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American Morning
House Rejects Bailout Plan; U.S. Markets Plunge; What the Impact of the Failed Bailout Would be on Your Money; Keeping Your 401(k) Safe
Aired September 30, 2008 - 06:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEO CLIP)
KIRAN CHETRY, CNN ANCHOR (voice-over): Red dawn. Markets dive worldwide after the biggest drop in the Dow's history. More than a trillion dollars gone from IRAs and 401(k)s and all Congress can do is point fingers.
DAVID GERGEN, CNN POLITICAL CONSULTANT: This is a huge failure of leadership across the board.
CHETRY: Today voters turn to us for help.
SUZE ORMAN, PERSONAL FINANCE EXPERT: How's America going to live?
CHETRY: Is your money safe? On this AMERICAN MORNING.
(END VIDEO CLIP)
CHETRY: And welcome. It's Tuesday, September 30th. And everyone seems to be able to agree there is a major crisis. How to solve that crisis is the big question.
JOHN ROBERTS, CNN ANCHOR: It's likely when you use to go to the carnival as a kid and you'd scream, mommy, I want to get off this ride. Please let them all stop.
We begin with breaking news this morning. Lawmakers heading back to the drawing board after the House rejected the $700 billion bailout package. The defeat triggered a record sell-off on Wall Street yesterday. House leaders will reconvene on Thursday. Senate may take this up on Wednesday.
We're going to hear from President Bush just before the opening bell at 8:45 Eastern this morning. Of course, we'll have that for you live.
And the bailout's defeat sending a big ripple through the global markets. The orders to sell just piled on, one on top of the other.
Japan and Australia down more than four percent. Hong Kong dives and then recovers to close up slightly. And in Europe where trading is already underway, most markets are up slightly. Here at home, Dow futures pointing to a higher opening today, so maybe some room for optimism there. The U.S. military beefing up its presence in the waters off Somalia after pirates hijacked a ship carrying Soviet-made tanks, grenades and other weapons last week. The pirates are demanding $20 million in ransom. A military spokesperson says the ships will remain there while negotiations with the pirates continue.
CHETRY: Back to our breaking news. We are just hours away now from President Bush addressing the country for the second straight morning. His remarks come after House lawmakers killed the government's bailout plan. Those lawmakers now will not return to Capitol Hill until Thursday because of the Jewish holiday, but they say they will work until they reach a bailout deal. Right now, each party seems more focused on blaming the other for the bailout's defeat.
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER (R), MINORITY LEADER: Americans are angry and so are my colleagues. They don't want to have, to vote for a bill like this.
REP. NANCY PELOSI (D), HOUSE SPEAKER: The Democratic side more than lived up to its side of the bargain. While the legislation may have failed, the crisis is still with us.
HENRY PAULSON, TREASURY SECRETARY: We've got much work to do and this is much too important to simply let fail.
(END VIDEO CLIP)
CHETRY: So much attention is being focused on the Dow's record plunge right now but even more alarming is the dollar figure on this drop. $1.2 trillion -- let's check it out -- lost in the market and here's how it all went down. It was 146 yesterday afternoon. About 20 minutes after the House started voting, the Dow plunged more than 600 points. There you see it happened.
This started to happen after it became pretty obvious that it was going to fail. Then at 3:01, the market recovered slightly as Treasury Secretary Henry Paulson promised to use all available tools to protect financial markets following the House vote. Then at 4:00, the closing bell finds the Dow Jones average suffering its worse one day drop, down 777 points. It closed at 10,365.
Our Ali Velshi is "Minding Your Business." I know you watched all of this go down yesterday.
ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: With amazement.
CHETRY: So it was a surprise.
VELSHI: Sure.
CHETRY: And people thought this was all but going to get passed by the House? VELSHI: I was about 100 feet away from here at 1:46 when we're looking at that clock on the House bill and we're seeing that there's 50 seconds to go and it does not look like they're going to pass, which is entirely unexpected. That's when that Dow started to go down. And sort of meander around the whole afternoon. We couldn't figure out what was going on.
But in fact, just to correct something you said there, at 4:00, it wasn't off 777 points, it was off 603 points. Between 4:00 and the 15 minutes that it takes to settle the market, usually we see a movement of 10 or 15 points. We went from 600 points down to 777 points down. The market just couldn't keep up with the trades. And when the market plunges right at the end, it means you're going to see continued movement on Asian markets as they fall.
Let's have a look at how U.S. markets looked yesterday. The Dow, as Kiran said, down 777 points. No one has ever seen a minus with a 700 on the Dow. That's a seven percent drop.
The Nasdaq down nine percent. The S&P down almost nine percent. Now, if you were to say in a year like this that you gained nine percent in an entire year, I would tell you that's a very good return on the market but you didn't. You lost eight percent in one day. The S&P 500 will look very much like your spiders or your S&P ETFs or index funds or mutual funds that you have. So that's part of it.
Now, as I mentioned, you can recover from a loss like this in just a few days. And right now, Dow futures, which are bets that are placed on how the Dow is going to do at the open of trading, are up more than 200 points. So the market is a particularly poor indicator of what's going on right now. It's just volatile. What you have to worry about is the credit markets.
The fact that credit markets world over are frozen, that's going to affect your ability to get a loan. It's going to affect the ability of someone who is going to buy your home to get a loan, and it may affect the ability of the company you work for to get short-term financing. And fundamentally, Kiran, that could affect your ability to get paid and even to keep your job.
We're expecting just in addition to all of this that's going on, we're expecting jobless claims on Friday morning and we're going to lose probably another 100,000 jobs this month alone. So this is a very serious situation. But for stock market holders, understand this market can go and come. Don't get panicked about the stock market.
CHETRY: All right. It will be interesting to see what happens and what the solutions are now. The treasury is trying to scramble and do other things...
VELSHI: Right.
CHETRY: ... which include printing money right now.
VELSHI: That's right.
CHETRY: Not knowing if that won't hurt.
VELSHI: They're taking every tool you've got in the book at this point.
CHETRY: All right. He called it a toolbox. He said it was incomplete, so we'll see what happens. Thanks so much, Ali.
VELSHI: OK.
ROBERTS: Well, the House is out today for the Jewish holiday. It will take another crack at the $700 billion bailout when it reconvenes on Thursday. Republicans and Democrats pointing fingers after a stunning rebellion where members of both parties defied their leaders and rejected the plan.
CNN's Kate Bolduan is live on Capitol Hill. And, Kate, I can't remember a vote in Congress that took $1.2 trillion with it.
KATE BOLDUAN, CNN CORRESPONDENT: I know. A lot of people I think still this morning as they're waking up are shaking their heads at that number. This is -- some thought this was all but a done deal but clearly it turned out to be anything but that and what was one of the most dramatic votes in years.
(BEGIN VIDEOTAPE)
BOLDUAN (voice-over): Lawmakers knew it would be a tough vote and House Republican leaders were begging for support until the last minute.
REP. JOHN BOEHNER (R), MINORITY LEADER: What's in the best interest of our country? Not what's in the best interest of our party. Not what's in the best interest of our own reelection. What's in the best interest of our country? Vote yes.
BOLDUAN: Then came the stunning count. When the official clock expired, support wasn't there. Leaders held the vote open for more than 20 minutes twisting arms. But in the end, fell 13 votes short. In all, 95 Democrats and 133 Republicans voted no.
UNIDENTIFIED FEMALE: The motion is not adopted.
BOLDUAN: The stock market then plunged more than 700 points and the finger pointing began. House Republicans claiming Speaker Nancy Pelosi's blast against free market advocates poisoned key Republican support.
REP. NANCY PELOSI (D), HOUSE SPEAKER: But in this case, in its unbridled form, as encourage supported by the Republicans, some in the Republican Party not all, it has created not just -- not jobs, not capital, it has created chaos.
REP. ERIC CANTOR (R), VIRGINIA: Right here is the reason I believe why this vote failed. And this is Speaker Pelosi's speech that frankly struck the tone of partisanship that frankly was inappropriate in this discussion. BOLDUAN: Democrats call that absurd.
REP. BARNEY FRANK (D), FINANCIAL SERVICES CHAIR: Here's the story. There's a terrible crisis affecting the American economy. We have come together on a bill to alleviate the crisis and because somebody hurt their feelings they decide to punish the country.
BOLDUAN: And Speaker Pelosi insists this crisis requires a bipartisan solution.
PELOSI: What happened today cannot stand. We must move forward and I hope that the markets will take that message.
(END VIDEOTAPE)
BOLDUAN: And where they go from here, John, is still very unclear. One top House Republican, Roy Blunt, says the bill could go to the Senate first, pass with some tweaks and then head back to the House, hopefully gaining support along the way. But one top Senate aide tells me that's very unlikely.
ROBERTS: Well, Kate, why is it unlikely that the Senate could take that up? And I guess tomorrow would be the day that they would do that and then move back to the House on Thursday.
BOLDUAN: Right. Tomorrow would be the first opportunity they would have that. Senate leaders, they're concerned that Senate Republicans after seeing what happened in the House that they can't hold on to the support that they thought they once had. As one top House Republican aide puts it, Senate leaders really, if they can't guarantee passage, they don't wan to -- they don't want walk the plank on an unpopular vote.
ROBERTS: Yes. A lot of people are wondering why Minority Leader Boehner even brought to the floor yesterday knowing that he didn't have the votes.
Kate Bolduan for us in Capitol Hill this morning. Kate, thanks so much.
The collapse of the bailout bill, the talk of the campaign trail. Barack Obama calling for urgent bipartisan action while John McCain who early yesterday trumped the work that he had done on the bailout later painted its failure on Senator Obama.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Senator Obama and his allies in Congress infused unnecessary partisanship into the process. Now is not the time to fix the blame. It's time to fix the problem.
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: It's important for the American public and for the markets to stay calm because things are never smooth in Congress and to understand that it will get done. (END VIDEO CLIP)
ROBERTS: And both candidates are talking about the economy today. Senator McCain is in Iowa. Obama is in Nevada. And don't forget that we're going to be speaking with Senator McCain coming up in our 8:00 hour here on AMERICAN MORNING.
CHETRY: You know, the scariest thing about America's financial crisis is wondering what it can mean for your money?
So all this week, we're calling in the best financial team on TV to help you out. In fact in just a few minutes, Gerri Willis will be here. She has some tips for keeping your 401(k)s safe.
Ali Velshi also firing up his blog. Go to CNN.com/am. You can send him a question and he will answer live this hour.
(COMMERCIAL BREAK)
HUGH RIMINTON, CNN INTERNATIONAL CORRESPONDENT: I'm Hugh Riminton in Hong Kong. Now an intriguing thing has taken place on Asian markets after what took place in Washington and in Wall Street. The markets tracked down what's right at the open and it was mainly financial stocks bearing the brunt of it. But as the day went on, they started to find some resilience.
Why might that have been? Two major reasons. One is, analysts and dealers here say the markets are factoring in the possibility despite all the gloom out of Congress, probably at some stage a bailout plan will go through. The other factor, though, is even more intriguing. And that is that Asian markets are starting to convince themselves that they are not Wall Street, that Asia is not the United States, and the contagion that is taking place in the U.S. need not affect Asia.
Hugh Riminton, CNN, Hong Kong.
ROBERTS: Snapshot of how the markets are doing in Hong Kong today. Meantime, here in this country, the bailout plan's failure in Congress is resulting in some very bitter finger pointing. Many Republicans say support evaporated after the debate took a fatal partisan turn when Speaker Pelosi railed against the Bush administration before the bill came to a vote.
Well, joining me now is Republican strategist and CNN contributor Ed Rollins. Let's get to that in just a second.
ED ROLLINS, REPUBLICAN STRATEGIST: Sure.
ROBERTS: President Bush coming out for the second time in two days. This morning, 8:45. Of course, we'll cover it here. He's going to stress the need for Congress to come back and work on this thing, that there's still a financial crisis facing this country and it needs to get done. What hope has he got convincing (INAUDIBLE) Republicans that this is the right thing to do? ROLLINS: Zero. And springing out out of the Oval Office and coming out and making a three minute speech is not going to do anything. It's not going to quiet the markets. It's not going to encourage anybody to go back.
What he needed to do is to have a gravitas speech in front of the Congress last week instead of what he did and really lay out and articulate what happens here. He doesn't have that ability to do that anymore.
ROBERTS: So who's in control?
ROLLINS: Well, no one's in control. It's now up to the House leadership to decide a, are the Democrats going to put 12 more votes on the board? They keep yelling and screaming at each other. They're not going to get anymore Republicans at this point in time.
ROBERTS: You probably heard Senator McCain yesterday in the campaign trail saying that Senator Obama and his colleagues injected unnecessary partisanship into this whole process that's why the bill failed. But do you think that McCain is the one that could be hurt by this?
ROLLINS: I think McCain is hurt because, you know, I think he needs momentum and I think he put himself into this and he wasn't able to produce. So I think there are a lot of finger pointing at him.
ROBERTS: Then what about Senator Obama, because he was touting his leadership on this as well? Ninety-five Democrats, a third of the Democratic caucus voted against it. All they needed was 12 more.
ROLLINS: He didn't put himself in that process. He was smart enough to realize he couldn't control the House Republicans or the House Democrats I think to a certain extent.
ROBERTS: But still he was urging something, did he not?
ROLLINS: He was urging something get done. I think the two of them have to go out and urge the party.
ROBERTS: And I talked to Larry Somers last night who's a big Obama supporter saying, I think that Obama showed leadership on this. He did the right thing. He went down to Washington. He got all --
ROLLINS: Until this happens and that's an inside game, and you know it well, I know it well. Until they get those votes on the board which may be Thursday, maybe Friday in some different version, it doesn't matter what Barack or McCain say at this point in time. They need to get back to their campaigns.
ROBERTS: So you don't expect that John McCain is going to announce that he's suspending his campaign again and coming to Washington?
ROLLINS: I would be astonished and it would be a great mistake if he did it. ROBERTS: Right. So what happens? I mean, how do they get this thing done, or do they get it done?
ROLLINS: Well, I think either they have to figure out that there's not enough Republican votes and they have to put pressure on the 12 Democrats to come to -- you know, they've got the majority and I think to a certainly extent, I don't think they're going to get more Republicans than they have today.
ROBERTS: All right. So if the split stays relatively where it is, maybe 12 votes on either side, where does that lead us going into the election?
ROLLINS: Well, I think the Democrats obviously are going to try to make this a revolution from their perspective. And I think Republicans feel that they've heard from their constituents and they're doing what the taxpayers want them to do.
ROBERTS: Ed Rollins, great to talk to you.
ROLLINS: Thank you very much.
ROBERTS: Thanks for coming in. We'll see you a little bit later on this morning with Lisa Caputo as well.
ROLLINS: Great, great.
ROBERTS: All right. Thanks.
Sixteen minutes after the hour. You're watching the "Most News in the Morning."
CHETRY: Protecting your 401(k). Gerri Willis on what the financial crisis means if you're retiring soon. You're watching the "Most News in the Morning."
(COMMERCIAL BREAK)
ADRIAN FINIGHAN, CNN INTERNATIONAL ANCHOR: Welcome back to the "Most News in the Morning." In London, I'm Adrian Finighan, where the weather this morning pretty much matches the mood. It's grim to say the least.
And here's the front page of one of the newspapers here, "Staring into the abyss." It says it all. Sums up the mood of traders over there in the city of London who are wondering what next? Completely shocked by the failure to get that $700 billion rescue package approved yesterday.
There is some bottom feeding going on at the moment. Some people picking up what they see as bargain shares. But the mood very much as sort of what follows now. We're a wait and see mood here in London.
John, Kiran, back to you.
CHETRY: Well, the headlines are really astounding. The market down 777 points, $1.2 trillion in losses. And it has just about everyone wondering what is the impact on my money, especially my retirement savings. And that's why we're turning to personal finance editor, Gerri Willis.
She begins a new series this morning with advice on protecting your 401(K). Gerri joins us now. We were just talking in the break as well. A lot of people worried. I was asking you as well.
GERRI WILLIS, PERSONAL FINANCE EDITOR: I know.
CHETRY: Is it time to rethink the 401(k)?
WILLIS: No. It's not time to rethink. You know, how are you going to retire if you don't have money in your 401(k)?
CHETRY: I don't think I am.
WILLIS: You have to have money in your 401(k). And I'm going to tell you how to read your monthly statement because people out there are completely freaking out. You know, they're looking at the bottom line. I'm going to show you the bottom line on this 401(k) right here.
Let's take a look at your account summary. People are focused on the losses here and the loss on this particular account is 6.2 percent, I believe. If you pull this out, you can see the losses. You see your beginning balance, here we go. You see your beginning balance at $80,000. This particular person has lost about $1,000 in the market.
But you know what? Your employee contributions, if you don't contribute you don't get the employer match. So you've got to do that to keep that money coming. That money doesn't change if the market goes down.
All right. Now, if you want to know how to gauge your risk in the market, you want to know compared to other folks, how risky is my 401(k).
Take a look at your asset allocation. That pie chart is critical to understanding just how risky your 401(k) is. And this particular one is very risky in some ways. That's because there's more money in bonds than there is in stocks and this particular employee is very, very young. So they have the asset allocation of someone who's much older.
Let's talk about the market value of your account for just a second here. We see a couple of funds here. You can see that -- how much money they're making by quarter. But you want to look beyond the quarter. You want a year comparison, two-year comparison, three-year comparison so you can really gauge just how good that fund is.
CHETRY: You put it in perspective for me just now as well, saying remember back in 1987, the market lost what? 20 percent in a day?
WILLIS: Right. So, I mean, you have to understand --
CHETRY: And yesterday it was seven percent?
WILLIS: Yesterday was seven percent, so it doesn't even compare. You really need to get some perspective on this, understand where you're going.
You also want to check and see you've got company stock in this 401(k) because you're really doubling down your bet on your employer if you have a lot of company stock and you work at the same company.
CHETRY: So what happens if your employer goes bankrupt? Does it -- what happens to your 401(k)?
WILLIS: Nothing. You know, the money is held separately. You still have your money. You should know that.
There's also a glossary in this particular 401(k) statement. I don't know if we can show it to you or not. This is the glossary right here.
Look, at the end the day, information is power, knowledge is key. Let's just take a look at what we found out this morning, review some of these ideas just a little bit.
You want to understand exactly what kind of allocation you have in your 401(k). Stocks, bonds, stocks are obviously more risky. Who is making the picks? Who's the fund manager?
Go to Morningstar.com for details. You want to understand the amount of company stock you have and you don't want to rush to buy and sell. That's the worse thing you could do is what we saw a lot of folks do this week. They are locking in those lows, Kiran.
CHETRY: Do you see yourself in all stock or something along those lines? Should you reallocate your 401(k)?
WILLIS: The (INAUDIBLE) is a bad time to do anything. I wouldn't reallocate now, but when the market makes some recovery I would start to reallocate. You want to have the right mix of stocks and bonds for your age, for your personal situation. No one should be 100 percent stocks now unless you're very, very young.
CHETRY: All right. Gerri Willis, thanks so much.
WILLIS: My pleasure.
ROBERTS: It's 23 minutes after the hour. The truth squad on the march this morning. We are fact checking the candidates claims on the issues of government regulation and spending.
And Sarah Palin speaking with the media. Hear what she's saying now about an early remark that John McCain had to publicly correct.
You're watching the "Most News in the Morning."
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP, NBC "THE TONIGHT SHOW WITH JAY LENO")
JAY LENO, HOST, "THE TONIGHT SHOW WITH JAY LENO": These things are so complicated. I guess the big problem was the plan came in two parts. They couldn't agree on which part to implement first, the smoke or the mirrors. Oh, I love this day.
(END VIDEO CLIP)
CHETRY: Well, that's Jay Leno weighing in on the financial crisis. The House defeated. The bailout bill fueled a record loss on the Dow. What kind of financial fallout can we expect for the average American investor?
Chrystia Freeland is U.S. managing editor for the "Financial Times" and she joins us now this morning. Thanks for being with us.
Put this in a little bit of perspective for us. This was the biggest one-day point drop but not the biggest percentage drop on Wall Street. Where are we right now if you're waking up in the morning and you're saying what should I do about my finances?
CHRYSTIA FREELAND, U.S. MANAGING EDITOR, "FINANCIAL TIMES": Well, if your personal finances, probably you shouldn't do anything because if any of us were so brilliant at timing the markets then we should probably be running hedge funds not doing our day jobs, and the markets are incredibly volatile and unpredictable right now.
One thing about this crisis, though, is, first of (ph), normal retail investors we tend to focus on the stock markets. Those are easier, more transparent to look at. This has mostly been a crisis of the credit market and that's the thing which I think government officials, professional investors are really going to be looking at. That's where the huge problems began last week and could have really terrifying implications for the rest of the economy.
People simply can't borrow money. And that is the core problem that this bailout package was intended to try to fix.
CHETRY: Is it naive when we hear some politicians saying things like, well, this is just a wake up call. We live on credit. We can't be like that. We need to change our ways.
FREELAND: That is absolutely true, in fact. And were it not the case that the American financial system was hugely over leveraged and that the American household was hugely over leveraged, no savings, huge debt, you wouldn't have this crisis. Having said that, when your house is on fire, is it the right thing to talk about, you know, who is playing with matches, or do you try to call in the fire department? And that's really the debate right now.
CHETRY: It's very interesting that you use the fire analogy because I was using that yesterday as well. And that if this bailout is passed eventually in some way shape or form, your house is still burnt, right? And it's still soaking wet. It's not going to reverse the problems that we have. It's just to stem future problems?
FREELAND: That's right. That's absolutely correct. And the other thing to bear in mind with the bailout is, it's possible that the impact of the bailout becomes less and less the longer it takes to actually pass it. So had this plan being agreed a couple of days after the secretary of the treasury proposed it 10 days ago, it would have had a bigger impact than the plan will have if it is agreed at the end of this week.
CHETRY: Right. You know, they are going back and forth trying to hammer out different things, help to the homeowners, maybe an insurance fund as opposed to actually buying up these securities. What I want to know is, does the Fed, does the treasury have the money to just do the one part they wanted to do, which is to be able to buy up some of these bad assets from these financial institutions to keep them up and running?
FREELAND: It's not much a question of having the money, it's having the authority. This is a huge step and the politicians are right. The lawmakers are right to acknowledge that this is really a big deal.
This is the American government going in and, you know, buying up, nationalizing private assets. That does require political approval. So it's not so much a question just of the money, it's a question of this has to be politically endorsed.
CHETRY: Right. So the treasury secretary though is doing many, many things without congressional approval right now, that he's allowed to do within his realm, or even talking about printing more money.
FREELAND: Well, it's not so much a question of printing more money. There have been lots and lots of operations really in two areas. One is in terms of liquidity. And that's really been the job of the Federal Reserve. The Federal Reserve, in cooperation with the central banks of other countries, has been doing a lot to try to make sure there's money in the system.
CHETRY: Right.
FREELAND: And that's been really important because banks, the only people who have been lending money over the past 10 days have been central banks. Banks have not been lending to each other. They haven't really been lending even to their top tier corporate clients. So that's one area.
The other area where we've seen the government acting in it, this hasn't been just the treasury. This has been different government institutions, has been cased by cased on specific troubled banks. So, we had the Wachovia deal yesterday, which would not have happened had the FDIC not come in and basically put a floor to the potential losses that Citi could suffer on that deal.
CHETRY: All right. Chrystia Freeland. Thanks so much for being with us this morning and helping us break it down. : Pleasure.
ROBERTS: Just about 30 minutes past the hour now and here is a check of the top stories. Afghan President Hamid Karzai, calling on Saudi Arabia to help initiate peace talks with the Taliban. The appeal is aimed at reducing violence in Afghanistan. Taliban leader Mullah Omar released his own message, calling Afghanistan's security forces thieves, smuggles and criminals.
A new study says heart patients should be routinely screened for depression. Researchers at the American Heart Association say heart attack survivors and others hospitalized with coronary problems are three times more likely to suffer depression than the general population. They say depression can cause patients to skip their medicines, ignore their diet, or forget other medical advice.
And Janet Jackson is in a Canadian hospital, this morning. A statement from her publicist says, the 42 year-old singer suddenly became ill at a concert in Montreal, last night and was rushed to the hospital. No word on Jackson's condition. This statement says only that she is being monitored and hopes to reschedule the show. Janet Johnson is currently on a North American tour.
Well, back to our breaking news this morning. In the future of America's economy, on the forefront of everyone's mind and on the front pages of newspapers across the country, a lot of scary headlines as the Dow plummets to its biggest single day fall in history, down 777 points. $1.2 trillion lost by investors and in people's retirement savings accounts yesterday.
And many hoping that the terrifying plunge will encourage lawmakers to hammer out a plan when they return on Thursday. President Bush is wasting no time. He's going to address the nation again this morning. CNN's Kathleen Koch is live at the White House.
What's he expected to say, Kathleen?
KATHLEEN KOCH, CNN CORRESPONDENT: Well, John, he's expected to in many ways, echo what he said yesterday in the Oval Office. But I had a lengthy conversation this morning, with the senior administration official who told me basically what today is all about is regrouping.
The president obviously will likely be speaking to Treasury Secretary Henry Paulson. Obviously, also meeting with his top staff, really right now trying to come up with a plan B. The official told me that the president's remarks will last about three and a half to four minutes. And he'll say that the crisis is real, that we need to address it. That the legislative process is difficult. But the president will make the point that the administration will continue to work with congressional leaders to find a way forward. Now, again, this very much echoing what the president said yesterday in the Oval Office.
(BEGIN VIDEO CLIP) GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I was disappointed in the vote with the United States Congress on the economic rescue plan. We put forth a plan that was big because we got a big problem. Our strategy is to continue to address this economic situation head on and we'll be working to develop a strategy that will enable us to continue to move forward.
(END VIDEO CLIP)
KOCH: The senior administration official tells me that White House staffers last night were in contact with Republican congressional leaders. Also with Democratic staffer. And the good news from all that is in the conservatives who oppose this, who voted against this yesterday, he said they've learned that they are willing to come together and pass something eventually.
ROBERTS: Both sides on Capitol Hill, Kathleen, blaming the other for the bill going down yesterday.
What does the White House thinks happen?
KOCH: A couple of thing. They do believe the remarks by Pelosi, House Speaker Pelosi, were a factor. This senior administration official telling me that he got three e-mails as she was speaking on the floor from Republican staffers saying she is killing this thing.
Also there's the credibility issue that the president has with lawmakers who said, well he said there were weapons of mass destruction in Iraq, they weren't there. The president said it was an emergency after 9/11, we had to pass the Patriot Act. Many of those regret those votes.
Now, this official this morning, when I brought up the credibility factor, he said, well, if the largest point drop in the stock market in U.S. history doesn't convince them this is real, what will? And then there's also the political reality, John. These lawmakers are up for reelection and knew their political lives were on the line.
ROBERTS: All right. Kathleen Koch for us at the White House, this morning. Kathleen, thanks so much.
KOCH: You bet.
ROBERTS: Then again, President Bush will be addressing the nation this morning at 8:45, from the White House. We'll bring that to you live right here on CNN and CNN.com -- Kiran.
CHETRY: Also this morning, Senator John McCain is accusing the media of gotcha journalism, after Sarah Palin apparently contradicted his policy on Pakistan. It happened at a restaurant over the weekend in Philadelphia. Palin was speaking to some voters. She was videotaped talking about U.S. troops across the border into Pakistan. It's a position similar to what Barack Obama has taken.
Here's a listen to the exchange and then Palin and McCain's response to CBS' Katie Couric.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: What should we do? Cross the border from, like, from Afghanistan to Pakistan, you think?
GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: If that's what we have to do to stop the terrorists from coming any further in, absolutely we should.
(END VIDEO CLIP)
(BEGIN VIDEO CLIP)
KATIE COURIC, HOST OF CBS EVENING NEWS WITH KATIE COURIC: Are you sorry you said it, Governor?
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Wait a minute. Before you say is she sorry she said it, this was a gotcha sound bite that --
COURIC: It wasn't a gotcha. She was talking to a voter.
MCCAIN: She was in a conversation with a group of people and talking back and forth and I'll let Governor Palin speak for herself.
PALIN: In fact, you're absolutely right on. In the context, this was a voter, a constituent hollering out a question from across an area asking, what your going to do about Pakistan? You better have an answer to Pakistan. I said, we're going to do what we have to do to protect the United States of America.
(END VIDEO CLIP)
CHETRY: Well, there we saw that. Palin reaction. She went on to say that an McCain administration should never quote, "Show our cards to terrorists."
ROBERTS: And a programming note, we are going to be talking with Senator McCain this morning, coming up a little bit later on here in the Most News in the Morning.
Keeping the candidates honest. AMERICAN MORNING'S Truth Squad is on the case. We're putting John McCain and Barack Obama's facts to the test. Plus, Ali Velshi is online, reading your money questions and getting ready to answer live. If you've got something that you want to ask, head to CNN.com/am. You're watching the Most News in the Morning.
(COMMERCIAL BREAK)
ROBERTS: 39 minutes now after the hour. And time to check in with the Truth Squad, today. We're trying to keep the campaigns honest by what they are saying and sorting fact from fiction. This morning, Alina Cho is looking into candidate claims about government regulation and spending. Good morning, to you.
ALINA CHO, CNN CORRESPONDENT: Good morning. A big topic, as you know, with everything that has been happening on Wall Street, there's no bigger story, no bigger topic. They have the government regulation right now. So, it's no surprise that it keeps coming up on the campaign trail.
Let's take a listen to what Barack Obama said just yesterday, in Denver.
(BEGIN VIDEO CLIP)
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: He's fought against common sense regulations for decades. He said in a recent interview that he thought deregulation has actually helped grow our economy.
Senator McCain, what economy are you talking about?
(END VIDEO CLIP)
CHO: Certainly a crowd pleaser. Deregulation helped grow our economy? Is that really what McCain said? Well, as we've said before, in the past, John McCain has definitely fought regulation in the Senate. And some of the bills he supported are now being blamed for the current financial crisis.
Now, one critical vote came back in 1999, essentially deregulating Wall Street. McCain was asked whether he regretted that vote in a recent interview.
Take a listen.
CHO: All right. My mistake. Take a looking at the screen is what I meant to say.
"No, I think deregulation was probably helpful to the growth of our economy," as you just saw there.
So the question again, when Barack Obama says John McCain thought deregulation helped grow our economy, was he right? Pretty easy one this morning.
The Truth Squad says yes. McCain did fight deregulation. And as we just saw, McCain has said that deregulation did help grow our economy. But an important footnote here. We should tell you that in talking about fixing the current financial problems, McCain has called for a high level oversight board, or simply put regulation. He now sees that as part of the solution.
And of course as always, we are checking both sides of the aisle. Coming up at 8:30, a claim by McCain that Obama is proposing nearly a trillion dollars in new spending, 800 billion to be exact. Hard to imagine in the tough times we're facing. We'll tell you if it's true or false. And interesting to note, John, that when you take a look at how it impacts the federal budget down the line, you may be surprised at the answer when you take a look at both McCain and Obama's plan.
ROBERTS: All right. Looking forward to that. Alina Cho for us this morning.
Alina, thanks so much -- Kiran.
CHO: You bet.
CHETRY: We want to set the record straight on a story that you saw here on AMERICAN MORNING, yesterday. Our Carol Costello is live in Washington, and joins us now with more.
Hey, Carol.
CAROL COSTELLO, CNN CORRESPONDENT: Hi, Kiran. In the spirit of full disclosure in a story I filed yesterday about some conservative criticism lobbied towards vice presidential candidate Sarah Palin, I quoted conservative columnist George Will as writing, Palin performed quote, "Like a flustered rookie in an interview with Katie Couric." Now, those comments actually referred to Senator John McCain. I should have quoted George Will from his September 3rd column where he said, quote "Palin has negligible experience." And I apologize for that.
Back to you, Kiran
CHETRY: Carol, thanks a lot.
Well, still ahead, your job, pension and home threatened this morning like never before. Our Ali Velshi's logged on, he's answering your questions next. You're watching the Most News in the Morning.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
JAY LENO, HOST OF THE "TONIGHT SHOW WITH JAY LENO": And it's interesting how this affects children. Because this crisis has actually affected the way children play. Like when kids play Monopoly now, the dumbest kid is the banker.
(END VIDEO CLIP)
CHETRY: Well, Jay Leno with his take on the current financial chaos that's going on. Our Ali Velshi is Minding Your Business and he's been getting a lot of questions on our web page. And you're answering some of them for us, this morning.
Hey, Ali.
VELSHI: Yes. You can go to CNN.com/am. Let me get to some of these immediately. Peter in Ohio says, we need to know what beyond this credit freeze issue is in more detail. What could happen and how might it effect us?
Well, this is a really good question. I want to keep trying to explain line. The bottom line is this credit freeze affects the ability of banks and investment companies to get you your loans, your auto loans, your home loans. It affects the ability to finance people who are looking to buy your home, for instance. So, if they can't get a mortgage and we've heard of some of these deals falling apart because somebody else can't get it.
And it affects the ability of business to get money short term that they can use for operating expenses, which could be your salary or job. So, that's how it affects you.
Nancy in Boston says, how does all this bailout, non-bailout affect my 403b account? 403b accounts are affected exactly the same way that 401(k) accounts are. Your underlying investments are still your choice. They can still go up and down with the market. The investment company is a separate issue. As long as your investment company is safe, that doesn't have any effect on your 401(k) or 403b. That doesn't mean you shouldn't look at your asset allocation and make changes if it's time to do that.
And Dwayne in Michigan says. Ali why do you keep supporting this bill? It does not fix the real problem; job loss. And it does not stop the current of future foreclosures. Why don't they put a freeze on foreclosures for 90 days? Please stop supporting this bill. It doesn't go far enough to help the middle class.
Excellent points, Dwayne. First of all, I'm not supporting this bill. I'm making the statement that the credit markets are frozen and something needs to be done to unfreeze them. If somebody would like to come up with a better bill, I think it's a good idea. But I am supporting doing something. Secondly it doesn't fix job loss and it doesn't fix foreclosures. It was not intended to. This is a specific bill intended to free up the credit markets. But, I agree with you. Job loss is the biggest problem we face right now. And the idea to fixing foreclosures needs to be dealt with, as well.
But, let's not confuse this. Everything can't be in this bill. Excellent questions. Keep them coming. I'll keep on trying to answer them.
ROBERTS: Senator Obama's going to propose something today to add into this bill, see if we can get passage. And that is raising the FDIC insured limit on deposits in the bank from $100,000 to $250,000.
VELSHI: The idea is here is it would stop a run on the bank. If you know that your money's safe in the bank, it's a good idea. The FDIC tried to have this done several years ago. The government didn't go for it. But, the reason it's a good idea is because the FDIC is not a taxpayer bailout, it's an insurance plan. The banks pay a premium. I think that would do a lot to keep people very safe. One of the biggest questions I keep getting, is my money safe in the bank. CHETRY: Right. It's not necessarily just the households, but it's the small businesses that rely on keeping that money there.
VELSHI: The average household doesn't keep more than $100,000 in the bank. But businesses need that for payroll.
CHETRY: This $100,000 hasn't been adjusted for inflation -- 28 years ago.
VELSHI: 21 years, or something. Yes, 28 years.
ROBERTS: We'll be hearing more about that. Thanks, Ali.
47 minutes after the hour.
(BEGIN VIDEO CLIP)
ROBERTS: Reading the candidates.
UNIDENTIFIED MALE: It was a second level notch of anger or indignation.
ROBERTS: Jeanne Moos takes a most unusual looking at the debate.
UNIDENTIFIED MALE: It's got talking points but he doesn't have healing points.
ROBERTS: A facial coding expert decodes the men who could be president.
UNIDENTIFIED MALE: He's one of the most introverted people we've ever had as president.
ROBERTS: You're watching the Most News in the Morning.
(COMMERCIAL BREAK)
ROBERTS: It's all about body language. It's not what you say, but how you say it. That may be especially true in a debate where a candidate's body often does a lot of the talking.
Our Jeanne Moos has a closer look at that for us.
(BEGIN VIDEOTAPE)
JEANNE MOOS, CNN CORRESPONDENT (voice-over): Debate note to Sarah Palin, you don't only have to watch what you say, you have to watch for people watching how you say it. Take that Alaska's proximity to Russia counts as foreign policy experience answer. It's been imitated on comedy shows.
TINA FEY, ACTRESS PLAYING GOV. SARAH PALIN ON "SATURDAY NIGHT LIVE"" You've got Alaska here and this right here is water and then that up there is Russia.
MOOS: It's been ridiculed. BILL MAHER, HOST OF "REAL TIME WITH BILL MAHER": But that was the sentence to no where.
MOOS: And now we've asked someone call a facial coding expert to analyze.
DAN HILL, FACIAL CODING EXPERT: Her mouth tightened. It was a second level notch of anger or indignation.
MOOS: But that's nothing compared to the body language bonanza during the first presidential debate.
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: -- While he's spewing his nonsense --
MOOS: There was disdain from McCain.
HILL: A really smirking smile from the corner of the mouth.
MOOS: A lack of passion from Obama.
HILL: He's got talking points but doesn't have feeling points.
MOOS: Who needs political pundits when Dan Hill can dissect a smile.
UNIDENTIFIED MALE: Now, having resolves Iraq, we'll move to Afghanistan.
HILL: You can see Obama's smile is a true smile. It's about twice as barring McCain's. McCain, when he smiles, it's always really more of a grimace smile. There's a tension that permeates McCain's personality.
MOOS: And maybe not enough tension permeating Obama.
HILL: What strikes me is how much Obama will look down when he's talking. He is quote an introvert, I think. He'd probably be one of the most introverted people we've ever had as president.
MOOS: But then, Hill's main take away from the debate, what he called McCain's lack of respect for Obama.
OBAMA: It would strip away those tax breaks that have gone to oil companies.
HILL: McCain was trying to make it look softer there by smiling, but in fact, his eyes were very narrow in what's a snake eyes expression of anger and there was contempt on his face.
MOOS: But, contempt is in the snake eye of the beholder. It didn't take a body language expert to notice that McCain didn't seem to look at Obama. But when asked about it on ABC --
MCCAIN: That's just foolishness. MOOS: McCain said he was focused on the moderator and viewers. Despite the exchange of good job when the debate ended, McCain's look didn't linger. Our expert found a link to his own cuff links.
HILL: McCain really specializes in his indignation. He is not afraid of being the frowning face.
MOOS: An analysis that may make McCain smile or raise an eyebrow.
Jeanne Moos, CNN, New York.
(END VIDEOTAPE)
(BEGIN VIDEO CLIP)
CHETRY: Inheriting a mess.
UNIDENTIFIED MALE: What's going on is going to define the economic policies for the first term of the next president.
CHETRY: Are the promises --
OBAMA: We are going to invest $150 billion --
CHETRY: -- Out the window.
MCCAIN: Tax cuts for America's hard-working families.
CHETRY: Thanks to the worst economy of our time. Plus, the attack dog.
SEN. JOE BIDEN (D), VICE PRESIDENTIAL CANDIDATE: End this war!
CHETRY: Versus the Pitt bull.
PALIN: I've been hearing about his Senate speeches since I was in like, second grade.
CHETRY: Getting ready for the most anticipated VP debate ever. On the most politics in the morning.
(COMMERCIAL BREAK)
ROBERTS: 56 minutes after the hour. Welcome back to the Most News in the Morning. The House had $700 billion of your taxpayer money on table yesterday. And with the eyes of the world watching, a majority voted against the bailout bill. Republican Marcia Blackburn represents Tennessee's 7th congressional district. She was one of those no votes and she joins us live this morning, from Nashville.
Congresswoman Blackburn, great to see you this morning. Tell me, why did you vote against the bill, particularly when you were part of the group that was trying to come up with a deal over the weekend?
REP. MARSHA BLACKBURN, REPUBLICAN STUDY COMMITTEE: Absolutely. And John, let me say that we are committed to finding a resolution to this issue and I think we'll have one by week's end.
One of the things for me that I think we need to go back and revisit is the top line cost of this. You're talking about $700 billion, $250 basically blank check at this point for Secretary Paulson. But then on top of that when you read the bill, there was an increase in the federal debt limit to $11.3 trillion.
Now all of that is taxpayer cost. And one of the things that we had said, hey let's look at the other side of the ledger. You're talking about all this cost. But let's dissect this problem. Why don't we do some across the board spending reductions for federal agencies. This is the time when you need to be reducing what you're spending. I mean, five percent across the board gives you $100 billion.
ROBERTS: And Congresswoman --
BLACKBURN: And if we're all in, let's get in and let's get this solved.
ROBERTS: Right. But these are obviously staggering amounts of money. Particularly the raising the debt ceiling. But, if you start getting the idea of cutting discretionary spending in this bill, I mean, are you ever going to get anything done by the end of the year? Because Congress still hasn't passed any of the spending bills from this year.
BLACKBURN: You're correct. And this is a very serious problem. And that's why we are very committed to finding a resolution to this and doing it this week. And I applaud those that have been negotiating this because they have worked hard and they have done a great job.
But there are other things that can be done and should be being done in conjunction with this. You've got the mark to market rule that should be suspended. You have FDIC insurance that should be raised. The --
ROBERTS: So, do you agree with Senator Obama on that?
BLACKBURN: Yes, I do.
ROBERTS: Because he's going propose an increase to $250,000, this morning in FDIC insurance.
BLACKBURN: And I'm in agreement with this. This is not a partisan issue. This is an issue that we have to be resolved. And this is something that should be done.
Raising those limits to help calm the market, that should be done. Suspending mark to market to help with the liquidity issue because as you know, it is a capital markets, it is the credit markets, it's a liquidity issue that is first and foremost.
Now, as we work on this in the future we get to those issues like reforming Freddie and Fannie. But you know, what we have to do is address this liquidity issue right now. We have to address it in front of us this week. We have to find a resolution. And there's some other components of this that ended up on the edit room floor, if you will, that need to be revisited.
Among them are the FDIC insurance, the uptick rules of mark to market. Some spending reductions from the Federal side of the ledger so that we're helping protect the taxpayers. $700 billion is a lot of money. 11.3 trillion dollar debt limit. Raising that debt limit from the 9.8 trillion up to 11.3 trillion, that's a lot of money.
ROBERTS: It's obviously a huge amount of money. Well, you say you can get it done by the end of the week. I don't know if we can hold you to your word. We'll keep watching.
BLACKBURN: We're committed to getting it done. And we know the American people want it done.
ROBERTS: Congresswoman Marsha Blackburn. Great to see you this morning. Thanks for coming in.
BLACKBURN: Good to see you. Thank you so much.
