. It's kind of like Kim Kardashian on "Dancing with the Stars." It's like all that ass and can't shake it. It's just like -- it sucks -- so sad.
(END VIDEO CLIP)
CHETRY: Well, Chris Rock, by the way, is an Obama supporter. And I believe he's supporting someone else on "Dancing with the Stars" as well. He's introduced Obama at campaign events as well.
ROBERTS: A metaphor I've never heard before. 58 minutes after the hour. Here are this morning's top stories. Breaking this morning, high stakes talk to save the economy will pick up again in a few hours time. An emergency economic meeting at the White House broke down late last night. Both Barack Obama and John McCain were there.
But where will they be tonight? John McCain still has not said that he's going to show up at Ole Miss for the first of three scheduled presidential debates. McCain suspended his campaign to work with fellow lawmakers on the economic rescue plan. Barack Obama says he is planning on going to Oxford, Mississippi.
CHETRY: And as the bickering continues on Capitol Hill, there's been another death this morning on Wall Street, I guess you could say. It's by far the biggest bank failure in history. The federal government seizing Washington Mutual and quickly selling it to JP Morgan. WaMu had more than $300 billion in assets.
And late breaking this morning, two terror suspects arrested on a plane. German special police say they broke up a hijacking plot. They took two men into custody before the plane took off for Amsterdam today. One said to be from Somalia. The other a Somali-born German citizen. Police say they found their, quote, "farewell letters" and are suspected of wanting to wage a holy war.
