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Lou Dobbs Tonight
New Turmoil and Uncertainly; Feds Playing a Bigger Role; Mexican Drug Gang Busted in U.S.
Aired September 17, 2008 - 19:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, CNN ANCHOR: Thank you.
Tonight, the stock market has plunged again after the federal government unexpectedly and effectively nationalized this country's largest insurer, AIG. I'll be joined by three of the best economic thinkers in the country to assess what in the world is going on.
Tonight, more blather on the campaign trail. These presidential candidates failing again to offer the American people any new ideas, any real ideas about what to do with this economy. I'll be joined tonight by the top advisers of both the McCain and Obama campaigns.
And tonight, U.S. Law enforcement officials say they have crippled a top Mexican drug cartel. But what will that do to end the raging war by those drug cartels that has now spread into the United States?
We'll have all of that, all the day's news and much more from an independent perspective straight ahead tonight.
ANNOUNCER: This is "LOU DOBBS TONIGHT;" news, debate and opinion for Wednesday, September 17th. Live from New York, Lou Dobbs.
DOBBS: Good evening, everybody.
New concerns tonight about the stability of our entire banking system and the future of our middle class. Many investors today selling bank stocks one day after the federal government effectively nationalized this nation's largest insurer, AIG, in an $85 billion deal.
AIG has $1 trillion of assets spread around 130 countries. The Bush administration didn't rule out further government intervention or further bail-outs.
The presidential candidates for their part intensified attacks on one another without offering any new proposals to help working men and women and their families.
We have extensive coverage tonight of this crisis and political reaction. We begin with Lisa Sylvester reporting from Washington.
(BEGIN VIDEOTAPE)
LISA SYLVESTER, CNN CORRESPONDENT: The U.S. government has written another check to bail out Wall Street. Bear Stearns, Freddie Mac, Fannie Mae, and now the insurance giant, AIG, that was on the verge of collapse; an $85 billion deal. In exchange, the U.S. government will take over AIG and receive nearly 80 percent of the company's stock.
Congressional reaction was swift.
(BEGIN VIDEO CLIP)
REP. NANCY PELOSI, (D) HOUSE SPEAKER: This is again, serious mismanagement on the part of the administration that has refused to regulate an industry where apparently all of the gain is privatized and all of the risk is nationalized. I just don't think that's a fair deal for the American people.
(END VIDEO CLIP)
SYLVESTER: The White House says the government had no choice, that had the nation's largest insurer gone under, it would have sent world markets into major upheaval. But is this the last taxpayer bailout?
(BEGIN VIDEO CLIP)
DANA PERINO, WHITE HOUSE PRESS SECRETARY: I would be misleading you if I knew. What we're doing is taking this on a case by case basis; evaluating each one carefully.
(END VIDEO CLIP)
SYLVESTER: The $85 billion loan is expected to be repaid with interest from the sale of AIG's assets. But full payback is not a guarantee, and ultimately, taxpayers are on the hook for those billions.
(BEGIN VIDEO CLIP)
REP. JEB HENSARLING, (R) TEXAS: It is time for us to re-examine just how long the poor, beleaguered taxpayer can be expected to bear all the losses and bear all the risk.
(END VIDEO CLIP)
SYLVESTER: AIG's problems stem from the sub-prime mortgage crisis. Critics say Wall Street was allowed to run amok in the absence of oversight.
PETE SEPP, NATIONAL TAXPAYERS UNION: Some of the regulators saw this problem coming. Unfortunately, most members of Congress told them to shut up. The fact that Fannie Mae and Freddie Mac, for example, were able to buy the silence of members of Congress through campaign contributions and lobbying for the better part of a decade helped this problem to fester until it became multi-billion dollars.
(END VIDEOTAPE)
SYLVESTER: Federal officials say there are taxpayer protections in place with this AIG deal. The U.S. Government will be paid back with interest and will be paid first from the sale of any assets. But the National Taxpayers Union says if this was so rosy of a deal, why wasn't the private sector lining up to bail out AIG?
That fact tells us it's a risky deal, a deal that taxpayers will have to pay for -- Lou.
DOBBS: Well, that risk is certainly now public. It was implied as public from both of those agencies, Fannie Mae and Freddie Mac. But to put that in context, we should underline that the liability is assumed here by the federal government extended a $5 trillion range, just about half of the mortgage market in this country.
Lisa, thank you very much. Lisa Sylvester. A sobering report; these are sobering times.
On Wall Street, stocks plunged again today; investors expressing outright skepticism about the rescue, the federal bailout of AIG. Dow Jones Industrials down by 450 points; A decline of 4 percent. Investors shifting money to treasuries and commodities, seeking a safe haven amidst all of the volatility and uncertainty. Crude oil prices rising by $6 a barrel. Gold prices rising by $70 an ounce; the largest one-day increase in gold prices ever.
Meanwhile, new indications today that the housing and economic crisis is in fact worsening. New housing starts falling by more than 6 percent in August to the lowest level in 17 years.
The federal government tonight trying to engineer yet another rescue package. This time for Washington Mutual, the largest savings and loan bank in this country. Shares in Washington Mutual today again plummeted as federal government officials tried to find a buyer for Washington Mutual.
So far this year, 11 banks have failed and have been taken over by the Federal Deposit Insurance Corporation. That's only a small portion of the nearly 8,500 banks that are insured by the FDIC across the nation, but the FDIC itself is running short of cash to support its insurance of those institutions.
Its insurance fund has fallen below the minimum level set by Congress. The FDIC now has $45 billion; the number of banks is at a five-year high.
The federal government has committed more than $800 billion of taxpayer money to bailouts and loans this year. That includes the $85 billion loan to AIG last night; up to $200 billion for the mortgage giants, Fannie Mae and Freddie Mac. and in addition, the federal government could spend as much as $300 billion to insure failing mortgages through the Federal Housing Administration.
By some estimates now, the Federal Reserve has about $200 billion in outstanding short-term loans to those banks in addition. And the government has promised $29 billion as well to support J.P. Morgan Chase's purchase of Bear Stearns back in March. That brings us to a total $814 billion of taxpayer money so far committed to support failing financial institutions and markets that are reeling.
The federal government's increasing role in our economy and our financial system is a startling, abrupt change in economic direction for this country. Some lawmakers are now demanding government bailouts in other areas of our economy, such as the automobile and airline industries be carried out as well. Others think that's not a great idea.
Bill Tucker has our report
(BEGIN VIDEOTAPE)
BILL TUCKER, CNN CORRESPONDENT: Fannie Mae and Freddie Mac, the country's largest mortgage companies, taken over to be run by the state. AIG, it is ours now; largest insurance company, taken over to be run by state appointed executives.
Senate majority leader, Harry Reid already indicating a green light for a $25 billion bailout for the auto industry. And the airlines are circling over Washington, D.C., waiting for bailout rights, too. The world's largest free market economy suddenly looks a lot like the world's biggest state-owned economy, China.
PETER COHAN, CONSULTANT: They own $350 billion worth of our government debt. In effect, we work for them now. We used our money to bail them out. Now we're beginning to look more and more like China used to be and they're beginning to look more and more like we're supposed to be.
TUCKER: China's banking system is state owned. China owns or controls its auto and airline industry. There are some differences. China appears better at managing its economy. It's enjoying a $142 billion trade surplus with the U.S. this year while we pick up the deficit.
A noted labor economist makes the point in a different way, talking about September's bailouts.
ROBERT SCOTT, ECONOMIC POLICY INSTITUTE: What we're doing is creating a few jobs on Wall Street and bailing out financiers, giving them enough money to buy retirement homes on Long Island, where as China invests its money very carefully and generates millions of jobs in its manufacturing sector.
TUCKER: One economist with New York University's Stern School of Business calls this wave of nationalization "socialism for the rich, the well connected and Wall Street" with taxpayers picking up the bill.
(END VIDEOTAPE)
TUCKER: Which it can be argued reflects the reality in china as well where there are two classes, the ruling class, which benefits from the labor of those who don't. And Lou, I can't let this one piece of irony go by without at least taking note of it; AIG was founded in Shanghai in the early 1900s. DOBBS: There's irony unfortunately, as it's all sad and for the most part tragic irony. There's another irony here, too, as well, of course. In 1994, this great American company, AIG, was also the first to dispense with its IT force and replace it with Indian outsource labor, cutting 250 people's wages in entirety, American citizens, and replacing them with labor that was making only half as much.
You would like to -- we hear so much nonsense about comprehensive from the campaign trails and from, frankly, this administration. Isn't it interesting we're not hearing anything about comprehensive responses to the absolute incompetence and greed of Wall Street?
TUCKER: Because it's a glaring failure, Lou. That's why.
DOBBS: Thank you very much. Bill Tucker.
That brings us to the subject of our poll tonight. The question we thought might be reasonably asked. And the answer, of course, will be important to all of us. Do you believe there should be criminal investigations of the top managers at the companies the federal government has effectively been forced to bail out? Cast your vote at loudobbs.com. We'll have your results later in the prime cast,
Up next, more partisanship on the campaign trail, as we would expect, but no new policy solutions from either candidate to deal with our worsening economic and financial crisis. Top advisers to both the McCain and Obama campaigns join me.
And federal agents announcing a huge success in the fight against the Mexican drug cartels. We'll have that special report.
We'll be right back.
(COMMERCIAL BREAK)
DOBBS: Senator McCain and Senator Obama tonight are campaigning in battleground states, each claiming they have a plan for this economy. Senator McCain today reacting to the $85 billion federal bailout of AIG, saying the federal government must not bail out the management and speculators who created the mess but should protect Americans who hold accounts with AIG.
Senator McCain and Governor Palin are holding their first joint town hall meeting tonight in Grand Rapids, Michigan; of course that is a key battle ground state. Governor Palin tonight, as you see senator McCain there, live, from Grand Rapids. He's taking questions. She's taking questions from voters for the first time since accepting the vice presidential nomination.
Earlier today, Governor Palin addressed reporters' questions for the first time. Governor Palin saying the decision to bail out AIG, this country's largest insurance company, is understandable but disappointing that taxpayers are called upon for another one.
Senator Obama today launching a new two-minute long television ad blaming Washington for failing to live up to its responsibilities when it comes to the economy.
Candy Crowley is with the Obama campaign tonight in Las Vegas. Candy, it seems both candidates think they have the upper hand on the economy, but they're starting to sound very much the same.
CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Well, it's true that they're both calling for tighter regulation, better enforcement, punitive, some sort of punishment for speculators in the market, that kind of thing.
What Obama is trying to do in addition to putting out here's what I want in terms of regulations is to say, John McCain is too tied to the lobbyists to actually fix the system, he is part of the system. They're trying to work it into their overall theme that John McCain is George Bush and he's part of the problem.
They have finally honed the speech. It's a teleprompter speech, they tell us, that's because they're trying out new lines. He's been very, very tough on McCain for the past few days. This in response to some worry in Democratic quarters that he's running even in the polls, even in a political environment that is very toxic to Republicans.
Definitely, Obama has stepped it up since news of the market collapse and all of the financial institutions going under. They have really seized this moment and believe it is a way for them to frame John McCain as an insider and Barack Obama as an outsider with a different point of view who really can clean it all up -- Lou.
DOBBS: We're going to get you a teleprompter. I've got one. It would only be fair that all of the candidates, all of the news anchors and hosts would have the teleprompters.
Great to have your report. Thank you so much.
I was kidding about the teleprompter. You're still going to be on your own. You're going to be out there using your wits and dealing with the consequences. You know that.
CROWLEY: 48 more days.
DOBBS: You got it, Candy. Thank you very much.
Both campaigns are pushing decidedly populist campaigns, and by the way that kind of excites me as an independent populist as you might guess. But in reality, both of these campaigns are tightly controlled and highly scripted. They're effectively restricting public access by limiting media access to those campaigns and to these two candidates.
The election now fewer than seven week away, 48 days away, in fact; Senator Obama's last news conference was 13 days ago, Senator McCain's last news conference was 35 days ago. And both candidates, it seems to me, at least, have a responsibility to answer questions and address the issues most important to the voters.
We'll continue to update you on just how they're doing with that. And by the way, we will keep noting when they use teleprompters and when they don't.
Up next, much more on what the candidates are saying they would do for our economy. I'll be talking with the senior advisers to McCain and the Obama campaign. Those two will join us here next.
And a drug war raging throughout this country, tonight, a massive report on just how deeply entrenched the Mexican drug cartels are in the United States as they wage an all-out war in Mexico. That story is next.
We'll be right back. Stay with us.
(COMMERCIAL BREAK)
DOBBS: U.S. law enforcement officials today say they have crippled one of Mexico's most violent drug cartel gangs. Nearly 200 members of the notorious Gulf (ph) cartel were arrested, and more than 40 tons of drugs were seized in this country and in Italy.
But Casey Wian now reports that despite all of those arrests, the drug cartels remain as powerful as ever. And I want to warn you that this report does contain graphic images that you may not want to see.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT: A rare victory against the Gulf cartel, one of the dominant forces in the drug war terrorizing communities on both sides of the U.S.-Mexico border.
MICHELE LEONHART, DEA ACTING ADMINISTRATOR: We successfully completed a hard-hitting, unprecedented and massive assault on the powerful and extremely violent Gulf cartel.
WIAN: U.S. law enforcement agencies arrested 175 alleged cartel members Tuesday and Wednesday and indicted three alleged leaders on charges they trafficked tons of drugs from South America across the southwest border and into the United States and Europe.
The arrests are part of "Project Reckoning," a 15-month operation involving more than 200 U.S. law enforcement agencies and several foreign governments.
MICHAEL MUKASEY, ATTORNEY GENERAL: We believe these arrests are a substantial blow to the Gulf cartel, and law enforcement can take just pride in the success of this operation. "Project Reckoning" has resulted in more than 500 arrests and seizure of drugs and money in staggering amounts.
WIAN: Officials list more than 16 tons of cocaine, 1,000 pounds of methamphetamine, 25 tons of marijuana, 167 weapons, and $60 million in U.S. currency. Still, Mexican drug cartels continue to operate with impunity in Mexico.
This week, in a Mexican Independence Day celebration as a state governor addresses a crowd of thousands, a bomb explodes. At least seven people were killed, more than 100 injured. Local officials and the U.S. Ambassador blamed drug cartels.
FELIPE CALDERON, PRESIDENT OF MEXICO (through translator): Last night, during the celebration of the shout of independence in Morella (ph), unscrupulous assassins murdered innocent people. These are horrible attacks that were carried out against the security of the nation committed by true traitors who have not the slightest respect for their neighbor nor their motherland.
WIAN: On Friday, 24 bodies were found bound and gagged, killed execution style just outside Mexico City; believed to be the largest mass drug cartel hit since the violence exploded two years ago. About 5,000 deaths later, it shows no sign of slowing.
(END VIDEOTAPE)
WIAN: Publicly, U.S. law enforcement officials suggest they have turned a corner in the drug war, in large part because of in what they call "unprecedented cooperation" from the Mexican government. Privately though, they admit there's no end in sight -- Lou.
DOBBS: It's surprising that there's any suggestion on the part of the United States Justice Department that the drug cartel, Gulf cartel, has in any way been crippled. By any reckoning with experience, these cartels are very resilient, very powerful, and not going away easily.
WIAN: And as long as that southern border remains open to the drugs coming into the United States, they're going to continue to make money and continue to be powerful -- Lou.
DOBBS: And we should also point out that because of those -- that open border with Mexico, Mexico remains the principle source of methamphetamines, heroin, cocaine and marijuana into the United States. And what we just saw in your report there Casey, as you well know, only a small fraction of what's being trafficked across the border.
Casey thanks. Casey Wian.
Let's take a look at some of your thoughts now.
AJ in Nebraska writing in to say, "Today, the stench from the banking world is worse than the rotting fish in Texas after the big storm. Where are the decent, principles, accountable men and women who work for these companies?"
Bob in Florida said, "Lou, Obama wants to blame the Republican Party for this mess but the Democrats have been in charge of both houses for two years and done nothing. They promised change. Where is it?
Robert in Michigan, "Joe Biden says McCain doesn't get it -- doesn't understand the economic hardships of the people. Let's see, Biden is a Democrat. Pelosi and the Democrats are running the Congress. Who doesn't get what?" Well, we're not getting much in the way of representation in Washington, D.C., but I assure you, Wall Street, corporate America, and special interests are doing just fine.
We'll have more of your thoughts here later in the broadcast.
Up next, the federal government taking unprecedented action to support our financial system and our economy. Is it nationalization? Will it help working men and women and their families across the country?
And voters demanding to know what the presidential candidates will do to end the economic crisis.
Top advisers of both campaigns join me here next.
(COMMERCIAL BREAK)
DOBBS: Well, Wall Street is absolutely -- it is now a disaster area. It is a cross current raging through Wall Street between free enterprise, outright intervention. Some would suggest it's outright nationalization of institutions. And this country is absolutely in the throes of a financial crisis.
What we're hearing from the candidates is not what many would perhaps expect or hope for. What we're hearing from the administration, the Bush administration, has been contradictory and incomplete itself.
But we're now joined by -- we're going to be joined by representatives of both campaigns here tonight. We're going to turn first to Senator Obama's campaign and with us now is Bill Burton. Good to have you with us.
BILL BURTON, OBAMA SPOKESMAN: Hey, Lou. Thanks for having me.
DOBBS: We have taken a look at what is being proposed here between the two candidates. Frankly, it's pretty thin gruel. While Obama attacked Senator McCain for putting forward the idea of a panel like the 9/11 commission, precisely the same is sitting there as a recommendation on the part of Senator Obama.
BURTON: I don't think you're looking at the exact same thing. What Senator Obama proposes are some reforms to increase transparency, increase accountability and make sure we strengthen the economy. And that goes along with his plan to make sure that we're strengthening the economy by getting the middle class tax cuts and getting folks health care and bringing down energy prices.
And that's as opposed to John McCain who basically only supports the commission. Barack Obama doesn't think we need to study the problem. We need to fix the problem.
And it's too bad. I know you were going to have Nancy [indiscernible] on tonight, and it's unfortunate that you didn't because it would have been interesting to hear her talk about what she had to say about the 9/11 commission which was she said for folks basically in the twilight of their careers to sit around and study something that had happened.
What we need right now is some action to help stabilize the markets.
DOBBS: What would senator Obama do right now to stop the bailouts, to end the run-on capital, and to end the credit crisis?
BURTON: First, let me say it's an outrage that we're even at the point we're at right now. But we are, unfortunately. And the fed is in a position where they feel like they need to address AIG and make sure that, you know, millions of Americans don't lose their life insurance and their savings. And we don't buckle the financial industry any worse than it already has. We're not in position to second-guess them on that. What Senator Obama would do is put reforms in place to insure that, a, there's transparency.
DOBBS: How would he reform government by the state insurance commissions?
BURTON: What we need to do is make sure that things are valued appropriately. The reason that we're in the mess we're in right now is that we have gone so long with all these financial mechanisms that are relying on these sub prime mortgages that insure that there's no accountability. Basically, there's been nobody minding the store. As a result, you see this collapse.
DOBBS: Do you understand why the American people in all likelihood are listening to you as a spokesman and later another spokesman for the McCain campaign, listening to these two candidates and saying why should I trust either of these guys because they are both mouthing the same thing in effect? They are both at the same time both responsible. The Democrats have been in control of congress for two years. Their oversight responsibilities have been completely abandoned. The Republicans and their free market nonsense have led to this disaster. Why in the world should the American people believe anything that is being said here?
BURTON: Let me start by saying first of all, Senator Obama understands there's a problem and that we need to address it right now. He's not like John McCain who went out there and said something even the Bush administration won't say which is that his assertion that the fundamentals of our economy are strong. Tell that to the middle class family who's out there worried about losing their home, losing their job, and looking for a leader in Washington who is actually address a problem he recognizes exists.
DOBBS: Senator Obama is talking about $1,000 middle class tax cut. We're looking over a half a trillion budget deficit. We have a $9.6 trillion national debt. We have a $6.5 trillion trade debt. We have $800 billion expended right now in support of this financial disaster on Wall Street. Why in the world would there not be a discussion here -- please, either your candidate or Senator McCain, I'm begging one of the two of you step out and tell the American people things aren't going to be the same again? We're going to have to be responsible and prudent, and by golly, it doesn't look like we're going to get a tax cut. In fact, it locks like we're going to have to share sacrifice and burden and restore the country to what it should be.
BURTON: I agree with you on some things. When you say it's never going to be the same again, I disagree. Senator Obama thinks that the best days for the economy are ahead.
Where I agree with you is where you say there has to be accountability. We have to take a hard look at the budget and make sure we're spending appropriately, making the right folks pay, making people understand that in order to strengthen the economy for all Americans, 95 percent of Americans under Barack Obama's plan will get a tax cut, but all Americans will benefit. To pay for that, we have to make hard choices.
What Senator Obama proposes is we cut corporate tax loopholes. We stop giving breaks to people shipping jobs overseas. And ending the war in Iraq is going to help with capital at home like getting folks health care, bringing down the cost of college tuition.
DOBBS: We got it. We're out of time. Thank you very much.
BURTON: Thank you, Lou.
DOBBS: Joining me now, Douglas Holtz-Eakin, he is the senior policy adviser to Senator McCain joining us from Arlington, Virginia. Let me ask you the same question I asked Bill Burton. Why isn't there straightforward talk on the part of the candidates that this is a profound moment in which we're going to have to rethink the way we operate in this country? That we can't be craven consumers committed to excess and frankly irresponsible debt, whether we're Wall Street institutions or households?
DOUGLAS HOLTZ-EAKIN, MCCAIN SENIOR ADVISER: Horrible situation which we find ourselves. It's a situation he explained clearly. Came from an over reliance in debt, regulators asleep at the switch, and it's something that with the biggest of these problems, Fannie Mae and Freddie Mac, John McCain stood up and talked about it in 2005. He said, look, these are a threat to the U.S. taxpayer. They're a threat to the financial markets. We need to rein them in and put a tough regulator in the treasury. It didn't happen. You know why. They're a tribute to the corroding capitalism that is Washington. They're protected by lobbyists from serious reform. They have had accounting problems. They've had all sorts of noncompliance.
DOBBS: They have had a management problem. Both Fannie Mae and Freddie Mac -- dust Senator McCain support going after the exit packages, the severance packages of all of the CEOs?
HOLTZ-EAKIN: The Fannie Mae/Freddie Mac thing is a complete disgrace. It's time for the institutions after we have sadly made clear what was always implicit and we're spending the taxpayers' money on it, John McCain has said they need to go away. We need to make them small and get them off the taxpayers' back. This is talking about the issues. Obama is taking this great national moment to attack McCain. Let's deal with the problems. This is a very serious time.
DOBBS: Here is the problem; we are just short of a trillion dollars in nationalizing a number of firms on Wall Street and Freddie Mac and Fannie Mae, taking full and direct assumption of liability for $5 trillion in mortgages in this country. Is it time to end the bailouts? Is it time to insist that the Republican Party will demand the same of institutions that it demands of individuals? That is responsibility and prudence and an absolute individual responsibility for misjudgments?
HOLTZ-EAKIN: John McCain has said for months, we're not going to reward speculators. We're not going to reward people who didn't do due diligence. And he was criticized for that by the Obama campaign. And that's the reality.
DOBBS: You have been harsh -- Doug, you're a little harsh about the folks over on the Obama side, too. You mustn't be a victim here.
HOLTZ-EAKIN: Look, this is about these issues.
DOBBS: Of course, it's about these issues. Let me ask you this, why is Senator McCain at the same time he's saying this about Wall Street, where, by the way, is the U.S. chamber of congress in the business roundtable when you need leadership? Why is Senator McCain saying he's not going to listen to the same idiots who permitted this lack of regulation, anything goes, Mr. Market be happy, we're going to push back against outsources, free trade. And he's talked about the American worker being a strength of the economy, and he's right. Why is he permitted the same people to put the American worker in competition with the cheapest labor in the world.
HOLTZ-EAKIN: They're the foundation of our prosperity. They deserve to be the focus of the health care policies, the energy policies. Bidding nuclear power plants, drilling for gas, having lower prices.
DOBBS: I give him all the credit in the world for what he said about energy. He was in favor of comprehensive immigration reform. Why in the world isn't he in favor of comprehensive form of what we're doing in the economy, which is an absolute attack on the middle class?
HOLTZ-EAKIN: He's in favor of comprehensive regulatory reform. I just listened to the Obama representative. He didn't have one specific to offer. AIG is in trouble because of credit default swaps. Period. Are they regulated? No. Let's do something sensible that takes care of the problems that are having Wall Street threaten American.
DOBBS: I think it's entirely appropriate to have a commission. That makes perfect sense. What I want to hear from your candidate what he's going to do to shore up in middle class worker in the country. Family values are alive and well, and one of the greatest attacks on the family in this country is a financial attack, and it has to start with respect for work, respect for the very foundation of this country, which is our middle class. HOLTZ-EAKIN: I couldn't agree more. Three steps, number one, the commission, which the Obama campaign is criticizing even though he said nice things about the 9/11 commission. Step two, let's get the congress to do real work for the American people. And John McCain is committed to working with Democrats or Republicans to get financial regulation through. Step three, make sure it does the things it needs to. Safety and soundness in all financial institutions. Let's make sure there's corporate governor's reform so the golden parachute is something they don't sneak in. And number four, a stable system.
DOBBS: Douglas Holtz-Eakin, thanks for being here. Come back here.
HOLTZ-EAKIN: Thank you.
DOBBS: I didn't give you as many items as I gave Bill Burton, but we'll sort that out. By the way, this isn't the fair and balanced network, anyway. Thanks. Good to have you here.
HOLTZ-EAKIN: Take care.
DOBBS: Up next, a prominent member of the Democratic Party refuses to support Barack Obama. Could to be because the Democratic Party is a little left, a little liberal, or is it something else all together? Three political analysts join me for that and all the day's political news.
And three leading experts on the economy will talk about what they heard the spokesmen for their respective campaigns say and we'll be talking about whether or not this country is going to be the same after we get through this crisis on Wall Street and in our economy. We'll be right back.
(COMMERCIAL BREAK)
DOBBS: Joining me now are three people who I think are amongst the sharpest of minds in this country in the issues of economics and finance. David Cay Johnston is here with me in New York. He's a Pulitzer Prize winning journalists, best-selling author of a new book "Free Lunch, How the Wealthiest Americans Enrich Themselves at Government Expense." David, it's great to have you here. From Washington, D.C., the former controller general, David Walker. He's now president of the Peter G. Peterson Foundation. And Huron, Ohio, Peter Morici; he's professor at the Smith School of Business at the University of Maryland and I know you have a busy schedule, and I appreciate you taking time to be with us.
I want to turn, if I may, first, to David. We just heard two spokesmen of these candidates. How impressed are you with their recommendations and philosophy on this crisis?
DAVID CAY JOHNSTON, AUTHOR, "FREE LUNCH": It didn't give me any sense at all they're going to do anything serious to address what needs to be done. It took a long time to get into the mess, and it's going to take a lot of time to get out of it. Regulations on spending is good for you sometimes. If you just have cotton candy, your teeth will rot.
DOBBS: When I looked at this I'm sort of reminded of the attacks I receive personally when I talk about free trade, when I've talked about outsourcing, the idea that I must be a protectionist and an isolationist. I hear people say you're anti-business. Why can't people in this country in a public policy debate, Professor Morici, hold competing ideas in their minds. You can be pro business, you can be pro labor, simultaneously and it works out for the good of the country.
PROF. PETER MORICI, ROBERT H. SMITH SCHOOL OF BUSINESS: Absolutely. We have to have a balance between free trade and regulation, but you know I was very discouraged by what the candidates said today. Obama says, gee, we need to regulate the banks if they want support. The banks are already regulated. The problem is oversight for the regulation is in congress. The Democrats control that right now. They're getting lots of campaign contributions on Wall Street. It's one of their favorite places to harvest contributions.
DOBBS: Tell me that wrong. Tell me that's wrong, that the Democrats aren't receiving contributions and donations and money from Wall Street?
MORICI: In my mind, Wall Street owns the senate and they're on the way to buying a president. Obama's just harvesting contributions up there better than a dairy farmer slicing hay.
DOBBS: I've got to ask you this. Is there any prospect here? We have had a do-nothing administration. We had a do-nothing congress the 109th, this is a do-even-less for the past two years. Is there any prospect that the American people's interest, the middle class, the foundation of the country, where do they turn for representation of their interests and their well-being?
MORICI: Not to these two candidates, I'll tell you that. I mean McCain wants more free trade, and so does Obama. His principle adviser, the guy behind his adviser, is Bob Ruben. They're both going to go easy on illegal immigrants. We're going to be -- these two guys, we're going to be knee deep with illegal immigrants that have driver's licenses and chest deep with broken banks on subsidies. It was not a promising performance the last couple days.
DOBBS: David Walker, let me ask you, with your perspective, your knowledge on all you have done as the controller general for years, why in the world -- I mean, can't come people come to terms with the reality, this is a watershed moment in our history. We're watching unprecedented, unparalleled government intervention in our markets and institutions and it seems to me that things are never going to be the same. Am I wrong?
DAVID WALKER, PETER G. PETERSON FDN.: We're at a critical crossroads. There's no question. You have to keep in mind that Washington is a lag indicator. Typically, it doesn't act until it's a crisis, and then sometimes it overreacts. I stopped believing in the theory a long time ago. There was inadequate regulation and virtually no oversight. We need to do something in the short-term problem, but they have the same problem some of the major institutions have. We have to start dealing with that, too.
DOBBS: I have to ask, we have people listening to you three gentlemen, and they work hard, they are responsible. They're raising families. They're clothing their families and feeding them. And they're watching this, and saying not only do they not trust their government or either one of the parties, but they're watching their institutions fall apart in front of them and the government support them instead of individuals.
JOHNSTON: This hasn't hit a lot of ordinary people yet. This is abstract, Wall Street. Even if you say to people, the bailout of AIG is about $750 per family. It doesn't come out of their pocket at this moment, so they don't get it yet. But as we see the practice of spending the future, we're now at the point where not in actual dollars, but in the equivalent of it, all the income taxes that come out of your paycheck in January, February, March, April, and the first two weeks of May go to pay interest on the national debt.
DOBBS: Think about that 4 1/2 months.
JOHNSTON: 40 percent. Remember we were promised in 1980, when President Reagan started this, promised balanced budgets. These debts have built up enormously. We see lay-offs, credit card debts which are signature debt being written off by the banks, you see a lot higher unemployment rate, then you're going to get the reaction and the change.
DOBBS: In the midst of all this, a friend brought over to our house last night, she decided to save during the midst of the crisis in the past month, she saved all of the solicitations pre-approved credit. She had a bag about ten inches by six inches filled with these offers, Professor. I mean, is anybody awakening to there is a new reality at hand?
MORICI: No, I don't think so. Listen to both campaigns. They think it's fine to have a trade deficit five percent of GDP. It cost us $50 million a month. Basically what we do is the Chinese invest in the bond market. The New York banks process the money. They give it back to us to spend. We now owe the world $7 trillion. The interest on that is $200 for every working American every year. If we could reduce the trade deficit by half, we could increase the GDP by $300 billion and increase the income of every worker in America by $2,000 a year. No one wants to take hold of that. Instead, it's OK to import all we want, have all those coffee makers at Wal-Mart and we'll process all the money through New York. It turns out the processors in New York aren't doing their jobs. We have given how much money to the New York banks? $800 million? 5 percent of GDP between the trade deficit and the banks. I would give that to the people.
DOBBS: David Walker, you get the last word here. Your thoughts going forward?
WALKER: Lou, you know, the federal government and too many Americans are addicted to debt. You know, it's time for leadership and tough love in Washington. We are at a critical crossroads in this country. We've got to get our act together. The clock is ticking and time is working against us.
MORICI: Absolutely.
JOHNSTON: Absolutely.
DOBBS: All right. Thank you very much, David Cay Johnston. David Walker, thank you, Professor Peter Morici, thank you.
Up next, taxpayers footing the bill for these big bailouts. What are these presidential candidates talking about? What are they saying? We'll discuss that and a great deal more with three of the best political analysts in the country as this race gets even tighter. That may be because there's not a big difference. Let's find out.
And up next, why I believe Senator McCain should fire one of his closest advisors. My opinion on that and a few other things straight ahead. Stay with us.
(COMMERCIAL BREAK)
CAMPBELL BROWN, CNN ANCHOR: I'm Campbell Brown, and the CNN ELECTION CENTER in a few minutes. New talks of bank buyouts or bailouts. And the candidates are promising to clean up the mess. We'll go live to their campaign rallies tonight to put their words to our no-bias no-bull test.
And a real live rock child turns from Hillary Clinton to John McCain. We'll ask her why she calls Obama an elitist. We'll see you in a few minutes.
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DOBBS: Every once in a while I just have to get something off my chest and tonight it's about one of Senator McCain's top economic advisors, Carly Fiorina. She's keeping something of a low profile today after she made some really bizarre comments about the candidates running for president and vice president in both parties. Fiorina, the former CEO of Hewlett-Packard, said neither Senator McCain or Governor Palin or Senator Obama or Senator Biden are qualified to be a CEO of a large corporation. This is the same Fiorina, by the way, who defended outsourcing of American jobs to cheap overseas labor markets by saying "There's no job that America's god given right anymore." Well, Fiorina presided over thousands of layoffs at Hewlett-Packard, she was ultimately fired herself. And in light of her latest ridiculous statement and her obvious lack of respect for working men and women in this country, I call for her firing at the time. They got around to it. I think she is so outrageous, I want to try it. I've never called for the firing of somebody twice, I suggest Senator McCain fire this woman. She is absolutely unbearable.
Joining me now, three of the best political analysts in the country, all CNN contributors and great Americans, Ed Rollins, republican strategist, former Huckabee campaign manager; Robert Zimmerman, democratic strategist, Democratic National Committeeman and Errol Louis, columnist for the "New York Daily News," host of WWRL's morning show. Good to have you.
All right. Let's start with you. You heard the spokesman for these candidates. Do you feel better about life in America?
ROBERT ZIMMERMAN, CNN CONTRIBUTOR: Only when I'm with you and these gentlemen, okay. But look, obviously, this is not an issue that can be addressed in a sound bite. And as you said in the beginning of the show, they're all beginning to sound the same when they talk about the need for more regulation, for more oversight. The issue is, what the history of each of these men is that they bring to this issue and that's -- Barack Obama's going to point to the fact --
DOBBS: You're electing a personality.
ZIMMERMAN: No, hopefully someone with a track record.
DOBBS: Capacity.
ZIMMERMAN: One would hope.
DOBBS: I would like that too.
ZIMMERMAN: Barack Obama can point to what he did two years ago.
DOBBS: But when I listen to these folks, I love the sort of condescending nonsense on the part of Paulson. Like we're just going to move out there and take care of $1 trillion worth of assets there at AIG because you all are too stupid to understand what's at stake. I think these folks are too clever, I think they've forgotten what's gone on in this country.
ERROL LOUIS, NEW YORK DAILY NEWS: I agree. And the word vision you threw out there is the thing that's been missing from both of the campaigns. The statements are extraordinary, given the stakes, the breath and the depth that's gone on. It's four yards and a cloud of dust. They're playing for, you know, the next 24-hour news cycle or for some slight tick in the polls in the battleground states. There's so much more at stake. There's a need for a grand vision of how all of this works together. One important thing left out is a role of state legislation. Unraveling and superseding, the state --
DOBBS: Well, that was the thing, they pushed the states aside and refused to do the job themselves.
ED ROLLINS, REPUBLICAN STRATEGIST: The liability the federal government has taken on is irresponsible. I think Sarah Palin today made her first public statement without a teleprompter said this is wrong. But her instincts were correct. And I think the American public knew half the $85 billion wasn't owned by Americans or other people, they took risk, it's a high risk. If I lose my football bets this weekend, I've got to pay them.
DOBBS: Don't you love the fact -- we've got all of these fools, the U.S. chamber of commerce business round table, very few CEOs with the guts to stand up and speak for themselves. Which was a shame that's where real leadership resides, much of it in this country. You know, they talk about the globalization, but where's globalization where these guys need a little help? Suddenly it's just the federal government and the American taxpayer eating more dirt. And it's just ridiculous.
ROLLINS: Just one last point. Before this kind of commitment was made by the federal government, the United States Congress should have stood up and basically said aye or nay. They are the ones responsible for appropriating and authorizing money. And I think -- the fact that Treasury did this without any input from the Congress is outrageous.
DOBBS: Yes, it is. And you know what else is outrageous, is that we're not having a real investigation into the people. If there's a dime in severance money put into one of these companies, I mean, the American people ought to just slap the heck out of somebody.
ZIMMERMAN: It means, as I was saying before, going back and looking at these two individuals and what their histories they bring to this campaign. Six months ago, John McCain described himself as the deregulator to the "Wall Street Journal," as, you know, a support of deregulation. Barack Obama, two years ago raised many of these issues. And that's one of the reasons I'm supporting him.
But the point is, the leadership they're going to show...
DOBBS: This message has been brought to you by...
ZIMMERMAN: No, no, it's not a talking point. I think...
DOBBS: No, (inaudible). I've just got to add equal time now.
ZIMMERMAN: I think there's philosophical differences...
DOBBS: Otherwise, Nancy Pelosi will get on me about the fairness doctrine.
ROLLINS: I don't want equal time. I'm not going to defend this on either side.
(CROSSTALK)
DOBBS: You get the last word tonight.
LOUIS: I mean, the problem, again, is you don't see any philosophy here. I mean, just as you don't see the candidates talking about any kind of grand strategy when it comes to foreign affairs, when it comes to domestic affairs, when it comes to the economy -- they've made the campaign so small. And they've talked so seldom through the press, with the press, or to the people in any kind of an honest way. We're -- it'll all be over in 47 days, and the problems will just be beginning, really.
DOBBS: Absolutely. And that to me is the greatest lament here, is that these candidates without the guts to tell the American people how they're going to lead, what they need to know, not what they want to hear. We'll continue this, gentlemen. Thank you very much, Robert. Thank you very much, Errol. Thanks, Ed.
Tonight's poll results, well, 98 percent of you say -- excuse me, 99 percent of you, I'm sorry I understated it -- 99 percent of you say there should be criminal investigations into the top managers of the companies the federal government has bailed out. Amen.
Thanks for being with us tonight. We'll be talking about accountability, as well, tomorrow. Join us tomorrow, please. For all of us, thanks for watching. Good night from New York. "The Election Center" with Campbell Brown begins right now -- Campbell.
