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Global Markets Mixed, Countdown to the Final Presidential Debate: Game Plan From Both Candidates; A Look at the Electoral Map; Three Major Wildfires Burning in Los Angeles; Foreclosed Homes Going at Bargain Prices; Passengers Stopped a Possible Acts of Terror in the Sky
Aired October 15, 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)
JOHN ROBERTS, CNN ANCHOR: On the clock. The campaign intensifies before the final presidential debate.
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: J-o-b-s. Jobs.
ROBERTS: John McCain tries to turn the tide with his plan for your bottom line.
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Fight to get our economy out of the ditches, back in the lead.
ROBERTS: What each candidate can do to lock it up tonight. The best political team kicks off the pre-game right now, on the "Most Politics in the Morning."
(END VIDEO CLIP)
KIRAN CHETRY, CNN ANCHOR: Welcome. We're teeing up to a big night tonight. The third presidential debate on this Wednesday, October 15th, the third and final one.
ROBERTS: This is going to be the last chance for the candidates to make their case to a massive audience and this one could be for all the marbles. Complete coverage of that this morning.
We start off, though, after all the bad economic news, some relief this morning at the pump. Some good news out there.
Gasoline prices down again for the 28th consecutive day. AAA reports the national average for a price of a gallon of regular unleaded is now $3.12. When's the last time you heard that? That's down nearly four cents since this time yesterday.
World markets digesting the U.S. bank rescue plan. Asian stocks were mixed overnight. Japan's Nikkei closed up one percent. Hong Kong's Hang Seng, though, lost nearly five percent. In London, the FTSE is trading in negative territory. Dow futures are also lower this morning by about 140 points.
And we're tracking Hurricane Omar. The storm expected to slam the northern Leeward Islands of the Caribbean tonight. Hurricane warnings have been issued for the U.S. Virgin Islands and parts of Puerto Rico. Right now, Omar's maximum sustained winds near 75 miles an hour. But the National Hurricane Center says Omar is expected to strengthen as it heads north.
CHETRY: All right. Well, now to the "Most Politics in the Morning." And we are counting down, as you see, to tonight's third and final presidential debate. It's less than 15 hours away now, and the stakes couldn't be higher.
The latest national poll of polls shows Barack Obama with an eight-point lead over John McCain, 50 percent to 42 percent. And as we say, there's just 20 days to go until the election, but, still, a lot could change.
CNN's electoral map suggests that McCain does have an uphill fight right now to become president. Obama is projected to have 264 electoral votes with McCain having 174; 270 needed to win.
The economy, of course, will be center stage in tonight's debate. CNN's Candy Crowley looks at the game plan from both candidates.
CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Kiran and John, something unexpected can always happen in these debates, but this year there has been more certainty. And one of the biggest certainties is that both these candidates are likely to talk most about the economy.
CROWLEY (voice-over): Trying to get on top of an issue that has crushed his campaign, John McCain rolled out a $52.5 billion economic plan.
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: If I'm elected president, I will help to create jobs for Americans in the most effective way a president can do this, with tax cuts that are directed specifically -- to create jobs. Create jobs and to protect your life savings.
CROWLEY: McCain's new initiatives would eliminate taxes for workers drawing unemployment, allow individual investors to write off up to $15,000 in stock losses and cut the capital gains tax on stock profits. There was as well casually for one of McCain's most loyal voting blocs, the over-60 crowd.
MCCAIN: Under the emergency measure I propose, we will also cut the tax rate for withdrawals from tax-preferred requirement accounts to 10 percent. Retirees have suffered enough and need relief. And the surest relief is to let them keep more of their own savings.
CROWLEY: The Democratic ticket spent the day double-teaming Ohio and McCain. Obama camped out in that critical state for debate prep said he doesn't know much about McCain's latest proposals but hasn't liked what he's seen so far.
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: There are some ideas that Senator McCain has put forward in the last couple of weeks that are very bad ideas.
CROWLEY: It is the kind of coolly, critical analysis Obama has made into an art form in presidential debates. His main goals Wednesday night remain, look presidential. Don't rock the boat. Joe Biden does the rocking.
SEN. JOE BIDEN (D), VICE PRESIDENTIAL CANDIDATE: The distinction could not be clearer. One guy's fighting for you, and the other guy's fighting mad! And attacking.
CROWLEY: For John McCain, the third and final debate is his last best shot at a huge audience of voters, many of whom have not been impressed with McCain raising the issue of Obama's relationship with '60s radical William Ayers who founded a group linked to several bombings in the Vietnam era.
McCain did not mention Ayers in his last debate. Some conservatives are urging him to bring it to Obama this time.
It's risky. It might hearten those who think McCain hasn't gone hard enough. It may likely turn off independents, who increasingly seem to be turning to Obama.
CROWLEY: In an interview with KMOX Radio in St. Louis, John McCain seemed to suggest that he thought the subject of Ayers would come up tonight, but he believes it would come in question form from the moderator -- Kiran and John.
ROBERTS: Candy Crowley for us this morning. Candy, thanks so much.
With Senator McCain slipping in the polls, does the Republican candidate need to score big in tonight's final face-off? CNN's Suzanne Malveaux is here with the debate preview.
You know, after being pummeled for two weeks on the economy, he's had a couple of good days with this new economic plan, but he goes into tonight's debate with this traditional disadvantage that Republicans have, because more people believe that Democrats would better handle the economy.
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Right. And, John, and the polls are actually bearing that out. They show that that's true.
And economists really, they have no idea what's going to happen. They say that everything is unpredictable. It has changed from day to day. Who would even suspect that the government would actually be buying shares in these banks?
And as widely believed that FDR in the 1930s, he said, you know, he won based on bold experimentation and that if it didn't work, he was just going to rip up the plan. He was going to start all over. Essentially today that would be called flip-flopping. It wouldn't necessarily go over so well, but I think these candidates, they need to really not only give the specifics about their economic plans and be confident about it, but they also need to acknowledge, you know, this is unchartered territory here. We have no idea what we're dealing with going into the future.
ROBERTS: But, you're right, I don't think a statement about bold experimentation --
MALVEAUX: Would work tonight, no.
ROBERTS: What you've seen is a very definitive policy these days. Listen, the latest poll of polls has got Barack Obama with an eight-point lead now, but eight percent of voters still undecided.
Back in 2000, George Bush managed to turn around a deficit but that was at the end of September. Beginning of October after the first debate, things started to change. Is it too late for John McCain or could he still make a last-minute rush?
MALVEAUX: You know, it's interesting because you think about that case with Gore in 2000. And I mean, really, he went in. He had an incredible lead. Everybody thought it was locked up and then it all turned on that last debate and he just took a downturn from that point on.
So, McCain, you know, he could -- it could be a game-changer. He could make up, you know, make people's minds up and change their minds here. But one thing that's really different this time around is the early voting.
ROBERTS: Right. Yes.
MALVEAUX: There are a lot of people, they're trying to get them out as quickly as possible before Election Day and a lot of people have already voted. And that's just something that we don't know. I mean, we have no idea how many people are out there who've already set this race in motion.
ROBERTS: Good point. Yes. Reagan turned it late in the game, too. So, it's possible. We'll see.
Suzanne Malveaux, thanks so much for that.
MALVEAUX: All right. Thanks, John.
CHETRY: Also this morning, Barack Obama is firing back at claims that he's tied to a group Republicans have accused of voter registration fraud. The activist group ACORN works in states to sign up low-income and minority voters who tend to favor Democrats. In recent weeks, it's been accused of filing a small amount of phony applications. Some reportedly signed by Mickey Mouse and members of the Dallas Cowboys football team.
Well, the McCain campaign says that Obama has close ties to the group and should rein it in. But Obama quickly challenged that after Sarah Palin called into Rush Limbaugh's radio show. (BEGIN VIDEO CLIP)
GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: Given the ties between Obama and ACORN and the money that his campaign has sent them and the job that he had with them in the past, Obama has a responsibility to rein in ACORN and prove that he's willing to fight voter fraud.
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: There is an ACORN organization in Chicago. You know, they've been active. As an elected official, I've had interactions with them, but they're not advising our campaign. We've got the best voter registration and turnout and volunteer operation in politics right now. And, you know, we don't need ACORN's help.
(END VIDEO CLIP)
CHETRY: Obama did represent the group while working as a private attorney back in the 1990s, but John McCain has also appeared with the organization. This is video of him at an ACORN-sponsored rally back in 2006. McCain aides say that he was there only to address people who supported his immigration reform bill and didn't endorse ACORN's agenda.
Well, the market rebound certainly some good news. But we are still hearing recession talk. The stock market turmoil confusing. Finding out about all of that, "Minding Your Business" breaking it all down for you.
Seized by the bank and sold to the lowest bidder.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: It was listed for $109,900. Now it's listed for $45,000. It's the same house. It is a tremendous loss to the banks.
(END VIDEO CLIP)
CHETRY: Foreclosed homes going at bargain prices, but why are the banks failing to help struggling homeowners?
You're watching the "Most News in the Morning."
(BEGIN VIDEO CLIP, "THE TONIGHT SHOW WITH JAY LENO)
JAY LENO, HOST, "THE TONIGHT SHOW WITH JAY LENO": Feeling like Halloween already?
LENO: Got your costume picked out?
AUDIENCE: Yes. LENO: I got mine. I'm going to wear my pants with the pockets out and just go as a bank. You know, hey.
Actually, you know, what most people are going to be this Halloween? Broke! That's what they're going to be!
(END VIDEO CLIP)
CHETRY: Oh, goodness. Well, the financial situation certainly had been fodder for the late-night comedians. Christine Romans join us now, "Minding Your Business."
It's not all that bad, is it?
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: We'll talk about the banks because the banks had a great day yesterday. That's because it took $250 billion of our money to get things fire lit under the bank stocks. But of the nine banks that will be the initial recipients of that federal infusion of taxpayer money, eight of them had a huge rally yesterday. Almost 10 percent moves for some of them.
JPMorgan Chase, though, the rare loser, down about three percent. That company is going to report earnings just in the next couple of hours and we could see that company losing money in the quarter for the first time in a very, very long time.
The focus today shifting now that we've talked about the recapitalization of the banks, and we've seen more details about the federal bailout. The focus around the world now is shifting to just how bad the economy is going to be worldwide.
Last night, Janet Yellen, who is the president of the San Francisco Fed, in a speech said that it appears that the United States is in a recession. The U.S. appears to be in a recession, that pretty much every part of the economy has been hit by the credit crisis.
We won't know if there's a recession until the National Bureau of Economic Research decides, that's the official arbiter decides that a recession has happened. But almost everyone we're talking to is saying that times are going to be tough here at the end of this year and probably heading into 2009. The depth and the magnitude of that -- of that economic weakness remains to be seen.
So, we're watching the bank stocks recover. But, remember, we don't know how long it's going to take before this federal bailout, this rescue, this ever-evolving rescue. We don't know how long it's going to take before the credit markets completely thaw and things get back to normal and then, of course, we don't know the damage that's already been done. So, this is still, you guys, a work in progress, trying to figure out where we go from here and whether it will stick.
Remember, the government doesn't have board seats. They can't sit there on those banks and say you have to start lending more money. The hope is that with these capital infusions that lending will resume. ROBERTS: But this is part of what people were worried about. You know, another band-aid in the problem stops the bleeding for a little while and then it continues.
ROMANS: We've had so many of it. We're covered with band-aids at this point, too.
CHETRY: Very cute.
ROBERTS: Thanks, Christine.
CHETRY: But gas prices down nearly a dollar.
ROMANS: You know, you're right.
CHETRY: From the high back in July.
ROMANS: And that is the silver lining when you're talking about worries about a weak economy. That means demand for things like oil go down and then you will feel some -- you will feel some relief at the pumps.
ROBERTS: If only you could afford it even at $3.12, right?
ROBERTS: Thanks, Christine.
CHETRY: Thanks, Christine.
The fight in the battleground states.
(BEGIN VIDEO CLIP)
GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: Pennsylvania, are you ready to help us carry this state to victory?
(END VIDEO CLIP)
CHETRY: Twenty-one electoral votes are up for grabs in Pennsylvania. And as key states turn into true toss-ups, we examine the impacts on the electoral map.
You're watching the "Most News in the Morning."
CHETRY: Welcome back to AMERICAN MORNING. It's 16 minutes past the hour now and Hurricane Omar drenching in the islands of the southeastern Caribbean. You see it moving there now. It's moving northeast.
Our Rob Marciano is tracking the storm live in the weather center. We got another hurricane, right, near the end of hurricane season? ROB MARCIANO, AMS METEOROLOGIST: Yes, near the end. We're on the "O" storm already. This has been incredibly active as you can imagine, and this storm has strengthened. So it's a Category 1 storm now. It's about 270 miles of the south southeast or south southwest of San Juan and heading to the northeast. So, it will hit the islands later on tonight. It may very well clip Puerto Rico as well.
Here's the forecast track. Actually, its forecast strength to a Category 2 storm as it scoots through the island and into the open Atlantic. So this is a good direction. That would be a bad direction towards the U.S. So we get rid of Omar at least in the continental U.S.
As far as the next storm that's brewing is tropical depression number 16, this one is a little bit closer. It's towards Honduras and Nicaragua. Actually, it's kind of hugging the coastline of Honduras and expected to continue towards the west. This could be our "P" storm as we wrack up the names towards the end of hurricane season.
All right. Cool air out west is kind of what's contributing to the Santa Ana event which is weakening today and will be a lot weaker tomorrow. But still critical fire danger out there.
Meanwhile, a lot of heat across the eastern half of the country. Still unseasonably warm as we now mark October 15th, officially the middle of October. The leaves are changing. But still, temperatures in D.C., 81 degrees.
Kiran, back up to you.
CHETRY: Enjoy it while it lasts. How about that?
CHETRY: Thanks, Rob.
ROBERTS: All right. To the "Most Politics in the Morning" now and how the weather map for the electoral vote looks across the country.
In tonight's debate, John McCain and Barack Obama will be aiming their messages at the dwindling number of undecided voters -- about eight percent now. Twenty days before the election, seven states are still up for grabs according to our magic wall.
And let's just take a look at some of the scenarios here. First of all, let's take a look at where we are.
Barack Obama has got 264 projected electoral votes based on polling, traditional voting patterns in these states to John McCain's 174. And, of course, there's the magic number on the magic wall, 270 needed to win. So, keep that in mind.
Here in the state of Nevada where we have five electoral votes, Barack Obama in the latest poll of polls is up by four. Here in Colorado where they have nine electoral votes, Barack Obama up by nine points. A substantial lead there.
Missouri, number of electoral votes in Missouri, 11. That race is pretty much even up. John McCain is ahead by one in the poll of polls. Some other individual polls have got Barack Obama up by a couple. So let's call that just dead even.
Here in Ohio, Barack Obama is up by two. In Virginia, he is up by four. It's all even up here in the state of North Carolina with 15 electoral votes. And down here in Florida with 27 electoral votes, Barack Obama in the latest poll of polls is ahead by three.
So, with 264 electoral votes to his credit, again, just projections, Obama only needs six more to get past that magic number of 270. So let's game this out on the map here and see what John McCain would have to do in order to win the White House.
He would have to first of all win Ohio. That would give him 194. He'd also have to win Virginia. He'd also have to win North Carolina. That gets him to 222 electoral votes. Obama still six away.
Even if he wins Florida, that brings him to 249. Not enough. If he runs the table all the way east of the Mississippi and a little bit west, 260, he's getting very close. And if he won the state of Nevada, 265, he'd be slightly ahead of Barack Obama.
Obama is so close right now to that magic 270 number. All he would need to do is win the state of Colorado and that would take him over the top. So, this really changes the strategy here for this election. He could afford -- he doesn't want to -- but he could afford to lose everything in the east, as long as he keeps the states where he is leading now and only win Colorado and that would give him the White House.
So, his route to the Oval Office quite a lot easier than John McCain. It doesn't mean it's over for John McCain? Not by a long shot, because still 20 days left. A lot of things could change.
CHETRY: The crumbling bailout plan and the attempt to remake it.
(BEGIN VIDEO CLIP)
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: We have achieved our goals of repairing and reforming our financial system, and thereby restoring prosperity to our economy.
(END VIDEO CLIP)
CHETRY: How will the government's new plan work? And can it inspire confidence in the market?
You're watching the "Most News in the Morning."
DEBORAH FEYERICK, CNN CORRESPONDENT (voice-over): TV shows like CSI make crime solving look so simple.
UNIDENTIFIED FEMALE: It's a match. John Doe is Vincent Barkley (ph).
FEYERICK: But in the real world --
UNIDENTIFIED FEMALE: Crimes take time. We don't solve crimes generally in half an hour.
FEYERICK: Well, crime scene investigators, listen up. Virginia University's Dr. Graham Cooks believes he's on the brink of making TV fantasy a reality.
DR. GRAHAM COOKS, PURDUE UNIVERSITY: What we're trying to do is to get the chemical information, which is captured in a fingerprint.
FEYERICK: He took these big machines called mass spectrometers and turned them into lightweight, portable chemistry labs. They're used with the technique called Desi, which involves spraying a solvent onto a fingerprint. The droplets splashed up from the prints are then analyzed.
COOKS: There could be drugs. There could be explosives. There could be other compounds. And those compounds are lifted off by the spray, and they're sucked down this pipe here.
FEYERICK: Cook says the Desi system cannot only identify who made the fingerprints but also what they've been touching.
COOKS: This methodology could be used for day-to-day crime fighting. It could be used in terrorism, in arson cases.
FEYERICK: But the system is still experimental and would require extensive training by law enforcement, so it might be a while before it's used at a crime scene near you.
Deborah Feyerick, CNN, New York.
ROBERTS: And it's 25 1/2 minutes after the hour. Fourteen hours, 34 minutes and 24 seconds to go until the final presidential debate. Welcome back to the last, the best, and the last and the "Most Politics in the Morning."
Tonight is one of the last chances for John McCain and Barack Obama to get their message out to undecided voters and with Obama opening up a solid lead in four key battleground states, tonight's third and final presidential debate shaping up to be a make or break appearance for John McCain. Joining me now is John Avlon, former speechwriter for Rudy Giuliani, also the author of "Independent Nation," and Patricia Murphy, editor of citizenjanepolitics.com.
Great to have you both in New York today.
PATRICIA MURPHY, EDITOR, CITIZENJANEPOLITICS.COM: Good morning.
JOHN AVLON, CONTRIBUTOR, POLITICO.COM: Nice to be here.
ROBERTS: A special treat this morning. It is.
So Barack Obama has to make sure he doesn't screw up tonight. John McCain really has to try to turn things around. If you were advising John McCain, Patricia, what would you suggest he do going into tonight's debate?
MURPHY: He needs to do two things. First of all, he needs to go back to McCain 1.0, the guy who came out of the convention who is the happy warrior, who was winning this election until about four weeks ago. He needs to go back to that persona who is not attacking, who is not partisan but who is putting forth a message that is coherent and that looks like it's going to deliver results.
He also needs to start pulling back some of those voters who've drifted away from him, women in particular. He has -- Obama has opened up a 15-point lead there. McCain needs to, again, go back to specific solutions on the economy. He started that yesterday. He needs to push forward on that tonight.
ROBERTS: John, a new "New York Times"/CBS News poll shows that his attacks are not working. Let's just pull up the polls just to show you what the percentages are.
Sorry, he stretched in a national lead here to 50 to 42 percent in our latest poll of polls with eight percent unsure. That "New York Times"/CBS News poll, the margin is even greater than that. So does he have to lay off the attacks as Patricia suggests?
AVLON: I think the personal attacks have backfired. In particular, independent voters and undecideds do not want to see gutter ball politics this election. They want to see something higher.
And so, what McCain needs to do is not try to run down Obama but express respect for him as he has but say, look, we have a difference of opinion. He's a charismatic guy. I respect him, but he wants to bring our nation's economy back to 1970s-type liberal Democrat solutions and unified control of government by Democrats would be bad for your pocketbook. That's the ground he wants to fight on. That's respectable ground, not this gutter ball politics.
ROBERTS: You know, for the last couple of weeks in the economy, it's like John McCain has just been run over back and forth by the Straight Talk Express.
ROBERTS: He just couldn't win anything. But the last day and a half or so, he's been doing pretty well. As Patricia said, can he focus on the economy now? And even though he's got that traditional disadvantage as a Republican, you know, to Democrats, people trust them generally more on handling the economy.
ROBERTS: Can he make some inroads?
AVLON: He should be able to. What's amazing is it used to be the Republicans had the edge on the economy. They were considered the party that was more responsible fiscally, but they've thrown that out the window with Tom DeLay's congress and the overspending under George Bush. So he should be able to make some inroads.
But Barack Obama is fighting on his home turf, domestic policy. And this is his real strength and he, as we've seen, is not only a disciplined campaigner, a real talented one. And if he returns to his post-partisan rhetoric, he can seal the deal tonight.
ROBERTS: Patricia, yesterday in an interview with KMOX Radio in St. Louis, Senator McCain suggested that the topic of Bill Ayers may come up. Now he didn't say that he was going to raise it. He thought that it might come up in the form of a question by the moderator. But should he bite on that if it does come up?
MURPHY: He shouldn't bite on that. Bill Ayers is irrelevant to most people right now. If you look at the numbers in a lot of these polls, the number that has jumped out to me is that 90 percent of Americans believe that this country is on the wrong track. That's not because of Bill Ayers. That's because of George Bush.
If McCain goes negative on anybody, how about George Bush? Most people blame him for the economy. McCain needs to separate himself from the president. He needs to put forward a positive vision, and he could turn it around.
He's best when he's losing. It's a very strange characteristic, but he's best when he's losing. And he's losing.
AVLON: You know, we need to stop re-litigating the 1960s. This is irrelevant. These are big times. This is a big election. And whatever way to go back to the culture war bag and try to re-litigate the 1960s, the American people realize that's a distraction.
ROBERTS: All right. We're watching very closely tonight.
John Avlon, Patricia Murphy, good to see you this morning. Thanks.
MURPHY: Good to see you. Thanks.
CHETRY: Well, a federal judge approved the $24 million settlement for owners of dogs and cats that got sick or died last year after eating contaminated pet food.
You may remember more than 1,500 animals died after eating the food containing Chinese-made wheat gluten. It was laced with melamine. It's a substance used to make plastics, but it can also falsely up the amount of protein in foods for a cheap price. More than 10,000 pet owners have filed claims so far. The deadline to file is November 24th.
Three major wildfires burning right now in the Los Angeles area, and the flames are getting dangerously close to homes. Firefighters say they're dealing with fierce Santa Ana winds and extremely dry conditions. Thousands of residents are now under mandatory evacuation orders. More than 30,000 acres has been wiped out by the flames.
And the global financial crisis will be issue number one at a Camp David Summit this weekend. President Bush is hosting French President Nicolas Sarkozy and the head of the European Union, Jose Manuel Barroso. The two European leaders are scheduled to attend the Chinese EU Summit in Quebec on Friday.
President Bush also meets with cabinet leaders later today to bring them up to speed on details of the plans to make -- to take over the major stakes of U.S. banks. Asian markets were mixed overnight after two days of rallies. Japan's Nikkei up by just over one percent. Hong Kong's Hang Seng lost 5 percent. London FTSE and other European markets are also trading in negative territory. The U.S. government plans to ease the credit crisis means big bucks for the banks. And CNN's Allan Chernoff is here to break it all down for us this morning.
ALLAN CHERNOFF, CNN SENIOR BUSINESS CORRESPONDENT: Good morning. Big bucks because we've got big problems here. The government has three major goals. Revive confidence in banks, restart lending and protect savings. This is not the route that the Treasury secretary wanted to take, but the financial crisis is so severe, his hand was forced.
CHERNOFF (voice-over): The continuing freezing of the lending market threatens to bring the economy to a standstill, so Treasury Secretary Henry Paulson had to revise his crisis playbook because his original plan to buy tax investments from banks failed to inspire confidence. He needed more.
BERT ELY, BANKING ANALYST, ELY & COMPANY: This is seen as not only a compliment to the troubled asset program, but also something that might be able to be implemented faster.
CHERNOFF: Step one, taxpayers will become part owners of private banks. An exceptional move rarely taken in American history and never done on this large a scale. Washington will invest $250 billion into banks in the coming days by buying special shares that will pay a 5 percent dividend. The intent is for bankers to take the money and lend it.
HENRY PAULSON, TREASURY SECRETARY: The needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it.
CHERNOFF: Step two, effective immediately, the Federal Deposit Insurance Corporation will help banks borrow money by guaranteeing bonds they issue through next summer. Step three, also effective immediately, the FDIC is insuring business deposits at banks in noninterest-bearing accounts. Both FDIC programs are free for the first month, then banks will be charged a fee.
SHEILA BAIR, FDIC CHAIRMAN: The lack of confidence is driving the current turmoil. And it is the lack of confidence that these guarantees are designed to address.
CHERNOFF: Step four, the Federal Reserve will help major companies borrow by buying three-month corporate IOUs known as commercial paper. And step five, the core of Paulson's original plan, buy toxic investments from banks through complex auctions that are still at least four weeks away from implementation according to the Treasury. The government hopes to eventually make money by reselling the securities.
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: We will not stand down until we have achieved our goals of repairing and reforming our financial systems and thereby restoring prosperity to our economy.
CHERNOFF: The hope is that gradually all five steps together will thaw the credit freeze to rescue the U.S. from a severe recession.
CHERNOFF: Will it work? The lending market is showing some signs of thaw. Some key interest rates are creeping lower, but they remain at historically high levels. Now, restoring the financial system is a process. The U.S. Government, experts say, is setting a foundation upon which to rebuild confidence in the financial markets -- Kiran.
CHETRY: Fingers crossed. Hope it works.
CHERNOFF: It's got to work. It's got to work.
CHETRY: It's very true. Allan, thanks.
Seized by the bank and sold to the lowest bidder.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: It was listed for $109,900, now it's listed for $45,000. It's the same house. It is a tremendous loss to the banks.
(END VIDEO CLIP)
CHETRY: Foreclosed homes going at bargain prices, but why are the banks failing to help struggling homeowners? You're watching the "Most News in the Morning."
ROBERTS: Coming up now on 37 minutes after the hour. 14 hours and 23 minutes away from the final presidential debate tonight at Hofstra University on Long Island. Now with the economy in crisis, you can be sure that both candidates will be talking about their plans to help struggling homeowners hang on to their homes. But for some neighborhoods, it is simply too late.
Carol Costello has been looking into this. She's live in Washington for us this morning.
Good morning, Carol.
CAROL COSTELLO, CNN CORRESPONDENT: Good morning, John. It's so sad. It is too late in part because of those toxic mortgages that banks refuse to renegotiate to the detriment of whole neighborhoods.
COSTELLO (voice-over): In Malcolm County, Michigan...
UNIDENTIFIED FEMALE: $150,049.
COSTELLO: ...there's a fire sale going on.
UNIDENTIFIED FEMALE: $75,600.
COSTELLO: Hundreds of homes seized by banks are being auction off.
UNIDENTIFIED FEMALE: $49,000.
COSTELLO: At bargain basement prices.
JENNIFER WARD, BANK FORECLOSED ON HOME: That just breaks...
KEITH WARD, BANK FORECLOSED ON HOME: Yes, it does.
J. WARD: ...it breaks my heart. You know, seeing it like it is.
COSTELLO: The Wards lost their home to foreclosure in 2007 after refinancing. They said they thought the interest rate was fixed. It was not. Today their lost family home sits empty. Bought at auction by a bank for $20,000. It's not only devastating for the Wards, but to their former neighbors who are seeing the value of their own homes plummet. It irks real estate agent Donna Caumartin.
DONNA CAUMARTIN, SCHULTES REAL ESTATE: This home went up on the market and it was listed for $109,900. Now it's listed for $45,000. It's the same house. It's a tremendous loss to the bank. Why wouldn't they try to do a loan modification? Or something or refinance it at different terms?
COSTELLO (on camera): Why do you think the banks won't negotiate with people?
CAUMARTIN: I don't know. I really don't know.
COSTELLO (voice-over): Groups that help troubled homeowners say it's because many banks don't own the mortgages. They simply handle the paperwork for investors.
BRUCE MARKS, NEIGHBORHOOD CORP. OF AMERICA: The servicers who the homeowners make their mortgage payments too. They're overwhelmed. They are not willing to staff up. And frankly, they have no skin in the game. So, if someone goes to a foreclosure, they don't lose anything.
COSTELLO: The Wards did try to renegotiate with their lender, Washington Mutual, a bank seized by the federal government last month because it handed out so many bad loans.
I spent hours, days...
J. WARD: Days.
K. WARD: ...on the phone with our finance company, our bank. Asking them, what I can do. And the only thing they told me was they needed, if I remember correctly, an amount close to $20,000...
J. WARD: Down.
K. WARD: ...up front and then they wanted to double our house payment also on New Year's Eve.
J. WARD: 4:00.
K. WARD: At 4:00 in the afternoon, a gentleman came and put a notice on my door that there was a sheriff sale on my home.
COSTELLO: Both presidential candidates want to help people like the Wards. John McCain wants to use taxpayer money to buy and refinance troubled mortgages. Barack Obama wants a 90-day payment break for struggling homeowners. But it's too late for the Wards. Their house has already been auctioned off. They rent now. Nine blocks from their old home. And, yes, they found a way to cope.
K. WARD: A lot of patience and a lot of love. It's the only way we can do it.
COSTELLO: A great family. The Wards and other families in an economic hole. We're watching tonight's debate with interest, John, and hoping that something will be said in that debate to help them. ROBERTS: Gosh, you feel so terrible for people like that because a home is so important. And, unfortunately, regardless of what comes out of tonight's debate, Carol, it will be too late for them and many other people like that.
COSTELLO: Too late because, you know, banks just refuse to renegotiate with these people. They want to pay something towards their mortgage. It's just that, you know, when your mortgage payment doubles or triples, you can't handle it anymore.
ROBERTS: All right. Carol Costello for us this morning. Carol, thanks so much for that.
CHETRY: Just in to CNN. We're following some breaking news right now just in to CNN. We have reports of an airplane hijacked overseas. Media outlets in Turkey say that a Turkish Airlines plane that was flying from the Mediterranean city of Antalya to St. Petersburg, Russia was hijacked some time this morning.
That's all the information we have at this point, but we are working this story. And as soon as we find out more details about what possibly happen here about reports of an airplane hijacked, we'll bring you more information as soon as we get it.
Also, the student loan dilemma. What do you do with all that debt? Gerri Willis is answering your money questions next. And there's still time to get one in if you go to cnn.com/am and ask Gerri.
CHETRY: Welcome back to AMERICAN MORNING. We're "Minding Your Business" this morning and minding your money with our Personal Finance Editor Gerri Willis. She's answering some questions.
You've gotten a lot of questions from people on the blog and you've been answering a lot of them for them this morning.
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Lots of detailed questions. The first one is from Audrey in Oklahoma. She writes, "My son recently graduated from law school with $70,000 in student loans but no one will consolidate these loans for him. He now has four separate payments rather than one consolidated loan. He can't afford it. Any advice on how he can consolidate?"
It is tougher to consolidate right now. A lot of banks don't want to do that. You can consolidate, though, through the Department of Education. Go to loanconsolidation.ed.gov. But I have to tell you, with $70,000 in loans, the real problem is that he can't afford them. What he should do is pursue what they call an "economic hardship deferment." Have him go to the college's student aid office to get some help on filing for that.
Mike in Missouri writes, "I have a fixed index annuity which is not covered by the FDIC. How vulnerable am I?" Good news, bad news here. You're right, annuities are not covered by the federal government with insurance. However, they are regulated by state governments. That's who stands behind these and are responsible for policing these insurance companies to make sure they have enough capital to stand behind your annuity.
Fortunately, your annuity is a fixed annuity, so the return is guaranteed. But as a company, the insurer goes out of business, then the state comes in and makes you whole.
And finally, Derek in Louisiana writes, "If most of these loans were at risk," meaning mortgage loans, "didn't those loans have what they call private mortgage insurance? Maybe I don't understand how PMI works. Can you help?"
Well, Derek, the idea with PMI, of course, is if you couldn't put 20 percent down on a mortgage loan, then you had to pay for PMI -- insurance in case you defaulted. For most of the folks in trouble with these mortgage loans, they had special 80/20 loans.
So, even though they weren't putting down 20 percent, they were taking out two loans, it didn't matter, they didn't have PMI. So, they don't have the insurance backing them up. That's how that works.
I'll be back in the next hour answering more of your questions. So, head to the blog CNN.com/am, ask away. We want to hear your questions. We want to answer your money questions this morning.
CHETRY: Lot of smart questions out there.
WILLIS: Yes, lots of details. Folks are worried.
CHETRY: Thanks, Gerri.
WILLIS: My pleasure.
ROBERTS: And this is just in to CNN. We told you just a moment ago that a Turkish airliner had been hijacked on its way from Antalya, which is on the Mediterranean Coast to the southern part of Turkey. The 1,600-mile trip destined to St. Petersburg, Russia.
We didn't have any details on the hijacking, who was involved, how it happened, whether the plane even got off the ground or not. But we are hearing local media reports now that apparently passengers may have taken matters into their own hands and overpowered the hijackers.
There's a quick Google Earth look at the route from Antalya there, again, on the southern coast of Turkey to St. Petersburg. No confirmation of this yet, but coming from local media reports that passengers have overpowered the hijackers on that flight.
We hope to get more details for you soon. CNN Turk, our sister operation there in Turkey, is working this story hard and we should have new details for you coming up in just a couple of minutes.
47 minutes now after the hour.
Stumbles on the stump.
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UNIDENTIFIED MALE: That's the wrong song.
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ROBERTS: Off script and off message. Jeanne Moos looks at what happens when the best-laid political plans come undone.
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GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: If everything's under control, then you're going too slow.
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ROBERTS: You're watching the "Most News in the Morning."
ROBERTS: Ten minutes now before the top of the hour. Politicians certainly spend a lot of time standing behind podiums. But it's not everyday that you see a world leader get a face full of lectern. CNN's Jeanne Moos looks at some recent political stumbles.
JEANNE MOOS, CNN NATIONAL NEWS 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.
UNIDENTIFIED FEMALE: I have to say that it's going to be very --
SILVIO BERLUSCONI, ITALY'S PRIME MINISTER: (SPEAKING ITALIAN)
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, the 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 louder. Governor Palin thought they were protesters and she used the old protesters put-down on her own supporters.
PALIN: I would hope at least that those protesters 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, GOV. SARAH PALIN'S HUSBAND: They just can't hear you back there. That's why they're doing the holler.
MOOS: The podium has been a fit fall lately for musicians. Country star Lee Greenwood.
LEE GREENWOOD, COUNTRY SINGER: That's the wrong song.
PALIN: Hey, if everything's under control, then you're going too slow. And we won't --
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., MUSICIAN: McCain-Palin tradition.
MOOS: But he sang some lyrics about terrorist connections that the campaign left out at the 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 called Sarah a dish.
WILLIAMS: Hey good looking dish.
MOOS: While we're dishing about podiums.
TINA FEY AS GOV. SARAH PALIN: It just goes to show that anyone can be president.
AMY POEHLER AS SEN. HILLARY CLINTON: Anyone.
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.
(voice-over): Yes, well, next time, Italy's prime minister walks like a man, maybe you should leave the podium behind. Jeanne Moos, CNN, New York.
ROBERTS: Here today, gone tomorrow.
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K. WARD: On New Year's Eve, a gentleman came and put a notice on my door that there was a sheriff sale on my home.
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ROBERTS: Families kicked to the curb. And this is just business? You're watching the "Most News in the Morning." (COMMERCIAL BREAK)
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DAVID LETTERMAN, HOST, LATE SHOW WITH DAVID LETTERMAN: Barack Obama, what a guy, actually going door-to-door, knocking on doors, been in neighborhood asking people if they'll vote for him. And coincidentally, John McCain is also going door-to-door, knocks on the door and says, do I live here?
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CHETRY: I think Dave Letterman is still mad at John McCain for canceling last week. Well, welcome back to the "Most News in the Morning." On the final day of the presidential debate, CNN's latest national poll of polls show John McCain trailing Barack Obama by eight points. So what does McCain need to do to make a big comeback? Our next guest says, he can still do it. And there are four ways it can happen. Joining me is Walter Shapiro, the Washington Bureau Chief of salon.com covering his eighth presidential election.
Are you still as excited as you were the first time?
WALTER SHAPIRO, WASHINGTON BUREAU CHIEF, SALON.COM: Covering Woodrow Wilson was just too much fun.
CHETRY: Well, let's talk about John McCain. You say there is a chance that he could still win even though we have seen a big separation in the polls lately between the two. But you list four factors. So let's talk about the first one when you say the volatile voter is a key factor for him.
SHAPIRO: Well, first of all, we have never been in a presidential election year like this. And the idea that all public opinion would be locked in stone for the 20 days after tonight's debate is a theory. It may not be true. Voters may bounce around.
I mean, six weeks ago, it looked like a neck-and-neck race. Now, it looks like an Obama landslide. Things change in politics and the great mistake is to believe that tomorrow is exactly like today.
CHETRY: All right, so you're saying that even though there's, what, only about 10 percent who say they are still undecided, people think they are going to vote one way --
SHAPIRO: I really think pollsters have an incentive to push the undecideds. Knocking on doors in places like Green Bay, Wisconsin. I picked up a sense that there are more undecided voters than most polls indicate. In fact, in one pole, they suggest -- it was a CNN poll had the undecideds early this month as low as 2 percent.
SHAPIRO: I can't believe that one out of every 50 voters is undecided.
CHETRY: Let's talk about number two, the October surprise that could help McCain win. What type of an October surprise?
SHAPIRO: Well, one October surprise that can help McCain win is just, for example, the economy seeming to get better. We had a 900- point rally on Wall Street on Monday.
SHAPIRO: If the economy recedes a little from the headlines, maybe the conversation will change a little. You know, again, we just -- things happen, you know.
SHAPIRO: You know, things happen badly. John Kerry believed that a Osama Bin Laden tape released on the eve of 2004 cost him the election.
CHETRY: You say another dice roll for McCain could change it.
SHAPIRO: Yes, exactly. What I mean by dice roll is John McCain has made two big gambles. Number one, to pick Sarah Palin, which right now, judging from the polls has not worked out so well. Number two, to suspend his campaign for two days and put the first debate in jeopardy by coming because of the economic crisis. Since he didn't really do anything to solve the economic crisis, it was seen as a bad political stunt.
Now McCain might do something, pledge that he'll only serve one term. Even break with George Bush. And, remember, the one candidate who made up six, seven, eight points and almost won an election in the closing days was Hubert Humphrey in 1968 after he broke with Lyndon Johnson on the war.
CHETRY: And last thing, you say that McCain should know when to fold.
SHAPIRO: What I mean is a Democrat calls McCain campaigning in Iowa. A state where he seems to be 10, 15 points behind on Saturday, political malpractice. To a large extent, McCain's only hope is to play defense in the still winnable Bush states that are now swing states. States like Ohio, Indiana, Missouri, Colorado, Florida, and just really pray for a miracle. That really -- there's nothing better in politics than being lucky, and John McCain has to be very, very lucky from here on end.
CHETRY: Walter Shapiro, Washington Bureau Chief for salon.com. Very interesting with four ways that McCain could still pull it out. Thanks so much.