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Lou Dobbs Tonight
Big Bailout Vote
Aired October 01, 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: John, thank you. Tonight, tension on Capitol Hill, senators preparing to vote on the great Wall Street bailout, or rescue, if you prefer, the vote could begin within the hour. And the ranking member of the Senate Banking Committee is Senator Richard Shelby. He is among my guests here tonight and the voices of fear in Washington. We'll tell you whether this economy really is on the verge of depression, as some of the fear mongers now suggest.
And tonight a new threat to our sovereignty, foreigners trying to dictate a solution to the global financial crisis, will anybody listen in Washington? We'll have that special report.
And I'll be joined by three of the best economic thinkers in the nation. All of that and a great deal more and all of the day's news from an independent perspective straight ahead here tonight.
ANNOUNCER: This is LOU DOBBS TONIGHT: news, debate, and opinion for Wednesday, October 1st. Live from New York, Lou Dobbs.
DOBBS: Good evening, everybody. U.S. senators tonight about to vote on a new effort to ram a huge Wall Street bailout through Congress and down the throats of the American people, the Bush administration, congressional leaders and lobbying groups all using fear mongering and threats to push the legislation through the Senate.
This after the House of Representatives refused to be intimidated and voted against that bailout Monday in a stunning victory for the American people. We have extensive coverage for you tonight on the rising tension in Washington, ahead of this vote in the Senate tonight. From Capitol Hill, Jessica Yellin and Ed Henry, and from the White House, Elaine Quijano. We begin with Jessica Yellin on Capitol Hill -- Jessica.
JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Lou, tonight, the vote will take place in the Senate, but all eyes are on the House of Representatives, which will decide this bill's fate.
YELLIN (voice-over): In the Senate, a sense of confidence, Democratic Leader Harry Reid.
SEN. HARRY REID (D-NV), SENATE MAJORITY LEADER: I believe every part of this Bill enjoys bipartisan support.
YELLIN: And Republican leader Mitch McConnell. SEN. MITCH MCCONNELL (R-KY), SENATE MINORITY LEADER: We believe that we have crafted a way to go forward and to get us back on track.
YELLIN: Both believe the bill will comfortably pass the Senate, but they're loathe to make the same prediction about the House of Representatives.
UNIDENTIFIED MALE: My job is not to get things passed in the House. My job is to get things passed in the Senate.
UNIDENTIFIED MALE: I don't think I should be predicting what the House will do.
YELLIN: That's because some measures that make the bill more appealing to certain House members are objectionable to others. And there are unusual signs of tension between Democratic leaders in the two bodies.
UNIDENTIFIED MALE: Frankly, an awful lot of people are going to look at this bill, not be pleased with what the Senate has done in adding those provisions that make the debt worse, so I'm going to be talking to the Republican leadership, Mr. Boehner, Mr. Blunt, to see where they are on votes before we bring it to the floor.
YELLIN: Lou, the three key sweeteners in the bill include new increase in the amount of insurance the federal government will insure your bank deposits for. Also, an extension of the current rules on the alternative minimum tax, and some additional tax breaks, and then I think you'll like this one. The entire bailout plan is attached to a mental health parody bill requiring that health insurance companies cover mental illness at the same levels at which they cover physical illness. It's a popular measure, just unusual for a financial bill -- Lou.
DOBBS: A popular and necessary measure, one would think, particularly for Capitol Hill. I mean this is extraordinary when you're looking at -- first of all, both Houses had passed the alternate -- alternative minimum tax legislation. This really gives them cover so they don't have to pay as you go or pay for those adjustments on the AMT, right?
YELLIN: Yes, in a word.
DOBBS: And the reality is that they're adding $150 billion in expenses to what is already a $700 billion bare minimum bailout of Wall Street. Are these people out of their cotton picking minds?
YELLIN: Well there are a lot of Democrats in the House of Representatives who are as angry about this as you are. And that's why you saw Steny Hoyer, the majority leader, so frustrated.
DOBBS: There have to be some statesmen left in the United States Senate; you're going to have to go beyond the range of our cameras apparently because I didn't see any there. This is -- and it's unbelievable that these senators are such elitists, so indifferent to the will of the people and the real economic issues involved in this crisis.
YELLIN: Well what they have done is attached so many popular items to this bill that they feel it will appeal to enough people to attract them, whether that is the best and most profound leadership, it's up to everyone out there to decide.
DOBBS: You got a deal. All right, Jessica. Thanks. You're going to be busy throughout the evening. Thank you very much. Jessica Yellin from Capitol Hill, where a Senate vote is expected perhaps as soon as within the hour.
Senators McCain and Obama and Biden today all suspending their campaigns to take part in the vote and of course to become front and center in front of television network cameras, Senators McCain and Obama trying to sell that Wall Street bailout to skeptical voters. Ed Henry has our report now from Capitol Hill. Ed, what are the good senators now saying about this new Wall Street bailout?
ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Well Lou, they're really both on the same page, saying similar things. Both saying they'll vote for this bailout bill, saying it's imperfect, but they think it's needed to deal with this crisis, and they're both going beyond, saying that they're going to vote for it tonight here in the Senate. They're both also telephoning colleagues in each party trying to lobby them to support it.
And they're sounding very familiar themes and similar themes. In fact, Senator Obama was first to arrive here on Capitol Hill before Senator McCain. He gave a Senate floor speech in which he basically said now is the time for bipartisanship. Not for finger pointing on about how we got here. And he also said -- claimed that if this bill does not pass, the virus is going to spread far beyond Wall Street. Senator McCain speaking earlier actually at the presidential library of a Democrat, Harry Truman in Missouri sounded very similar themes about bipartisanship. Take a listen.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: And I'm pleased to report today, I'll be returning to the floor of the Senate to vote on a bill that marks a decisive step in the right direction, but only in the right direction. The original proposal was flawed.
SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: And it will go on and on and on rippling through the entire economy. Potentially, we could see thousands of businesses close. Millions of jobs could be lost. And a long and painful recession could follow. In other words, this is not just a Wall Street crisis. It's an American crisis.
(END VIDEO CLIP)
HENRY: Now, to give you an idea of how rare it is to see both of these lawmakers in the hallways of the Senate, the last Senate roll call vote for Barack Obama was on July 9th; Senator McCain's last floor vote on April 8th. Nevertheless, both of them saying they will vote for this legislation later tonight, despite the fact that I just ran into for example Republican Senator John Cornyn of Texas, he's up for re-election and saying that the calls and e-mails into his office right now are 100-1 against this bill -- Lou.
DOBBS: This is remarkable rhetoric coming from both of these senators undifferentiated, bipartisan. Is either one of these senators -- let's test their rhetoric. Are they saying that there won't be a loss of millions of jobs, that there won't be a severe economic downturn if this now pork-laden piece of legislation is passed?
HENRY: They're both claiming that it's unclear how far this economic crisis will go. You know if the bill actually passes. But they are both suggesting that without this legislation, the crisis is going to be much, much deeper. It's obviously impossible really to know until this actually plays out how deep the economic crisis will be one way or another, but they're both trying to claim that this legislation while imperfect will be better than doing nothing -- Lou.
DOBBS: All right, an interesting piece of intellectual exercise. Thank you very much. Ed Henry. Well as Ed Henry reported, Senators Obama, Biden and McCain are not often on Capitol Hill these days. In point of fact, these three candidates have missed more votes than just about any other senator.
Senator Obama has missed 303 votes in the 110th Congress, just under half of the total votes taken. Senator Biden has missed 206 votes, nearly a third of them. Senator McCain has missed more votes than any other senator, 420 in all, nearly two-thirds of the total votes. And McCain has missed more votes than Senator Tim Johnson, who suffered a brain hemorrhage in December of 2006 and went into a coma. We are pleased to say tonight that Senator Johnson is now back at work and voting.
Well, the White House today stepped up its fear mongering to try to scare members of Congress into supporting this Wall Street bailout. White House spokesman Tony Fratto saying there's rising evidence of a credit squeeze on small business and municipalities, President Bush telling lawmakers to take this bailout very seriously and to pass it. Elaine Quijano has our report from the White House -- Elaine.
ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: And Lou, President Bush calls the Senate bill improved, in his words, and says he is confident it will pass. The president made his remarks in the oval office during a meeting with the top U.S. military commander in Afghanistan, General David McKiernan. Mr. Bush saying this legislation is important in order to stabilize the financial situation.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: It's very important for members take this bill very seriously. It's important to get credit flowing again so that small businesses in our communities will be able to finance their operations. (END VIDEO CLIP)
QUIJANO: Now, at this hour, President Bush is not here at the White House. He has just left in order to attend a USO gala here in Washington. He, of course, will be monitoring the activity, though, that is taking place in the Senate and will likely be back at the White House when the vote actually takes place.
In any case, aides say that President Bush has been working the phones, talking to lawmakers throughout the day. He also met earlier in the day with his Treasury secretary, Henry Paulson, as well as the head of the Federal Reserve, Chairman Ben Bernanke to get an update on how the markets were faring. Aides are expressing confidence as well about the prospects in the Senate, but again the bigger question, as we've heard Jessica outline, is what will happen in the House later this week -- Lou.
DOBBS: Well it's certainly one of the questions. The other question is, is there any discussion there at the White House as to why there would be an expectation that this Treasury secretary, Henry Paulson, and this president, George W. Bush, would have any credibility with the American people whatsoever on the issue of the economy or the bailout on Wall Street?
QUIJANO: Well certainly you have heard from the president's own fellow Republicans on this issue who simply feel that they are getting what one congressman called, compared to a line from a used car salesman; the intense pressure that initially surrounded the administration's push was not received very well, as you know. Particularly, some conservatives in the House, the president's, the members of the president's own party unhappy with the way in which this was forced upon them, they felt. So the question is has the administration now done enough to some assuage some of those lawmakers...
DOBBS: Well Elaine, the question was, is there a discussion on the fact that they have almost zero credibility on the issue of Wall Street, this bailout, and the economy?
QUIJANO: Well they don't -- at this point, they're not talking about what they could have or should have done differently. What they continue to say amid questions of credibility is look we are focused now on where things stand and not on the sort of postmortem analysis, if you will, Lou.
DOBBS: Thank you very much -- Elaine Quijano from the White House.
Let's take a look at the poll tonight. The question is do you believe that Congress' record low approval rating will rise as a result of the Wall Street bailout that they're trying to shove down the throats of the American people? Yes or no. We would love to hear from you. Cast your vote at loudobbs.com. We'll have the results here later.
Next up, an outrageous new threat to our national sovereignty, foreigners trying to tell the United States government, the Congress, and the American people how to deal with this financial crisis.
And as senators prepare to vote on the Wall Street bailout, you won't believe some of the so-called sweeteners that have been added to the legislation that is so necessary for our economy we're told. Those sweeteners adding at least $150 billion to the price tag, but what's $150 billion? We'll be right back.
DOBBS: We're expecting the Senate to vote at any time now on that new version of the Wall Street bailout. The Senate version of the legislation includes new provisions that could -- well would cost taxpayers a lot more money. So there's an improvement already from Monday. As Louise Schiavone now reports, lobbyists are responsible for many of these new additions to the legislation and of course the multibillion dollar higher price tag.
LOUISE SCHIAVONE, CNN CORRESPONDENT (voice-over): A three-page White House proposal for a $700 billion financial sector bailout now stands at 451 pages, ringing up at a cost of $850 billion, thrown in now to an already complex response to a flailing economy, a $150 billion package of specialized tax breaks.
TOM SCHATZ, CITIZENS AGAINST GOVT. WASTE: It again raises the taxpayers' concerns about what's going on in Washington. We're concerned about the economy. We're concerned about rescuing these banks. We don't want to bail out Wall Street. And now we hear about all these additional tax breaks for wool research and arrows for children and specific states and districts.
SCHIAVONE: Insiders say the tax breaks, which have already sailed through the Senate but not yet through the House are designed to win both Senate and House support for the bailout. They include a major forestalling of the alternative minimum tax for 20 million Americans, tax breaks not only for natural disaster victims at renewable energy producers and investors, but also tax relief for film and television productions, motor sports, race track property, the Wool Trust Fund, and makers of wooden practice arrows used by children.
RYAN ALEXANDER, TAXPAYERS FOR COMMON SENSE: Lobbyists have been lining up support for these tax extensions. You pack them all together because there are people who object to some of the ones in there and others who you know object to others, and hope for you know a compromise and they think that's what lobbyists have doing for months on the tax extension bill.
SCHIAVONE: Senate tax writers make the case that the tax extenders phase in over 10 years and out of the $150 billion spent, 43 billion are recovered.
SCHIAVONE: But Lou, we have to ask at a time of fiscal crisis, when money is scarce, how did Congress come up with the idea that the solution is to just spend more money?
DOBBS: Well, it's a question that I think the American taxpayer, the American voter, the American citizen should be asking. On Monday, the House of Representatives kills this legislation. On Wednesday, the Senate improves it by adding $150 billion to the already outrageous sum of $700 billion.
There's no responsibility, no sense of crisis here at all and there is also absolutely no relief for the American homeowner, working men and women and their families who are facing the loss of their homes. This is madness at warp speed.
SCHIAVONE: They're just addicted to the spending. It's crazy. It's the only solution they can ever think of, is to throw more money at it. And they call it sweeteners. And it will be interesting to see how persuaded people are in the House by this. Because they're sure that this thing is going to pass in the Senate.
DOBBS: You know there was a time the Senate was supposed to be the deliberative body. They're a bunch of drunks. They're drunk with power. They're drunk with deficit spending. One hopes that the House can find some sobriety and seriousness in its deliberations and ultimately, its vote. Thank you very much -- Louise Schiavone.
The Bush administration, the presidential candidates, and some members of Congress, well they have taken to trying to scare this country into supporting that massive Wall Street bailout, which is $150 billion larger just in two days. Many of those very same officials claiming the financial markets and the economy are heading for disaster, and therefore the Wall Street folks deserve a big old bailout.
But as our Bill Tucker now reports, things aren't quite as bad as these fear mongers would like you to believe, at least yet.
BILL TUCKER, CNN CORRESPONDENT (voice-over): Once upon a time in America, leaders assured.
UNIDENTIFIED MALE: That the only thing we have to fear is fear itself. Nameless, unreasoning, unjustified (INAUDIBLE).
TUCKER: Now Wall Street and Washington exploit fear.
OBAMA: This is what we have to do right now to prevent a crisis from turning into a catastrophe.
MCCAIN: We are square in the greatest financial crisis of our lifetimes.
SEN. LAMAR ALEXANDER (R), TENNESSEE: What we have is as most of us have said a big wreck in the middle of the economic highway.
REID: This is an effort to solve what I think is the greatest financial crisis we have had since the great depression. TUCKER: Wait. The great depression was brutal. Unemployment peaked at just over 25 percent in 1933. The economy lost 29 percent of its output from 1929 to 1933. Wages plunged almost 21 percent during that time. One noted economist believes that economic times will get rougher, but a depression?
JEFFREY SACHS, COLUMBIA UNIVERSITY: With or without the bailout, we're going to have a pretty steep recession, nothing like a depression.
TUCKER: Depending upon the depth of any recession, Sachs believes that we could see unemployment rising from just over six percent to perhaps a size nine percent. By way of perspectives in the early '80s, when thousands of banks and thrifts failed, unemployment rose to almost 11 percent.
TUCKER: Now not everybody in Washington is practicing the politics of fear. Some Republicans and some Democrats most notably allude to or who were guests on this program last night are saying wait, stop. Let's do something unique here. Take our time and deliberate on what kind of solution we should approach and use.
DOBBS: One has to wonder what the American people are thinking right now as they watch their leaders, whether it's Bush or whether it is Pelosi or whether it is Reid, indulge in the politics of fear...
DOBBS: ... which I think nearly everyone had decided had been rejected as a result of the way in which we entered the war in Iraq. To watch that indulgence on the part of leaders who should be inspiring us, who should be in point of fact fortifying our will, and strengthening our resolve at a time when we're challenged rather than -- I mean they are absolutely shameless in screaming about this Wall Street bailout and all of the calamity that could befall us.
I mean and these two presidential candidates, Barack Obama and John McCain, this is almost childish on their part, the way in which they are choosing to at least give us an advance look at the way in which they would lead were they president of the United States, one of them. It's crazy -- absolutely nuts.
TUCKER: There is very little original thought going on here, Lou. There is very little of anybody saying let's step back and think about what we're about to do here.
DOBBS: Well it's striking. We're going to be talking about that with three original thinkers in terms of economic policy as we have had the opportunity to introduce you at home to a lot of people in Washington and economic thinkers who are thinking originally and cautiously about the direction we're headed with this massive Wall Street bailout. Bill Tucker, thank you very much.
Up next, the Senate vote on this bailout is expected at just about any time. We'll be talking with a powerful member of the Senate Banking Committee, Senator Richard Shelby. He's the ranking member. We'll be talking about this bailout, his views, and what he thinks should happen.
And a new threat to our national sovereignty tonight, our special report on foreign efforts to dictate economic public policy in this country. That story is next. Stay with us. We'll be right back.
DOBBS: The Senate about to vote on that huge Wall Street bailout, foreigners now trying to dictate American public policy and effectively seize control of some elements of the U.S. financial markets. The International Monetary Fund and some European leaders calling upon Congress to pass this massive Wall Street bailout and to thwart the clear will of the American people. Why? Kitty Pilgrim has our report on this latest threat to national sovereignty.
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Suddenly, the International Monetary Fund, the European Commission, and other international organizations have plenty of unsolicited advice for the U.S. Congress.
JOSE MANUEL BARROSO, EU COMMISSION PRESIDENT: I renew our call for a swift decision by the U.S. legislators on the so-called Paulson plan.
PILGRIM: IMF managing director Dominic Strauss-Kahn wants the IMF to become an international regulatory agency to set global standards. Some conservative economists say that is a blatant assault on U.S. sovereignty.
DAVID JOHN, HERITAGE FOUNDATION: What we have seen them do in for instance anti-trust policy is that they set up a policy and then they try to impose it on the rest of the world. So what we're going to have to look at next is going to be a very careful examination of how we end up fixing our financial regulatory system and making sure that it meets our needs and not necessarily the needs of the European community.
PILGRIM: Yesterday, the IMF director said a bailout plan must be passed in U.S. Congress. Kahn told Reuters "a non-perfect plan is better than no plan at all." Some economics especially on the left question whether the IMF with its track record should have a role in managing financial crises.
CHRISTIAN WELLER, CTR. FOR AMERICAN PROGRESS: The IMF history has shown that when countries follow the IMF's policy recommendations, there's a higher chance of the countries actually going into a crisis than without following those (INAUDIBLE).
PILGRIM: Weller cites Argentina as a glaring example of misguided IMF FINANCIAL direction.
PILGRIM: Well the head of the IMF says he has wide backing from China, Brazile and many European countries for international regulation of the financial market. The United States is clearly opposed to that blatant threat to sovereignty, Lou.
DOBBS: Well I wouldn't be so quick to -- you know that's a little hasty because the way these idiots are going in Washington, they may sign up for the IMF plan, want to turn the whole operation over to the European Union and China. By the way, at the rate we're borrowing money and the way that they're throwing it down the rat hole called Wall Street, they may need to turn it over to China. Thanks very much -- Kitty Pilgrim.
Well billionaire industrial Warren Buffett is -- he's investing in another struggling blue chip company, Buffett's company Berkshire Hathaway, buying $3 billion of preferred stock at a steep discount of course from General Electric. That deal gives Buffett the option of buying up to $6 billion in stock. This is Buffett's second major investment during the crisis.
Last month he purchased a $5 billion share at a discount in Goldman Sachs. Buffett we should note supports the Wall Street bailout and we should point out that you probably in the offering by GE won't be getting exactly the same price as Warren Buffett. Now I have the deepest respect and fondness for Warren Buffett, but he's got a little advantageous position here that you should be thinking about before you buy too many shares of GE.
Coming up next, both sides trying to lower expectations for tomorrow's big debate between the vice presidential candidates. Can Governor Palin survive this because the national liberal media suggests -- I don't know -- she could just fall all apart there. Let's see what's going to happen. We'll talk with some of the best analysts in the country about what she should expect and what you and I might expect.
And we're waiting for that Senate vote on the Wall Street bailout. What should we expect? Well we'll be talking about that with Senator Richard Shelby of the Senate Banking Committee here next. He joins us from Capitol Hill. We'll be right back. Stay with us.
DOBBS: The Senate tonight is about to vote on the Wall Street bailout. Senator Richard Shelby is one of the staunchest opponents of the $700 -- well, it was $700 billion; now it's $850 billion in bailout. Senator Shelby is the ranking Republican on the Senate Banking Committee, former chairman of the committee, and joins us tonight from Capitol Hill. Senator, great to have you with us.
SEN. RICHARD SHELBY (R), ALABAMA: Thank you, Lou.
DOBBS: This bailout effectively added $150 billion to what was $700 billion and rejected by the House Monday. What's going on?
SHELBY: They're trying to throw a lot of sweeteners, they call it, legislatively, in to try to get a number of the House members to change their votes. And there's always a price to pay, as you just added up some numbers there.
This bill was flawed from the beginning. The premise is flawed. And when it came out and it is flawed today, and they added on more things to just exacerbate it.
DOBBS: Well, now, Senator Harry Reid today called for bipartisan support. He said "there are a few people in the House who'd rather we did this some other way. We've tried other ways. I say to my friends in the House we've got to get this done." He's already decided it's a done deal in the Senate. And I wasn't aware they tried any other way.
In point of fact, this is a bailout of Wall Street. You have your colleague, Senator John McCain, saying we should call it a rescue, that that would be more palatable. Why isn't anybody being intellectually honest about the fact no one knows what the result of this would be, other than to run up a huge price tag on the American public and bail out some institutions that perhaps aren't entirely deserving?
SHELBY: Lou, you're absolutely right. Last week, I even brought up with the president that I had nearly 200 of the leading economists in this country said, let's slow down, let's look at it a different way we can do this. But no one would listen. No one listened to me. No one listened.
You know, they were going to do the deal. The critical mass has happened. You're going to see a lot of Republican senators and a lot of Democratic senators vote for this package, an unprecedented disaster for the taxpayer.
DOBBS: And is it your judgment at this point that it will be passed tonight?
SHELBY: Well, I hear that they've got the votes -- you know, the proponents, both sides. You can justify anything, but at the end of the day, this won't work. And if it does work, it will be temporary in nature, and then we'll be back at the drawing board. People are going to start looking to be bailed out by the taxpayer.
This is an uncharted path we have never been down before to this extent. We went down it a little bit with Chrysler. I voted against that in 1979-'80. I thought it was wrong. Now, Chrysler, General Motors, everybody wants to get more money from the taxpayer.
DOBBS: The taxpayer is going to be on the hook for this. Some of the same taxpayers who, by the way, are having their homes foreclosed will be asked to support through their taxes a bailout of the institutions that are repossessing their homes. I mean, this is an irony that is not funny. It's not ironic. It is tragic.
And the idea that both candidates for president, both Senator McCain and Senator Obama support this, what is -- you have been in Washington for a while. How in the world are the American people to react to two people who would be president of the country taking that position tonight?
SHELBY: Well, it's baffling to me, you know, that either Senator Obama or Senator McCain would just buy this from an administration that won't even be in power in four months, from a secretary who won't be there, will have more power for the next few months if this goes into law than any president has probably ever had.
DOBBS: Well, for crying out loud, Senator McCain today said he admired Secretary Paulson. I guess -- I don't know what to make of it.
SHELBY: Well, Secretary Paulson, you know, I have worked with him for several years now, I knew him when he was head of Goldman Sachs. I can tell you, he's smart and he's a deal-maker, but this is a bad deal for the taxpayer.
DOBBS: All right, Richard Shelby, Senator Shelby, we thank you for being here. And good luck to the country tonight.
SHELBY: Thank you.
DOBBS: Senator Shelby, coming to us from Capitol Hill, where the vote in the Senate is expected literally any moment now.
Up next, the controversy over the author of a new book celebrating the age of Obama and her roll in tonight's presidential debate. It is a big deal if you're the republican who signed up for it. And three experts join me to talk about the revised Wall Street bailout. By that, I mean it's been raised by $150 billion. They have conflicting views on it. Stay tuned. We'll be right back.
DOBBS: We're waiting now for the senate to vote on that Wall Street bailout legislation. Just moments ago, you heard Senator Richard Shelby, the ranking member of the banking committee, tell us he believes the senate will pass the legislation.
Joining me now, three leading experts on the economy. In Clifton, Virginia, Lawrence Lindsey, former director of the National Economic Council, also serving at white house economic adviser to President Bush, Larry, good to have you with us. In Chicago, Professor Lawrence Officer, professor of economics at the University Illinois in Chicago. Professor, good to have you with us. And in Sarasota, Florida, William Isaac, the former chairman of the FDIC. Bill, good to have you here.
WILLIAM ISAAC, FORMER CHMN. FDIC: Nice to be here.
DOBBS: If I may turn to you, Lawrence Lindsey, first, you support this bailout. You think it's a good idea. Is that right?
LAWRENCE LINDSEY, FMR. WHITE HOUSE ECON. ADVISER: Well, I'm in favor of the current bill. I shared Senator Shelby's view of the original bill. I think what has been added gives the bill a pretty significant chance of working, which is did not have before it was voted down in its original form.
DOBBS: Which part, if I may ask, that is so persuasive to you?
LINDSEY: I think that the addition of FDIC insurance for depositors really helps. The problem we had with Wamu and Wachovia is we had deposits flowing out of the banks. And if that happens, there's no amount of change you can do to the asset side of the balance sheet and save the bag. What you have to do is tell Americans there is a safe place to put their money. That's in the banks. It would have been great if this had no limit at all. Something Ireland did today. That way, the money would stay in American institutions rather than go overseas or whatever. Once you stabilize the liability side, once you tell people it's safe to have money in the bank, you have a chance to work with the bank.
DOBBS: What in the world were President Bush, Speaker Pelosi, Senator Majority Leader Reid, Barack Obama, and John McCain doing trying to scare the American people out of their wits for two weeks, talking down not only the economy, but the markets themselves?
LINDSEY: Well, I think they were trying to sell a plan. Again, I think the plan is much improved. I don't think it had a chance to work in its original form, but I think it is much improved. Now it has a reasonable shot at succeeding.
DOBBS: Professor Officer, your thoughts?
PROF. LAWRENCE OFFICER, UNIVERSITY OF ILLINOIS: Well, this is just fantastic. I just cannot believe that intelligence politicians and economists can support this plan, which remains a bailout plan. Normal way we do monetary policy is to have the Federal Reserve purchase good securities such as government treasury bonds, treasury bills. This bailout has a treasury buying crappy security, horrible security, sour security.
DOBBS: Toxic. The word is toxic these days.
OFFICER: I can't even conceive of it. It's so fantastic.
DOBBS: Let's turn to you, Bill Isaac. You can conceive of it. You have seen it before. First your reaction to the bailout, and secondly, what do you think we ought to be doing?
ISAAC: I think that I would agree with almost everything Senator Shelby said, in fact everything. And I think it is sort of shocking they're ramming this through the senate without ever gone through a committee meeting and not having the chairman of the bank, without him being terribly involved in the process. And they have done the same thing in the house. They're trying to cram a very bad bill, and Larry Lindsey and I go back a long way. And agree with almost everything Larry says except for on the insurance deposit thing. He doesn't have it right. He had it right on we need full coverage right now. What I have been advocating very strongly is the FDIC ought to use its existing statutory powers to declare there's an emergency in the financial markets and that going forward through this crisis, the FDIC whenever it handles a bank failure, will protect all creditors, all general creditors of banks.
DOBBS: We're in a bizarre position where the federal government is insuring money market funds but leaving holes for demand deposits in commercial banks.
ISAAC: Well, that's exactly right, Lou. You're spot on. Just last week, the treasury gave a full guarantee of the U.S. government to all the money market funds. They're up $12 billion this week. What are we trying to do to the banking system to offer a $250,000 bone. We need to get the public to realize that our banking system is safe. We have a way to do that. We did it in the '80s. We can do it again today. The FDIC should say we are going to make all general creditors and banks whole when they fail.
DOBBS: That's within the power right now of the treasury secretary, the Federal Reserve chairman, and the president of the United States, is it not?
ISAAC: The president has to recommend it, and the treasury has to recommend it, in consultation with the president, and it has to be approved, and it was intended to be used in these circumstances.
DOBBS: Let's get to the issue of insolvency because we have a number of institutions dealing with this very real crisis. What would you recommend?
ISAAC: With what?
DOBBS: Insolvency with the banks that are in trouble. We can work on the issue of the safety of the deposits, but as to the security and safety of those institutions, what is the government to do?
ISAAC: Well, one big step was taken yesterday. The SCC, a year late, after begging them, they got rid of the rule that was forcing banks to market when there was no market, and they destroyed $500 billion of bank capital over the last year, which means that banks are short on the ability to lend by $5 trillion. The sec single-handedly took down a number of institutions and has this whole financial institution on edge right now. They did that yesterday. That's one of the things the house members when they rejected this bill insisted be done and finally it got done. The FDIC also had a network certificate program it used to buck up the capital in banks during the 1980s. It was a phenomenally successful program. We need to put it back in place.
DOBBS: Bill Isaac, I'm going to jump in here. I'm going to ask Professor Officer, you and Larry Lindsey, do you believe we're going to see a significant recession despite the bailout.
OFFICER: Economists have correctly predicted 9 of the last 10 recessions. I done think we're going to see a significant recession regardless. LINDSEY: I'm not quite as optimistic, but I agree with everything Bill Isaac just said. The problem is the treasury secretary does not want to extend deposit insurance. I was hoping congress would do it.
DOBBS: It's about time for the treasury secretary to get over himself. This should be a matter of collaboration with some of the best minds in the country. And I would have encouraged them to talk to Bill Isaac and Larry Lindsey, just as an opener. We thank you for talking with us, gentlemen. Thank you for your views.
At the top of the hour, the ELECTION CENTER with Campbell Brown. What have you got?
CAMPBELL BROWN, CNN ANCHOR: We're going to be following all of the breaking news, even if tonight's vote in the senate passes, the latest version of the financial bailout, and it is expected to. There's still a lot of bailout battle ahead in the house. That senate vote, we should mention, expected to happen in the hour. We'll keep up with the drama on Capitol Hill. Also with Senators Obama, McCain, and Biden there for the first time in months.
We're also going to be gaining out the strategies for the Biden/Palin debate. We'll have Palin's latest comments to CBS News tonight as well and hear how the candidates are using their opponents' past debates to prepare for this one. All at the top of the hour, Lou.
DOBBS: Thank you Campbell.
Up next here Senator McCain arriving at the U.S. capital moments ago. Senator Obama already there. Both ready to cast their votes for the legislation they fully support that now $850 billion bailout. Just $700 billion directly for Wall Street, and the moderator of the vice presidential debate tomorrow, author of a book "The Age of Obama." How would you like to be the republican who approved her as the moderator? Is that smart, is that fair? We'll be right back. Stay with us.
DOBBS: Well, a Senate vote on the massive Wall Street bailout expected at any time. We're standing by to go to the Senate just as soon as that vote begins. And joining me now, three of the best political analysts in the country. Republican strategist Ed Rollins, White House political director under President Reagan, chairman of the Mike Huckabee presidential campaign. "New York Daily News' columnist Errol Louis. Errol also the host of the morning show on WWRL in New York. And syndicated columnist Miguel Perez. Gentlemen, the Senate surpasses itself, adds $150 billion into, what I love, cute little word, sweeteners, to get the House to buy into it as well as the Senate. What's your reaction, Miguel?
MIGUEL PEREZ, SYNDICATED COLUMNIST: My word for sweeteners is pork. This is what they're doing. I'm amazed before we came on here with you, we were all talking about how John McCain can go along with this.
DOBBS: He's the maverick.
PEREZ: His whole campaign is based on how much he's going to fight pork. All of a sudden at the last minute, wooden arrows and mental health insurance are being tacked onto this. It's absurd.
DOBBS: He may think it's for his colleagues in the Senate.
PEREZ: Right, exactly. If anybody needs mental health insurance, it's these people.
DOBBS: Errol, your thoughts?
ERROL LOUIS, NEW YORK DAILY NEWS: I spent this morning interviewing some economists, good solid neutral government accountants who put the fear of God in me, convinced me that maybe something needs to be done. I talked with Charlie Rangel, chair of Ways and Means to put another kind of little scare into me.
And then you come and look at this Christmas tree bill where they're hanging wooden arrows in there and tax benefits and mental health sweeteners and all kinds of pork, and I go back to my original belief which is that the way that they're trying to ram this down people's throats, the way they're trying to put in all kinds of politics and patronage and the way the presidential candidates are going along with it, which is a disgrace, indicates to me they should at least put this off until after the election.
DOBBS: Is there any way we could put off the election? Because both of these presidential candidates, they're bringing into sharp question their leadership ability, their capacity.
ED ROLLINS, REPUBLICAN STRATEGIST: Well obviously, they're attempting to appease a Wall Street constituency as opposed to the Main Street constituency. The calls are still coming into the Capitol overwhelmingly against this package.
DOBBS: The folks I call lying, cheating thieves are the folks who run the Democratic Congress. They're trying to spread the story that those calls coming in are in support of the bailout. I have talked to a number of people in Congress. They don't even know where they're getting that idea.
LOUIS: Laid off bank employees might account for a few. Other than that, I'm not sure.
ROLLINS: The tragedy is something needs to be done. Everybody is basically saying we don't need this amount of money. It's kind of a morale booster. Why do you have to have a morale booster for companies that are going bankrupt? What you need is some kind of a reasonable supplemental program here.
DOBBS: Bill Isaac laid out as intelligently as one can, an approach. Congresswoman Marcy Kaptur, Congressman Peter DeFazio, coming up with the no-bailouts act. The idea that this Congress is doing this without a public hearing. The point made, Richard Shelby wasn't even talked to. Bill Isaac, one of the foremost bankers on our markets, not talked to. Lawrence Lindsey, think of the intellectual capital we have in this country, and they're not consulted by this arrogant treasury secretary, this arrogant speaker of the House and Majority Leader Harry Reid. Did I mention the president of the United States?
ROLLINS: You did. No, you did not.
DOBBS: Well, I won't.
ROLLINS: The problem is even if thing passes tonight, which it probably will, to get to the House, they have to hang more ornaments on this Christmas tree. The last eight or 10 votes, they're not going to come from the Republicans. I would be shocked at that. So they're going to go basically to a whole bunch of people, a whole bunch of things to the last 10 or 12 votes, and as opposed to be responsible, they'll be more irresponsible.
DOBBS: I want to correct something I said the other day, talking about Congresswoman Kaptur and Congressman DeFazio. I said that the CEO said the crisis could be worse if they pass the bailout. He apparently didn't mean to imply that. Rather than some of it is uncertain. So I apologize if I mischaracterized what he said, what he effectively said was no one knows the outcome. We're going to be back with our panel as we wait for the Senate to begin its vote on the huge Wall Street bailout. Is America safe tonight? We'll let you know more when we come back.
DOBBS: Well, we're waiting for the Senate to begin its vote on this now $850 billion bailout legislation. Back with Ed Rollins, Errol Louis and Miguel Perez. We have just received word that Dianne Feinstein, Senator Feinstein's office has been receiving calls. I mentioned that I thought there were some people lying about the ratio of calls for and against that they're receiving from their constituents. Senator Feinstein's office says point blank they received 92,000 phone calls, and presumably, that's just today, 92,000 calls, 85,000 of those calls absolutely against this bailout.
I mean, I don't know where we're headed here, but it's not in the direction of a democracy, because the rule of the majority is not in question here. The last time the majority rule -- I thought that was a fundamental tenant, precept of any democracy that the majority rules. What is going on? Are we a democracy, Miguel?
PEREZ: Actually, you know, no, it doesn't look that way right now especially since we're socializing our economy. But you know, what really scares me, Lou, is the scare tactics. The fact they're scaring -- it's all mental. I have things I want to buy right now. I'm not buying anything right now because I don't want to spend my money until I know what I'm going to do with my money or if I'm going to have money at the end of the game.
DOBBS: I have been saying, is this a dress rehearsal for the two men who want to lead this nation, Obama and McCain? If this is the way they're going to behave, we have seen this act before. It's ridiculous.
LOUIS: They're acting like senators unfortunately and not like leaders. If that kabuki dance that McCain did last week, rushing to Washington to act as if he was going to resolve the thing and then of course failing to do so, then Obama saying, call me if you need me, and then coming in now to bless this thing, which is if anything, worse than the first round.
DOBBS: You get the last word.
ROLLINS: John McCain wanted to turn around his campaign to go on the floor tonight and be against this on two principles. One is he's against all these add-ons and you've got $150 billion added on to this thing.
DOBBS: He hasn't the courage.
ROLLINS: And he's not going to speak on it. But he would turn his campaign around to be on the side of the public and can jump start this thing, but I don't think he's going to do it and I'm for McCain.
DOBBS: Thank you very much. What should Obama do?
LOUIS: Obama should do a 180 as quickly and gracefully as possible.
DOBBS: All right, well thank you very much, Miguel. Good to see you, Miguel Perez and Errol Louis and Ed Rollins. Thank you.
Our poll results, 87 percent of you say you don't believe that Congress's record low approval rating will rise as a result of their courageous Wall Street bailout they're trying now to shove down the throats of the American people. Thanks for being with us tonight. Thanks for voting. Where your voice is always heard, always here at LOU DOBBS TONIGHT, thank you. Good night from New York. "THE ELECTION CENTER" with Campbell Brown begins right now. Campbell?