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American Morning
Stocks Up Worldwide: What It Means for Your Money; Senator Obama Outlines Recovery Plan; Clinton on the Financial Meltdown; Fact Checking Obama on McCain Avoiding Talks on the Economy; California Wildfire Kills Two
Aired October 14, 2008 - 06:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEO CLIP)
KIRAN CHETRY, CNN ANCHOR (voice-over): Breaking news. The record rebound continues. Stocks surging today everywhere. Buyers get back in. What it means for your bottom line.
Plus, Senator Hillary Clinton --
SEN. HILLARY CLINTON (D), NEW YORK: This is an unprecedented crisis.
CHETRY: One on one.
CLINTON: We haven't done nearly enough to prevent home foreclosures.
CHETRY: On fixing the financial mess on the "Most Politics in the Morning."
(END VIDEO CLIP)
CHETRY: A lot going on today. It's Tuesday, October 14th. Glad you're with us. You know, for a second when the bell closed I said, am I seeing things? I need to wet my eyes. We're up 900 points?
JOHN ROBERTS, CNN ANCHOR: What a difference a quarter of a trillion makes. Hitting the right place, huh? Wow.
We begin this morning with a big infusion of cash and confidence to shore up the U.S. financial system. The Bush administration following the lead of European governments and buying shares in troubled banks.
The news prompted a monster rebound on Wall Street. The Dow gaining a record 936 points. And the surge is going global. Asian stocks soared overnight. European markets also in positive territory. We'll have all the details for you just ahead.
Today, North Korea restarts the process of dismantling its nuclear reactor. The International Atomic Energy Agency has been invited back to the site of the reactor at Yongbyon. A previously agreed to disarmament deal was saved over the weekend after the U.S. removed North Korea from its list of nations sponsoring terrorism. And two wildfires ravaging Southern California just north of Los Angeles. At least two people have been killed. Dozens of mobile homes destroyed. A state of emergency has been declared in two counties and thousands of people have been evacuated.
Right now, firefighters are trying to prevent the 60-mile-an-hour Santa Ana winds from driving flames as containment lines. Big job they've got ahead of them today.
CHETRY: Well, back to our top story. The Bush administration taking dramatic steps to try to solve America's financial crisis. The Treasury Department will invest as much as $250 billion in nine of the country's biggest banks and possibly thousands of others. In return, the government will receive stock shares and become part owners of these banks.
This morning, President Bush and Treasury Secretary Henry Paulson will announce details of this rescue plan. It's designed to flood banks with cash and get credit flowing again. It's been well received.
On the overseas markets, Japan's Nikkei surging to a record one- day high gaining more than 14 percent. In Hong Kong, the Hang Seng was three percent higher. European stocks are trading in positive territory, and London's FTSE is up nearly five percent. Dow futures also higher coming off of Monday's record rally, 936 points up.
Christine Romans is here now "Minding Your Business." So pretty much we lost what, about 18 percent of the value of the stock market?
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Right.
CHETRY: And in just one day alone, it shot back up 11 percent.
ROMANS: It was wild here right to where it was yesterday afternoon because it was -- I mean, it was double the record one-day gain or something. It was just incredible.
The Dow Jones Industrial Average having a good morning. You know, we told you yesterday about all of those rallies overseas and then building on it well into the afternoon for the Dow Jones Industrial Average simply took off. It rallied so sharply and so strongly just as banking CEOs and the treasury secretary were meeting in Washington, D.C. pushing through and talking about this rescue plan.
Now, the details have not been officially laid out but this is what we can tell you about what this rescue package debut is going to look like. And I can tell you that a lot of folks on Wall Street really like the sound of this. People who have a big aversion to the nationalization of banks are cheering this. This is a direct investment of taxpayer dollars into the banks.
It's the president asking fast track Congress for $100 billion more of that $700 billion to get it moving right away, some rules on CEO compensation and then also an expansion of FDIC insurance of loans between the banks. It's all designed, as we keep saying, to unfreeze the credit. And that is the big problem.
The stock market kind of a sideshow. The big, big much larger market that has been having some serious problems is the credit market. Companies can't get loans as easily as they could or at the same, you know, agreeable terms and banks aren't lending to each other so the federal government is trying to do everything it can, Kiran, to get that thing going again.
Now, why isn't this an outright nationalization of the banks? Five years ago, even a year ago, to be talking about our government taking a direct stake in free market companies, publicly traded banking companies, a lot of folks saying it isn't because there is an exit strategy. It's a minority stake. These are preferred shares. They're non-voting shares and that the government will have to lay out an exit strategy, how it's going to get -- how it's going to get out at some point.
(CROSSTALK)
CHETRY: Hopefully at a profit, right?
ROMANS: Hopefully for the taxpayers at a profit. That's right.
CHETRY: Very interesting stuff and we'll be going over it today, how it directly affects you if you're either trying to get a loan or if you're taking a look at your 401(k) today. So a lot to talk about.
Thanks a lot, Christine.
House Democrats, by the way, are laying the groundwork for a second stimulus package. This would cost around $150 billion. The plan will include funding for infrastructure projects, like roads and bridges, funding for state Medicaid programs for children and seniors, and an expansion of unemployment insurance. House Speaker Nancy Pelosi says the package will help recharge the economy.
(BEGIN VIDEO CLIP)
REP. NANCY PELOSI (D), HOUSE SPEAKER: Our recovery package will contain some of the same goals to rebuild America, to provide relief for the middle class, to encourage consumer confidence, and to have regulatory reform by rewriting the rules for financial institutions.
(END VIDEO CLIP)
CHETRY: House Republicans are criticizing the plan saying nothing being discussed will help stabilize the economy in the long term.
ROBERTS: And the economy appears to be a winning issue for Barack Obama. With 21 days left to go until Election Day, he continues to pull ahead. The latest CNN poll of polls gives him a 50 to 42 percent lead over John McCain.
And Obama is also expanding his lead in CNN's electoral map. He's got 264 projected electoral votes at this point. He needs just 270 to win. McCain has 174.
And while speaking to voters in Toledo, Ohio, Obama outlined one aspect of his economic plan that he says is intended to help the middle class.
(BEGIN VIDEO CLIP)
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: Since so many Americans will be struggling to pay the bills over the next year, I propose that we allow every family to withdraw up to 15 percent from their IRA or 401(k) up to a maximum of $10,000 without fine or penalty through 2009. Just to help tie folks over.
(END VIDEO CLIP)
ROBERTS: CNN's Suzanne Malveaux joins me now. And what else would the Obama plan accomplish here? What else is he got in it?
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, what Obama has been trying to do is simply show that he's a leader by addressing this issue, not getting distracted by anything else. So far, it has been working.
Today Obama is preparing for that final debate with McCain tomorrow. But yesterday he was in Toledo, Ohio. He unleashed a more detailed economic plan that he's urging Congress and the Bush administration to adopt within weeks.
Now it includes providing a tax credit for businesses that create jobs, about $3,000 per job. Also, creating a 30-day moratorium on foreclosures for responsible homeowners to restructure their loans temporarily, eliminating taxes on unemployment insurance and, again, allowing taxpayers to withdraw up to $10,000 from their 401(k) and IRA plans without any penalty.
Now, Obama's plan also calls to cut taxes for 95 percent of working families, but McCain says that raising those taxes for the other five percent, the wealthiest Americans, not necessarily a good idea. A lot of those folks, they say, are the ones who are investing in the economy, providing the jobs, John, that essentially make the whole financial system work.
ROBERTS: You know, a lot of controversy over whether any tax increase is a good idea at this point. We've asked him that question several times that he seems to think that things will be OK with that.
John McCain trailing in the latest CNN poll by eight percentage points. Is he worried about it? Let's listen to what he told our Dana Bash?
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: I have been written off, Dana, on so many occasions by political pundits that it's hard for me to count. I think it's more lives than a cat. But the point is, we're doing fine. I'm happy with where we are. We're fighting the good fight. That's what it's all about. That's what I love.
(END VIDEO CLIP)
ROBERTS: He's got the little suit on that says underdog, right? No, he's a fighter and, you know, to be in the underdog position is not a bad place to be. I'm just not sure it's a good place to be 21 days out.
MALVEAUX: And not the day after the election obviously, but that's what the campaign believes that he is in a strong position. At least he's in a fighting position. And today, what John McCain is going to do, he's going to lay out his own economic plan for the government to buy $300 billion in bad mortgages directly. He's going to talk about tax breaks for those who are suffering. Also get into how to help seniors and those who have lost their investments in their 401(k)s.
McCain's camp is really trying to draw voters into his theme, once again, fight with me. That we heard from him with Dana, also the Republican Convention. He is trying to present himself again as the happy warrior, not the angry candidate that some have portrayed him as fairly recently.
ROBERTS: It's interesting that there is one similarity between the McCain and the Obama plan, and that is for people who are of retirement age, 70 1/2, who have to convert their 401(k) stock into cash, they're going to try to find some way to delay that so people don't have to sell it at market bottom here. So --
MALVEAUX: So they do agree on something.
ROBERTS: One thing. Can you imagine?
Suzanne, thanks so much.
Kiran?
CHETRY: Well, coming up this morning at 7:50 Eastern, we're going to be speaking with former New York City Mayor Rudy Giuliani. He joins us to unveil Senator John McCain's new economic plan.
Senator Hillary Clinton speaking out on the financial meltdown.
(BEGIN VIDEO CLIP)
SEN. HILLARY CLINTON (D), NEW YORK: This is an unprecedented crisis, and I do think it's difficult for all of us to get our arms around it.
(END VIDEO CLIP)
CHETRY: Her thoughts on the road ahead and the race for the White House. You're watching the "Most News in the Morning."
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
SEN. HILLARY CLINTON (D), NEW YORK: I've got a new slogan for the economy. What will create in Pennsylvania if you give the Democrats a chance to lead and serve you? And what will create across America with a Democratic president and a bigger Democratic majority in the House and the Senate? It comes down to this. Jobs, baby, jobs.
(END VIDEO CLIP)
ROBERTS: That was Senator Hillary Clinton on the campaign trail for the Obama/Biden ticket. I had a chance to sit down with the New York senator to talk about the $700 billion bailout plan and whether she thinks the administration has the right program to address the economic crisis.
(BEGIN VIDEOTAPE)
SEN. HILLARY CLINTON (D), NEW YORK: Well, John, I think they are moving toward a much better plan. They didn't initially and that's one of the reasons why there was such a negative reaction. It was hard to understand and people couldn't quite grasp what it is they were actually attempting to do. But I hope that the administration has now moved toward what is both a cleaner and more effective means of enhancing liquidity. And that is making these direct investments and taking a preferred position so that we get the upside as taxpayers.
I think that is a better idea. It's what was promoted by Prime Minister Gordon Brown in Great Britain. It seems to be what our country and other countries are moving toward. So this is an unprecedented crisis and I do think it's difficult for all of us to get our arms around it. But, at least, now the treasury is saying that they will take this more effective step.
There's still a lot to be done. We haven't done nearly enough to prevent home foreclosures. You know, I've been calling for a moratorium for about I guess 15, 16 months, and I think we need to do that. So there is more to do but we're moving in the right direction.
ROBERTS: And Senator Obama has also called for that as well, and in addition, a penalty free withdrawal of 15 percent of 401(k) investments this year and next, up to a maximum of $10,000.
What about the McCain mortgage plan, the $300 billion that he unveiled that night at the debate? That's a modification of your plan. But with McCain's plan, it seems as though it doesn't have to be any kind of a write down, no haircut of the value of these mortgages, that they could be bought up at face value. Is that a good idea? CLINTON: Well, I don't think so. You know, the plan that I have been promoting would require the financial institutions to write down the mortgage, to take, as you say, a haircut. I think that's a much better approach.
There's not a lot of details about the plan that Senator McCain threw out. I've actually drafted very detailed legislation, worked with a number of economists. It's modeled on what worked during the Great Depression and I think something along the lines of what I'm advocating does need to be implemented.
And as you say, Senator Obama has come up with some new and additional ideas to give people confidence, to get them to leave their money in their financial institution so that then in turn it can be lent out and we can get the wheels of commerce moving.
(END VIDEOTAPE)
ROBERTS: You can hear more of my interview with Senator Hillary Clinton coming up in our next hour here in the "Most News in the Morning." We talk about her predictions for the 4th of November and whether she thinks Obama has a lock on the election.
CHETRY: Well, you can run but you can't hide from AMERICAN MORNING's "Truth Squad." Barack Obama claims the McCain campaign wants to stop talking about issue number one. We're fact checking the explosive charge.
And a record rally snaps an eight-day losing streak on Wall Street. We're going to take a look at what it means for your money and your investment based on how close you are to retiring.
It's 15 minutes after the hour. The "Most News in the Morning" will be right back.
(COMMERCIAL BREAK)
CHETRY: Well, a video game guru is following his father's footsteps into space. Overnight, a Russian spacecraft docked with the International Space Station and the shuttle was carrying an American multimillionaire. Richard Garriott reportedly paid $30 million for the 10-day stay. His father, Owen, a former astronaut, spent two months aboard the first orbiting space station back in 1973.
Eighteen minutes past the hour. We have Rob Marciano with us at the weather center in Atlanta. I guess, you know, the economy is not affecting the multimillionaires.
ROB MARCIANO, AMS METEOROLOGIST: No.
CHETRY: They can still pay $30 million to go in space for 10 days.
MARCIANO: That's just pocket change. Not a bad one. You have a dad who was an astronaut. I mean, you're a whiz kid that develops video games to the tune of, well, obviously, well over $30 million. Congratulations to him. I am jealous.
All right. Check this out. Tropical depression number 15 about 140 miles north of Cheraw (ph), not really moving all that much. Certainly it has flared up a little bit. This could very well become our next tropical storm.
Right now, indications are if it does form, it will probably develop and head more north and east. More immediate concern is this just off of Honduras and Nicaragua. If this develops, this may head west. So keep your fingers crossed. And the tropics although active right now in the Caribbean, early indications are that those two systems may very well split the difference to get out of here.
All right. Temperatures record heat across the eastern half of the country. Some chilly air in the mountains that is forcing the winds down the valley, and that's why we've got those wildfires out west. A quick peek at some of the action across So Cal.
Three big ones that are burning. Thousands of people have been evacuated. KTLA, thanks for those shots. And as we go through the morning, the winds will continue to pick up.
This is the time of day out there where the Santa Ana winds become the most fierce. Yesterday, we had, in some cases, measured wind gust over 80 miles an hour. It's not a good scenario there from just outside of Los Angeles and north of Malibu, through south into San Diego as well.
So today is going to be a critical time, John and Kiran, throughout the next few hours. Tomorrow looks a little bit better, but today they're going to have their hands full as far as fighting those fires.
Back up to you in New York.
CHETRY: The fire officials put many of those communities on notice. You may have to get out, you know, instantaneously if we make the call. So it's going to be tough. Hopefully they can stay in their homes and things will be OK.
MARCIANO: It will be better tomorrow, that's for sure. But today will be difficult.
CHETRY: All right. Rob, thanks.
MARCIANO: OK.
ROBERTS: It's 20 minutes now after the hour. Barack Obama is out on the stump saying that John McCain wants to avoid talking about the biggest issue facing the country today, the economy. Well, our "Truth Squad" is looking into this charge and Alina Cho is here now with her report.
Good morning to you.
ALINA CHO, CNN CORRESPONDENT: Hey there, John, good morning to you. Good morning, everybody.
It is a pretty explosive charge considering what we're going through right now. The economy is issue number one. So why would John McCain avoid talking about it, or is he?
Well, here's the charge from Barack Obama on Monday in Ohio.
(BEGIN VIDEO CLIP)
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: Last week, Senator McCain's campaign announced 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 -- his campaign actually said, and I quote, "If we keep talking about the economy, we're going to lose."
(END VIDEO CLIP)
CHO: Now did the McCain camp really say, "If we keep talking about the economy we're going to lose?" Is Obama right when he says this?
Well, he appears to be citing a pair of newspaper articles from earlier this month. First on October 4th, "The Washington Post" quoted a top McCain adviser saying, "We are looking forward to turning a page on this financial crisis and getting back to discussing Mr. Obama's aggressively liberal record."
Two days later, "The New York Daily News" quoted an unnamed McCain strategist as saying, "If we keep talking about the economic crisis, we're going to lose."
But when CNN reached out to the McCain campaign, they told us, well, that the quotes were taken out of context. Now, listen to this. They say the remarks were specifically about political strategy in the days after Congress voted on the bailout. Now, remember that was what led McCain to briefly suspend his campaign.
McCain's spokesman says it was not that they did not want to talk about the economy. There were just bigger issues on the table like passing the bailout.
So the question again, when Obama quoted the McCain campaign as saying, "If we keep talking about the economy, we're going to lose," was he right? The "Truth Squad" verdict on this one is "in dispute," which I think is the same sound effect as misleading.
Obama does accurately cite the quotes, but the McCain campaign says those quotes were taken out of context. And, of course, as always, we're watching both sides.
Coming up at 8:00, McCain says Obama wants to access secret ballots that labor unions use. Is that true? We're going to have the verdict coming up.
And as you know, John, a lot of viewers have been writing me. A lot of our own CNN staffers say, "Can't we tally them all up?" We want to know how many trues, how many falses, how many misleadings each candidate has.
We encourage you to go to our Web site CNN.com/am for that. We have a lot of the "Truth Squad" posted there as well as my previous reports. You can watch them too.
ROBERTS: Great. This stuff is all very good and it's interesting. The truth has one color, but the rest is varying shades of gray.
CHO: Gray.
ROBERTS: Yes. Absolutely.
Alina, thanks so much for that.
CHO: You bet.
ROBERTS: Twenty-three minutes now after the hour.
CHETRY: Wild ride.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Fear feeds on itself.
(END VIDEO CLIP)
CHETRY: What's next on Wall Street? What history tells us to expect in the days and months to come.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Crashes come at the end of a bear market.
(END VIDEO CLIP)
CHETRY: You're watching the "Most News in the Morning."
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP, FROM NBC "LATE NIGHT WITH CONAN O'BRIEN")
CONAN O'BRIEN, HOST, "THE LATE NIGHT WITH CONAN O'BRIEN: This weekend the leaders of the world's richest countries got together to discuss the global economic meltdown. Yes. President Bush wanted to go the meeting but after last week, the U.S. is no longer one of the world's richest countries.
Yes. Yes. Yes. Yes. You can boo all you want. It's kind of true.
(END VIDEO CLIP)
CHETRY: Actually a bit of a turnaround this week. Wall Street finally coming up for air after eight straight losing sessions. The Dow posting its biggest one day rally ever. It gained 936 points yesterday.
And that record surge stretched across the globe. Japan's Nikkei gaining more than 14 percent overnight, its best day ever. So is it a sign of more good things to come for investors?
Kim Palmer is senior editor at "U.S. News & World Report," and she joins us this morning from Washington. Kim, good to see you.
KIM PALMER, SR. EDITOR, "U.S. NEWS & WORLD REPORT": Good to see you, Kiran. Thank you.
CHETRY: You know, so, the advice in the middle of last week was look, if you're already in stocks just stay there, because things will come back. What was your take after yesterday when we saw that 900- plus point gain?
PALMER: Well, yesterday the perfect example of why when it comes to investing, especially for your retirement, you need to be thinking in terms of years and decades and certainly not days or even weeks.
A lot of people last week in the last month have felt very nervous, very uncomfortable. Some people started to stop contributing to their 401(k). Other people sold their stocks. And yesterday this upswing just shows why you really need to be thinking long term.
CHETRY: Does this dovetail into the Bush administration's spending of that initial $250 billion to try to buy up stocks in private banks. How does that affect the average investor or the average homeowner even?
PALMER: Well, consumers and homeowners will not see the direct effect in terms of whether or not the treasury now saying it will buy the equity stakes in the banks. Those specifics consumers will not see directly. What they will see is the big picture.
Consumers will find it, should find it easier to get credit. It's been very difficult for people wanting to take out auto loans, personal loans, even mortgages the last few weeks. And now, that should start to loosen up.
CHETRY: All right. Let's talk about age specific advice. If you're in your 20s or 30s right now and you're taking a look at where we are, what would you recommend?
PALMER: Well, people in their 20s and 30s, the most important thing is to continue investing because now you actually have the opportunity to buy stocks more cheaply than you have been over the last few weeks and year. So it's an opportunity to continue investing, to get into the market. The worse thing you can do is stop contributing to your 401(k). And when you're young, you want to be investing in stocks, generally 80 percent stocks, 20 percent bonds, depending on how risk diverse you are.
CHETRY: I got you. All right. Well, what about people in their 40s, a transitional period? You're starting to look ahead toward your retirement but you're really not quite there.
PALMER: That's right. So in your 40s, you want to start to reevaluate your investments. You want to start to shift into safer investments. And so, generally speaking, you want about 30 percent in bonds or cash. So you're starting to become safer to be less exposed to the ups and downs of the stock market.
CHETRY: OK. And then people that are heading into retirement -- 50s, 60s, some people that are almost there, and you really at this time want to find ways to hold on to your money.
PALMER: That's right. So 50s and 60s, as you get close to retirement, you want to be much safer because you don't want to have the kind of exposure that would leave you feeling really badly after a week like last week. So generally speaking, 80 percent bonds and cash, 20 percent stocks. Of course, it depends on each person if you have other income streams.
And that actually brings up the point a lot of seniors do want to continue having another income stream. More and more people are continuing to work into retirement. About seven out of 10 pre- retirees now say they want to keep working. So, of course, that's another option as well.
CHETRY: All right. Kim Palmer, good advice for us this morning. Thanks for being with us.
PALMER: Thank you.
ROBERTS: Just about half past the hour now and checking our top stories for you today.
John McCain will unveil his economic plan for the country. Some of his proposals include using $300 billion of the $700 billion bailout to help homeowners struggling with high adjustable rate mortgage payments and giving tax credits for seniors tapping into retirement accounts. Yesterday, Barack Obama offered his own remedy including no bank foreclosures for 90 days and a two-year tax break for businesses that create jobs.
Oil prices have been plummeting during the economic crisis and it's having an impact at the pump. According to AAA, the national average for a gallon of regular is now, get this $3.16. That's down slightly from yesterday. In the past 27 days gas prices have fallen 69 cents. Students now have a web site to alert school officials about potential threats on campus and in the classroom. The web site schooltipline.com was created by a student in Utah and allows kids to anonymously report bullies, as well as information about drugs and thefts. Nearly 50 schools across Texas, California, Washington and Arizona are using the Web site.
The Bush administration putting its financial bailout plan into action. The news having a positive effect on overseas markets. Japan's Nikkei surged to a record one day high up more than 14 percent. However, it was closed yesterday. So it's also making up for ground lost yesterday. In Hong Kong, the Hang Seng was 3 percent higher. In Europe, London's FTSE is trading in positive territory. And in a couple of hours, President Bush and Treasury Secretary Henry Paulson will announce details of their bank rescue plan.
After Monday's record rally on Wall Street, is it time for investors to celebrate, break out the champagne? Allan Chernoff puts the gains in perspective for us.
So, is it over or is this just a momentary, you know, little swing on the upside?
ALLAN CHERNOFF, CNN SENIOR BUSINESS CORRESPONDENT: Well, hopefully, we'll get more of a swing. Because, basically, the stock market had became just like a rubber band stretched to its limits and ready to snap back.
(BEGIN VIDEOTAPE)
CHERNOFF (voice-over): Monday's record point gain for the Dow industrials came after the worst week in its history. There was the Wall Street rollercoaster ride ready to rest. Don't bet on it. Many trades say the market crashed last week, the Dow losing 18 percent. And after a crash, the market always rebounds. Monday's gain was an 11 percent jump. Analysts say if Friday marked a bear market bottom, there will be more big gains to come. The problem is no one knows if the market really did hit bottom.
SAM STOVALL, STRATEGIST, STANDARD & POORS: I call it a Mosses movement. Because basically in 40 days you recoup about a third of what you lost in the prior bear market.
CHERNOFF: In September 2001 when the stock market reopened after the 9/11 terror attacks, the Dow tumbled 14 percent in a week. The following week it bounced back 7 percent. In 1987, the Dow plunged nearly 23 percent on Black Monday, October 19th. The following two days it rebounded 17 percent.
FRANK GRETZ, ANALYST, SHIELD AND COMPANY: When you get to that kind of a point of a decline where fear feeds on itself, I mean, that's an ending phase. Crashes come at the end of the bear market not at the beginning.
CHERNOFF: There still may be tough times ahead though. The bank lending freeze has to fall and forecasters warn the economy is probably headed for a serious recession. After stocks rebounded in late 2001, they sank to a new low a year later as the economy fell into recession.
(END VIDEOTAPE)
CHERNOFF: So what should investors do now? Well, it all depends upon your risk tolerance and your time frame. Last week if you had trouble sleeping and if you have money in the market that you need pretty soon, investment advisors say sell on rallies. But, if your time frame is longer, at least five years, and it should be for money in the stock market, then investment advisors say ride it out. We probably have more gains to come. And if you have some extra cash perhaps think about maybe buying some stocks at these bargain levels. Many people think these are still bargain levels even after yesterday.
ROBERTS: But bottom line this crisis still is not over yet. There's a lot of things that have to work through the system.
CHERNOFF: Absolutely. We need to still see that lending freeze. Hopefully, we're going to see a major thought today. We're also almost certainly headed towards a serious recession.
ROBERTS: All right. Allan Chernoff for us this morning. Allan, thanks for that. Appreciate it.
CHETRY: John McCain is getting set to unveil his economic plan this morning. But before he does that, he went one-on-one with CNN's Dana Bash and spoke about his plan to help Americans stay in their homes. Also we have Gerri Willis. She's answering your personal finance questions.
One e-mailer asking if they should cutback on having kids. Well, maybe Gerri can answer that question for them. But anyway, she is going to give us some advice. 34 minutes after the hour.
(COMMERCIAL BREAK)
CHETRY: This morning we're "Minding Your Business" and we're answering some questions about the economy with CNN's personal finance editor, Gerri Willis. Hey, you said it a couple of days ago. You said now is not the time to be thinking about whether or not you should get out of the stock market and sure enough yesterday quite a big rally.
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: I would like to say that I caused that rally but not the case. You know, stocks reported higher again today. Let's hear what the viewers had to say. Carl in Florida writes, "My son is advising me to jump into the market while it's down. I'm 4 years from retirement with my 401(k) split very conservatively between bonds and money market funds. While I didn't participate in the run up, I didn't lose much in the crash. Where do I go from here?"
Well, Carl, I got to tell you, most folks at your age would have some allocation of stocks and now is a good time to actually get into those stocks. But do it in a conservative way. Buy an S&P 500 index bond in your 401(k) or commit new money to it. Now is a good time because some of these stocks still cheap. We're looking at probably more rebounds for the stock market over time. But understand we can still retest the lows that we've seen. So, caution is the word, but your son may actually have some good advice there.
Lynn in Washington writes, "I'm 30 years old with a 401(k) and moving to a new job. It offers a 401(k) with the same financial firm I used now. Should I do a 401(k) roll over, a Roth IRA, or a traditional IRA, or should I cash it in, as stocks are falling?" Well, don't cash it in. Your way too young to stop playing the retirement game. You need to keep saving. Stocks are on sale right now. This is really going to help you retire in the long run. So, don't cash it in. Do a 401(k) rollover into your new plan if you like the plan. If it has lots of options that you think are good. If not, you might want to do the Roth IRA, set it aside so you can manage it on your own. At the end of the day you don't want to get out of the market.
Joni in Atlanta writes, "My husband and I are newly weds and I'm 28, he's 30. We want to have kids soon. However, is now, with the unsettled economy, a good time? We're nervous about the potential expenses and the advise everywhere is saying to cut back on everything -- is having children included?"
Well, Joni, I got to tell you, you shouldn't make decisions about your personal life due to the economy. You should make them about what's right for you right now. Of course there is a recession looming. We've all been talking about what that's going to be like in the coming months and quarters. But at the end of the day, we should go ahead, live your life. Just make sure you have some savings on the side in case you and your husband lose your job. You want to make sure you have three to six months worth of savings.
Guys, I know you like that last question.
CHETRY: Well, it's just -- it's never a good time.
WILLIS: No.
CHETRY: I guess you could say you just got to jump in with both feet, right?
WILLIS: If you're going to wait until you can afford kids you'll never have them is the reality.
ROBERTS: And a good rule thumb on your first question about investing in stocks when you're very close to retirement. People have always said to me, don't bet money that you can't afford to lose. If you want to take a little bit of a flyer, buy some stocks, go ahead, but make sure it's money that you can afford to lose.
WILLIS: But at the end of the day, he's probably going to live another 20, 30 years. He's going to need stocks to drive that engine into retirement. A lot of people may have decent stock allocations even going into retirement. We have to have enough cash to weather this storm.
CHETRY: That's a good point. Exactly. All right, thanks, Gerri.
WILLIS: My pleasure.
ROBERTS: Caught in the credit crunch.
(BEGIN VIDEO CLIP) UNIDENTIFIED MALE: If you don't have cash, you got to -- you got to still make a payroll.
(END VIDEO CLIP)
ROBERTS: Reaction to Barack Obama's plan to help small businesses stay afloat from the people who need it most.
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UNIDENTIFIED MALE: I think he's trying to reinvent the wheel.
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ROBERTS: You're watching the "Most News in the Morning."
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ROBERTS: 43 minutes after the hour. And Senator John McCain is expected to unveil a new economic plan today in an interview with CNN's Dana Bash. McCain explained why his $300 billion plan to buy up bad mortgages is the key to helping people stay in their homes.
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SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: What I want to do is have some of this $750 billion, about 300 billion of it, go and buy out these bad mortgages and, of course, the parameters are for people's primary residences, certain income level and all that and give them a new mortgage. Give them a new mortgage so that they can afford it and they can stay in their homes.
And I might add, during the Depression, there was a homeowner's -- it was a bureaucracy that was set up that -- the Homeowner's Loan Corporation, and they provided these new mortgages and after a number of years, actually, the government got paid back. And that is also a suggestion that Senator Hillary Clinton made not that long ago. I agree with her.
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ROBERTS: McCain also went on the say that until housing prices stop their decline, America's economy will not make a lot of progress.
And Barack Obama also turning the conversation toward economic health for the middle class. Yesterday, he rolled out a new plan to help thousands of small businesses. But will it work? That's the big question. CNN's Chris Lawrence gets answers from business owners and experts for us now.
CHRIS LAWRENCE, CNN CORRESPONDENT: John, Kiran, some say that Senator Obama's plan could help rescue their business. Others call it nothing more that a short-term fix.
(BEGIN VIDEOTAPE)
LAWRENCE (voice-over): This small business owner would normally be opposed to Barack Obama's plan.
ROB LORANGER, SMALL BUSINESS OWNER: Because I'm not a big government guy. I don't like government involved at all in business.
LAWRENCE: But Rob Loranger needs credit and banks have stopped lending.
What Hi-Tech Plastics is building now, it won't get paid for until next spring. Bank loans help bridge that gap in cash flow. Under Obama's new plan, the small business administration would guarantee more loans that banks make to small businesses.
LORANGER: And it says the bank is not going to be as risky. Therefore, I can give you a little more. And sometimes that incremental amount is all you need to get over the top.
LAWRENCE: Obama's plan would also expand the government's disaster loan program, which bypasses banks all together and offers lower interest rates over longer terms.
LLOYD CHAPMAN, PRES., AMERICAN SMALL BUSINESS LEAGUE: I think he's trying to reinvent the wheel.
LAWRENCE: Lloyd Chapman is the head of the non-partisan American Small Business League. He says Obama's new plan ignores the series of federal investigations that found the government guilty of giving billions of dollars in small business contracts to huge Fortune 500 companies.
CHAPMAN: If he would reaffirm his commitment to stop the flow of government small business contracts to corporate giants as he said, that would have a much bigger impact on the middle-class economy than anything he's proposed so far.
LAWRENCE: At Hi-Tech Plastics, a few dozen workers fill orders for the military and other contractors. But if nothing changes in the next two months, some of them may be laid off by Christmas.
LORANGER: I don't want to do that, but I'm just saying that, you know, if you don't have cash, you got to -- you got to still make a payroll.
(END VIDEOTAPE)
LAWRENCE: So, what's the price tag? Senator Obama's team says $4 billion would go to fund those disaster loans, another $1 billion for the guarantee programs.
John?
Kiran?
CHETRY: Up close and personal. Jeanne Moos on Obama's door-to- door campaigning and other close calls for the candidates. You're watching the "Most News in the Morning."
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UNIDENTIFIED FEMALE: I have been following you for a while.
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CHETRY: You're watching the "Most News in the Morning."
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CHETRY: The presidential candidates do a lot of hand-to-hand campaigning. CNN's Jeanne Moos looks at how some supporters react to these close encounters.
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JEANNE MOOS, CNN NATIONAL NEWS CORRESPONDENT (voice-over): Imagine someone knocked on your door and you opened it to find -- Barack Obama? Well, the shock wasn't quite like winning a million bucks.
UNIDENTIFIED FEMALE: Oh, God.
UNIDENTIFIED FEMALE: Oh, my God.
UNIDENTIFIED MALE: Oh, my God!
MOOS: With Obama it was a little more subdued.
OBAMA: How are you doing?
UNIDENTIFIED FEMALE: How are you?
MOOS: As Obama went from house to house like a trick or treater, there were a few squeals.
OBAMA: How are you?
UNIDENTIFIED FEMALE: (SCREAMS)
MOOS: But no scream out of the Senator when a woman pointed out he had a spider on him.
UNIDENTIFIED FEMALE: You have a spider on you.
OBAMA: Is it a big one?
MOOS: He gently brushed it away, unlike the way he handled folks handling him. To touch or not to touch the candidate? That is the question. From a hand on his stomach to kissing his hand plays right into that McCain Web commercial...
UNIDENTIFIED MALE: They will call him the one.
MOOS: The candidates are used to touching outstretched hands and kissing babies. Disembodied hands are always reaching out to pat them. And all that posing for photos makes the small of the back a big point of contact. There are overenthusiastic hand shakes which sometimes turn into overenthusiastic hugs, which is better than the opposite.
A photo op that flees.
GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: Over here.
UNIDENTIFIED MALE: (INAUDIBLE).
PALIN: We won't publish it anywhere.
MOOS: They eventually relent it.
PALIN: All right, you guys.
UNIDENTIFIED MALE: Thank you.
MOOS: But when you work a crowd, the crowd works you.
UNIDENTIFIED FEMALE: We love you!
MOOS (on camera): Of course, there is a down side to all that love. All that touchy feely stuff -- germs. It's not just their speeches candidates sanitize.
MCCAIN: Hey, shall we get on?
MOOS (voice-over): This lady told Senator Obama she's not voting for him but she still gave him a hands-on blessing.
UNIDENTIFIED FEMALE: Well, I just want to punch him in (INAUDIBLE).
OBAMA: I appreciate your prayers.
MOOS: And then there are supporters so overcome they need comforting.
UNIDENTIFIED FEMALE: I have been following you for a while.
OBAMA: Well, it's so nice to meet you.
MOOS: Though all that touching is subject to being freeze framed. Barack Obama strangles Ohio gal, joked the Web site Wonkette -- choked no, choked up, yes, leading to hug number two.
UNIDENTIFIED FEMALE: Thank you.
OBAMA: All right. You're going to be great.
MOOS: Jeanne Moos...
UNIDENTIFIED FEMALE: I'll be following you.
MOOS: ...CNN, New York.
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CHETRY: The great schlep.
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UNIDENTIFIED FEMALE: Schlep over to Florida.
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CHETRY: Young Jewish voters stumping in beauty parlors and bingo halls.
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UNIDENTIFIED MALE: And their reaction was, as they said that I'm a little meshuga.
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CHETRY: Trying to sell seniors on Obama.
And Senator Hillary Clinton one-on-one on Sarah Palin. Shattering that cracked glass ceiling.
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SEN. HILLARY CLINTON (D), FORMER PRESIDENTIAL CANDIDATE: I would like to see the very first woman in the White House who I agree with.
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CHETRY: You're watching the "Most Politics in the Morning."
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ROBERTS: Welcome back to the "Most News in the Morning." New poll numbers from the battleground state of Virginia to tell you about. The latest CNN poll of polls shows Barack Obama leading John McCain leading 49 percent to 45 percent. Republicans have won Virginia in the last 10 presidential elections. So what are voters in the swing states saying about this close race? Joining me now is radio talk show host Doc Thompson. He's at WRVA in Richmond, Virginia for us this morning.
Doc, good morning to you. Welcome back. Thanks for being with us.
DOC THOMPSON, RADIO HOST, WRVA IN RICHMOND VIRGINIA: Absolutely, John. It's nice to be with a fellow Virginian.
ROBERTS: There you go. This latest poll of polls has got Barack Obama up by five, some individual polls have got him up by almost as much as seven. How is he leading there in a state that hasn't voted for a Democrat since Lyndon Johnson in 1964, and where was his strongest basis of support. THOMPSON: Well, strongest base is Northern Virginia. It's almost a third of the state's population and it's primarily liberal there that's most of his base. Also, obviously, in the urban centers. But the big thing is so many people are buying into the notion of change. Unfortunately, they think that it's all the Republicans fault this time around.
ROBERTS: Right. You know, John Kerry won the northern part of Virginia, 51 to 48, over George Bush in 2004. But you know, it proves that northern Virginia does not give him the state because he lost it. How is Barack Obama doing in that slice of southwestern Virginia between Roanoke all the way down to the Tennessee border there in Bristol? That's heavily Republican territory. It's an area that Hillary Clinton won during the primaries. Is he making any inroads there?
THOMPSON: I think he is. I think it's pretty split at this point. I've spent some time over there recently over in Harrisburg and Stanton, and then a little further west. I think he is doing OK. He's opened up offices all over the place and he's really trying to get the message out there.
Unfortunately, like I said, so many people are buying into the notion of change when it has very little to do with Democrat and Republican this time around. It has to do with our Congress and our presidents over the last couple of decades not doing their job. They are trying to bribe us right now, John.
ROBERTS: John McCain and Sarah Palin also trying to push this notion of change. They were in Virginia Beach at a rally yesterday. John McCain tried to distance himself from the last eight years of President Bush. Let's listen to how he put that.
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MCCAIN: We cannot spend the next four years as we have spend much of the last eight waiting for our luck to change.
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ROBERTS: He's trying to distance himself from President Bush, but can he make it so just by saying it?
THOMPSON: No. First of all, it's too late for that. I mean, if you got three weeks to the election, people aren't going to buy into it. And the unfortunate thing -- you know, there's a famous quote to paraphrase. We can survive, a democracy can survive until the politicians realize they can bribe their constituents with their own money. Which is what they are doing.
Barack Obama laid out a four point new plan to bribe us yesterday. John McCain has done that as well. The stimulus checks that they've sent us. It's just to try to bribe us to say, look, the president or Barack Obama or John McCain has given us money. Well, it's our own money and we're too stupid to realize that. ROBERTS: John McCain is going to lay out another economic plan later on today as well. We're looking forward to hearing to what he has to say.
THOMPSON: Right. My prediction is over the next three weeks they're going to go back and forth trying to give us our own money just to try to get elected. And that's ridiculous.
ROBERTS: You talked to some people, Doc, at the Sarah Palin rally in Richmond there, yesterday. What were they saying?
THOMPSON: They were real happy. They were excited to be there. Again, my show is primarily conservative so most of my listeners and the people that went, they were all happy to be there and meet her. They said it was a fun time and they were happy to get out there and show their support.
ROBERTS: You know there's been some controversy at some recent McCain-Palin events, and the crowds getting just a little overzealous if you will. And yesterday, Jeffrey Frederick, the chairman of the Virginia Republican Party made a comment talking to campaign volunteers. He was ever heard and transcribed by "Time" magazine's Karen Tumulty.
He was trying to make a connection between Barack Obama and Osama Bin Laden. He said both have friends that bomb the Pentagon. That's scary. I mean, he's talking about the September 11th airplane attack and he's also talking about William Ayers planting a bomb in the washroom at the Pentagon. I mean, how does talk like that go over with voters there. How can there be an equivalence between Osama Bin Laden and Barack Obama. Osama Bin Laden directed the 9/11 attacks. Barack Obama had some association with Bill Ayers.
THOMPSON: Well, exactly. It's a ridiculous statement, although people aren't upset. At least my listeners aren't that upset about it, because they're just happy that Bill Ayers thing is coming out. And on the opposite side, you have people like John Lewis, the congressman who compared John McCain, his friend, to George Wallace. They keep going back and forth on this. I think the surrogates, the supporters are happy to get that message out there. And then the politicians say, no, no, no, that's ridiculous. But at least on both sides they think that message is getting out there to jack people up.
ROBERTS: Doc Thompson, it's always great to talk to you. I appreciate your perspective on all this. Thanks for joining us this morning.
THOMPSON: Thanks, John.
ROBERTS: Have a great show today.
THOMPSON: You, too.
