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Campbell Brown
Wall Street Crisis; Campaign Ads Crossing the Line?
Aired September 15, 2008 - 20:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAMPBELL BROWN, CNN ANCHOR: Hi there, everybody.
Breaking news on Wall Street tonight. It is a -- quote -- "once- in-a-century financial crisis," according to former Fed Chairman Alan Greenspan. That's what he said yesterday. Then today, it got even worse.
The Dow had its worst point drop since the markets reopened after the 9/11 attacks. Lehman Brothers has filed for the biggest bankruptcy in history. And Merrill Lynch is being taken over. So, why? What happened? And what does it all mean for you?
Just about everybody watching right now has either a mortgage or a 401(k), or both. So, what is happening on Wall Street? It affects all of us, including the candidates for president. Poll after poll shows that, for voters, the economy is issue number one. Tonight, we are going to break it all down and get some smart advice coming up in just a minute.
And here in the ELECTION CENTER, we are all about holding both sides accountable, no bias, no bull, but so much of what has been said in this campaign is patently false, not just partisan, but simply wrong. And tonight we are going to do some pretty aggressive fact- checking and tell you about that.
And then a little bit later, of all the sound bites over the weekend, what's the one that everybody still seems to be talking about today? It's Tina Fey's impression of Sarah Palin on "Saturday Night Live."
Take a look.
(BEGIN VIDEO CLIP, "SATURDAY NIGHT LIVE")
AMY POEHLER, ACTRESS: I believe that diplomacy should be the cornerstone of any foreign policy.
TINA FEY, ACTRESS: And I can see Russia from my house.
(LAUGHTER)
(END VIDEO CLIP)
BROWN: We're going to have more of that coming up a little bit later tonight in the ELECTION CENTER.
But, first, we are going to go straight to the very latest on the fall of Lehman Brothers, one of the world's biggest investment banks. We are covering the story tonight from all angles with senior correspondent Allan Chernoff and senior business correspondent Ali Velshi.
And Allan is live at Lehman Brothers headquarters in Manhattan. And let's go there first.
Allan, this is a major Wall Street firm with a storied history. They got through the Depression, but couldn't get through this crisis. What happened?
ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Well, back in the depression, Lehman Brothers was financing a company called Radio Corporation of America, RCA. They did have some business during the Depression. What they weren't doing is, they weren't taking the major, major bets that they had been taking over the past few years.
Lehman bet very heavily on mortgage securities, pools of mortgages, many of those mortgages not very secure. They suffered billions and billions of dollars of losses in those mortgages. As the losses mount, they lost the confidence of other firms on Wall Street. When they tried to raise money, they simply couldn't. That led to the collapse.
BROWN: All right, Allan Chernoff for us from Lehman Brothers headquarters -- Allan, thanks.
And there is no question that the news on Wall Street is bad, but if you're sitting at home wondering if your retirement fund is toast or maybe worrying about mortgage, we have got news for you. The worst actually may be over.
Moneyman Ali Velshi is here to explain that.
And, Ali, let's start at the beginning here. Greenspan, as we said, called this a once-in-a-century crisis. Many I have heard say this is the worst economic crisis since the Depression. Is that true? What's the bottom line? Is the sky really falling?
ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: The sky has been falling. It is probably mostly fallen. There's more to go. There's definitely more to go. But let's take a look at where it stands in contest. We talked about Enron. We talked about WorldCom, the biggest bankruptcies we had seen so far.
Take a look at the comparison here. The Lehman Brothers' bankruptcy, by assets, is five times as big as WorldCom was, even more than that compared to Enron. This is really, really huge. Now, let's see what happened. The markets reacted to the deal. It started off this morning when we heard about it and it got really bad. The Dow ended up more than 500 points lower. That is the biggest point loss since September 17 of 2001, after 9/11.
But at that point, there was a rallying. There was a sense of, we can do something to fix this. Right now, there's uncertainty, which means there's more of this to come. Take a look at the five major investment firms that were on Wall Street, Merrill Lynch sold to bank of America. Lehman Brothers is gone now, bankrupt. Bear Stearns was bailed off and no longer exists. Now we're left with Morgan Stanley and Goldman Sachs.
Out of five three months ago, there are two left -- Campbell.
BROWN: And, that said, all of that said, and that's a lot of bad news, there are some analysts who see do a silver lining here, especially for Main Street, I guess.
VELSHI: Yes, well, look, here's the thing. There are a couple of companies that are in serious trouble right now. One of them is AIG. And its debt was downgraded again, which means it will run into the same problems as Lehman Brothers and not be able to raise money.
The other company is Washington Mutual. Its debt was downgraded less than a couple hours ago to junk status. It will have trouble raising money. There will be other banks, not necessarily those, but there will be other institutions that will fail. The bottom line is, history has shown us, this will bottom out at some point. And, at some point, that will be an opportunity for people. These things work in cycles. The cycles always come around.
BROWN: So, what should people watching right now be doing? Buying? Selling? Saving their money in banks? Moving their money out of banks? I'm hearing a different story from everybody I talk to.
VELSHI: Yes, let me tell you, that's true.
Now, the people I have talked who really, really understand this say, because there's more to come, it's probably not a great time to be investing in banks right now. They will come back at some point, but we don't know when. We don't know who else collapses.
But if you have got money on the sidelines, now might be a time to hold onto it for a little while and see how bad this gets. At some point, there will be an opportunity to invest your money for your 401(k), that that you have on the sidelines, and get back in there.
There's always a problem. If you're fully invested, this may not be a good time to sell, because you lock in the losses. You don't lose a penny until you sell. But, if you have a financial adviser, check, because if you are heavily invested in the financial sector, there could be more losses to come. You do have to look at that part of things.
The financial sector is 30 percent of the economy. And that means it's 30 percent of some peoples investment portfolios, maybe even more. This is a time to understand that a little bit.
BROWN: Still volatile right now, so a lot could change.
(CROSSTALK)
VELSHI: Absolutely. And Asian markets will open up very shortly. We will see if this continues into tomorrow. BROWN: All right, Ali Velshi for us tonight -- Ali, thanks.
From that, from Wall Street, let's go to Washington. If there was ever an election where it is the economy, stupid, this is it. Tonight, John McCain and Barack Obama are battling over who will protect your financial future.
Candy Crowley, more on that from Pueblo, Colorado, for us tonight.
And, Candy, I want to play some of what both candidates said today about all this. Let's hear first from John McCain and then Barack Obama.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: You know that there's been tremendous turmoil in our financial markets and Wall Street. And it is -- it's -- people are frightened by these events.
Our economy, I think, still, the fundamentals are -- of our economy are strong, but these are very, very difficult times. And I promise you, we will never put America in this position again. We will clean up Wall Street.
(CHEERING AND APPLAUSE)
MCCAIN: We will reform government.
SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: It is not that I think John McCain doesn't care what is going on in the lives of most Americans. I just think he doesn't know.
Why else would he say, today, of all days, just a few hours ago -- think about this -- we just woke up to news of financial disaster, and, this morning, he said that the fundamentals of the economy are still strong.
(AUDIENCE BOOING)
OBAMA: Senator McCain, what economy are you talking about?
(END VIDEO CLIP)
BROWN: Now, Candy, Obama has, frankly, been criticized by some in his own party for not focusing enough on the economy lately, getting drawn into fights with McCain that McCain has wanted to have, and not to mention all the focus last week on Sarah Palin. Does the campaign view this, frankly, as an opportunity to refocus their message?
CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Oh, absolutely, particularly something this enormous. Think about what we have been talking about all day long. It's just another sort of jarring reminder to people if -- you know, the sort of the home mortgage foreclosures, if they have sort of gone off the front page, that kind of thing.
Something this big, they have seized on, because it really plays to two of their major themes. One is, John McCain is out of touch.
And John McCain made at least a rhetorical mistake by saying the fundamentals of the economy are sound, because they were all over that, and the Obama campaign picked it up right away. And the second is their theme in the Obama campaign that John McCain is George Bush. If you like the people who brought you this economy for the last eight years, you are going to love John McCain -- so two major themes there that they think they can play on and grab headlines with.
BROWN: So, Candy, how does John McCain handle when? I mean, how do you distance yourself from an economy that went sour under a Republican administration that you supported?
CROWLEY: You say: Because I would have done things differently. I would have been for more regulation and more oversight and would have oversight of some of these really bum loans that banks were putting out there. I would have watched Wall Street more carefully.
And that's what they're trying to do is say: Wait a second. I'm not George Bush. Here's what I would have done differently.
BROWN: All right, Candy Crowley for us tonight -- Candy, thanks.
And, of course, the entire campaign may turn on the economy. Coming up next, our political panel is going to tell us which candidates' dollars and cents message will play best with voters.
And then a little bit later, we call foul on some of the campaign ads that have clearly crossed the line. Our ELECTION CENTER fact- check, no bias, no bull, is coming up.
(COMMERCIAL BREAK)
BROWN: Today's meltdown on Wall Street has both campaigns struggling to find an economic message that will win them votes. And that couldn't be more important. More than half, a whopping 56 percent of voters in a recent CNN research opinion poll, said the economy is issue number one.
So, how are the candidates doing?
Here to talk about that, CNN contributor David Brody, Christian Broadcasting Network senior national correspondent, Republican consultant Alex Castellanos, and CNN political analyst Roland Martin, who is a Barack Obama supporter, we should mention, as well.
And, Roland, a huge opportunity for Obama here, as Candy just pointed out. Are they taking advantage of it?
ROLAND MARTIN, CNN CONTRIBUTOR: It's a game-changer. And I think that is what you are seeing, because it gets away from the nonsense of lipstick and stupid stuff like that and focuses on the economy. BROWN: And not just nonsense, frankly, the attention that has been going to Sarah Palin.
MARTIN: Yes, but, really, all the attacks and everything that means absolutely nothing to people who are pointing food on the table trying to send their kids to college.
And so the Obama campaign must take advantage of this. And you see what's interesting. Obama focused today on the whole issue of deregulation, which caused this meltdown today. McCain is trying to stick to a broad-based economic message, tax cuts and then being able to help the economy. That might be a problem if he doesn't address this specific issue.
BROWN: Alex, how much of a problem is this for McCain? I mean, we heard the Obama campaign go after him for what he said. The fundamentals of the economy are strong. He has said it before. Is this something that's going to be a problem?
ALEX CASTELLANOS, CNN POLITICAL CONTRIBUTOR: Well, it may be a game-changer, but we don't yet know for who, and for this reason. In uncertain times, in stormy seas, people tend to cling to the life raft they're on.
And right now, it's not just policy that people want to know about. It's kind of, do you have tested, proven leadership experience to handle tough times and crises? For example, today, your point, Campbell, Senator McCain tried to reassure the country. That is what he was very clearly trying to do, I think, when he said, look, our fundamentals are sound. We are going to get through this. However, in the very next phrase, this is a crisis, something we have to deal with.
And I think the country saw today two very different approaches, one guy taking it very seriously, saying we can get through it, but it's going to be tough, and the other one immediately jumping on the politics of it and, saying, hey, Senator McCain doesn't understand what is going on?
(CROSSTALK)
MARTIN: Alex, did you miss the memo that HP is laying off 25,000 people? You are going to have thousands laid off at Lehman Brothers. You are going to have thousands laid off at Merrill Lynch.
CASTELLANOS: So, Roland, you would agree then...
MARTIN: Alex, my whole point is...
(CROSSTALK)
CASTELLANOS: No, you asked me a question, Roland, and I was going to answer.
(CROSSTALK) MARTIN: ... going to go well, going to get through it. You have to confront the reality, people are scared right now. And just saying we are in a crisis, it's not going to do it.
BROWN: OK, Alex, go ahead.
CASTELLANOS: And, Roland, I think -- and, Roland, to your point, people are scared right now. And I think, at this point, what we would all want from our leaders, Democrat or Republican, is somebody to say, you know what? We are gong to get through it. Reassure the country. It's step one. And when you have been there in tough times, I think that's something you understand.
BROWN: All right, David, David, you have done a lot of reporting on this and talked to a lot of people. What are people responding to? Which side do you agree with?
DAVID BRODY, CNN CONTRIBUTOR: Dumb it down, Campbell. That's the answer.
MARTIN: That's right.
BRODY: In America, you have got to dumb this thing down. You can't go in talk about tri-party repo and all of these terms. People want to -- they want to feel like you're feeling their pain. And that's very important and that's what they have to do.
MARTIN: Absolutely. You have got to make it crystal clear, because people have to get it, Campbell. When you say, oh, well, this whole deregulation, people don't get that.
BROWN: All right. I get that. But, frankly, both -- neither of these candidates has really successfully done that. Would you agree, David?
MARTIN: You're right.
BROWN: Would you agree, David?
BRODY: Oh, yes, sure. I mean, I think that's a problem.
But you saw Obama's campaign do this a little bit when try to get on the park bench and try to make it 25 people at a time and really talk economic issues. I thought that was real important, Campbell.
BROWN: Alex, what do you think?
CASTELLANOS: And, Campbell, well, and I think the deregulation thing is a problem for Republicans and for Democrats, in this sense. You know, Joe Biden comes from Delaware, the bank...
(CROSSTALK)
CASTELLANOS: ... credit cards, where there's been quite a bit of deregulation. And Senator Biden, frankly, has been on that side. He's on the Obama ticket, so it's going to be a challenge for both sides.
MARTIN: Campbell, the person who seizes this message is going to all of a sudden vault to the lead. That's why it's a game-changer.
(CROSSTALK)
BROWN: Well, let's see what happens. Hold on, we have got to take a quick break. You guys, you aren't going anywhere, I know.
This history-making crisis on Wall Street dominating the campaign trail today. When we come back, we're going to listen to what the candidates are saying directly about it. We will put it to our no bias, no bull test.
This is the ELECTION CENTER.
(COMMERCIAL BREAK)
BROWN: Here in the ELECTION CENTER, our motto is no bias, no bull. And, frankly, there's a ton of bull out there on the campaign trail right now. We have been and we will continue to point out when the candidates are taking liberties with the truth, leaving out important details in their stories or claiming something that just isn't true.
The crisis on Wall Street is the talk of the campaign trail today. John McCain and Barack Obama both blaming Washington and both promising to shake things up. Let's listen.
(BEGIN VIDEO CLIP)
MCCAIN: We're going to put an end to the abuses in Washington and on Wall Street that have resulted in the crisis that we are seeing unfold today. Enough is enough. Enough is enough. We're going to reform the way Wall Street does business and put an end to the greed that has driven our markets into chaos.
We'll stop multimillion dollar payouts to CEOs that have broken the public trust. And we'll put an end, as I have said, to running Wall Street like a casino. We'll make businesses work for the benefit of their shareholders and their employees. And we'll make sure that your savings, the IRAs, 401(k) and pensions are protected.
OBAMA: And I certainly don't fault Senator John McCain for these problems, but I do fault the economic philosophy he subscribes to because...
(CHEERING AND APPLAUSE)
OBAMA: ... because it's the same philosophy we've had to the last eight years. One that says we should give more and more to those with the most and hope that prosperity trickles down to everyone else.
It's a philosophy that says even common-sense regulations are unnecessary, unwise. One that says we should just stick our heads in the sand and ignore economic problems until they spiral into crisis. (END VIDEO CLIP)
BROWN: Tom Foreman here now to put what they're saying to our no bias, no bull test.
So, Tom, what is it? Are we sticking our heads in the sand or running Wall Street like a casino?
TOM FOREMAN, CNN CORRESPONDENT: Well, Campbell, as often is the case, both senators here are playing it a bit fast and loose with the facts.
And we will take them in the order we just played them there. Senator McCain laid out quite a laundry of list reforms that he would like to slap on Wall Street. But it's not clear the government has the right or the ability to accomplish many of those things, at least not directly. We know that because government has tried.
Remember the bursting tech bubble, Enron and WorldCom? All of those sparked a lot of talk, hearings, investigations, and legislative proposals aimed at stabilizing markets, controlling CEO pay, making companies accountable and protecting the savings and investments of regular voters. The simple truth is, no matter what Senator McCain says he would do, such reforms face enormous and many would suggest insurmountable obstacles here in Washington, for some of the reasons your guests just suggested moments ago.
On the other hand, let's consider what Barack Obama says. He effectively accuses John McCain of being a hard-and-fast Republican supply-side economist, not interested in controlling what business is up to. And that's overstating it.
Yes, McCain has often echoed the idea that rose to prominence under Ronald Reagan of making business healthy, then letting the money trickle down to everyone else. But, last year, before the economy was even such a big story, McCain was being attacked by the Club For Growth, a group that usually helps Republican candidates who share their views.
And they criticized him for -- quote -- "occasional, but eager support" for increased government regulation. And McCain's current economic plan talks a good bit, as he did today, about the need for more, not less, government influence over the dealings of private business.
So, they both have a point to make. But they're also making points that perhaps they shouldn't be making -- Campbell.
(LAUGHTER)
BROWN: All right. Fair point. Tom for us tonight, Tom Foreman. Thanks, Tom, as always.
We keep telling you the race comes down to the Electoral College and a handful of absolutely vital states. And there's big news today. Up next, I'm going to tell you which candidate just lost a state on our electoral map that slipped back into the tossup column.
Stay with us.
(COMMERCIAL BREAK)
BROWN: Well, some big changes to the CNN electoral map.
Minnesota has now moved from leaning Obama to a tossup, too close to call. The race just couldn't be any tighter. In our latest poll of polls, McCain and Obama locked in a dead heat, 45 percent each, 10 percent unsure.
With so much to fight for, no surprise that campaign has turned nasty.
Back to talk about it, David Brody, Alex Castellanos, and Roland Martin.
And let's just talk quickly about Minnesota for a second here.
Alex, how much does this have to do with the Palin affect?
CASTELLANOS: Well, there are a lot of working-class voters that were undecided about this race. You know, Hillary Clinton left a lot of voters on the table.
There was a big wound in the Democratic Party, a split between Obama voters. And Obama was not getting those Hillary populist working-class voters. And Sarah Palin comes along and not only appeals, I think, to that working-class segment, but sends a big message of change in Washington out there.
So, yes, that's obviously been very effective. But one thing we know for sure, Campbell, is that this election looks different than last week than this week, and next week it will be different again.
(LAUGHTER)
BROWN: You think so, too, Roland?
MARTIN: Well, absolutely.
Look, the bottom line is, if you look at the strategy that is going on right now, in terms of obviously going to turn to the economy. But one of the things the Obama campaign is doing is trying to attack John McCain's integrity and honor when it comes to the campaign commercials, the whole notion of lying.
If you can pierce that, all of a sudden, you begin to put a person's credibility into play. Now when you start looking at these various states, you begin to build upon that. McCain folks had a very strong two weeks with Sarah Palin. Now what do they do in terms of getting more specific? That's going to be critical with these swing states.
BROWN: David, do you agree with that? We spent a lot of time last week talking about lipstick on a pig and Sarah Palin. Is this a bit of a reset moment for the campaigns?
BRODY: From an economic standpoint, it is.
But getting to the whole negative advertising situation, look, Campbell, I think this is going to come down to September 26. And I think this is going to come to Mississippi in that debate, where Barack Obama's going to have to call John McCain on the carpet and say to John McCain, you are lying. He is going to have to say something like that if he wants to make this a big issue.
Right now, Campbell, it is being talked about a media, on our -- on CNN and others, and FactCheck.org. But people aren't going every day, working up, saying, let me FactCheck.org.
(CROSSTALK)
MARTIN: ... changed. Here's what has changed, Campbell.
BROWN: We're -- and I should point out, too, stay with us, because, after the break, we are going to be doing a longer piece on this. I think something has changed here.
MARTIN: Absolutely.
And my point is, you're seeing it build up, because, early in the week, last week, it was like, well, this thing was out there. All of a sudden, I think "The View" changed it.
When they began to press John McCain -- and the was on Tuesday -- all of a sudden, you began to see Thursday, then Friday, then Saturday, when you begin to see more media outlets begin to cast a negative light on John McCain's ads, that does have an impact, not immediately, but about a week later, when it comes to these campaigns.
BROWN: Alex?
CASTELLANOS: I think -- I think the Democrats better be a little careful on this one.
You know, if they're going to charge John McCain for putting his own interests first ahead of the country's interests, they're talking about a man who's kind of proven his mettle on that, who has put the country's interests before his own interests.
(CROSSTALK)
MARTIN: Alex, you can't hold the POW as a shield.
(CROSSTALK)
CASTELLANOS: ... we all remember.
So, no, listen -- that's why I think...
(CROSSTALK)
MARTIN: That's not going to work, Alex.
CASTELLANOS: A lot of voters -- yes, it -- yes -- you know, we ought to talk about that, because the first...
(CROSSTALK)
BROWN: That's not quite what it's about, though.
MARTIN: Thank you.
CASTELLANOS: Yes, it is.
BROWN: It's about factual inaccuracies in a lot of what's been coming from the McCain campaign.
(CROSSTALK)
CASTELLANOS: Absolutely.
And the first ad that crossed the line -- and the first ad that crossed the line in this campaign belonged to Barack Obama, who charged John McCain with $4 billion in special tax cuts for oil companies, when there was no such thing.
(CROSSTALK)
MARTIN: Alex --
BRODY: See, Campbell --
BROWN: Hold on, David.
CASTELLANOS: When Barack Obama himself -- when Barack Obama himself says he is considering the same thing.
BROWN: David?
BRODY: Yes.
BROWN: Go ahead, David.
BRODY: Now part of the problem here, Campbell, is that everybody's got a sliver of the truth. And this is the problem.
You know, Barack Obama wants to complain about John McCain and he is right in many ways. At the same time, Barack Obama's campaign hasn't been entirely truthful either. It's hard to take the high road here because -- and here's the other problem, Campbell.
All campaigns throughout history have done this and so, therefore, you know, where are you going to go? Obama in a way if he wants to make John McCain an issue in all of the negative advertising, well, he's been burned by past political candidates before.
BROWN: All right. Guys, stay with me, because when we come back we're going to talk about this more and get into some of the specifics of this campaign, particularly of some of what we heard over the last week to the point where you even had Karl Rove coming out and saying that he thinks that this has crossed the line on the Republican side.
MARTIN: Shocker.
BROWN: We will talk about that when we come back. Stay with us.
(COMMERCIAL BREAK)
BROWN: Breaking news tonight to tell you about. The Wall Street meltdown reaching Asian markets where it's already Tuesday morning. In early trading, Japan's Nikkei stock average is down four percent. Stocks in South Korea fell more than five percent at their opening and that was somewhat expected.
We are going to have all the latest for you coming up on CNN throughout the evening, so stay with us for that information, as well.
Moving on now, in every campaign there are charges, there are countercharges and then there are facts. Here in the ELECTION CENTER, we do care about the facts. It is our job to tell you when the campaigns don't tell the truth.
Tonight, a lot of people and not just Democrats are saying the McCain/Palin campaign is giving us a lot less than straight talk. So we asked our Randi Kaye to check it out. She's joining us tonight from Anchorage, Alaska, with all the details -- Randi.
RANDI KAYE, CNN CORRESPONDENT: Hi there, Campbell. I talked to one political expert today who says if the McCain campaign can't win pretty, it is going to try and win ugly. That it will take it any way it can. But truth be told, it's getting pretty ugly on both sides.
(BEGIN VIDEOTAPE)
KAYE (voice-over): Call it what you will -- mistruths, half truths, stretching the truth, telling the truth. Whatever it is, it has both Democrats and Republicans questioning what's going on inside the McCain campaign. Their opponents have gone so far as to say that John McCain and Sarah Palin are lying their way into the White House, claims the campaign brushes off.
TUCKER BOUNDS, MCCAIN SPOKESMAN: I think that those who say that John McCain and Governor Palin are lying about anything in this campaign need to pay closer attention to our advertisements and the record of the candidate we're running against.
KAYE (on camera): Make no mistake. The Obama campaign also been accused of mistruths along the way, like telling voters McCain wanted to spend 100 years in Iraq. McCain actually said, troops should stay in non-combat roles for as long as it takes, not that he wanted 100 years of war.
(voice-over): But today, Obama turned up the heat on McCain.
(BEGIN VIDEO CLIP, OBAMA CAMPAIGN AD) NARRATOR: He's running the sleaziest ads ever. Truly vile. Dishonest smears.
(END VIDEO CLIP)
KAYE: McCain stands by his ads, he told the ladies from "The View."
(BEGIN VIDEO CLIP, "THE VIEW")
JOY BEHAR, CO-HOST, "THE VIEW": We know that those two ads are untrue. They're lies, and yet you at the end of it say I approve these messages. Do you really approve them?
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Actually they are not lies.
(END VIDEO CLIP)
KAYE: Well, are they or aren't they keeping them honest?
(BEGIN VIDEO CLIP)
NARRATOR: Learning about sex before learning to read?
(END VIDEO CLIP)
KAYE: Did Obama really want to teach sex education to kindergartners? Not exactly. The program in question was intended to teach kids how to avoid sexual predators says the nonpartisan group, FactCheck.org.
VIVECA NOVAK, FACTCHECK.ORG: What he wanted to do was increase the range of some form of sex education, K through 12. But the kind of thing he was interested in having kids at a young age learn about was inappropriate sexual advances that might be made against them.
KAYE: The campaign's response?
BOUNDS: Our ads are based on honesty and truth and a true reflection of Barack Obama's records.
KAYE: But what about Sarah Palin's record? On the campaign trail, she keeps hammering home one point.
I told Congress thanks, but no thanks, to that infamous bridge to nowhere. But that's not true. Congress had already killed the project.
NOVAK: She never said no thanks, Congress.
KAYE (on camera): Opposing the bridge plays into a bigger theme of the McCain campaign that Sarah Palin is the perfect crusader to help McCain rid Washington of its addiction to earmarks and wasteful pork barrel spending.
(voice-over): This is what McCain said on "The View."
(BEGIN VIDEO CLIP, ABC "THE VIEW")
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Which she vetoed half a billion dollars worth in the state of Alaska.
BARBARA WALTERS, CO-HOST, "THE VIEW: She also took some earmarks.
MCCAIN: No, not as governor, she didn't. She vetoed.
(END VIDEO CLIP)
KAYE: The truth, Governor Palin has cut Alaska's earmark requests in half. But this year alone, the state asked for $197 million.
NOVAK: She says that she vetoed a lot of legislation that would have called for earmarks, but that doesn't get rid of the fact that she actually did ask for earmarks for the state of Alaska.
KAYE: On energy policy, Palin said Alaska provides 20 percent of the energy produced in the U.S. Is that true? No. The U.S. Energy Information Administration says it's 3.5 percent.
NOVAK: It's a big deal because Sarah Palin and John McCain have been claiming that Palin is an expert on energy in the United States because Alaska has a good bit of oil. But the figures she's citing are simply wrong.
KAYE: And what about Palin's international credentials? The extent of her travels abroad?
BOUNDS: The Alaska National Guard has confirmed just like we had confirmed that the campaign that she has traveled abroad. She went to Kuwait. She entered Iraq. She underwent and presided over a ceremony. So here we are trying to bat down something that was completely true, 100 percent accurate.
KAYE: Apparently not. We checked with the Army National Guard and they told us they are 100 percent sure Palin never made it past the Iraq/Kuwait checkpoint, that she never entered Iraq. And her trip to Ireland originally billed by the campaign as a visit to a foreign country, campaign spokeswoman Maria Comella says it was a refueling stop.
Some Republicans are uneasy. Bush White House strategist Karl Rove on "FOX News Sunday" criticized both the McCain and Obama campaigns.
KARL ROVE, FOX NEWS CONTRIBUTOR: McCain has gone in some of his ads similarly gone one step too far and sort of attributing to Obama things that are, you know, beyond -- beyond the 100 percent truth test. Both campaigns ought to be careful about it.
KAYE: Still, political expert Larry Sabato says mistruths can work well with the party base which is conditioned to believe the campaign.
LARRY SABATO, POLITICAL EXPERT: A smear campaign can succeed. If it's completely outrageous and it's completely contrary to the facts, then probably the truth will catch up with it before the end of the campaign. But if the unfairnesses or the mischaracterizations are subtle enough, then the campaign will probably succeed.
(END VIDEOTAPE)
KAYE: Now, how a campaign is run can actually come back to bite a candidate or even a president. Our expert, Larry Sabato, tells us that voters remember. Not only do they remember the truths, but they remember the fibs even more.
He cited the first George W. Bush back in 1988 who won that campaign handily but his advertisements, Sabato says, were rather ugly and full of mistruths, he says. And he says the voters didn't forget that when he ran again. He says it wasn't the economy that cost him that second term, but his advertising campaign, Campbell.
BROWN: All right. Randi Kaye for us tonight. Randi, a lot to chew over with our panel when we come back. I know Alex Castellanos and Roland Martin and David are going to have a lot to say about this. Stay with us.
MARTIN: Just a little bit.
BROWN: We'll be back right after this.
(COMMERCIAL BREAK)
BROWN: Some tough charges against the McCain campaign you just heard. We should mention our truth squad is going to look very closely at what Obama has said as well as Joe Biden tomorrow. But we're going to talk about all this right now with our panel.
First, though, if you want proof that this campaign has turned ugly, listen to what Karl Rove said on FOX News yesterday.
(BEGIN VIDEO CLIP)
KARL ROVE, REPUBLICAN STRATEGIST: McCain has gone in some of his ads similarly gone one step too far and sort of attributing to Obama things that are, you know, beyond -- beyond the 100 percent truth test. They don't need to attack each other in this way. They have legitimate points to make about each other.
(END VIDEO CLIP)
BROWN: And we should mention there, of course, Rove was talking about Obama and McCain. But it is sort of surprising that he is pointing to McCain here. Has the campaign -- McCain campaign gone too far?
We want to talk about that now with our panel. David Brovy (ph) -- David Brody, excuse me, I'm marveled out tonight, Alex Castellanos and Roland Martin.
And, Alex, you know, you got to pay attention when Karl Rove, of all people, says the McCain campaign has gone too far. But from what we can tell, Team McCain frankly doesn't seem to care. I mean, the truth's got to matter for something, right? Or do they need to be careful here?
CASTELLANOS: Well, I think -- first of all, it's much easier to lose a race than it is to win a race. And if you blow your credibility, if people don't believe what you're saying, you can give all the speeches and have all the money and TV commercials you want, you're not going to do well. And it's pretty clear.
It's hard to defend, for example, a McCain campaign's charge that Senator Obama was actually talking about Governor Palin, the lipstick on a pig thing. You know, that's, I think, crossed the line on that one.
But, for example, notice what we were just talking about with the sex education charge on Senator Obama when we said, well, that's not what he wanted to do. He wanted to protect kids against sexual predators. Well, that's great, terrific. But we don't get to live with Senator Obama's or any politician's good intentions. We actually have to live with what they vote for. And when you look at the actually legislation --
BROWN: But Alex -- OK, go ahead.
CASTELLANOS: I'm sorry, Campbell. It had strong provisions against sexual predators, but it also had to speak of standards in there which were 5 to 8-year-olds should be, you know, talking about body parts, lifestyles and what feel good and a lot of Americans think that that's going too far.
Now, you know, whether he intended it or not, that's what he voted for and that's fair game.
BRODY: Well --
BROWN: Go ahead, David.
BRODY: Yes. However, on that sex education ad, I mean, it actually said, "Learning about sex before learning to read?" I mean, you can read a lot into that and I think that's a big part of it.
Hey, Campbell, here's the bottom line on all of this. There was a situation back in the '80s when Princeton played Georgetown, and hang with me here for a moment.
BROWN: OK.
BRODY: All right. Princeton was the underdog. They were the 16th seed in college basketball and the only way they could beat Georgetown is to play their game. They had a dumb it down. In other words, they had to play their game and that's exactly what the McCain campaign is doing. They can't get 200,000 people in Berlin. They can't get any sort of enthusiasm gap here. So what they have to do, well, Palin has changed that to a degree. But the point is that they have to play their game and bring Obama down.
Remember, Obama talked about a new kind of politics. If they can bring Obama down into the mud, if you will, so to speak, that works the McCain advantage and it's a political master stroke really.
BROWN: And Obama's hands are not clean here either. I mean, we're going to go through in greater detail the specifics on the Obama campaign, too, tomorrow night as we mentioned.
MARTIN: Absolutely.
BROWN: Roland, but go ahead.
MARTIN: The bottom line is when you lie, you lie. And look, we can talk all about Princeton and Georgetown. What John McCain is doing is doing exactly what he said he did not like in 2000. And what he is saying is I'm going to sell my soul in order to win.
And at one point he said he would never do that. But he knows he is playing in the gutter. And you can sit and talk about, you know, one issue about four million. But look, when you lie to say she went to Ireland, it was a refueling deal, it's called a lie, not a fudge.
Going to Iraq, lie. This whole issue of sex education, lie.
When you talk about any -- it's constant lie after lie. And when you get called on it -- and I'm telling you something, Karl Rove there is smart. I think the reason Karl Rove made the comment yesterday, because he sees how this tide is turning. He knows. And if all of a sudden, if more members of the media begin to say lie, lie, lie, lie, it can backfire on McCain. Very smart by him to try to send a message.
BROWN: But it may not. Because in large part, the intention to some degree, Alex, you probably agree with me on this, is to set up a war with the media, right? Don't trust them, trust us.
CASTELLANOS: Oh, it is. Part of it I'm sure.
BROWN: I mean, it's a strategy that's certainly been employed before.
CASTELLANOS: It's classic outsider versus the establishment and the elite and that certainly plays to McCain's advantage. But you know, it's again, Republicans are going to look out here at this and they're going to be motivated by this because they're seeing that all of a sudden Senator McCain's campaign is being called to the carpet when, in fact, in some cases maybe they have crossed the line but some they haven't. But up to now, Senator Obama's campaign has even called on --
(CROSSTALK) MARTIN: They have crossed it, Alex. They're lying.
CASTELLANOS: They haven't. No, come on, Roland.
MARTIN: They're lying.
CASTELLANOS: They've been -- not called on the carpet for the 100 years. They've not been called on the carpet for making stuff up on the -- on lots of things.
BROWN: OK. And we should say just in case anyone was unclear on this, Obama -- Roland is supporting Obama now. Alex Castellanos is obviously a McCain supporter. David Brody...
BRODY: In the middle.
BROWN: ... just trying to play it straight.
MARTIN: Like a (INAUDIBLE), Campbell.
BRODY: Referee. Campbell, a referee.
BROWN: All right. David, Alex, Roland, thanks to all of you. Appreciate it.
Coming up, they look alike, they sound alike. And Tina Fey's guest appearance as Sarah Palin on "Saturday Night Live" was so popular, fans want an encore. Well, here in the ELECTION CENTER, we aim to please. So stick around.
(COMMERCIAL BREAK)
BROWN: Our Wall Street coverage continues on "LARRY KING LIVE" coming up in just a few minutes. Also, Larry has a special guest, a real McCain insider. Larry, tell us more.
LARRY KING, HOST, "LARRY KING LIVE": Well, Campbell, as we all know now, Wall Street's in shock tonight. What put two financial titans in such trouble, and what's going to happen? We'll address these questions and surely the one everyone's asking -- how does this affect my money and the election?
Plus, Meghan McCain is here. All next on "LARRY KING LIVE" -- Campbell.
BROWN: All right. Larry, we'll see you in a bit.
Right now, down in Texas, rescue crews are just getting the first look at what Hurricane Ike did to the most remote parts of Galveston Island. We're going to get a live update, coming up next.
(COMMERCIAL BREAK)
BROWN: Still ahead, the political spoof everyone is talking about and there's buzz we are going to see a repeat performance before too long. But first, to Erica Hill here tonight with "The Briefing -- Erica.
ERICA HILL, CNN CORRESPONDENT: And, Campbell, we want to update you with some breaking news actually from Galveston, Texas, tonight where the mayor has ordered thousands of people who actually rode out Hurricane Ike there, to leave and leave now. And as for those who did evacuate, well, they're being told to stay away.
CNN's Gary Tuchman just got back from one of the places in the area actually near Galveston. A lot of people have been wondering about, Gary, you were one of the first -- with some of the first people to make it on to -- is it Crystal Beach today?
GARY TUCHMAN, CNN NATIONAL CORRESPONDENT: That's right, Erica. We just finished a wet and muddy journey on a motorboat. We believe we're the first reporters to have stepped foot on this very isolated town, Crystal Beach, which is northeast of Galveston, cut off from the rest of the world. You can't drive there anymore. So we took a motorboat ride.
We don't report rumors. However, for the last few days, there's been a very strong rumor reported to police by many people that perhaps as many as 200 people were inside a grocery store that collapsed on that island. Well, we went to that grocery store today. The grocery store did indeed collapse. It's devastating.
We don't have the pictures in just yet. We will feed them in later.
So we just got off the boat moments ago, but we can tell you there is no truth to that rumor. Even though there is inventory, roofing, pipes, metal all over the ground, and anyone who was in there could have very easily been killed. It's very clear that while there may be a couple of people, we don't know for sure bodies that could possibly be in there. And I emphasize possibly. We went through the entire store and we did not see anything. And that is very good news because people all over Texas were very worried about that.
But the downtown is devastated. It looks very much like the Lower Ninth Ward after Hurricane Katrina. Back to you, Erica.
HILL: Boy, that is not -- not really a comparison you want to hear, Gary.
Real quickly, I understand that in Galveston, the city manager says things are just deplorable, conditions are terrible. Do they have anything there, if everyone's being told to stay out, even water?
TUCHMAN: There's no food. There's no water being sold. There's no electricity. There's no communications. They want everyone to get out of here.
This is a barrier island and it's a barrier island that protected Houston. This island has been devastated.
HILL: All right. Gary, thanks.
Campbell, that update from Gary. Not exactly what you want to hear.
BROWN: No, not at all.
All right. Erica Hill, thanks for that tonight. Appreciate it.
When we come back, Tina Fey's impersonation of Sarah Palin on "Saturday Night Live." Stay with us.
(COMMERCIAL BREAK)
BROWN: Some breaking news tonight. The Wall Street meltdown reaching Asian markets where it's already Tuesday morning. In early trading, Japan's Nikkei stock average down four percent. Stocks in South Korea fell more than five percent at their opening and this was somewhat expected.
We are going to have the latest on this throughout the night. More on this, too, coming up on "LARRY KING LIVE" here on CNN.
Now, to end on a fun note, one of the most asked questions in our newsroom this morning didn't have anything to do with Wall Street. Just about every conversation started with, did you see Tina Fey on "Saturday Night Live" playing Sarah Palin? So, did you?
Well, it's already gone viral on the Internet. It's sure to be a classic. For those who hadn't seen it, take a look.
(BEGIN VIDEO CLIP, "SATURDAY NIGHT LIVE")
TINA FEY, PLAYING GOV. SARAH PALIN: You know, Hillary and I don't agree on everything.
AMY POEHLER, PLAYING HILLARY CLINTON: Anything.
I believe that diplomacy should be the cornerstone of any foreign policy.
FEY: And I can see Russia from my house.
POEHLER: I believe global warming is caused by man.
FEY: And I believe it's just God hugging us closer.
POEHLER: I don't agree with the Bush Doctrine.
FEY: And I don't know what that is.
What an amazing time we live in to think that just two years ago I was a small town mayor of Alaska's crystal meth capital. And now, I am just one heartbeat away from being president of the United States. It just goes to show that anyone can be president.
POEHLER: Anyone. Anyone. Anyone. I probably should have wanted it more. I invite the media to grow a pair and if you can't, I will lend you mine.
(END VIDEO CLIP)
BROWN: All right. So we should mention that Sarah Palin actually watched according to the McCain campaign.
HILL: And?
BROWN: It thought it was very, very funny.
HILL: Good.
BROWN: She enjoyed it. So we are told that apparently she went as Tina Fey one Halloween for Halloween party dressed up.
HILL: See, you knew -- you knew it had to happen.
BROWN: I don't know.
HILL: Of course, the big question now is, will she be back to do the role again? I think there's a good chance.
BROWN: Rumors are flying she will.
HILL: How could she not.
BROWN: All right. Erica Hill, thanks for joining us tonight. Tonight, we should mention we looked at how John McCain, Sarah Palin taking liberties with the truth. They aren't the only ones.
Tomorrow night in the ELECTION CENTER, our truth squad digs into where Barack Obama and Joe Biden may be playing fast and loose with the facts, as well. Stay with us tomorrow night in the ELECTION CENTER.
"LARRY KING LIVE" starts right now.
