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Lou Dobbs This Week
Reviewing the Topics Lou Dobbs Covered for the Week
Aired October 05, 2008 - 19:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KITTY PILGRIM, HOST: Tonight: The Congress sells out the will of the American people, and burdens taxpayers with hundreds of billions of dollars. The House of Representatives is voting in favor of a bailout for Wall Street that is loaded with pork.
Also: A showdown between Governor Palin and Senator Biden in their only debate. We'll tell you how Governor Palin defied her critics in the liberal national media.
We'll have all that and much more -- straight ahead tonight.
ANNOUNCER: This is LOU DOBBS THIS WEEK: News, debate, and opinion. Here now: Kitty Pilgrim.
PILGRIM: Good evening, everyone.
The House of Representatives this week defied the will of the American people. They voted for an $850 billion bailout of Wall Street. It was a stunning reversal for the House, which voted against the bailout earlier in the week. The House supported the bill, after the Senate added $150 billion in pork to the legislation.
Now, this bailout will give unprecedented powers to the treasury secretary to take whatever action he wants to deal with the financial crisis.
Brianna Keilar reports from Capitol Hill.
BRIANNA KEILAR, CNN CORRESPONDENT: Kitty, two weeks of negotiations, debate, arm-twisting, finally culminating in the House, pushing through a bailout plan they could send to President Bush that he could sign into law. The House picking up about 60, almost 60 more "yes" votes than it did on Monday. Those 60 votes about evenly split between Republicans and Democrats.
You can see in the House, there some broad bipartisan support for this bailout plan. But one of the things we've heard from Democrats and Republicans is that this was a necessary evil. They've all said this isn't a perfect bill but it was the best they could do in the short amount time that they had.
Here's House Speaker Nancy Pelosi.
(BEGIN VIDEO CLIP)
REP. NANCY PELOSI, (D) HOUSE SPEAKER: So many of our -- part of our leadership were part of this success of this legislation today, and I don't say that we celebrate it, because I don't frankly think that we could have had a much better bill under different circumstances, but these are not the circumstances we were under. We were dealt a bad hand; we made the most of it. I think the American people will benefit from it.
(END VIDEO CLIP)
KEILAR: But let's not forget now about the scores of members of the House who voted against this, because after all, there were 171 of them, including Congressman Brad Sherman, a Democrat from California.
(BEGIN VIDEO CLIP)
REP. BRAD SHERMAN, (D) CALIFORNIA: Wall Street wants the $700 billion so bad they can taste it. To get it, they need two things. First, you create panic. Then, you block alternatives, and then you herd the stampeding cattle toward passing a bad bill.
(END VIDEO CLIP)
KEILAR: The next step, we're going to be seeing some hearings, questions about: how did the economy get to the dire situation it's in. And also, a lot of members who didn't necessarily get all the provisions they wanted in this bill. They're going to be angling to get that.
But above all, Kitty, in this election year, with so many voters who are not onboard with this bailout plan, you've got a lot of members of Congress who are doing the hard sell to their constituents ahead of November -- Kitty.
PILGRIM: Brianna, that begs the question, why did so many switch their votes when the voice of the American public clearly was against this?
KEILAR: Well, there's no one answer to that. For some of them, they cited the add-ons, the FDIC insurance cap increase, the additional tax cuts and tax breaks that some members were sort of wooed by.
But on the other hand, Kitty, I know that you remember all of those calls that were coming into Capitol Hill from constituents who were staunchly against this, as time wore on over the past week, we heard from some members who said, some of those calls, even in some cases, it being split 50/50, you had some people calling in after the Monday vote saying they actually supported the bill.
So a lot of pressure, market pressure as well, and pressure from groups like AARP and the U.S. Chamber of Commerce -- Kitty.
PILGRIM: All right. Thanks very much, Brianna Keilar. Thanks, Brianna.
Well, President Bush quickly signed the bailout legislation into law. In a statement in the Rose Garden, the president strongly defended the bailout.
(BEGIN VIDEO CLIP)
PRES. GEORGE W. BUSH, UNITED STATES OF AMERICA: I know some Americans have concerns about this legislation, especially about the government's role and the bill's cost. As a strong supporter for enterprise, I believe government intervention should occur only when necessary. In this situation, action is clearly necessary. And ultimately, the cost -- ultimately, the cost to taxpayers will be far less than the initial outlay.
(END VIDEO CLIP)
PILGRIM: President Bush declared the legislation will prevent the crisis on Wall Street becoming a crisis in communities across the entire nation.
The stock market turned lower after the House passed the bailout bill. Earlier, the Dow rose more than 300 points but the Dow ended Friday nearly 160 points lower. Crude oil prices fell very slightly, declining 9 cents a barrel on Friday. And the dollar lost some ground against the euro after its recent gains.
On the campaign trail, the financial crisis, our worsening economy, were top issues in the one and only vice presidential debate. Both candidates tried to present themselves as populist who will defend working men and women and their families. Now, after the debate, polls said, a huge majority of voters believe that Palin did better than expected.
Candy Crowley has our report.
(BEGIN VIDEOTAPE)
CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT (voice-over): Sarah Palin did not deliver perfection.0
GWEN IFILL, DEBATE MODERATOR: As vice president, there's nothing that you have promised as a candidate that you wouldn't take off the table because of this financial crisis we're in?
GOV. SARAH PALIN, (R) VICE PRESIDENTIAL CANDIDATE: There is not, and how long have I been at this, like five weeks? So there hasn't been a whole lot that I've promised.
CROWLEY: But neither did she implode, repeatedly touching base with her regular gal persona. Here decrying Wall Street's meltdown.
PALIN: Let's commit ourselves, just everyday American people, "Joe Six Pack," hockey moms across the nation, I think we need to band together and say, "Never again."
CROWLEY: She was the newbie but she went toe-to-toe on climate change, economy, and Iraq, with a 35-year Washington insider.
SEN. JOE BIDEN, (D) VICE PRESIDENTIAL CANDIDATE: Barack Obama has offered a clear plan -- shift responsibility to the Iraqis over the next 16 months, drawdown our combat troops. Ironically, the same plan that Maliki, the prime minister of Iraq and George Bush are now negotiating. The only odd man out here, only one left out, is John McCain.
PALIN: Your plan is a white flag of surrender in Iraq. And that is not what our troops need to hear today, that's for sure.
CROWLEY: Eighty-four percent of debate watchers said Palin did better than expected. That's according to a snap poll from CNN and Opinion Research Corporation. But 51 percent said Joe Biden won the night.
Polite and even warm toward Palin, Biden mostly debated the top of the McCain-Palin ticket.
BIDEN: I haven't heard how his policies are going to be different on Iran than George Bush's. I haven't heard how his policies are going to be different with Israel than George Bush's. I haven't heard how his policy in Afghanistan is going to be different than George Bush's.
CROWLEY: She answered some questions, but not others, it may not have won her the night, but she did take control.
PALIN: I may not answer the questions the way that either the moderator or you want to hear, but I'm going to talk straight to the American people...
CROWLEY: If nothing else, Palin seems to have quieted conservatives' growing concern she was not up to the job. The rest now is up to John McCain.
Candy Crowley, CNN, St. Louis.
(END VIDEOTAPE)
PILGRIM: Governor Palin defied her critics in the national liberal media in this debate. As Candy reported, voters believe Palin did much better than expected. Palin began the debate with the liberal news organizations strongly critical of her, and strongly in favor of Senator Biden.
Lisa Sylvester reports.
(BEGIN VIDEOTAPE)
LISA SYLVESTER, CNN CORRESPONDENT (voice-over): There's been plenty of blunders on the campaign trail. This one from Senator Joe Biden.
BIDEN: When the stock market crashed, Franklin Roosevelt got on television and didn't just talk about the, you know, the princes of greed.
SYLVESTER: Wrong. Franklin Roosevelt wasn't the president during the stock market crash, Herbert Hoover was. And in 1929, Americans did not watch TV, they listened to radio.
Here's another one. Biden sounds like he's going to take down his own running mate. BIDEN: I guarantee you, Barack Obama ain't taking my shotguns, so don't buy that malarkey. Don't buy that malarkey. They're going to start peddling that to you. I got two. If he tries to pull my Beretta, he's got a problem.
SYLVESTER: Senator Biden's gaffes fly under the radar of mainstream media. But "Washington Post" and CNN media critic, Howard Kurtz says Governor Sarah Palins seem to be magnified.
HOWARD KURTZ, HOST, CNN'S RELIABLE SOURCES: There is a tremendous disparity between the coverage that Joe Biden and Sarah Palin are getting. When Biden makes a mistake, it is nowhere near the big story that's endlessly repeated the way it is when Governor Palin does so.
SYLVESTER: "Newsweek" editor and CNN analyst, Fareed Zakaria wrote a sharply-worded editorial that Palin wasn't ready to be vice president, a point he reiterated on CNN.
FAREED ZAKARIA, HOST, CNN'S FAREED ZAKARIA GPS: It's not that she doesn't know the right answer; it's that she clearly does not understand the question.
SYLVESTER: But Palin's defenders say the liberal elite media is being plain nasty and Sarah Palin's approval rating as Alaska's governor is a strong 68 percent because she has something that counts with voters.
BRIAN DARLING, HERITAGE FOUNDATION: If you look at Sarah Palin, she's not a career legislator. She's a real person who got involved in politics, and I think most Americans look at her and can more identify with Sarah Palin than any of the other candidates running for federal office.
SYLVESTER (on camera): Sarah Palin said quite confidently that she's not only ready but willing and able to serve as vice president. And she has a message that resonates with voters, and keep in mind, as governor of Alaska, she actually has more executive experience than any of the other candidates in this race.
Lisa Sylvester, CNN, Washington.
(END VIDEOTAPE)
PILGRIM: Much more ahead on the impact of the vice presidential debate, and the great bailout of Wall Street. Also, new evidence of the increasing financial stress on our middle class. And what's left of our manufacturing industry. And, we'll have a special report on the victims of the foreclosure crisis, victims who are being ignored by political and corporate elites.
(COMMERCIAL BREAK)
PILGRIM: More evidence tonight of the staggering impact of the financial crisis on the nation's working men and women. Employers cut 159,000 jobs last month, that's the biggest drop in five years. More than 3/4 of 1 million jobs have been lost so far this year. The unemployment rate, though, remained constant, 6.1 percent. The nation lost jobs in most sectors. Manufacturing, construction, retailing had the largest job cuts.
Many of the manufacturing job losses in the country are due to our massive trade deficit. In fact, a key measure shows manufacturing activity is near a seven-year low.
As Bill Tucker reports, this crisis is being ignored by Washington lawmakers.
(BEGIN VIDEOTAPE)
BILL TUCKER, CNN CORRESPONDENT (voice-over): America's trade deficit makes Washington's one-time $850 billion bailout package look tame in comparison.
BOB BAUGH, AFL-CIO INDUSTRIAL UNION COUN.: We actually do this every year where we send $800 billion overseas in trade deficits, and the captains of Wall Street are the captains of the "Titanic" these days, and these are the same guys who gave us advice on our trade policy.
TUCKER: Bad advice, argues the Coalition to Fix America's Economy, an ad hoc alliance of manufacturers, unions, farmers and trade associations. The group says that while Washington panics over Wall Street's fears, nobody's paying attention to our industrial policy or trade policy, and it's killing our economy.
PATRICK MULLOY, AMER. MFG. TRADE ACTION COALITION: Both parties should be talking about these matters, because year after year, America's on a position where we're eroding our manufacturing base, we're outsourcing our jobs, and we're becoming a bigger and bigger debtor nation dependent upon foreign capital.
TUCKER: Since 1996 through July of this year, we have racked up a trade deficit of $4.5 trillion in just manufacturing alone. According to a just-released study by the Economic Policy Institute, we lost or displaced 5.5 million jobs last year, solely because of our trade deficit. But unlike the financial community...
CHARLES BLUM, COALITION FOR PROSPEROUS AMERICA: We're not looking for a bailout, what we're looking for is a competitive national strategy. Every country in the world has got an idea of how it can succeed in a global economy. We don't.
TUCKER: And if we don't decide that strategy, the coalition argues, our economy will never regain its vitality.
(END VIDEOTAPE)
TUCKER: The Coalition to Fix America's Economy wants Americans to start demanding that their politicians and the presidential candidates answer the question of what those candidates and what those politicians will do to make domestic manufacturers healthy again. They're not asking for billions of dollars, Kitty, they want people paying attention and demanding answer.
PILGRIM: Well, it begs the question, what are they doing, Bill? TUCKER: They're doing nothing. And that was the point that was made this week when they had their coalition launch. There are laws on the books that are being ignored. Does this sound familiar? There are laws there that we're not enforcing that's allowed these trade deficits to build up, and nobody's paying attention because I guess it's not sexy, it's not glamorous to talk about trade and the deficit and the result.
PILGRIM: Thanks very much, Bill Tucker. Thanks.
Some states tonight are also struggling to deal with the worsening economy, and they're issuing dire warnings about the consequences of the nation's financial crisis. California Governor Arnold Schwarzenegger said his state might need an emergency loan of as much as $7 billion. The governor sent a warning letter to Treasury Secretary Henry Paulson.
The governor said, "Unless the financial crisis is solved, California and other states may be unable to obtain the necessary level of financing to maintain government operations."
New Mexico and Massachusetts have delayed bond sales, and Maine could cancel a highway project funded by bonds.
The massive Wall Street bailout will rescue banks and their executives, but this plan does really little or nothing to help those who need help most -- millions of homeowners facing foreclosure.
Casey Wian has our report.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): In California, nearly 1,300 homes are being foreclosed every business day. State-wide, more than half a million homes are under foreclosure. In the second quarter of this year, 121,000 homeowners in the once golden state received default notices. And California home prices have plunged 41 percent since last year. Not surprisingly, one of the leading legislative critics of the Bush administration's bailout plan is from California.
REP. BRAD SHERMAN, (D) CALIFORNIA: This will do very little, perhaps nothing, to help people with troubles paying their mortgage.
WIAN: Nationally, 7.5 million homeowners now face foreclosure. Another 5 million have zero or negative equity in their homes. The president and his Wall Street supporters say the plan would help homeowners.
BUSH: The assets related to home mortgages that have lost value during the housing decline, under the Emergency Economic Stabilization Act, the federal government will be authorized to purchase these from banks and other financial institutions, which will help free them to resume lending to businesses and consumers.
MARK ZANDI, MOODY'S ECONOMY.COM: The idea here is that the federal government would take ownership of these mortgage loans, and then it has some options and it could work to keep people who are in foreclosure in their homes.
WIAN: Or not.
A group called Vote No Bailout says it has sent 170,000 letters to Congress, warning the legislation does virtually nothing for the millions of hard-working people who have lost their homes or are now facing foreclosure. Instead of rewarding bankers' greed, the group says, homeowners should receive the same opportunity as Wall Street to restructure their deals. About 12 percent of the 2 million mortgages now under foreclosure were written for homeowners with bad credit or with little or no money down.
Two years ago, subprime borrowers accounted for 20 percent of home loans. Now, 9 percent of the nation's 75 million homeowners are either behind on their mortgage payments, or in foreclosure.
Casey Wian, CNN, Los Angeles.
(END VIDEOTAPE)
PILGRIM: Coming up: Congress bailed out Wall Street. What about middle-class Americans saddled with credit card debt? We have a special report on that.
And the bailout not only includes hundreds of billions for Wall Street, but billions for congressional pork also. Also, we'll tell you who benefits. Stay with us.
(COMMERCIAL BREAK)
PILGRIM: The Wall Street bailout is loaded with billions and billions of dollars in pork barrel-spending projects -- projects that simply have nothing at all to do with our financial crisis.
Louise Schiavone reports on how your hard-earned tax dollars will be spent.
(BEGIN VIDEOTAPE)
LOUISE SCHIAVONE, CNN CORRESPONDENT (voice-over): Congressional deal makers reason there are some things money can't buy. For everything else, there's the American taxpayer. And so it was that an unpaid-for $150 billion package of tax sweeteners became part of an almost $1 trillion bailout.
DIANA FURCHOTGOTT-ROTH, ECONOMIST, HUDSON INSTITUTE: If I were a small business and that was how I ran my business, I would soon be out of business.
SCHIAVONE: Considered at first politically improbable...
SEN. JOHN MCCAIN, (R-AZ) PRESIDENTIAL CANDIDATE: It's completely unacceptable for any kind of earmarks to be included in this bill. It would be outrageous for legislators and lobbyists. SCHIAVONE: The McCain campaign called the inclusion of earmarks regrettable, but said this was a national emergency to protect Americans from losing their homes and savings. Senator Obama was also among 74 senators supporting the bill, to the outrage of conservative critics.
MICHAEL FRANC, HERITAGE FOUNDATION: You've got members of Congress dancing with the lobbyists, and frankly, at the end of a congressional session, which is where we are now, the level of fear on the part of these lobbyists is at its greatest, because they're afraid they're not going to get their little special interest items through to passage.
SCHIAVONE: The Senate embraced tax considerations for Hollywood, rum importers, motorsports tracks, the woolen industry, plug-in hybrid vehicles, parties affected by 1989 Exxon Valdez oil spill, clean coal construction, research and development for high-tech and pharmaceuticals, business developments for American Samoa, makers of wooden practice arrows used by children, and much more.
ROBERT BIXBY, CONCORD COALITION: You have to start wondering at this point who's going to bail out Washington. And if that needs to happen, there are only three choices -- the American taxpayers, foreign lenders, and the government's printing press.
SCHIAVONE (on camera): Sources say it probably won't win many if any votes among the red ink-watching Blue Dog Democrats, but make no mistake, this package of sweeteners is going to help get a massive financial sector bailout through Congress.
Louise Schiavone for CNN, Washington.
(END VIDEOTAPE)
PILGRIM: Lobbyists for the U.S. Chamber of Commerce and other business interests played a major role in pushing Congress to pass the great Wall Street bailout. The business round table and the chamber of commerce both took out full-page ads in national newspapers, urging Americans to lobby their lawmakers to vote for the bill.
The U.S. Chamber of Commerce, of course, is the biggest spender when it comes to buying influence in Washington. The chamber of commerce spent an average of $40 million a year on lobbying in the last decade. The business round table spent about $11 million a year on lobbying over 10 years. In 2007, special interests spent more than $2.8 billion lobbying Washington.
Well, there was no lobbying at all for the interests of middle-class Americans. American families are struggling with massive credit card debt, and household debt. But a bill to protect consumers from predatory lending failed to pass in the Senate, while the banks are getting all the help, credit card holders have little protection from predatory practices.
(BEGIN VIDEOTAPE)
PILGRIM (voice-over): Massive relief for banks. But for Americans burdened with credit card debt, nothing.
The so-called "Credit Cardholders' Bill of Rights" was written to protect consumers from arbitrary and sudden interest rate hikes on credit cards, excessive fees and gimmicks that trigger penalties. That bill passed in the House with overwhelming support. But in the rush to get the Wall Street bailout done, the Senate never took up its version of the legislation to curb credit card abuses.
The Bush administration, in an official statement, actually tried to shoot down the bill, saying it would constrain financial institutions. Consumer groups say the Wall Street bailout bill is expected to allow the government to buy securitized bad debts, including credit card debts.
TRAVIS PLUNKETT, CONSUMER FED. OF AMERICA: The bailout bill is going to help many of the same firms who are responsible for these abusive tactics. And, under the bill, the government will be able to buy, not just bad mortgage debt, but bad credit card debt as well.
PILGRIM: Robert Manning has testified before Congress on the credit card industry and says banks pressured Congress.
ROBERT MANNING, ROCHESTER INST. OF TECHNOLOGY: They're going back to Congress and say, hey, now is not the time to impose regulations. We need the money. Cash flow coming from the credit card portfolios is going to be crucial to maintaining financial stability in other divisions that are losing money.
PILGRIM: Manning estimates, credit card operations have been a cash cow for years. Last year, earning $117 billion in revenue, and $12 billion in late fees and over-limit fees.
(END VIDEOTAPE)
PILGRIM: The Bush administration promises that new Federal Reserve regulations will help credit cardholders in December. But there is doubt that the regulations will protect the consumer against abusive practices the same way the legislation would have.
Coming up: The liberal media said she couldn't pull it off. But a majority of voters say Governor Palin did much better than expected in the vice presidential debate.
Also, Senator McCain and Senator Obama back on the campaign trail, supporting the Wall Street bailout. Three of the best political minds will join me.
And opponents of the great American sell-out jam the phone lines to our Capitol to express outrage. Two of the nation's best economic thinkers will give us their assessment.
(COMMERCIAL BREAK)
DON LEMON, CNN ANCHOR: Hello, everyone. I'm Don Lemon live at the CNN world headquarters. We'll get back to LOU DOBBS THIS WEEK in just a moment. We want to tell you what's happening right now in the news.
President Bush has signed the $700 billion Wall Street bailout; it's law. Treasury Department staffers are working out details of this program. The big question now, is it enough to save this struggling economy? The measure will allow the government to spend $700 billion buying up bad debts from mortgage holders. It also increases government oversight of Wall Street transactions and bars so-called golden parachute payouts to top executives of companies who get help. The measure also raises the limit on federally-insured back deposits from $100,000 to $250,000.
O.J. Simpson could spend the rest of his life in prison. He was found guilty yesterday of kidnapping and robbing two sports memorabilia dealers. The 61-year-old athlete could face a 30-year sentence. He'll find out about that in December.
There was tough talk today on the campaign trail from the republican vice presidential candidate Sarah Palin, accuses Democrat Barack Obama of, "palling around with terrorists." There she is in Carson, California, just moments ago. She was referring to former '60s radical who now lives in Obama's neighborhood Hyde Park in Chicago.
We'll have more on everything from the campaign trail to the bailout coming up tonight at 11:00 here on CNN. Now back to "Lou Dobbs this Week."
KITTY PILGRIM, CNN HOST: Well, joining me now are two of the most respected economic thinkers in the country. David Smick says he does not believe that the bailout will encourage more lending. David is the author of the new book "The World is Curved, hidden dangers of the global economy." Lawrence Officer calls the pork-filled bill an abomination. He's an economic professor at the University of Illinois in Chicago. Gentlemen, thanks very much for being with me tonight.
DAVID SMICK, AUTHOR "THE WORLD IS CURVED": Certainly.
LAWRENCE OFFICER, PROFESSOR, UNIV. OF ILLINOIS: Thank you.
PILGRIM: David, I have to start with you. Will this bill avert the crisis? That's what we're being told. Will it?
SMICK: Well, you know, we've been told this notion there's a magic pill, and that's the way it's been for the last 10 days. You know, pass this, and - there was about a 30-second stock market rally before the market dropped by more than 400 points. And what the market is saying essentially is that, you know, we are not - the Treasury is so unsure about what the price will be for these securities that we don't think the $700 billion is enough, and we know Congress isn't going to give us another $700 billion, so I think this is maybe the most oversold project since the new Coke.
PILGRIM: Lawrence, we were told if we don't do this, it's the end of things as we know it. Will this avert the crisis now that it's done?
OFFICER: Well, there are two crises here, the crisis of credit, and the crisis of confidence. I don't think it will avert either. Let's put it this way. There was a time when legislators would object when the military would spend $100 on a $20 hammer. Well, Congress has just authorized, and the President just signed, a bill to permit the Treasury to purchase securities that might be worth no more than $20 at $100.
PILGRIM: Yes. You know, in reading through other things that were added to this bill, these sweeteners, $150 billion worth of sweeteners, you're just struck by the absurdity of it, and on top of this enormous numbers, the $700 billion number. $150 billion. I'm looking down the list. One way to Hollywood film and television productions, $478 million, rum importers, 130 -- $192 million, the woolen industry, certainly these are line items that certainly were probably not dire at the moment, and yet got inserted into this bill as absolutely must-do, probably to sell it politically. Your thoughts on just padding out this bill, David?
SMICK: Well, I think that's a very important issue. But you know, what's - what is troubling the market, why isn't the market up 800 points, why is it the other way? Because the market just figured out that this bill doesn't encourage new lending. I mean, what you have is -- let's say the bill worked perfectly, or the plan worked perfectly and it took the toxic waste off of bank balance sheets. What's you're left with is a bunch of bankers who are like scared rabbits hiding under the bed.
Most think they'll probably be you know arrested or certainly indicted but they're not going to do lending. And we are now seating the emergence of a credit crisis. That's you know one of the problems of spending 150 on this pork is, you know, early next year we may wish we had that money for kind of a middle class - you know, fiscal relief, certainly the Fed's going to have to cut interest rates, but you know, typical Washington, look, they're always operating looking in the rear view mirror.
We have serious economic problems coming, and we need a plan that deals with what is clearly going to be a problem of lending. The only people who are going to get loans, the only person who is going to get a loan is going to be Warren Buffett and he's the only guy who doesn't need a loan. I mean, how do we get more lending? This bill doesn't really address that.
PILGRIM: Right. Thoughts, Lawrence, on the credit issues?
OFFICER: Yes. Well, you know, as I say, this bill is an economic abomination. Traditional monetary policy involves the Central Bank, in this case, the Fed, purchasing good stuff. Government Treasury bills, government bonds. Good securities. This bill is authorizing the Treasury to purchase bad stuff. It's just unreal. Now, what Bernanke has to do, and I think what he's begun to do is to provide liquidity to the system in the usual way, by making loans to credit- worthy banks and also by purchasing good securities. The bill does nothing for that. If Bernanke does his work properly, then I'm hopeful we won't have that fear of recession.
PILGRIM: All right. Let's take a break here and we'll have a little bit more on what this means, on what this Wall Street bailout means for American taxpayers when we return. Stay with us.
(COMMERCIAL BREAK)
PILGRIM: We're back with two of the country's best economic minds, David Smick and Lawrence Office, and we're discussing the bailout on Wall Street. Gentlemen, you know, many people - we have this bizarre flip-flop with Congress, first no, then yes. Let's listen to what House Speaker Nancy Pelosi had to say after the vote, after it passed.
(BEGIN VIDEO CLIP)
REP. NANCY PELOSI, HOUSE SPEAKER: So many of our part of our leadership were part of this success of this legislation today, and I don't say that we celebrate it, because I don't frankly think we could have had a much better bill under different circumstances but these were not the circumstances we were under. We were dealt a bad hand, we made the most of it. I think the American people will benefit from it.
(END VIDEO CLIP)
PILGRIM: David, what do you think about this, better than nothing approach, and also, the fact that there was very - no input from alternative opinions, alternative views, this was concocted in a bubble on Capitol Hill. David?
SMICK: This was just a ram through. I think one of the problems that I have with this thing is that listening to the testimony last week, I heard the Treasury Secretary answer a question, somebody said, what about reforms? How come there aren't any reforms? And he said, well, bailout now, reforms later. In other words, reforms of the financial system that would prevent this fiasco from ever happening again, and also reforms that would improve transparency. The flaw in the system is that it's relying on the taxpayer when there's some $6 trillion in global money market funds alone sitting idle, waiting for us to reform our system.
There's money in the world, it's just sitting on the sidelines waiting for us to make this system more credible. So that people can believe these financial assets reflect true value. So I think the flaw here has been lack of the guts to go ahead and reform the system. And that could be ugly for a lot of financial firms. But reform is key.
PILGRIM: You know, David, you make a great point, and actually in the course of this great discussion that went on this week, many people were saying, it's not time for recriminations, we just need to solve the crisis now and get on with things later. What do you think about that approach, Lawrence?
OFFICER: Well, you know, I think that we must let the American system work. The capitalist system work. There are some financial institutions that have made bad management decisions, horrible management decisions. They should be allowed to fail, to be bought out by other firms, even to go bankrupt. That's already happening. As the financial system becomes consolidated, I think that we'll see a resurgence of lending, providing as I say, monetary policies conducted properly, and we don't have any horrible fiscal policy. And as you say, there's pork that's made this small three-page bill into an ominous bill, gives us very bad preview of what might happen if Congress doesn't wake up and do its job properly. I do fear we could have a serious recession.
PILGRIM: David, last point, I wanted to ask you, the American middle class sitting here. I mean, the FDIC increased the insurance on deposits from $100,000 to $250,000. Should they feel good about that measure? What's been done for the average American sitting in this country right now?
SMICK: Not much. And the hard times are coming when they're going to need help. You know, to add insult to injury in this whole mess is, you had on - late last week on as this week was coming to an end, you had CitiCorp of Citigroup waiting to do a merger with Wachovia Bank. And they were waiting until this bailout program came through so they could use the taxpayer back stop, and guess what happened? Another bank came along, Wells Fargo and bought Wachovia without the government bailout. And if you're a congressman who just voted for this thing, you've got to be scratching your head, saying, how did that happen? I thought that the taxpayer was the only way to arrive at some way of reforming and restructuring these institutions. It's a bit of an embarrassment.
PILGRIM: David and Lawrence, we have to end it there. Thank you very much for your very expert analysis this evening. David Smick and Lawrence Officer, thank you.
SMICK: Thank you very much.
OFFICER: Thank you.
PILGRIM: Coming up, the back hall deals, the political maneuvering that helped move the bailout bill through Congress and into law, we'll have three of the country's best political minds to join me with their thoughts on the great American sell-out. Stay with us.
(COMMERCIAL BREAK)
PILGRIM: Joining me now are three of the best political analysts in the country, they are all CNN contributors. We have democratic strategist Hank Sheinkopf, "New York Daily News" columnist Errol Louis, and Errol is also the host of a morning show WWRL in New York City, and syndicated columnist Diana West. And thanks for being with me. This week, the biggest event, the mark key event of the week, of course, was the big vice presidential debate. Hank, were there any clear winners, in your estimation?
HANK SHEINKOPF, DEMOCRATIC STRATEGIST: They both won. Sarah Palin didn't come across as if she knew nothing, and Joe Biden came across as if he knew something. And the things we expected was for her to make a lot of errors, it didn't happen and the other thing we expected was for him to beat her up somewhat and didn't also happen. So they both won but Biden certainly came across as more of an executive type and more conversant with the issues. PILGRIM: Diana, what do you think? There certainly was such a high level of tension about this debate and the worry that something really dramatic would happen to skew either campaign. That did not happen, it seems.
DIANA WEST, SYNDICATED COLUMNIST: Right. I would agree with that. I think that Hank is in some ways right. I think in the morning after, however, we start seeing that Senator Biden's great points, which sounded really good as they came across the screen, many of them were whoppers, hallucinogenic episodes. I've never seen such parseen of what went wrong afterwards. I'm not sure we're going to see it in the media because we're still focusing on you know, the fact that Governor Palin did not fall off the stage or something. But this was an extraordinary performance by Senator Biden that maybe we could talk about some of these things.
PILGRIM: All right. We will get into these in a minute. You know, the microscope really was on Sarah Palin in this event. Errol, how do you think this went?
ERROL LOUIS, "NEW YORK DAILY NEWS": to the extent that it was all about her, it even distracted from the top of the ticket, which is what traditionally vice presidential candidates focus on. They both tried to stare it back to McCain and to Obama and in the end, you know, people tuned in to see her, whether they liked her or whether they didn't. I do wonder, I have to see the undecided voters out there. That shrinking sliver who are going to make up their minds in the next 30 days and determine the outcome of this election, what they made of all of this. If you were tuning into this for the first time, you know I think people must have wondered if they read after the fact all of the spin, they must have wondered what the big deal was. These were just a couple of people with two very different styles, two very different philosophies kind of going at it respectfully on stage.
PILGRIM: Well you know, you say that McCain, McCain should have been more featured in the debate, but Biden did attack McCain on several occasions. Let's listen to what he had to say.
(BEGIN VIDEO CLIP)
SEN. JOE BIDEN (D), VICE PRESIDENTIAL CANDIDATE: It was two Mondays ago John McCain said at 9:00 in the morning that the fundamentals of the economy were strong. Two weeks before that, he said we've made great economic progress under George Bush's policies. 9:00 the economy was strong, 11:00 that same day, two Mondays ago, John McCain said that we have an economic crisis. That doesn't make John McCain a bad guy but it does point out he's out of touch. Those folks on the sidelines knew that two months ago.
(END VIDEO CLIP)
PIGRIM: Of course this is the biggest issue on Americans' minds right now and it always polls as one of the highest, the economy, and they had to address this very strongly in this debate. How do you assess those comments? SHEINKOPF: We said almost in this program almost a year ago that the economy would be the issue, going into this campaign, not anything else. How did he do there? Frankly Democrats tend to do better in those kinds of circumstances. He took the argument away from Palin and made it much more difficult for her to say that McCain was anywhere close to right on the economy.
PILGRIM: Diana, some thoughts on that?
WEST: Well, I would say that this is my area of greatest disappointment with Governor Palin. She missed many opportunities to bring this argument right back to the Democrats, namely in discussing and making it clearer for Americans to understand the origins of the economic crisis in frankly Marxist social engineering policies that sought to turn our banks into instruments of so-called social justice by trying to expand minority home ownership, something that Senator Obama was involved in, even as a young community activist. This is something President Bush has been involved in as well. So here was a key place for Governor Palin to put daylight on a bad problem and put daylight between her candidate and his rival, Senator Obama and the other rival, really, President Bush. Big missed opportunity.
PILGRIM: Let's draw some of her response to that. We do have a comment from Sarah Palin.
(BEGIN VIDEO CLIP)
GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: John McCain in referring to the fundamental of our economy being strong, he was talking to and he was talking about the American work force and the American work force is the greatest in this world with the ingenuity and the work ethics that is just entrenched in our workforce. That's a positive, that's encouragement and that's what John McCain meant.
(END VIDEO CLIP)
PILGRIM: So taking a future positive spin on this whole approach as opposed to attacking. What do you think?
LOUIS: Well, I mean, that was the line that McCain himself came up with to try and clean up that very damaging remark that he made about the fundamentals. So he tried to sort of spin it back into a positive. I don't know if it ever really took. I think I have to say that Governor Palin was wise not to take the talking points which are very popular on Republican talk radio and so forth, that somehow the community reinvestment act of 1977 caused all of this, as if trillions of dollars somehow were forced into inner cities and you know low income rural communities when that is absolutely not the case.
When three quarters of the loans that were made that are now at the base of the financial crisis have nothing to do, were not even covered by CRA-regulated institutions. And you know I think whatever the Republicans come up with to try and get their feet on the ground on economics, they're going to have to get off this kind of fantasy that's going out around the blogosphere, the talking points and they're going to have to get beyond cutting taxes. I mean, you know, there is a philosophy out there that would speak to the real needs of people that comes from the right, but we are not hearing it.
PILGRIM: Hank, you want have something?
SHEINKOPF: Yes, I think this is absolutely utter nonsense. The next people you're going to blame are those that got loans because they came back from fighting the second World War or the Korean War and were helped by the government. This is absolute nonsense. The problem here, regulation.
We didn't regulate. We don't understand that you can't put criminals in a room and give them an opportunity to do it again. You got to stop them before they get there. The result, trillions of dollars disappearing. The Republicans didn't to what they were supposed to do.
PILGRIM: Diana, you're just bursting to chip in here.
WEST: Yes, I want to twice but I'll just go right to Hank for the moment. No, this is something that, again, Governor Palin did not make clear. John McCain actually was one of the Republicans who tried to reign in Fannie and Freddie as recently as 2005. What we see here is not a lack of regulation per se, but Democrats who are deeply involved in Fannie and Freddie trying to prevent regulation brought by House Republicans and you don't have to believe me, we have Bill Clinton on the record saying exactly that this past week.
What we're also seeing in, in terms of what Errol is saying is it's not fantasy. This was the philosophical, political overlay on to our banking system of asking banks to abandon conventional traditional markers of eligibility for loans to do a social good, to try to expand what they thought was the social good, minority housing ownership. Of course it didn't stay there, of course we have people of all races, ethnicities and creeds using these instruments.
LOUIS: Building home ownership in this country has been a cornerstone of social and economic policy since the second world war.
PILGRIM: Yes but let's not abandon -
WEST: Errol, I didn't finish -
LOUIS: Since the second World War, I mean -
WEST: Excuse me, but not by abandoning the need for a down payment, the need for a good credit reference, the need for good credit. Wait one moment more - President Bush has been one of the leading cheerleaders of this. So I am not blaming one party. This has been a systemic issue. House Republicans. Some of them were against it. John McCain was as well.
PILGRIM: We will get more to this bailout, which is really generating a lot of discussion here in just a moment. We'll be right back. Stay with us.
(COMMERCIAL BREAK) PILGRIM: We're back with Hank Sheinkopf, Errol Louis and Diana West. We were in the thick of an argument over what went wrong and who's to blame. And you know, the taxpayer in the end is going to end up with this whole thing on a whole burden on it. This was a travesty and everyone is going to have to pay the price. Hank, your thoughts on where things went wrong here.
SHEINKOPF: Things went wrong when we got rid of the end of Glass- Stiegel which stopped banks and insurance companies from combining. We didn't learn anything from the R.T.C. Resolution Trust Corporation debacle which should have been an indication of how we've got to watch people with money, number two. Number three, this administration just compounded what went on before and said let the guys go. It's OK. And four, if you have real campaign finance reform or public finance campaign, you won't have the need to raise all kinds of money from people you're regulating and, therefore, they avoid regulation. That applies to both sides. Those are things that are going to happen now.
PILGRIM: Diana, in the political context, no one really wins here, do they?
WEST: No, I don't think anyone wins here because we have two candidates who supported kind of, sort of, the bailout. We have a president who is in disrepute who supported the bailout and we have angry voters who are wondering where there is leadership anywhere on these incredibly important issues. I think this was an example of political panic and it's most mortifying.
PILGRIM: The American middle class has been left out of this entire equation. We've had it repeatedly on this broadcast pointed out all of the measures that could have helped the middle class, not even close to in this bailout bill. Errol, thoughts on this -
LOUIS: It's shocking. The largest single transfer of - it's the largest government bill in the history of the country, and that it started out as three pages. It swelled a little bit, it got increased by another $100 billion. But there wasn't one hearing, there was no fact finding. I found out more literally sitting in a car dealership talking with the credit manager and it was literally on Main Street in a suburb north of here in the city and he told me what was going on from his point of view. And that's as much as could I find out.
PILGRIM: Like you said, Errol, actually literally, I went in and bought an American made car on Main Street at the height of this thing.
PILGRIM: This is such a disaster for the American working class. Do you think that they will be able to easily recover from this? We haven't even closed to fix this for middle America. Hank.
SHEINKOPF: This is a disaster. People have relied on the financial markets to protect their pension, their investments, their home, their cars, all the things they have in life. Their college education for their children. No recovery is going to come quickly if at all and the financial sector will never be the same. PILGRIM: You know, Congress actually did this very artful flip flop when they first rejected it and then went for it and expanded the number of pages in the bill, but it actually never really addressed the critical problem, did it? Diana.
WEST: No, it didn't. I mean, I think this is a classic case of kicking the can down the road. It's a Band-Aid. We don't - I mean, everyone - I saw some of the news reports right afterwards and they said, gee, the markets didn't respond with euphoria. And I thought, my goodness, who was expecting that? It's the most ridiculous kind of expectation. I think it's very childish and I think it really makes you wonder if there are any grown ups in charge in Washington once again.
PILGRIM: Well, on that note, we do end it. Thank you very much. Diana West, Errol Louis and Hank Sheinkopf, thank you. Please, thank you for joining us. Please join us tomorrow, a reminder to join Lou on the radio Monday through Friday for the "Lou Dobbs Show." Go to loudobbsradio.com to find the local listings for the "Lou Dobbs Show" on the radio. For all of us here, thanks for watching. Good night from New York.
