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AMERICAN MORNING

Global Markets Plunge; Fed Cuts Its Key Rate Down; How Obama and McCain Would Fix the Economy

Aired October 8, 2008 - 07:00   ET

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


KIRAN CHETRY, CNN ANCHOR: We're just coming up to 7:00 here in New York. A look at the top stories this morning. While Americans slept, world markets were taking a beating. In Japan, the Nikkei closed down more than 9 percent. Moscow ended the day down more than 10 percent. European markets also fell sharply at the opening. Britain's government announcing an $87 billion package for U.K. banks. It's similar to the bailout the Congress passed here in the U.S.
Dow futures also showing that the U.S. market is likely to fall when Wall Street opens for business. And as markets shrink, so does the money in your retirement account. Analysts say now that Americans have lost $2 trillion from their retirement plan in just the last 15 months.

Meanwhile, President Bush has been trying to call America's economic fears. Yesterday, he said we're in tough, tough times but assures the public that the economy will eventually bounce back.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Thawing the freeze in the financial system is not going to 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.

(END VIDEO CLIP)

CHETRY: And breaking this morning, as stocks look poised to take another big fall, Dow futures sharply lower this morning. That follows five disastrous -- really is the only way to put it -- days of trading, a loss of 13 percent or more than 1,400 points over that span. It's the biggest five-day point drop in Dow history, and it's almost exactly one year ago today, October 9th, that the Dow actually hit its record high. And it's fallen from that record high 33 percent since then.

JOHN ROBERTS, CNN ANCHOR: And Christine Romans joins us now.

Christine, just got some news in from the Fed...

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: That's right.

ROBERTS: ... breaking there. They've decided to do something about issues. ROMANS: That's right. In a coordinated move among central bankers, the Federal Reserve is lowering the federal funds target by half a point to 1.5 percent. That's from two percent to 1.5 percent.

This is what we call an inter-meeting rate cut. They've done this without their normally scheduled meeting, and they have come out before the markets opened, some two and a half hours before the markets open and after you've seen those huge declines in Asia and in Europe. And they have cut interest rates, that federal funds target to 1.5 percent.

There have been some talk in the markets over the past few days that this was something that was going to happen. There was talk, hope I should say, not talk but hope, that the Fed and other central banks would do so. The Australian central bank cut rates yesterday. Again, cutting interest rates by half a point to 1.5 percent one of those rare inter-meeting rate cuts.

CHETRY: What is it? What does it shake down to mean in practical terms?

ROMANS: It shakes down to mean they're trying to -- they're trying to ease the borrowing situation. They're trying to lower borrowing class (ph). They're trying to get things moving. They're trying to -- they're trying to goose the economy. They're trying to goose the banking system.

You know, they've done absolutely everything that they can. They've even invented some new things, new tools for their tool box that we haven't heard of.

Yesterday we knew that there was -- we heard of a Fed bank bailout where they're going to basically be the backstop for commercial paper market. A lot of companies use short-term borrowing to pay their bills, to buy their raw materials. And the Fed and the Treasury said that they're going to -- they're going to go back and backstop those loans so that that can continue to happen.

They've been cutting interest rates. They've been trimming borrowing costs. They've been bailing out banks. They have been injecting hundreds of billions of dollars of liquidity into the markets.

I can't see how the Asian or how the European markets are reacting to this, but I can tell you that a coordinated move among central bankers is the key part here. The Federal Reserve is lowering the federal funds rate by half a point to 1.5 percent, John and Kiran.

ROBERTS: You know, there was some speculation that this was -- there was going to be an announcement by the Fed. A lot of people thought perhaps interest rate cut and the Dow futures have bounced back a little bit.

ROMANS: They have. OK.

ROBERTS: Still deeply in negative territory. They're still down about 140 (ph). Markets across Europe tanked. At the opening this morning, they made back some of that ground. Banking stocks are among the biggest losers, however, British banks appeared slightly better after Britain's government announced that it is injecting nearly $90 billion into its banks. CNN's Richard Quest is live for us in London this morning.

Some pretty dramatic action today by the Chancellor of the Exchequer, Richard.

RICHARD QUEST, CNN CORRESPONDENT: Indeed. The chancellor, unlike in the United States where they are buying debts from banks, in Britain they're actually buying the banks themselves taking equity stakes.

I just want to follow on from what Christine Romans was talking about there. The Fed moving in the United States. But, John, you are talking about how it's a coordinated response, international. We know that there has got to be a coordinated response.

We are expecting the Bank of England to cut interest rates in the U.K. by half a percentage point, exactly the same as the Fed. We're expecting that any time now.

ECB potentially doing the same thing. There has now a definite view around the world that this will be sold by cutting interest rates to keep consumer spending and at least to prevent some of the fear that is out there at the moment.

ROBERTS: At the same time, Richard, though, you got the problem with banks there as well, and Prime Minister Gordon Brown out this morning saying that he is going to take legal action over an online banking service in Iceland, Ice Bank, which prevented people from getting their money out of deposits?

QUEST: Absolutely. British savers invested in an Icelandic bank which then went bust. British savers couldn't get their money. The governments guarantee.

In this environment, John, what is happening is fear. It's the old adage, the moment you can't get your money out of the hole in the wall, then you start to panic. And that's what started to happen in Europe this week.

So it doesn't really matter which way we look at it, where we look at it from Tokyo, from Frankfurt, from Moscow, from London, from New York, the panic is still the same. And what the government is all basically saying to everybody is we will pull the necessary oil on these troubled waters, but it's going to cost a great deal of money and that's what happened today in Britain.

ROBERTS: Right. It did appear to have some pallid of effect on the markets there in London as well.

Richard Quest for us this morning. Richard, thanks very much.

CHETRY: So we are following breaking news again. The Fed ordering an emergency interest rate cut, half a percent this morning.

We have Christine Romans with us to talk more about exactly what this means. This was something that they did not at the regularly scheduled meetings.

ROMANS: Right.

CHETRY: Sort of underscoring the urgency here. What impact will it have today?

ROMANS: It's not at a regular scheduled meeting. Sometimes it has even more impact in the marketplace and I'm confident because it shows that there are kind of, I guess, on the ball and they're moving quickly.

One of the things in the statement that I think is interesting to point out, Kiran, inflationary pressures that started to moderate in a number of countries, partly reflecting the market's decline in energy and other commodity prices. Earlier in the year when you had energy prices skyrocketing and the consumer price index moving up so much more quickly than, you know, wages and other forms of compensation, you had people concerned that if you kept cutting interest rates it was going spark inflation and that was something that kind of held back expectations for a rate cut.

But now, you're seeing that -- now you're seeing that energy prices are actually coming back because of concerns of global economic weakness. So energy prices have come down and that gives them a little bit more breathing room.

So, it's a complicated kind of set of all of these formulas and things that they're looking at to try to figure out what to do. But lowering interest rates is something that the markets have been hoping for. And it's sends a psychological signal I think to the marketplace.

ROBERTS: In terms of the psychological signal that is in the marketplace, you know, on CNNMoney we're still a little bit delayed here but apparently, Dow futures are soaring on this news.

ROMANS: Are they?

ROBERTS: They were down as much as 250 points which pointed to a sharply lower opening. Now, it looks like we may be in positive territory for the day. But even so, how much have we lost over the last couple of weeks?

ROMANS: Oh, I mean, we've lost 12 percent in the Dow over the past five days. I mean, the markets have been just hammered. You've got for the year, the major averages are on track for the worse year since I think 1937.

CHETRY: How quickly it changes. We hit our high last year at this time.

ROMANS: I know. Last October, just a year ago last October, and they're down some 30-some percent since the high last year. I mean, a lot has changed since then.

And remember when stocks were hitting their highs, we knew that there was a subprime crisis. We knew. We just saw it, or you know, a lot of people thought that it was going to be contained. It obviously wasn't contained.

In every corner, Iceland, for crying out loud, every corner of the globe, we're talking about the spillover effect of what started here with the subprime crisis in the housing and the housing bubble.

So we'll watch this. You know, one thing about inter-meeting rate cuts, there have been a few but since 2001 after September 11th, the Fed came in on the morning of the 17th, I think, when trading resumed and did a big rate cut. A half a point -- that's too little increment.

ROBERTS: Right. But here's the thing that's really crucial to look at here is that in the last six months, the Fed and the Treasury Department have literally thrown everything but the kitchen sink at this problem and it continues to go down.

ROMANS: That's right.

ROBERTS: So is this just going to be a momentary uptick but still the trend will be a downward one?

ROMANS: There are two ways to look at it. One, they're doing everything that they can and they're inventing new powers that we didn't know they had, and that the government will help fix this. The other way to look at it is they've done all of this and we are still sliding.

Maybe this isn't something the government can fix. Maybe this is something that has to play out. I mean, there are a lot of different ways to look at it. But we do know that the Fed and the Treasury and now, you know, global central banks have done an unprecedented intervention. We haven't seen intervention in the financial markets like this since the Great Depression spread out.

ROBERTS: Christine, thanks so much for that.

ROMANS: Sure.

CHETRY: We'll be following this all morning with you, Christine.

And meanwhile, we're going to take a quick break. When we come back, one thing that's not up for debate is that we're in a financial crisis. But at last night's presidential debate, which candidate laid out the best plan to help solve it. The best political team on television breaks it down when AMERICAN MORNING comes right back.

ROBERTS: Race and politics.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: He flat out said to me I can't vote for that black boy.

(END VIDEO CLIP)

ROBERTS: Union workers launch a small town offensive.

Inside the fight to convince crucial voters to look beyond the color of the candidate's skin.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Look, you know, we got to get past that.

(END VIDEO CLIP)

ROBERTS: Carol Costello with the "Voice of the People."

You're watching the "Most News in the Morning."

(COMMERCIAL BREAK)

ROBERTS: Twelve and a half minutes after the hour. Welcome back to the "Most News in the Morning."

Breaking news this morning as the Federal Reserve cuts its key interest rate by half a point. By the way, this was a coordinated effort together with central banks in the United States and in Europe. Interest rates being cut in Europe as well.

Dow futures are soaring on this news turning around sharply. This comes after yesterday's 508-point drop that sent markets around the world tumbling as well. Japan's Nikkei index fell nearly 10 percent. Russia had to shut down its stock market after it opened with huge losses. London, Paris, Frankfurt all lower as well.

CHETRY: Well, last night's debate between John McCain and Barack Obama was more pointed than their first contest. The rivals were showing sharp contrast in everything from health care and the economy to foreign policy.

Our Ed Henry is live for us this morning from the debate hall at Belmont University in Nashville with a look at how things went last night.

Hey, Ed.

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Well, Kiran, it's interesting. Good morning. This was supposed to be in John McCain's wheelhouse, the town hall style format. He certainly looked comfortable. He certainly made his points. But in the end, he really did not shake up the dynamics of this race.

(BEGIN VIDEOTAPE)

HENRY (voice-over): On a day the Dow dropped 508 points, the financial crisis dominated round two. And the front runner, Barack Obama, spent most of the night in control after immediately tying John McCain to the status quo.

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: I believe this is a final verdict on the failed economic policies of the last eight years, strongly promoted by President Bush and supported by Senator McCain that essentially said that we should strip away regulations, consumer protections, let the market run wild.

HENRY: McCain moved just as quickly to break from the White House, touting a plan for the government to buy mortgages homeowners can no longer afford.

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: And it's my proposal, it's not Senator Obama's proposal, it's not President Bush's proposal. But I know how to get America working again, restore our economy and take care of working Americans.

OBAMA: We --

HENRY: After barely looking at Obama in the first debate, McCain, again, could not hide his disdain, especially over a 2005 energy bill.

MCCAIN: Loaded down with goodies, billions for the oil companies, and it was sponsored by Bush and Cheney. You know who voted for it? You might never know. That one.

HENRY: They also offered deep differences on foreign policy.

MCCAIN: And in his short career, he does not understand our national security challenges. We don't have time for on-the-job training, my friend.

OBAMA: It's true. There are some things I don't understand. I don't understand how we ended up invading a country that had nothing to do with 9/11.

HENRY: And a sharp contrast in the closing statements. Dramatic change versus steady leadership.

OBAMA: But we're going to have to have the courage and the sacrifice, the nerve to move in a new direction.

MCCAIN: And I'll rest on my record but I'll also tell you, times are tough. We need steady hand at the tiller.

(END VIDEOTAPE)

HENRY: The bottom line is going into this debate John McCain was already falling behind in key battleground states. He really did little to change that dynamic. It's going to put more pressure on him going into next week's third and final presidential debate. Time running out very quickly, Kiran.

CHETRY: All right. Ed Henry for us this morning in Nashville. Thanks.

ROBERTS: And looking at voters reaction to last night's debate, we asked people who watched who did the best job. And our CNN/Opinion Research Corporation poll shows viewers chose Senator Obama. The Democrat topped John McCain 54 to 30 percent.

Coming in to last night's debate, a lot of pundits said McCain needed it to be a game changer. His poll numbers are slipping nationally including in several key battleground states.

Our Suzanne Malveaux was watching the contest closely. She joins us now with more. People said that John McCain had to go into this thing and he had to win it. So, people say he didn't. So where does that leave him this morning?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: John, I talked to a lot of Republicans and they're really kind of demoralized. They're disappointed about the performance last night. They said that they needed a game changer. It did not happen that there were a lot of missed opportunities for him to go after Barack Obama on health care, on taxes, that he needed kind of a knockout punch.

There were some moments as well where some jokes fell flat. His attempt at humor didn't quite work, that they are essentially running out of time here. Some of the body language and even the phrases that he used when he called Barack Obama, referring to him as "that one," they said no bad intentions, but to some people it didn't look like he was being polite.

ROBERTS: You know, the national poll numbers that we've seen that have Obama in the lead by about five or six points, that's just sort of a broad sentiment of how voters are feeling. But when you look at the battleground states, our latest projections are if the election were to be held today, Barack Obama would be six electoral votes away from occupying the Oval Office.

Are the folks in the Obama campaign who you're talking to allowing themselves to be optimistic at this point about their chances?

MALVEAUX: Well, they're a little cautious here. I mean, there's 27 more days. They say that's a lifetime for a campaign.

They feel very good about what happened last night but at the same time they describe it this way. They say, you know, really the campaign is very much like the candidate. You know, the highs are not too high, the lows are not too low. What they want to do is be steady.

They want to focus on the economy. If there are punches that are delivered to Obama, he's going to punch back. But essentially they feel that if they keep doing what they have been doing, it's working for them.

And one of the big things that they're focusing on obviously is voter registration. Ohio, Virginia, Georgia, Florida and the African- American vote, nine million African-Americans who are eligible to vote who are not registered. That's a very big number and that's what they're going to focus on.

ROBERTS: It's going to be a huge get out the vote campaign.

MALVEAUX: Absolutely.

ROBERTS: All right. Suzanne Malveaux for us. Thanks.

It's now 18 minutes after the hour.

Candidates in crisis.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: I have a plan to fix this problem.

(END VIDEO CLIP)

ROBERTS: What would they do? Our experts weigh in. A critical look at how Obama and McCain would fix the economy.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: We got to take some decisive action.

(END VIDEO CLIP)

ROBERTS: You're watching the "Most News in the Morning."

(COMMERCIAL BREAK)

ROBERTS: Twenty-one minutes after the hour and again, to the breaking news this morning. The Fed announcing a half point cut in its federal funds discount rate. 1.5 percent now. This is a coordinated action with European banks and also, apparently, the banks in Japan looking favorably upon this, though we haven't heard if they'll be cutting interest rates as well.

To talk more about this and also some foreign policy aspects of last night's debate, Richard Haass, the director and the president of the Council on Foreign Relations is with us this morning.

Tell us, first of all, what you think about this coordinated action to cut interest rates? What effect could this have?

RICHARD HAASS, FMR. POLICY PLANNING DIR., STATE DEPT.: It's positive. And the key word as you say, John, is coordinated. Just think for a second. The other day you had all sorts of European institutions moving to provide unlimited insurance for deposits. Some money was flying around to safe harbors. That was totally uncoordinated.

What we've seen in the last 24 or 48 hours is central bank and government realization. And unless we do this together, we're all going to basically pay a price. This is actually good news both substantively on the interest rates, but more important the fact that it was done in an orchestrated way.

ROBERTS: You know, the candidates were asked about all of this last night. Did they miss a point on here? Did they miss an opportunity?

HAASS: I think so. There was a question about that -- how to connect America's economic difficulties with what's going on in the world. There was almost a disconnect between how bad the international economy is, the consequences of that for the United States and our interest around the world. And the debate in some ways seemed small given the stakes of what's going on in the world.

ROBERTS: Of course, you're a foreign policy expert. You worked in Colin Powell's State Department. You've got a real good handle on all of this.

The debate last night over Pakistan and whether or not Barack Obama should be telegraphing this idea that the United States will act unilaterally to go after terrorists that the Pakistani government can not. John McCain has been throttling on this issue. Is it proper to lay out your policy in a way that Barack Obama did?

HAASS: I don't see anything wrong with it. If the Pakistani government is unable or unwilling to do what it needs to do to reign in terrorists, to make sure its country is not used as a sanctuary for the Taliban, yes, we are going to do that and, by the way, we're already doing that. It's nothing new.

Secondly, I think it's important to send that message to the Pakistanis that they do not have a blank check. If they are going to be partners of ours, if they're going to receive billion dollars in American aid, along with that comes some obligations. So I actually think what Barack Obama is saying is pretty much reality.

ROBERTS: Right. Now to Russia as well. Both candidates were asked if they believe that Russia is an evil empire looking back to Ronald Reagan's statement that he believed that it was under Gorbachev.

Both candidates kind of sidestepped the issue. Barack Obama said he thinks they're doing evil things. John McCain said maybe. Can't say yes and ignite a Cold War. Can't say no and ignore the problem. But what kind of a problem is Russia going to be for the next president?

HAASS: I wouldn't exaggerate it, and the last thing we want to do is isolate Russia. What's interesting today, Secretary of State Schultz and Kissinger have a joint op-ed in "The Washington Post." And they essentially say let's take a strategic view towards Russia.

Yes, we don't particularly like what they did in Georgia. But we have a broad relationship with them. There's a lot of interest that we still share in common. We got to work with them on nuclear issues, on energy issues, on Iran, and so forth. We do not need to go on an anti-Russian tear in American foreign policy.

ROBERTS: Do you think Barack Obama allayed some fears as to his foreign policy experience last night?

HAASS: It's impartially substantive. Partially it's been temperamentally. People want to see someone who is calm, relax as a commander in chief. So my sense is he did himself some good. ROBERTS: Richard Haass, it's always great to see you. Thanks for coming in this morning.

HAASS: Thank you, John.

ROBERTS: Appreciate it.

ROBERTS: Twenty-four minutes after the hour.

CHETRY: Credit crisis. Christine Romans on what if anything can stop the wild ride on Wall Street.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: These whipsaws that we're getting, it's like being on a rollercoaster ride.

(END VIDEO CLIP)

CHETRY: A look at what the markets might have in store today. You're watching the "Most News in the Morning."

(COMMERCIAL BREAK)

ROBERTS: We've got breaking news to report to you this morning. The Federal Reserve cutting a key interest rates by half a point. The Europe banks are joining the U.S. Federal Reserve slashing their interest rates there as well.

CNN's Richard Quest is live in London for us this morning with the European inclusion of this. This is the first time that they've taken this coordinated action, Richard, at least during this particular financial crisis. What's the effect over there?

QUEST: Absolutely. This is the first time that there's been such a major coordination, and it's not just the European central bank, John. The Bank of England, the Bank of Canada, the Swiss bank, the Swedish bank, even the Chinese are involved now in cutting interest rates by half a percentage point around the world. It's coordinated, it's deep and it is concerted and the object is to get, of course, consumer confidence and to get people spending again, or at least to prevent any further fear from taking the market lower.

What reaction we're all seeing, markets that have been done on now just of attack it has slowly turned the tide. We're a long way out of the woods yet, John, but at least this morning we can say that central banks are working together. They're cutting rates and it seems to be having a little bit of a reaction.

ROBERTS: All right. Richard Quest for us in London this morning with the latest news from there on the cut in both interest rates here in the United States and there in Europe among not just the European central bank but other banks as well. Richard, thanks so much.

CHETRY: Well, it's certainly all about the economy at the debate last night. And recent polls show that John McCain falling behind in several key battleground states. Did the debate change anything last night?

Joining me is CNN contributor and Republican strategist Ed Rollins, and Democratic strategist Lisa Caputo. Thanks to both of you for being with us this morning.

You know, Ed, I'll start with you. But just by default because we have a Republican in the White House, John McCain was the one on the defense last night as he tried to explain how he would get us out of this economic crisis. Did he deliver?

ED ROLLINS, REPUBLICAN STRATEGIST: No, he didn't. And he introduced a whole new proposal, this $300 billion plus bailout of people who can't pay for their mortgages without any explanation, without anybody reading on what it is.

You know, I think John needed to have a big night. I think he had an OK night. I think it probably ended up a draw at best, but that doesn't change the game.

CHETRY: And let's hear, Lisa, because I like to get your reaction to what James Carville said last night on CNN.

(BEGIN VIDEO CLIP)

JAMES CARVILLE, DEMOCRATIC STRATEGIST: I think he's going to win. I think absent some unforeseen circumstance, you can call the dogs in, wet the fire and leave the house, the hunt is over.

(END VIDEO CLIP)

CHETRY: He's talking about Barack Obama, of course. But there was a lot of talk about that last night. Is it over?

LISA CAPUTO, DEMOCRATIC STRATEGIST: Well, it ain't over until it's over and we've got under 30 days to go. And I love James dearly and I think he's got it right. I mean, unless there's a game changer that happens, I don't see this going McCain's way at all. In fact, I see Obama winning quite significantly.

If you look at your own polls last night, he is a good 20 percent, 20 points ahead on economic issues. You know, who do you trust most to deal with the economy? And that wise man, James Carville, once said it's the economy stupid, and it's coming home to roost in this election.

CHETRY: Is this how fickle the political landscape is, and that if this was still about Iraq, if this was still about fears of a terror attack, we'd be talking about something totally differently today?

ROLLINS: Yes, we would. But obviously, you have to deal with what people are interested in and I'll just remind this that Al Gore had a similar lead in 2000. We're certainly in a gold line stance. Democrats have not been able to punch it across the last couple of elections. Maybe they do this time. It will close up again, though, not by the performance last night but there's a lot to go. But still I don't think Barack Obama has made the sale totally yet. I still think there's still some doubts and some questions. He may be leading but it's not done yet.

CHETRY: Go ahead.

CAPUTO: I was just going to say one difference between Gore in that race was you didn't see the dynamics now at this stage with a candidate so far behind in the battleground states. I mean, Gore and Bush back in 2000 were close. You see John McCain pulling out of Michigan and he's behind in these battlegrounds. He's also, when we watched last night and we watched on CNN and you had your polls survey going with undecided voters in Ohio it was remarkable to me how many times Barack Obama struck a chord with women.

CHETRY: We also saw one of the things that you were talking about looking at those undecided voters and how every time either one of them, well first of all every time McCain seemed to talk about Iraq or Afghanistan you saw things plummet and any time either one of them started to get a little bit negative amongst one another. Or say you were with Freddie or you were with Fannie Mae, we saw it drop as well.

ROLLINS: People don't want that kind of dialogue. They want a serious discussion about a very serious issue which is the economy. Women, men, what have you, people are frightened. My wife came home last night and she said I hate to say it I'm scared. And I think she reflects the views of a lot of people.

CHETRY: And quickly, if people are frightened and people are scared they are going to with a candidate who has less experience?

ROLLINS: I think that's still the issue but I think the bottom line is he's so calm and reassuring and John, you know, John, unfortunately, his performance last night was, you know, 50 percent. It was a little radical, a little - I think he's confident. I think he's experienced but I don't think he reassures people.

CAPUTO: McCain needed a game changer last night. He didn't get it. And I think traditionally, the American public knows that Democrats are just great on the economy issues and when you see that kind of all-star cast that Barack Obama has surrounded himself with in terms of policy advisers on economic policy, you just can't beat that and that's very reassuring to voters.

CHETRY: All right. We'll see how it shakes out. I love having you guys the day after. Thanks for being with me.

ROLLINS: Thank you.

CHETRY: Ed Rollins, Lisa Caputo.

ROLLINS: Pleasure. Thank you.

JOHN ROBERTS, CNN, ANCHOR: 32 minutes after the hour, here are this morning's top story. Just half an hour ago, the Federal Reserve cut its key interest rate by half a point. That sent the Dow futures soaring. Futures are pointing to a higher opening after being down as much as 200 points before the announcement. It's not just the Feds cutting rates. Banks around the world are lowering rates as well. That is giving stocks around the globe a boost. London's FTSE rebounded from sharp losses and is now in positive territory. Other European markets including Frankfurt and Paris are rebounding as well. Christine Romans joins us now. We're talking about this being the first time there's been this level of coordinated activity between the Federal Reserve and banks around the world. But unfortunately, we have the Dow futures were down 200, went up 200 and now it's sort of settling down back to earth again.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Yes. You can never predict how the markets are going to respond to something like this. But you're right. It's the first big coordinated rate cut between meetings, and the word coordinated is what's got everybody's attention today. The Bank of Canada, the Bank of England, the European Central Bank, the Swiss Central Bank and the Swedes all stepping in and cutting interest rates. And what does this do? This pumps money into the systems. This lowers borrowing costs for all the different kinds of loans throughout the food chain. And then that is supposed to help the economy.

So the Fed funds rate now that target rate that the Fed set is 1.5 percent. And they also lowered the discount rate and the prime rate now stands at 3.5 percent. Why does a Fed rate cut matter? Well, in a normal healthy economy, what they are hoping to do is make money cheaper to borrow. Businesses can expand and hire more people, save on lower rates and consumers are able to spend more. I just got off the phone with Mark Sandy of mooneyseconomy.com (ph). He said you got to have a lot of fortitude but this might be a time to buy actually. He says that the cumulative effect of the Fed doing so much, he says and they will keep, they got can and they can just keep going. They can keep doing whatever they can to -

ROBERTS: But here's the quick question. All right. You lower interest rates but there's also a credit crunch at the same time. So it makes money cheaper to brother, but is the money available to borrow?

ROMANS: Well, that's the question the credit market on a day to day basis are not but once t.a.r.p., which is the buying up of the bad assets and once this new commercial paper facility are up and running, Mark (Sandy) says liquidity will return. It will return eventually. It's just when is the question.

ROBERTS: It would be nice to get a shot of good news, wouldn't?

ROMANS: Yes.

ROBERTS: Christine, thanks so much.

(BEGIN VIDEOTAPE)

ROBERTS (voice-over): Race and politics.

UNIDENTIFIED MALE: He flat out said to me I can't vote for that black boy. ROBERTS: Union workers launched a small town offensive. Inside the fight to convince crucial voters to look beyond the color of a candidate's skin.

UNIDENTIFIED MALE: Look, we got to get pass that.

ROBERTS: Carol Costello with the "Voice of the people." You're watching "the most news in the morning."

(COMMERCIAL BREAK)

CHETRY: Welcome back to "the most news in the morning." We have breaking news this morning. As the Federal Reserve cuts its key interest rate by half a point. Dow futures are up this morning. They soared initially and then we've seen them up 68 but hey it's positive. And a lot of people say they will take that after yesterday's 500 plus point drop. European central banks also join the fed. This was a coordinated rate cut. It's also boosting stocks slightly in London, Paris and Frankfurt. Well, if you have questions of what all of this means for your money, ask personal finance editor Gerri Willis. Go to CNN.com/am. You can submit your questions and Gerri will answer some of them live this morning on the show.

ROBERTS: Well, let's get back to the most politics in the morning now. Today we are bringing you part two of our "Voice of the People" series. Today we examine race in the election. Our Carol Costello has got our special report for us this morning as she joins us now live from Washington. Good morning, Carol.

CAROL COSTELLO, CNN CORRESPONDENT: Good morning, John. You know race does matter in states like Pennsylvania and Ohio. Union leaders who back Obama certainly know it and they are worried. So they are using a strategy that's meant to appeal to a middle America that admires telling it like it is. They are hoping it works.

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COSTELLO: It remains an ugly truth, race still matters. The question is, how much. Barack Obama leads in the latest national polls yet his foot soldiers on the ground still worry.

UNIDENTIFIED MALE: When he finally got to where she lowered her voice it's because he's black.

COSTELLO: In a small town in Pennsylvania, Jim English with the United Steelworkers Union is sending out teams of union workers like Andy, Laura and Doug to knock on doors. Their job is to make sure their fellow steelworkers vote Obama.

UNIDENTIFIED MALE: I'm just worried about foreign policy with Obama.

COSTELLO: That's an argument they feel they can win. But sometime it's more complicated.

DOUGLAS WARD, UNION MEMBER: One lady I went to told me, the reason why she had the issue was because how she was raised. She said her father is still alive and is 85 and he couldn't see herself voting for a black man.

COSTELLO: So they had to convince some of their union brethren, the race isn't about race.

ANDY ZANAGLIO, UNION MEMBER: And she flat out said to me I can't vote for that black boy.

WARD: They talked about him being a Muslim. He said countless time that he's a Christian.

COSTELLO: Obama is and always has been a Christian. The union feels the Muslim tag is really code for he's black.

JIM ENGLISH, SECRETARY TREASURER, UNION STEELWORKERS UNION: What they are saying really is probably a cover for being uncomfortable with him because of his race.

COSTELLO: In other words, he says sadly in some circles it's socially acceptable to call Obama Muslim rather than something else. And it's not just here in Pennsylvania. Subtle references on the campaign trail to Obama's middle name just reinforced those Muslim belief.

UNIDENTIFIED MALE: On November 4th let's leave Barack Hussein Obama wondering what happened.

COSTELLO: And just last week in Ohio.

UNIDENTIFIED MALE: He was the Muslim but he won't say it.

COSTELLO: Andy, Doug and Laura are used to that by now. Andy says about a quarter of the people he talks to raise the race issue. But he has a ready response.

ZANAGLIO: What I do when they bring that up I just say look you know we got to get pass that. We live in America, we're the best nation on earth. We got to get to the real issues of what's going on in this campaign.

(END VIDEOTAPE)

COSTELLO: The economy just may trump everything. Barack Obama points to the polls as proof the race question is overstated. He's ahead nationally. Obama says that tells me the American people are good, that they are judging me on my ideas and my vision and my values and not my skin color. John.

ROBERTS: Carol Costello for us and we'll be talking with former San Francisco mayor Willie Brown. More about this coming up. Looking forward to that.

COSTELLO: I'm sure he will have a lot to say.

ROBERTS: He usually does. He's an interesting guest. Carol, thanks so much for that. Carol is going to be back tomorrow by the way with part three of our "Voice of the People" series. We'll be examining something that's become hot topic in this economic crisis, Main Street versus Wall Street.

CHETRY: And Gerri Willis is logged on, taking questions about your money right now. Hey, Gerri.

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Yes. We're going to be talking jobs, your 401(k). It's now the time to buy stocks, not sell them. We're still getting your e-mail in CNN.com/am. We're answering those questions right after the break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: Part of the problem, I think, for a lot of people who are listening here tonight is they don't feel as if they are sharing the burden with other folks. I mean, you know it's tough to ask a teacher who is making 30 or 35,000 a year to tighten her belt when people who are making much more than her are living pretty high on the hog.

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Senator Obama's secret that you don't know is that his tax increases will increase taxes on 50 percent of small business revenue. Small business across America will have to cut jobs and will have their taxes increased and won't be able to hire because of Senator Obama's tax policies. You know, he said sometime ago he said he would forego his tax increases if the economy was bad. I got some news, Senator Obama. The news is bad.

(END VIDEO CLIP)

CHETRY: Well as the economic crisis goes global we're "Minding your Business" this morning and answering your questions with CNN's personal finance editor Gerri Willis. And as we saw last night in the debate, economic issues, when people in the town hall format were able to ask questions they said what are you going to do to fix this?

WILLIS: Right. You can tell how upset people are. I'm telling you, the e-mail I'm getting this morning is just off the charts. This question from anonymous who writes "since the stock market has dropped so dramatically, there are people who believe this is a great time to invest. Is it? How does the average person know what to invest in? Well, I got to tell you. It is a great time to put money into the stock market. Look, the average Bear market which is what we're right in now.

There have been 15 since 1933 and the average loss is about 33 percent. So we're pretty much in a conventional bear market. No less than Warren Buffet has been putting money in the market. You should do so too but do so in a reasonable fashion. Make sure you have the right asset allocation.

This is from Chris in Michigan. She writes "I'm a 30-year-old with $15K in three separate 401(k)s from previous employers. I want to combine them in a single account. What are my best options?

Well, you want to roll over those 401(k)s. Make sure that you put them in the same place and do it in a way so you don't get your paws on that money because if you do there will be tax consequences.

Toni in Missouri writes "what about the job market? No job equals no money equals no savings equals no college for my high freshman. I lost my job five years ago and have not been able to find one paying the same. My husband has a great job but we are swimming in debt from student loans and medical bills, when will this end?

Well, it is all about jobs at the end of the day for so many people. You really need to look at security, health care, education. These are sectors in the economy that don't get hit by the downturn in the economy as much as some other sectors. You need to make sure that you're getting your name out there with organizations that represent people in your profession and also look for any freelance work. That's something that can turn into a real full time job.

You know, Kiran, I know people out there are frustrated. We're continuing to look at these e-mails. I'm going to be back tomorrow answering some of these. We definitely want to get to as many of them as we can.

CHETRY: Yes, it's one of those things as the last e-mail was brought up, which is maybe you have a job, it's just simply not paying what you used to make and you still owe what you used to owe.

WILLIS: Got to get that debt down.

CHETRY: Gerri, thanks.

WILLIS: My pleasure.

ROBERTS: Stocks plummeting. Americans in some cases losing much of their retirement savings. That's making some people mad as hell. We hit the streets to hear from you. You're watching "the most news in the morning."

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ROBERTS: Breaking news this morning. The Federal Reserve cut interest rates setting Dow futures sharply higher, up 125 at this moment. That comes after the worst five day stretch in the history of the Dow. Has all the money madness on Wall Street left you leaving a little hot under the collar, a lot mad, even mad as hell. CNN's Jeanne Moos is not going to take it any more.

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JEANNE MOOS, CNN CORRESPONDENT (voice-over): Don't you use your fingers to count your losses, it's time for the finger pointing. Why look at your 401(k) statement and scream when we can scream at each other.

UNIDENTIFIED MALE: Stop the B.S. here. Stop the crap. Come on you cowards, say the truth

UNIDENTIFIED MALE: Who are cowards?

UNIDENTIFIED MALE: You are cowards. You blame everybody else!

MOOS: The financial meltdown has everyone feeling like the guy in "Network."

UNIDENTIFIED MALE: I'm as mad as hell.

MOOS: Members of Congress are acting mad as hell as they grill company execs.

UNIDENTIFIED FEMALE: I think you should be apologizing.

UNIDENTIFIED MALE: It's just so disgusting.

UNIDENTIFIED MALE: Clean up his own dirty assessment.

MOOS: Make that Whirlpool.

REP. ELIJAH E. CUMMINGS (D), MARYLAND: AIG spent, listen to this one, $23,000 at the hotel spa.

MOOS: A week after AIG was bailed out, with $85 million in taxpayer money, the company spent $200,000 on rooms at a luxurious resort. AIG says it was a recognition event of high-performing sales agents who are not even AIG employees.

CUMMINGS: When it comes to pedicures, facials, manicures, the American people are paying for that.

UNIDENTIFIED MALE: I agree.

CUMMINGS: And they are very upset.

MOOS: Regular folks were upset down on Wall Street. Who are you mad at as hell at?

UNIDENTIFIED FEMALE: I'm mad as hell at President Bush.

MOOS: George Washington will be agog at the carnival atmosphere as the Dow plunges.

UNIDENTIFIED MALE: It's all a bunch of whiners. It's all going to get a job!

MOOS: He's playing Treasury Secretary Hank Paulson as part of the protest against the bailout and the companies being bailed out.

UNIDENTIFIED FEMALE: I am mad as hell. You know, how do you sleep at night? Truth is we know, on fine French linens, right? And taxpayers are the ones that are taking it up the (expletive).

MOOS: No wonder Washington's face looks like this on a joke dollar circulating on the web. And then there's the more serious zero dollar being handed out by artist Laura Gilbert.

I got mad, I'm losing a lot of money. But I don't know who to be mad at. UNIDENTIFIED MALE: I can tell you.

MOOS: She blames the financial whizzes who peddled bad mortgages. As for the zero dollar. What are you going to do with that/

UNIDENTIFIED MALE: I'm going to frame it of course in the same way that I've been framed.

MOOS: We decided to spend ours. Will you give us a soda for a zero dollar?

UNIDENTIFIED MALE: Me?

MOOS: A hotdog for a zero dollar? Hey, I don't suppose you'd give me a fruit shake for a zero dollar? Would you?

UNIDENTIFIED MALE: I would do it for you.

MOOS: Would you?

UNIDENTIFIED MALE: Yes.

MOOS: There's nothing like a bargain after losing thousands. Three buck razzle-dazzle fruit shake for a zero dollar.

Here's your zero dollar.

UNIDENTIFIED MALE: Thank you.

MOOS: Thank you.

Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

ROBERTS (voice-over): Are we on the brink of a global market meltdown? The day after the debate, nightmare for the next president. The worldwide economy in crisis.

Plus, who really won the debate?

UNIDENTIFIED FEMALE: I don't think he had that game-changer moment he needed.

UNIDENTIFIED FEMALE: I though it was very hilarious.

ROBERTS: Why both sides claim victory today? You're watching the "most news in the morning."

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: I'm going to spend some money on the key issues that we've got to work on. You may have seen your health care premiums go up. We've got to reform health care to help you and your budget. (END VIDEO CLIP)

ROBERTS: Welcome back to the most news in the morning. A new CNN poll says Barack Obama did better in last night's debate on "issue #1," the economy. Joining us now is former San Francisco mayor and columnist for "The San Francisco Chronicle," Willie Brown. Mr. Mayor, thanks for getting up early with us. I know it's early, early there.

MAYOR WILLIE BROWN, FMR. MAYOR SAN FRANCISCO: Thank you, John, for the opportunity.

ROBERTS: Appreciate it.

Hey listen, when we talked to you several weeks ago, you said that you were concerned about Senator Obama, worried that the magic was going to end, that the good times would not last. How you feeling now?

BROWN: Well, because of the economy, suddenly Obama represents the alternative to the people who created the problem for the economy. And McCain represents the people who created that problem. And so Obama's skills are now being looked at as a means to get out of this mess, and he's doing very well at it.

ROBERTS: Do you still have any anxiety, though, as to whether or not this candidacy can continue to soar in the way it has in the last couple of weeks?

BROWN: Absolutely I have some anxiety about it. Simply because the piece that you did earlier about race matters. That is still a problem in this country. Believe me, it goes away when there are other troubles that are more challenging, and right now whether or not we survive - and the economy is more challenging, but race can rear its ugly head. I just hope it doesn't before November 4th.

ROBERTS: You know, on this idea of race, many African-American commentators have talked about this idea of a voting booth conversion. That voters will say one thing when a pollster contacts them to say who would you vote for come November the 4th, but when they get into the polling booth they have a second thought and they pull the lever for somebody else. Is there a possibility here that Senator Obama's supporter is being overestimated?

BROWN: Absolutely. As a matter of fact, there's a possibility that the issue of race is being underestimated and that's always a problem. We had that experience in California with Tom Bradley's candidacy, for the governorship. Over the weekend, he went in five to seven points ahead and he came out on Tuesday a loser. All because of race in our opinion. And I think the Bradley factor is there, and we must guard against that as Obamaites.

ROBERTS: So what effect do you think race may have on November 4th?

BROWN: I think race will play four or five percentage points in this whole operation in some key states. States like Ohio, states like Pennsylvania, states like North Carolina, Virginia. That can be some devastating numbers coming out of those states. And I fear those states, and I think the Obama campaign fears those states for that very reason.

ROBERTS: You know, many of those states are close enough that that could make the difference.

BROWN: That could make the difference, believe me. Presidential elections are not decided by huge landslides as was the case in '72 involving McGovern. You don't see that very much. You will see, in my opinion, a very close race, but I also think you will see Obama the winner. As demonstrated last night, his skills, his ability to communicate, his presidential posturing all represents that which the American people, I think, will embrace even though he happens to be black.

ROBERTS: Mayor Brown, the last time you were with us was back on September the 8th, we were talking to you about Sarah Palin. You thought that she had changed the game for the republican party and to some degree for the Democrats, throwing the Democrats on defense. And you said, "democrats do not do well on defense." She's now altered course a little bit. She's going after this Joe six-pack audience. What do you think of when you hear such talk?

BROWN: Well, that was always the primary foundation for Republican candidacy in this country. George Bush made it that way, and in part, Ronald Reagan made it that way, although he was able to attack what's called Reagan Democrats. She can only do an effective job when the bloom has been taken off with that group. The absence of quality for presidential aspirations and for presidential demonstration are so vacant when it comes to her, that it's impossible for anybody to permit her to go any other place. Katie Couric literally demonstrated that with the simplistic of questions. For an example, what newspapers do you read? And she could not respond. That was a devastating hit.

ROBERTS: Well, don't know if she could not respond or if she just chose not to. She did later come back and say some of the publications she did read. Actually said she read "The New York Times" as well.

BROWN: Well, I think she - I think she chose not to, frankly. And I think that when Democrats go after her on the basis that she didn't answer that question, they're ignoring the fact that she chose not to. Her choosing not to, though, was the result of over preparation. Her handlers have made it frankly impossible for her to say at the September 8th level. If they had just permitted her to be Sarah, there was something magically attractive about her for common ordinary people and she wouldn't have to say -

ROBERTS: Right.

BROWN: -- speaking for Joe six-pack. She wouldn't be speaking for Joe six-pack.

ROBERTS: Well, they do seem to have let loose the ties that were binding her. So, Mayor Brown, it's good to talk to you. Thanks for joining us this morning.

BROWN: Nice to see you, too.

ROBERTS: All right. We'll see you again soon.