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Anderson Cooper 360 Degrees

Palin Deposition Announced in Second Trooper Investigation; Stock Markets Plunge

Aired October 22, 2008 - 22:00   ET


ANDERSON COOPER, CNN ANCHOR: Tonight, breaking news on two fronts: financial and political.
With just 13 days to the election, heartbreaking news on the financial front, another $700 billion in value gone, a brutal day on Wall Street.

Right now, breaking now, global markets getting hammered, Japan's Nikkei index down another 6 percent, Japanese traders right now reacting to this, a chaotic day on Wall Street, investors driven by weak corporate profits and the possibly they will sage even more during the holiday shopping season, that plus the worst jobs report since the 9/11 attacks driving the Dow industrials nearly 700 points down at one point today, the index closing, finally, at 514.

We're going to have more on the financial crisis later and if your job is safe, but, first, the breaking political news that we learned tonight: Sarah Palin and her husband, Todd, will be deposed, questioned under oath this Friday. It's part of a second investigation in the firing of Alaska's top cop.

Now, the first investigation concluded Palin had violated a state ethics rule, but that the firing of the employee was legal. The second investigation is being conducted by an independent counsel on behalf of Alaska's personnel board. The results will likely be announced before Election Day.

Candy Crowley joins us with the "Raw Politics" of this breaking news -- Candy.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Well, this is probably not what John McCain would liked to have seen in the last two weeks of this campaign.

Nonetheless, as you said, this is the ongoing investigation by yet another board, a non-legislative board, if you will, into whether Sarah Palin abused her power when she fired her top public safety official. He alleges that he was fired because, in fact, she had wanted him to fire a trooper who happened to be her ex-brother-in-law, who she said was abusive.

So, this is an ongoing case -- a couple of things to remember. First of all, Palin herself asked for this investigation. When she looked at the legislative investigation, which is now wrapped up, she said it was all political. And she went to the personnel board and said, I want an investigation of this. Now, the flip side of that is the personnel board can recommend -- recommend punishment. That could be sanctions. It could be a reprimand. It could be a fine. So, there is the risk to that. And, as you said, Anderson, the conclusions of this independent investigator will come likely before the election, so, yet another distraction for a campaign that really doesn't need one, because, as we say, all of this is happening in the face of one real fact. And that is 13 days to go before voting.


UNIDENTIFIED MALE: Ladies and gentlemen, let's give a big Buckeye welcome to the McCain/Palin ticket!


CROWLEY (voice-over): The Republican ticket campaigned outside Akron, Ohio, blasting Barack Obama's plan to increase taxes on people making over $250,000, and cutting them for everyone else.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: We finally learned what Senator Obama's economic goal is. As he told Joe the plumber right here in Ohio, he wants to -- quote -- "spread the wealth around." Sarah Palin and I will not raise your taxes, my friends.


MCCAIN: We want you to get wealthy.

CROWLEY: Campaigning in Virginia, hoping to break the Republicans' 44-year hold on the state, Obama gave as good as he got.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: But let's be clear about who John McCain's fighting for. He's not fighting for Joe the plumber. He's fighting for Joe the hedge fund manager.

CROWLEY: The economy consumes this race, but the two have returned to the dangers beyond U.S. borders, long seen as McCain's strong suit. And, in these closing days, he is playing it.

MCCAIN: And I will not be a president that needs to be tested.


MCCAIN: I have been tested.


MCCAIN: I have been tested. Senator Obama hasn't.

CROWLEY: Obama tried to counter McCain's credentials with a muscle-flexing photo-op of his national security advisers, to McCain's argument that Obama is untested in a dangerous world, the Democratic nominee suggests, McCain is outdated in a changed world.

OBAMA: We are not going to defeat terrorist networks that operate in 80 countries through an occupation of Iraq. We are not going to deny the nuclear operations of Iran by refusing to pursue direct diplomacy, alongside our allies. We are not going to secure the American people and promote American values with empty bluster.

CROWLEY: The polls nationwide and in the battlegrounds suggest, if the election were held today, Barack Obama would win. They feel it in the crowds, and he feels it, too.

OBAMA: I feel like we have got a righteous wind at our backs.

CROWLEY: Still, nobody knows better than John McCain that politics can surprise. He returned to New Hampshire this morning, the state that resurrected his primary campaign.

MCCAIN: My friends, I'm asking you to come out one more time. Get out the vote. Get them out, and we will win.


CROWLEY: Less than two weeks to go, and, as always, these two men see things differently. For Obama, the days are too long. For McCain, they are too short.


COOPER: Candy, you know, with just 13 days to go, at this point, I mean, where does McCain see signs of hope?

CROWLEY: Well, listen, because there has been fluctuating in the polls. There are those undecideds in some cases. It doesn't look as though there are enough undecideds to change in some states, because the margin Obama has is that big.

Nonetheless, we have seen all along -- at least up until the time the economy started to implode, we have seen all along that these polls have gone back and forth. They believe in the McCain campaign that they have gotten traction off Joe the plumber. They believe in the McCain campaign that his debate performance caused some people to take a second look.

So, they are watching the polls as closely as anyone. They certainly understand the odds here. But they do believe -- and, as you know now, Pennsylvania a big part -- winning Pennsylvania a big part of their strategy. And that is a really, really tough go for McCain. Nonetheless, they are looking at it. They see reasons to be hopeful.

And, honestly, that is what politicians do. They really -- it is not over them until those polls close across the country.

COOPER: Thirteen days to go. Anything can happen.

Candy, thanks very much.

We have just learned on our breaking news that the depositions that Governor Palin and her husband, Todd, will be giving under oath on Friday are going to take place in Saint Louis. We didn't know that just a few moments ago.

More now on the new numbers -- the race tightening somewhat in national polls, but widening in states that President Bush won four years ago, and John McCain needs to survive -- the new CNN poll of polls showing a seven-point Obama lead nationally, two points closer than just yesterday. It was nine points last night, if you remember.

But it is those red states, as Candy was talking about, that really tell the story tonight.

So, let's look across the board with John King's at the magic map -- John.


JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Anderson, must-win is the term McCain uses for all five of the states where we have new battleground polls, and, yet, it is Obama, the Democrat, leading in four of the five.

Let's take a closer look, moving from east to west. We start here in North Carolina. And here are the numbers, 51 percent to 47 percent, advantage Obama in North Carolina, which has not gone Democrat for president since Jimmy Carter in 1976. We will get rid of this. Look at the blue areas from four years ago. This is where you have a significant African-American population.

It is a boost for Obama in the early voting under way so far, critical. If he can keep that state in his column come Election Day, that would be enough to deny McCain the presidency. So would an Obama win here in Virginia. And look at those numbers. Not since 1964 has Virginia gone Democrat for president, a 10-point Obama advantage in that state at the moment.

Obama is beating McCain 2-1 up here in the Northern Virginia suburbs. That's where most of the population is in the state. And, also, 9 percent of Virginia Republicans tell us they will vote Democrat for president. Pollsters say that is an impact among moderate Republicans, who, in part, don't like McCain's choice of Sarah Palin to be vice president.

The bright spot for McCain in our new polling here in West Virginia, a nine-point advantage in a blue-collar state critical to George W. Bush twice. It looks like that one is looking safe for the Republicans at the moment.

But it won't make a difference, if McCain wins West Virginia, if he can't win here in Ohio, 50 percent to 46 percent, advantage Obama at the moment. What you find significant when you look inside the Ohio numbers, again, 10 percent of Republicans in the Buckeye State say they plan to vote for the Democrat for president.

One other big significant thing here, Republicans need a cushion in the Cincinnati-Dayton area to offset these blue areas elsewhere in the state. At the moment, it is a dead heat between Obama and McCain in Cincinnati-Dayton. If McCain doesn't turn that around, hard to see him winning in the state of Ohio.

And, lastly, out in Nevada, stunning evidence here of the influx of Latino voters, advantage Obama 51 percent to 46 percent statewide. But if you break down the numbers a little bit more closely, and you remember a huge influx of Latinos into the Las Vegas area, 67 percent to 30 percent -- 67 percent to 30 percent, Obama is leading among non- white voters.

An influx of Latinos into Nevada could make the difference in this campaign, Anderson, and you add it all up and you get a map that, at the moment, is significantly in Obama's favor.


COOPER: All right, John King, thanks.

We're talking politics online at I'm about to join the conversation myself. Check out Erica Hill's live Webcast during the break as well.

Up next, the latest development involving Sarah Palin's medical records. It sounded like she agreed to release them today, but is that really what she said to NBC's Brian Williams? We will play you the clip, try to figure it out together. Our political panel joins us on that and a whole lot more.

Also, John McCain talking to Wolf Blitzer about the Colin Powell endorsement and Powell's critique of Sarah Palin.

And we add another name to our 10 most wanted list, the culprits of the financial collapse. This guy made millions and has cost you even more. We will find out who he is and what he did tonight.


COOPER: The McCain/Palin ticket today in Akron, Ohio, still getting mileage from Ohio's unlicensed plumber in chief, Samuel Joe Wurzelbacher, otherwise known as Joe the plumber.

Digging deeper now with "TIME" magazine's Joe Klein, who has got an exclusive and eye-opening interview with Barack Obama in the next -- next week's edition. And that's on the newsstands this Friday -- also CNN senior political analyst David Gergen, and CNN political contributor Tara Wall of "The Washington Times." She supports John McCain.

David, what do you make of this news that Sarah and Todd Palin are going to be giving depositions in this trooper investigation on Friday in Saint Louis? It's certainly the last thing, I guess, the campaign wants to be talking about today.

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Absolutely. It's one more diversion of a campaign that desperately needs to have a consistent message about the economy day after day.

And Sarah Palin now has gone from being a strong plus to a growing liability for John McCain, as he seeks independents and Democrats to come over. She is still very strong with the base, but not beyond that. That new NBC/"Wall Street Journal" poll we talked about last night -- Anderson, back in September, they had Sarah Palin 47 percent positive by the public, 27 percent negative. Today, it's 47 percent negative, 38 percent positive.

She has had a real reversal here over the last several weeks. And to have this kind of -- I don't think this deposition -- I think the deposition may help to clear her, but you just don't want these kind of distractions toward the end of a campaign.

COOPER: Yes, Tara, that poll that David was talking about, it says -- and I quote -- that "Palin appears to be a continuing, if not an increasing drag on the GOP ticket." As David said, 49 percent of voters have an unfavorable opinion about her.

At this point, does the McCain campaign do something to kind of counteract that? Or is the -- I mean, the -- the time is nearly up.


Well, one correction, Anderson. I have not come out to support any candidate.

COOPER: Oh, I'm sorry about that.

WALL: And -- yes.

But I will say that -- that, you know, listen, they need to keep doing what they are doing, in a sense. It is -- she has been a drag, in many ways. I think, actually, the parodies that Tina Fey has done on her probably have hurt, more than help, in some ways. It's given folks a different kind of perception of her and questioned her abilities. And, of course, there's the Katie Couric interviews.

But I think what she is doing now, going out doing interviews with McCain on the trail, on the stump can probably help a little -- a little bit. But, in the long run, I think most Americans are paying attention to what matters. And that is the economy. That is the issues, national security, foreign policy, things of those nature, and issues of those -- issues like that, as opposed to how likable or unlikable Sarah Palin is. The candidates are what matter at the top of the ticket.

COOPER: Joe, has she -- especially toward undecided and independent voters, has she been a drag?

JOE KLEIN, COLUMNIST, "TIME": Yes, I think so.

And it is kind of an embarrassment a day. I mean, today's embarrassment was the fact that she spent $150,000 on clothes in the month of September.


COOPER: Well, luckily for her, she didn't spend the money. It was the RNC.


KLEIN: But the Republicans did.

COOPER: Right.

KLEIN: But, also, today, in the NBC interview, she -- she was asked what a precondition was in a negotiation, and she couldn't really answer.

A precondition is a demand that you make of the other -- of the party going in, just as we're demanding of Iran that they stop, you know, making nuclear fuel. She didn't know that. And, every time she's asked a question, and she doesn't know it, I think that more and more votes drift away.

COOPER: Tara...

WALL: I...

COOPER: Sorry. Go ahead.

WALL: I just wish -- I wish they would also ask these same questions about the inexperience, particularly in foreign policy, when it comes to Barack Obama.

She is not being held, number one, to the same standard. And she is, again, the number two on the ticket. I mean, let's get real here. I don't think that we have heard these -- the same type of aggressive questions about the lack of experience from a Barack Obama, who essentially was in the Senate 143 days before he launched his campaign.

So, in all fairness, actually, to be fair the Pew Center just issued a report out today that actually showed how much coverage these candidates were getting. The good news is, they are getting coverage equally. The bad news for the McCain campaign is that it seems that he's getting the brunt of the negative coverage.

So, I think that, if the scales were balanced a little more here, and we were asking those same tough questions of the top candidate, of the other candidate who also has -- who also is lacking in experience, if you will, in many minds, I think that we could have -- we would have a real conversation here.

KLEIN: Could I can dispute that, though?



KLEIN: You know, I just completed an interview with Obama. Most of it was about foreign policy.

And -- and he has been pretty strong on that. I mean, the status of forces agreement in Iraq now pretty much conforms to the withdrawal plan that he wanted to see. He and I talked about Afghanistan. And he is really keeping up -- in fact, he and General Petraeus have come to the same conclusion, that we should be negotiating with the Taliban, that we should be trying to do with some of the southern Pashtun tribes in Afghanistan what we did with the Sunnis in Iraq, which is, you know, an awakening program to pry some of the tribes away from the bad guys.

He keeps up with this stuff. He's been on top of it. I was kind of surprised by how much he knew.

COOPER: So, you don't -- you don't think he has been let off the hook?

KLEIN: No, I don't he was. If...

WALL: Well, maybe Joe didn't let him off the hook. But I would love to -- I would love to hear more of that, see more of that across...


KLEIN: It is in "TIME" magazine this week, Tara. You can read it.


WALL: No, no, I don't -- in addition to your magazine, though you know, I would love to see the Katie Courics and the Charles Gibsons and all the others that are doing these interviews and that are scrutinizing her every word do the same with Barack Obama, because I -- when he -- again, when he was in Israel, and he was on his European tour, there were some moments that I saw that he really did come up short.


WALL: And, still, there are -- again, there are many questions in some Americans' -- in Americans' minds about just where he is on foreign policy.

COOPER: OK. I got it.

We're going to have more from Tara and David Gergen and Joe Klein coming up.

Up next: John McCain in "THE SITUATION ROOM" reacting to Colin Powell's Obama endorsement and statement that Sarah Palin is not ready for the job.

Later, a lot of attention given today to Governor Palin's swanky wardrobe -- Joe Klein just mentioned it -- $150,000 in clothing and makeup at Saks and Neiman Marcus, unusual, no doubt. Anybody about that inappropriate? We're "Keeping Them Honest" -- ahead.


MCCAIN: It's great to be here in Pennsylvania. We need to win in Pennsylvania on November the 4th.


MCCAIN: And, with your help...


MCCAIN: With your help, we're going to win, and we're going to bring real change to Washington, D.C.


COOPER: John McCain in Pennsylvania -- his campaign now pinning big hopes on turning it red, though the polling numbers show it turning blue -- the latest CNN poll of polls for Pennsylvania showing Obama ahead with a 13-point lead.

Senator McCain spoke today at length in "THE SITUATION ROOM" with CNN's Wolf Blitzer. They talked in particular about Colin Powell's endorsement of Obama, his critique of Sarah Palin, and McCain's temperament. Take a listen.


WOLF BLITZER, CNN ANCHOR: His criticism was that you were going back and forth of some of the specific issues, and he didn't like that. He thought that Senator Obama had a consistency in his approach.


MCCAIN: Well, all I can do is laugh.

We have been very consistent about cutting spending, cutting taxes, and the fundamentals of our economic message. Senator Obama has been all over the place, including wanting to -- quote -- "raise taxes on only the rich," 95 percent -- tax cut for 95 percent of Americans, when 40 percent of them pay no federal income taxes as it is.

You know, whatever it, he's changed. Look at the positions that he held on tax increases when he was first running in the primary, and look at them now. They are vastly different. And the fundamental difference -- and maybe Secretary Powell agrees with him -- I don't know -- but to spread the wealth around is certainly not something that I would ever do, that I would ever do.

BLITZER: Do you think...

BLITZER: If you're elected president of the United States, do you believe America's enemies, whether terrorists or hostile governments, would test you during the first six months of your presidency?

MCCAIN: I have already been tested. And I'm astonished and amazed to hear Senator Obama -- Senator Biden predict that the untried, untested President Obama will be tested by our enemies, and we may not agree -- or his own backers may not agree.

Look, I have been tested. Senator Biden referred to the Cuban Missile Crisis. I was there. We came that close, as historians say, to a nuclear exchange. And Senator Biden expects -- his own running mate expects Senator Obama to be tested in that way?

I mean, that's a remarkable statement, and that should concern all Americans.

BLITZER: Because, usually, in a new administration, there are tests early on by hostile powers out there.

MCCAIN: They know I have been tested. They know I have been tested. I have been tested many times.

BLITZER: I was reminded walking in, coming here to Manchester, June of 2007, I moderated one of the early Republican debates. You were up on the stage.

MCCAIN: You did a great job.

BLITZER: I don't know about that.


BLITZER: But there were eight or 10 of you Republican candidates.

And, at that point, it didn't look very good, if you remember, for John McCain. Your poll numbers were not very good. There were some formidable challengers.

MCCAIN: They were in the tank.


BLITZER: But you came back.

We only have a few days left to go right now. Can you come back from what the polls are saying and be elected on November 4?

MCCAIN: Sure, Wolf. And we will. And we are moving up rather significantly.

But I think we will be up late. It's going to be a tough race, and -- but we're working hard. And I am confident of victory.


COOPER: Well, more politics ahead. The price tag for Governor Palin's wardrobe has raised a lot of eyebrows, $150,000, a lot of money for clothes. But were any campaign or party rules actually violated? We're "Keeping Them Honest."

And new worries tonight about, after today's market meltdown, why it happened and what may happen tomorrow. And we're going to add another name to our 10-most wanted list. The culprits of the collapse, you need to know who these folks are and how much they have cost you. Find out who joins the list tonight.


COOPER: Back to breaking news on the economy today, the Dow plunging 514 points, $700 billion in stock value lost on Wall Street. And, right now, the Asia Pacific markets are taking a beating. Japan's Nikkei is down more than 5 percent, China's Hang Seng down about the same.

There is more. A new report here in the United States shows massive layoffs last month, soaring to their highest level since 9/11 -- your money, your vote.

So, is your job safe?

Well, CNN senior business correspondent Ali Velshi has some new important information for us all tonight. He joins us now.

Ali, the Dow closed more than 500 points down. What happened?

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: All right, there are few things at play here, and I'm going to tell you about them.

First, let me take you for a tour of what happened on this market. Take a look at that Dow, the same thing that has been happening for weeks, in that last hour, a major plunge. A little ray of hope, by the way, you see it tick up, back around to that 8500 number. We are still trying to find a bottom on this market -- more on that in a bit.

There are really three basic reasons why this market went down today. Now, one of them is that we are in earnings season. That might sound boring, but, like your kids' report cards, four times a year, America's companies give you a rundown of how they did. And it doesn't look great. The second thing that we are looking at is jobs.

And let me show you what we are talking about in jobs. You just mentioned the layoffs in September, the highest numbers of mass layoffs since September of 2001. Mass layoffs means more than 50 layoffs at a single company. We have seen lots of those.

This is what the year looks like. These are the monthly job losses that we have seen all year, culminating in September, which is the last month that we have number for, down 159,000. You add all this up, we have lost more than three-quarters-of-a-million jobs this year alone. Our next jobs report won't come until November 7, after the election. Now, what we should be doing, according to economists, is, we should be having a 100,000- to 150,000-job increase every month. Instead, we're seeing these losses. So, we should be up 900,000 to 1.3 million. We are down 750,000.

Quite simple, Anderson. That means those are people who don't have an income, who are not paying taxes and giving the government revenue. They might even be taking money, because they are getting unemployment benefits. That does not help this economic recovery. So, the market, you will get used to seeing this up and down for the next few months, but the jobs are really the main issue here -- Anderson.

COOPER: Any idea, I mean, what may happen tomorrow with the stock market? I mean, no one obviously knows, but, I mean, is this -- are we near a bottom? Do we know?

VELSHI: Well, when you -- when you have a bottom, sometimes, it takes a long time to formulate. And you can sometimes hang around in that bottom.

I have been looking at charts of previous crashes in the markets and the recovery. They could take six to seven months, depending on how that goes. In that six to seven months, the bottom trades in a range. So, you could see big swings up and down. There are people who are buying stocks because they think they are good values and there are people who are trying to get out of this market.

So, every time there's a lot of buyers, and the market goes up, you then see a lot of sellers trying to get out of their positions. This is the kind of volatility you see when you're setting up a bottom.

But, typically, Anderson, in the months following a bottom, once you start establishing that, you can do very well in the market, if you stay invested.

COOPER: All right. Ali Velshi, we will be watching tomorrow. Thanks very much.

Coming up on 360: Sarah Palin's six-figure wardrobe and -- wardrobe and makeover, compliments of the RNC. Will the price tag hurt her image as a hockey mom? We're "Keeping Them Honest."

First, though, Erica Hill joins us with a 360 news and business bulletin -- Erica.

ERICA HILL, CNN CORRESPONDENT: Anderson, jury deliberations began today in the corruption trial of Senator Ted Stevens. The Alaska Republican is charged with seven felony counts of making false financial disclosures about home renovations worth a quarter-of-a- million dollars. Prosecutors say the renovations were gifts from oil industry executives and should have been reported.

We now know just bad things were when Wells Fargo stepped in to buy Wachovia earlier this month. In its quarterly report released today, Wachovia posted a loss of nearly $24 billion. That is the largest ever for a bank.

And, Anderson, an update on a place I know you have reported on and from, Niger -- or Niger -- Doctors Without Borders now urging authorities there to allow the group to immediately resume its feeding programs. The government, some authorities there, had suspended the work of Doctors Without Borders three months ago.

But now the humanitarian organization is saying that the existing health care staff in the country cannot meet the demand and is worried that thousands of children are at risk of illness and death -- Anderson.

COOPER: It is unbelievable that the country of Niger would throw -- would stop Doctors Without Borders from being able to operate. This is a Nobel Prize-winning group who have saved...

HILL: It blows your mind.

COOPER: ... tens of thousands of lives in that country over the last several years.

I mean, we have been documenting this for the last two years. It's -- it's -- it's just -- it is unconscionable. It's incredible. Hard to believe. We'll continue to follow that.

On a lighter note, here's tonight's "Beat 360" photo, Governor Sarah Palin speaking at the University of Finley in Ohio today.

Here's the caption from our staff winner, Kate: "I just want to give a shout-out to Giorgio, the designer who whipped up this little number for me."

(SOUND EFFECT: "Oooooh!")

COOPER: Two victories in a row for Kate, should point out. Think you can do better? Go to Click on the "Beat 360" link and send us your entry. We'll give the winner a "Beat 360" T- shirt.

All right. Coming up, it's not exactly a wardrobe malfunction, but Sarah Palin's makeover is raising some awkward questions for the McCain campaign. We're "Keeping Them Honest," coming up.

Plus, the latest on Governor Palin's medical records. She made news on that today.

And tonight our "Ten Most Wanted Culprits of the Collapse." We're adding another name to our list. A big shot who had a corner office when Fannie Mae was allegedly cooking its books.


COOPER: Sarah Palin and her family. Palin's kids and husband often appear with her when she's campaigning. Today with just 13 days to go, the McCain campaign found itself dealing with an issue they most likely would have preferred not to have to deal with. Sarah Palin's wardrobe, of all things. Turns out the Republican National Committee treated Palin and her family to a pricey makeover after the Governor joined the ticket. The tab was about $150,000. Her supporters say, "So what?" Her critics say it's inappropriate. CNN's Joe Johns is "Keeping Them Honest."


JOE JOHNS, CNN CORRESPONDENT (voice-over): It's the kind of story you don't want when you're flying around the country, trying to appeal to average people like hockey moms and Joe and Jane Six Pack: a chichi shopping spree for Governor Sarah Palin and her family, compliments of the Republican National Committee, with a whopping $150,000 price tag, at fancy clothing stores, according to reports filed with the Federal Election Commission.

And we're not talking about a buying binge at T.J. Maxx. Seventy-five thousand spent at Nieman Marcus, widely known for high- end inventory. Forty-nine thousand spent at Saks Fifth Avenue. Macy's didn't do as well. The party only spent $9,500 there. To be fair, there was one $133 Bill from the Gap.

Happens all the time, right? Not necessarily, says Jan Baran, a plugged-in Republican election law expert.

JAN BARAN, ELECTION LAW EXPERT: I've been in town for 35 years. I just don't remember a party organization or a campaign paying for a candidate's everyday clothing.

JOHNS: We asked the Democratic National Committee if they'd ever done this for their candidates. They said no.

So the $150,000 question is whether this is legal. Baran says no real problem there.

BARAN: Ultimately, this controversy that is a greater public relations problem than a legal problem. Even if any of this is taxable, it can certainly be offset through charitable deductions.

JOHNS: In a statement tonight, the campaign says the clothing will go to charity after the election. It says, "The majority of the Governor's new clothes have been bought off the rack at department stores," meaning they've not been custom made, and some bought before the convention have already been returned.

So why didn't the McCain/Palin campaign pay for the clothes? Simple answer: the other person on the Republican ticket wrote the law that says thou shalt not use campaign money to buy clothing. It's called the McCain-Feingold Campaign Finance Reform Act.

So the lesson here: if you've got a hockey mom running with John McCain, it's better to let the party buy the wardrobe. That way it's legal.


COOPER: Sarah Palin is now facing questions about some expenses she incurred before the nomination, right?

JOHNS: That's right. As Governor of Alaska, she billed state taxpayers more than $20,000 for the cost of taking some of her children to a bunch of events she attended.

Just before she went on the ticket with McCain, Anderson, she updated some of her expense reports to try to explain what the kids were doing at those events, to say they'd been invited or they were performing duties like, say, pulling raffle tickets or whatever.

But frankly, it's pretty commonplace stuff for governors to take family members to events.

The other thing that's important to say is that these are questions about what she was doing with Alaska money before she was on the ticket. As a candidate for vice president, it's widely accepted the national campaigns can foot the Bill for family travel.

COOPER: All right. Joe Johns, thanks very much. "Keeping Them Honest" tonight.

New information about Sarah Palin's health records. Will they actually be released? Our panel weighs in on that and what we heard tonight. And the race as it now stands.

And what John McCain said about Colin Powell's criticism of his running mate and how he's been running the race. It's all in our "Strategy Session" when 360 continues.



GOV. SARAH PALIN (R-AK), VICE-PRESIDENTIAL NOMINEE: We believe that the best of America is not all gathered in Washington, D.C. It is here. It is in the kindness and the goodness and the courage of everyday, hard-working American people.


COOPER: Governor Sarah Palin on the trail today in Finley, Ohio.

This weekend Colin Powell talked about Senator Palin -- Sarah Palin's earlier campaign comments when he told Tom Brokaw that McCain's choice of running mate called his judgment into question.

Today, in an interview with Wolf Blitzer, McCain responded. Take a look.


SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: I respect General Powell, but I respectfully disagree. I especially disagree when he said the comments that he made about Governor Palin, the most popular Governor in America. Governor knows energy issues, $40 billion pipeline. Reformer, took on the Governor of her own party.

And I hope at some time General Powell will take time out of his busy schedule to meet with her. I know she will be pleased to met with him.


COOPER: Joining me for a "Strategy Session," Joe Klein of "TIME" magazine; CNN senior political analyst and former presidential advisor, David Gergen; and Tara Walls of the "Washington Times."

David, in an interview with NBC tonight, Palin was asked if she would release her medical records. I just want to play her response for you.


PALIN: The medical records, so be it. If that -- if that will allow some curiosity seekers, perhaps, to have one more thing that they can either check the box off that they can find something to criticize perhaps or find something to rest them assured over. Fine. I'm healthy. I'm happy. Had five kids. That's going to be in the medical records. Never been seriously ill or hurt. And you'll see that in the medical records if they're released.


COOPER: It seemed like in the beginning that she would release them, and at the end, she said, "if they're released." I'm not sure there's really any significance in that. But it does just sort of invite, I guess, more scrutiny. But if she doesn't release them, then she's the only one who hasn't. Or release some form of medical records.

DAVID GERGEN, CNN POLITICAL ANALYST: You know, Anderson, on Friday when she takes the deposition or releases her records, get all this out of the way and get the campaign back to the economy and the focus back on John McCain.

I do not think it's helpful, at all, for the Republicans to have these continuing stories about Sarah Palin. She's energized the base, as Bay Buchanan has told us on several occasions. She needs now to get off television, basically, national television and keep the focus on her running mate, who is a leading running mate, and on the economy.

This is not over. I'm here in Pennsylvania, Anderson, and I can tell you that folks here have been telling me here in Philadelphia, the Democrats, that while Barack Obama has a ten- or 11-point lead in the polls, there is a widespread feeling that it's much closer than that. And it's going to be very close on election day.

And Governor Rendell very much wants Barack Obama to come back here to campaign. So this is not over, but if they get into all these continuing distractions, I don't see how the Republicans have, you know, much that they're fighting with.

COOPER: Joe, if the polls are so far apart how, then, are people saying on the ground that it's going to be closer?

JOE KLEIN, "TIME" MAGAZINE: There are reports that even Obama's private polls have Pennsylvania closer than the public polls. I don't know how that works.

But I do know that -- I think that David is absolutely right. I mean, remember, once again, the stock market went down another 500 points today. This is an absolutely crucial issue. That what Ali Velshi was just showing about the numbers of layoffs in this country, you know, in this year, as opposed to any other, we should be talking about that stuff, not about her medical. I don't care about her medical records.

COOPER: Tara, though, I mean, is -- can -- if McCain is only talking about the economy, I mean, is that enough? I mean, is that enough? Or does he -- we've had other people on the program who say, look, he has to attack the character of Barack Obama to sow doubts in people's minds.

TARA WALLS, "WASHINGTON TIMES": Well, there's going to be a question about saying someone's character as opposed to someone's judgment. I think there's a distinct difference. You go after someone's judgment as opposed to character.

I think that's not the only thing. I mean, the negativity, I think, has probably turned off some independent voters. He has to widen the scope, though. I mean, of course, the economy matters to most American. But we're also seeing in some of these polling -- this polls are back and forth all over the place. Even today the AP poll out showed Barack Obama with just a one percentage point lead over McCain.

So I think you're going to see a tightening up in some spots. I think that, when you look at the issues, when you poll individuals about what they're concerned about, you know, they are still -- they still believe that McCain, the majority that McCain leads on national security issues, that he is more presidential.

So I think the issues like that, issues that matter beyond just the scope of the economy, are those things that he's got to continue to hit home on. What he showed -- when he talked about inexperience and readiness, those kinds of things, I think those resonate not just with the base but even some of those independents and undecided that are still on the fence.

GERGEN: Anderson, I do think you have to say for Barack Obama today, two things. One is a lot of these polls do show that he has erased most of John McCain's lead on national security. I think the debates have -- he helped himself a great deal with that and with the Colin Powell endorsement. But the other thing I thought he did today, which was smart, was to call in those national security advisers. The last two days he has surrounded himself with some really strong, reliable people that the country would say, you know, if he gets elected, those kind of people are going to be around him. He's going to be a much -- the government is going to be in good hands. Always a pivotal question for a president.

So you know, while McCain is struggling, I have to say Obama is managing to look increasingly presidential. I don't know what Joe Klein thinks about that.

KLEIN: Two points from the interview I did with him. No. 1, he endorses David Petraeus at Centcom. He wants Petraeus to continue on there and says he's been doing a good job.

On the economy he said something really, really interesting and kind of candid. He said that we've been living on easy credit for the last 20 years. That's been the turbo charger of this economy, but it's not going to be the turbo charger in the future. We're going to have to find something else to drive us. And he said to me, "My No. 1 priority would be to create an alternative energy economy, a green economy." He's never been so clear on that before.

COOPER: And that interview is going to be in "TIME" magazine this Friday.

KLEIN: It's in "TIME" magazine on Friday. Yes.

COOPER: All right. That's what we call a plug. Joe Klein, thanks very much.

David Gergen, thanks. Tara Walls, as well.

Up next -- up next, we're adding another name to our "Ten Most Wanted List, the Culprits of the Collapse." Every time we heard these, you can't believe what these guys have done. An executive with ties to the mortgage meltdown.

And at the top of the hour, the battle -- the battleground showdown, Obama gaining some momentum in some key states. But as we've just been talking about, the race may be a lot tighter than some people think. "Raw Politics" when 360 continues.


COOPER: Our "Ten Most Wanted List, The Culprits of the Collapse," big shots who helped create the crisis knocked thousands of points off the Dow and put everyone's finances in jeopardy.

As you know, the Dow lost 500 today, and Asian markets continue to fall as we speak. That's the breaking news.

You'll probably notice not too many of the culprits are stepping up to shoulder their share of the blame. They're kind of pointing fingers at other people, usually in different parties. We think that's wrong. So tonight we're adding a ninth name to our list. It's Franklin Raines, the former CEO of Fannie Mae, the government-backed corporation that bought up mortgages, including subprime mortgages, and sold them to investors.

Here is 360's Tom Foreman.


TOM FOREMAN, CNN CORRESPONDENT (voice-over): In the glory days of the housing boom, Fannie Mae and Freddie Mac were dream weavers: government-backed businesses that helped get loans to people with low or moderate income. Political leaders from both parties were pushing Fannie and Freddie to expand their efforts and hailing success.

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: The lowest unemployment rate in 30 years and the highest homeownership ever.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Homeownership is the highest rate ever.

FOREMAN: Then, in 2003 and '04, worrisome reports. At Freddie Mac, massive accounting problems and, soon after, government regulators said Fannie Mae had been cooking the books, too. Fannie's CEO was Franklin Raines, a respected and accomplished former budget director for Bill Clinton.

FRANKLIN RAINES, FORMER CEO, FANNIE MAE: This is a very serious allegation, and I deny that that occurred.

FOREMAN: Oh, but it had, regulators said. As the mortgage business had flooded with high-risk loans, many handled by Fannie and Freddie, Fannie's accountants had failed to appreciate the danger of market instability to their bottom line.

Worse, the report said they hid problems, because Fannie's executives did not want to lose huge personal pay bonuses. Raines' compensation was worth about $20 million a year, with taxpayers potentially on the hook if it all went bad. Libertarian activist Fred Smith had warned Congress years earlier, but when everyone was making money, he says no one wanted to listen, including Frank Raines.

FRED SMITH, COMPETITIVE ENTERPRISE INSTITUTE: If everyone around you says, "It would be stupid to blow the whistle now. Everything's going well," I could be wrong. How am I to say that this is really stupid?

RAINES: Then you're not going to blow the whistle?

SMITH: I'm not going to blow the whistle. We saw that with Enron. We saw that in the S&L crisis in the '80s. Honorable people acting in ways that just don't appear honorable, because around them the whole context was are you out of your mind? How could this be wrong?

FOREMAN: At the time, Raines said he did not believe the regulators. RAINES: We found no fact that would support the allegation that's included in the report.

FOREMAN: But once the Securities and Exchange Commission backed up the regulator's report, Franklin Raines resigned. Raines sent us a statement today, saying, "I left Fannie Mae in 2004, and both Fannie Mae and its regulator have stated that the company's current financial problems are the result of mortgages purchased years after my departure."

But because Fannie was already getting into trouble under his watch, Franklin Raines now has a place among our "Ten Most Wanted Culprits of the Collapse."


COOPER: Tom, thanks.

Let's make it official. Franklin Raines, the former CEO of Fannie Mae, joins our "Ten Most Wanted List." We began with Joe Cassano from AIG and Richard Fuld from Lehman Brothers; Chris Cox from the SEC; Phil Gramm of Texas; Alan Greenspan; Ian McCarthy, CEO and president of Beazer Homes USA; Angelo Mozilo, the guy -- the founder of Countrywide Financial; and James Cayne, former CEO of Bear Stearns. There they are, the "Culprits of the Collapse." We'll add another name tomorrow.

Up next, a light moment on the campaign trail. Senator Obama shows Ellen DeGeneres his dance moves. It's our "Shot of the Day."

And at the top of the hour, Obama's battle for red states. John King breaks it down for us in his magic map.

Plus, Wolf Blitzer's one-on-one with John McCain. Why he's still confident of a victory on election day.


COOPER: Time now for our "Beat 360" winners, our daily challenge to viewers. I'm still laughing from Erica Hill's Web cast during the break.

HILL: I'm glad you enjoyed it. I'm dancing because it is cold.

COOPER: It is cold. I like it icy.

So we know what "Beat 360" is. It's a challenge to viewers to come up with a caption better than the one our staff can come up with.

HILL: Yada, yada.

COOPER: Here's the photo of Governor Palin, speaking at the University of Finley in Ohio today. Kate, our staff winner: "I just want to give a shout-out to Giorgio the designer, who whipped up this little number for me."

(SOUND EFFECT: "Oooooh!")

COOPER: Our viewer winner is Sean from Charleston, South Carolina. His caption: "When it comes to my wardrobe the other candidates 'Palin' comparison."

Thank you.

HILL: Oooh! I like it. Try the veal.

COOPER: Exactly. Stop the punishment.

Sean, your "Beat 360" T-shirt is on the way. You can check out all the entries on Congratulations.

Time for "The Shot." Barack Obama took a time-out from his campaign, not a time-out, but took time out from his campaign trail.

HILL: He's on a time-out.

COOPER: That's right. To boogie for Ellen DeGeneres today. The talk show host and her audience watched as Obama -- well, take a look what he did.


ELLEN DEGENERES, TALK SHOW HOST: Let's talk about dancing. Michelle was on the show, and she was talking some smack about your moves. You have 20...


DEGENERES: Yes. You have 20 seconds to respond to this clip.




HILL: A little better. I don't know.

COOPER: I give him props for doing that. I've had people try to get me to dance on television. Let's listen in.


OBAMA: Let me tell you that Michelle may be a better dancer than me, but I'm convinced I'm a better dancer than John McCain.


COOPER: There you go.

HILL: I have a quick question for you. You've been on Ellen's show. Haven't you?

COOPER: I have. Yes.

HILL: And so you didn't dance?

COOPER: I didn't dance. Yes. I...

HILL: Did she give you a hard time about it?

COOPER: She didn't say anything about it, but I've never been back. So maybe...

HILL: Well, there may be a reason for that, Anderson.

COOPER: I just can't bring myself to do it. I don't know. No.

Sure. Do we have the video of the crew? The crew dances.

HILL: Sure.




HILL: Yes. There we go.


COOPER: Yes. He recovered.

HILL: This doesn't ever get old, ever.

COOPER: I know. I can watch this over and over again. It's always good. What I like about it is I always notice -- I always notice new little things in it, you know. Like little things I didn't notice before. It's the gift that keeps giving.

HILL: It is.

COOPER: There we go. Oh.

All right. Now a special programming note. We are teaming up with MTV, saluting veterans home from Iraq and Afghanistan and those still serving. Friday night at 8 p.m. Eastern, "A Night for Vets," an MTV concert for the brave. That's on MTV.

Then this Saturday and Sunday at 8 p.m. Eastern, don't miss a 360 special, "Back from the Battle." We're going to bring you the stories of the brave men and women back on the home front, sharing what their lives are like now. Hope you join us for that.

Up next, more on our breaking news, another rough day for investors and what it means to you and Obama's surprising lead in states that used to be reliably red. Are the races actually closer than some of the polls might imagine or might indicate? John King and the magic map. And McCain fielding tough questions from Wolf Blitzer, reacting to criticisms of his temperament and his running mate. All that ahead.


COOPER: Tonight, breaking news on two fronts, financial and political. Just 13 days till the election, heart-breaking news on the financial front. Another $700 billion in value gone. A brutal day on wall street.