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Obama, McCain to Debate Tonight; Obama Doing Better on Electoral Map; Federal Reserve to Lend Money to Businesses
Aired October 07, 2008 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
KYRA PHILLIPS, CNN ANCHOR (voice-over): Debate No. 2. Issue No. 1. The presidential hopefuls prepare to do battle in Nashville while our shell-shocked economy forces bold new action from the Fed.
UNIDENTIFIED MALE: Joe Six-Pack.
PHILLIPS (on camera): That's Joe Six-Pack?
(voice-over) To some it's a slam, to others, a badge of honor. To Sarah Palin, it's a political demographic. This hour, the search for Joe Six-Pack.
Talk about courage under fire. A policewoman pulls a woman from a burning car with seconds to spare. All of it, caught on tape.
(END VIDEOTAPE)
PHILLIPS: Hello, everyone. I'm Kyra Phillips live in the CNN world headquarters in Atlanta, and you're live in the CNN NEWSROOM.
The last time John McCain and Barack Obama met on the same stage, which was also the first time a banking system bailout was up in the air, Obama was up by five in our national poll of polls and the Dow closed at 11,143. Eleven days later the bailout is passed, Obama's up by six, and the Dow is about 1,200 points lower. Did you get all that?
Tonight it will be up to undecided voters to ask the questions in a town-hall format at Belmont University in Nashville. Another thing that's changed since the first debate is the tone of the campaigns. The McCain camp attacked Obama's past associations with a former '60s radical, prompting Obama to point out McCain's role in the S&L scandal of the '80s and '90s.
Now, don't expect to see much of either candidate between now and the big event. But lucky for us, Ed Henry is front and center with the latest on the stakes and the strategies.
Ed, what does McCain need to do to help his numbers and pull ahead?
ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Well, you talked about the negative attacks in recent days. That's all about trying to bring Barack Obama down, raise more doubts among American voters, especially the undecided ones in the middle, to say, "Look, he's not ready to be commander in chief. He can't handle the economy. He can't handle national security, et cetera."
Tonight John McCain has to get beyond that. He has to show that he feels it right here. He understands that people are going through tough times, and he has to lay out what he would do to deal with that.
This format -- the good news for McCain is this format suits him well. It sort of plays to his strengths. Out on the campaign trail I see him all the time pacing back and forth on that stage with the microphone, almost like Oprah sometimes, and trying to reach out, take your questions, interact with people in the crowd.
It will be a little different now, because he's not going to be solo. He's going to have Barack Obama in that chair next to him. And Tom Brokaw will be moderating, and he'll be asking questions. And undecided voters will be asking questions, not just Republican partisans in a McCain crowd, just as Obama normally gets Democratic partisans in his crowd.
So I think the challenge for McCain, clearly, is to reach out to people in the middle, especially on the economy, Kyra.
PHILLIPS: All right. We'll all be watching. That's for sure. And we'll debrief after tomorrow.
Ed, thanks so much.
And if we've learned nothing else since 2000, it's the paramount importance of the electoral map and the number 270. As things stand now, Obama seems a lot closer to that number than McCain does. Our John Roberts breaks it down.
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JOHN ROBERTS, CNN ANCHOR: Kyra, we have seen so many changes in our Electoral College map this year. We've got some more to tell you about today, based on new polling just released this morning.
First of all, let's take a look at the lay of the land. We have eight toss-up states, as denoted here by the yellow color. The light blue, dark blue are ones that either lean Democrat or are safely Democrat. The pink here and then the deeper color of brown, those are states that either lean Republican or are safe territory for John McCain. So there's the lay of the land. Eight battleground states.
Current projections are that, if the election were to be held today, Barack Obama would have 250 electoral votes compared to John McCain's 189. but that's going to change based on these latest polls. Let's put them up for you and take a look.
First of all, in the battleground state of Wisconsin, which was within three points, Barack Obama now leads John McCain 51-46 percent. So he's now got a five-point lead.
The battleground of New Hampshire, the Granite State, with four Electoral College votes, Barack Obama now leads John McCain by eight points, 53-45.
And take a look at this. In North Carolina, which has been safe, safe Republican territory -- the last time it voted Democrat, Kyra, was 1976 when it went for Jimmy Carter. Look at this. Forty-nine percent -- 49 percent, even up there in the state of North Carolina.
Now, why does all this matter? Well, let's take a look historically at the record here. We'll go back to the 2004 election, look at the results of that.
First of all, in the state of Wisconsin, take a look at this. One point separated John Kerry from President Bush: 50 percent for Kerry, 49 percent for President Bush. Barack Obama is now five points ahead in that state.
Let's go over here to New Hampshire and see what happened in 2004. Here we go. Again, one-point difference John Kerry to George Bush. That margin now, eight points. That's if the election were held today, again.
And look at this. In the state of North Carolina, this is the big change here. 2004, President Bush hammered John Kerry by 12 points. And that state is now even up.
So here's where the rubber meets the road. Let's take it back to our Electoral College map. Things are changing now because of the results of these latest polls.
First of all, the state of Wisconsin, because of the polling, because of historic trends, we are now going to put that in the lean Barack Obama category. So that ups the number of electoral votes he has now to 260. John McCain, 189.
We're also, because of polling and historic trends, we are going to take the Granite State. We're going to put that as a lean Barack Obama state.
So look at this. This changes the number. He now has 264 electoral votes. He is only six away; 270 needed to win the White House. Only six away from winning the White House.
And because things are so close here, and we had it close before, but looking at historic trends again, the fact that last time it voted Democrat was 1976, we are only now going to put North Carolina in the toss-up category.
So that makes the total, if the election were to be held today, CNN projections are Barack Obama would come away with 264 electoral votes to John McCain's 174. Again, 270 needed to win. So if were you to pick up Florida, 27 electoral votes, an easy win. State of Ohio, an easy win, with 20 electoral votes. Even the state of Colorado, with nine electoral votes, would be enough to take Barack Obama over the top.
So you can see, his route to the White House, very much more easy than Senator John McCain's. But again, still four weeks to the election, Kyra. A lot could change between now and November the 4th.
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PHILLIPS: All right, John Roberts, thanks so much.
And don't forget: the second of the three presidential debates begins at 9 p.m. Eastern, 6 Pacific. But you can catch the best political team on television starting at 4 Eastern in "THE SITUATION ROOM." A special edition of "AC 360" follows the debate at 10:30, only here on CNN.
So need cash fast? Call the Fed. Well, not you exactly, but your employer might. It's yet another lifeline for a credit-starved economy, and it's not the same as the bailout.
Ali Velshi, we're talking corporate I.O.U.s, right?
ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: That's right.
PHILLIPS: So let's talk about what that means for me and the difference between last week and this week.
VELSHI: All right. So bottom line is companies all over the world and in America borrow money on a short-term basis. And most companies raise their money on the stock market by putting up stock. People buy the stock, company gets money to raise money.
Then they raise money by borrowing for long term, building factories and things like that.
But there's this whole business of borrowing money for the short term, up to two months, for covering some expenses before some revenues come in. That is exactly what this credit freeze has been about: companies having trouble borrowing money. Real big companies like Caterpillar, like AT&T.
Now the federal government is getting into the business of directly lending money to these people. The way it used to be is, if you were AT&T, you'd go to Morgan Stanley or Goldman Sachs, say, "I need a billion dollars for two months." They'd go find some investors, maybe overseas, who would lend you the money. You'd pay it back.
That isn't able to be done anymore. So the federal government, the Federal Reserve, will now lend money to these companies as long as the credit is good, and it's for a set amount of time for a set interest rate. And that will -- that should serve to unfreeze the short-term lending that is starting to sort of cripple business in America.
PHILLIPS: OK. Hold that thought. Ben Bernanke is talking right now. Let's go ahead and listen, and you and I can discuss what he has to say and incorporate it into our discussion.
(JOINED IN PROGRESS) BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE: ... securities remain closed or impaired. Considerable experience in both industrialized and emerging economies has shown that severe financial instability, together with the associated declines in asset prices and disruptions in credit markets, can take a heavy toll on the broader economy, if left unchecked.
For this reason, the Federal Reserve, the treasury and other agencies are committed to restoring market stability and are working assiduously to assure that the financial system is able to perform its critical economic functions.
Recent actions by the Congress have given the treasury new tools and resources to address distressed conditions of our financial markets and institutions. The Federal Reserve has also been granted a new authority: the ability to pay interest on bank reserves, which will allow us to expand our lending as needed, to support the system, while better managing the federal funds rate.
These tools will provide important additional support for the government's efforts to strengthen financial markets and the economy.
Let me briefly review recent financial developments. On the heels of nearly a year of stress in credit markets, investors' and creditors' concerns about funding and credit risks at financial firms intensified over the summer as mortgage-related assets deteriorated further, economic growth slowed, and uncertainty about the economic outlook increased.
As investors and creditors lost confidence in the ability of certain firms to meet their obligations, their access to capital markets, as well as the short-term funding markets, became increasingly impaired, and their stock prices fell sharply.
Among the companies that experienced this dynamic most forcefully were the government-sponsored enterprises Fannie Mae and Freddie Mac; the investment bank Lehman Brothers; and the insurance company, American International Group or AIG.
The Federal Reserve believes that, whenever possible, such difficulties should be addressed through private sector arrangements. For example, raising new equity capital, as many firms have done; by negotiations leading to a merger or acquisition; or by an orderly wind-down. Government assistance should be provided with the greatest reluctance and only when the stability of the financial system. and thus the health of the broader economy. is at risk.
In those cases when financial stability is threatened, however, intervention to protect the public interest may well be justified.
Fannie Mae and Freddie Mac present cases in point. The Federal Reserve has long warned about the systemic risk posed by these companies' large portfolios of mortgages and mortgage-backed securities, as well as the problems arising from the conflicts between the objectives of shareholders and the objectives of the government. Given the scale of losses in their portfolios, raising enough capital from private investors wasn't feasible for these companies. The firm's size and their government-sponsored status precluded a merger with or acquisition by another company.
To avoid unacceptably large dislocations in mortgage markets, the financial sector and the economy as a whole, the Federal Housing Finance Agency, FHFA, put Fannie and Freddie into conservatorship, and the treasury, drawing on authorities recently granted it by the Congress, made financial support available.
The Federal Reserve, acting in a consultative role, worked closely with FHFA, in evaluating the GAC (ph) portfolios and capital positions. Based on the joint findings of these agencies, we supported FHFA's decision to place the companies in conservatorship as necessary and appropriate, given their conditions and their systemic importance.
The government's actions appear to have stabilized the GSEs, although like virtually all other firms, they're experiencing effects of the current crisis. Nonetheless, we already have seen benefits in their stabilization in the form of lower mortgage rates, which should help the housing market.
The difficulties at Lehman and AIG raised somewhat different issues. Like the GSEs, both companies were large and complex and deeply embedded in our financial system. In both cases, as the firms approached a fall, the treasury and the Federal Reserve sought private sector solutions, but none was forthcoming. Attempts to organize a consortium of firms to purchase or recapitalize Lehman were unsuccessful.
With respect to public-sector solutions, we determined that either facilitating a sale of Lehman or maintaining the company as a free-standing entity would have required a very sizable injection of public funds, much larger than in the case of Bear Stearns, and would have involved the assumption by taxpayers of billions of dollars of expected losses.
Even if assuming these costs could be justified on public policy grounds, neither the treasury nor the Federal Reserve had the authority to commit public money in this way. In particular, the Federal Reserve's loans must be sufficiently secured to provide assurance that the loan will be fully repaid. Such collateral was not available in this case.
Recognizing that Lehman's potential failure posed risk to market functioning, the Federal Reserve sought to cushion the effects by implementing a number of measures, including substantially broadening the collateral accepted by the Fed's primary dealer credit facility and term securities lending facility to ensure that the remaining primary dealers would have uninterrupted access to secured funding.
In the case of AIG, the Federal Reserve and the treasury judged that a disorderly failure of AIG would have severely threatened global financial stability and the performance of the U.S. economy. That judgment reflected our assessment of prevailing market conditions, AIG's central role in a number of markets other firms used to manage risks, and the size and composition of AIG's balance sheet.
To avoid the default of AIG, the Federal Reserve was able to provide emergency credit that was judged to be adequately secured by the assets of the company.
To protect U.S. taxpayers and to mitigate the possibility that lending to AIG would encourage inappropriate risk-taking by financial firms in the future, the Federal Reserve further ensured that the terms of credit extended to AIG imposed significant costs and constraints on the firm's owners, managers and creditors.
AIG's difficulties and Lehman's failure, along with growing concerns about the U.S. housing sector and the economy, contributed to extraordinarily turbulent conditions in global financial markets in recent weeks. Equity prices have fallen sharply. The cost of short- term credit, where such credit is available, has spiked, and liquidity has dried up in many markets.
One money market's fund's losses forced it to break the book (ph). That is, the value of its assets fell below par, an event that triggered extensive withdrawals from a number of money market funds. Those funds responded to the surge in redemptions by attempting to reduce their holdings of commercial paper and large certificates of deposit held by banks.
Some firms that could not roll over their commercial paper drew on backup lines of credit with banks just as the bank were finding it even more difficult to raise cash in the money markets.
At the same time, a marked increase in the demand for safe assets, a flight to quality and liquidity, resulted in a further drop in the value of mortgage-related assets, and sent the yield on treasury bills down to a few hundredths of a percent.
Developments during the summer pressured not only non-bank financial firms but also a number of depository institutions, including Washington Mutual and Wachovia. In recent weeks, these two institutions suffered deposit outflows and reduced access to wholesale funding.
The Office of Thrift Supervision, WaMu's regulator, closed that company and appointed the FDIC as receiver. The FDIC immediately sold the institution to JPMorgan Chase.
In the case of Wachovia, to avoid serious adverse effects in economic conditions and financial stability, the secretary of the treasury, in consultation with the president and on the recommendation of the Federal Reserve and the FDIC, authorized the FDIC to use its funds to facilitate the sale of that company's banking operations without loss to creditors. Both Citigroup and Wells Fargo have offered to buy the company, and negotiations are continuing.
Most importantly, however, in either case, all depositors and creditors of Wachovia are fully protected, and depositors and other customers will experience no interruption in banking services.
By potentially restricting future flows of credit to households and businesses, the developments in financial markets pose a significant threat to economic growth. The treasury and the Fed have taken a range of actions to address the very tight funding conditions that now prevail.
For example, the treasury implemented a temporary guarantee program for balances held in money market mutual funds, helping to stem the outflows from these funds and thus reducing their need to sell assets into already distressed markets.
The Federal Reserve has taken a number of steps, including putting in place a temporary lending facility that provides financing for banks to purchase high-quality asset-backed commercial paper from money market funds.
The Fed has also significantly increased the quantity of funds it options to banks and has accommodated heightened demands for funding from banks and primary dealers.
As of last Wednesday, our various lending facilities, including our securities lendings program, were providing more than $800 billion of liquidity to the financial system.
To address dollar funding pressures worldwide, we have significantly spanned (ph) reciprocal currency arrangements, so-called swap agreements, with foreign central banks. These agreements enable the foreign central banks to provide dollar funding to financial institutions in their jurisdictions, which helps to improve the dollar -- the functioning of dollar funding markets globally.
In addition, this morning, the Federal Reserve announced a new facility that will help provide liquidity to term funding markets by purchasing three-month commercial paper and asset-backed commercial paper directly from eligible issuers.
The expansion of Federal Reserve lending is helping financial firms cope with reduced access to their usual sources of funding. Recently, however, our liquidity provision have begun to run ahead of our ability to absorb excess reserves held by the banking system, leading the effective funds rate on many days to fall below the target set by the federal open-market committee.
This problem has largely been addressed by a provision of the legislation that Congress passed last week, which gives the Federal Reserve the authority to pay interest on balances that depository institutions hold in their accounts with the Federal Reserve.
The Federal Reserve announced yesterday that it will pay interest on required reserve balances at ten basis points below the federal funds rate target and pay interest to excess -- on excess reserves, initially, at 75 basis points below the target.
Paying interest on reserves should allow us to better control the federal funds rate, as banks are unlikely to lend overnight at a rate lower than they can receive from the Fed. Thus, the payment of interest on reserves should set a floor for the funds rate over the day.
With this step, our lending facilities may be more easily expanded as necessary. So long as financial conditions warrant, we will continue to look for ways to reduce funding pressures in key markets.
Economic activity had shown signs of decelerating even before the recent upsurge in financial-market tensions. As has been the case for some time, the housing market continues to be a primary source of weakness in the real economy as well as in the financial markets.
However, the slowdown in economic activity has spread outside the housing sector. Private payrolls have continued to contract, and the declines in employment, together with earlier increases in food and energy prices, have eroded the purchasing power of households. This sluggishness of real incomes, together with tighter credit and declining household wealth, is now showing through more clearly to consumer spending. Indeed, since May, real consumer outlays have contracted significantly.
Meanwhile, in the business sector, worsening sales prospects and a heightened sense of uncertainty have begun to weigh more heavily on investment spending, as well.
The intensification of financial turmoil and the further impairment of the functioning of credit markets seemed likely to increase the restraint on economic activity in the period ahead. Even households with good credit histories are now facing difficulties obtaining mortgage loans or home equity lines of credit. Banks are also reducing credit-card limits, and denial rates on automobile loan applications are reportedly rising.
Businesses, too, are confronting diminished access to credit. For example, disruptions in the commercial paper market and the tightening of bank lending standards have made it more difficult for businesses to obtain the working capital they need to meet everyday operating expenses such as payroll and inventories.
All told, economic activity is likely to be subdued during the remainder of this year and into next year. The heightened financial turmoil that we have experienced of late may well lengthen the period of weak economic performance and further increase the risk to growth.
To support growth and reduce the downside risks, continued efforts to stabilize the financial markets are essential. The Federal Reserve will continue to use the tools at its disposal to improve market functioning and liquidity.
Inflation has been elevated, reflecting the steep increases in the prices of oil, other commodities and imports that occurred earlier this year, as well as some passed through by firms to consumers of their higher costs of production.
However, more recently, the prices of oil and other commodities, while remaining quite volatile, have fallen from their peaks, and prices of imports show signs of decelerating.
In addition, expected inflation, as measured by consumer surveys and inflation treasury securities, has held steady or eased. These recent developments, together with economic activity that is likely to fall short of potential for a time, should lead to rates of inflation more consistent with price stability.
Still, the inflation outlook remains highly uncertain, in part because of the extraordinary volatility of commodity prices. We will need to continue to monitor price developments closely.
Overall, the combination of the incoming data and recent financial developments suggests that the outlook for economic growth has worsened and that the downside risk to growth have increased. At the same time, the outlook for inflation has improved somewhat, though it remains uncertain.
In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate.
The intensification of the financial crisis in recent weeks made clear that a more powerful and comprehensive approach involving the fiscal authorities was needed to solve these problems. On that basis, the secretary of the treasury, with the support of the Federal Reserve, went to the Congress to ask for a substantial program aimed at stabilizing our financial markets.
As you know, last week the Congress passed, and the president signed, the Emergency Economic Stabilization Act. This legislation provides important new tools for addressing the distress in financial markets, and thus mitigating the risk to the economy.
The act adds broad, flexible authorities to buy troubled assets, to provide guarantees, and to directly strengthen the balance sheets of individual institutions. Notably, the legislation establishes a new Troubled Asset Relief Program, or TARP, under which the treasury is authorized to purchase as much as $700 billion of troubled mortgages, mortgage-related securities, and other financial instruments from financial firms that are regulated under U.S. law and have significant operations in the United States.
The act also raises the limit on deposit insurance at banks and credit unions from $100,000 to $250,000 per account, a step that could reinforce depositors' confidence in the security of their funds and thus help to stabilize depository institutions.
And as I mentioned, the act provides the Federal Reserve the authority to pay interest on reserves, which will allow us to better manage the federal funds rate as we provided liquidity to the markets. We will begin exercising that authority this week.
The TARP's purchases of the liquid assets from banks and other financial institutions will create liquidity and promote price discovery in the markets for these assets. This, in turn, will reduce investor uncertainty about the current value and prospects of financial institutions, enabling banks and other institutions to raise capital, and increasing the willingness of counter parties to engage.
More generally, increased liquidity and transparency in pricing will help to restore confidence in our financial markets and promote more normal functioning. With time, strengthening our financial situations and markets will allow credit to begin flowing again, supporting economic growth.
The interests of the taxpayers are carefully protected under this program. First, the Congress has required extensive controls and oversight to ensure that the allotted funds are used appropriately and effectively.
Second, the $700 billion allotted by the legislature is not an authorization to spend but rather an authorization to purchase financial assets. The treasury will be a patient investor and will hold these assets for an appreciable period of time. Eventually, however, some assets will mature, and the treasury will choose to sell others to private investors.
Financially, in the long run, the taxpayer may come out either ahead or behind in this process. In light of the many uncertainties, no assurances can be given, but the ultimate cost of the program to the taxpayer will certainly be far less than $700 billion.
Third, and most important, restoring the normal flow of credit is essential for economic recovery. If the TARP promotes financial stability, leading ultimately to stronger economic growth and job creation, you will have proved a very good investment indeed and to everyone's benefit.
To be sure, there are many challenges associated with the design and implementation of the TARP, including determining which assets will be purchased and how prices will be determined. The treasury, with the advice and cooperation of the Federal Reserve, is working to address these challenges as quickly as possible.
It is unlikely that a single method will be used for acquiring assets. Inevitably, some experimentation will be necessary to determine which approaches are most effective.
Importantly, the legislation that created the TARP does provide sufficient flexibility to allow for different approaches to solving the problem, subject, of course, to the close oversight that will ensure that the program's funds are used in ways that are in the interest of taxpayers.
These are momentous steps, but they are being taken to address a problem of historic dimensions. In one respect, however, we are fortunate. We've learned from historical experience with severe financial crises that, if government intervention comes only at a point at which many or most financial institutions are insolvent or nearly so, that the costs of restoring the system are greatly increased.
That is not the situation we face today. The Congress and the administration chose to act at a moment of great stress, but one at which the great majority of financial institutions have sufficient capital and liquidity to return to their critical function of providing new credit for our economy.
The steps being taken now to restore confidence in our institutions and markets will go far to resolving the current dislocations.
I believe that the bold actions taken by the Congress, the treasury, the Federal Reserve and other agencies, together with the natural recuperative powers of the financial markets, will lay the groundwork for financial and economic recovery.
Thank you very much.
PHILLIPS: OK. I'm not sure if I should feel encouraged, anxiety ridden, confused. One thing is clear, though, when Ben Bernanke talks, the Dow drops.
Ali Velshi, try and make sense of this for all of us that are, I guess, trying to read between the lines.
VELSHI: Well, let me tell you, Darius Walker (ph), one of our producers here -- he's our bureau chief -- just came up to me and said, "Is there any better definition of a lack of confidence?" It doesn't matter who's talking and what plan they're putting in place, this Dow just keeps on sort of -- it keeps on a slow bleed. I mean, it's really incredible.
There's something in what Ben Bernanke said in there that's worth listening to. And he said -- maybe, I don't know if you got it yet. Let me just read it to you. He said, the combination of incoming data and recent financial developments suggests the outlook for economic growth has worsened, blah, blah, blah, blah, blah. And then he says, in light of these developments the federal reserve will need to consider whether the current stance of policy remains appropriate.
Now, that, as you know, Kyra, is fed speak. Current stance of policy means keeping interest rates where they are. That was a big, big hint to the markets that the fed may cut interest rates. Which again, a few months ago wouldn't have seemed like the right thing to do. So, that's a hint that the fed might cut interest rates. Usually, I don't have to be that smart to have read that into it. That means everybody read the same hint into it.
But the markets didn't go up on that news. Which leads me to believe that there are a lot of people thinking cutting interest rates is not the solution to the problem that we're in. In fact, it probably isn't. There's no confidence in the market. It's not the interest rate that's the problem. It's the fact that nobody wants to lend money to anybody -- Kyra.
PHILLIPS: Right. And he made that clear. You know, you can't get cars, you can't get credit.
VELSHI: Right. PHILLIPS: The lending, so there's a block. All right, we're going to continue to monitor Ben Bernanke, of course, and talk with you throughout the afternoon and try to just make sense of it all.
VELSHI: Sure.
PHILLIPS: Ali Velshi thanks so much.
VELSHI: OK.
PHILLIPS: AIG got a huge government bailout. Then, just days later, the insurance giant's executives wined and dined at a posh resort. Well, the company's troubles, front and center today at a House committee hearing. We're going to hear from Congressman Elijah Cummings who's hopping mad about some of those AIG excesses.
And faith on film. A low-budget Christian movie is changing lives and making big bucks at the box office. Live interview with its star, Kirk Cameron.
And we've got an incredible rescue from Indiana, to show you. Every second counted in this life and death situation.
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PHILLIPS: 1:34 Eastern time. Here's some of the stories we're working on in the CNN NEWSROOM. President Bush wants struggling business owners to know that he's listening. This hour he's visiting with employees at an office supply company in Virginia. He's expected to get an earful on the economy and afterwards he'll make some comments on the bailout. We'll bring them to you live.
They ran AIG for the past 41 years, but three ex-CEOs say it's not their fault the insurance company collapsed. Members of the House Oversight Committee are grilling those execs today. It's the panel's second, in the series of hearings on the nation's in economic crisis.
Then tonight, the second of three presidential debates. John McCain and Barack Obama clearly expecting the economic crisis to dominate the town hall-style meeting.
Joe six-pack. That's one of Sarah Palin's favorite terms when she's referring to voters on the campaign trail. But, who exactly is she talking about? Let's find out. CNN's Carol Costello hangs out with them all the time. She joins us live from Washington.
How you doing there, C.C.?
CAROL COSTELLO, CNN CORRESPONDENT: I'm doing fine, Kyra. And you're right. I know a lot of Joe Six-Packs.
You know, who thought the term Joe Six-Pack would generate so much conversation? I've talked to my mom about who he is. I overheard a whole tableful of people at a restaurant very pointedly saying, I am not Joe Six-Pack. So who is Joe Six-Pack? We wondered, too. (BEGIN VIDEOTAPE)
GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: Can I call you Joe?
COSTELLO (voice-over): Politicians love to use labels and Sarah Palin is a champ. Her hockey mom label scored big and her latest is causing quite a stir.
PALIN: Let's commit ourself, just every day American people, Joe Six-Pack, hockey moms across the nation --
COSTELLO: Hmm. Joe Six-Pack. It refers to someone who buys beer and not champagne, right? Right? But it is a loaded moniker. To some, it conjures up images of rather unattractive, fictional slobs like Al Bundy, or the sexist football obsessed Hank from "King of the Hill."
(on camera): So who was Sarah Palin addressing when she mentioned Joe Six-Pack? I mean, who is Joe Six-Pack, anyway?
UNIDENTIFIED MALE: Joe Six-Pack?
UNIDENTIFIED MALE: Right here he is.
COSTELLO: That's Joe Six-Pack?
UNIDENTIFIED MALE: There he is.
COSTELLO (voice-over): At Lincoln Financial Field where the Philadelphia Eagles play and fans party, there were plenty of Republicans willing to say that on football Sunday, they become Joe Six-Pack. Loud, kind of drunk --
UNIDENTIFIED MALE: There's nothing in that can.
COSTELLO: And in love with Palin.
UNIDENTIFIED MALE: She's definitely hotter than Barack Obama, I think.
COSTELLO (on camera): But is that a great reason to vote for someone?
UNIDENTIFIED MALE: I think so.
COSTELLO (voice-over): Other Republicans were more thoughtful, delighting in Sarah's Palinism.
UNIDENTIFIED FEMALE: It makes her seem like more of a person that would come out to an event like this instead of somebody who's too busy tied up in Washington.
COSTELLO: But, Democrats I talked with have grown tired of Palinisms. Joe Six-Pack was the last straw.
(on camera): Does that resonate with you at all?
UNIDENTIFIED MALE: No. I don't really know what that means. Is that the vote that she's looking for? The people who drink six packs of beer?
COSTELLO (voice-over): He says the question we should be asking is not who is Joe Six-Pack, but do we really want Joe Six-Pack in the White House?
"Newsweek" magazine put it more bluntly calling Palin's campaign style mindless populism. Still, analysts say Palin's Joe Six-Pack shout-out resonates with -- well, Joe Six-Pack.
TERRY MADONNA, FRANKLIN AND MARSHALL COLLEGE: Sarah Palin, in a sense being herself, articulating the needs and the desires and the wants and the problems of average Americans. That's probably her strongest suit.
(END VIDEOTAPE)
COSTELLO: So who is Joe Six-Pack? Well from my unscientific survey, Republicans think he's a down-to-earth guy and Democrats think he's -- well, not so smart. If you want science, the governor's Palinisms don't appear to be packing quite the positive punch they once did, according to CNN Opinion Research Poll. The majority of Americans now feel she is not qualified to be president and Palin's unfavorability rating doubled since she was named a candidate -- Kyra.
PHILLIPS: All right. Part two is just expect, mingle with the metro sexual. We look forward to that.
Carol Costello. Talk to you later.
So many questions about the economy, where do you even start? Well, with us, it starts with the morning meeting. Here's a question that came up. Is the decline of oil prices really good news? Or, good news with an asterisk? That kind of got some ideas going.
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UNIDENTIFIED FEMALE: Gas prices, I mean, crude oil prices are steadily dropping, like below $80 a barrel. Which they haven't been since, what, last year? So, that's a good thing because globally, everybody buying less. So that -- in the long term could help consumers.
UNIDENTIFIED FEMALE: One thing, too, I know we mentioned last week. The dollar's still as strong. I heard a little mumble about that this morning, too. And I think that's one thing that maybe we can explain a little bit further.
UNIDENTIFIED FEMALE: We've got Robert Reich, but -- what do you call it?
UNIDENTIFIED FEMALE: We should do e-mails with him. He is --
UNIDENTIFIED FEMALE: Fabulous with e-mails.
(END VIDEO CLIP)
PHILLIPS: That's right. That's how we arrived at Robert Reich. Formerly a secretary, author, professor at Cal Berkeley. And Mr. Fabulous with the e-mails.
Thanks for joining us, Robert.
ROBERT REICH, AUTHOR "SUPERCAPITALISM": Well, good to see you. Look, I don't know who Joe Six-Pack is either, but he's not at Berkeley, I can tell you that.
PHILLIPS: OK. Oh, a lot of those boys drink beer at Berkeley. Don't try and --
REICH: Yes. That's actually true. I'm going hear a lot of feedback on that comment.
PHILLIPS: Yes, you are. All right. We'll follow up with that next.
Hey, let's get right to the e-mails. I do have a couple of other questions for you, but I want to get these three in for sure. Here's what Larry wants to know from you, Robert.
"Who is managing the disbursement of the $700 billion and how does it not lead to corruption? What are the audits in place and who is accountable to the taxpayers?" That's a great question.
REICH: Kyra, it is being managed by the Treasury Department. The Treasury'S right now setting up rules for exactly how it's going to be disbursed. Whether it's going to be a kind of auction. That's one idea. Basically you go to -- just like airlines when they've overbooked. The Treasury says, look, here's some money. We will take in the first bad loans that you guys want to unload on us. That's one model.
The other model is, here's some money for you banks and we will take some shares of stock in you, to the extent that you want some extra cash. So, all of that's being worked out. The oversight mechanisms are also being worked out right now. I would say, probably another two and a half to three weeks before we see that whole system actually in force.
PHILLIPS: OK. Well, there's a lot of concern that, wow, do we really trust that our government can be the oversight committee or group or whatever to a situation that they were very involved with in the first place and got us to this horrible point.
REICH: Well, Kyra, that's a very, very good question. Because, you know, nobody trusts Wall Street and nobody trusts the government. And here we have Wall Street and the government both disbursing $700 billion of money.
Well, public trust is at an all-time low and on top of all of this we've got a lame duck administration, we have a Treasury Secretary from Wall Street. We have Congress locked in you know, four weeks away an election. A lot of partisanship. So, there is a major leadership vacuum right now which accentuates the distrust that everybody feels.
PHILLIPS: All right. I'm actually going to skip past the second and right to James. We've only got about a minute or so. He says, "Why has no one brought up all the personal mortgage insurance people have paid and are still paying? Were the banks not covered?"
REICH: Well, if the question from James is really that we need to make sure that the mortgage insurance people and also all of the people who are in danger of losing their homes, at least get some help. He is absolutely right.
I mean what we are doing is essentially bailing out Wall Street. What we ought to be doing in my view, is to be providing some help to homeowners and those who are insuring homeowners, providing some means by which distressed homeowners can actually get back to kind of a 30- year fixed rate if they're on variable rate. Because after all, it's much better to have somebody in a home paying their mortgage, better for everybody, including the mortgage banks, than to have a vacant home, somebody not in it. A family without a house and bringing property values down for the entire community.
PHILLIPS: All right. Just with your experience, I want to ask you about 401(k). How long do you think folks need to ride this out? We've gotten a lot of e-mails about, do we take our money out? Do we let it go, a lot e-mails. I'm older, or I'm younger. Is it different for each generation?
REICH: Well, Kyra, it is different. If you are within five years of retirement, you are in a little bit of a pickle right now. Don't take your money out. Don't -- buy high and sell low. That would be the worst thing did you.
But if you can possibly, if you've got a money market fund, make sure its insured. If you have a money market fund also, you might put more into short-term certificates of deposit. But on the other hand, if you're 10 or 15 or 20 years away from retirement, don't worry about it. I mean, chances are the stock market is going to come back. You are not trouble. Certainly don't take any money out of your stocks or your 401(k) now.
PHILLIPS: We'll be working until we're 90. We'll need lots of six packs -- Robert Reich.
REICH: A lot of us are going to work a very long time, I'm afraid. And retirement for a lot of people means 70 now, and it may mean even more than 70 years old.
PHILLIPS: Well, and for many, it's our oxygen. Robert, great to see you.
REICH: Thanks, Kyra. PHILLIPS: Well, something as simple as a fan could help protect your baby from SIDs, Sudden Infant Death Syndrome. Researches from Kaiser Permanente have found that improving ventilation in the room lowers the SIDs risk. Experts say that the best advice is still to place sleeping babies on their backs and such advice helped cut SIDS deaths by more than half in the last decade. But SIDS remains the leading cause of deaths for infants up to 1 year old.
And in Los Angeles, official trying to determine what made about 200 University of Southern California students sick? They know that it's some kind of contagious virus and health officials say that the students started showing up with symptoms including vomiting, diarrhea. It happened over the weekend and classes have actually continued operating normally, even with all those students getting sick.
Fire proof. A new box office hit raising eyebrows and according to its stars, saving marriages. We're going to talk with actor Kirk Cameron, straight ahead.
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PHILLIPS: Well, in a time when Wall Street is getting grilled for corruption and greed, there's a new film is out that involves very little money, a moral compass and a lot of faith.
Now, Kirk Cameron play a firefighter trying to save his marriage from the brink of divorce. And it sounds like a typical Hollywood movie, right? But, actually it's not. It's plot, purpose and proceeds actually have a much higher calling. It debuted at the fourth highest grossing film its first weekend, despite being produced by a church on a shoestring budget.
So, what does this film success say about the faith in America right now, just 28 days before we vote for a new president? Actor Kirk Cameron joins me now live from Agoura, California.
Kirk, great to see you.
KIRK CAMERON, ACTOR: Thank you. Good to see you, too.
PHILLIPS: Well, what do you think about this response to the film and what have people been saying to you?
CAMERON: Well, the response has been very, very encouraging. We're finding that people are just flooding our in boxes with e-mails, with stories of the lights coming up in the theaters. Couples are rededicating themselves to one another. Praying in the theaters. Divorce lawyers saying that they're going redo the way they do practice and have their clients see this movie before they finalize divorces. So, it's definitely striking a cord in the hearts of people across America.
PHILLIPS: Wow. So, when you see what's happening, you see what's dominating news. From this corruption on Wall Street, to all this mud-slinging within the political process. Even all the infidelity and the divorces that are taking place. Yet, you see a movie like this do so well.
What does that tell you about the faith of America? What does that tell you about you know, the average family?
CAMERON: Well, I think historically that people have always turned out to see movies when times are not good. During economic down times people want a release and they want a form of entertainment and an escape.
So, movies are a good way to find that. But when you also can combine that with something that holds up the honor that belongs to marriage. And you emphasize things like faith and hope and love, that really resonates with people. And it's turned this movie into a great, big success. So, middle America has definitely turned out and stood behind us with this movie, "Fireproof."
PHILLIPS: Let's watch another clip.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: When two people get married, it is for better or for worse, for richer or for poorer, in sickness and in health.
CAMERON, PLAYING CALEB HOLT, "FIREPROOF": I know that, but marriages aren't fireproof. Sometimes you get burned.
UNIDENTIFIED MALE: Fireproof doesn't mean that a fire will never come, but that when it comes you will be able to defend it.
CAMERON: You didn't have to glue them together.
UNIDENTIFIED MALE: Don't do it, Caleb. If you pull them apart now you'll break either one or both of them.
CAMERON: I am not a perfect person, but better than most and if my marriage is failing, it is not all my fault.
UNIDENTIFIED MALE: But Caleb, (INAUDIBLE) run into a burning building to save people you don't even know, but you're going to let your own marriage just burn to the ground.
(END VIDEO CLIP)
PHILLIPS: Wow, I think back 17 years ago -- I interviewed you in Los Angeles --
CAMERON: That's right.
PHILLIPS: -- at KTBS. You had just gotten married, now here you are 17 years later, six kids. You guys still look absolutely amazing from the first time I met you. And you're in this movie talking about what it takes to make marriage and family work. And it's hitting the box office by storm. You are kind of living proof in this role, you're not just acting.
CAMERON: Well, that is true. Being married 17 years with six little kids, we certainly understand the struggles of family life and a lot of people relate to everything going on in this movie because it is much the same for all of us. We have jobs. We have family. We have relationships that go sour. We expectations that are not met.
And people tend to -- they don't have the instruction to fall back on to know how to make it work. Many of us have learned how to drive a car because it is important to know how, but we don't learn how to be married, we don't learn how to be a family, and that is much more important. And "Fireproof" gives people tools with the love of their book (ph) and some of the other principles there, like leading your heart instead of following your heart, that people can see are real ways of pulling their marriage up out of from a nose-dive.
PHILLIPS: Well, it is pretty awesome, too, proceeds from this of movie going to first responders, right?
CAMERON: That's right. And also, many of the proceeds of this movie are going to a community center in Albany, Georgia, where there is going to be basketball courts and all kinds of things there to pull some of the kids off of the streets and get them involved in great, positive things.
PHILLIPS: Well, you have done that your entire life and your entire career and marriage.
Kirk Cameron, great to see you again. Thanks so much for being with us.
CAMERON: Thank you, my pleasure.
PHILLIPS: Straight ahead, the car was ready to blow, and police were ready to go, and a woman's life was saved within seconds to spare. You won't want to miss this story.
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PHILLIPS: Minute more and it would have been too late. A car engulfed in flames, the driver stuck behind the wheel. Well, in the nick of time Indianapolis police roll up and get right to work and the whole thing is caught on tape.
Here is Daniel Miller of our affiliate, WISH.
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OFC. CHRIS WILBURN, INDIANAPOLIS POLICE: Without officers on scene, the person who you will see in the video wouldn't be alive today.
DANIEL MILLER, WISH REPORTER: On Friday night, September 26th, metro police officer Madaline Lothamer responded to this car fire on 39th and Lafayette Road. This is dash cam video from her police car.
OFC. MADALINE LOTHAMER, INDIANAPOLIS POLICE: When I approached the vehicle initially I did not hear or see anything.
MILLER: But seconds later, Officer Lothamer heard the driver call for help.
LOTHAMER: And I heard the help me, help me, and saw her shadow through the smoke.
MILLER: According to metro police, the driver ran into the back of a tanker truck. The impact caught the car's engine on fire.
LOTHAMER: The goal was to just get her out quickly.
MILLER (on camera): She tried to pull the victim out, but the doors were locked. When other officers arrived on scene, the victim was still inside. One officer used his baton, smashed this window and pulled her out.
(voice-over): You can see from this dash cam video the officers pulling the victim out. Just moments after she is on the ground, the tan Chrysler explodes.
LOTHAMER: That was -- that was a priority to get her out of the vehicle.
WILBURN: They acted heroically. We are very proud of their actions. And -- just a little glimpse of what these officers do on a day-to-day basis.
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PHILLIPS: Well, the woman that the officers saved is still in the hospital with third degree burns, but she has been upgraded to fair condition.
So it's got to be stressful when your firm collapses and the government bails you out. But do you really have to spend about $450,000 at a spa to deal with the stress? We are talk next hour with the lawmaker who couldn't believe what he was hearing about when it came to AIG.
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