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Bush Addresses Business Owners on Economic Climate; Presidential Candidates Set for Debate, Will Negative Attacks Prevail?: Overseeing the Oversight Committee
Aired October 07, 2008 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: Live to Chantilly, Virginia, right now. The president talking to business owners about how the current economic climate is impacting them. Let's listen in.
(JOINED IN PROGRESS)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: ... Guernsey Office Products. I want to thank all of you all for working hard to make this visit as comfortable as it is, and it is not easy to host the president, I understand.
(LAUGHTER)
Thank you very much, David, for being an entrepreneur and a dreamer and a doer and for providing people stable work. It is interesting to know that Guernsey is a trusted name throughout the Washington area. You sell everything from office supplies to coffee products to furnishings.
David is a good marketer. He said, listen, I understand that you are going to be retiring here pretty soon.
(LAUGHTER)
You need some furniture in your new digs in Texas.
(LAUGHTER)
I met David at the White House earlier and it was my honor to welcome him into the White House compound and I appreciate your well coming me here into your business. I know that small businesses, like Guernsey, around the nation are feeling the impact of the financial crisis. And I appreciate your giving me the chance to come to visit to you about what government is going to do, and how we are going to address the challenge, and how we are going to get the economy back on track.
There's no doubt that people from all walks of life and all aspects understand that we are having serious times. Families are squeezed by the high price of gasoline and feeling the pinch of food prices and monthly mortgage payments. Workers are anxious about whether their paychecks will stretch -- and some workers are anxious about whether they can keep their jobs.
We also know that we are the most dynamic economy in the world; that we have been through tough times before. We will come through this time again. Our entrepreneurial system has delivered unparalleled levels of productivity and growth and prosperity. During my presidency, we have faced tough times after the terrorist attack of 9/11 and we came through strongly, and we will come through this. No question that the times are tough. But no question, America will emerge.
And yet, we have work to do and that is what I want to share with you. The immediate challenge facing the economy is the lack of credit. The problem became clear when the housing market declined and complex financial assets related to home mortgage dropped in value. People put together securities based upon mortgages and when the mortgages' value went down, so did those securities. This led banks that owned the securities to suffer losses and then they found themselves short of capital, and some banks failed, and some banks restricted lending to businesses and each other. And that is the definition of a credit crunch. People are just not lending.
Nations around the world especially in Europe are facing severe credit shortages of their own. So, this is not just a problem in the United States, it is a problem that is worldwide. To some people the credit crunch might sound simply like technical talk, it's a technical matter, but the people who work in Guernsey, you understand that credit is the fuel that drives economic expansion and job creation and here is how.
You see, when credit runs dry in one part of our economy, there is a chain reaction. So you want to sell a desk to somebody, and that person needs to borrow the money in the short term to buy the desk, and yet because the credit is tightened because some banks are not lending, the potential customer does not have the money to buy your desk and that effects you.
So a lot of the talk that you are hearing about credit crunches applies directly to your business here at Guernsey. It hurts your suppliers, it affects entire economy. Similar stories play out not only in businesses like Guernsey, but all across the economy, and if the credit crunch were allowed to worsen, the outcome would become much worse with widespread job losses, and this country could be in a possibly painful and deep recession.
So I decided to do something about it. As you know, I'm a market oriented person. I believe markets ought to be allowed the work, until I was convinced that this time the government needed to act, and needed to act boldly in the face of a significant problem. So, I went to Congress and I asked Congress to pass a rescue package. And there was some tough moments in the negotiations as you might remember. Nevertheless, Republicans and Democrats did come together to pass a good bill to enables to us handle this challenge head on.
Now, the plan will provide the government a range of tools to help banks rebuild capital, for example, so they can help move credit that will enable people to buy your desks and make it more likely -- you know, that people will have less job insecurity. I mean, when you are building desks and selling desks, you find work and keep work.
The bill ensures that responsible, hard-working Americans are protected. I mean one thing is for certain, we don't want your money to reward failed executives. There's oversight and as the bill gets implemented and in other words people in Washington will worry whether there is too much power in the Treasury, therefore let's have reasonable oversight. And I agree. I think that makes a lot of sense. It temporarily expands federal insurance and bank and credit union deposits of up to $250,000. That is important. In essence it is a safeguard for a lot of small businesses and a lot of families.
In other words, if you have got cash in a bank up to $250,000, it is safe. FDIC has never failed to make good on its promise, and it won't fail to make good on this promise. These are urgently needed steps. They will help bring stability to the volatile markets. They will help protect 401(k)s and retirement accounts.
As the markets begin to stabilize, it will help the markets overseas. I have been in close contact with European leaders. I was on the phone with them this morning to ensure that our actions are closely coordinated. We live in a globalized world. We want to make sure that we are effective at what we do. Once we made the decision that there is a role for the federal government to move to stabilize the markets, we want to make sure that all of us move in the best coordinated way as possible. Interestingly enough, the finance ministers from the G7 and other leading nations will be here in Washington this weekend to make sure that the response is coordinated.
It is going to take time for the actions that I have described to you in the bill to have full effect. You want to make sure that when we move, we move effectively. We want to make sure that the plan is well thought out and well delivered. Thawing the freeze in the financial system is not going happen overnight. But it will be a process that unfolds over several stages, and obviously, the first stage began last Friday when I signed the rescue package into law. So the Treasury Department is moving aggressively to implement the new authorities.
In the meantime, the Federal Reserve and the FDIC will use their powers to help stabilize the markets. Just this morning the Federal Reserve announced action to provide additional liquidity to credit markets. The federal government moved -- the Federal Reserve moved to try to free up liquidity. So, that this credit crisis begins to unwind. In few weeks from now the main elements of the new legislation will begin to kick into gear.
As banks rebuild their capital, they will build in increased lending to each other and begin approving new loans for families and businesses. It will not happen all at once, and it will be a gradual process and will take time to have its full effect.
As the banking sector and the market for troubled assets recover, the government will begin to recoup some of the taxpayers' funds invested in the recovery. In other words, some of these assets were taken at a depressed value, and homeowner -- home prices are down, and the value of the assets are down, and eventually, we expect that much, if not all, of the tax dollars will be recouped.
The financial troubles are the most urgent challenges facing our economy to day, but they are not the only ones. I want to spend a little time talking about them and then I will be glad to answer any questions if you have any.
One pressing concern is obviously the cost of energy. The cost of energy affects families, but it affects businesses as well, like Guernsey, which rely on energy to ship products and make your products. The high energy costs obviously are attributable to the high price of oil and natural gas. That is why this administration working with Congress has dramatically expanded funding for research into alternatives, and including hybrid car batteries, fuels like ethanol and biodiesel, solar and wind power, safe and clean nuclear power.
The rescue package I signed, last week, extended tax incentives to alternative energy sources. So in other words, the rescue package is just not aimed at dealing with the financial issues, it was aimed at dealing with the energy issues, too. To help encourage alternative energies so we'd become less dependent on foreign oil. However, in the meantime, we need to be drilling. I mean, I'd rather us drill here, than send our money overseas. We can do so in environmentally friendly ways.
Congress responded to the will of the people by lifting the ban on offshore energy exploration, which is good. It is going to take a while to go through all the permitting and all the environmental regulations, but nevertheless, a positive step was taken to become less dependent on foreign oil.
Another issue is home foreclosures. And there is a smart way to deal with that. The truth of the matter is that people -- some people bought homes far beyond their means. And some people bought homes to simply speculate, but there is also a lot of sensible homeowners who can make ends meet with just a little bit of help; and hat what we want, we want to help people stay in their homes. So we have created what is called Hope Now, which brings together the homeowners, lenders and mortgage servicers, and others to find ways to prevent foreclosures. To help people work through, you know, the current mortgage issues.
I told you that mortgages were bundled up into securities that banks bought, and as the securities went down in value, it affected the banks' balance sheets. Well, interestingly enough, when you securitize mortgages and sell them, it means that the person who originated your mortgage no longer owns the paper. So a lot of people say, who can I talk to the help me refinance my home? Where do I go? So now the Hope Now alliance is an opportunity to say to folks, here is how you can find ways to renegotiate your paper, renegotiate your note. It is working.
By the way, we have another initiative out of the Federal Housing Administration. And all of these programs have so far helped more than two million Americans stay in their homes. In other words, there is and ongoing attempt to help people who need just a little help to be able to pay off their mortgages. And by the way most people are paying off their mortgages which ultimately means that the mortgage-backed securities, and the value we may end up owning will be recouped. And that is why I say there is a good chance that taxpayers will get their money back.
Every American knows the burden of taxes. During the tough economic time, that burden falls especially hard, and a lot of people are wondering whether or not their taxes will go up. One of the interesting things about the package I signed is that it does prevent the alternative minimum tax from kicking in, which would have caused 26 million Americans $2,200 apiece. During this economic uncertainty, we don't need to be raising taxes.
And so, the bill was more than just the rescue plan. The bill helped deal with alternative minimum tax that would have kicked in, that would have affected a lot of you in this room. And the truth of the matter is that I think that Congress ought to send a signal when they come back next year, and say, look, we will make all of the tax relief we passed permanent, so there is not any doubt in anybody's mind.
Finally, we need to deal with exports. That bright spot in the economy has been that we have exported a lot of goods overseas and people are buying our products and they should, because we have great products and we have great workers. Last year about half of the growth was attributable to exports, and so it makes sense for Congress to continue to open up markets in places like Colombia or Panama or South Korea. And take Colombia, for example, most of their goods come into our economy duty free, and yet our goods are taxed in Colombia. I cannot understand why Congress wouldn't want to at least level the playing field; for our workers, to simply send a message treat us the way we treat you. That's all we want. Give us a fair chance so we can export our goods.
Exports are a very important part of our economy. And Congress ought to work hard to expand markets. We will work through this We are taking aggressive steps, and it is not easy problem, no question about it. It's tough times. But I am confident in the long term for this country. I am confident that the steps we have taken are bold and necessary and more importantly, I am confident in the resiliency and the spirit of the American people and the workers. This is not first time the American economy has faced challenges and it won't be the first time that we haven't recovered and come out better either.
They have a motto here at Guernsey that says, no matter what your clients need, your answer is the same, we can do that. That ought to be the motto for the United States, right now. We can do it.
(APPLAUSE)
I will answer some questions. It is hard to ask the president questions, I know.
Yes, David.
QUESTION: Thank you, Mr. President. It is certainly very reassuring. Every time we open up a newspaper, or we turn on the TV today and see all this impending financial doom, I think it is enough to make people want to dig a fox hole and hide under.
What would be your advice to the small business community, in terms of the actions going forward to dovetail with what you are trying accomplishes here?
BUSH: Well, first of all, I would -- I think it is, first, important to recognize what the problem is. And if a small business owner is worried about getting credit to be able to roll over inventory or to make payroll, my first question to the small business owner is what are you going to do about it, President Bush? And the answer is, one, recognize the problem and start freeing up some credit into the economy to start unsticking it. And it is going to take a while. And the truth of the matter is that until you see the credit begin to get easier, you will have doubts as to whether or not the government has an effective plan.
But I believe the steps we're taking will free up the credit. It took a while to get it frozen, and it will take a while to get it unstuck. The Fed took a big step today.
And the other thing, David, obviously, there is something resilient in your spirit, otherwise, you wouldn't have started this business in the first place. As you can testify, running a small business is full of all kinds of challenges. And it has not been an easy path to success. You have met challenges before, and a successful businessperson will meet them again and you will adjust your business according to the circumstances.
In the meantime, have faith that this economy is going to recover over time and when it does, you are going to be in a good position to take advantage of an expanding economy. I wish I could snap my fingers and make what happened stop. But that is not the way it works. I told you, I made a decision that is really opposite of my philosophy.
I basically believe that people make bad decisions in the marketplace, they ought to fail, but the problem is in this case, failure would have cost you. What appeared to be something that might be isolated in New York would have cost you the jobs. That was unacceptable to me. That is why I made the decision I made.
Believe me, I fully understand a lot of the small business owners saying, look, I met the payroll or people such as yourself, I paid the mortgages and paid my bills and what are you doing?
Well, what I am doing is, I'm taking the action necessary to make sure that the financial system doesn't collapse, so you don't get hurt. Listen, I understand America's frustrations, better than you can possibly know. I went home out there, to west Texas, where I was raised, and some old guy said, you know, hey, man, what are you doing?
(LAUGHTER)
And I said, I'm recognizing reality; that this is a serious economic situation that requires strong government action. That is what we have taken. So to answer your question is, let's give it time, give this plan time to get these credit markets eased up, so that normal business can begin.
And it is, you know, there is a lot of uncertainty, and lot of worry, and I understand that. It is one of the reasons I came here to talk about the deal.
Yes, ma'am?
QUESTION: (OFF MIC) -- installing fence systems in the region, but just as importantly I'm chairman of the Dulles Regional Chamber of Commerce. We are a chamber made up of small and medium-sized businesses and we are located here in the Dulles corridor and we know that this is one of the key places in the country to locate your business. We are very proud that last week we hit the 1,000 mark of members, meaning we are the largest chamber in Fairfax County.
What our board of directors would like to ask you today, on behalf -- their behalf, today, I would like to know what would you recommend and give us as advice that we can do to help our members sustain the next period of time in this economic climate? What would you advise us to do as a chamber of commerce?
BUSH: I would advise -- a week ago I would have advised you to write your congressmen and tell them to vote for the plan. Now I would advise the president to make sure that which you do -- you know, the powers inherit in the bill when we do something are effective.
It is interesting, because I met with some of the local business folks today, and a man wisely said, OK, now that you have the plan, where is the action? And as I said in my remarks, that we are, you know, we want to make sure that when we move, we move effectively. And so that the consequences are positive. And so what I would the do is I would tell your president to not be hasty. Have a good team of people put together a strategy that will address the root cause of the problem.
In the meantime, I would remind people that, you know, we have been through tough times before. One of the things that I am concerned about is the psychology of people that basically saying that this is just too tough. But the good news is that in America we don't generally do that. The good news in America is that we will deal with the circumstances and we're going to deal with them in a resolute fashion.
But, you know, we have to work our way through this. And it is -- and I'm confident that we will succeed. I really am. It is not going to be easy, because everybody got kind of interwoven and it is hard to explain to people how this happened. You know, it is -- we -- the truth of the matter is the government in good conscious tried to encourage people to buy homes, but the problem is that the financial institutions in Washington, Fannie Mae and Freddie Mac just were basically unregulated to point where they wrote a lot of product untrustworthy over time.
You know, the tendency in politics is to try to blame somebody else. And I'm certainly not doing this at this point in time, but we did try to pass regulation that basically said to Fannie and Freddie, stay in your lane and focused on your core mission. But that is not what happened. Now we have to deal with the consequences. And lot of the people on the paper that devalued the value which is causing the financial institutions to recoup.
There is very little that you can advise your members of until this credit crisis eases, because your members are going to be asking you, what did he tell you about the easing of the credit? Because until the credit eases, it is going to be hard for businesses to feel confident to move. That is the whole purpose to coming today was to tell you that, one, we recognize the credit problem; and, two, we are taking bold action to deal with it.
Yes, ma'am, you have a -- that is what we call a follow-up.
QUESTION: Well, I think it is also important that as members we learn to work together and we re-look at everything that we buy and look within our membership, and that all of us, in America, become partners with each other to help each other's businesses, because we are all in it together.
BUSH: Well, you answered your own question and very well. No wonder you are the head of the chamber of the commerce.
(LAUGHTER)
Yes, sir.
QUESTION: Mr. President, what do you think is going to happen to my 401(k) and other people's retirement plan?
BUSH: Yes. Well, in the long run, they will be fine, because the stock markets will reflect real value, and the short term they are going to take a hit. And so the question is, how fast can we get credit in the economy to get this economy moving again? And there are a lot of aspects of the economy that are suffering right now.
The housing market, for example. A lot of people wonder what happened. Well, what happened was they overbuilt -- or we overbuilt; built too many homes relative to the number of buyers. And until that overhang gets worked off, the housing market is going to remain soft, but the positive news is that long-term mortgage rates are dropping. In other words money is becoming cheaper to buy a mortgage. And over time the housing market will begin to recover. That will help the economy recover. Easing the credit will help the economy recover and the values in the stock market will recover as well.
No question, in the short term, if you are the, the value of your 401(k), if you are in stock, it is going to go down. The question is how fast can we recover this economy? I know we have had, you know, a very powerful economy. After all, we grew, you know, 52-uninterrupted months of job growth and when we recover we will have a powerful economy again. We are a productive country, we're and entrepreneurial country. The small business sector is strong.
And right now, we're Able right now we are in tough, tough times, and no question about it. But you cannot convince me that in the long run we are not going to get back on our feet again. And if anybody ever says that, they don't understand the American spirit.
Yes, sir.
QUESTION: Mr. President, and I've followed your whole tenure in office pretty closely and I was pretty surprised that you made the bill, but you made a strong argument as to why you signed it, and you laid it out.
BUSH: You sound like the guys I grew up with in West Texas.
QUESTION: Well, you did a great job, because I really was not convinced until I heard you speak.
BUSH: Well, thank you.
QUESTION: Does anything in the bill, or anything that you are working with right now, have to simplify the understanding of the general public in terms of the Fair Credit Act passed in the 1970, and the amendment passed in 2003, as to how people can understand credit? Because it is very difficult to understand credit unless you do your homework.
BUSH: Yes, I am telling you it is very hard to understand credit.
QUESTION: Yes, it is just very difficult. And unless you know how to use the Internet very well, and unless you have the ambition to do so, you are not going to really take the initiative. And then that is how you can get into the credit crunch, because something on the credit report or something reflects negatively and you know the CRA, the credit reporting agencies are not going to do anything about it.
BUSH: That is an interesting question. I sure that the Congress will revisit the 2003 law. One of the things we pressed is financial literacy, so people understand what they are dealing with in the first place. I really suspect when we dig into the mortgage issue that people were buying mortgages that they had no idea were going to reset. In other words, somebody went out and said, here, you got yourself a low interest rates, but they forgot to tell them that in two or three years' time the interest rate would bump up and caught people by surprise.
We need a full analysis on the credit rules and how people are dealt with as well, as transparency in the mortgage industry. But a lot of it has to do with the financial literacy. People just are not sure what the language is that they are dealing with.
I appreciate your comments on the rescue package. I really meant what I said that, you know, I am a firm believer that if people make mistakes, in the business world, you know, make bad decisions that they ought to suffer the economic consequences; but the problem was in this case, you would suffer them.
You know, my pals say, and I understand this, I fully believe this, that, you know, how can you possibly stand there and let Wall Street do what they did? Listen, people are angry about the people looked like they were dragging out money when there is failure. I understand that. I don't mind rewarding success. It is when people make money on failure. And I think that there is going to be a, needs to be a reassessment of these packages. There needs to be a reassessment of how interconnected people became. How they made promises that they were not in a capital position to fix.
Step one is to fix the immediate, solve this thing. And step two is to make sure we don't get tomorrow where we are today. Without creating a regulatory regime that inhibits small business growth. And I think that it is going to be a real challenge. But my immediate concern is solving today. Is to make sure the plan -- first of all, last week was getting the plan passed. Which happened last Friday. It may seem like a month ago.
(LAUGHTER)
But it was last Friday, and getting it implemented, and working with our partners overseas to make sure that the effort is as coordinated as possible so that we can be effective. And the definition of effective from a small business perspective is when you begin to see credit ease. And we understand that. And we're trying to move as quickly as we can to get credit moving in a way that people say, OK, now I see what they were trying to do.
Yes, sir?
MIKE GRAY, WIFE OWNS SMALL BUSINESS: First of all, I want to just say thank you very much for understanding the importance of credit. My name is Mike Gray, we're next door. The company is called Exhibit Edge. My wife is the owner, Bev Gray of the company.
BUSH: That's a smart move.
(LAUGHTER)
BUSH: She just doesn't want to talk in front of all the cameras, so you're her spokesperson.
QUESTION: Yes, sir. I just want you to emphasize how important freeing up credit is.
BUSH: Yes, thank you.
QUESTION: I mean, just to give us some quick numbers -- we are a $3.5 million company and we rely on a $500,000 home credit line to support our business, which means we have to roll this money over six, seven times a year. That is how much we need this credit.
And, you know, now the -- we got a notice or a letter from the bank that runs our credit line that says that home values are going down a little bit, and if you pay down your principle a little, we're not going to give you quite as much back. And so our strategy is don't pay it down, to keep it maxed out all of the time. And so, we are comfortable now, and we are able to take care of our business by doing this, but it is so important for you to emphasize the needs that small businesses have for the use of that credit. And I thank you so much for really working hard --
BUSH: Thanks for hanging in there.
QUESTION: Absolutely. And you too.
BUSH: And it is also important for, obviously, consumers to be able to borrow money to buy a car or, you know -- it's just -- credit is what makes our system go. And when the credit freezes, it creates a standstill. And when people stand still it -- it just begins to shutdown the economy, and that is why we are moving as hard as we are moving. It is -- somebody asked me, is it going to work? You know, this is the best shot we've got and it is a big, bold move.
And it's -- I listened to a lot of smart people about what to do. And it was a hard one for Congress to swallow because -- I understand -- there's a lot of skepticism about the government making a big, bold move. But you're the kind of guy that was represented by the yes votes when they said, I'm worried about credit freezing, what are you going to do about it?
And so -- what I am trying to describe to you today, I hope I am getting through to the people listening as well, is that we are trying to address this guy's problem. And trying to address, you know, small business people's problems all around the country.
PHILLIPS: Well not quite sure if it is getting through, Mr. President. If you look at the numbers there, Dow Industrials down 209 points. He has no problem standing up there in front of business owners at Guernsey Office Products there in Chantilly, Virginia, saying that he is confident, but we're not seeing the confidence when it comes to the numbers there on Wall Street and the e-mails that we've been getting from people all over the United States wondering what to do with their money, what's going to happen with this economy.
And even when the economy was chugging along, relatively speaking, President Bush's job approval rating was still in the cellar. And now it's even worse, 24 percent to be exact. It's an all- time low in CNN polling, by the way. That ties Richard Nixon's lowest rating ever, just before he resigned.
Now, asked whom they trust to handle the financial crisis, Americans actually rank Mr. Bush seventh, Barack Obama comes in first, with Congress and administration officials all beating the president right now.
You heard from the president just there, but have you been listening to some of those hearings by the House Committee on Oversight and Government. Members are raking CEOs of some of these collapsed firms over the coals.
Remember AIG? That's the insurance firm that you helped bail out for $85 billion. And guess what the company leaders did right after they got the helping hand? Take a listen.
(BEGIN VIDEO CLIP) REP. ELIJAH CUMMINGS (D), GOVT. OVERSIGHT CMTE.: AIG spent -- listen to this one -- $23,000 at the hotel spa and another $1,400 at the salon. They were getting their manicures, and their facials, their pedicures and their massages while American people were footing the bill.
(END VIDEO CLIP)
PHILLIPS: Well, they get the pedicures, you foot the bill. Nearly $450,000 grand for a week at a California resort.
Elijah Cummings joins us now.
Well, at least they were relaxed for the hearings, Congressman.
CUMMINGS: Yes, they were relaxed and looking pretty.
PHILLIPS: Serious business, though, you really have been grilling these guys that have been coming before the mics, in particular today, and we'll talk about yesterday in just a second -- but just tell me why you are so angry, and why you feel you have the right to come at these guys no holds bar?
CUMMINGS: It is very upsetting because the American people are giving -- gave -- say for example gave AIG some $85 billion, $85 billion to bail them out. And that was on the 16th of September. On the 22nd of September, to the 30th, they spent almost a half of a -- $400,000-something at a resort having manicures, playing golf, spending up to $1,600 per night for rooms. And that is the kind of thing that upsets my constituents, many of whom are losing their houses, losing money in their 401(k)s and they are very, very upset and rightfully so.
PHILLIPS: But Congressman, let's have a reality check here. You are the oversight committee, and there were warning signs for months and months and months. We can go all the way back to Countrywide. And there was evidence that was surfacing that these executives -- that Wall Street -- was involved with fraudulent mortgages. And we saw the foreclosures and we saw people suffering, but nothing was done.
So it is hard, I think, for the American people to not only believe in the president, not only believe in Wall Street, but believe in all of you that something is really going to happen when it comes to oversight.
CUMMINGS: Well, clearly something is going to happen.
Let me just go back to what you just said. I also sit on the Joint Economic Committee between the House and the Senate. And we were told over and over again, as late as say six weeks ago, that everything was fine with these companies. And then the next thing you know Bernanke and Paulson come before us and tell us that the sky is about to fall.
And I just listened to the president and what he was saying, I wish that the president had expressed that kind of confidence actually long before the bailout. What we got from Paulson and Bernanke, and the president, was that if we did not pass the bailout package the sky would fall. And you know what? That becomes a self-fulfilling prophecy.
But what we are doing now is we're looking at what these companies have done and the way they are spending money. And a lot of times these -- in the case of AIG and Lehman Brothers, as the company was falling and doing bad, the executives were getting paid more and getting paid bonuses.
PHILLIPS: Well -- and there is my question. There were warning signs, things were happening a long time ago. Where was the oversight committee then? Where was SEC chairman then? Why weren't the feet being held to the fire then? Why is it always an aftereffect?
CUMMINGS: Well, I can tell you that our committee held hearings, we brought out a lot of this information. A lot of these kinds of things you would think the companies would do it themselves. Like the executive said to me this morning, that if they had known certain things were happening, and they claimed they didn't know certain things were happening, they wouldn't have done it this way. But that is on one side of it.
On another side of it is that they were over-leveraging finances, which was a major, major problem. The fellows at AIG this morning said that they -- they didn't feel that anything was their fault. They felt that they were doing the right thing and they just went along with the market.
I think that clearly Congress has got to put some regulations, some very strict regulations, on these companies, CEO pay, compensation and making sure that these squats (ph) that they -- have gotten us into so much of this trouble, are regulated. And the CEOs this morning admitted that they needed to do that -- that we need to do that.
PHILLIPS: So -- and how can we believe in that, Congressman? It is our culture not to touch big money, tell us and all our viewers right now -- (CROSSTALK)
CUMMINGS: I can tell you -- I can tell you that this $700 billion -- really $850 billion bill has forced the Congress, both Republicans and Democrats, to look at this situation and say, we've got to regulate. Because if we don't regulate, what happens, as we can clearly see, is that these execs and these companies will take advantage of nonregulation.
And so I think that you will see -- as a matter of fact I think you're going to see a lot. And I think the mere fact that we are holding hearings today -- as a matter of fact, we are supposed to be out, but here we are, addressing this issue. And we've got three more issues and possibly as many as five more hearings -- rather -- to address these issues.
So we are going to come back. We're going to address it. But we -- but you know, the other thing, we've got to do it. We don't have any choice.
PHILLIPS: All right. Well, Americans are counting on you and other members right now in the committee to hold the feet to the fire and to actually see something. I don't know about you, but I don't want to work until I am 95. How about you?
CUMMINGS: I don't either. Nobody -- I don't want my great grandchildren paying this bill.
PHILLIPS: There you go. All right. We're going to hold you accountable.
CUMMINGS: Thank you.
PHILLIPS: Look forward to talking to you. Always good to talk to you, Congressman.
CUMMINGS: Thank you.
PHILLIPS: We also love to talk to our Candy Crowley. She is one of our favorite members of the best political team in television. She is in Nashville for the big debate tonight. We're going to talk to her right after the break.
(COMMERCIAL BREAK)
PHILLIPS: Well, just hours from now, it is round two in the presidential debates. John McCain and Barack Obama face off tonight at Belmont University in Nashville. The event -- exactly four weeks from Election Day. It will be a town hall format with the audience participating. Voters will also weigh in over the Internet.
CNN senior political correspondent, Candy Crowley, joins us now from Nashville.
Candy, what can we expect? What are you hearing? Give me the behind the scenes.
CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Well, listen, I can tell you from the Obama campaign's perspective that they think this debate is about John McCain, especially given the lead up to this particular debate where McCain and Palin have both gone very aggressively after Obama's past relationships with William Ayers, a '60s lefty, if you will, and someone who has admitted to bombing some U.S. institutions. So that has been something that Palin in particular has been out there with. So there is this whole vibe that's going on here.
But the Obama campaign says, OK, here we are in a town hall setting and that means that they are, Kyra, within three to four to five feet of actual voters, independent voters, voters who have not decided yet. It is very difficult to go after someone, particularly on a personal basis, with voters that close. It is one thing to have a negative ad that sort of comes to them in their living room, it's another thing to be right there because voters don't tend to like that. So what they believe that one of two things can happen, John McCain shows up and he goes aggressive and Obama can say, well, that is too bad, because I think what voters really are interested in is the economy. What is your plan about that? Or, they think John McCain can show up and start talk about policy, and they'll say, well you see, he's George Bush. Here is what I offer -- something different.
So they are feeling pretty good about this particular gathering because they do think that the focus is going to be all on McCain. And frankly, when you look at the polls, when you look at the calendar, you do understand that the pressure really is on John McCain.
PHILLIPS: So you -- you just brought up an interesting point. You're saying that voters -- undecided voters in particular -- don't like the nasty jabs, is that what you were saying? Which I find interesting --
(CROSSTALK)
PHILLIPS: -- because that is where it is going. I mean, we are hearing about years ago Obama associating with Ayers, who used to be involved with a radical group in the '60s. And we're hearing the S&L scandal come up again with McCain and the Keating Five. So that's interesting.
So why do they continually go for those tactics when voters -- it is proven that voters don't actually bite on that?
CROWLEY: Well, let me split the difference here, and that is -- a negative ad is one thing and almost, even though the candidates say I approve this message, kind of comes from a different place. It is distant. And we all know that negative ads have worked.
It is also different when you are in a crowd of the faithful and they like that so-called red meat, the cliche we have used for really going after the other candidate, making some real attacks. So even in a group -- Palin when she was talking the other day, those are the McCain/Palin supporters, they like that sort of thing. People in the middle, the swing voters, tend to be the ones most resistant to negative advertising, but in particular, to negative up-closeness, if you will, seeing the candidate do that right in front of them.
And let me add just one more element about this, and that is -- we have never had a campaign in this sort of atmospheric in modern history. We see the stock market, the financial institutions, you see the president out there talking today, you see Bernanke talking today. All of these things that are causing real angst out there. And the question is, in the midst of all of this, are voters going, you know what; I don't want to here this, I want to hear about an economic plan?
So there are a number of reasons why people don't like it up close that have existed throughout the years, and then we have what is really a very different election year, and a very different atmosphere than we have had before. PHILLIPS: All right. We're all looking forward to it. We'll talk again tomorrow.
Candy Crowley, great to see you.
CNN, the best place to watch tonight's presidential debate, of course. Our special coverage gets under way at 4:00 p.m. Eastern on "THE SIT ROOM" with Wolf Blitzer. You'll see more from Candy, of course. The debate starts at 9:00 Eastern.
(COMMERCIAL BREAK)
PHILLIPS: Well, in politics you can argue about almost anything. And what you can't deny or debate, you can spin. But you can't fight the calendar either, and the closer Election Day draws, the greater the urge of both campaigns to draw blood. My next guests have been there, they've lived to tell about it. Tad Devine is a Democratic strategist and former top adviser to John Kerry's presidential bid in 2004. Jennifer Millerwise Dyck was deputy communications director for the 2004 Bush/Cheney campaign.
Great to have you both. Let's see -- 28 days now until we vote for a president.
Jen, take me inside sort of the inner workings of what a candidate does at this point? We are starting to see the nastiness coming forward. I want to know when you were working on the Bush/Cheney campaign, was it about this time you sat there and said, OK, we might have to pull some things out of the hopper to try to get those undecided voters? And it made it get nasty.
JENNIFER MILLERWISE DYCK, DEP. COMM. DIR., BUSH-CHENEY '04: Well, I can tell you this is about the time when no one is sleeping anymore which kind of makes everything a little bit more difficult and a little bit more urgent.
But you know, this is also the time where -- when an electorate is as close as ours is, which you still have a very evenly divided electorate between Republicans and Democrats, that you really are focusing on those independents in the middle. You're also focusing on the map in a very realistic way, especially as your money starts to dwindle to some extent. And you've got to be realistic about where you want to play and where you don't want to play.
And this is also around the time that you sometimes that you sometimes have to do some -- try to do some game-changing events. And sometimes those can be in the form of saying something unique at a debate that people aren't really prepared for. Or, it could be in the form of an ad, which is something I know that we did in 2004, with a specific ad that had to do deal with some wolves that I'm sure Tad may remember. I think we sprung that in the last two weeks of the campaign and it was pretty effective.
PHILLIPS: So tell me though -- so do you actually sit back and think, all right, we have to play dirty. That's our only option. It's the only option that works. And does the candidate get brought in and do you tell the candidate, look, this is what we've got to do.
DYCK: You know, I think that most of the campaigns would say that they don't at all believe that they're playing dirty. They're bringing up things that are certainly negative about the other candidate. But I think if you were to talk to the McCain folks and I think if you would talk to most Republicans, I think it's incredibly valid that the McCain campaign and that people like myself are talking about Barack Obama's judgment when it comes to some of the people he's chosen to be friends with.
Whether it's you know, an unrepentant former domestic terrorist, like Bill Ayers, or if it's Reverend Wright, who's just spewed just horrible anti-American things for years and he's continued to sit there to listen to. You know, those are some real, legitimate issues that the American people deserve a chance to really vet and to think about when they're trying to decide who should be their next leader. So, I can see they're legitimate issues.
PHILLIPS: All right. Legitimate issues.
Tad, are they? Do you remember Jennifer's ad? Do you remember the wolves? Do you remember when they started pulling things out of the bag? And then, do you sit there and think, OK, that's it. We're going to play dirty, too. This is what we're going to do. This is how I advise you.
TAD DEVINE, DEMOCRATIC STRATEGIST, FMR. TOP ADVISER, KERRY CAMPAIGN '04: Well, sure I remember those things. And I think the Obama campaign remembers, too, what the Bush campaign did in the last two elections and they're determined not to let it happen to them.
I don't think they're legitimate issues when you pull out these characters from the past and try to change the subject. I mean, the McCain campaign, one of their senior advisers yesterday, said listen, we have to stop talking about the economy and the economic crisis otherwise we'll lose the election. You know, we need to turn the page.
But the American people I don't think, want the page turned. They want to know who can solve the economic crisis, who has real plans for health care, who can responsibly out of Iraq.
PHILLIPS: But, Tad, that's not what we see. We're hearing about the Keating Five and Obama's relationship to a radical '60s activist. So, we're not hearing that now. We're hearing these other things getting pulled out of the bag.
So when it comes down to it, that all sounds really nice and the yes, people want to hear about the real issues. But when you guys are there with your candidates, you're pulling out things out of the nasty bag.
DEVINE: Well, I think the Obama campaign has to respond to this attack that the McCain campaign has launched. And they need to fight back. But, I think tonight in a town hall debate with people in that audience asking real questions and really standing in as surrogates for millions of Americans. I think you're going to be hard pressed to see that kind of attack. And if Senator McCain launches it, tonight could be the end of his campaign.
PHILLIPS: Wow. Final thought, Jennifer.
DYCK: Yes. Well, first I'll say that the Obama campaign was actually the one that preemptively put out some negative ads. But what I think people need to watch for tonight is how unremarkable Barack Obama can be. That is what his theory has been. I don't want to do anything to stick my neck out. Whether it was the financial crisis when John McCain rolled up his sleeves and tried to get in there and help to get this package through to Congress, Barack Obama sat on the sidelines and you can expect him to do the same thing tonight. Because not lead, but to coast through this debate and hope --
PHILLIPS: Oh, Tad, coast and unremarkable.
DEVINE: Well, he's been so unremarkable, he's managed to seize a huge lead already in the presidential campaign. So I hope he keeps being that unremarkable for the weeks ahead.
PHILLIPS: OK. I have an idea. Will you guys come back tomorrow and we'll see just how remarkable and unremarkable both candidates were?
DYCK: You bet.
DEVINE: Look forward to it.
PHILLIPS: All right. So do I. Tad Devine, thanks so much. Jennifer Millerwise Dyck, great to have you both.
DYCK: Thank you.
PHILLIPS: All right, coming up after the break. Ben Bernanke, the fed chair, we heard him talk a little while ago. Were you confused, encouraged, a little bit of both? Ali Velshi's going to try to break and break it down for us, right after the break.
(COMMERCIAL BREAK)
PHILLIPS: All right. If you were with us last hour, you heard Fed Chairman Ben Bernanke talk about the prospects for an economic turn around.
Here's a little bit.
(BEGIN VIDEO CLIP)
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: Overall, the combination of the incoming data and recent financial developments suggest 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.
(END VIDEO CLIP)
PHILLIPS: All right. Ali Velshi was listening, too. And he actually said, Kyra, if you read between the lines, we should be looking for more interest rate cuts.
Tell me why you believe that to be the case.
ALI VELSHI, CNN. SR. BUSINESS CORRESPONDENT: Do they think they speak like that, like in their normal lives and then say, let me write this so that it sounds all complicated.
What he said in the last line there where he said, maybe our policy stance is not appropriate. The policy stance is Fed speak for what they do with interest rates. And what they're doing right now is not changing them. What that means is that because of the lousy nature of the economy right now, and they can see it, that they may consider cutting interest rates.
That's what was supposed to be read into that. Typically when you say that sort of thing, it prompts markets to do better. But people are saying, maybe even an interest rate cut doesn't help us. We have seen everything thrown at this, the Fed going to be buying up short-term debt from companies, Federal Reserve chairman saying they might cut rates. You heard the president talking. And still, look at that bottom corner of the screen. Markets are not reacting to this.
So, most markets think we are in a bit of a quagmire, here. And it's going to take every, last thing we've got to get us out of it. Fed Reserve chair saying, we might cut interest rates. So, that's something we can look forward to maybe happening in the following weeks.
PHILLIPS: Well, from what I understand, they're going to have to print some new money, too.
VELSHI: Sure.
PHILLIPS: Did you by chance, see the new bill?
VELSHI: Yes, I saw it.
PHILLIPS: Did you see it? Take a look at it right now.
VELSHI: Yes, that's right. That's what we're all feeling. That's what we are all feeling.
PHILLIPS: That is what's going to take us out of the tank. Ali Velshi, right there. Just says it all. See you tomorrow.
VELSHI: OK.
PHILLIPS: Quick break, we'll be right back.
(COMMERCIAL BREAK) PHILLIPS: Hey, Rick Sanchez, what do you think of the new dollar bill?
RICK SANCHEZ, CNN ANCHOR: I love that. And you know, it's funny. As Ali Velshi was about to give you a answer, like oh, yes, there's a new T-bill that's going to be coming out. He had to look at the camera.
PHILLIPS: There it is, folks. That's what's going to save America. God bless America and Rick Sanchez. See you tomorrow.
SANCHEZ: Buenas noches.
