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Feds to Buy Stake in Big Banks; McCain Lays Out Economic Plan

Aired October 14, 2008 - 18:00   ET

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


ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: All the buzz comes at a steep price, $3.5 million and counting for Hofstra. But its president says it is worth every penny.
UNIDENTIFIED MALE: I don't know which candidate is going to win, but Hofstra has won already.

(on camera): The president told me, he is already lobbying the commission to give them a second presidential debate in 2012. Early campaigning never hurts, just like the candidates, who will likely be trudging through New Hampshire shortly after this election is over -- Wolf.

(END VIDEOTAPE)

BLITZER: Ed Henry, on the campus, thanks very much.

And, to our viewers, you're in THE SITUATION ROOM.

Happening now: The federal government is set to buy a stake in America's biggest banks. It is another historic move to prop up the economy and free up frozen credit. But here is the question: Will it work?

Plus, John McCain's $52 billion solution. He has a new plan to help financially-strapped voters, but Barack Obama says it is packed with -- quote -- "bad ideas."

And the presidential candidates at odds over an investigation into voter registration fraud, new ammunition three weeks before Election Day. The best political team on television is standing by.

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You are in THE SITUATION ROOM.

It is a new example of government intervention in the economy not seen since the Great Depression -- the Bush administration announcing today it will directly buy shares in some of the nation's top banks.

A cautious response on Wall Street today -- the Dow Jones industrials ended the day down 76 points. It was the first time in nine sessions the Dow didn't close up or down in triple digits.

CNN's Kelli Arena is in Washington with more on the bank bailout.

Kelli, this amounts to partial nationalization of these big banks. What is going on? KELLI ARENA, CNN JUSTICE CORRESPONDENT: Well, yes, it does, Wolf, but the president says the plan is not meant to take over the free market, but to preserve it.

(BEGIN VIDEOTAPE)

ARENA (voice-over): It is a far-reaching effort aimed at getting banks to once again loan money to companies, consumers and each other. The government will buy up to $250 billion worth of preferred stock in banks and financial institutions.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We have a strategy that is broad, that is flexible, and that is aimed at the root cause of our problem.

ARENA: Nine major firms have already agreed to participate in the plan. The money comes from the $700 billion bailout plan which was recently passed by Congress.

HENRY PAULSON, U.S. TREASURY SECRETARY: Government owning a stake in any private U.S. company is objectionable to most Americans, me included. Yet, the alternative of leaving businesses and consumers without access to financing is totally unacceptable.

ARENA: The stock purchases are just part of the plan. The FDIC is temporarily guaranteeing most new debt issued by insured banks, which include loans that banks make to each other. It will also temporarily expand its insurance to cover non-interest-bearing accounts, which are commonly used by small businesses to cover things like their payroll.

The FDIC says its part of the program does not rely on taxpayer dollars.

SHEILA BAIR, CHAIR, FEDERAL DEPOSIT INSURANCE CORPORATION: Instead, both aspects of the program will be paid for by direct user fees included as part of the bank's regular insurance premium.

ARENA: And along with the government's involvement comes certain restrictions, such as limits on how much money the top brass at companies can make. It is something Democrats in Congress pushed for.

REP. BARNEY FRANK (D), MASSACHUSETTS: Yes, I think that this is historic, as a matter of principle.

ARENA: Most bank stocks did soar on the news, but critics say the plan does not address a fundamental problem.

BERT ELY, BANKING ANALYST: There are frankly a lot of weak borrowers out there who do not have the capacity to borrow and repay their loans.

(END VIDEOTAPE)

ARENA: What's more, the steps announced today do not deal with all the troubled mortgage assets that are still owned by banks, pension funds, and other investors. The Treasury Department does still plan to buy some of them and is working toward getting that program finalized -- Wolf.

BLITZER: Kelli Arena in Washington, thank you.

Twenty-one days before America votes, John McCain can turn the page on America's economic crisis. Today, he rolled out a new $52.5 billion plan a day after Barack Obama offered some new economic proposals of his own.

CNN's Dana Bash traveled with McCain to Pennsylvania today -- Dana.

(BEGIN VIDEOTAPE)

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Wolf, John McCain finally did today what Republicans across the country have been urging him to, offer some new economic proposals and specifically telegraph them in a speech. But Barack Obama offered a plan of his own this week, and the question is whether or not it is too late for McCain to break through.

BASH (voice-over): Three weeks to go and John McCain is taking another whack at luring economically distressed voters with a fresh round of tax cut proposals.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: As president, I intend to act quickly and decisively.

BASH: He offered a new $52. 5 billion plan targeting jobless voters by eliminating taxes on unemployment benefits, which Barack Obama proposed a day earlier.

MCCAIN: It's unclear to me why the government taxes money it's just sent you.

BASH: McCain is also going after those at or near retirement, calling for taxes on up to $50,000 in withdrawals from IRAs and 401(k)s to be lowered to 10 percent. And for investors who lost money in the markets, he would increase the deduction allowed from $3,000 to $15,000. For those who have made money, McCain would cut the capital gains tax in half.

MCCAIN: ... the hard-earned savings. Americans should not be penalized by the erratic behavior of politicians.

BASH: McCain wasn't even done speaking when camp Obama slammed him, saying Trickle-down ideological recipes won't strengthen our economy and grow our middle class.

Convincing voters to trust him on the economy is incredibly tough now for McCain. Here in Pennsylvania, Obama has nearly a 20-point advantage on the issue. It's why McCain's attacks on Obama may be less personal, but they are just as pointed.

MCCAIN: Even he can't turn a record of supporting higher taxes into a credible promise to cut taxes. Perhaps never in history have the American people been asked to risk so much based on so little.

(CHEERING AND APPLAUSE)

BASH (on camera): Voters in this area, fiscally conservative suburban Philadelphia, should be a prime target for McCain's call to lower taxes, but locals say, McCain has the same problem here he does across the country, that voters are so sick of President Bush, Obama may be a so-called risk they are willing to take -- Wolf.

(END VIDEOTAPE)

BLITZER: All right, Dana, thank you.

Barack Obama, meanwhile, is preparing for his final debate with Senator McCain tomorrow night. But he did take some time out to criticize his opponent's new economic plan.

CNN's Jessica Yellin is over at Hofstra University out on Long Island. That is the site of tomorrow's big debate.

Jessica, Obama's attacks on McCain are falling into a broader theme, aren't they?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: That is right, Wolf. They are trying to raise doubts about McCain's leadership abilities by seizing on a word McCain used himself today. They're calling him erratic.

(BEGIN VIDEOTAPE)

YELLIN (voice-over): Today, Senator Obama was getting out the early vote in the battleground state of Ohio.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: Now, remember, Ohioans, you can vote now. Don't wait.

YELLIN: He got a welcome greeting by workers at this auto parts plant near Toledo. Speaking to reporters, the senator had some harsh words for McCain's new economic plan.

OBAMA: There are some ideas that Senator McCain has put forward in the last couple of weeks that are very bad ideas. The idea, for example, of purchasing homes at full price from banks, so that banks have no losses, and taxpayers automatically have the losses, that is a bad idea.

YELLIN: He also criticized Senator McCain's proposal to slash capital gains taxes.

OBAMA: I don't know anybody, even the smartest investors, who right now are going to be experiencing a lot of capital gains. That probably is not going to be particularly useful in solving the financial crisis.

YELLIN: On the stump, Obama's running mate offered even more biting criticism of McCain, accusing him of being erratic. SEN. JOSEPH BIDEN (D-DE), VICE PRESIDENTIAL NOMINEE: Because John has nothing new to offer. That is why I think you are seeing John McCain's campaign becoming so erratic, relying on stunts and negative ads, instead of offering real solutions.

YELLIN: And painting McCain as an angry warrior.

BIDEN: The distinction could not be clearer. One guy is fighting for you, and the other guy is fighting mad and attacking.

(CHEERING AND APPLAUSE)

YELLIN: Both candidates lavished praise on the state of Ohio, saying, a win there could seal victory.

(END VIDEOTAPE)

YELLIN: Now, Wolf, the Obama campaign says they expect that, at the debate here tomorrow, John McCain is going to attack Barack Obama. They say they believe that is what will happen. They say they are ready for it, and Obama in turn will focus on his plans for the middle class -- Wolf.

BLITZER: Thanks very much, Jessica for that.

It is mired in controversy, ACORN, that is, the voter registration group claiming to do good, but accused right now of some things very bad. So, what exactly are Barack Obama and John McCain's dealings with this group? We are investigating. That's coming up.

And Barack Obama sees red. Can he really flip seven states that voted for President Bush?

Hillary Clinton says she put 18 million cracks in the highest glass ceiling. Would she like to see Sarah Palin finally break it as well? Wait until you hear what Senator Clinton says about McCain's running mate. She spoke with our John Roberts. Stick around. You're going to want to hear this.

That is coming up -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: With ties to Barack Obama, the grassroots activist group known as ACORN has been carrying out a massive voter registration effort across the country. But, in some areas, trouble is clearly sprouting up, as ACORN's efforts lead to allegations, very serious allegations, of fraud. What is going on?

Drew Griffin is standing by in Philadelphia.

But let's go to CNN's Brian Todd. He is in Washington, looking at this.

It is becoming an issue out there, Brian. Give us some background. BRIAN TODD, CNN CORRESPONDENT: It certainly is, Wolf, especially because this group says it has registered more than a million voters between last year and now. But it is accused of widespread fraud in several states.

One example shown here from "The St. Petersburg Times," the character Mickey Mouse character appears on a registration form. Now, ACORN denies that that came through their system, but still both presidential candidates are now distancing themselves from ACORN.

(BEGIN VIDEOTAPE)

TODD (voice-over): In northern Indiana, more than 2,000 bogus registration forms, some in the names of dead people, in Las Vegas, an office raid turns up registration forms with names of Dallas Cowboys players, incidents tied to the group ACORN, the Association of Community Organizations for Reform Now.

The group faces investigations in several states for voter registration fraud. Its officials say they turn in all the bogus registrations to election officials, and they say temporary workers they hired defrauded them.

KEVIN WHELAN, SPOKESMAN, ACORN: When we catch them, we fire them, but it is also important to us to prosecute them.

TODD: ACORN was established in 1970 as a grassroots movement to bring lower-income people into the political process. It claims its voter registration efforts are nonpartisan, but ACORN's political wing has officially endorsed Barack Obama.

The Democratic nominee has ties to ACORN dating back more than a decade. He conducted two training sessions for ACORN leaders in the late 1990s, was on a team of lawyers who represented ACORN and other groups, including the Justice Department, in a 1995 voter-related lawsuit, and, during the primaries, Obama's campaign paid $800,000 to a group that subcontracted out to ACORN.

But Obama's campaign now denies close affiliations to the group, says the accusations of fraud should be investigated.

OBAMA: As an elected official, I have had interactions with them, but they are not advising our campaign.

TODD: John McCain has been relentless in recent attacks on ACORN.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: Somehow here keep yelling ACORN, ACORN.

(CHEERING AND APPLAUSE)

MCCAIN: Now, let me just say to you, there are serious allegations of voter fraud in the battleground states across America. They must be investigated.

TODD: But McCain has himself stood on the same podium with ACORN leaders.

WHELAN: On the issue of immigration reform and coming up with a safe and legal and fair path to citizenship, Senator McCain had appeared with us at rallies. He seemed friendly enough to our members.

(END VIDEOTAPE)

TODD: He is referring to a 2006 immigration rally in Miami sponsored by ACORN, by People For the American Way and others. McCain's aides say he was there only to address people who supported his immigration bill, and they say he did not endorse ACORN's agenda.

A McCain aide says -- quote -- "We have nothing to do with these guys" -- Wolf.

BLITZER: Brian, these state investigations into ACORN and what is going on, any indication they could go higher?

TODD: Many people are pushing for it. Republicans in Congress have asked the Justice Department to investigate. A government official tells us that Justice is reviewing the material in the state investigations to see if there is any basis for a federal probe, but officials at Justice refused to say if they have opened any investigation or not.

BLITZER: Brian Todd in Washington.

Let's get a closer look at this voter registration controversy. Drew Griffin of CNN's Special Investigations Unit is joining us now live from Philadelphia.

You have been looking closely into this. What are you picking up, Drew?

DREW GRIFFIN, CNN INVESTIGATIVE CORRESPONDENT: This is the latest spot where those investigations are under way, Wolf.

In fact, I can tell you and Brian that the city of Philadelphia has sent 1,500 what they say are fraudulent voter registration forms to the U.S. attorney here to be investigated, all 1,500 from one group, ACORN.

This is Deputy City Commissioner Fred Voigt.

(BEGIN VIDEOTAPE)

GRIFFIN: Is ACORN a group that has been problematic in its organizing of these voter registration drives?

FRED VOIGT, PHILADELPHIA DEPUTY CITY COMMISSIONER: Absolutely.

GRIFFIN: Have you tried to work with them to explain to them...

VOIGT: Absolutely.

GRIFFIN: Why...

(CROSSTALK)

VOIGT: I don't have an answer for you, OK?

GRIFFIN: Right.

VOIGT: All right?

We originally -- this has been going on for a number of years. We have met with them. We have talked to them. We know that there have been people who have not been able to meet their quota, and they get fired. They are facing the prospect of being fired. And the people who are doing this are in many cases homeless. In many cases, they are recovering drug addicts, recovering alcoholics, who are desperate for money.

GRIFFIN: So, the quota system is pretty much the same thing as a pay...

(CROSSTALK)

VOIGT: It's a different...

GRIFFIN: Different form of the same thing?

VOIGT: Different form of the same thing.

(END VIDEOTAPE)

GRIFFIN: That is Deputy Commissioner Fred Voigt saying, basically, ACORN is setting up the voter registration drive where they pay people to register people to vote. It sets up this atmosphere where they get them in or they don't get paid, Wolf. And that leads to fraud, specifically because they are hiring these homeless people to actually go out and gather votes.

We tracked down the ACORN director here in Philadelphia. Her name is Junette Marcano. Here is what she said, not denying any of that.

(BEGIN VIDEOTAPE)

JUNETTE MARCANO, ACORN: If someone needs a job, and we are a community organization that services low- and middle-income families, who are we supposed to assist?

GRIFFIN: But, I mean, just because you are low-income does not mean you would commit fraud.

MARCANO: No. And that is our point. That is our point. Just because you are low-income, you are not supposed to have a second chance at earning a fair income?

(CROSSTALK) GRIFFIN: Why is the deputy city commissioner of Philadelphia telling me that ACORN is hiring recovering alcoholics, drug addicts, homeless people, who are so desperate to get money that they know that, if they don't make their quota, they just fill in any old name? That is what he is telling me.

MARCANO: That is not the point.

GRIFFIN: That is not the point?

MARCANO: No, that is not the point.

GRIFFIN: What is the point?

MARCANO: We did not deliberately go out there and say, you are homeless, you are a recovering alcoholic, you are decrepit.

GRIFFIN: But has it presented itself as a problem to ACORN? Wouldn't ACORN like to run a nice, clean, smooth voter registration drive?

(CROSSTALK)

MARCANO: We have done that, because if we have been able to register 85,000 -- above 85,000 good registrants, compared to 5,000 suspect cards, we have done a good job.

(END VIDEOTAPE)

GRIFFIN: The actual number here, Wolf, city officials tell us close to 8,000 -- 8,000 of those ACORN registrations could be fraudulent. They are being looked at right now here in Philadelphia, and 1,500 sent over to the U.S. attorney for possible criminal investigation -- Wolf.

BLITZER: And could be embarrassing, obviously could be very embarrassing.

All right, I want you to be very precise, Drew, and just clarify for our viewers what we know about the relationship between the Obama campaign and ACORN specifically, because there has been confusion out there.

GRIFFIN: I think Brian Todd laid it out very well.

Barack Obama goes back with this organization. It is a community-organizing organization. He was a community organizer. They crossed paths back in Chicago, worked together. He trained some of them. As an attorney, he represented the ACORN group in a motor voter case in the state of Illinois, a case that he won.

And, in the primary campaign, Barack Obama's campaign gave $800,000 to a subsidiary of ACORN to go out and register to vote. Now, today, I am told that the Obama campaign is saying, we may have paid them some money for canvassing, but, in earlier e-mails with the Obama campaign, they did say that they paid them $800,000, this subsidiary of ACORN, in the primary to garner votes.

What the Obama campaign is trying to say now is, look, we are not working with them in the general election. That was the primary. This is the general election. And these problems that we're seeing surfacing right now are in the general election; therefore, we are not connected with ACORN.

BLITZER: But, Drew, are they confirming that they worked with what you are describing as a subsidiary of ACORN or some third party that in turn went ahead and subcontracted to ACORN?

GRIFFIN: In earlier e-mails with the Obama campaign, our producer Kathleen Johnston specifically spelled that out with their people, Ben LaBolt, in Chicago, who said, look, yes, we did work with them, this subsidiary of ACORN, back in the primary, but we are not working with them anymore.

I want to also point out -- we are talking about whether or not this is a nonpartisan group or not. I attended a volunteer rally with ACORN. I would say that 50 percent of the people had on "ACORN for Obama" T-shirts. So, to say that this group is nonpartisan or not somehow connected or at least favorable toward the Obama campaign, I don't think is accurate.

BLITZER: Drew Griffin working the story for us.

And, by the way, our viewers should know, you can get a lot more of Drew's reporting tonight, 10:00 p.m. Eastern, on "ANDERSON COOPER 360."

So, can he turn red into blue? We are talking about Barack Obama. He is making battlegrounds out of seven states that went to George W. Bush the last time around.

The first President Bush and former President Bill Clinton, they are teaming up once again -- why they are taking a helicopter tour over Texas.

And Ringo Starr may be tired of being a star. If you are thinking of sending fan mail, you will want to listen to what he has to say.

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(NEWS BREAK)

BLITZER: To our viewers, you are in THE SITUATION ROOM.

Happening now: the battle for the suburbs. Voters there, especially women, could swing this election. Which candidate has the advantage?

Also, Hillary Clinton tells CNN what she really thinks of Sarah Palin as the Republican vice presidential nominee -- that and much more with the best political team on television coming up.

Plus, massive deadly wildfires burning out of control in Southern California, their the impact on the state's budget.

I'm Wolf Blitzer. You are in THE SITUATION ROOM.

Only 21 days to go, and not a vote to spare. As we count down to Election Day, right now, CNN considers seven states to be tossups. They are, Colorado, Florida, Missouri, Nevada, North Carolina, Virginia, and Ohio, and they have a total of 100 electoral votes at stake. All seven of the states voted for President Bush in 2004. And now, by CNN's estimate, they could go either way.

So, let's turn to one of those crucial battlegrounds, Missouri.

Our chief national correspondent, John King, is in Saint Louis.

John, you have been looking at Senator McCain's specific problems with a key voting bloc. What are you coming up with?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Wolf, in past campaigns, we have called them the soccer moms or the security moms. We are talking about suburban women, a key constituency here in the state of Missouri and in many of those battleground tossups you just mentioned.

And what we are finding is that, three weeks out, John McCain has a problem.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: Do you need anything else?

KING (voice-over): Getting Molly (ph) off to school is part of the morning routine, a push to stay late for extra credit.

UNIDENTIFIED FEMALE: When are you going to find out about staying after?

KING: And a few jokes about the election now just three weeks away.

UNIDENTIFIED FEMALE: Who are you voting for?

KING: In Susan McGraw's rear-view mirror, two votes for George W. Bush.

But, in this campaign struggle for the suburbs, she is leaning Obama, despite scoring things in McCain's favor on the issue of leadership and experience.

SUSAN MCGRAW, MISSOURI VOTER: I feel like, the state that we're in right now, we need something different. And to get different, you have to do different. And, so, that's why I'm leaning towards him.

KING: In big, diverse states like Missouri, close elections are usually decided in the suburbs. And, three weeks out, McCain has a problem here and in other key battleground states. Republicans don't expect to win among suburban women, but the margin matters.

Four years ago, Democrat John Kerry had just a narrow edge, 51 percent to 48 percent, and President Bush won reelection. But the latest CNN polling shows Barack Obama with a big 56 percent to 44 percent lead among suburban women. And among the reasons are significant doubts about the woman McCain chose to share the Republican ticket.

MCGRAW: It's not that I'm so rah-rah Obama. But, you know, Sarah Palin, I -- I feel like, when she talks, she's like, "OK, John, I pulled that one off."

And -- and it's -- this is too important. I hate to say it, but Sarah Palin has really -- she scares me.

KING: Stacey Newman feels the same way, but says picking Palin hurt McCain with a key target constituency -- women who voted for Hillary Clinton in the Democratic primaries.

Newman is a longtime Democrat who says the Obama campaign has done little to reach out to prominent Clinton supporters.

STACEY NEWMAN, FORMER HILLARY CLINTON SUPPORTER: I don't know if it's the arrogance that we are going to vote Democrat anyway, so why do we need to spend -- you know, more energy on us? But, yes, there's a disappointment.

KING: But while she was an all but certain Democratic vote in any event, Newman says friends who were once open to considering McCain are now contributing to a new blog opposing the McCain/Palin ticket.

NEWMAN: So it's been more of the -- you know, the Palin, in terms of inciting us to realize that, wait a minute, we have to support the Democrat, even though we, you know, are not as emotionally tied.

(END VIDEOTAPE)

KING: Now, Wolf, I've kept in touch with Susan McGraw, the first woman in that piece, a classic suburban swing voter. She says it's not just Sarah Palin, that rising energy and health care costs are putting the squeeze on her family budget. She is a divorced mother of two teenaged girls. She says she'll watch the final debate this week and that John McCain possibly -- possibly change her mind, but she's leaning Obama increasingly, Wolf. And, as you know, three weeks is not too much time.

BLITZER: Only 21 days.

All right, John, thank you.

Let's talk about what's going on right now with the best political team on television -- our senior political analyst, Gloria Borger; Steve Hayes, the senior writer for "The Weekly Standard"; and our senior political correspondent, Candy Crowley -- Candy, let me start with you. Anyone who says this race is over I think is mistaken. And there are some poll numbers to back that up.

Take Florida, which was key in 2000. Twenty-one days before the election in 2000, Gore was ahead by 3 points over Bush, 46-43 percent. Right now, in our poll of polls in Florida, Obama is ahead by 3 points, 49-46 percent. It could still go either way in Florida and potentially that state could be decisive.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Yes, absolutely. But it has to go that way in an awful lot of states. And you're absolutely right. It's not just that these polls are going to tighten, because almost certainly there will, if the past is prologue, although this has been one of those years when the past hasn't been much of a prologue.

But the other thing is that this is where John McCain tends to shine, is when he's down and out. I mean that's when he reverts back to let McCain be McCain. And if he can do that, he can probably close those polls (INAUDIBLE).

BLITZER: And, Gloria, the same in Ohio, which was decisive four years ago, 21 days before the election, Bush and Kerry were tied in Ohio, 48 percent-48 percent. Right now, we have, in our poll of polls, 48 percent for Obama, 46 for McCain. But that's well within the margin of error.

So if McCain could come back in Ohio, that could be decisive, potentially, as well, right?

GLORIA BORGER, SENIOR POLITICAL ANALYST: You've been talking to the campaign, haven't you?

BLITZER: Potentially.

BORGER: Florida and Ohio, 47 electoral votes, key for them, within their grasp. The least negative news -- let me put it that way -- not positive news, but the least negative news they have had is in those two states. And so they're going to make a play for those two state because they need them...

BLITZER: Which...

BORGER: ...particularly since some of the states like Nevada and New Mexico aren't going the way that they thought they were going to go.

BLITZER: Which sets the stage for tomorrow night's debate at Hofstra University, not far from where we are right now.

What does he need to do -- McCain, because this is his really last chance in a one-on-one with Senator Obama, to turn things around?

STEPHEN HAYES, SENIOR WRITER AT "THE WEEKLY STANDARD": It is. I think he needs to begin laying the groundwork for the final three weeks of the campaign. And to do that, he needs to talk in a clear and compelling way about the economy. And I think he needs to reintroduce national security in the context of the economy. It's the one issue on which John McCain is beating Barack Obama still -- I mean, literally the one issue on which he has an advantage at this point.

I think it will look out of touch if he focuses on national security, but he can talk about economic security and national security and John McCain being the guy who can do both...

BLITZER: Because the ostensible subject of tomorrow night's debate...

HAYES: Is domestic.

BLITZER: ...is the domestic stuff.

BORGER: Right.

BLITZER: Not national security. But then again, that first debate was supposed to be on foreign policy and it turned out to be a lot on the economic issues, as you point out.

Stand by, guys. We have much more to discuss, including Hillary Clinton. She still wants to see a woman in the White House one of these days, but what if it's Sarah Palin?

Senator Clinton speaking out about the Republican vice presidential nominee to our own John Roberts. Stay with us.

Plus, the perils of the podium -- where anything that can go wrong often does.

(COMMERCIAL BREAK)

BLITZER: Hillary Clinton often boasts she put 18 million cracks in the highest glass ceiling.

So what does she really think about Governor Sarah Palin potentially breaking it?

Senator Clinton spoke with CNN's John Roberts this morning.

(BEGIN VIDEO CLIP FROM "AMERICAN MORNING")

JOHN ROBERTS, CO-ANCHOR, "AMERICAN MORNING": As a woman -- and not to just say that women vote for women just because of gender -- but would you not like to see the very first woman in the White House?

SEN. HILLARY RODHAM CLINTON (D), FORMER PRESIDENTIAL CANDIDATE: Well, I would like to see the very first woman in the White House who I agree with and who I think has policies that would really fulfill the goals that I have for our country.

Of course, it's exciting to have a woman on the ticket. The Democrats had a vice presidential candidate as a woman back in 1984 and the Republicans did it this year.

But that, in and of itself, is not enough reason. And really, no one will shatter that ceiling until we have a woman serving as president or vice president. But I am going to be supporting women and men with whom I agree, who I believe have the right policies and the right ideas about what's best for America.

(END VIDEO CLIP)

BLITZER: And among her supporters, Gloria, in the latest "Washington Post"/ABC News poll of Clinton Democrats, 81 percent say they will support Obama, 17 percent say they'll support McCain.

But she's really been pretty much out there trying to do whatever she can to help Senator Obama.

BORGER: Yes, she has been out there. I think the economy is a key factor for women voters. And I think those women are going to Barack Obama. And I think Sarah Palin, as John's piece showed earlier in the show, Sarah Palin has not exactly attracted those Hillary Clinton supporters. She's been much more popular with white men than she has been among the Hillary Clinton supporters.

BLITZER: Several Republicans have said to me they -- they really sort of feel disappointed that Senator McCain picked her, even though they know politically she's energized the base and done some good things politically for him and the campaign. But they're disappointed that he thought she was best qualified to potentially be commander-in- chief.

HAYES: Yes, you've seen a lot of people make that argument. I mean I think she brings obvious positives and she brings obvious negatives. I mean, she did not do well in situations like the Katie Couric interview. On the other hand, if you see her out on the stump, she has, I think, a masterful sense of political timing. She can give a great speech. And she certainly has energized the base. I mean you'll talk to people who were never going to vote for John McCain and weren't going to go out for John McCain who are now enthusiastically defending him on things that they've disagreed with him before.

BLITZER: How should Senator Obama, tomorrow night -- you've been covering his campaign for a while -- what are you hearing?

How is he going to deal with Senator McCain, for example, if he directly confronts him with the William Ayers -- the '60s Weather Underground radical?

How is he going to deal with this?

CROWLEY: It will go something like this. I certainly have known Mr. Ayers. I certainly don't agree with what he did when I was eight years old. But it's too bad we're discussing this, because, of course, what the American people really want to talk about is the economy. End of story.

BLITZER: And that will be the...

CROWLEY: That will be that.

BLITZER: ...he'll take that road, because it's a potentially sensitive issue out there. BORGER: Yes, it's a very sensitive issue. But I think both of these candidates -- and while there may -- there's going to be that back and forth, I think both of these candidates understand that what the American people want to hear about is their solutions on the economy.

And, you know, we have a John McCain plan, we have a Barack Obama plan. In some ways, they're pretty similar. In some ways, they're different.

And, you know, Obama's plan is more of a relief effort for the middle class, to a certain degree, a public works program kind of thing. And McCain's plan is more geared toward older people and investors.

BLITZER: And there's no doubt that Senator Obama tomorrow night will once again, as he's been doing a lot, trying to link Senator McCain, suggesting he's a third term of the Bush administration.

How would -- based on what you're hearing from the McCain camp, how will Senator McCain handle that?

HAYES: Well, I think, you know, part of the problem is they don't have any new arguments to really handle that. I think it was something that they made -- a case that they made before was, look, we voted against him, we fought him on big issues.

The problem is this environment. With the economy, I think voters are saying we don't want Republicans. And, generally, John McCain -- you know, that's, I think, his biggest problem at this point, is that he's a Republican. He has an R next to his name.

BLITZER: Well, because some suggest that he should simply say you know what -- and he might say this -- the Democrats are going to be the majority in the House and the Senate, do you want -- you know, no checks and balances?

Don't you think that there needs to be some checks and balances on Nancy Pelosi and Harry Reid?

HAYES: Yes, we've heard Sarah Palin make that case, I think, on the road for a while...

BORGER: McCain said it.

HAYES: ...and John McCain has done it more and more. I'd be shocked if he didn't make it. But it's still hard, I think, for him to get away from George W. Bush, even as he tries to sort of change the subject.

CROWLEY: You know, if he -- I don't know what they're saying to him at this point. But I mean he could easily say well, let's just -- let me just run down the list here. The legislation on torture, the gang of 14 to stop the filibusters of Supreme Court nominees, campaign finance reform -- I fought them tooth and nail.

BLITZER: So he's got a bunch of things he can go through...

CROWLEY: Yes.

BLITZER: And he probably will.

All right, guys, we'll watch that debate tomorrow night.

It's one of the most closely watched Senate races in the country right now, pitting Democratic challenger Al Franken against incumbent Republican Norm Coleman. Now a new poll has numbers in this race. We're going to tell you what's going on there

Plus, what can go wrong at the podium -- a lot. Just ask Jeanne Moos. She's getting ready to take a Moost Unusual look.

(COMMERCIAL BREAK)

BLITZER: Lou Dobbs is getting ready for his show, that begins right at the top of the hour -- Lou, what are you working on?

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Well, Thank you, Wolf.

ACORN, the left-wing radical group with ties to Senator Obama, is sparing no effort to sign up new voters, even trying to register Mickey Mouse. Now the Obama campaign is trying to distance itself from ACORN and rewriting the history of Obama's relationship with ACORN. We'll have complete coverage tonight.

Also, a Democratic Congressman who put ethics and honor the center of the campaign has a little problem with a sex scandal now.

And was there a cover-up by top Democrats in Washington?

We'll have that report.

And a startling reversal by President Bush and Treasury Secretary Paulson. The federal government will buy stakes in this country's financial institutions after weeks of saying no. Two leading economic thinkers will be joining me to assess that.

And three of my favorite talk show hosts also join us here tonight at the top of the hour.

Please be with us. We'll have all of that and more, and all the day's news from an Independent perspective -- Wolf, back to you.

BLITZER: Lou, see you in a few moments.

Thank you.

On our Political Ticker today, a new poll in the Minnesota Senate race gives Democratic challenger Al Franken a very slight edge. The Quinnipiac University survey of likely voters shows the former comic with 38 percent, compared to the 36 percent for the incumbent Republican, Norm Coleman. Some analysts say Coleman may be at a greater disadvantage because Barack Obama is leading John McCain in Minnesota.

Michelle Obama is bringing a special guest to tomorrow's third and final presidential debate at Hofstra University in New York. She'll sit with the wife of Republican Senator Chuck Hagel of Nebraska. Mrs. Hagel endorsed Barack Obama for president last week. Senator Hagel has not endorsed either presidential candidate.

And it's a multimillion dollar decision -- a judge's ruling affecting the owners of thousands of dogs and cats sickened by tainted pet food.

And some reassurance in California -- the governor's assessment of resources in the battle against the perfect storm of wildfires.

(COMMERCIAL BREAK)

BLITZER: Carrie Lee is monitoring some other important situations incoming into THE SITUATION ROOM right now.

What's going on -- Carrie?

LEE: Well, first of all, Wolf, the economic stimulus checks should be in the mail soon for about a quarter of a million married couples. Now, couples are supposed to notify the Social Security Administration of any name changes. But if they didn't, they missed out on the February rebate. The IRS had said it wouldn't send checks to anyone whose name and Social Security numbers didn't match. But last week, the agency reversed its position.

And pet owners whose dogs and cats became sick after eating tainted pet food will now receive financial compensation. Just a short time ago, a federal judge approved a $24 million settlement in a class action suit against manufacturers and stores that sold the pet food. A lawyer for the plaintiffs says more than 1,500 animals in the U.S. died after eating that food.

And fierce Santa Ana winds are blowing wildfires across Southern California. Thousands of people have fled their homes and two people have been killed.

Governor Arnold Schwarzenegger is assuring residents that the state has $1.t billion to fight the fires.

(BEGIN VIDEO CLIP)

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: Even though we have had budget problems in our state and we have an economic slowdown, but we spare not one single dollar when it comes to fighting fires. We're going to use all the money, even if we have to take it from somewhere else. We always make public safety and protecting the people's lives and protecting the people's properties our number one priority.

(END VIDEO CLIP)

LEE: The fires have burned more than 25 square miles in suburban Los Angeles and Northern San Diego County, Wolf, just a huge area. Very hard to contain.

BLITZER: I hope it gets better.

LEE: Yes.

BLITZER: All right, Carrie.

Thanks very much.

Our Internet reporter, Abbi Tatton, is looking at those I-Reports from one of those fires north of L.A. -- Abbi, what are you seeing?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, these pictures show you just how close the flames are getting to residential areas.

If we can take you into Porter Ranch, an area in the north of Los Angeles. Take a look at the those homes along there by the canyon. This is what it looked like at 1:00 a.m. This morning. Matt Hartman was there taking pictures. He said the flames got so intense, that this area was evacuated and the families left.

If we can go just to the other side of the canyon, we've also got I-Reporters who are watching and waiting what's going to happen next. This is the view today from Brandy's Grote's house, if we can pull up that picture. She's in Grenada Hills. She says the winds are moving west, those fires moving away, she hopes. She doesn't feel too threatened, but she does say that her and her neighbors have been dousing their yards, any dry areas, just as a precaution -- Wolf.

BLITZER: Thanks, Abbi.

A foreign dignitary takes the stage then takes the podium -- literally. Jeanne Moos will explain.

And stock market roller coaster -- traders reacting to a huge market swing in Asia. We're going to show you that and a lot more in today's Hot Shots.

Stick around.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Here's a quick look at some of our Hot Shots.

In Iraq, a soldier stands guard at a church.

In Lebanon, Italian U.N. peacekeeping troops a salute.

In the Philippines, stock traders exchange high fives after a surge.

And in New York, Hofstra University students practice for tomorrow's debate.

Some of this hour's Hot Shots. Let's go straight to CNN's Jeanne Moos right now.

She has a Moost Unusual look at the perils of the podium.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): When Italy's prime minister takes the podium, he really takes the podium. Silvio Berlusconi had been praising President Bush when he tripped over a mike cord.

(VIDEO CLIP)

UNIDENTIFIED FEMALE: That's going to be very difficult.

(VIDEO CLIP)

MOOS: Which translates, "This is what happens when you love too much." The two men exchanged kisses.

But even when it stays in one piece, a podium can be a perilous place -- a place where even the slightest mishap is magnified. Take this Sarah Palin rally. Some of her supporters couldn't hear her, so they started chanting loudly.

(VIDEO CLIP)

MOOS: But Governor Palin thought they were protestors, so she used the old protestor putdown on her own supporters.

GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: I would hope at least that those protestors have the courage and the honor of thanking our veterans for giving them the right to protest.

MOOS: That's when husband Todd stepped in to fill her in.

TODD Palin: They just can't hear you back there. That's why they're doing the hollering.

PALIN: OK.

MOOS: The podium has been a pitfall lately for musicians. Country star Lee Greenwood...

LEE GREENWOOD: That's the wrong song.

PALIN: Hey, if everything's under control, then you're going too slow.

MOOS: Now that could be a McCain campaign slogan.

At a previous rally, Hank Williams, Jr. sang new lyrics to one of his old hits.

HANK WILLIAMS, JR: McCain-Palin tradition.

MOOS: But he sang some lyrics about terrorist connections that the campaign left out of its official version song.

WILLIAMS: They don't have radical friends to whom their careers are linked.

MOOS: The campaign also left out the part where Hank calls Sarah a dish.

WILLIAMS: Hey good looking dish.

MOOS: And while we're dishing about podiums...

(BEGIN VIDEO CLIP FROM "SATURDAY NIGHT LIVE," COURTESY NBC)

TINA FEY: It just goes to show that anyone can be president.

UNIDENTIFIED FEMALE: Anyone.

(LAUGHTER)

(END VIDEO CLIP)

MOOS (on camera): Poor podiums. The same night that Italy's prime minister decapitated his podium, the cast from "Jersey Boys" serenaded White House guests with this classic.

(VIDEO CLIP)

MOOS (voice-over): Yes, well, next time Italy's prime minister walks like a man, maybe he should leave the podium behind.

Jeanne Moos, CNN, New York.

(END VIDEO TAPE)

BLITZER: Oh, those podiums.

Tomorrow, by the way, Donald Trump -- he's going to be right here in THE SITUATION ROOM. It's debate night in America.

Our coverage will begin here in THE SITUATION ROOM.

Until then, thanks very much for watching.

Up next, "LOU DOBBS TONIGHT" -- Lou.

DOBBS: Thanks, Wolf.

Tonight, Senator McCain ridiculing Senator Obama's economic policies one day before they meet in a potentially game changing presidential debate.

And tonight, ACORN, the left-wing radical group with ties to Senator Obama, sparing no efforts to sign up new voters -- even trying to register Mickey Mouse.

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