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Glenn Beck

Economy in Crisis: Bailout Debacle

Aired September 30, 2008 - 19:00   ET

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

(BEGIN VIDEOTAPE)
GLENN BECK, HOST (voice-over): The bailout bill defeated, and the Dow suffered its biggest single day loss yesterday. Today I think it`s up. It`s like a yo-yo. Bounced back up. So now how is Congress responding? You know, they took a couple of days off. They worked almost, like, four days solid. They were working the weekend. You know, put their feet up, relax a little bit. Revel in the job not done.

I don`t know about you, but it is crystal clear to me we do not need a Democratic or a Republican plan. We need an American plan. I`ll look at how we -- how we could possibly get one as we continue to examine our economy in crisis tonight.

Well, hello, America. I mean, blood shoots out of my eyes every time I see Congress playing the little politics, you know, with the financial bailout and "They did it." "No, no, they did it."

You know what? If you feel that way, call Washington and tell them shut the -- oh, no. Sorry. Can`t do that. Too bad. My mistake. There`s no one`s there to pick up the phone.

Hours after the defeat of this bailout bill and a devastating 778- point plunge in the Dow, the largest single-day point loss in history, Congress headed home. Take a couple of days off. You know? "Hey, I think we got everything done here. What do you say?" I see, Congress, that you`re earning every bit of your whopping ten-point approval rating.

So here`s "The Point" tonight. When you look at the numbers of who did and didn`t vote for this bill, you`ll see this is not a partisan issue. It`s an American issue. And here`s how I got there.

First, President Bush made a statement this morning regarding Congress` failure to pass the bailout.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I assure our citizens and citizens around the world that this is not the end of the legislative process. Producing legislation is complicated, and it can be contentious. It matters little what path a bill takes to become law. What matters is that we get a law.

(END VIDEO CLIP)

BECK: Yes, yes. Mr. President, that`s kind of what I think a lot of Americans are afraid of: politicians spending most of their time and our money with the legislative process. This time around we cannot afford the politicking.

It was 205 for the bill and 228 against the bill. That`s 13 shy of passing. Oh, those damn Republicans. Really? Since when did somebody who`s not in charge of Congress have to worry about the party that isn`t in charge? I mean, it doesn`t make any sense. You probably heard these numbers everywhere today.

Let`s dig just a little bit deeper here. Not only were most of the other Democratic "nos" cast by members in swing states -- whoa -- but according to the Associated Press, two thirds of Congress` most vulnerable members, Republicans and Democrats alike, chose to vote "no" to protect their seats. That`s a Washington weasel way of saying, "I need to save my job."

They ignored their parties` leaders. Nancy Pelosi gave permission to vote with the people. And they voted with their constituents. Americans see this bill for what it is: a bloated plan that could actually end up making things worse, even though we do need a plan.

So tonight, America, here`s what you need to know. Congress is fiddling while Rome is on fire and burning to the ground. That`s a -- that`s a fancy pants version of what they`re saying down on, you know, Wall Street and Main Street.

On Main Street, actually, might be -- might be more appropriate to say, your elected leaders were sleeping in today while you went to work. They`re playing politics. You`re trying to pay the bills. They`re trying to save their job. Your job is actually at risk. Vulnerable seat or not, the financial crisis isn`t really going to be solved by a Democratic or Republican plan. It`s only going to be solved by American who are committed to doing the hard thing: making the sacrifices and the tough decisions to save our own lives and our own way of life.

Congress gets back on work -- at work on Thursday, and I certainly hope they`re very well-rested. Little sleepy.

Ali Velshi is CNN senior business correspondent.

Ali, what the heck happened to the market today? The market is back up. Some people are surprised. Does this have anything to do with the new FDIC rules that have been changed?

ALI VELSHI, CNN CORRESPONDENT: Well, the FDIC, you know, both John McCain and Barack Obama have asked that the FDIC deposit, the Federal Deposit Insurance Corporation raise the limit of insured deposits from $100,000 to $250,000.

BECK: Is that because we`ve devalued the money so much that $250,000 is the old $100,000? Yes.

VELSHI: You know what it`s got more to do with? It`s two things. Small businesses have been left out of this whole equation, and small businesses need to, in many cases, keep more than $100,000 in a bank account, so -- in order to keep their money safe. Are they going to have to run a few different bank accounts? You can be a very small business and not even be very profitable but need more than $250,000 in a bank account.

The other one is psychological to stop a run on the bank.

BECK: Right.

VELSHI: Because when people started taking their money out, that affected the ability of companies to get loans. But you know, Wall Street`s up today. First of all, Wall Street, as you and I know, the Dow is a poor indicator of the economy.

And there`s up today because there`s been a small shift over to the side of things that say, a deal will get done. And while there`s nobody who thinks the deal is savory, nobody really likes it, but I agree with you: something has to get done.

BECK: Here`s -- here`s the problem, Ali. And I said this on the radio today. I tried to come up with a leader that we actually trust, somebody that we can say...

VELSHI: Right.

BECK: Because I don`t trust -- $750 billion to the people who got us here, and they`re worried about oversight? Who`s providing oversight to them? Who`s watching these guys?

VELSHI: We need -- we need our presidential candidates to step up and be ahead of this rather than be reacting to it. Look, you`ve got the treasury secretary in charge of this. You`ve got the president coming out every morning with speeches on this whole thing. You`ve got the head of the Federal Reserve, who for many months was denying we were in any sort of economic problem at all, while you were warning that we were.

We have the head of the Securities and Exchange Commission, the SEC, Chris Cox. I mean, this is not a regulator`s regulator. This is a guy who thinks everything was fine.

We don`t have a whole lot of people who -- I understand why the American people are angry about this. They`re not sure who exactly they`re supposed to give this check to sign. And that`s why this being held up. We need somebody in front of this thing to say, "Here`s how it`s going to work."

Despite all the politicking, Glenn, we still don`t know how this is going to work.

BECK: I know. Hang on just a second. I want to come back to you in a second.

But first, I want to go to David Walker, the guy who said -- and then he`s the guy we trust. He`s the president and CEO of the Peter G. Peterson Foundation and former comptroller general of the United States. This is -- this guy was reappointed by Reagan and reappointed by Clinton.

And you were there the whole time, when you saw this. You`ve been ringing the warning bell the whole time. Now, these weasels on both sides, Republicans and Democrat, are asking us for more money. And they won`t -- it`s like alcoholic -- I mean, we need to give them a big book. They`re like alcoholics that won`t admit they have a problem in the first place.

How do we -- how do we solve this, David, where the American people don`t trust any of these people?

DAVID WALKER, PRESIDENT/CEO, PETER G. PETERSON FOUNDATION: Well, first we`ve had a total failure of leadership. We`ve had a lack of courage of a half a number of individual members. You know, that we`ve gotten to the point now where they`re trying to protect their job rather than doing what`s in the public interest.

Frankly, I hate the fact that we are where we are, but something is going to have to get done. They`re going to have to pass some bill that has adequate oversight, has adequate protection.

BECK: Look. David, you and I talked about this before.

WALKER: Sure.

BECK: I am really willing to pay more taxes, but not to these people.

WALKER: Right.

BECK: Not a dime more to these people. If it meant that they would pay down my debt so -- so my children could have a future that I had growing up, you damn right I`d do it. But these people are screwing us every step of the way.

So how do you have oversight when Chris Dodd and Barney Frank were there the whole time, pushing it, and so was Bush?

WALKER: Washington is out of touch and out of control. We need tough statutory budget controls. We had those kinds of controls in place during the 1990s. They took us from large and growing deficits and surpluses that expired in 2002. I wouldn`t send them any more money until they do something on this.

But understand this, Glenn. We`re in a 53 trillion-plus hole. We`re debating right now what are we going to do about a $750 billion bill. That`s an appropriation. The actual price tag will be less than that. The actual price tag -- hold it. The actual price tag will be less than 1 percent of our financial hole.

Don`t get me wrong: there are lessons to be learned here. We need to get it right. Let`s look at the larger problem.

BECK: I can`t accept that. I`ve been wanting to ask you this all day. I can`t accept that.

WALKER: All right.

BECK: You can prove me wrong right now. You did our books for how many years? Twenty years?

WALKER: Audited the books almost ten years.

BECK: OK. So you were looking in our books. You saw everything. Name one program that people said, "Oh, it`s only going to cost this" that came in under what they asked for. Name one, just one.

WALKER: No, no. Here`s the key. Well, actually, part of the prescription drug program -- part, element is costing less than we thought but way more than we can afford. Way more than we can afford.

BECK: The whole package is much more than they said.

WALKER: Here`s what`s -- in this case, we`re buying assets at market value, OK? That market value is much less than par value. We`re buying it at a depressed price, presumably. OK? And at some point in time we`re going to resell them and so, yes, we`re going to have to spend money right now, but at some point in time we`re going to recover.

Frankly, this is the most poorly communicated piece of legislation I`ve seen in a long time.

BECK: In this piece of legislation, they were trying to add in the -- the retirement benefits of these cities.

WALKER: Totally inappropriate. OK? But what ends up happening...

BECK: Is Social Security is not enough for us?

WALKER: Let`s get back to core. OK, let`s get back to core. What ends up happening is people try to Christmas tree a bunch of things on top of legislation. We need to -- we need to focus on the essential. We need timely, targeted and temporary action. We need to make sure that we`ve got appropriate oversight by independent parties, not the people that caused the problem.

We need to make sure we`ve got adequate transparency and make sure that we`re learning lessons from how did this happen and we need to get on with a much bigger problem. The federal government`s finances are in terrible shape. Nobody`s going to mail out America. We`re going to have to solve our own problem.

BECK: Right. Do you think this is actually -- in the long run this may actually -- this crisis may actually help us solve this?

WALKER: I`m hoping that it`s going to be a wake-up call. This is less than 1 percent of our problem. It`s a huge problem today. But in the overall scheme of things, it`s just a -- not even a down payment.

BECK: David.

WALKER: Great to see you.

BECK: Thank you for being a guy we can actually trust.

Coming up, not one sector of the financial market is safe during our current economic meltdown. I`ll explain why some of the world`s largest hedge funds could actually now be on the chopping block and why you should care.

And the Great Depression is a period in American history we`d like to all forget, but maybe a greater depression is coming our way? Possibly a new, New Deal? We`ll have the latest. Stick around.

(COMMERCIAL BREAK)

BECK: This past Sunday, writer Tom Wolfe wrote an op-ed for "The New York Times" on the disappearance of his Masters of the Universe. That is the name that Wolfe had given the "greed is good" investment bankers who began making millions on Wall Street in the late 1980s.

He wrote that this financial crisis has little to do with them. for the last five years, those masters had been fleeing Wall Street for hedge fund firms. That`s where the real cash has been lately, though that could be changing. Hedge funds are huge pools of managed wealth almost like shadowy kind of organizations to some of us.

Four times a year investors can redeem their investments. Take their money out. Today happens to be one of those days. We`ve been seeing people pull their money out of the banks, and that, of course, leads to collapse if everybody did that.

Did the new Masters of the Universe follow suit and leave hedge funds nothing but empty shells or shaky? To translate all of this into English, and why you should actually care, why it actually affects you, joined once again by Ali Velshi. He is a CNN senior business correspondent.

OK. I read an article today that said this was going to be Bloody Tuesday. Clearly not Bloody Tuesday. What happened with the hedge funds?

VELSHI: The hedge funds, you know, to invest in a hedge fund you have to put up a minimum of a quarter million dollars, and that can`t be the bulk of your investment. So this is for very wealthy investors and pension funds and institutions.

And the advantage of a hedge fund is that it is not regulated in the same way that a mutual fund is, so these guys can take far bigger risks and, hopefully, get far bigger return as a result of it.

The bottom line here, though, is that because they`re so big, they buy big blocks of stocks in many of the same companies that you and I do, so when their investors decide, "Hey, I want to sit this out. This is a little crazy, this market, and they decide to redeem some of their money on this day that they can, that could have pressure on the stocks that you own, because they`ll be selling a ton of those names.

Now, this could still happen over the course of the next few days. And again, these are the wealthiest -- wealthiest of investors, so they may not be as panicked as some people are out here.

But that`s the influence that hedge funds have on you. You can have nothing else to do with a hedge fund but you share the same stocks as many of them do. You buy them. And when they start selling them, that could start affecting the market and pushing it down without you having anything to do it.

BECK: Ali, I said to somebody just last week that everybody that will talk to me off the record, all of the people that are involved in the global finances, they all have told me the same thing. The real culprit here are the hedge funds. These guys are massive.

VELSHI: Yes.

BECK: Nobody knows who they are. They have absolutely no oversight.

VELSHI: Yes.

BECK: Why is it, besides John Edwards being in one, Chelsea Clinton being, you know, involved in one. All -- everybody is involved in hedge funds. Their profit margin is like 90 percent profit margin.

VELSHI: Yes.

BECK: Why is no one talking about the hedge funds?

VELSHI: And I think they will be as a result of everything that`s been going on in the market right now. They will be coming under some degree of regulation, which is another reason why some of these people might want to get out of them. They`ve been able to take bigger risks in this market. In the last few years, that has meant much bigger returns for them.

But the bottom line is did they start it? Well, it all depends. The thing could have been started by people taking mortgages they couldn`t afford or banks overpricing their houses. But they are definitely responsible for some role in this. And it`s very clear they`ll have to be regulated to some degree.

That`s probably going to have more of an influence on them selling stocks, because they just don`t -- they`re not used to disclosing the stuff the way mutual funds are. If they are forced to, you might see them change their investments. But it is going to affect you, because they buy big chunks of the stocks that you and I would invest in or our viewers would invest in.

BECK: Perfect. Thanks a lot, Ali. I appreciate it.

All right. Now let`s turn to Andy Serwer. He is the managing editor for "Fortune" magazine.

Andy, we were just talking about these hedge funds, and this -- these are the funds that a lot of people have in their retirement. Right?

ANDY SERWER, "FORTUNE" MAGAZINE: Yes.

BECK: OK.

SERWER: Yes. I mean, this is the thing that a lot of people are in hedge funds, Glenn, and they don`t know they`re in hedge funds. Because a lot of pension funds and retirement funds have a slice of their money in these hedge funds.

And when these hedge funds have blown up before, and they have, you`ve seen some of these retirement funds get really smacked like the Pennsylvania retired teachers fund. Something like that.

BECK: So yesterday when I was looking at this bailout, I said on yesterday`s program there is a clause in the bailout for the pension funds of cities and et cetera, et cetera.

SERWER: Right.

BECK: And I thought this is a union pay back, but it`s not. This is a telegraphing of the government. They`re concerned about these hedge funds going down.

SERWER: Yes. I mean, these hedge funds, it is this giant secret world and the thing is, right now, you know, the market didn`t go down today. It actually went up a lot. So it looks like maybe there`s not a problem. But the thing is that hedge funds are just now, just today reporting the results. So it`s starting to get out there, and once they report that their results are bad, then people are going to start selling. I think it`s going to be a bit of a delayed affect here.

BECK: What are you -- what are you expecting? Because I heard that a fifth of these...

SERWER: Uh-huh.

BECK: ... could go down. A, would a fifth, would that affect us?

SERWER: Yes, it really would affect us, because it sends the market lower, No. 1. And No. 2, it`s definitely going to make some of these pension funds blow up.

Now a fifth is not as bad as it sounds, because mostly, it`s concentrated at the very top. So only a few of the largest hedge funds have most of the money. So you`ve got a bunch of little ones going by the by. Well, you know, that`s too bad for some rich guys living in Greenwich, Connecticut. They`re going to be going splat, and we`re not going to shed too many tears for them.

BECK: Why is this -- why is this completely unregulated?

SERWER: You know, it`s this world where, for some reason, the government has decided that rich people over here can sort of play in their own little playpen. Like, if you have $1 million to spend, you can invest in some crazy stuff and we won`t even watch you. Now that`s OK, because we`ll just let you all, you know, have a bad time over there or whatever happens to you.

But the problem is, is when these retirement funds can get in that same mix and then the little guy gets hurt. I mean, that`s the problem here.

BECK: Isn`t that exactly what -- see, this is what I don`t understand.

SERWER: Yes.

BECK: This is what I hear from all these politicians, especially the Democrats. They`ll say, "John McCain wants to do this risky scheme and have your Social Security invested in the market."

SERWER: Right.

BECK: It`s not invested in the market. This is invested in the riskiest of the risk, right?

SERWER: Yes. It is. And you know, it`s hard to believe. And the Securities and Exchange Commission, you`re talking about trying to point some fingers, by the way. Let`s look at the Securities and Exchange Commission. Hello. I mean, these are the people who are supposed to be regulating this stuff. Where are they?

They keep saying, you know, "We`re underfunded. We don`t have any money to go after this stuff." Well, you know what? They could have gotten some more money. I mean, they could have gotten more funding. They should have been looking after the store.

So I think that they should have been looking at this. There needs to be a little bit more oversight here with regard to who gets into these crazy hedge funds.

BECK: OK. I want to talk about who gets into them and who`s into them in just a second. We`ll be back after a quick break.

(COMMERCIAL BREAK)

BECK: Back with Andy Serwer. He is with the -- he`s the managing editor for "Fortune" magazine.

By the way, I can`t believe in "Fortune" that I read the actual quote of the treasury spokesperson that said how they came up with the $750 billion. You see that? It was -- I love this. "We just were looking for a big number."

SERWER: Yes.

BECK: Oh, my gosh.

OK. So the hedge funds, everyone I said a minute ago -- I`ve talked to a lot of people off the record. Big, big, big titans of industry and people who are involved in this. They`ve all said the same thing. These guys are the real dark horse. These are the real bad black hats. And nobody`s talking about them. Why -- I can`t get any information. Why -- who are these people?

SERWER: You know, it`s really -- it`s unbelievable that we have allowed this whole world to be created outside of any sort of oversight. And, you know what`s happened is here`s the way it works on Wall Street.

OK. You set up some regulations, right? Here`s this and you can only do things in this little box here. And then these really, really smart rich people say -- they have their teams of lawyers and accountants, and they set up a parallel universe. And they just set it up over here, and it`s outside of the purview of, you know, Washington, D.C., or anyone to understand. And they set up their own world.

And that`s fine. OK. Maybe you don`t believe in the regulation anyway. Maybe you think we`re too regulated. The problem is, is they get so big and bad that then they are able to impact our economy and markets in bad ways.

BECK: Yes. If these guys really collapse, they could just -- they alone could collapse everything.

SERWER: Well, look -- go back ten years ago, Glenn, to 1998, that long-term capital mess. Remember that? I mean, that was one hedge fund up there in Connecticut that almost took down our entire financial system, because they had all kinds of crazy derivatives and funds. Now we`re talking about a whole slew of these babies.

BECK: OK. Now -- so let me go here. If they`re not regulated...

SERWER: Right.

BECK: ... and everybody has their money in...

SERWER: Yes.

BECK: ... because they`re not regulated...

SERWER: Right.

BECK: ... they can do all this crazy stuff.

SERWER: Right, indirectly. Indirectly, in many cases, like with pension funds and stuff. Not -- not -- the average guy on the street doesn`t have their money in there.

BECK: Yes, yes, yes. I`m talking about -- I`m talking about the players.

SERWER: Right. Exactly.

BECK: The people that -- the people that can design the box over here.

SERWER: Exactly.

BECK: Got it. OK. So those people...

SERWER: Right.

BECK: ... they like being over there.

SERWER: They do.

BECK: They don`t like being regulated.

SERWER: They don`t like it. Yes.

BECK: And you start to say, you know what? We`re going to look into this hedge fund...

SERWER: Right.

BECK: ... aren`t you going to collapse it anyway? Because those people say, "I`m getting my money out now."

SERWER: Yes. I mean, that`s a good point, and, you know, it`s unclear. I mean, will these people just run to the next safe haven, a lot of these people? Yes. Some of them are getting smacked, though. Some of them are losing all their money.

And, you know, basically I think what you have to think of these guys is, you know, some of these people on Wall Street, they had $600 million and now they`re down to the last $20 million. Aren`t we shedding tears, you and I? Do you have a hanky somewhere? You know what I mean?

BECK: Yes.

SERWER: But you know, so they`re just scampering around the globe looking for places that they can put their money that`s safe. The problem is -- and we don`t care. That`s fine. You want to create jobs, create businesses, that`s OK. Just don`t mess up our system.

BECK: Sure.

SERWER: And that`s what`s happening now a lot.

BECK: OK. So what is your prediction? Because this -- these numbers could start rolling in next -- by Christmas, right?

SERWER: The next couple of days, I think, weeks we`re going to really start to see the impact of some of this.

BECK: OK. What is your prediction. Are these unstable?

SERWER: Yes. They`re very unstable. I mean, some of them are OK. I think you`re going to see some big failures. I think you`ll see front-page stories in the newspapers where some of these big names that are unknown to the majority of Americans, but you`re going to see things like such-and- such hedge fund blows up, sends credit market in this direction. The stock market is going to go down a couple of hundred points.

So you`re going to see that stuff and, you know, a pension fund with, you know, retirement money is going to be trouble.

BECK: More good news. Sunshine and lollipops.

Coming up, why the House`s failure to pass the bailout bill may be a blessing in disguise. Tonight`s "Real Story," next.

(COMMERCIAL BREAK)

BECK: Welcome back, America and welcome to "THE REAL STORY".

Americans have a pretty short memory. So when we see something dramatic happen like yesterday`s record drop in the DOW, we tend to blame, oh yes, I think it`s his fault but "THE REAL STORY" is that the seeds of almost every crisis we faced from the Cuban missile crisis to the gas shortages in the southeast that are happening right now to this financial crisis, these seeds were planted a long, long time ago.

Let me read you a few highlights from a "The New York Times" article to prove my point. Quote -- "In a move that could help increase homeownership rates among minorities and low income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase banks and other lenders. The action will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans.

Fannie Mae, the nation`s biggest underwriter of home mortgages has been under increasing pressure from the administration to expand mortgage loans among low and moderate income people. In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to these so-called sub-prime borrowers.

In moving even tentatively into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during the flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn prompting a government rescue similar to that of the savings and loan industry in the 1980s."

So you know that article was published exactly nine years ago, today, September 30th, 1999; the administration that was pressuring Fannie Mae, the Clinton administration. Hmm.

The point is, this storm has been building for an awfully long time and both sides are dirty in it.

But it began with a seemingly harmless concept; the idea that home ownership is the American dream and, therefore, a right and not a privilege. Gee, have I heard that on the campaign trail lately?

This idea was championed by groups like the Association of Community Organizers for Reform Now; or ACORN for short. This is a group that lobbies or if I may speak plainly blackmails companies and politicians into meeting their demands. ACORN screams affirmative action to scare lenders and then volunteers to serve as advisers to those same lenders that will change their practices. In other words, they threaten to expose people as racist unless they agree to ACORN`S idea of reform. It is a scam pure and simple.

The ironic part of all this is that people actually call ACORN a group of community organizers which also happens to be the title of, oh, Barack Obama, that he`s so fond of. Unfortunately, the title isn`t the only thing that they have in common as David Freddoso author of "The Case against Barack Obama" and political reporter for National Review will explain here.

Look, first, am I being too strong in saying that they engage in blackmail, David?

DAVID FREDDOSO, AUTHOR, "THE CASE AGAINST BARACK OBAMA": Well now, blackmail is a crime, of course. It`s something that very much resembles that. The idea here is that if your bank isn`t willing to do what we want to make these risky loans, we`re going to use every legal avenue we have. The Community Reinvestment Act of 1977 allowed groups like ACORN to object when banks wanted to engage in certain transactions that required federal approval, for example, if they wanted to do a merger.

Beginning in 1990 in Illinois, actually, ACORN headed by an activist leader who is close to Barack Obama, Madeline Talbot, this is by the way an excellent piece in "The New York Post" recently by Stanley Kurtz outlining all of this. Beginning in 1990 in Illinois, ACORN began a campaign of intimidating these banks into making more of these loans or else they would file and start proceedings to try to block bank mergers and block the banks from doing what they wanted to do.

BECK: And so David they would -- we have such short a period of time. So what they would do is they would relieve -- the banks would relieve their pressure, they would just give in, do it. Because they don`t want to be called racist and they wanted to be able them to open up but then they would move that extra money over to Fannie and Freddie, right; to relieve pressure off of them.

FREDDOSO: Well right. This is where Fannie Mae and right, where Fannie Mae comes in and it`s so important because they were able to buy the risk from the banks. They keep the banks liquid to make more bad loans by buying loans that are worse and worse and that story you read from "The New York Times" that was key in them expanding the pool of loans they were willing to buy.

BECK: Oh it was a praise piece believe it or not in 1999.

FREDDOSO: Yes.

BECK: Now Obama has connections. There was not only in this bailout bill, 20 percent of all the profit was supposed to go to a slush fund for ACORN which is campaigning now if I`m not mistaken for Barack Obama, but what is his connection to ACORN?

FREDDOSO: Well, Obama`s connection to Acorn is very extensive. There was a recent, I believe a couple of years ago an article in which one of ACORN`S leaders said, hey, he is like an old friend of ours. It`s only natural that people from ACORN would volunteer to work on the state senate campaigns and its U.S. senate campaign and it`s very likely that his presidential campaign will also be featuring ACORN volunteers out working for him. They also register voters.

Obama headed up ACORN`S voter registration drive in Chicago but unfortunately those drives are known nowadays mostly for the voter fraud allegations and convictions that have come down.

BECK: Ok, David thanks a lot.

And by the way David is writing an exclusive series all this week for us subscribers to my free email news letter. The series is called "Sub- Prime Leadership" and tomorrow`s article is all about the close Obama adviser and a friend who championed aggressive sub-prime lending that resulted in the collapse of superior bank.

Don`t let these people get away with this. This is must read stuff that you`re just not going to get in "The New York Times." Gee I wonder why. You can sign up now at glennbeck.com. It is completely free. Sign- up right now.

Now, doctors will tell you that fevers and upset stomachs, while terrible to go through, actually it`s just your body`s reaction to fight off a threat. And maybe the same thing could be said for this financial crisis.

Nobody likes to see massive drops in the stock market but maybe the "REAL STORY" is that what we`re experiencing is simply a healthy reaction to a very serious infection. I hate to say it but our leaders are now taking me to a place where question everything really isn`t strong enough for me anymore. I don`t believe a word that any of these weasels say, left or right, in Congress or the administration.

I understand how fragile everything is right now. I was warning about this well before Barney Frank and Chris Dodd and Henry Paulson and George Bush were talking about it but I also understand that the worst time to make a decision is when you`re under the most stress.

Sign it, sign it, sign it. That`s a bad time. It`s why you don`t go to the grocery store when you`re hungry. It`s why you don`t let a murder victim decide the killer`s sentence. It`s also why we shouldn`t pass a bill this expensive and this important just because distressed executives and politicians who we don`t believe anyway tell us to.

Yes, the market was down big-time yesterday. Yes, there are going to be very bad days ahead. And yes we need to figure out a long-term solution that may or may not require taxpayer dollars.

But we also need to take a deep breath here and don`t shoot ourselves in the head by doing something stupid. We need to realize this problem is not going to be solved by just printing more money. No matter how many zeros are on the check that`s all we got in the bank account, zero.

We need to understand that solving the crisis by creating a new one has got to stop. Our solution to the bursting of the dot-com bubble fostered in the housing bubble. Then the housing bubble collapsed and that gave us the credit crisis. And now the credit crisis is setting us up for our next big problem, could be our last one; the dollar that is barely worth the paper that it is printed on.

John Tamny is the editor of Real Clear Markets, a senior economist AC Wayne Wright Economics. John, have I misstated this at all? Have I -- do you disagree with the real bubble that we`re really headed towards is a worthless dollar or a much diminished dollar?

JOHN TAMNY, EDITOR, REALCLEARMARKETS: Well clearly, that`s been going on for a while. But I agree with your point of view on this. I think the best law we could pass right now would be one saying every time politicians say they there`s a crisis, we have a law that says they can`t pass any bill for three months after institute -- a cooling off period. Because what we have in these instances, my favorite example is Sarbanes-Oxley.

Enron and WorldCom imploded in 2001 and 2002. The markets didn`t blanch at all. Then Congress hastily passed this bill to look like it`s doing something which is what we`re experiencing today and the S&P 500 fell 175 points in the next three weeks. Given the fact that this law made CEOs -- innovative CEOs into accountants, the last thing you want to do is have Washington act hastily. It always makes mistakes.

BECK: Let me ask you this John, because I noticed with Citibank taking on Wachovia and who else the JP Morgan Chase that took on WAMU, here they are. They say to us just the day before, hey, these banks -- these things are going to fail.

Well, all of a sudden private money is there to help bail these guys out. They can seem to solve that problem. And yet, I don`t believe -- Washington`s never made a good deal in their life. I don`t believe that they`re going in and buying on this bad debt. They`re buying it at a higher cost than the market would buy it. Are they not?

TAMNY: Exactly. And that`s the problem. We have a situation where private investors might want to buy the distressed assets of banks and might want to buy banks but banks have a problem right now. And they can sell their assets in a fire sale or they can say, hey, wait a second a bailout`s on the way we know the government will overpay. So why not wait this out?

And so what we need right now is for the government to get out of the way. If firms go bankrupt, that`s a shame. But when firms go bankrupt, they don`t vanish. They go into the hands of other owners who will do a better job of using their assets than the previous owners that drove the company into the ground. It`s a good thing.

BECK: All right John, thank you very much. That`s "The Real Story" tonight.

Coming up, do our current economic struggles mirror the ones that happened just prior to the Great Depression? The answer, next.

(COMMERCIAL BREAK)

BECK: Back in 2007, it started to become pretty obvious to me that we were facing an extraordinarily difficult time in our economy. And something was coming and a lot of it came from a book that I was reading called "The Forgotten Man." and I turned to the write, of the "The Forgotten Man" an expert in the Great Depression. Here`s how I introduced her last year.

(BEGIN VIDEO CLIP)

BECK: The author of "The Forgotten Man" and a book every American should absolutely read. Don`t take it from just me. Rudy Giuliani said that on my program about your book. I don`t know if you know that, Amity. You don`t believe a depression is coming. You believe we`re headed towards 1970 stag-flation, right?

AMITY SHLAES, AUTHOR, "THE FORGOTTEN MAN": That`s correct.

(END VIDEO CLIP)

BECK: Amity, it`s a year later almost. It`s an opportunity for you to change your answer.

SHLAES: Now you`re right, Glenn.

BECK: Yes. It`s spooky. You know what? And you know Amity, what`s amazing is that maybe it was close to -- you were just close to the -- close to the trees and you didn`t see the forest because I saw -- I got it from your book. I saw the same damn mistakes that you said we made in the Great Depression, I saw -- I`m like, this is what we`re doing. This is what`s coming.

SHLAES: Well, one thing the two periods have in common is this sense of crisis leading to the assumption that government needs more power. Crisis, power to government, government can have unlimited power. That was a problem in the `30s and you could see it`s a problem now.

BECK: Right, it was -- the 1930s, the problem with it was -- correct me if I`m wrong -- but 1929 was not the problem. The crash was not the problem. It was everything that was done by the government that made the Great Depression the Great Depression. Right?

SHLAES: That is correct. The Depression was Great not because of the crash; it was great because of the duration. If the crash had happened and then we`d all gone on our way, it would be some monetary anomaly that no one remembered. But the many policies promulgated by Hoover and then by Roosevelt were quite problematic and we see some repeats today.

BECK: Right. And we`re seeing tighter regulations. We`re going to have higher taxes. We see even in the bill that passed last week where they let the oil ban expire. There`s no business that is -- there is not a single oil company running out to find that oil because they don`t trust the government to not change the rules. And that was really one of the major problems in the Great Depression.

SHLAES: Yes. There was also an anti-business atmosphere. They strung up their Greenspan; that was Andrew Mellon. They strung up their Sergei Brin, their Steve Jobs. That was the man named Sam Insul who electrified Chicago. They took their business heroes and crucified them.

BECK: Right.

SHLAES: So politically and then in courts. So you get a consequence from that, of course, business is to blame for a lot of this but you don`t want to say we hate you.

BECK: Right which is weird because it`s exactly what we`re doing right now.

You know, when I read just the name of the "The Forgotten Man," I`d always heard the "The Forgotten Man" but didn`t really know what it was and your book really kind of opened it up because, boy, America, if this doesn`t explain how you feel, nothing -- nothing will. What is the definition of "The Forgotten Man", Amity?

SHLAES: "The Forgotten Man" who matters is the taxpayer. The one who will help pay for the $700 billion; who will pay and the phrase comes from old philosophy of William Graham Sumner who has said you know what about the third man who`s subsidizing the project the first man wants to do. Who`s subsidizing it willy-nilly just watching his money get spent.

BECK: Right.

SHLAES: So the taxpayer is the modern forgotten man and even then, too.

BECK: Right and "The Forgotten Man," in America, this is -- at least that`s the way I feel.

Look, I`ll play by the rules. I`m willing to help out but I`m getting screwed by the people who screwed the other people. I`m in the middle here. And I seem to be the only one really getting screwed. Politicians get what they want and the people who have been messing around and not living and playing by the rules they`re getting bailed out.

Amity, thank you so much and if you haven`t read her book, it is called "The Forgotten Man." And it is tremendous. It`s out in paper back now, I believe.

Coming up, tonight`s "Real America," brought to you by CSX.

There are a lot of things that scare the living crap out of me, swimming with sharks, being in open water, being seen with my shirt off, pretty much that`s it, or voting for any politician.

But for a group of young men at Walter Reed Hospital, being scared is not in their vocabulary and failure is just not an option.

(BEGIN VIDEOTAPE)

BECK: Shane he`s always knew he liked scuba diving. But after he took a dive into the waters of Guantanamo Bay, he was hooked.

SHANE: It`s different. You almost feel like you`re floating. It`s very, very peaceful.

UNIDENTIFIED MALE: Get a strong current.

BECK: Shane scuba teacher is John Thompson, he`s been diving since Shane was in diapers and has seen it all; from coral reefs off to Florida Keys and the sharks in the Caribbean.

But the most incredible sight for John? That`s easy. Here in the waters of the therapy pool at Walter Reed Hospital.

JOHN THOMPSON, SCUBA TEACHER: I worked with a guy early this year, actually, I`ve working with him for about six months and I had not seen him smile one time during that six months. And then we took him on one of our trips down to the blue tropical water and after his first dive, he was beaming. You know, ear to ear. First time I`d seen him smile.

BECK: Thompson runs the SUDS program here at Walter Reed. It stands for Soldiers Undertaking Disabled Scuba. But trust me. The abilities of these guys overtake their disabilities the second they hit the water.

THOMPSON: We do have a few tricks but there`s a saying out there that water is the great equalizer. And things are just much easier to do in the water than on land for a lot of these folks with serious injuries.

BECK: Each week, about ten injured soldiers take the class. John drives 14 hours from his home in North Carolina to instruct the guys. It`s just a few hours a week, just a few feet deep in the pool. But for amputee soldiers like Shane, it`s the only thing that makes him feel like his old self.

SHANE: You are going through a life-changing event. But that doesn`t necessarily mean that your life is over, your dreams are over. Things you want to truly pursue don`t have to come to an end because of that. And it`s -- it`s nice. It`s reassuring to know that we`re still normal.

BECK: These soldiers are learning to scuba dive; overcoming incredible obstacles, and most amazingly, doing it all with a smile.

THOMPSON: You go out and you show people, look at me, appreciate me for me. I can still do all of these things. I`m still a normal human being; I just may be missing an arm or a leg.

BECK: For Shane and his friends, this experience may just be about wanting to feel normal. But I got news for these guys. They`re not just normal. They`re heroes. They`re incredible. And they`re all a big part of the "Real America."

(END VIDEOTAPE)

BECK: That`s tonight`s "Real America," sponsored by CSX; it is how tomorrow moves.

(COMMERCIAL BREAK)

BECK: Well, every day on my radio program and in our email newsletter, we do "Arguments against the Idiots." It`s our little way to arm you with the succinct facts that you need to win those pesky election season arguments with some of your annoying friends.

For example, when your friend says, "Oh I hope you`re happy now. You right wingers got your way that`s for sure and now the whole rescue deal is falling apart." You can say, yes, yes.

Well, considering that the right wing is in the minority now, I`m not exactly sure how they stopped this. The Democrats could have lost 17 of their own votes without getting one single Republican vote, and still pass the bill. That`s weird, huh?

With all of the Republicans who voted for it, all they had to do was not lose 82 Democrats. No, no, instead they lost 95. Maybe instead they should come up with a cleaner option that doesn`t saddle generations to come with unending debt.

Then your idiot friend will say, well, we don`t have time. It`s supposed to be done by Rosh Hashanah, or we`re going to face the economic apocalypse. Really, really; let me tell you something. Government is a disaster, even when they take their own sweet time. And try think of -- try to think of all the problems that they could just create, they are thinking, "Oh let`s take time here. I think we could come up with something truly diabolical."

This bill shouldn`t be defeated because of politics. Congress should vote yes or no based on whether it is good for America long-term. But remember, 166 economists from MIT, Columbia, Stanford and Johns Hopkins signed a letter saying no bailout. It`s more important to do something right than to just do something quick.

Oh, please, I read on Michael Moore`s blog yesterday, I`m not kidding you; the real reason for this mess is not the sub-prime mortgage crisis at all, it`s health insurance. If we just had universal health care, people would have more money to pay their mortgages -- I can`t -- I mean, I don`t even know. How do you argue with a genius like Michael Moore?

Well, we can also throw in, you know, big-screen TVs and cars and food and electricity and the Internet. You know, Halloween Candy, subscriptions to my magazine, "Fusion," I`m just saying. Can you imagine if the government would just take care of all of that, how much cash you`d have for your mortgage then? Oh, oh, oh.

Look, I know what we`re facing. I don`t mind a bailout that softens the landing, but I`m less and less confident that Congress is capable of anything that won`t make this much, much, much worse.

But, hey, I`m looking out for your finances. That`s why the daily argument against unit is free. Sign up now for our newsletter at glennblek.com.

From New York, goodnight, America.

END