Return to Transcripts main page

CNN Newsroom

Despite Surprise Fed Interest Rate Cut; A Rescue Package In The Pipeline; And Global Banks Cutting Rates; Global Markets Continue To Sell Off

Aired October 08, 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: ... look at your 401(k) statement, your credit card statement, may make you feel a little better. Early this morning the Fed cut interest rates again. And it didn't act alone. In an extraordinary emergency response to troubled banks and tanking markets central banks cut rates from China and Britain. And Britain is not stopping there. It, too, is rolling out a bailout of banks and lenders taking ownership stakes in return.
Overseas stocks went through the shredder again. Bank shares soared in London, though. Japan's Nikkei suffered its worst one-day plunge since the crash of '87. And Wall Street, where the Dow has given up almost 900 points just this week, can't make up its mind today. Right now, Dow industrials are down 107 points.

Let's start with the Fed and your credit. CNN's Christine Romans is in New York.

Christine, let's talk about the rate cut and what does it mean?

CHRISTINE ROMANS, CNN FINANCIAL CORRESPONDENT: It has been a dramatic 18 that's for sure. You mentioned those overseas markets that just tumbled overnight, really dramatic stuff. The Japanese stock market was down more than 9 percent and that is even a leading indicator of the global economy, so that means there is a lot of pessimism about just what is going to happen around the world with the economy.

And, then, at 7:00 this morning the Fed came in and cut the interest rates by half a percentage points to 1.5 percent. That is the Fed funds target. What it means, in laymen's terms, is that it is cheaper to borrow money. That is the goal, to make it cheaper to borrow money.

And we know that they also lower the discount rate. And we know the important part here is that it was concerted with other global banks. That means that other central banks did the same thing, so we know that there is international cooperation among the central bankers to try to step out and say, look, we know that there is an intensifying financial crisis. And that is what they said in their statement, an intensification in the financial crisis. But they are going to step in, lower rates and try to do just one more in a long line of things, Kyra, to try to make it easier and cheaper to borrow money. And, of course, that is important to restoring confidence, to unfreezing the credit markets and getting the oxygen flowing there again. PHILLIPS: All right. Christine, thanks.

And talk about that oxygen flow, I have been used to saying that the Dow industrials are down, but they are actually up 89 points. I meant to say up, but I said down. All right.

Up-down, Ali Velshi, let's talk about it. Will it get the borrowers borrowing and the lenders lending again? That is the whole idea, right?

ALI VELSHI, CNN BUSINESS CORRESPONDENT: Yes, and I don't think this is what it is. Because really the interest rate part of the equation was not the problem. This not like the late '70s, where we had double-digit interest rates. The rate for a 30-year mortgage is still about six percent. Prime rate was five percent, it has now dropped to 4.5 as a result of this Fed decision to cut rates. But that wasn't why people are not spending money.

People are not spending money because they are scared of their jobs, the value of their house has gone down. People are not borrowing money, because it is actually harder to borrow money these days unless you have perfect credit and you are buying a house in a area that is remarkably stable. Companies are having trouble raising money. That is the whole credit crisis that we're talking about. So, I am not entirely sure that other than what Christine was talking about, the fact that it is a concerted worldwide effort; it's a big signal that central banks around the world are on the case, and whether this was actually the right medicine.

I can't imagine introducing new metaphors into this, and analogies, because we have been doing that for so many weeks, because we are trying to describe complicated economic things to folks who didn't get economic degrees and really weren't looking to have economic degrees. But the thing is this has been described to me by one economist this morning as the fact that, you know, the markets have a cold. They have to work through it. You can give it medicine everyday or you cannot, but it is still last as long as it is going to last. These markets are looking for what we call a bottom. The point at which investors get back in and try and buy stocks because they think it is a deal. That bottom was probably going to come very soon after we saw what happened on Asian markets and European markets.

And then the central banks went and cut rates, which is now, as you say, confusing things. Which is why you said, you don't usually make those mistakes, Kyra, why you said the market was down, when it was up. Because that is the way it is, if you turn your back on this market for ten minutes, who knows what's going on. And that is the confusion that you are seeing on Wall Street. So, I think you get a free pass on saying the wrong thing on the Dow, because every time I walk away. I go to the restroom, I come back, it is like, up or down 100 points a day. It is crazy.

PHILLIPS: OK, good. I am just trying to keep up, Ali. I'm trying to keep up with you and everybody else. Thanks so much, Ali.

Stay put, please. We want to talk about the credit crisis in just a few minutes. We're also going to hear from Susan Lisovicz from Wall Street, rather. Gerri Willis is going to have some advice on how to stay calm in the storm. And Becky Anderson will join us live from London; she'll have a look at the big picture and the sorry sight it is, that frenzy overseas. We hear it all coming up.

And once again we are waiting for Sarah Palin and John McCain to step up to the mics there in Bethlehem, Pennsylvania. We brought you the Democrats' rally last hour, and we will hear from the Republicans this hour as soon as it starts.

Now Barack Obama, and John McCain, supporters of both claiming victory after the two presidential candidates went face-to-face in their second of the three debates. Senator Lindsay Graham backs McCain. He says the Arizona senator whipped Obama in the Nashville face-off. Obama's campaign manager sees it a little differently. He says McCain appeared angry about the state of his campaign and was all over the place on issues. In the town-hall style debate, McCain and Obama answered questions from the audience, and from voter e-mails. Much of last night's focus, the financial crisis.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Until we stabilize home values in America, we are never going to start turning around and start creating jobs, and fixing our economy. We have to give some trust and confidence back to America. I know how to do that, my friends. It is my proposal. It is not Senator Obama's proposal, it's not President Bush's proposal, but I know how to get America working again and restore the economy and take care of working Americans.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: The middle class need a rescue package and that means tax cuts for the middle class. It means help for homeowners so that they can stay in their homes. It means that we are helping state and local governments set up road projects and bridge projects that keep people in their jobs. And then, long term, we have to fix our health care system; we have to fix our energy system that is putting such an enormous burden on families. You need somebody working for you and you have to have somebody in Washington who is thinking about the middle class, and not just those who can afford the hire lobbyists.

(END VIDEO CLIP)

PHILLIPS: Debate watchers are weighing in on the face-off at Belmont University and give they Obama a clear edge. In a CNN/Opinion Research Corporation poll, 54 percent say Obama did the best job and 30 percent McCain. Now, when asked who would better handle the financial crisis, 57 percent chose Obama and 36 percent chose McCain.

Your life turned upside down by the economic crisis. What are your legal rights? Can you sue your banker, your broker. We're going to ask our legal expert Sonny Hosten (ph).

And what about your mental well-being? How can you de-stress when the economy is such a mess? We are going to talk with a psychiatrist you may know, Dr. Gail Saltz (ph).

(COMMERCIAL BREAK)

PHILLIPS: All right. Let's take a look at the Big Board and right now Dow industrials up 105 points. The market has been all over the place today, even after the news of the Fed interest rate cut, but Wall Street is only part of the story. And we are tackling issue one on several fronts.

Susan Lisovicz keeping a watch on Wall Street for us. Ali Velshi is helping us to cut through the money speak and just explaining what is going on with the economy. Gerri Willis here to help you with your own personal money issues and worries. And Becky Anderson joining us in London; she is our window on the world markets as the financial crisis goes global.

Let's go ahead, Susan, and start with you. And just talk about the numbers. You actually sent me a note here, and tell me if I am laying this out right. Talking about the Fed Reserve and it has been doing something in a big way the free up the market and calm investors for days now. Everyday the stock market has sold off at least part of the day, so is there a logic to this, Susan?

SUSAN LISOVICZ, CNN CORRESPONDENT: No. You hit upon the key word, "logic". Logic is not driving the train. It has not been driving the train for some time. It is fear. It is indecision. It is rumors run amok. It is speculation as who is the next to go. And what we have been seeing, as a result, is these big abrupt turn, reversals in direction, and especially today.

And you know the good thing here, the positive thing that you can take away from it, when you see something like this fear index, it is called the VIX, it is a volatility index, at all-time highs and some veterans, a growing number of them, say we could be close to a bottom. Given the magnitude of the sell offs, given the volatility that we have seen, given the price, the price of these stocks, you know, there is a lot of nonfinancial stocks that have not gotten into any trouble at all, that this could be nearing a bottom. And that is what you could take away from this.

But nonetheless, the volatility continues. The Dow at its low was down 250 points and at the high up 180, and we are right in the middle, right now, Kyra.

PHILLIPS: And looking at all this e-mail traffic, Ali Velshi, you say we just all need therapy?

VELSHI: Yes, you know what we need to do, everybody just has to hold on for a second and understand that there are a lot of treatments going toward this ill, but they don't act immediately.

So, we have three major things that have happened. We have had this bailout package. We know that that is going to run -- you know, it is not going to be kicked into place for some weeks now and it will run over the course of a year. We have yesterday's decision by the Federal Reserve to buy loans - and give loans to companies. That is not going to start until at least later on this week, and that will take several months to kick in. And by the way, in the old days, when we used to see the Fed cut or raise interest rates we used to know that it took 12 to 18 months for that to work into the system.

So the idea that these are instant solutions to this is ludicrous. And we have created an expectation amongst investors that this is going to help. So, you know what, they will all help, they will not all help today. That is the problem we have here. So for investors out there, understand that help is on the way for this crisis that we are in, but the forces of a recession are stronger than some of the medicine we can give it immediately and that is what we are going through right now.

So, these markets are confused. So should you be if you have a 401(k). Understand that your 401(k), if it is well diversified will be down about 30 percent now, for this year, but that we are all - the central banks' message is that they are all on the case and there should be some recovery at some point. We don't know where this market bottoms out. Maybe these Fed rate cutting activities today has delayed the bottom of this market, but it will come, and the markets will start to go up again.

PHILLIPS: Gerri Willis, can people stop buying into the panic?

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: I think you absolutely should. You know, look, information is power as we all know. And I want to talk about the stock market for just a second here. Ali talking about all this medicine coming to the aid of the markets. Well, I know you are obsessed with your 401(k). You are looking at your losses, you are very worried. What you need to know today is that you have been in a bear market already before.

Remember the dot.com crash? Stocks were down 50 percent, not 30 percent, like they are right now. You have been through worst times. Maybe you just don't recognize it is happening over again. But we have been through this time and again. We have been through 16 bear markets since 1932, since the Great Depression. It happens routinely. This is a market purging. We see it all the time.

The key is to unplug a little bit. take a breath, and make sure you understand what you are invested in. That is the key here, Kyra. You want to know what you are invested in, understand your investments, and don't make moves in this market willy-nilly.

PHILLIPS: Gerri, thanks.

Becky Anderson, let's go to you, live in London. What do you think? Is everybody breathing OK as you're dealing with your own issues?

BECKY ANDERSON, CNN CORRESPONDENT: Well, yes, Kyra, I am just listening to my three colleagues there. And I am just saying to myself, between the four of us we probably have about 80 to 85 years' worth of experience of reporting on financial markets. Sorry, guys, I hate to sort of lay it on the line.

(LAUGHTER)

ANDERSON: I think they the interesting thing is this: That we are confused, to a certain extent, as to what is going on. So imagine what the traders in the markets are feeling at present.

This is my sense today. We got an interest cut, a concerted interest rate cut from the central banks around the world and what we saw here, in Europe, in the U.K. and in Europe, was a bump in the markets. We got a bounce of about six percent across the board. And the markets have been down about six percent and at lunchtime, as we got that lift, we got a lift in the markets with it. Let me tell you.

PHILLIPS: OK.

ANDERSON: These markets have closed down 6 percent today. They also got a bailout plan from the U.K., at least, today to the tune of about $90 billion for buying into the banks. But also another something like $900 million -- and that is money being injected into the market. So we are confused, and traders are confused. Well, I thought, when I saw that bounce, earlier on today, was that the markets have realized that that was it from the government. You know what, guys, you are now on your own. The markets have to do something about it.

I am amazed. In the afternoon session they still sold off. So there is no bottom to this market. I have called it, for all intents and purposes. Today, I thought, we have seen capitulation and we're at the bottom of this market. We're not yet. But I feel not the green shoots of recovery in the economies, because those are in bad shape, but I feel the beginning of a bit of confidence in these European markets. I may be wrong, guys - correct me if I am, tomorrow. But that is my sense.

PHILLIPS: Well, I will tell you what, I will let everybody weigh in on that, but really quickly, guys, our best Money team on television, and Susan Lisovicz, Ali Velshi, Gerri Willis, Becky Anderson. I love it. We will continue this conversation.

But real quickly, I just have to point out that Sarah Palin and John McCain have stepped up to the mics. They are holding a rally right now in Bethlehem, Pennsylvania, and we are going to check in and listen in just a second.

But first, Jacqui Jeras has something on a tornado on the ground in eastern Alabama. Jacqui, you want to bring us up to date?

JACQUI JERAS, CNN METEOROLOGIST: Yes, this is that same area, very near where we were just talking about earlier, Kyra. This is near the town of Pinckard. If you know where that is. So, a tornado warning is in effect now for Dale, for Henry, Houston Counties.

Law enforcement is reporting a tornado on the ground at this time. This is about nine miles to the west of Dolphin (ph), so the rotation right in this area here. The storm is moving up to the north and east. If you live in Dolphin (ph), it is always a good idea to take cover as the storm is very close to you. But we do think that it is going to stay out of your neighborhood and be just to the north and east of there.

We also have a warning on this cell here, up into Dale County. This is a Doppler-radar indicated tornado and that would be near the town of Snow Hill. So two storms that we are watching very closely. One confirmed on the ground, again, that is near Pinckard. And we are also watching just on the northeast side here, of Dolphin (ph). This storm showing some signs that it could be intensifying and possibly rotating as well. So we will continue to break in and bring you more information. We also have reports of damage out of Enterprise, from these storms, about an hour and a half ago - Kyra.

PHILLIPS: All right, we'll keep tracking it for you. Jacqui, thank you so much.

Now I want to take you over to John McCain and Sarah Palin, live in Bethlehem, Pennsylvania. So let's go ahead and listen in to their rally.

(JOINED IN PROGRESS)

GOV. SARAH PALIN (R-AZ), VICE PRESIDENTIAL CANDIDATE: And in a McCain/Palin administration that will mean developing new alternative energy resources.

(APPLAUSE)

And it will require building more nuclear power plants and it does mean -- yes.

(APPLAUSE)

And it does mean harnessing those alternative sources like energy, and wind, and solar, along with environmentally safe offshore production. We do need to drill here and drill now.

(APPLAUSE)

Yes. Now here, again, as Cindy McCain suggested there about the choices we have, too. Here again, we have a clear choice in November. Just a couple of weeks ago, Joe Biden told a voter that he is against clean coal.

(BOOS)

And yet, to Barack Obama has opposed offshore drilling, but of course last night he changed his position on that, too. What that told me is that he is not willing to drill for energy, but he is sure willing to drill for votes.

(APPLAUSE)

AUDIENCE: Drill, baby, drill! Drill baby, drill! Drill, baby, drill!

PALIN: You are right.

You are right, in a McCain /Palin administration we will achieve have energy security for our country, and that means American energy resources, brought to you by American ingenuity and produced by American workers.

(APPLAUSE)

AUDIENCE: USA! USA! USA! USA!

PALIN: So last night Senator McCain talked about real and pragmatic solutions, and Barack Obama talked about why he'd rather run against George Bush.

(LAUGHTER)

And that's a strategy that is starting to wear pretty darn thin. John McCain didn't just come out of nowhere. The American people know John McCain. They know that he is the maverick, and that's what our opponents are afraid of most.

(APPLAUSE)

You see, Pennsylvania, you know that John McCain is his own man. He doesn't run with the Washington herd. And from -- look at his background, from an enemy prison camp to the halls of Congress, this man has always put his country first.

(APPLAUSE)

Always putting his country first, he is the only man in this race with a plan that will actually help working families, and cut taxes, and create jobs, and get our economy back on track.

(APPLAUSE)

You know, too, he is the only man in this race who talks about the wars that America is fighting. And he is not afraid to use the word victory.

(APPLAUSE)

And last night in the debate, we heard again, Barack Obama lecturing John McCain on the stakes involved whenever America goes to war.

(BOOS)

But, wait a minute, may I remind Senator Obama that Senator McCain served our nation in uniform for 22 years.

(APPLAUSE)

God bless him, he spent five and a half years as a POW. And he knows the cost of war, because he has paid those costs himself.

(APPLAUSE)

And as the mother of one of those troops, yep, that's exactly the kind of man I want as commander-in-chief.

(APPLAUSE)

John McCain always so proud to be an American just like you, and just like the many veterans that we have here in the crowd, and our active duty soldiers and airmen.

(APPLAUSE)

Hey, do me a favor, those of you who are serving today, or have served our nation in the past, raise your hand. Let us honor you and thank you guys.

(APPLAUSE)

Thank you. Thank you, guys. Thank you, guys. Thank you. Thank you! Thank you. And you do deserve that standing ovation. For your service and for your sacrifice and for the sacrifice your families have made, also, God bless you.

Pennsylvania, the time for choosing is near. Now, what does that have to do with anything?

(LAUGHTER AND APPLAUSE)

Pennsylvania, the time for choosing is near and it is going come down to what we believe in, OK. It is what we believe in. And what John McCain and I believe in is what Ronald Reagan believed in.

(APPLAUSE)

We believe in a culture of life.

(APPLAUSE)

And we believe that -- yes. We believe that America's workers are the best in the world.

(APPLAUSE)

We believe that America is a good and honorable nation, and that our country is a beacon of hope for those seeking freedom and equal rights. And we believe that with the right kind of leadership, we can once again be that shining city on a hill, and Ronald Reagan spoke of that so many years ago. One man has the wisdom and the experience to get us there, and that man is John McCain.

(APPLAUSE)

AUDIENCE: John McCain! John McCain! John McCain!

PALIN: Pennsylvania, from now until the election day, you are going the hear our opponents go on and on about how they will quote, "fight for you", but since he won't say this on his own behalf, I will say it for him. There is only one man in this campaign who has really ever fought for you, and he is the only one with courage to keep on fighting for you.

Ladies and gentlemen, the next president of the United States, John McCain.

(APPLAUSE)

MCCAIN: Thank you. Thank you. Thank you. Thank you, thank you.

It is an honor. It is an honor to be introduced by Governor Sarah Palin of the great state of Alaska. And I can't wait, and I can't wait to introduce her to Washington, D.C. as the next vice president of the United States.

(APPLAUSE)

I can't wait for that. I'd like to again thank my wonderful wife Cindy, and my daughter Megan, who with all of their support

(APPLAUSE)

(INAUDIBLE)

Good words. My friends, with your support, Sarah is going to help me set the American economy back on the path of recovery, growth and job creation for American workers.

(APPLAUSE)

And it has to happen right here in the state of Pennsylvania, my friends. I'd like to give you a little straight talk, Pennsylvania will have a great role in determining who the next president of the United States and the vice president of the United States. I need your vote. We need to carry Pennsylvania. We can do it with your support. We can win this election.

(APPLAUSE)

We need you. Thanks for this turnout.

(APPLAUSE)

Thanks for this wonderful warm welcome and turnout.

You know, thank you. Last night, last night in my debate with Senator Obama -- by the way, how did we do last night? OK?

(APPLAUSE)

Last night I set forth a critical first step our country must take to get through this time of crisis. We must go to the heart of the problem. And you know right now that problem is the housing crisis, here in Pennsylvania, and across this country.

Under my orders as president, the secretary of Treasury will carry out a homeownership resurgence plan and the United States government will purchase mortgages directly from the homeowners and mortgage services, and replace them with manageable mortgages. The dream of owning a home should not be crushed under the weight of a bad mortgage.

(APPLAUSE)

This moment, this moment requires that government act. And as president, I intend to act quickly and decisively, so that you can realize the American dream.

(APPLAUSE)

I don't have to tell you in so many ways Washington is still on the wrong track. We need to change, and I know how to deliver it. The status quo is not on the ballot. We are going to see change in Washington, and the question is in what direction will we go? Will our country be a better place under the leadership of the next president, a more secure and prosperous and just society, and will you be better off in the jobs you hold now, and in the opportunities that you hope for? Will your sons and daughters grow up in the kind of country you wish for them, rising in the world and finding in their own lives, the best of American and which candidate's experience in government and in life makes him a more reliable leader for our country?

UNIDENTIFIED MALE: John McCain! John McCain! John McCain!

UNIDENTIFIED MALE: John McCain! John McCain! John McCain!

UNIDENTIFIED MALE: John McCain! John McCain! John McCain!

MCCAIN: And which makes him a better commander in chief for our troops? In short -- in short, who is ready to lead in a time -- in a time of trouble, in a time of trouble and danger for our country? Who will put our country first?

I set out on this campaign for president many months ago. I promised at the beginning to be straight with the American people, knowing that even those who don't agree with me on everything would at least expect that much. In 21 months, during hundreds of speeches, town halls and debates, I've kept my promise to level with you about my plans to reform Washington and get this country moving again.

As a senator, I've seen the corrupt ways of Washington and wasteful spending and other abuses of power. As president, I'm going to end those abuses, whatever it takes. I will propose and sign into law reforms to bring tax relief to the middle class and help businesses so they can create jobs. I will get the rising cost of food and gas under control. I will help families keep their homes and help students struggling to pay for college.

I will make health care more accessible and affordable. I will impose a spending freeze on all -- on all but the most -- on all but the most vital functions of government. I will review every agency of the federal government, improve those that need to be improved. and eliminate those that aren't working for the American people. You and I together will confront the $10 trillion debt that the federal government has run up and balance the federal budget by the end of my term in office.

Across -- across this -- across this country, this is the agenda that I have set before my fellow prisoners, and the same standards of clarity and candor must now be applied to my opponent.

You know, we've all heard what he's said, but it's less clear what he has done or what he will do.

UNIDENTIFIED MALE: Nobama! Nobama! Nobama!

UNIDENTIFIED MALE: Nobama! Nobama! Nobama!

UNIDENTIFIED MALE: Nobama! Nobama! Nobama!

MCCAIN: What -- you know, what Senator Obama says today and what he has done in the past are very often two different things. Rather -- rather than answer his critics, Senator Obama will try to distract you from noticing that he never answers the serious and legitimate questions that he's been asked.

He's -- he's even -- he's even questioned my truthfulness. And let me reply in the plainest terms I know, I don't need lessons about telling the truth to American people. And were I ever to need any improvement in that regard, I probably wouldn't seek advice from a Chicago politician.

What was my opponent's actual record in the years before the great economic crisis of our lifetimes? This crisis started, as you know, in our housing market in the form of subprime loans that were pushed on people who couldn't afford them. Bad mortgages were being backed by Fannie Mae and Freddie Mac, and it was only a matter of time before a contagion of unsustainable debt began to spread. This corruption -- this corruption was encouraged by Democrats in Congress and abated [SIC] -- abetted by Senator Obama.

I was the one -- I was the one who called it at the time for tighter restrictions on Fannie Mae and Freddie Mac that could have helped prevent this crisis, could have helped prevent it from happening in the first place. And Senator Obama was silent on the regulation of Fannie Mae and Freddie Mac. And his Democratic allies in Congress opposed every effort to reign them in.

As recently as September of last year, he said that subprime loans had been, quote, "a good idea." Well -- well, Senator Obama, that good idea has now plunged this country into the worst financial crisis since the Great Depression. To hear him talk now, you'd think he'd always opposed the dangerous practices at these institutions, but there is absolutely nothing in his record to suggest he did.

He was -- he was surely familiar with the people who are creating this problem. The executives of Fannie Mae and Freddie Mac have advised him, and he's taken their money for his campaign. In fact -- in fact, he's received more money from Fannie Mae and Freddie Mac than any other senator in history, with the exception of the chairman of the committee overseeing them.

Did he -- did he ever talk to the executives at Fannie and Freddie about these reckless loans? Did he ever -- did he ever discuss within them the stronger oversight I'd proposed? If Senator Obama is such a champion of financial regulation, why didn't he support these regulations that could have prevented this crisis in the first place?

He won't -- he won't tell you. He won't tell you, but I'll tell you, you deserve an answer.

On health care, Senator Obama has been misleading on two fronts. Offhand, it's hard to say which health-care proposals he has misrepresented the most: his own or mine. He said -- he said that his goal as a single-payer system where government is in charge of health care.

Under the plan he has proposed, he will fine employers who don't offer health insurance and put their employees in government health care. He never did tell you what the fine was, did he? And what he doesn't say and what nobody has asked is how big that fine will be? You deserve an answer, and you sure didn't get one last night.

Again, on taxes, we see a difference between what Senator Obama says today, what he said yesterday, and what he's actually done. During the Democratic primary, he promised to double taxes on every American with a dividend or an investment. He promised to raise payroll taxes. He promised higher taxes on electricity. And now, all of the sudden, Senator Obama claims he will give 95 percent of the Americans tax relief.

What he hasn't told you is that he would tax half of the income of small business in America. That's what his plan would do. These are the people who have actually added 350,000 jobs when America lost 700,000 jobs. I don't have to tell you they are the backbone of the economy and our best hope of getting America back on track. When I'm president, their taxes are going down instead of up, and we're going to help them create jobs for America.

Senator Obama has got a record on tax increases that he doesn't talk about very much. He voted for the Democratic budget resolution that promised to raise taxes on individuals making just $42,000 a year. At the time, he even said his vote was intended to get, quote, "our nation's priorities back on track."

Well, if he's such a defender of the middle class, why did he vote to raise their taxes? Whatever happened -- whatever happened to the tax relief he promised them when he was a candidate for the Senate? And why should middle-class Americans trust him to keep promises that he's already broken?

You know, my friends, Senator Obama and I both have differences with now President Bush has handled the economy, but he thinks taxes are too low, and I think that spending is too high. According to third-party estimates, Barack Obama will increase government spending over $860 billion. That's on top of the trillions in debt we've already burdened our children and grandchildren with.

When I am president, I'll cut the size of government. I'll put the government back on the side of America's working family. And I'll get this country moving again.

Then there's the matter of earmarks. In his three short years in the Senate, he has requested nearly $1 billion in pork projects for his state, $1 million for every day he's been in office. Far from fighting earmarks in Congress, Senator Obama has been an eager participant in this corrupt system.

You know, last night I mentioned the example of the more than $3 million he sought for a new overhead projector for a planetarium in his hometown. Coincidentally, purely coincidentally, the chairman of the planetarium pledged to raise more than $200,000 for Senator Obama's campaign.

We don't know if he ever discussed the money for the planetarium, and no one has asked Senator Obama. But even the appearance of this kind of insider dealing disgusts Americans, and I'm going to put a stop to that, my friends, when I'm president of the United States.

So, who is the real Senator Obama? Is he the candidate who promises to cut middle-class taxes, or the politician who voted to raise middle-class taxes? Is he the candidate who talks about regulation or the politician who took money from Fannie Mae and Freddie Mac and turned a blind eye as they ran our economy into the ditch? Is he the candidate who promises change or is -- or is he the politician who has brought into everything what is wrong with Washington?

We can't change the system with someone who's never fought the system. He has -- he has never once...

UNIDENTIFIED MALE: John McCain! John McCain! John McCain!

UNIDENTIFIED MALE: John McCain! John McCain! John McCain!

UNIDENTIFIED MALE: John McCain! John McCain! John McCain!

MCCAIN: He has never once taken on the leaders of the party on a single issue. That's a matter of record.

Washington is on the wrong track, and I'm going to set it right. The American people know my record. They know I'm going to change Washington because I've done it before. They know I'm going to reform our broken institutions in Washington and on Wall Street, because I've done it before. They know -- they know I'm going to deliver relief to the middle class, because that's what I've done.

You don't have -- friends, you don't have to hope that things will change when you vote for me. You know that things will change, because -- because I've been fighting for change in Washington in my whole career, and I've been fighting for you my whole life.

That is what I am going to do as president of the United States: fight for you and put the government back on the side of the people. Thank you and God bless you, and I need your vote on November 4. Thank you for being here. I'm proud to be with you.

PHILLIPS: Senator John McCain and his running mate, Governor Sarah Palin, there in Bethlehem, Pennsylvania, rallying up the crowds. We had heard from Joe Biden and Barack Obama in the noon Eastern hour, and -- 2 p.m. or 1 p.m. Eastern hour, rather. Now for the sake of fairness, of course, we listened to the Republican side of things as it's getting close. Twenty-seven days until we all vote for the next president of the United States.

And Mary Snow is actually in one of the biggest battleground states right now. She is in Chillicothe, Ohio. She's actually been hanging out there, getting to talk with voters, what their take is, those undecided voters, who they are going to vote for. We're going to catch up with her right after a quick break.

(COMMERCIAL BREAK)

PHILLIPS: Now to Chillicothe, Ohio, where Mary Snow is standing by. Why Chillicothe? Well, she's going to explain why Ohio is an extremely important state when it comes down, in 27 days, before we vote for the next president. Hey, Mary.

MARY SNOW, CNN CORRESPONDENT: Hi, there, Kyra. You know, we are literally on Main Street, and of course, everyone has been talking about what happened in the markets, their financial futures.

And a lot of people are just very scared. We talked to a number of people who say they are really expecting the worst. They're taking precautions with their money. Here's a little bit of what they had to say.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: You know, I don't know if it was wise or not, but I withdrew 80 percent of my investments and liquidated 80 percent of my investments for cash. Good call or not? I'll find out if it was or it wasn't.

UNIDENTIFIED FEMALE: I have IRAs, and they have dropped considerably. As a matter of fact I got a statement yesterday, and it was down several thousand dollars. So it is dropping. Although mine are in fairly secure investments, it's still dropping.

(END VIDEO CLIP)

SNOW: And you know what, Kyra? This is a town which was once a booming industrial town. It has had its share of pain. And Ohio with an employment -- unemployment rate that's at a 16-year high, certainly those concerns have -- about jobs are No. 1 here, and they have been for many years, which has really been amplified -- Kyra.

PHILLIPS: So did the debate last night change anybody's mind?

SNOW: You know, we talked to a number of people, and they said really no. Some people have already made up their minds who they're going to vote for, and even though they're supporting a candidate, they say they weren't convinced they heard any solid proposals last night.

One interesting point: this town, Kyra, is kind of a bellwether. It has made a name for itself, because it's been able to kind of predict who will win the White House. Mirrored the 2000, 2004 results. That's why we're here. Very interesting here, because a lot of people are saying they can't tell at this point who will win here. It's pretty much split.

PHILLIPS: All right. We'll track with it you. Mary Snow, thanks so much.

Well, despite everything, nobody is using the "D" word, depression, except the legions of therapists treating millions of stressed out, freaked out, maxed out casualties of a pretty scary economy. A survey by the American Psychological Association finds as many as 8 in 10 Americans are now stressing over their money.

In fact, our next guest, Dr. Gail Saltz, says that the economy has been the biggest stress on Americans since 9/11. She's a psychiatrist and best-selling author whom Tom Brokaw has called a voice of wisdom and insight in a world of confusion.

Gail, what gives?

GAIL SALTZ, PSYCHIATRIST: Well, it's quite clear. You know, money is one of the most important things to people. It is a matter of survival when you get down it to it. It is one of the most stressful issues that we think about, one of the biggest issues that couples argue about, and everybody is legitimately highly concerned.

You put that together with the fact that we have this upcoming election, and that there's a lot of disagreement in this nation about, you know, which direction the country should go in. And that perfect storm creates tremendous anxiety, job loss, home loss. What's going to happen to me economically? These are the most vital things to people.

PHILLIPS: Well, and it's times like this -- of course, it's other kinds of disasters, too, that also make us realize how little we can live without. I mean, when we don't have it, we realize that we can get by. Yes, it's a struggle, but it also tells us the message that there's a lot of things in life that we just don't need.

SALTZ: You know, everybody is going to need to reset their thermostat. And I think that's probably -- when you talk about panic, I mean, ultimately, what you hope is that people will reset their thermostat and realize just what you're saying: reorient their priorities, what really matters most to them, what can they do without.

We're coming off of a period where the sky was the limit and it seemed, frankly, you could have anything. And then people came to believe they needed everything. So now there will be a period of time where people will suffer loss and feel very devastated about that. And as in every other period in history when this has happened, come out on the other end, hopefully feeling resilient, because they've proved to themselves that they can live without a lot of things and still enjoy their lives.

PHILLIPS: Gail, as you can imagine, we're getting a lot of e- mails. Some -- a lot of people keeping their sense of humor, as well, but some serious ones.

Patricia here asks you, she says, "I'm usually optimistic, a 'glass half full' person, but I've really been feeling stressed and depressed. I know I need to sit tight and relax, but I find myself bringing on -- or binging on food, rather, having difficulty sleeping and stuck to CNN, looking for some good news."

SALTZ: You know, this is -- this is a kind of a classic situation. People tend to do, unfortunately, self-destructive things to try to comfort themselves, with food, with alcohol. And of course, this is only going to make you feel worse and, by the way, make it harder for you to sleep.

What you need to do, and I know this is a terrible thing to say as I'm sitting on CNN, but don't listen to your TV all day long, because it just, in a way, re-traumatizes you. You know, pay attention maybe in the morning, maybe at night, so you know what's going on. But otherwise, it is important to find other things to focus on.

You make your plan. You do what you know you need to do. And then the rest is, frankly, just psychic stimulation that is going to pull you in a negative direction for no real good.

So you need to exercise. This is a great form of relieving stress. You need to enter in with some thoughts that are -- that are more positive for you. What -- what do you have going on in your life that you like? What hobbies can you distract yourself with? Listening to music, taking a warm bath, talking with somebody you like to commiserate is very helpful.

But if you really are not sleeping at night, and you either really lose your appetite or you're eating up a storm, and you feel really hopeless and helpless, then you may be heading into a depression, and you might need to see a professional. I can tell you there are definitely more people coming into my office at this point, because they are having trouble with anxiety that's actually an anxiety disorder, a depression that's really depression with a capital "D," and they need some help.

PHILLIPS: Well, you know, it's interesting. Karen writes, "This is probably one of the most stressful times of my life. However, this is just a money loss. 9/11 was a human loss. So if Americans will just put things in perspective, we will get through the terrible time."

And then Jay writes, "I can't get a student loan to pay for my graduate program and may get kicked out of school. I've looking for a job for the last six months. I'm under more stress than Santa's elf trying to bench press an elephant."

SALTZ: You know, what I can say is this. There are the realities, but a lot of the stress that people are suffering are based, again, on perception. And to some degree, unfortunately, the economy is suffering from -- some of this psychology. Some of this is, you know, the panic mob mentality: we must sell. Everybody, sell, sell, sell.

And if you can hold onto the fact that, historically, we always come out of these things. We always come out. And that what we need to do is to get yourself in as conservative a stance as you can, and then know you've done what you can do, and focus on things that can be helpful to yourself, that can be relaxing to your mind.

Because -- and talk with other people, because support and knowing that you're not alone, you know, even the poor Santa elf guy, you know. There are a lot of people in the situation who you might be able to band together and form something that is some form of employment.

PHILLIPS: That is so true. Gail Saltz, I'm putting you on my speed dial. Thanks, doctor.

SALTZ: My pleasure.

PHILLIPS: The mastermind of the Wall Street bailout is about to speak, and we'll certainly be listening. Treasury Secretary Henry Paulson, live, 3 p.m. Eastern, right here on CNN.

(COMMERCIAL BREAK)