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CNN Larry King Live

Senate Passes Wall Street Bailout Bill

Aired October 01, 2008 - 21:00   ET

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

LARRY KING, HOST: Needless to say, a big night on Capitol Hill. It could have major consequences for the presidential campaign. Any minute, the Senate is going to vote on its version of a massive financial bailout bill. The action comes just two days after the House rejected a $700 billion rescue package pushed by the president and leaders from both parties.
Before we meet an outstanding panel to discuss this, let's go to Capitol Hill and Jessica Yellin -- I understand, Jessica, they will need 60 votes to pass this, right?

JESSICA YELLIN, CNN Capitol Hill CORRESPONDENT: That's right, Larry. And they are pretty confident they will get those 60, maybe even more. Right now, Senate Majority Leader Harry Reid is speaking on the floor, explaining why this is so essential, in his view. He says he's getting inundated with voter calls asking him to pass this bill.

We've seen the presidential candidates arrive. They are both on the floor. There was a moment when Barack Obama walked over and shook John McCain's hand; another moment when we saw Barack Obama and Hillary Clinton talking and apparently laughing over a joke. A lot of action on the floor right now.

It's going to be very crowded. And, again, the leadership is confident that this will easily sail through the Senate. The big question tonight, Larry, is the House of Representatives. It is still not clear that they have the votes to pass this bill when it comes to them -- Larry.

KING: Thanks, Jessica.

We'll be checking in with you throughout the night.

And, by the way, once they get the 60 aye votes in the chamber, we can report that they have reached that number. But they need to pass the bill and send it to the House when the gavel goes down. We'll keep you posted.

Let's meet our panel.

In Austin, Texas, Karen Hughes, former counselor to President George Bush and now vice chair for global P.R. and communications for Burson-Marsteller.

In New York is Katrina Vanden Heuvel, editor and publisher of "The Nation". Here in Los Angeles, Ben Stein, the economist, "New York Times" columnist, former presidential speechwriter and best-selling author. His latest book is "How To Ruin the United States of America".

And in Washington, Kiki McLean, the Democratic strategist, senior adviser to the Hillary Clinton campaign, now supporting Obama.

All right, Karen, what do you make of all this?

KAREN HUGHES, FORMER COUNSELOR TO PRESIDENT GEORGE W. BUSH, SUPPORTS MCCAIN: Well, it's an extraordinary night in what's been, you know, just an extraordinary presidential campaign. I do think that the Senate will pass the rescue tonight. And I call it a rescue because I think people are beginning to understand that this truly is an effort to rescue Main Street from the meltdown on Wall Street.

They're starting to see that businesses can't get credit to buy supplies and to meet their payrolls, that -- I saw this morning that local government, state governments, the State of Maine is not able to get the cash it needs, the credit it needs to be able to repair its highways. In Montana, they can't get the money they need to build an emergency room.

And so I believe that people are starting to see the effect of failure to act and that that is a powerful prescription calling on the Congress to join together, in a bipartisan fashion, and take action.

KING: Ben Stein, you are not a fan of this.

BEN STEIN, ECONOMIST: I am somewhat a fan of it. I think it needs to be passed. But I think it's a Christmas tree festooned with money that the taxpayers are going to have to pay, where even if, in the end, they make some money on these failed mortgage instruments.

But, look, I could just cry that this whole thing has come up at all. We had an economy that was running very, very smoothly j I hate to say this -- under Mr. Clinton. It's been demolished by excessive deregulation and failure to regulate with the laws that were there. It's been demolished by the powers on Wall Street sucking trillions of dollars out of the U.S. economy and giving it to themselves in wages. In return, giving us the worst mismanagement of Wall Street since the 20s.

It is just a crime what has been done to the people of the United States by this mismanagement both in the White House -- and I love Mr. Bush, but also by this mismanagement in Treasury and mismanagement -- serious, criminal mismanagement on Wall Street.

KING: Criminal?

STEIN: Yes, I think it's criminal. I think it rises to a level of incompetence and abuse of the stockholders and breach of fiduciary duty that is criminal.

KING: Katrina Vanden Heuvel, how do you see it? KATRINA VANDEN HEUVEL, EDITOR, "THE NATION," SUPPORTS OBAMA: Well, I agree with Ben Stein that this has been criminal mismanagement. And we should be looking at indictments, not just reform.

But I'd like to bring it back to the ground for a moment.

Do you know that there are 10,000 foreclosures every day in this country?

And I think what's being lost in this top down bailout is that there is a bottom up that has been lost, which is to keep people in their homes, to put a moratorium on foreclosures, to revise the bankruptcy codes so that these mortgages can be modified to help working families, working people.

We need all kinds of reforms. We need re-regulation. We need a tax of stock transactions. We need to end this casino economy, which Ben Stein, I think, described well.

This is not a just and equitable bill. It may not work. Many people don't know. It is what we are faced with. I hope it goes back to the House and that there is some fight, because those at the very bottom -- and Karen Hughes mentioned the small businesses -- but those losing their homes, which is the root cause of this crisis, may well not be helped, nor will this economy, if it's just constructed by buying these toxic assets...

KING: All right...

VANDEN HEUVEL: ...from these firms.

KING: Let's get the thoughts of Kiki McLean.

KIKI MCLEAN, DEMOCRATIC STRATEGIST, SUPPORTS OBAMA: You know, there's something tonight that Karen Hughes and I agree on, and we're both two women from Texas who have disagreed a lot over the years. But Karen is absolutely right, we have to pass this package tonight.

In addition to all the things you've heard that she laid out, we have situations where there are non-profit hospitals who, their interest rates are doubling and tripling in Florida, across the country. They can't get the money they need to keep operating.

And what this really comes down to is a case of let's have something. It may not be perfect. I'd like perfection. But I don't think we can let perfection get in the way of the good.

If we have something that moves in the right direction -- and I think the Senate version made some good adjustments -- then we can continue to fix things.

If we do nothing, it all collapses and there's nothing left to fix. And that's why this vote tonight is so important.

I also think, Larry, that after the drama of the finger-pointing and the politicization -- the political atmosphere that took place 48 hours ago, I think we saw yesterday and today a calmness come over, the market was a little more stable, mostly because they knew there was more unity moving forward to get something done. And I think -- I think and finger-pointers learned their lesson.

KING: Karen, do you expect the House to go along?

HUGHES: Well, Larry, it will be thought. I do expect that, in the end, they will. I think it will be hard for some of them. And, you know, as a conservative -- as a conservative a fiscal conservative, this is hard. It's a lot of money.

But I think it's very important for people to understand that, again, what the government is doing is not handing out money to people on Wall Street. The government is going to buy these loans so they will have some asset. And the government is an entity that is big enough to hold them for some period of time, until they begin to regain some of their value.

So the taxpayer, in all likelihood, is going to get back a substantial amount of this money once the market comes back. You know, I thought there was a very telling story this morning in the "New York Times" that I think summed up the attitude that you're hearing in the populist streak among conservative Republicans. And it's let the rich scoundrels, you know, just let them -- let them go.

There's the story of a man who sold shirts on Wall Street during the collapse in 1929. And when it happened, he cheered and said let the scoundrels go down, let the rich guys who all made all that money, just let them burn. Well, a year later, unfortunately, the ripple effects put his shirt making business out of business. And that's the situation we're faced with here.

KING: By the way, I've got to hold you there, Karen.

We're coming right back.

The vote is expected to start within minutes. It's going to take 10 to 15 minutes. A quick -- a quick reminder about, Larry King Interactive. It's your chance to be a part of the show. Interact right now at CNN.com/larryking.

We're right on top of this vote and we'll be right back.

(COMMERCIAL BREAK)

UNIDENTIFIED MALE: Mr. Gregg?

Mr. Gregg, aye.

Mr. Hagel?

Mr. Hagel, aye.

Mr. Harkin?

Mr. Harkin, aye.

KING: We're staying on top of this. The Senate obviously is voting. We'll be right back with the panel.

Jessica Yellin, how long does this take?

YELLIN: It takes 10 minutes total. They're seven-and-a-half minutes in, Larry. I heard them count out the first 25 to 30 votes. And of those, I heard only three or four nos.

So this is looking very good -- healthy vote totals, looking like this is going to pass the Senate easily. And we will know exactly that definitive vote count in just less than eight minutes from now, Larry.

Again, all eyes, after this moment, will switch to the House of Representatives, where they're not at all certain they'll get a similar outcome -- Larry.

KING: All right. You'll tell us when it's done and we'll go right back to you.

YELLIN: Will do.

KING: OK. Good deal.

Ben Stein, how do we know it's going to work?

STEIN: We don't know it's going to work. I mean, that's the big problem. We know we're going to throw a huge amount of money at it. We're going to throw a huge amount of money at it and we hope it will work.

There are some hints it will work.

But we don't know for sure what caused the credit crisis. I think -- and I think most people familiar with Wall Street think it was because Mr. Paulson allowed Lehman Brothers to explode and that just blew apart all trust in the financial system. It took 75 years for people to have trust that the federal government would bail out the financial system, not allow another run on the banks. Henry Paulson blew that apart in one minute of deciding not to save Lehman Brothers.

KING: You would have bailed out Lehman?

STEIN: Oh, without question. We should not be letting banks fail period. We should -- if they have obligations to borrowers, obligations to keep the business system running, don't let them fail. It costs pennies (INAUDIBLE)...

KING: Katrina, what if the House rejects it?

VANDEN HEUVEL: Well, could I just say about what Ben said about -- I think what we've learned is not so much about Lehman going down, but a much larger lesson, Larry, which is that we have been told these last 30 years that the market can do no wrong. And I think that market fundamentalism, as some call it, has now been shattered. And the idea that there is a role for active and smart government is crucial.

How that will play out is the fight ahead of us. Whether it means reinvesting and rebuilding this country, or whether it means just throwing more money at a Wall Street that there is a role for, that Wall Street has forgotten the real economy in these last 30 years. And that is the struggle.

If the House rejects it, I think there are stabilizers in this system, Larry, left over from the New Deal. The Republicans have spent a lot of their last 30, 40, 50 years trying to repeal the New Deal, but there are stabilizers.

So this scaremongering...

KING: OK.

VANDEN HEUVEL: ...and there's a legitimacy. But there's been too much scaremongering.

KING: Kiki, is the Senate bill better than the House -- what the House rejected?

MCLEAN: Well, I think it's better when you have the increased limits on the FDIC insurance. Look, there are some things that people are tacking onto this that may not be great.

But I do think that one thing to keep in mind here is that now, in the economy that we've experienced, particularly through the Clinton administration and moving into the 2000 years, we've got an expanded level of participation in homeownership, in the stock market. There are more people in the middle class who are -- now have retirement -- are more dependent on themselves to plan retirement. And so they're looking for ways to grow money beyond the jobs that they're working, sometimes one and two a day.

This is a big issue in terms of the fallout from this and beyond about how we keep as many of the people who have made it into the middle class there and what are we going to do to help rebuild those and help move back in those who fell out of this?

KING: Karen, we're -- by the way, we are awaiting the vote. It should be any minute. And Jessica Yellin will let us know. And then the panel will now comment on what was -- what was passed.

Karen, do you think the House might reject this?

HUGHES: Larry, I certainly hope not. And I really don't believe that that -- in the end, that they will. I think there have been some improvements made. I think the fact that the FDIC increase to $250,000 lets people know that there's a safe place where they can put their money. It protects people's retirements who have worked to have that savings there.

And so I think there are some improvements and I hope that that will be enough. And I think the members of the House are beginning to hear from local businesses, from local people who can't get a home loan or a student loan for their child to go to college. And so I hope that will be enough to turn the number of votes that are needed.

I thought Katrina made an interesting point about reform. And I think going forward, the next president is going to have to deal with that. And I think that in -- over the course of the next 33 days, we're going to hear a very vigorous debate about that. And I will submit that it's John McCain who has a record as a reformer, as someone who's a maverick, who can take on the entrenched special interests, who will take on the special interests and the lobby crowd, who is the president that we need to institute the kind of reforms that are going to come about -- need to come about as a result of this.

KING: We do have a kind of phenomena here tonight, Ben. We have Katrina Vanden Heuvel of "The Nation" agreeing with Karen Hughes.

STEIN: And with me.

VANDEN HEUVEL: Well, I didn't agree...

STEIN: I never thought the day would come. But there's some...

HUGHES: I imagine she disagrees a little bit...

STEIN: It's an amazing thing.

HUGHES: ...about some of what I said.

VANDEN HEUVEL: I disagree with the McCain point. I'll come to it later.

STEIN: Well, George Bush the giant champion of deregulated free markets, is going to go down as the man who killed them. And then Paulson...

HUGHES: Now, wait a minute, though, Ben, who signed that bill?

STEIN: ...who made...

(CROSSTALK)

HUGHES: Remember, President Clinton?

(CROSSTALK)

KING: Hold it. Let him finish. Let him finish.

STEIN: Henry Paulson, who took $1.2 billion out of Goldman Sachs, largely for helping them get into the subprime (INAUDIBLE)...

KING: All right. Hold it, Ben.

Let's go to Jessica Yellin on the Hill, our CNN Capitol Hill correspondent.

Is it over, Jessica? YELLIN: The clock is still counting down, Larry. Not quite over. But they have, it seems, the votes to pass at this point. We're doing our count as we go here.

Some interesting observations I'll tell you. There were a number of Democrats who ended up voting no on this, the more liberal Democrats, who have objections to the way this is being financed. We always knew Republicans were objecting, but some surprising objections from Democrats. Of course, they know they can afford to do that because the bill is going to pass easily.

But it will be interesting to get this final tally, which we should have within the next five minutes -- Larry.

KING: Thanks.

Ben, back to you.

STEIN: I was going to say, here we have Henry Paulson, who took $1.2 billion -- most of it untaxed because of various laws -- out of Goldman Sachs, largely for putting together a giant subprime business at Goldman Sachs. He's going to be the guy who presides over the destruction of Wall Street, so that Wall Street, basically, is just a shadow of its former self, all because we didn't learn the lessons of the Depression -- you cannot trust Wall Street. You have to regulate them all the time. You cannot trust people with other people's money. You have to regulate them all the time.

That basic idea was somehow lost.

UNIDENTIFIED FEMALE: I have to...

KING: Is there anything reminiscent...

VANDEN HEUVEL: When I talked about...

(CROSSTALK)

KING: I'm sorry, go ahead.

VANDEN HEUVEL: I'm sorry.

When I talked about deregulation earlier, you know, coming out, again, of the New Deal, there were buffers, there were stabilizers in the system.

I disagree completely with Karen about John McCain being the reformer. He has overseen, with Phil Gramm, who was his finance adviser until recently, deregulatory mania.

But I would be wrong to not talk about the Clinton administration. I am an Independent. And "The Nation" magazine has criticized Bob Ruben, Roger Altman, Larry Summers for presiding over more deregulation.

Now, they have seen the light and they are calling for more investment and more regulation now. But under Clinton, the Glass- Stiegel amendment repealed, obliterating the lines between commercial and investment banks. It's contributed to part of the problem we see.

Everyone is complicit. The people who are being shafted are those below. And that's why they need a voice now.

MCLEAN: You know, I have to say, as pleasant as it has been to agree with Karen on so much tonight, I do have to say that the problem for John McCain on this, I think, at this point is even if I agreed with what she said about his supposed maverick -- his supposed maverick record, the reality is he made a fool of himself last week.

The whole political stunt of the suspension and rushing back to Washington, but not really rushing back. He ruined his own credibility on this issue. This was something of a gigantic, gigantic proportion in this country and he made a fool of himself with it.

HUGHES: I think, Larry, John McCain showed himself to be a man of action, while Barack Obama was strangely on the sidelines. I was glad to see, finally, yesterday, he came out and defended it, at least said he was for this because it was so...

MCLEAN: Yes, but Karen...

HUGHES: ...essentially.

MCLEAN: ...he never...

HUGHES: ...essential. But it was an awfully long time for him to do that.

MCLEAN: But I have to ask this. I just sort of wonder about the basic political operation the McCain team has when the RNC and the Republican leaders can't even warn him not to take a victory lap, not to give that speech, because they're about to lose the vote on the bill. And that just was amazing to me.

HUGHES: Well, I think the leaders on both...

VANDEN HEUVEL: John McCain...

HUGHES: The leaders of...

VANDEN HEUVEL: John McCain made P.T. Barnum...

KING: One at a time.

VANDEN HEUVEL: ...made P.T. Barnum look like a statesman. I mean it was such stuntsmanlike behavior...

UNIDENTIFIED FEMALE: Yes.

VANDEN HEUVEL: ...that he invested his political capital and then it kind of fell out on the floor.

KING: Ben... VANDEN HEUVEL: And he just didn't know what to do.

KING: The other night, Ben, Paul Krugman said that this is delivering to Barack Obama Herbert Hoover.

STEIN: I know, delivering the chance to run against a guy who is on the verge of putting America under a depression. Really, that isn't Bush. Bush is a great guy. He made a tremendous mistake having Paulson be in charge of this. Paulson is just not the guy to do it. He's a gambler. He's a Wall Street player.

KING: Let's listen in to the floor on the Senate and check as it goes.

SEN. HARRY REID (D-NV), MAJORITY LEADER: It's my understanding that there's a request for a roll call vote.

If that, in fact, is the case, we'll do that. But people may not sit at their chairs, because other people have -- after they vote, they can depart the chamber.

Mr. President, we'll be in session tomorrow. There will be minor business transacted. It will be morning business. And we'll try to clear some bills that we can.

The -- we'll see Friday. We'll see what the House does. They're coming back into session tomorrow. So we're going to have to be in session until a decision is made, when the House can take up the legislation.

Everyone should understand, the week of November 17th is where we're going to have our organizational meetings. And we will be in session several days during that period of time. And we will tell everyone all about this.

With the one thing we're going to move to is a lands package. And we talked to everybody about that. It's something that Senator Bingaman and Senator Salazar have talked to many of you about.

But to see what business will be conducted, we'll have to wait and see what, if anything, the House does. If they don't do anything, we can't do anything. So we will see what they do. So members should keep that time open.

KING: OK, we'll hear from Jessica Yellin with the official concept of the vote.

Ben saying you heard they had 75 votes.

STEIN: Yes, they just said on the screen they have 75 votes. So it's passed.

Now the question is can they get it through the House?

Debatable, but they probably will.

But then will it work?

KING: Hold on. I'm hearing Harry at the same time.

Yes, go ahead.

STEIN: Will it work?

Will it work?

Will a banker in Minneapolis or in Denver or in Dallas say, OK, now I'm going to start lending again?

I think without a solvency guarantee by the Treasury, they won't do it. And I totally agree with Katrina, let's also push the money up through the bottom. Let's push it up to the guy who is about to lose his house.

KING: All right, let's get the update from Jessica Yellin -- Jessica, what's the story?

YELLIN: Larry, the vote passed 74 in favor, 25 against -- 74 in favor, 25 against. If this measure was designed to put pressure on the House of Representatives to pass, they have done that and then some. They needed 60 votes to get that passage. They well exceed that.

It is in the dynamics of this body, the big brother saying come on, kid, look what we did, now it's your turn.

So the Senate has ratified this. There is an official vote that will happen next.

But you heard Harry Reid, the Senate majority leader, saying if the House acts on Friday, then we can take up some other discussions.

The big question is will the House be able to act, because they've already made it clear if they're not confident they have the votes Friday morning, they will not hold this same bailout bill vote on Friday afternoon -- Larry.

KING: And I assume, Jessica, it was Senator Kennedy that did not vote, right?

YELLIN: That's correct.

KING: Yes.

Thank you very much.

Outstanding reporting.

Jessica Yellin.

In a couple of moments, we're going to have a political panel. Karen Hughes and Kiki McLean will be remaining for it. That means that Katrina and Ben Stein will be leaving us.

But before they go, Ben, a prediction -- House passage?

STEIN: It will pass in the House. Just the question is will it work?

Let's pray it will. If it doesn't, it's going to be scary times.

KING: What do you think, Katrina?

VANDEN HEUVEL: I think...

Pass or not?

VANDEN HEUVEL: Well, I'm sorry I'm not political enough for your political panel. It's a joke.

My point is about the people's house, which is the House of Representatives. You've got a different scenario there than in the Senate, Larry, because they're all up for re-election. So that has played a role. I mean they are closer to the ground.

KING: Yes.

VANDEN HEUVEL: They're listening to their constituents.

So I'm not sure how that's going to factor in. It's a much more obstreperous body.

If I could just one second about a senator. Bernie Sanders, a profile in courage, whose plan to recoup the costs for taxpayers, to put a surcharge on the mega rich to pay for some of the bailout, was allowed to be heard by Harry Reid on the Senate floor. And I think so many Americans don't know that there are people like that who are speaking for them in the Senate or in the House.

KING: All right. Well said.

Karen, by the way, do you think the House -- do you think the House will approve?

HUGHES: I think it was a big vote and a big message to the House, Larry. I think it will be close. As I said, it's a tough vote. It's a tough vote and, you know, 95 Democrats, I believe, voted against this in the House on Monday, not just Republicans. It was 128, I think, Republicans voted against it and 95 Democrats. So you had opposition from both sides of the aisle.

But I think the Senate vote tonight sends a big message. I think they are hearing from constituents and I hope that it will pass on Friday.

KING: Ben, what do you fear the most?

STEIN: What I fear the most is that they pass this, they start shoveling the money into Wall Street's greedy little paws and somehow banks still aren't lending. Banks say OK, that's fine, you've propped up the big players on Wall Street, but what about us? You haven't propped us up.

What if we land and the economy goes into a depression or a severe recession and we don't get our money back?

So we're not going to lend. We'll just hoard the money. That -- we haven't guaranteed them against insolvency.

KING: So are...

UNIDENTIFIED FEMALE: Larry...

KING: Have we now set a standard that we will bail you out?

STEIN: I think we should set a standard that any good sized bank or even any medium sized bank is going to be bailed out. You know, it's fine with me if they have nationalized banking in America.

UNIDENTIFIED FEMALE: Right.

STEIN: Banking is too serious to be left in the hands of gamblers.

VANDEN HEUVEL: But then why not recapitalize banks...

UNIDENTIFIED FEMALE: But, Larry, wait a minute.

KING: One at a time.

VANDEN HEUVEL: That would be a better...

UNIDENTIFIED FEMALE: Larry, what if...

VANDEN HEUVEL: Recapitalize banks directly.

Why should it be a kind of buying toxic assets?

Just do it directly. Do a real nationalization and call it as such.

STEIN: That's fine with me, Katrina. It's fine with me. I just said to Larry...

VANDEN HEUVEL: Right.

STEIN: ...banking is too serious to be left in the hands of gamblers.

MCLEAN: You know, Larry, I think the Senate tonight sent a message to the House -- there's a building on fire, sitting there debating about whether you go out the window or go down the stairs isn't going to save anybody. You've got to move and you've got to do something.

KING: Well said. VANDEN HEUVEL: My concern is that, as Ben says, that we don't know. And what does seem known is that more is going to be needed. And what that more is is what the struggle will be about.

As I said earlier...

HUGHES: Yes, but...

VANDEN HEUVEL: ...will it be about public investment in a new of economy -- "green jobs," for example, a new infrastructure in an infrastructure that's crumbling, because no one has been paying attention to it, or will it be more money to a Wall Street that isn't connected to Main Street because it's been under investing or outsourcing its investment these last years with no regulations.

MCLEAN: But we can't simply contemplate those things.

(CROSSTALK)

VANDEN HEUVEL: I agree.

MCLEAN: We have to act on them.

HUGHES: And I do think it's important...

KING: Oh, hey...

HUGHES: ...that the legislation that's emerged has much more significant protections for the taxpayers. Senator McCain fought for a limit on executive pay. There's provisions for (INAUDIBLE)...

MCLEAN: I think Senator Obama laid out some principles on this, as well, Karen.

(CROSSTALK)

HUGHES: Well, after Senator McCain did, also. So...

KING: Thanks to our guests.

By the way...

(CROSSTALK)

KING: I thank our guests now.

HUGHES: The point is they were -- the protections were...

KING: Thank you, Ben.

Thank you, Katrina.

VANDEN HEUVEL: Thank you, Larry.

KING: Karen and Kiki will be remaining.

VANDEN HEUVEL: Thanks, Larry.

KING: We want to thank them for their expertise on this historic night. Seventy-four passing it. You keep blogging at CNN.com/larryking.

We'll be back to discuss Palin and Biden.

Stay there.

(COMMERCIAL BREAK)

KING: Welcome back.

Now our political panel is assembled, not that some politics didn't come into the first half hour.

But Karen Hughes remains with us. Joined now by Paul Begala. He's in Washington, the Democratic strategist and CNN political contributor. He served as counselor to President Clinton.

In New York is Kellyanne Conway, the Republican strategist and pollster, president and CEO of the polling company.

And remaining with us is Kiki McLean, the Democratic strategist, spokesperson for Senator Joe Lieberman when he was the 2000 Democratic vice presidential nominee.

I want to go to a video toss for you in which CBS' Katie Couric interviewed both Palin and Biden.

Here were the answers and then we'll get right into it.

Oh, we don't have that.

I'm sorry.

OK, so -- I have it listed, but we don't have it. It's one of those nights.

Paul Begala, what's going to happen tomorrow night?

PAUL BEGALA, CNN CONTRIBUTOR: You know, who knows?

We're all going to tune in to watch. If the two vice presidential candidates do their jobs, though, it will be what most people expect. The reason the good lord created vice presidential candidates is to attack the presidential candidate of the party opposite, right?

And so I'm sure Governor Palin is well prepared. She will go after Barack Obama. I'm quite sure that Senator Biden is equally well prepared. He will go after McCain.

So these two will be shooting past -- it will be like an old episode of my old show, "CROSSFIRE," where they're shooting past each other rather than at each other.

KING: All right, Kellyanne, do you agree with that?

CONWAY: That could be. Actually, if Sarah Palin is able to do that tomorrow night, that's a very good construct for her, because so many people are attacking her, quote, lack of experience, her, quote, lack of readiness. Where she at least is presiding over an 11 billion dollar budget as the governor of Alaska. She has an 80 percent approval rating. And very few people are questioning the same experience level of Barack Obama.

She actually wants to do the cross there. I think it benefits here. Larry, it's very simple, the last time Sarah Palin debated two men, not just one but two, she became the governor of Alaska. Those two men, including the sitting governor at the time, have since told the media, including in press accounts today, that they totally underestimated her and she cleaned their clocks. She's not to be underestimated.

The last time Joe Biden debated in the Democratic primary, he got zero delegates and lost the nomination.

KING: So you're saying it's a clean sweep tomorrow night, Sarah Palin dominates. It's all over. Right, the election's done. She's going to wipe them out. Is that what you're saying?

CONWAY: I didn't say that. But if you want to keep repeating it on national TV, I think that's a great sound bite.

(CROSS TALK)

MYERS: The rumors might be different that it's actually John McCain that gets dumped from the ticket rather than Sarah Palin after tomorrow night by Kellyanne's assessment. I have to say, having been on staff through the vice presidential debate, having been there, Paul makes a good point. Here is the other thing that is interesting. I'm with Kellyanne. I think she has had a bad run on these Katie Couric interviews. They have been horrendous and this is the kind of thing that press secretaries jump out of windows over.

I do believe she's got a record of being articulate in interviews and being able to do it in these short time frames. I think, ultimately, what the bigger challenge will be is not performance, but really defending John McCain's record and what John McCain wants to do. We're in an economic free fall. She's got to defend a guy's record of voting for privatizing Social Security three times. He wants to give Social Security to Wall Street to manage. That's not going to go over well. That's a bigger challenge.

KING: Karen, a professor at Washington University in St. Louis, the site of the debate, says this face off has the potential to blow the race open because both Biden and Palin are loose cannons. Do you want to comment, Karen?

HUGHES: Well, Senator Biden is known for his very verbose speaking style, shall we say. And I think he probably made, although it wasn't on "Saturday Night Live," he probably made the most significant gaffe of the last couple of weeks when he said that -- he declared that President Franklin Roosevelt went on television during the great depression in 1929. Only a couple problems with that, to reassure the nation, the president was Herbert Hoover. And that was before Al Gore invented television, or was it the Internet?

KING: The professor, Karen, is saying that they're both guilty of gaffes. The Katie Couric interview had some gaffes.

HUGHES: I think what you saw in that interview was Governor Palin has gone from zero to 120 miles per hour in the past month. I remember what it was like to go from a governor's office to a national campaign. We had, when I was working for President Bush, a year and a half or two to make that transition. She's had one month. She's had to absorb a lot of information.

MYERS: Karen, she couldn't answer what paper she was reading.

HUGHES: What I saw her sorting through was the political calculations. She's sort of been second guessed. If she says an Alaska paper, well, she sounds parochial. If she says the "New York Times," well, the McCain campaign has been criticizing the "New York Times." I imagine, when I was in the governor's office, you get a morning briefing that has information from a lot of papers. Again, I think she doesn't want to make a mistake. She's choosing her words carefully. I would advise her to be an advocate for Senator McCain.

And she has a unique ability to speak to the kitchen table issues. She's a mom. She's a working mother. She can relate to people. I would advise her -- I hesitate to say this, because President Bush used to always laugh at us when we would say, just be yourself. He would say, who else do you think I'm going to be? I think she has to be herself. She has to talk about her experience as a decision maker, how being a small-town mayor, you live with people's problems. You go to church and the grocery store with them. You get to know people. And that kind of experience can be very beneficial in Washington, D.C. It's a voice that isn't often heard.

KING: We'll take a break and we'll check in with two senators who just voted on the bailout. They'll be here when we come back and then back to the panel.

(COMMERCIAL BREAK)

KING: The Senate has overwhelmingly, with 74 votes, passed the new bailout bill. And we have senator Lindsey Graham, a Republican from South Carolina, who voted for the measure. He's a supporter of John McCain. And Senator Chuck Schumer, Democrat of New York, who voted for the Senate version as well, a supporter of Barack Obama. You two guys agree on this? Whole-heartedly, Senator Graham, were you whole-heartedly for this?

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: Completely. It's not anything either one of us wanted to do, but I think both of us believe we had to act decisively to avoid a catastrophe. So I'm proud of the Senate coming together.

KING: Chuck, you too? SEN. CHUCK SCHUMER (D), NEW YORK: Yes, if I was writing it, most Democrats would write it differently. But we made very good changes in it to protect tax payers and home owners and get oversight and the additional things that help tax payers directly, AMT. It's a much improved bill and Congress rose to the occasion. The Senate did, and we hope the House will in a few days.

KING: In that regard, Senator Graham, do you think the House will?

GRAHAM: I think so. If anybody went home in the last couple days during the holidays, they heard -- if you walk down Main Street in South Carolina, you heard people in small businesses begging to get things done. They can't get credit. The people I grew up with -- my dad owned a liquor store and a restaurant, and we borrowed money on occasions to replenish the inventory. Average everyday people can't find credit. I heard that everywhere I went. The 401-k plans in South Carolina have really been hit.

So I feel good about my vote. It's not a perfect bill, but I think I helped people I grew up with, and I didn't grow up on Wall Street.

KING: You represent Wall Street, Senator Schumer.

SCHUMER: The feelings of the average person in New York were not different than in South Carolina. There were some on Wall Street, obviously, and financial services is an important industry in New York. But the average New Yorker felt just like the average American, that things went awfully bad on Wall Street, wanted to make sure that the people who did the wrong things were not rewarded, but began to understand as the week went on that, even though it's not fair, the auto worker in Buffalo is depend on the financing that Wall Street buys for people who buy cars.

One little example of how it's all interrelated; if you didn't have a good credit rating, a very high credit rating, you couldn't get a car loan. If that continues, we'll sell six million fewer cars. So the auto worker in Buffalo who is blameless, who works hard and just supports his or her family would have been stuck. I think that's what was beginning to dawn on people.

KING: Senator Graham, those who call this highfalutin socialism, are they partially right?

GRAHAM: You know, this is a government intervention that none of us would have chosen to do, but the effects to the average person on the street, on Main Street, is what drove my thinking. We have been involved in the economy before, the Great Depression. We're trying to intervene before it becomes a deep recession, leading to a depression. Again, when I went home, I heard people tell me, if you don't do something, Senator Graham, I can't go to the bank to borrow money to run my business, to buy a car, or to send my kids to college.

I think my job is to fix problems. And we're going to learn from the mistakes we make. To sit on the sideline and watch this economy fail, that to me is responsible government, not socialism.

KING: Let's take a listen to Senator Harry Reid. He's holding a live press conference on the Hill.

SEN. HARRY REID (D-NV), MAJORITY LEADER: I'm so impressed, having been in Washington 26 years, it's hard for some to comprehend, I guess, there are people who are more impressive each time you work with them. And that's Chris Dodd. And each day that we worked on this crisis together, I being his lieutenant, he was out front on this, has been every day, a day of my being more impressed.

I have stated on the Senate floor on many occasions how much I appreciate Judd Gregg. We disagree on lots of things, but the one thing we don't disagree on is his being a great representative for the state of New Hampshire. I appreciate very much having been able to work with him.

The input of the Finance Committee, Senator Baucus, has been something I will always recognize and remember. And, of course, the work of Senator Conrad, who is our money man on the Democratic side, has been exemplary. Senator?

SEN. MITCH MCCONNELL (R), MINORITY LEADER: Thank you, Harry. This has been the Senate at it finest. In the years that I have been here, I can't recall a single time where, in this close proximity to an election, both sides have risen above the temptation to engage in partisan game playing, if you will, to address an issue of magnitude, great magnitude.

The fact that Senator Obama and Senator McCain were here tonight and also played a constructive role in this process is also quite significant. One of the things I run into all the time in my state and across the country is people say, why can't you folks ever get along and do anything together for the country? I wish we could do that more often, but we clearly have demonstrated in the toughest possible situation, five weeks from an election, that we can come together and address a major crisis.

As my friend, the majority leader, has indicated, this was a measure for Main Street, not for Wall Street. This was a measure that was much need to unfreeze the credit markets and get America's economy working again.

I also want to express my gratitude to my old friend Chris Dodd for his work on it, and particularly Senator Judd Gregg, who I designated as our negotiator, who did a brilliant job of representing the interests of my conference. And, frankly, I don't think we would be here tonight without the magnificent work of Senator Gregg.

So this is an important occasion for our country. We have much to be proud of. This doesn't entirely solve the problem, but it begins to move us in the direction of getting the American economy back where it needs to be very soon.

SEN. CHRIS DODD (D), CONNECTICUT: Well, let me -- a couple things. First of all, let me thank our leadership, because I think the tone that brought us to this vote this afternoon gets set by the leadership. And if that tone is working in the right direction, a lot of good things can happen. And the tone set by the majority leader, Harry Reid, his invitation to Mitch McConnell to be a part of this, and then, of course, asking myself and Judd Gregg to lead the effort here, along with our other colleagues who played very important roles, made it possible for this moment to come.

I begin by thanking them for creating that tone. I would be remiss, as well, if I didn't also thank other people who were critically important in this. Kent Conrad and Max Baucus were invaluable. Jack Reed in my committee, Chuck Schumer played a very important role, as well as the House leadership. I know they're not done yet, but Barney Frank did a great job. As well as, of course, the Republican leadership on the side of the House. I know we're working on all this.

The statistics and the things we're talking about obviously are the credit crunch and talking about the numbers, what has happened on Wall Street, the Dow moving around every day, what the credit markets are doing, all of these statistics. The people are mentioning the effects of this on Wall Street, foreclosures. But there's something even more profound and serious about today than all of these numbers and statistics which are bandied about. It's the most important thing that we can do as a Congress, and that is to restore America's confidence and its optimism and its belief that their institutions of government can respond at a moment like this. Maybe more than anything else we have done today, my hope is that that sense of confidence and optimism and belief that America can be back on its feet again.

We can solve this problem, and offer that sense of hope that tomorrow could be a better day. We haven't done it all here, obviously. There's a lot of things to come. There's not going to be a blossoming tomorrow afternoon or Friday with the economy. We've got many difficult months ahead to get this right. None of that could happen without the decision today. And so the journey in front of us is going to be difficult and long. But I think America tonight, I hope, saw a Congress, saw the United States Senate acting in a way that our forebears and founders wanted us to act. And I'm deeply proud to be a part of this moment.

SEN. JUDD GREGG (R), NEW HAMPSHIRE: Grounds been covered, but let me add a little bit. It was a pleasant and extraordinary experience to participate in this effort to address a crisis which the American people are about -- were about to confront, and which we hope we have alleviated to a significant degree. It came about because the institution of the Senate stepped up in a mature and responsible way, under the leadership of Senator Reid and Senator McConnell, and said, we're not going to allow partisanship; we're not going to allow differences which are real and substantive to divide us in this effort to pull together and come up with a solution to a problem which we all recognize is critical and which, if it isn't addressed, would lead to severe disruption of the lives of all Americans, especially those on Main Street.

I have to hold out special thanks to Chris Dodd. He was the chairman of this exercise. He chaired the committee, the meetings we had. He was also fair. He was always open. He heard everybody's opinions. And he pushed us towards resolutions which would allow us to come out of the room knowing that all of the concerns had been addressed and, interestingly enough in this effort, they were addressed in a positive way. And I don't think anybody left that room not feeling that we had improved the bill, and that the issues that their constituents -- which they were sent there for their constituencies had been effectively resolved and moved forward.

Senator Baucus put an idea on the table early on that helped a lot on one of the most critical issues, which was how we deal with excessive compensation. So his role was also critical. On our side of the aisle, Bob Parker and Bob Bennett played an immense role in basically being the support for the efforts in the negotiations.

So this is the way the government is supposed to work, folks, and it did. I can take a little pride in that. Thank you.

KING: LARRY KING LIVE returns with an outstanding panel in 60 seconds.

(COMMERCIAL BREAK)

KING: We've got a panel assembled, so we are going to play that clip of Sarah Palin discussing the same question asked by Katie Couric about the Supreme Court. Let's watch.

(BEGIN VIDEO CLIP)

KATIE COURIC, CBS ANCHOR: Why, in your view, is Roe v. Wade a bad decision?

PALIN: I think it should be a states issue, not a federal government mandating yes or no on such an important issue. I'm, in that sense, a federalist, where I believe states should have more say in the laws of their lands and individual areas. Now foundationally also, though, it's no secret that I'm pro-life. I believe a culture of life is very important for this country. Personally, that is what I would like to see further embraced by America.

COURIC: Do you think there's an inherent right to privacy in the Constitution?

PALIN: I do.

COURIC: That is the cornerstone of Roe. v. Wade.

PALIN: I do. And I believe individual states can best handle what the people within the different constituencies in the 50 states would like to see their will ushered in in an issue like that.

COURIC: Why do you think Roe v. Wade was a good decision?

SEN. JOE BIDEN (D), VICE PRESIDENTIAL CANDIDATE: Because I think it is as close to a consensus that can exist in a society as heterogeneous as ours. What does it say? It says, in the first three months that decision should be left to the woman. Then the second three months, Roe v. Wade says, well, then the state, the government has a role, along with the woman's health. They have a right to have some impact on that. And the third three months, they say the weight of the government's input is on the fetus being carried.

So that sort of has reflected about as close as anyone is ever going to get in this heterogeneous, this multicultural society of religious people as to some sort of not consensus, but as close it gets. The Liberty Clause of the 14th amendment offers a right to privacy. That is one of the big debates I have with my conservative scholar friends. They say unless a right is enumerated, unless it uses the word privacy in the Constitution, then no such Constitutional right exists. I think people have an inherent right.

(END VIDEO CLIP)

KING: We'll have our group comment on that right after this.

(COMMERCIAL BREAK)

KING: All right, Paul Begala, what did you make of the answers on Roe v. Wade?

BEGALA: I thought two good, thoughtful answers. Both of them walked back from some of the really painful, strident language that some of the most principled people in the abortion debate have. Governor Palin didn't fall into the hateful rhetoric that sometimes people use about people who are pro-choice at all. In fact, she began not even as if she were talking about abortion. She just talked about federalism. Then she said, of course, fundamentally -- foundationally, I'm pro life.

The same thing with Joe Biden. There are a lot of pro-choice supporters who use very harsh language about people who oppose a woman's right to choose an abortion. I think good for both of them. Those are two very good, thoughtful answers.

KING: Kellyanne?

CONWAY: Well, sort of. I thought, remarkably, that Joe Biden, in reminding us Roe v. Wade in the last trimester, he said, goes toward -- the weight of it goes towards actually supporting the fetus being carried. Well, Barack Obama, his boss, doesn't support that. He does not support a ban on partial birth abortions, which are usually conducted in the final couple months. He voted against the Infant Born Alive Act, which says when an aborted fetus survives the abortion, you have to allow it to live.

KING: Don't presidents and vice presidents often -- for example, Governor Palin is against stem cell research and Senator McCain is for it.

CONWAY: Sure and we've heard so much about that. I think it is good for us to hear what I just said. Frankly, looking at your split screen right now, Larry, I think all those people who have made age and old a liability, trying to reduce John McCain's stature, are going to rue that tomorrow when they see the same split screen you have up now, Sarah Palin and Joe Biden. I don't think age is a liability at all. Plenty of people have tried to make it that way.

KING: Running close on time. Kiki, what did you make of their answers.

MCLEAN: Look, I think Paul makes a good point, in terms of nobody speaking in anger. I think they both spoke from the point of view that they come from. You heard Senator Biden really talk as an analyst on the legislation, actually being someone who supports women's privacy and their right to choose. You heard Sarah Palin from her anti-choice position. It was straight forward. I agree with Kellyanne, people ought to know their positions. And the reality is this goes to bigger arguments.

I think the problem tomorrow isn't about age, Kellyanne. The problem is about records and plans for the future. Barack Obama has a better one.

KING: Karen?

HUGHES: Larry, I want you to write this down. I probably will never say it again. I agree with Paul Begala. I thought it was a very, very thoughtful answer. I have friends on both sides of this issue. I'm pro life. I think a lot of my friends who are pro choice respect Sarah Palin for her consistent pro-life principles, the fact that she chose to have a child, even though she knew the child would be a special needs child, and celebrates that. So I think a lot of people respect her for that position. I think they were both very thoughtful answers.

KING: I'm going to let Governor Bush know that you agreed with Paul Begala -- President Bush. I first met Karen Hughes in Austin at the Governor's house. Remember?

HUGHES: That's exactly right. A lot of years ago. You don't look any older, Larry.

KING: Neither do you. We both don't age. Thank you all very, very much for an illuminating half hour.

We have a new feature, Larry King Interactive. It's your chance to be a part of the show. Interact right now, CNN.com/LarryKing. Ben Stein has even weighed in. You can even blog on our site tomorrow night during the Biden/Palin debate. Don't forget our quick vote, who will do better in that debate? Vote now at CNN.com/LarryKing. While you're there, download the podcast, the hilarious Chris Rock.

Next week, Michelle Obama on LARRY KING LIVE. Now, Anderson Cooper and "AC 360."