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Vice Presidential Candidates Prepare to Debate; Modifications Made to Failed Bailout Bill; Chinese Gymnasts to Keep 2008 Olympic Medals; Alaska Senator Ted Stevens' Trial Resumes

Aired October 1, 2008 - 09:00   ET

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


HEIDI COLLINS, CNN ANCHOR: Senators on their own rescue mission vote tonight on a bill. Could passage push the House to get on board now?
And while we're watching for the big vote, they are rehearsing for the big show. One of the most highly anticipated vice presidential debates ever. Just one day away. The candidates are cramming.

It's Wednesday, October 1st. I'm Heidi Collins. You are in the CNN NEWSROOM.

All eyes on Capitol Hill as senators tackle their version of a financial bailout bill. Watch for John McCain, Barack Obama and Joe Biden to head that way for tonight's vote.

For the most part, world markets react favorably to the moves in Washington and another record day on Wall Street. This one, good. Look at that. Yesterday's rally a relief for investors who saw the Dow recoup more than half of what was lost the day before.

Today's trading opens in half an hour. So, of course, we'll be watching very closely for that.

More about the bailout bill, though. Why the Senate decided to move on it and how it sits with the House. Keeping up with all of it, CNN's Kate Bolduan on the Hill.

Kate, good morning to you. When is the vote actually going to take place?

KATE BOLDUAN, CNN CORRESPONDENT: Well, things can always slip and slide, as you know, Heidi...

COLLINS: Yes.

BOLDUAN: ... but right now the guidance that we have is about 7:30 this evening, giving time for lawmakers who are away for the Jewish holidays to get back here for the vote.

Now what they'll be voting on is a modified version of the failed House bill. And the modifications are added provisions -- can be described as sweeteners in order to win votes.

A couple of those, just very broadly, one would be raising the FDIC insured cap rate, also tax package, tax relief for businesses and also offering tax relief for alternative energy and a mental health insurance parody bill. A lot of different things that will be going into this.

But even before they announce this new deal on the Senate side, Senate leaders were out saying we need to move quickly and we need to move now.

Listen here.

(BEGIN VIDEO CLIP)

SEN. JUDD GREGG (R) NEW HAMPSHIRE: This is a tourniquet placed on somebody who is bleeding profusely from a severe injury. And what we're trying to do is stabilize the patient, get him to the hospital, and then hopefully return him to a normal life of -- in this case -- normal economic activity.

(END VIDEO CLIP)

BOLDUAN: Senate leaders are confident they can get this passed through the House. But the big question, Heidi, is what will happen when this bill goes to the -- I'm sorry, passed in the Senate. What will happen when this bill goes to the House? And to say the least it is not a done deal yet.

COLLINS: No, it's not. It certainly is a little bit confusing.

Sure do appreciate that. Kate Bolduan, we know you're watching all the action. Thanks so much, live from Capitol Hill this morning.

Meanwhile, the Bush administration welcomes the modified bill and the upcoming vote. What's the difference about the Senate's plan?

Well, Ali Velshi is here to explain a little bit more on that for us and dissect it even further.

Good morning to you, Ali.

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Good morning, Heidi.

I should tell you one thing we sometimes talk about in the morning is something called the futures for the market. The bet on how stocks are going to open...

COLLINS: Yes.

VELSHI: ... in the next 25 minutes. And Dow futures are actually down right now, which is sort of in line with the thinking here that nobody really thinks that this was the big hurdle we had to overcome -- getting this passed in the Senate.

The Senate was never really the political problem in this anyway. It's the House. So for now, investors are not thinking that whatever they put in this bill is going to make the big difference. They want to know if the House is getting this done.

Now there are some provisions, as Kate alluded to, that have been added to this bill that are supposed to act as sweeteners for those people who think this is a Wall Street bailout as opposed to a rescue plan for everyone, including raising the limit on FDIC insurance.

Raising the limit about the -- on the amount of money that you can have in a bank that would be insured if that bank were to fail. This is largely a symbolic move designed to stop people from pulling their money out of banks because your deposits in a bank aren't just there because it's a place to put your money.

That is money that is loaned out to businesses in this credit freeze. Businesses are having trouble raising money. So if you -- if everybody in America were to pull their money out of money markets and CDs and bank accounts there really would be a bigger credit freeze than the one we're in right now.

So you -- the limit was $100,000. They are suggesting it become $250,000 per account. That is actually a lot of -- I've been getting a lot of e-mails and blogs this morning that say, why does that matter? Do most Americans have $250,000...

COLLINS: No.

VELSHI: ... in their bank account? No, not generally. It's actually a small business thing. A lot of businesses need money for payroll. The other thing is that it's really a -- it's the idea that we don't cause a run on the banks, Heidi.

So that's one of the biggest provisions. There are certain other provisions which go against the principle of when they initially said they wanted this to be a clean bill without add-on. Well, they've added some add-ones to try and make everybody a little happier and try and get this through the House.

But the -- you know, while the sense of urgency to get this bill done is growing, particularly on investment market, on the other side, there's a wave of Americans who think this still is a Wall Street bailout and they don't want to take part in it.

COLLINS: Yes. And is there a misconception -- real quickly, Ali -- that when people saw the -- quote -- "rebound," of the stock market yesterday that everything is better suddenly?

VELSHI: Yes. I would -- for the average investors watching us I would almost largely put the stock market to the side right now. It's not the main show. The credit market freeze is more likely to have a big impact on you. That's your ability to get a loan, a mortgage, the ability for somebody who's buying your home to perhaps get a mortgage and, most importantly, the ability for companies to get short-term financing if they need it in order to continue day-to-day operations.

We're not seeing a lot of problems. I was just looking at a page in "The Wall Street Journal" I want to show you. I'm going to do some work on this. But this is a bank, Sterling National Bank, which says, what credit crunch? And they've got nine boxes here that have listed loans that they have given out recently.

COLLINS: Wow.

VELSHI: All of more than $1 million. So...

COLLINS: So now they're going to compete like that?

VELSHI: Right. There's -- people telling you...

COLLINS: They're going to start saying, well, here's what we have. Yes.

VELSHI: There's no credit crunch, but the caveat here is you better have good credit and good collateral to get that, and there's some people who say, that's the way it should be. It's the way it should have always been.

But the bottom line is that's not the way our economy is built. So in order to change from one where we are overleveraged and have too much debt to one where only people with good credit and good collateral get loans there will be some dislocation. And dislocation is a fancy Wall Street word for job losses.

COLLINS: Yes, and probably for quite some time.

Ali, let us know what more you find out about that. Fascinating stuff. Thanks so much. Ali Velshi, appreciate it.

The financial crisis dominating the political discussion. And that is still happening today for the candidates. Three of them -- John McCain, Barack Obama and Joe Biden -- heading back to Washington to take part in the expected Senate vote that we've been talking about.

We'll get to Senator McCain in just a moment. But first, let's go to CNN's Suzanne Malveaux live in Washington this morning.

So, good morning, Suzanne.

SUZANNE MALVEAUX, CNN CORRESPONDENT: Good morning, Heidi.

COLLINS: What's happening now with the bailout plan on the Democrat side?

MALVEAUX: Well, Barack Obama is simply trying to stay ahead of this train wreck. He's going to be coming back from a rally in Lacrosse, Wisconsin to cast his vote here in Washington for the bailout package.

Yesterday, he was on the phone with President Bush. He was weighing in on the deadlock, trying to look presidential, certainly engaged in the process. And he is noticeably striking a conciliatory tone.

He's put much of the partisan rancor to the side for now. The idea is that this is going to help ease the worries of Americans who are still very skeptical about this huge undertaking while at the same time, putting something pressure on the House, which is expected to vote later in the week, for them to get on board.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: So the Democrats and Republicans who oppose this plan yesterday, I say step up to the plate. Do what's right for this country.

And to all Americans, I say this. If and when I am president of the United States, this rescue plan will not be the end of what we do to strengthen our economy. It will only be the beginning.

(END VIDEO CLIP)

MALVEAUX: And Obama says it is not wise to reopen the negotiations on these core issues or elements or even start from scratch. He is open to some tweaks, however, that might make it more palatable for lawmakers.

One of those tweaks, which was mentioned before, would increase the amount the federal government insures in bank accounts from $100,000 to $250,000. And he believes that it would boost small businesses and to help try to reassure families that their money is safe -- Heidi?

COLLINS: All right. So what is the risk then here for Senator Obama?

MALVEAUX: Well, it's interesting because, while McCain is going to be tested on how influential his role is with the conservative House Republicans, Obama has to keep enough Democrats on board.

And there some are who may pull out their support because of this other tweak which allows tax cuts that are not offset by cuts and government programs or increased revenue. And that really is objectionable to some conservative so-called blue dog Democrats.

So he has to make sure that there are enough Democrats on board to push this thing through.

COLLINS: All right. We'll be watching very, very closely yet again today.

CNN's Suzanne Malveaux -- thanks, Suzanne.

MALVEAUX: Sure.

COLLINS: Want to get to -- to the story now on Senator McCain, of course, as well.

CNN's Dana Bash is live in New York this morning.

So Dana, McCain is going to have to give a speech this morning. He's heading back to Washington, D.C., of course, for the vote tonight. What do you think that we'll be hearing this morning regarding this financial crisis?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Heidi, it's going to be very interesting to listen to McCain, because what I'm told from advisers that he's actually going to do what our Ali Velshi, what our Christine Romans have been trying to do for a couple of weeks and asking why the politicians haven't.

And that is change the rhetoric, change the tone, and kind of the pitch here. No longer talking about Wall Street. No longer using the word bailout, but make it clear that he believes that this is not just about that, but specifically is aimed at Americans out there from -- in all stripes, all sizes, all shapes, average, everyday Americans.

And he's going to specifically talk about students trying to get college loans, airlines in trouble. So he's going to really try to break it down and connect. That is something that McCain hasn't been able to do. That is something, frankly, that Obama hasn't been able to do.

And you know, they know inside the McCain campaign that, in a way, Monday's failure in the House was kind of old-fashioned democracy, Heidi. Why? Because these members were getting angry calls from their constituents saying we don't want to bailout Wall Street and we will punish you at the polls if you do that.

So what they're trying do -- and it's not just McCain, but also Obama and members of Congress -- is shift the rhetoric and say it's not about Wall Street. It is about Main Street and it is about average everyday people that we really need to help, not just the bad cats here in New York.

COLLINS: Yes. And then you bring up that word bipartisanship yet again. And we understand that McCain is going to be talking a little bit more about that. Is that what you're thinking, Dana?

BASH: Yes, I'm also told that that is going to be another theme. He started doing that yesterday, but he's going to, I'm told, emphasize it more, this whole idea of the need for bipartisanship and this whole idea that Congress is really on the wrong track -- Congress, of course, led by Democrats.

He's going to talk about the fact that they can manage to pass earmarks but not manage to pass the regular budgets and have been having trouble with this financial -- with this financial package -- rescue package, I guess, we can call it.

But you know this whole idea of bipartisanship, this is just kind of the latest approach that we've heard from McCain. He's tried various approaches, whether it was the idea that leadership is called for, whether it's his hits on Barack Obama a couple of weeks ago.

Now they have, at this point, settled on a concept and approach of bipartisanship. That is something that has been a central theme of the McCain campaign in trying to reach out to independents saying, you know, look at what's going on in Washington, guys. When I'm there, I have a history. I have a record and I can reach across the aisle. So they're kind of going back to that at this point now that they see that things seem, seem to be back on track in Washington.

COLLINS: OK. Fingers crossed. Dana Bash, sure do appreciate it live from Washington this morning.

BASH: Thank you.

COLLINS: The candidates are talking to voters this morning before they head to Washington for that expected vote. John McCain in Kansas City, Missouri. Barack Obama in Lacrosse, Wisconsin. We'll bring you live coverage of their events coming up, 11:00 Eastern right here on CNN.

The supporting players taking center stage now. Vice presidential debate tomorrow. What the candidates are doing today.

(COMMERCIAL BREAK)

COLLINS: We talked earlier about how the presidential candidates are handling the financial crisis today. But tomorrow night, the other half of the ticket takes center stage.

Vice presidential candidates Joe Biden and Sarah Palin will meet in St. Louis for their one and only debate.

CNN's deputy political director Paul Steinhauser is at the site of the debate.

Good morning to you, Paul.

PAUL STEINHAUSER, CNN DEPUTY POLITICAL DIRECTOR: Good morning to you.

COLLINS: Tell us what you think we're going to...

(CROSSTALK)

COLLINS: Sorry, go ahead. Tell us what you think we're going to see tomorrow night.

STEINHAUSER: Yes, you're -- Heidi, your absolutely right. There is so much on the line tomorrow night here in St. Louis when they meet because it's the only chance you're going to see Joe Biden and Sarah Palin to go head-to-head.

Both campaigns are trying to build up the other guy and build down their person. You know the Republicans are saying, look, Joe Biden has been in the Senate 36 years. He's a pro at this. He knows foreign policy inside and out.

But the Biden and Obama campaign is saying, listen, Sarah Palin, she is a very good debater. She did a great job when she ran for governor two years ago and she's -- you know, she's a strong debater, so don't -- don't think she's going to be a pushover at all.

This is going to be the first time since 1984 you've got a woman in the vice presidential debates. Of course, that time it was George Herbert Walker Bush versus Geraldine Ferraro.

You think maybe that Joe Biden would have the upper hand, but take a look at this number from CNN and the Opinion Research Corporation, last week we asked, who do you Americans -- who do you think will do a better job in the debate? And it's pretty close, 48 percent for Biden, 46 percent for Palin.

I think maybe this is a reflection that, you know what, Americans really don't know either candidate that well. Yes, Palin is a fresh face but a lot of Americans really still don't know who Joe Biden is. And that's why they're kind of undecided on who would do a better job -- Heidi.

COLLINS: So let's talk a little bit about how the candidates are preparing.

STEINHAUSER: Yes, sure. Of course, Sarah Palin is in Arizona. John McCain gave her the keys to his ranch. That's kind of nice of him. She's at his ranch in Sedona and she is there preparing with a lot of his top members of his team.

And we have some pictures of them yesterday. They put the lecterns outside in a very tranquil setting. It's not going to be so tranquil here tomorrow.

Joe Biden has been back home in Delaware -- in Wilmington, Delaware, and that's where he's been getting ready. Governor Granholm of Michigan has been with him playing the part of Sarah Palin.

He did take a break yesterday, though, to get some cheesesteaks and get a little lunch. Today, of course, Joe Biden has got to go down to D.C. He's going to hop on the Amtrak train, vote for the big -- vote on that big Senate bill, and then probably get back.

They'll both be here tomorrow night and we're here and ready to go.

COLLINS: All right, I know you are. Everybody is anticipating this one pretty highly, I think.

Paul Steinhauser, sure do appreciate it.

And you can join us, of course, for live coverage of tomorrow night's vice presidential debate. The debate begins 9:00 p.m. Eastern. But be sure to tune in a little bit early for opinions and analysis from the best political team in television.

We are get some new numbers for you today, too, that you'll want to find out about. A new CNN/"TIME"/Opinion Research Corporation Poll looks what likely voters are saying in some of the key battleground states.

You can see those new numbers on "THE SITUATION ROOM" with Wolf Blitzer today at 4:00 p.m. Eastern.

Light at the end of the tunnel for drivers in the southeast looking for gas. Gas lines getting a little bit shorter. More stations have gas and supplies are returning to normal.

A spokesman for the pipeline that carries gas from the Gulf Coast region to the Atlanta area says flow is back to pre-hurricane levels. But truckers delivering the gas say motorists can help.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: When you pull up to a store, before the stores are even open, the people are just coming into the pumps and they are blocking the trucks in and it just takes more time for us to do our job properly.

UNIDENTIFIED MALE: Don't panic and our company is dropping, stay out of my way so I can get out of the gas station and go get another load.

(END VIDEO CLIP)

COLLINS: So even though capacities in the pipeline are kicking up, things still aren't totally back to normal. It can take days for gas to flow through the pipeline and deliveries are quickly disappearing because of frantic motorists filling up out of fear.

Look at this. Here's the price that we haven't seen in awhile. Yes. At least one station in Topeka, Kansas selling regular gas by $2.99 a gallon. Cheap gas, by today's standards. And you better believe drivers were lining up for that.

AAA says the national average for regular is now about $3.62 a gallon.

Heading to Iraq. The Pentagon announces next year's troop deployments. Why military leaders are against faster drawdowns.

(COMMERCIAL BREAK)

COLLINS: U.S. air strikes in Pakistan. Pakistani military sources say the U.S. launched missiles into a village in North Waziristan overnight at the tribal region near the Afghan border.

The sources say at least one home was hit and the AP, quoting Pakistani intelligence official, is reporting six people were killed.

American forces recently ramped up cross-border operations against Taliban and al Qaeda militants in Pakistan increasing tensions with Islamabad.

The strike comes amid reports Pakistan's top Taliban leader has died of kidney failure. Pakistan's government blames him for the assassination of former prime minister, Benazir Bhutto.

Analysts say his death was sparked a power struggle and the appointment of the new Taliban leader in Pakistan.

Now to the war in Iraq. A Pentagon -- the Pentagon is announcing the 2009 troop deployment there. And a briefing actually taking place this hour on the security situation in Afghanistan.

So we want to get the very latest now from our Pentagon correspondent Barbara Starr.

Lot to talk about here, Barbara.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Absolutely, Heidi. General David McKiernan, the top U.S. and NATO military commander in Afghanistan, at this hour briefing the Pentagon press about the latest security situation in that country and if either of the presidential candidates are listening, it's not really good news.

General McKiernan now telling the press corps violence is up, militants coming across the border, pretty much have free reign. He is expressing a lot of concern about the situation there.

Have a quick listen as to what he had to say.

(BEGIN VIDEO CLIP)

GEN. DAVID MCKIERNAN, NATO INTERNATIONAL SECURITY ASSISTANCE FORCE: There's a very broad range of militant groups that are combined with the criminality, with the NARCO trafficking system, with corruption that form a threat and the challenge to the future.

(END VIDEO CLIP)

STARR: But what's the solution in Afghanistan? Partially more troops. General McKiernan wants 20,000 more troops but that is not likely to happen anytime soon because of Iraq.

As you said, the Pentagon announcing another rotation, 26,000 troops going into Iraq to replace troops who have finished their tour of duty and as long as troop levels remain so high in Iraq, it is very unlikely that they will be able to free up enough troops for Afghanistan for months to come.

So, Heidi, as we look towards a new president and a new administration, the real headline here is the success, the future of both of these wars now really tied together -- Heidi?

COLLINS: Well, what happens next? I mean will there be discussions? Will there be more contingency planning? I mean it seems like this is a matter that would clearly need attention.

STARR: Absolutely. General McKiernan, in fact, will be at the White House later today, as we know, to speak with President Bush about all of this. What they are trying to do is find a way to get more troops to Afghanistan.

But everyone agrees it's very tough going and, of course, another wrinkle, all of this very expensive. It's about $12 billion a month for the wars in Afghanistan and Iraq. $12 billion a month is a big chunk of money these days as Washington, of course, is debating the financial crisis at the same time -- Heidi?

COLLINS: CNN Pentagon correspondent Barbara Starr -- Barbara, thank you.

Safe bet. One company sees sales go through the roof during risky financial times. Consumers making deposits in their own banks.

(COMMERCIAL BREAK)

COLLINS: I certainly don't have to be the one to tell you that it has been an extraordinary week on Wall Street. Monday, the Dow posted its biggest point loss ever. And then just yesterday we saw the Dow's third best point gain.

Let's go to CNN's Susan Lisovicz at the New York Stock Exchange now for how things are likely to be shaping up today.

Hi there, Susan.

SUSAN LISOVICZ CNN CORRESPONDENT: Hi, Heidi.

Well, you know, Wall Street is not known for its subtlety, but even by that definition, what we've seen this week has really been extreme. You know, the worst point loss for the Dow, then the third best point gain for the Dow Industrials.

Today we're expecting a little bit of pressure at the open. You know, we're coming off a terrible month. We're in October now. September living up to its bad reputation, historically, the worst month of the year, was the Dow's worst month in six years.

Again, the focus is on Washington. Yesterday's rally gained strength late in the session on word that the FDIC would like to temporarily raise government insurance bank deposits to $250,000.

Today, of course, we're awaiting the Senate's vote on the $700 billion bailout bill. That won't come until after the close.

We saw Asia and Europe rally. But we're not expecting a rally here. The problem is that credit markets are still virtually frozen. We're seeing that in mortgage applications which plunged more than 20 percent last week.

Also, today, is the big three automakers are set to report September sales for GM, Chrysler. All expected to post significant declines. At the open, we're seeing a modest decline for the Dow industrials, and I actually can't really see what's happening for the Nasdaq. But it's early yet. And it's volatile. You know, one trader said basically what we're seeing is the market's moving on emotion and fear. And, boy, have we seen that play out?

COLLINS: Yes, it's always that way, though.

LISOVICZ: Only on Wednesdays. COLLINS: Yes, absolutely.

LISOVICZ: Well, that's true. There's a lot of emotion that is tied up in the market. It's just a matter of degree. As I would say that, you know, the burners are on pretty high.

COLLINS: Yes, got it. Got it. I think you called it a dead cat yesterday.

LISOVICZ: Dead cat. But that was wrong, Heidi. That was really more of a bungee bounce. That was a pretty big rally and it lasted. And you know, we recovered half of -- more than half of the Monday's losses.

COLLINS: Yes. All right. Well, we are watching closely. The Dow, the opening bell just a few seconds ago there.

(CROSSTALK)

LISOVICZ: Nasdaq is down about one percent.

COLLINS: One percent, all right, very good. Thank you, Susan Lisovicz. We'll check back later on.

Meanwhile, movement also in the markets overseas. Want to get a check on how investors in England, India and Russia feel about what's going on in this country and their own. We want to start with Adrian Finighan in London.

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP)

ADRIAN FINIGHAN, CNN INTERNATIONAL CORRESPONDENT: Good morning, Heidi.

A much better day here in London today where a stiffer, tumble breeze has blown away yesterday's bloom and stock markets are in a much more buoyant mood today. We're going to get some sort of bailout plan out of Washington. As far as the stock markets here are concern, it doesn't matter what that bailout plan looks like. At least we're getting one. However, the money markets are still frozen. The credit crunch is still biting. We're not out of the stormy weather yet.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MALLIKA KAPUR, CNN INTERNATIONAL CORRESPONDENT: I'm Mallika Kapur in Mumbai.

We've seen it all this week. We saw the Indian stock market fall to new lows for the Euro on Monday. A swift recovery on Tuesday. Now, traders are waiting for any bit of news, good or bad, to give them direction and inevitably, the focus returns to the U.S. and to the bailout package there. Many stockbrokers say until we know what happens with the package, whether it goes through and in what form it goes through, why worry?

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: I'm Matthew Chance in Moscow.

A degree of stability appears to have been restored to the Russian markets following a round of roller coaster volatility in recent days, in reaction to the rejection of the U.S. financial rescue plan. Russia's powerful prime minister though has been sharply critical of Washington's handling of the economic crisis. Vladimir Putin accusing the United States of irresponsibility saying the U.S. system appears unable to make decisions which are needed to end the crisis.

(END VIDEO CLIP)

(END VIDEOTAPE)

COLLINS: The financial problems we've seen over the last few weeks are just the latest chapter. The crisis has been growing. But that may be hard to remember given some of the recent comments from the Bush administration. For more on that now, we turn to our Christine Romans in New York.

Good morning to you, Christine.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Hi, there, Heidi. You're right, dire warnings about what happens without a bailout. But not that long ago, both President Bush and Treasury Secretary Henry Paulson were using entirely different words to describe this economy. Listen.

(BEGIN VIDEOTAPE)

ROMANS (voice-over): It's about as dire as a president can get on the economy.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES OF AMERICA: We're facing a choice between action and the real prospect of economic hardship for millions of Americans.

ROMANS: This from an administration that for months said the economy was vibrant, the financial system strong. The president didn't acknowledge, quote, "storm clouds" until last December. By then, it was raining.

BUSH: There's definitely some storm clouds and concerns. But the underpinning is good. And we will work our way through this period.

ROMANS: Then, with each disastrous job report or capital market crisis, an upbeat assessment.

In January --

BUSH: Our economy is flexible. It is resilient.

ROMANS: In February, the president surprised by spiking gas prices.

BUSH: What did you just say? You're predicting $4-a-gallon gas?

UNIDENTIFIED REPORTER: A number...

BUSH: That's interesting. I hadn't heard that.

ROMANS: In March, Bear Stearns was in a death spiral, and the Fed brokered its sale.

BUSH: We're under -- we're in challenging times. But another thing is for certain, that we have taken strong and decisive action.

HENRY PAULSON, U.S. TREASURY SECRETARY: Our financial institutions are strong. Our investment banks are strong. Our banks are strong. They're going to be strong for many, many years.

ROMANS: In July, Indy Mac bank failed.

BUSH: I believe we will come through this challenge stronger than ever before.

ROMANS: The three trying to sell this $700 billion rescue didn't see it coming.

The Treasury secretary told NPR last year of the global economy:

PAULSON: It's as strong as I have seen it at any time during my business career.

ROMANS: And again last October.

PAULSON: This is happening against the backdrop of an economy that -- which, in other respects, is -- is very solid. So far, there's very little evidence that it's bleeding over into other areas.

ROMANS: As the subprime crisis devolved, early last year, the Fed chief --

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: We don't expect significant spillovers from the subprime market to the rest of the economy or to the financial system.

ROMANS: And now?

BERNANKE: This plan is an emergency plan to put out a fire, to resolve a serious crisis which has real Main Street implication.

(END VIDEOTAPE)

ROMANS: Slowly, over the last ten or 11 months, the administration has been acknowledging the problem. Always with the caveat that the underlying system is vibrant and the banking system is flexible and the economic fundamentals are strong.

It might be, Heidi, one reason why so many are pushing back against Washington bailout plan. If they didn't see it coming, how can they lead us out -- Heidi?

COLLINS: I guess then when you look at all of that, which is really interesting to see some of these comments that they made of prior to where we are today, are we supposed to think, well, were they lying? I mean, did they know and not want to tell? Did they not want to create panic? Or what are we supposed to take away from all of that?

ROMANS: To a certain extent, you have to have an administration that's a cheerleader of the American people. You couldn't a year ago have the president come out and say you know the sky is falling. But months and months after a lot of people have been staying there were some real problems going on in middle class, a lot of problems with rising gas prices, rising grocery prices, job loss and the like. Over and over again until December of last year you heard that everything was great. That we had a good economy. We had high productivity and that we were the envy of the world.

So even after, as I said it was already long raining before the president acknowledged there were storm clouds. And even as this credit crisis was unfolding, you heard again and again from the administration that it would be contained. The subprime would not hurt the rest of the housing market; that the housing market wouldn't hurt the rest of the economy, and, of course, all of that turned out to be wrong.

COLLINS: Yes. Is any of it unexpected, and these people who have studied these things economically, financially for years and years wouldn't have been able to see this final result that we're in right now?

ROMANS: There are some people who did see it coming. There are a couple of people who are fed governors who saw it coming. There are some scholars who saw it coming. There are people in the housing market who kept saying this. This can't go on this way and there are people who are taking a hard look at the way those mortgages were package and resold, who were raising alarm bells. Risk management type people who are raising alarm bells. But, obviously, there are a lot of people who didn't see it coming and now the administration -- at least the public statements from the administration show that they didn't see it coming either.

COLLINS: All right. Christine Romans, sure do appreciate that. Great piece.

Uncertainty about banks has some people looking for another place to keep their money now. That has led to a spike in sales for some Los Angeles business owners. They sell safes.

(BEGIN VIDEO CLIP) UNIDENTIFIED MALE: They are storing cash, gold, commodities. It's not uncommon for people to buy safes to do that. It's uncommon for business to be going right through the roof like it is right now.

(END VIDEO CLIP)

COLLINS: Some of their customers say they don't trust their banks anymore, while others say they are just putting away money for an emergency.

People near Detroit have been having some trouble getting their mail. That's because one of their mail carriers wasn't delivering the goods. Instead, she was piling up thousands of letters and magazines in a rented storage unit. Apparently, she couldn't complete her route on time so she just kept what she couldn't deliver. She said no one noticed so she just kept doing it. She could face five years in prison for mail theft.

Rob Marciano is standing by now. Kind of a interesting transition to you there, Rob. But we are wanting to know, you know, the mailmen come, rain, sleet or snow, right?

(WEATHER REPORT)

COLLINS: Sarah Palin says you can see Russia from Alaska. We are going to take you exactly to that point.

(COMMERCIAL BREAK)

COLLINS: As you know by now, Joe Biden and Sarah Palin will face off tomorrow night in their one and only debate. Joe Biden has been preparing at home in Delaware. But he's heading to Washington this afternoon to take part in the expected Senate vote on the bailout plan. Sarah Palin has been taking a break from the campaign trail over the last couple of days. Here's a picture from the McCain-Palin campaign showing her prepping in Arizona.

You can join us for live coverage of tomorrow night's vice presidential debate. It begins at 9:00 p.m. Eastern. And be sure to tune in a little bit early for opinions and analysis from The Best Political Team in Television.

Geography becoming part of the presidential campaign. Sarah Palin says you can see Russia from Alaska. She hasn't, but our Gary Tuchman did.

(BEGIN VIDEOTAPE)

GARY TUCHMAN, CNN NATIONAL CORRESPONDENT (voice-over): This is the island. A piece of Alaska that Governor Sarah Palin cites as evidence of her foreign policy experience. No streets, no cars, no air strip. A helicopter is the only practical way to get here. Nome is the nearest city on the mainland, Anchorage, 550 miles away.

(on camera): This is the city of Diomede, Alaska, on an island known as Little Diomede, about 25 miles off the western Alaska coast. This is basically a rock dropped in the Bering Sea.

Only about 150 people live on the entire island. There are no hospitals, no hotels, no restaurants. And what's most unique about it is this. This is the Bering Sea, the Bering Straits. A half mile in front of me is the international dateline. And this rock in front of me, that is the nation of Russia.

Right now, it's Tuesday afternoon in the United States. There in Russia, it's Wednesday afternoon.

(voice-over): The smaller island in front is Little Diomede, and then the division between eastern and western hemispheres, with Russia's Big Diomede Island only two and a half miles behind it.

Since World War II, it's been a Soviet and now Russian military installation. Twenty miles in the background, you can see the Russian Siberian mainland.

UNIDENTIFIED FEMALE: Well, you can pick the lines without the check marks.

TUCHMAN: The 25 students in the Little Diomede school may be in the United States, but Russia dominates their view. And yes, you can see it from every house.

Is Big Diomede in the United States of America? Where is it?

UNIDENTIFIED FEMALE: Russia.

TUCHMAN: Governor Palin may be talking about this island, but she has never been here. Patrick Omiak is the tribal chief of the native Alaskan community on Little Diomede.

Since Alaska has been a state, which is almost 50 years next year, have you had a governor come visit here?

UNIDENTIFIED MALE: No.

TUCHMAN: The only statewide politician ever to come here is current U.S. Senator Ted Stevens. So regarding Sarah Palin...

ERIC IYAPANA, LITTLE DIOMEDE RESIDENT: She's making a comment that she shouldn't have made in the first place about seeing Russia. She should have come out here beforehand and then made the comment.

TUCHMAN: While some here feel Sarah Palin is doing a good job as Alaska governor, others are nowhere near getting swept up in her new national fame.

What's the governor's name?

THELMA AKHVALUK, LITTLE DIOMEDE RESIDENT: Sarah Palin.

TUCHMAN: There is no television on Little Diomede Island, so many here don't keep up with the news.

Do you know that she was picked by John McCain, who's running for president, to be the vice president of the United States possibly?

UNIDENTIFIED MALE: No, I did not know that.

TUCHMAN: Diomede mayor, Andrew Milligrock, does know of her but does not believe that Russia's proximity to Alaska provides foreign policy experience.

Has this governor, Palin, or any other Alaskan governor ever said to the mayor of this city, "We need to work hand-in-hand dealing with the Russians if A happens or B happens?"

MAYOR ANDREW MILLIGROCK, LITTLE DIOMEDE, ALASKA: No.

TUCHMAN: Never have? No discussions with the state capitol about that?

MILLIGROCK: No.

TUCHMAN: In fact, nobody we talked with here feels threatened with Russia being about the same distance from them as the White House is from the U.S. Capitol.

The Palin campaign defends the way the governor deals with this foreign policy issue.

MEGHAN STAPLETON, MCCAIN-PALIN CAMPAIGN SPOKESWOMAN: Her experience as CEO of this state is unlike many others, and her experience as CEO of this state with regard to international affairs is like any other governor, including Governor Ronald Reagan, Governor Bill Clinton and Governor Carter before they took office.

TUCHMAN: On Little Diomede, many would be happy to welcome the governor some day. They're a proud people, but the poverty rate is above 40 percent. There is little running water, and occasionally, residents dump their garbage into the sea.

And depending on the currents?

UNIDENTIFIED MALE: It's going down to the Russian side.

TUCHMAN: It's going to the Russian side.

UNIDENTIFIED MALE: The Russian side yard.

TUCHMAN: So far, no international incidents.

Gary Tuchman, CNN, Little Diomede Island, Alaska.

(END VIDEOTAPE)

COLLINS: The campaign trail running from Wall Street to Main Street. What the candidates want you to know about the financial rescue plan. That is just ahead.

Alaska Senator Ted Stevens' trial resuming this hour. With his one time friend returning to testify against him, oil executive Bill Allen expected to say his employees spend hundreds of hours renovating Stevens' home. The senator is accused of not reporting the gift.

Their soccer field was in the middle of a war zone. Now Iraq's national team can return to practice.

(COMMERCIAL BREAK)

COLLINS: We want to give you a taste of the campaign trail now. The financial crisis has, of course, been dominating the discussion for the presidential candidates. John McCain talk about the proposed bailout plan during an economic roundtable in Des Moines, Iowa.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Frankly, this is one of these situations where failure is not an option in my view. It's not an option because of the consequences of us not fixing this very broken situation and restoring confidence is one of the first ways that, for example, I don't think if we pass this legislation, which was not perfect, that we would ever have spent $750 billion or trillion dollars. Larry is nodding his head. Because we would have spent some money, and then restored confidence, and then the system would have started functioning rather than being gridlocked as it is today.

(END VIDEO CLIP)

COLLINS: McCain and Barack Obama will be in Washington today for the expected Senate vote on the plan. Obama talked about the need for immediate action during his rally in Reno, Nevada.

(BEGIN VIDEO CLIP)

OBAMA: What it means is that thousands of businesses could close around the country. Millions of jobs could be lost. A long and painful recession could follow. Let me be perfectly clear. The fact that we are in this mess in the first place is an outrage. It's an outrage --

(APPLAUSE)

-- It's an outrage because we didn't get here by accident. This was not a normal part of the business cycle. This was not the actions of a few bad apples. This financial crisis is a direct result of the greed and irresponsibility that has dominated Washington and Wall Street for years now.

(END VIDEO CLIP)

COLLINS: So what will the candidates say today before they head to Washington for the expected vote? Well, John McCain is in Independence, Missouri; Barack Obama in Lacrosse, Wisconsin. We are going to be bringing you live coverage of course of their events, coming up 11:00 a.m. Eastern right here on CNN.

Cash over credit cards. We'll take you one place where people leave home without it all the time. (COMMERCIAL BREAK)

COLLINS: The decision is in, and it's another win for the Chinese gymnasts. They get to keep their 2008 Olympic medals. An investigation found the gymnasts were all old enough to compete. The rule says they had to at least turn 16 years old this year. The Chinese women won six medals in Beijing including two golds. But while this team has been cleared, the investigation continues into the ages of the team from the 2000 Olympics.

They are the Asia cup champions. But they haven't been able to practice at home in years until now. CNN's Cal Perry is with the Iraq National Soccer Team.

(BEGIN VIDEOTAPE)

CAL PERRY, CNN INTERNATIONAL CORRESPONDENT (voice-over): For the first time in years, Iraqi children finally have the chance to get close to their heroes. The Iraqi National Football Team is back practicing in Baghdad.

The team trained in Baghdad until 2004, he says. But with the situation worsening drastically, the team started training in Amman, Syria and Dubai. Now is an opportunity for the team to train at Shaab Stadium and for the fans to watch their team after the age of Asian Cup win.

Goal keeper Noor Sabri is a national superstar, mobbed wherever he goes from bringing back that Asia Cup in 2007 to today. The day they won that cup was the day that united a nation. In the shadow of an apache helicopter flying over the stadium, Basim Abbas shrugs off the personal risks in the name of patriotism.

We have been threatened a lot, he tells me. But these threats mean nothing to us because we will make the sacrifice for our country. The Iraqi government resigned the man who led the team to their historic Asia Cup victory last year. Brazilian coach Jorvan Vieira to low one-year deal. But his contract came with one key clause.

BASSAM AL-HUSSAIN, PRIME MINISTER'S SPORTS ADVISER: We had told him, the number one condition that we need to mobilize and train the team, all the training session takes place in Baghdad.

PERRY: A clear acknowledgment of Iraq's public relations strategy.

AL-HUSSAIN: And we're also sending a message to the whole world. Baghdadi is safe now. You know, things are much improved security- wise. And when we see foreign coaches come to Baghdad and practice with the team, this is an indication.

PERRY: Coach Vieira, too, gets mobbed wherever he goes.

JORVAN VIEIRA, COACH: I'm proud. I'm proud, because this is a big responsibility for myself. I hope if I can add something for the peace in this country, I'm ready. PERRY (on camera): And you think that --

VIEIRA: I don't care about the result. The best result for us is peace that's coming.

PERRY (voice-over): It takes tough security to escort the coach from the stadium, but he's a tough coach who trains his players hard, keeps strict rules. No one is allowed on the pitch. But even that is not enough to stop Iraq's littlest fan from grabbing himself a little souvenir.

Cal Perry, CNN, Baghdad.

(END VIDEOTAPE)

COLLINS: Investors queasy after roller-coaster rides, sweeping runs in just two days. Why the credit market may put on the break.

The Senate could send the markets higher. They are looking to pass their version of the bailout bill, but will the House follow their lead?

It's Wednesday, October 1st. I'm Heidi Collins. You are in the CNN NEWSROOM.