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CNN NEWSROOM

Global Steps Taken to Shore Up Economy; McCain Emphasizes Fighting Spirit; Obama Reveals Revised Economic Plan; Web Site CEO Predicted Economic Downturn

Aired October 13, 2008 - 13:00   ET

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


(BEGIN VIDEO CLIP)
KYRA PHILLIPS, HOST (voice-over): Here's $700 billion, kid. Now, go save the world economy. How'd you like to have that on your to-do list? He's got the whole bailout in his hands. Question: who the heck is this guy?

Another guy says he saw the financial reckoning coming years ago, but no one's listened to him. He's got some ideas on how to fix it.

And another casualty of the financial crisis. The offering plate. Not exactly flush with cash as folks in the pew tighten their belts.

(END VIDEO CLIP)

PHILLIPS: Hello, everyone. I'm Kyra Phillips, live at the CNN world headquarters in Atlanta. And you're live in the CNN NEWSROOM.

Sad news to report first this hour. It's a story that we're following out of Magnolia, Texas. That's where a news helicopter from our Houston affiliate, KTRK, has gone down. It happened about 11:09, according to police.

Apparently, the pilot and the photographer were headed to the scene of an officer-involved shooting. And unfortunately, we are told now by the sheriff's office that both of them have been killed.

Authorities at the crash site right now, as you can see. It's a really heavily wooded area. No word yet on what might have caused that chopper to go down. We, of course, will bring you more information as we get it.

All right. Let's talk about a bit of relief. Some cautious hope and lingering uncertainty now. We're talking about all of this swirling around the market at this moment.

It's a new day on Wall Street and maybe a new direction. U.S. stocks are higher today after a week of crippling losses, but can they keep their footing? Foreign markets also surged after a weekend of unprecedented global moves to free up cash and unfreeze credit. European nations are pledging billions of dollars to prop up their banks. The Federal Reserve is pledging unlimited amounts of other central banks or two other central banks, rather. And President Bush is now promising progress. (BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: These are tough times for our economies, yet we can be confident that we can work our way through these challenges, and America will continue to work closely with the other nations to coordinate our response to this global financial crisis.

(END VIDEO CLIP)

PHILLIPS: And we're also getting a progress report on the U.S. government's massive bailout plan. The man is charge is big on gold but light on details. Neel Kashkari is overseeing the rescue funded by $700 billion of your taxpayer money.

He told a banker's group today the government is trying to nail down guidelines for buying bad assets from banks and has consulted with law firms on how to take partial ownership of troubled banks.

(BEGIN VIDEO CLIP)

NEEL KASHKARI, ASSISTANT TREASURY SECRETARY: Addressing this problem should enable our banks to begin lending again. Our nation has successfully worked through every economic challenge that we have faced. And we are confident that this new program will help us to overcome these challenges, as well.

(END VIDEO CLIP)

PHILLIPS: Well, point man, rocket scientist, rock fan, Neel Kashkari is full of surprises. He's just 35 years old and, as a high schooler in Ohio, loved heavy metal bands like AC/DC. He comes from a family of scientists. He has a master's in engineering, worked as an aerospace engineer.

He then decided to change careers and go to -- you guessed it -- business school. He was hired on at Goldman Sachs and later followed former CEO Henry Paulson right to the Treasury Department.

OK. We now know who Neel Kashkari is, but what will he do to get this bailout up and running? Let's ask CNN's Christine Romans.

Where does he even begin, Christine?

CHRISTINE ROMANS, CNN CORRESPONDENT: Well, I think it begins this afternoon with meetings of the treasury secretary and all the big heads of the banks. We know that there'll be a big meeting today, and they're still hammering out details.

He said in his first public appearance today as the new bailout czar, as they're calling him, his office is actually the Office of Financial Stability. But he said that they're already starting to hire people. They're already starting to team up with partners to divvy up their responsibilities to figure out how to do this.

Just taking those toxic assets, buying them up off the books of the banks, is something he said usually, certainly a program like that, would take months, if not years to do, but in the ten days since that bailout bill was passed, he said they're moving very, very quickly.

One of this things that has sort of shifted in the last 10 days, Kyra, is that we're now talking about injecting money right into the banking system, recapitalizing the banks, buying shares in the banks with your money and my money, and then getting preferred -- preferred stock for the government.

Also, the Fed overnight offering unlimited cash to three central banks: Bank of England, the European Central Bank and the Swiss. That's just almost unheard of. As much money as you want, we're going to loan it to you so you can loan it to other people.

The U.K. also overnight announcing it's investing $63 billion in three British banks.

And the other overseas moves to tell you about, Europe moving to protect bank depositors and to guarantee lending between banks. So the Europeans, Kyra, really moving very, very quickly to shore up their banking system there, coming out with an emergency meeting over the weekend (AUDIO/VIDEO GAP).

PHILLIPS: We apologize for that. We sometimes lose our signal. We lost Christine Romans. We'll continue to talk to her, though, throughout the next couple of hours.

Meanwhile, why don't we go ahead and take a quick look at the big boards, see where the numbers are. The Dow Industrials up 574 points right now. What's the mood on the trading floor? We're going to check in with Susan Lisovicz on Wall Street in just a few minutes.

Twenty-two days and counting. Election day is just three weeks from tomorrow. On the trail, it's almost 24/7 campaigning. John McCain and Barack Obama and their running mates hitting some big battleground states today. CNN's Ed Henry is with the McCain campaign in Richmond, Virginia. Jessica Yellin is with the Obama campaign in Toledo, Ohio.

Ed, let's go ahead and get started with you.

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Well, Kyra, it tells you about all you need to know about this race, the fact that John McCain and Sarah Palin are spending so much time in this key battleground of Virginia. This is a state Democrats have not carried in 44 years, and yet this morning, John McCain and Sarah Palin this morning in Virginia Beach. A short while from now, behind me, Sarah Palin will be coming in solo here at the Richmond Raceway.

Under great pressure, this ticket is, to come up with a new message. And so John McCain came out with a new one today. You might call it John McCain 4.0. We've heard him raise questions about Obama's inexperience. We've heard him talk about Obama being risky in recent days. We've also heard John McCain bill himself as a maverick. Now, he's focusing on John McCain as a fighter. (BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: America is worth fighting for. Nothing is inevitable here. We never give up. We never quit. We never hide from history; we make history. Now, let's go win this election and get this country moving again.

(END VIDEO CLIP)

HENRY: Now, in that fighting spirit yesterday, John McCain also said that when it comes to Wednesday's third and final presidential debate, he said of Barack Obama, I'm going to, quote, "whip his you know what."

Normally, before a big debate, politicians like to lower expectations. In this case, John McCain raising expectations. Bottom line: he has no other choice but than to try and hit hard on Wednesday. It's one of his last chances, really, to try to shake this race up, Kyra.

PHILLIPS: Indeed. Ed Henry will be talking to you some more.

Meanwhile, Barack Obama is getting set for a rally in Toledo, Ohio, just a short time from now.

CNN's Jessica Yellin is there -- Jessica.

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Hi, Kyra.

Barack Obama is going to unveil his new -- what they're calling -- economic rescue plan for the middle class. It includes a restatement of some of his principles for economic improvement and revitalization, but it also includes a number of new proposals that are directed to add immediate relief to consumers.

Specifically, a temporary tax credit for any companies that create new jobs in 2008 and 2009. A penalty-free withdrawal proposal, so folks can take some money out of their 401(k)s and their IRAs to give them immediate cash. Say they're unemployed and they need some money to tide them over. They can do it that way.

A 90-day foreclosure moratorium for people who are acting in good faith. Meaning folks who really could pay a mortgage but can't pay it after the price skyrocketed on them. Gives them some time to refinance and renegotiate those terms.

Here's a technical thing: something called a lending facility to address the credit crisis for states and localities. That's just to ease up this credit crunch everyone's talking about.

And temporarily lifting taxes on unemployment insurance. Obviously, that would be a great help to folks who are currently unemployed.

Now Barack Obama is outlining this in Ohio, not by mistake. This is one of those state's that's been incredibly hard hit by the economic downturn. Also, a battleground, bellwether state in the nation. And it's increasingly trending in Obama's favor.

In fact, the latest CNN poll of polls shows that Obama is just barely ahead here. I think we -- I believe we have that graphic. He has slightly edged out John McCain in this state, but it is still too close to know who is really going to win here. Look at that, with eight percent unsure. It is really up for grabs, and both campaigns are fighting hard here in Penn -- sorry, here in Ohio -- Kyra.

PHILLIPS: That's all right. You've been going -- you've been going to all the various states. It's hard to keep track of your itinerary, I know. Thanks, Jessica Yellin.

Wednesday night is the final debate for McCain and Obama from Hempstead, New York. Don't miss a minute of the action, right here on CNN, your home for politics.

Well, tough economic times affect all of us. And that includes charities. Churches especially feeling the pinch. But can we take faith in a recovery?

Also, a California inferno. Homes lost and interstates shutdown. We'll catch up on a couple of fast-moving wildfires.

(COMMERCIAL BREAK)

PHILLIPS: Big banks and big automakers in a bit of a flux. The Federal Reserve has OK'd Wells Fargo's multi-billion-dollar buyout of Wachovia. Well Fargo's stockholders still have to OK the deal. It was valued at more than $15 billion when it was announced less than two weeks ago, but it's since dropped $4 billion after Wachovia's stock plunged.

Citigroup had been competing to take over part of Wachovia. But scrapped its efforts last week. It still plans to seek damages for breach of contract.

From banking giants to automotive giants, it seems everybody's just trying to survive. A number of reports say that GM and Chrysler have been talking about some kind of combination, including a possible GM buyout of Chrysler. U.S. sales are way down, and both companies are bleeding cash.

Well, the fear gripping Wall Street has rippled across the country. Folks are looking to save money any way they can. Big discount stores like Wal-Mart, Costco, are weathering the economic downturn better than others. Many report a sharp increase in sales, especially for low-priced groceries, clothes and other necessities.

Thrift stores and consignment shops also say business is booming. One Salvation Army store in Dublin, Georgia, reports a 50-percent spike in sales.

One guys says he saw this coming, but nobody listened to him. And now he says we're nowhere near the end of the economic mess. Patrick Byrne is CEO of Overstock.com, a Web site that offers all sorts of merchandise at deep discounts. Good to see you, Patrick.

PATRICK BYRNE, CEO, OVERSTOCK.COM: Kyra, thanks for having me on.

PHILLIPS: Well, a number of quotes I'd love to get you to respond to. You're quite the character, and it seems a lot of people have quite interesting things to say about you.

You've been quoted as saying, "I've had a great sleeper -- or I've been a great sleeper all my life. The last three years I've averaged about three hours of sleep a night. I've been sick to my stomach, trying to tell people there is a train coming."

How did you know the train was coming?

BYRNE: Well, boy, you do your homework. Yes, if you go on YouTube and YouTube my name, you'll see all these videos where I've been saying that.

Basically, every drinking binge I've ever seen ends in a hangover. Well, every expansion, every boom that's fueled by cheap credit ends in a collapse like this. So it's been sort of four or five years, it's been pretty clear this is coming, coupled with there's rampant stock manipulation on Wall Street that's just made the system more brittle.

PHILLIPS: Let's talk about that, because you wrote the president, you wrote leaders of Congress, about this practice of naked short-selling. I know that's illegal. If you could just explain quickly what that is and what is your solution.

BYRNE: Well, I'll explain with no -- with no jargon. If you buy stock from me, you give me money, and I give you stock. That's called settlement. Believe it or not, there are loopholes in the system where I can give you IOUs for stock. You and I can't do this, but big hedge funds can do it and the big banks can.

Turns out there are billions of basically fake stock or counterfeit stock circulating in the system. A couple of years ago, Wall Street was denying this. They started being destroyed by it. This summer, it's exacerbated the problems, and now, they're running around demanding special protection from this crime that two or three years ago they were denying even existed.

PHILLIPS: So you're blaming Wall Street, but not necessarily greed. Isn't it the same thing?

BYRNE: Well, it's -- what it is, is it's called regulatory capture is the economic jargon for it. And it just means our regulators in D.C. have come under -- they're supposed to protect us from Wall Street. They've come under the thumb of Wall Street. They can't even pass very ordinary, commonsensical regulations to protect Main Street. They can't do, if it threatens the interests of the people, that they're hoping to go get jobs with next year. PHILLIPS: All right, now, and I know you filed a number of lawsuits, which levied you this quote by "The New York Times" that called you "the conspiracy-mongering, trash-talking, lawsuit-filing chief executive of Overstock.com." Is that fair?

BYRNE: No. In fact, that reporter, Joe Nocera, we have outed in a blog on my site, "Deep Capture." We have outed him basically being -- taking, more or less, instructions from some dirty players. And if you go to DeepCapture.com and look for Joe Nocera, you'll -- you'll see that.

By the way, the -- the conspiracy thing he was talking about, most of the themes of that speech have come true. They're referring to a speech I gave three years ago that said there's a bunch of bad guys on Wall Street. Hedge funds are doing this manipulation. And it's all going to end in a collapse. And most of those things have come true. So the people who were calling me crazy three years ago kind of got laryngitis these days.

PHILLIPS: It's pretty interesting. I have seen a number of your critics come forward and say, "Well, maybe we should have listened to him."

Now, you were mentored by Warren Buffett, right, at the age -- starting at the age of 13?

BYRNE: Knock on wood. Boy, you do do your homework. Yes. I've -- he was my -- one of my great heroes. He's been one of my great heroes and teachers.

PHILLIPS: And it seems that's he's added a lot of humor to your relationship. What was it he told you about Wall Street and Christmas parties this year?

BYRNE: Oh, yes. He said we're going to cancel all the Christmas parties on Wall Street, because he can't find three wise men or a virgin.

PHILLIPS: All right. You know what's interesting, too, is you talk about you go all the way back to the days of Herbert Hoover when he was president and basically saying, "Look, we're going through what he experienced when he didn't listen to his treasury secretary." And I was so glad you brought this up, because it's one of my favorite quotes that I've been using for weeks now. And I want to get your response.

You know, it was back when Andrew Mellon said to Herbert Hoover, quote, "You've got to use a shock treatment when it comes to something like this. Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. That will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people."

So, my question to you: has our love for money condemned us to repeat history?

BYRNE: Well, I'm not sure I'd call it love for money. I think what's happened is some -- what used to be called, back in Hoover's time, the money trust, we have a bunch of banksters, as Roosevelt called them, banksters like gangster, who have captured D.C.

And so the left wants to look at this all and say, "Gee, look, isn't capitalism and free markets bad?"

The right looks at it and says, "Look at these bums in D.C. who have let this happen."

And I guess the answer is, there's definitely a grain of truth in -- well, both of them have a good point.

PHILLIPS: So how's business?

BYRNE: Business was rocking for us. It has compressed some in this malaise. We're not down like other -- brick-and-mortar retail is actually shrinking. We're doing OK that way, but since all this got started a month or two ago, we've seen a -- basically, a halving in our growth rate.

PHILLIPS: Patrick Byrne, CEO, Overstock.com. It's always interesting to talk to you. Thanks, Patrick.

BYRNE: Thank you, Kyra.

PHILLIPS: Well, on Wall Street, there's a lot of ground to make up following the worst week ever for the Dow Industrials, but we could snap an eight-session losing streak if this rally holds. Susan Lisovicz on the floor of the New York Stock Exchange with all the details.

Susan, you listen to Patrick Byrne with Overstreet.com (sic), and you wish, gosh, why couldn't we come up with a concept like that, because we'd probably be staying a little more afloat?

SUSAN LISOVICZ, CNN CORRESPONDENT: Well, you know, I think there are -- you know, in the aftermath, it's so -- all so easy to figure out what went wrong. I mean, it -- you know, it has a lot to do with those two primary emotions, after all, Kyra: greed and now fear.

But the fear has dissipated somewhat, Kyra. No question about it. We started to see that on Friday, with that -- one of the most volatile -- the most volatile day ever for the Dow Industrials. And the good news is that we had a rally at the open, and it has held.

Why is that? Well, we've had, instead of just these dramatic but sort of piecemeal, ad hoc moves from governments around the world, we have a more coordinated effort that we heard over the weekend from governments in Asia, in Europe and the United States with President Bush, G-7, G-20, the IMF taking steps to really shore up the global banking system. That included everything from the Federal Reserve offering unlimited dollars to three central banks. That is the Bank of England, the European Central Bank and the Swiss National Bank. The central banks will then use that capital to help financial institutions.

The British government also injecting tens of billions of dollars to several of its most troubled financial institutions.

How's it translating? Big-time on the big board. The Dow Industrials right now very close to session highs, up 576 points. For every -- for every stock that is going down, there are 14 going up, and that is a change, a big change from the trends we've seen lately.

And the NASDAQ, meanwhile, is up 120. So we're talking about big gains. And my mood is not dark, but I may appear dark, because our camera lights...

PHILLIPS: Yes, I saw that going, and I thought, "Oh, I hope that's not sort of bad karma that's going to tell us about the day."

LISOVICZ: I hope not. We've got three hours to go.

PHILLIPS: OK. Susan, thanks.

Well, tough economic times mean tightening the purse-strings. That's for sure. And that can have a big impact on charitable giving. No place is that more evident than in many church collection plates.

Mindy Mizell with our CNN affiliate WBAL has a case in point from Baltimore.

(BEGIN VIDEOTAPE)

MINDY MIZELL, WBAL REPORTER (voice-over): They're songs of worship and celebration. At the New Unity Church in Baltimore, members are singing just as loudly this Sunday as they've ever done before. But outside of church, smiles are hard to come by when it comes to the latest economic turmoil on Wall Street.

Just ask Reverend Johnny Golden. Many of his members are now struggling just to make ends meet.

REV. JOHNNY GOLDEN, NEW UNITY CHURCH MINISTRIES: It's bad. For some, it's very bad. There's a saying that, for some folks, that when some folks catch a cold, others have pneumonia.

MIZELL: Take longtime church member Rodney Bennett. He works part time but still can't find a full-time job.

RODNEY BENNETT, CHURCH MEMBER: You see the advertising. Well, you can come in and get a job. And when you get there, it's like, "Well, we already filled the position."

MIZELL (on camera): Churches members aren't the only ones hurting. Churches themselves are low on donations, too. It's a vicious cycle. The less people are able to give, the fewer resources church have to help out.

GOLDEN: Our doorbell rings constantly. And so our ability to help is -- we still do it, but our ability to help has certainly been diminished.

MIZELL (voice-over): His church relies on weekly donations, donations from members like Morris Boyd.

MORRIS BOYD, CHURCH MEMBER: It's very difficult for me.

MIZELL: Boyd attends church here regularly, but says it's tough to afford giving a donation in the offering plate.

BOYD: It's a very difficult decision, because you've got to think about home and yourself, but you've also got to involve giving to the Lord and that he'll make a way.

MIZELL: His church is hoping to offer a bit of encouragement, using financial workshops and morning sermons to focus on the economy.

GOLDEN: My message is that Philippians 4:19: "But my God shall supply all of my needs, according to his riches, which are in Christ Jesus."

MIZELL: It's a message many of his members are already loudly singing out of faith.

Reporting, Mindy Mizell, WBAL, TV-11 News.

(END VIDEOTAPE)

PHILLIPS: Nana and now Omar. More topical weather brewing right now. We're going to talk with our severe weather specialist, Chad Myers.

And while out west, wind-stoked wildfires are burning across California. We're going to check in on the firefighting efforts.

(COMMERCIAL BREAK)

PHILLIPS: Embers and dry air are bad enough, but kick in Santa Ana winds, and you've got this. A wildfire in Los Angeles County has already eaten up more than 3,000 acres, destroyed several mobile homes and other buildings, closed an interstate, and brought about mandatory evacuations. No reports of anyone getting hurt, by the way. Crews are trying to keep the fire from jumping into neighborhoods.

Meantime, a second fire on Angel Island in San Francisco Bay has burned a couple hundred acres but hasn't damaged any buildings.

Let's get back to the fire in Southern California. It's those winds that makes things so dangerous and unpredictable. We're take you to CNN's Ted Rowlands. He's actually in Little Tujunga Canyon with more on what's happening there, right there on the scene.

Hi, Ted.

TED ROWLANDS, CNN CORRESPONDENT: Hi, Kyra.

A little break in the wind right now for us, but boy, it's been fluctuating all morning long. Gusts have been coming up, carrying embers and stoking fires throughout the region.

You can see the amount of smoke here. Basically, all of the eastern part of the San Fernando Valley is covered with smoke.

Early this morning, things got really hairy, where firefighters were unable to keep their containment on this fire, which started Sunday morning at about 2 a.m.

Overnight, the winds were so intense that it actually cleared eight lanes of freeway. Embers went all the way over the 210 Freeway and near the 5 Freeway, as well. Firefighters were able to contain it after a battle.

But overnight, a lot more evacuations took place. People who had been told to be ready to go were told to get up and get ready this morning. And this morning, we saw a lot of people gathering things out of their homes, and trying to get what they could.

Here's one lady who was frantic as she tried to put things into her trunk and get out as soon as possible.

(BEGIN VIDEO CLIP)

JENNIFER SINGLETON, EVACUEE: I'm trying to get as much as I can out of the house. I'm trying at least get the pets out of the house. I'm not really worried about the material things. But I have a lot of pets in the house, my birds, my turtles, my dog. So I have a lot of pets in the house and a lot of very important items -- items that you can't replace. When your children were smaller, pictures and -- of my parents that are deceased. And you know, different things like that I'm trying to get of the house. That's more important to me than anything I've got. As much as I can carry. You can see what I have in my trunk.

(END VIDEO CLIP)

ROWLANDS: And the problem here, Kyra, is the winds. And to give you an example, when we arrived here at this spot about an hour ago, this entire hillside was up. And we're very close to a number of homes in the area.

Firefighters -- they used helicopters, and firefighters on the ground were able to contain this. And then they moved on to the next one. And the problem is that, once the winds kick up, you take those embers and they plop them somewhere else and now, boom, you have a new fire.

Forecasters say these Santa Ana winds going to be with us at least until noon tomorrow, so a long day ahead for firefighters and people here worried about their homes.

PHILLIPS: All right. We'll keep checking in with you. Ted, thanks so much.

Let's go ahead and shift the topics to the tropics now, where it looks like Nana is about to check out and Omar is about to check in. What's happening, Chad Myers?

CHAD MYERS, CNN METEOROLOGIST: I think Nana got run over by a reindeer. Here in the Atlantic Ocean. This was Tropical Storm Nana -- N-A-N-A. But it really doesn't look very good today. And it's forecast to just basically become a depression and then all the way down to nothing.

This, though, could be the next storm. This could be Omar. And then there's Paloma after that. This is a pretty good flare-up of activity here. It is forecast to go over Puerto Rico and then on up into the middle Atlantic.

This could be the next storm system. This just popped, really, I'd say in the last 12 hours or so. A hurricane hunter aircraft will go down to fly into this, because this is more of a threat to get into the Caribbean and maybe for the Gulf of Mexico, whereas this storm is going to go -- yes, it's going to go over Puerto Rico, but it will probably end up toward the North Atlantic from there. So we'll have our own set of different problems with two sets of things.

You know, we talked about this water is still very warm, although it's not as warm as it was. Here's Nana. Going to be all the way down to a depression by Tuesday night. Not moving anywhere near any land.

And then a little farther to the west of there, in that little area there, this is where we think that Tropical Depression 15 will turn into Omar tonight and then right over Puerto Rico, with winds to about 65 or so miles per hour.

Those Santa Ana winds, again, will pick up tonight, though, Kyra, because that's how it happens. The winds, actually, in California with Santa Ana, they die off during the day. They pick up during the night. And then you wake up in the morning with a firestorm around your neighborhood. So you have to watch that out there.

PHILLIPS: Wow. Yes, growing up in California, boy, I remember how fast those fires go.

Well, here some of the other stories that we're working on for you in the CNN NEWSROOM right now. A news helicopter from CNN affiliate from KTRK in Houston, crashed today as the crew headed to cover a story. The pilot and the news photographer on board were killed.

And in Los Angeles, a dangerous situation with a big wildfire. We've been talking about those unpredictable winds. Fire crews now trying to keep a canyon full of flames out of a big residential area. Several neighborhoods are under a mandatory evacuation. Our Ted Rowlands is there.

And is Wall Street getting its groove back? Well, stocks are higher after eight miserable days. The move into positive territory comes after a weekend of unprecedented moves to sure up banks and thaw out credit. Just 22 days until America picks a new president. So, how are economic tough times affecting voters' attitudes in the all important battleground state of Ohio? We're going to find out, coming up next.

(COMMERCIAL BREAK)

PHILLIPS: Non-stop campaigning as we head towards election day. Live pictures right now. Barack Obama campaigning in the big toss-up state of Ohio, while his running mate Joe Biden is in New Hampshire. Their focus? The nation's economic crisis. The two men, both putting part of the blame on John McCain for supporting President Bush's economic policies. We're monitoring that for you. We'll dip into it when he starts getting into specifics. He's doing thank you's right now.

Well, you may not have heard of the group known as ACORN. It's registered hundreds of thousands of new voters. And it could be in some legal trouble now, over voter fraud allegations. Drew Griffin with CNN's special investigations unit has just gotten some new information for us.

It's all captured our attention when you showed up at these places and they just simply didn't exist.

DREW GRIFFIN, CNN SPECIAL INVESTIGATIONS CORRESPONDENT: Right. I mean, this is Lake County, Indiana. But, ACORN's in trouble all across the country with its huge voter registration. Actually, 1.3 million new voters registered according to ACORN. The problem is, are they really voters?

Up in Lake County, Indiana, they're finding out they are not. Some 5,000 applications came in, all filled out by ACORN, and there they are. They went through the first 2,100 of them. Every single one of them, fraudulent. And I want to show you, Kyra, just how they knew.

All right. So these are the ladies that had to go through it. Here are some samples. Take a look at this one. Here is Bob States, Kara Stongs, and Shea Bones, all signing on the same date. Obviously, these are all the same person filling out the same signatures. If you just look at the S's, that's one, OK. So, that's all fake.

Here's Levy McIntosh. Levy McIntosh, he registered to vote, let me get the date here, it's 8-1-08. You get that Robert? Get my hand out of the way? 8-1-08, he registered to vote in Lake County. The problem is, Levy died. Levy died on November 16th of 2007. All right? So, it's going to be very hard for him to vote, let alone register to vote as a new voter in Lake County..

PHILLIPS: Could be interesting.

GRIFFIN: So, that's obvious fraud. And here is the other one that they gave me as a clear example. It's kind of funny. Jimmy Johns and this street address. Jimmy John's is actually a sub shop, named Jimmy Johns.

PHILLIPS: Did you go get a sub?

GRIFFIN: I went there and I looked for a voter, I didn't get a sub.

PHILLIPS: You got an Italian sub, versus an actual person that voted.

GRIFFIN: Yes. It would be funny if this wasn't all criminal. And in fact, the Indiana Secretary of State has now asked for an investigation. And we have a letter that he is sending to the attorney general, I believe, calling for an investigation saying, "I have secured credible evidence of fraud in the voter registration process." He wants to the Lake County district attorney and the Secretary of State and even the U.S. attorney to get involved with this investigation.

PHILLIPS: You know what? Not only is it not funny, but it's such a waste of time. And if you look at what we went through you know, in previous elections, from hanging chads, to voter irregularities, I mean, we're talking about our country right now dealing with an economic crisis, a war in Iraq, a war in Afghanistan. You know, for people to do this, it's just a shame. It just wastes more time. And you wonder if the process will even -- that your vote will count.

GRIFFIN: Yes. I mean, certainly, the credibility has dropped in the system. No matter which way Lake County votes. Lake County, heavily Democratic by the way. Which way it votes, either side now is going to have ammunition to say, oh, there's probably voter fraud.

And keep in mind, those ladies that we showed, checking through, fraudulent or not, legally, they have to check and verify every single one of those. So, they are working 12, 14 hour days up there, just trying to verify what they already know is fake.

Now, what does ACORN say about this? I talked with their attorney in Boston. He tried to defend this in two ways. Number one saying, saying we hired some bad apples. And number two, that actually it's the government's fault.

Take a listen.

(BEGIN VIDEO CLIP)

BRIAN MELLOR, ACORN ATTORNEY: These employees, many of our employees, are very, very dedicated. Most of our employees are dedicated to getting people registered in our communities so their communities can participate in Democracy.

As in any business, some of them go to the McDonald's and are lazy and don't do their job. We -- our quality control fires these people. They fire them. That's what we can do. What we also can do -- how many we can fire? We have a list of about 50 people who we turned in as problematic cards. I don't know, you know --

UNIDENTIFIED MALE: So, how many people did you fire? MELLOR: I don't know. We fire people who we catch getting problematic cards. And we asked --

UNIDENTIFIED MALE: Did you fire people in Lake County, Indiana?

MELLOR: Yes, we did. Yes, we did.

UNIDENTIFIED MALE: But you don't know how many?

MELLOR: No, I don't. But, let me tell you another way that we could have help prevent this. And that is to have election officials do their job. When we turn these cards in, in other cities, in other areas, in March, in April, and we asked election officials and law enforcement to prosecute our employees so we could tell our employees, that no, this isn't just a firing offense, this is an offense that could lead you to jail. Then, we could then put that in the ready rooms where we train people.

(END VIDEO CLIP)

GRIFFIN: I was on the phone during that conversation. But, really couldn't explain why 5,000 turned in. 2,100 so far fake. They're going to go through the rest of the 2,900.

PHILLIPS: Yes. It's not just like, 50 mistakes. I mean, we're talking thousands of --

GRIFFIN: Right. And all dumped or placed in the registration office on the last few days before the deadline in. So, it wasn't like an on-going thing where they were turning them in and you could weed out the bad ones. It all just came in at once. It was not a good idea.

PHILLIPS: We'll call it the investigation, that's for sure.

Meanwhile, I mean, what happens now? I mean, is there new oversights, are there new checks and balances?

GRIFFIN: Well, those ladies in that office are going through them diligently, trying to make sure they're not missing any of this. That their concern is that the volume is so huge that they'll actually miss one and send out a voter card to one of these --

PHILLIPS: They better be getting hazard pay, double pay, something.

Drew, thanks a lot.

Well, let's go ahead and listen in to Barack Obama. He's campaigning that big toss-up state of Ohio.

Let's listen in.

(JOINED IN PROGRESS)

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: -- that they were going to turn the page on talking about our economy so they can spend the final weeks of this election attacking me instead.

His campaign actually said and I quote, if we keep talking about the economy, we're going to lose. That's what he said. Well, Senator McCain may be worried about losing an election, but I'm worried about you losing your jobs. I'm worried about you losing your homes. I'm worried about you losing your life savings. You can't afford four more years of the failed economic theories that say we should give more and more to millionaires and billionaires and hope prosperity trickles down on everybody else. We've seen where that's led us and we are not going back. It is time to turn the page.

Now, over the course of this campaign, I've laid out a set of policies that will grow our middle class, strengthen our economy in the long term. I'll reform the tax code so that 95 percent of workers and their families get a tax cut. I'll eliminate income taxes for seniors making under $50,000 a year. We'll make the tax code fair. I'll bring down the costs of health care for families and businesses by investing in preventive care and new technology. And giving every American the chance to get the same kind of health insurance that members of Congress give themselves.

We'll ensure every child can compete in the global economy by recruiting an army of new teachers and making college affordable for anyone who wants to go and is willing to put some time into community service.

(APPLAUSE)

And we'll take a page from Toledo, that's become a leader for solar panel technology. We are going to create 5 million new jobs higher wage jobs by investing in the renewable sources of energy that will eliminate oil we currently import from the Middle East in 10 years.

(APPLAUSE)

We'll create another 2 million jobs by rebuilding our crumbling roads and schools and bridges, our infrastructure. And if people ask you how we're going to pay for that, you just tell them, if we can spend $10 million a month rebuilding Iraq, we can spend some time rebuilding Ohio.

(APPLAUSE)

But that's the long term strategy for growth. Right now, we face an immediate economic emergency and that requires urgent action. We can't wait to help workers and families and communities who are struggling right now. Who don't know if their job, or their retirement will be there tomorrow. Who don't know if next week's paycheck will cover this months bills.

Some of you know I went canvassing just yesterday. And it was wonderful meeting folks and talking to them. But on this single block, there were already two or three foreclosed homes. And that depresses property values for everybody, which means potentially, it's going to put more burdens on city services to keep up. Or, you might end up seeing major layoffs. So we've got to act now. We need to pass an economic rescue plan for the middle class and we need to do it not five years, from now, not next year, we need to do it right now.

(APPLAUSE)

So today I'm proposing a number of steps that we should take immediately to stabilize our financial system, provide relief to families and communities and help struggling homeowners. It's a plan that begins with one word that's on everybody's mind and it's easy to spell. J-O-B-S. Jobs. We've got to work on jobs.

We've already lost three quarters of a million jobs this year. Some experts say that unemployment may rise to eight percent by the end of next year. We can't wait until then to start creating new jobs. That's why I'm proposing to give our businesses a new American job tax credit. Instead of giving tax credits and tax breaks to companies that ship job overseas, what we're going to do is, say to American companies, for each new employee you hire in the United States over the next two years, you are going to get a tax break. That makes sense.

(APPLAUSE)

Now, to fuel the real engine of job creation, I've also proposed eliminated all capital gains taxes on investments in small businesses and start-up companies. They're the ones that create 80 percent of the new businesses. And I've proposed an additional tax incentive through next year to encourage new small business investment. It is time to protect the jobs we have and to create the jobs of tomorrow by unlocking the drive and the ingenuity, and innovation of the American people.

And we should fast track the long guarantees that we've already passed for our auto industry and provide more as needed so that they can build the energy efficient cars not in Japan, not in South Korea, but right here in the United States of America.

(APPLAUSE)

We'll also save 1 million jobs by creating a jobs and growth fund that can provide money to state and local communities so that they can move forward with projects to rebuild and repair our infrastructure. A lot of these projects and these jobs are at risk right now because of budget short falls. But this fund will make sure they continue. So, that's point number one. Let's create some jobs right now and put people back to work.

Number two, the second part of my rescue plan, is to provide some immediate relief to families who are watching their paychecks shrink and their jobs and life savings disappear. Now, I've already proposed a middle class tax cut for 95 percent of workers and their families. But today, I'm calling on Congress to pass a plan so that the IRS will mail out the first round of those tax cuts as soon as possible. We should get you a rebate in your pockets to deal with heating your homes this winter. Making sure that you can afford the new coat for your child, or maybe even a new computer to help them in school. We should also extend and expand unemployment benefits to those Americans who have lost their jobs and are having a tough time out there finding new ones in this weak economy.

(APPLAUSE)

And while we're at it, we should stop making people who are getting unemployment insurance pay taxes on those benefits. Because that will give them a little bit of extra relief.

At the time when the ups and downs of the stock market have rarely been so unpredictable and dramatic, we also need to get families and retirees more flexibility and security when it comes to the retirement savings. I want to give credit where credit is due. I welcomed Senator McCain's proposal to waive the rules that currently force our seniors to withdraw from their 401(k)s, even when the market is bad. I think that's a good idea.

But I think we need to do even more. Since so many Americans will be struggling to pay their bills over the next year, I propose that we allow every family to withdraw up to 15 percent from the IRA, or 401(k), up to a maximum of $10,000, without fine or penalty through 2009. Just to help tie folks over.

(APPLAUSE)

This will help families get through the tough times. Get through this crisis without being forced to make painful choices like selling their homes or not sending their children to college.

Third part of my rescue plan is to provide relief for homeowners who are watching their home values decline while their property taxes go up. Earlier this year, I pushed for legislation that would help homeowners stay in their homes by working to modify their mortgages. When Secretary Paulson proposed his original financial rescue plan, it included nothing for homeowners. At a time when John McCain was silent on the issue, I insisted that it include protections for homeowners.

So, now the Treasury has to use the authority its already been granted and move aggressively to help people avoid foreclosure and stay in their homes. We don't need a new law and we certainly don't need a new $300 billion giveaway to banks like Senator McCain has proposed. We just need to act quickly and decisively. Get people in line to start modifying those mortgages. I've already proposed a mortgage tax credit for struggling homeowners, worth 10 percent of the interest you pay on your mortgage. And we should move quickly to pass it. And we should change the unfair bankruptcy laws that allow judges to write down your mortgage if you own six or seven homes, but not if you only have one. That makes no sense.

(APPLAUSE)

And for all those cities and small towns that are facing a choice between cutting services like health care and education or raising property taxes, we'll provide the funding to prevent those tax hikes from happening. We cannot allow homeowners and small towns to suffer because of the mess made by Wall Street and by Washington.

(APPLAUSE)

And for those Americans in danger of losing their homes today I'm also proposed a three-month moratorium on foreclosures. If you're a bank --

(APPLAUSE)

-- if you're a bank or a lender that is getting money from the rescue plan that passed Congress, and your customers are making a good-faith effort to make their mortgage payments and renegotiate their mortgage, you will not be able to foreclose on their home for three months. We need to give people the breathing room to get back on their feet.

(APPLAUSE)

And finally, this crisis has taught us that we can't have a sound economy with a dysfunctional financial system. You know, we passed a financial rescue plan that has the promise to help stabilize the financial system, but only if we act quickly and effectively and aggressively. The Treasury Department has to move faster with their plan to put more money into struggling banks so they have enough to lend. They should do it in a way that protects taxpayers instead of enriching CEOs.

There was a report yesterday that some financial institutions participating in this rescue plan are still trying to avoid restraints on CEO pay, just like those AIG folks who got help from the federal government and then go on a $400,000 junket. That's not just wrong; it's an outrage to every American whose tax payers -- whose dollars have been put at risk.

(APPLAUSE)

And it won't happen when I'm president of the United States of America.

(APPLAUSE)

No major investor would ever make an investment if they didn't think the corporation was being prudent and responsible. We shouldn't expect taxpayers to think any differently. And we should also be prepared to extend broader guarantees, if it becomes necessary, to stabilize our financial system. And I believe that the Treasury should not limit itself to purchasing mortgage-backed securities; it should help unfreeze markets for individual mortgages, for student loans, for car loans, and for credit card loans. And I think we need to do even more to make loans available to two very important areas of our economy: small businesses and communities.

Now, this past Friday, I proposed a small business rescue plan that would create an emergency lending fund to lend money directly to small businesses that need cash for their payroll or to buy inventory. It's what we did after 9/11, and it allowed us to get low-cost loans out to tens of thousands of small businesses. And we also need to make it easier for private lenders to make small business loans by expanding the Small Business Administration's loan guarantee program. By temporarily eliminating fees for borrowers and lenders we can unlock the credit that small firms need to pay their workers and keep their doors open.

Now, today I'm also proposing that we maintain the ability of states and local communities that are struggling to maintain basic services without raising taxes to continue to get the credit they need. Congress should pass this emergency rescue plan, the rescue plan for Main Street, as soon as possible. If Washington can move quickly to pass a rescue plan for our financial system, there's no reason we can't move just as quickly to pass a rescue plan for our middle class that will create jobs and provide relief and help homeowners.

(APPLAUSE)

And if Congress does not act in the coming months, it will be one of the first things I do as president of the United States of America.

(APPLAUSE)

We can't wait any longer. We can't wait to start creating new jobs. We can't wait to help struggling communities and homeowners. We can't wait to provide real and immediate relief to family whose are worried not only about playing this month's bills, but their entire life savings. This plan will help ease those anxieties. And along with the other economic policies I've proposed, it will begin to create new jobs, grow family incomes and put us back on the path to prosperity.

Now, Toledo, I won't pretend this will be easy. George Bush has dug a deep hole for us. It's going to take a while for us to dig our way out. We're going to have to set priorities as never before. And we're going to have to stick to those priorities. That means pursuing investments in areas such as energy and education and health care, that bear directly on our economic future. But we're going to have to defer on some other things we can afford to do without. It means going through the federal budget, line by line, ending programs that we don't need and making the ones that we do work more efficiently and cost less.

(APPLAUSE)

And, Toledo -- Toledo it also means promoting a new ethic of responsibility. You know, part of the reason -- part of the reason this crisis occurred, if we're honest with ourselves, everyone was living beyond their means, from Wall Street to Washington to even some on Main Street. CEOs got greedy. Politicians spent money they didn't have. Lenders tricked people into buying homes they couldn't afford. And some folks knew they couldn't afford them and they bought them anyway. We've lived through an era of easy money in which we were allowed and even encouraged to spend without limits, to take out as many credit cards as possible, to take out the home equity loans, to borrow instead of save. I know that in an age of declining wages and skyrocketing costs, for many folks this was not a choice but a necessity just to keep up. I understand that.

People have been forced to turn to credit cards and home equity loans to keep up, just like our government has borrowed from China and other creditors to help pay its bills. But we now know how dangerous that can be. Once we get past the present emergency, which requires immediate new investments, and we can't put those off, we have to break that cycle of debt. Our long-term future requires that we do what previous generations do (sic), that we do what's necessary to scale down our deficits and grow our wages and encourage personal savings again to live within our means.

It's a serious challenge, but we can do it if we act now and if we act as one nation.

(APPLAUSE)

PHILLIPS: Barack Obama rallying his supporters there in Toledo, Ohio. You can keep listening to this speech -- actually at our Web site, CNN.com/live.

Also, a quick programming note. Wednesday night is McCain and Obama's final face-off. You don't want to miss any minute of the action. Wednesday night on CNN -- your home, of course, for politics. We're going to be back in just a moment.

(COMMERCIAL BREAK)

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