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The Situation Room

Clinton Hits Trail For Obama; McCain Rides Palin Popularity

Aired September 08, 2008 - 16:00   ET


WOLF BLITZER, CNN ANCHOR: And happening now: John McCain rides the wave of Sarah Palin's popularity. The Republican running mates have a new burst of campaign energy, but not necessarily a convention bounce.
Barack Obama's campaign is trying to compete with a new political rock star out on the campaign trail. Is Hillary Clinton the antidote for Palin fever?

And your home, your money and the federal bailout of two mortgage giants -- what the takeover of Fannie Mae and Freddie Mac means for all of us.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

There's new evidence today that Barack Obama's campaign fears it has a problem, and her name is Sarah Palin. The new Republican vice presidential candidate is continuing to steal some of the Democrats' thunder while casting a fresh glow on John McCain.

So, Obama is fine-tuning his strategy right now and deploying his not-so-secret weapon against Palin. That would be Senator Hillary Clinton. We will get more on Senator Clinton's possible impact. That's coming up shortly.

But, right now, Dana Bash is standing by with the McCain campaign in Missouri. Let's hold off on her for a moment.

We will go to our senior political correspondent, Candy Crowley. She's in the battleground state of Michigan right now.

All right, they're fine-tuning what they're doing. What is the latest today? What are we hearing about the Obama campaign's strategy, Candy?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Well, pretty much everyone I talk to today inside the Obama campaign said they really do have to bring this back to, A, issues, and, B, not engage Sarah Palin, so much as John McCain.

They say, in the end, this is about Barack Obama vs. John McCain. So, by and large, Barack Obama is sticking with John McCain. And, today, he is sort of pushing back against the idea that there is anything fresh and new about this ticket.

He says listen, you know, John McCain says that he will battle the way Washington has done business all along, but he has seven lobbyists working in his campaign. He can't come back and bring change to Washington. So, they're pushing back very hard on the specifics of John McCain today about the lobbyists that -- former lobbyists that work for John McCain, and -- and trying to kind of move it off the idea that there is anything fresh or new about this ticket, Wolf.

BLITZER: So, what are they specifically saying about John McCain and Sarah Palin? They keep harping on this word change, that they are the agents of change.

CROWLEY: Absolutely. And there -- that is really the key to today saying -- Barack Obama saying, wait a second. It was all about experience for a year-and-a-half. And now, all of a sudden, John McCain says that he's about change, but he's not about change. He's voted for Bush -- voted with Bush more than 90 percent of the time.

This is something interestingly that parallels what went on with the Clinton/Obama fight in the primaries, where Hillary Clinton began to sort of bring change into her camp, and Obama hit back very hard and said, wait a second, I'm the one with the new ideas. I'm the change agent.

But they know, looking at those polls, that they have to hit back very hard and sort of deny this notion that somehow John McCain, after decades in Washington, regardless of who he's brought on as his running mate, that he is still the same old thing in Washington, and he is not change.

BLITZER: All right, Candy, stand by. We're going to be getting back to you. We're going to be hearing directly from Senator Obama later.

Let's get to McCain/Palin ticket right now. The Republican running mates are in Missouri today, where she's trying to be a magnet for votes, as well as for attention.

Dana Bash is out there covering the GOP campaign.

Lots of enthusiasm at these rallies we're seeing now for McCain and Palin -- Dana.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: That's right. We're seeing it, and now we know it sort of in terms of our data. A new CNN/Research poll -- CNN/Opinion Research poll, rather, shows that Republican enthusiasm for voting this year has spiked in just a week 11 percent, Wolf, 11 percent.

And, you know, Sarah Palin was actually supposed to go and campaign on her own today in Pennsylvania. There are some whispers that that was scrapped because that -- she simply wasn't ready to go out on her own. But McCain advisers insist that there was another reason. It's because of the energy that she brings to John McCain and his events.


BASH (voice-over): Thousands of Missouri voters wait in line to get in.

(on camera): Would you have come if it was just McCain, pre- Palin.

UNIDENTIFIED FEMALE: Possibly, but for sure with -- with Palin.


UNIDENTIFIED FEMALE: Probably, I would have been here only if Palin was here.

BASH: Yes.

UNIDENTIFIED FEMALE: I would have stayed home and watched it on TV on CNN.


BASH (voice-over): Sarah Palin's ability to draw unprecedented McCain crowds is a key reason he scrapped plans for her to campaign solo, and aides scrambled to arrange this in suburban Kansas City, where McCain must win big to take the state.

UNIDENTIFIED FEMALE: I'm leaning a lot more since he picked Palin.

BASH (on camera): Why?

UNIDENTIFIED FEMALE: I like her spirit, and I like her no- nonsense attitude.

BASH (voice-over): Inside, McCain and Palin played up that attitude as proof they're a pair of reformers offering new examples from her little-known record as Alaska governor.

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL NOMINEE: And I put the state -- our government's state checkbook, I put it online for all the world to see. You're going to see every penny that we spend up there.


PALIN: So...


PALIN: ... doing that though, of course, it didn't thrill all the bureaucrats.

BASH: But McCain aides concede the only way their agents of change message will sell is to discredit Barack Obama. McCain seized on a comment Barack Obama made over the weekend that one way he would reach across the aisle and buck his fellow Democrats is expanding the military.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: He says now he wants to increase it, but, during the primary, he told a liberal advocacy group that he would cut defense spending by tens of billions of dollars.


MCCAIN: And that's not bucking his party. That's telling them just what they want to hear.


BASH: Now, the Obama campaign argues that McCain is taking him out of context, that what he was pushing for -- Barack Obama, that is -- is cutting wasteful military spending.

And McCain advisers have conceded that that is something McCain himself has pushed for quite some time. But all this shows, Wolf, is this idea we have heard now for four or five days from the McCain campaign is something that they feel is absolutely imperative, imperative for them, to take -- for any shot to win in November, and that is this is idea that they understand that John McCain is somebody, as Candy was saying, who has been in Washington for a quarter-century, and they need to use Palin on the ticket as proof that just because he's been there doesn't mean he's not the best person to actually change it -- Wolf.

BASH: And, Dana, Senator Obama is really going after Senator McCain on the whole issue of lobbyists, saying, you know what? He says he's for change, but take a look at his campaign. It's run by a bunch of Washington lobbyists who are real Washington insiders, and they will dominate a McCain administration.

Listen to what Senator Obama said today in Michigan.


SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: So, John McCain says that he is going to tell all those lobbyists in Washington that their days of running Washington are over, which sounds pretty good, until you discover that seven of his top campaign managers and officials are, guess what, former corporate...


BLITZER: All right, Dana, what do they say about that, that several of his top advisers in the campaign, whether Charlie Black, or Rick Davis, or his top foreign policy adviser, they were or are lobbyists?

BASH: Well, publicly, the line inside the McCain campaign is that to push the idea of the "were" part, that, right now, the McCain campaign, they say, has very strict rules against lobbyists working inside their campaign.

But the reality, Wolf, if you go back months and months talking privately to some people inside the McCain campaign, they realize that this has been a problem, has been a problem, and perhaps a hindrance to this message that really isn't new, this message that he's somebody who's different from those in Washington, but it is maybe more -- more difficult to answer, given the fact that the McCain campaign, with Sarah Palin on the ticket, has now put this whole argument of agent for change at the top of their platform, if you will, their campaign platform.

So, it's not going to be easy for them to answer. There's no question about it.

BLITZER: All right, Dana, thanks very much. Dana is going to be joining us later.

McCain and Palin, by the way, they are trying to get as much mileage out of their convention and her big debut out on the national stage.

Let's go to our political analyst, Bill Schneider. He's the results of a brand-new CNN/Opinion Research Corporation poll.

Bill, where does this race now stand after both conventions?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: About the same place it stood before the conventions, close.


SCHNEIDER (voice-over): The dead heat is getting hotter. Before the conventions, it was Barack Obama 47, John McCain 47. Now it's 48/48. This campaign is all about change. That's a natural issue for Obama. He leads the opposition party.

OBAMA: It's time for them to own their failure. It's time for us to change America.


SCHNEIDER: Before the conventions, Obama had an 18-point edge as the candidate more likely to bring about change. McCain used his convention to try to claim the change issue. He even put a Washington outsider on the ticket.

MCCAIN: And let me just offer an advance warning to the old big- spending, do-nothing, me-first/country-second crowd. Change is coming.


SCHNEIDER: After the conventions, Obama retained the title of change agent, but by a narrower margin.

President Bush has a dismal 28 percent job rating, nearly the lowest on record for any president. Imagine what the race would look like if Bush were running for reelection or if Vice President Dick Cheney were running to succeed him. But they're not. John McCain is.

Before the conventions, voters were split over whether McCain's policies would be mostly the same as President Bush's or mostly different. Obama used his convention to argue, McCain equals Bush.

OBAMA: John McCain has voted with George Bush 90 percent of the time.

SCHNEIDER: It worked. After the Democratic Convention, more voters believed McCain's policies would be the same as Bush's. Then McCain used his convention to say...


SCHNEIDER: Right now, 70 percent of voters disapprove of President Bush. But nearly a third of them are voting for John McCain, because they believe McCain is not like Bush. Obama's job is to persuade them otherwise -- Wolf.

BLITZER: And we're going to have more of these numbers coming up later from our new CNN/Opinion Research Corporation poll. Bill, thank you.

Jack Cafferty is off today. As we told you on Friday, Jack's beloved wife, Carol, died unexpectedly. Many viewers have asked if they can send messages to Jack. And the answer is, absolutely, yes.

You can send them to "The Cafferty File." They will be posted. We will make sure Jack sees them. There have been thousands of comments, thousands of messages sent to Jack already. And I'm sure it's a source of comfort knowing that you're thinking of him right now in this very, very sad time.

Let's get back to the presidential race.

Governor Palin's religious views, they're under the microscope right now. CNN is in Alaska, and we're taking a much closer look at the church where the governor worshipped for many years, a church with some potentially controversial views.

And Hillary Clinton, she's on the trail today for Barack Obama. Can she help him defuse Sarah Palin's explosion on the political scene?

And why Freddie Mac and Fannie Mae needed to be bailed out by the feds. Some say that cozy relations between Congress and lobbyists are to blame for the mess. We will tell you what we know -- right here in THE SITUATION ROOM.


BLITZER: Many Christian conservatives are more revved up -- revved up about the Republican presidential ticket right now, now that Sarah Palin is on it. The Alaska governor's faith has help shaped her views of politics and the world.

Let's go to Alaska. Jessica Yellin is on the scene for us, watching this for us.

All right, what is going on, and what is the McCain campaign saying about all of this, Jessica?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Wolf, all the McCain campaign is saying about Governor Palin's faith is that she was originally baptized Catholic and that she now attends a number of churches, especially a nondenominational evangelical church, but they do not mention the church where she spent the most years worshiping.


YELLIN (voice-over): In June, Sarah Palin spoke at the Wasilla Assembly of God, where she had worshipped for much of her adult life.

PALIN: It was so cool growing up in this church and getting saved here.

YELLIN: She was addressing graduates of a youth ministry program that promotes itself with this video.


UNIDENTIFIED MALE: God has a destiny for the state of Alaska.

UNIDENTIFIED MALE: ... master's commission is one of the keys in God's plan for Alaska, the United States and the entire world.


YELLIN: The church teaches that Alaska will be a shelter at the end of the world.

UNIDENTIFIED MALE: I believe Alaska is one of the refuge states -- come on, you guys -- in the last days, and hundreds and thousands of people are going to come to the state to seek refuge.

YELLIN: Like many Pentecostal churches, the Wasilla Assembly of God practices speaking in tongues. Whether Palin shares these beliefs is unclear. During her June visit, she described the Iraq war and a natural gas pipeline she's trying to build as part of God's plan.

PALIN: So, pray for that.

YELLIN: Since she hit it the national stage, the governor has not spoken publicly about her faith. This parishioner believes the Wasilla Assembly of God shaped Palin's beliefs.

TERRY NELSON, PARISHIONER: She has a better idea of what God is wanting her to do in inviting her and leading her, and that it's coming from him.

YELLIN: Since 2002, Palin has regularly attended a nondenominational church with more traditional practices.

Her current pastor says:

PASTOR LARRY KROON, WASILLA BIBLE CHURCH: She really cares about her God, and -- and it doesn't get in the way of anything. I think it enhances her in terms of how she approaches everybody with respect.


YELLIN: And, Wolf, I just spoke with the McCain campaign, and they offered a clarification of what she meant when she suggested that she hopes people pray that the Iraq war is part of God's plan.

They say it was a hope. She's not asserting that it's God's plan, but hoping that it's God's plan. And they say this is an incredibly humble statement -- I'm quoting -- "a statement that this campaign stands by 100 percent, and a sentiment that any religious American will share, the hope that our country's actions are indeed righteous" -- Wolf.

BLITZER: All right, Jessica.

Jessica is going to be out there in Alaska for us. We're going to be checking back with her.

Meanwhile, the Democratic vice presidential candidate, Joe Biden, says Governor Palin seems to have -- and I'm quoting him now -- "some extreme views." And, in a TV interview, Biden suggested Palin is avoiding questions from the news media.

Let's talk about that and more with the governor's former aide, Meg Stapleton. She's joining us from Anchorage right now.

Meg, thanks for coming back. We got positive feedback from you on Friday. So, we wanted more, since you actually know this woman a lot better than we do.

Let's go through some of the issues, and you can help us better understand where she's coming from.

Right now, the Obama campaign is saying, in effect, that the McCain campaign is lying when they say she always opposed the so- called bridge to nowhere.

I will read to you a statement from Bill Burton, the Obama campaign spokesman: "Despite being discredited over and over again by numerous news organizations, the McCain campaign continues to repeat the lie that Sarah Palin stopped the bridge to nowhere. McCain and Palin will say or do anything to make people believe that they will change anything besides the person sitting in the Oval Office."

I assume you know about the origins of this bridge to nowhere, her initial support for it when she was running for governor, and then her opposition after she became governor. But tell us what you know.

MEG STAPLETON, FORMER AIDE TO GOVERNOR SARAH PALIN: Well, Wolf, the bottom line is that she killed the bridge to nowhere. I was there. I was in her office. She spoke about this from the very beginning upon taking office that this was one of her top priorities, along with putting that jet on eBay to get rid of that bridge to nowhere.

It was a symbol of corruption in this state that continued and a symbol of that incredible earmark spending.

I will say that, as a candidate in 2006, she was down in Ketchikan. It's not a bridge to nowhere to Ketchikan residents and to residents in southeast Alaska. That bridge goes to the airport. She recognizes and she speaks on behalf of her constituents when she says they need some sort of transportation infrastructure, other than a ferry, to get residents and visitors to and from Gravina Island.

She recognized that a bridge was needed. At that point in time, the dollars for that bridge were about half of what they bloated to once she took office. She received more details. She received the final figures and said, that's it. That's a horrible way to spend the taxpayers' dollars in the nation. We are not going to build that bridge.

BLITZER: Because there are all sorts of quotes from her when she was a candidate saying, the bridge was essential. She supported it -- quote -- "The window is now, while our congressional delegation is in a strong position to assist," she was quoted by "The Anchorage Daily News" as saying.

But the argument is that she only came out for it -- against it after she was governor after it was clear that Congress was going to kill the funding for that specific bridge in any case, and she simply jumped aboard what was a popular -- a popular train.

STAPLETON: No, not true. And we were there, and we were in there, and those dollars were there, and those dollars for the Gravina Bridge. She killed it, bottom line.

BLITZER: All right, so you're -- you're saying that she was for the bridge, but, once she became governor and saw what the extent was, she came out against the bridge. Is that right?

STAPLETON: It was a different bridge when she was a candidate than the bridge when she became governor.

BLITZER: It was different because the funding was greater? Is that what you're saying? It was the same bridge.

STAPLETON: Funding was far greater.

BLITZER: It was between two different locations -- the same two locations, the bridge?

STAPLETON: You bet. You bet. But the funding was far different and the details came out. And that was -- the details included that funding, and it almost doubled in size. And that was a waste of taxpayer dollars. And she knows that we can do it for far less. And she knows the state can handle it.

BLITZER: All right.

Let's talk about some of her issues on these social issues and economic issues.

Global warming, does she believe it's the result of manmade activities or simply some -- some natural phenomena out there?

STAPLETON: I would say that I have actually not spoken to her specifically about climate change and where she stands on that.

Particularly, I can tell you, though, that we receive a lot of outside influence up here, Wolf, in terms of what's impacting what and in terms of the polar bears. She is very much determined that the fact that, look, our development is not impacting wildlife.

Wildlife and development can coexist in this state. And, therefore, polar bears and other species up here can continue to work in harmony and live in harmony and play in harmony with our development.

BLITZER: Does she believe there should be any exemptions for abortion, for example, incest or rape?

STAPLETON: My understanding is that any exemption she has is for the life of the mother, Wolf.

BLITZER: And that's it?


BLITZER: On the issue of same-sex couples, I know she, like McCain, opposes same-sex marriage. But does she believe that same-sex couples should be eligible for any benefits, for example, visiting rights when one of the partners is sick in a hospital?

STAPLETON: I know that we faced some of the benefits issue when we first took office. And the benefits issues included more along the lines of health care coverage.

She was against that in terms of the definition of marriage in the state through constitutional amendment as that between a man and woman, and she felt that the Alaskans had spoken about that. However, the court said, no, you must provide benefits. She was not going to try and take on the courts. She knows that there is a distinct delineation there, and honored the court's request and the court's order, and so let that stay.

BLITZER: Meg Stapleton is a former aide to the governor.

We're going to be counting on you to come and join us often, since you actually know this woman. You have worked with her. And you can help us better understand where she's coming from.

Meg, thanks very much.

STAPLETON: Happy to do so. Thank you, Wolf.

BLITZER: All right, Meg is joining from us Anchorage, Alaska.

Other news we're following includes a deadly storm now on a killer path. That would be Hurricane Ike. It's taken lives and turned others upside-down in the Caribbean and could soon do the same thing right here in the United States. You're going to find out right now if you should be worried depending on where you live.

And do Democrats think they can neutralize Governor Palin's appeal by using Senator Hillary Clinton? She's speaking out on the campaign trail today for Barack Obama. We will tell you what she's saying -- right here in THE SITUATION ROOM.



BLITZER: And, to our viewers, you're in THE SITUATION ROOM.

Happening now: two nations that have tense relations with the United States prepare to team up. That would be Russia and Venezuela. They may hold joint military maneuvers in the Caribbean, Russia even featuring a ship called a carrier killer and another that's a submarine destroyer. Why should the U.S. be worried? Stand by. We have got details.

Also, the U.S. adamantly disputes that American troops mistakenly killed as many as 90 civilians in a recent Afghanistan airstrike, but complicating their argument is some shocking new video from a cell phone. We have that for you.

And they're partly the reason why all of us can only carry small amounts of liquid on airplanes, eight men who allegedly hoped to blow up planes at the same time in 2006. There are now verdicts in that case.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

All that coming up, but more right now on Sarah Palin -- the governor of Alaska is sticking very close to Senator John McCain out on the campaign trail today. And she's standing behind his position on the war in Iraq.

Listen to what the governor has been saying in Missouri.


PALIN: John McCain refused to break faith with the troops who have now brought victory within sight.


PALIN: I will tell you, as the mother of one of those troops, that is exactly the kind of man I want as commander in chief.


PALIN: Now, for his part, our opponent, he still can't acknowledge the coming victory in Iraq. And he couldn't just yesterday even in an interview. He said he's for change.

But, in Iraq, change happened. And that's a great thing for America, Senator. (CHEERING AND APPLAUSE)

PALIN: So, here is how I look at the choice that we face in this election.

In politics, there are some candidates who use change to promote their careers. And then there are those like John McCain who use their careers to promote change.


BLITZER: And from the Republican vice presidential nominee to the Democratic vice presidential nominee, Senator Joe Biden is speaking in Des Moines, Iowa right now saying John McCain and the Republicans are simply out of touch when it comes to the economy.


SEN. JOE BIDEN, (D-DE) VICE PRESIDENTIAL CANDIDATE: What are we going to do now? We owe more on the house than our house is worth. What are we going to do about our retirement? That's how we were going to deal with it. What are we going to do about sending Mary or Johnny to school, to college? People sitting there and the rumors running rife through the neighborhoods that we hear the company may be outsourcing, may be leaving. We saw somebody walking through the plant looking at the machinery we didn't know.

The rumor, the rumor, did you hear, did you hear what's going on in terms of our health care? Are they going to drop it?

Ladies and gentlemen, the anxiety, the anxiety middle class Americans are having right now and the lack of any attention being paid to it is profound.

My dad used to talk about jobs. You know, when my grandpop by an expression he said when the guy in Menuca (ph), which is a neighborhood outside of Scranton, when the guy in Menuca loses his job, it's an economic slowdown. When your brother-in-law loses his job, it's a recession. When you lose your job, it's a depression.

Well, it's a depression for tens of thousands of Americans all over this country and an anticipated depression in the minds of a vast majority of the middle class people.

And it's not just people -- It's not just people we traditionally talk about. It's not just people working on the line. It's people all the way up the line. It's the vast majority of Americans who are those people who couldn't go an entire month without a paycheck, without either putting their house in jeopardy, having to take their child out of school, having to drop their health care.

Most people are a paycheck away, a paycheck away. From serious, serious problems. And what are we doing about it? What's happening? I've never seen a time when so many Americans have been knocked down. And so little has been done to lift them up. And ladies and gentlemen, that's got to change. I beg your pardon? I know I'm in Iowa. You still instruct me. You are the most outrageous people I have ever met in my life. Only in Iowa would I come and be told how to speak. And I love being back and being instructed. Thank you very much. It's a good suggestion. Can you all hear me now?


BLITZER: All right. We certainly hear Senator Biden. He is speaking in Iowa. That's where he wanted -- where he ran, he wanted to be the Democratic presidential nominee. Didn't do that well in Iowa. He's hoping certainly he and Senator Barack Obama will do much better this time. We're watching what's going on on the campaign trail and watching what's going on when it comes to issue number one. That would be the economy.

What they do helps many of you buy a home, but now the government is running things at mortgage giants Fannie Mae and Freddie Mac. How did this come about?

And she's one of the most well-known female politicians. So can Hillary Clinton help neutralize the appeal of the other female politician getting lots of attention right now? That would be John McCain's running mate, Governor Sarah Palin. Much more coming up right here in THE SITUATION ROOM.


BLITZER: One financial expert put it this way, and I'm quoting now "it saves Armageddon from happening." He's talking about the government's takeover of the embattled mortgage giants Fannie Mae and Freddie Mac. The government is extending as much as $200 billion in support. This will surely be among the most expensive government bailouts or interventions as they like to call it ever. The companies back loans from banks that help you buy homes and own or back about $5 trillion in home loans, that's about half of the nation's mortgage debt. The fear was if they collapsed, it would have plunged the already battered housing market even deeper.

So how did these mortgage giants get into this position to begin with? Let's go to our senior correspondent Allan Chernoff watching the story for us. You've been looking into the role of these two mortgage giants and their lobbyists and what are you discovering, Allan.

ALLAN CHERNOFF, CNN CORRESPONDENT: Well, as you know, wolf, Washington is all about clout and Fannie Mae and Freddie Mac made sure they would have plenty of it by hiring plenty of lobbyists with access to the halls of Congress.


CHERNOFF (voice-over): Fannie Mae and Freddie Mac have been among the most aggressive lobbyists in corporate America, spending about $170 million to lobby Washington during the past ten years. JOSHUA ROSNER, GRAHAM FISHER & CO.: They've tied up almost every lobbying firm in Washington whether they use them or not over the past several years.

CHERNOFF: Campaign contributions were plentiful, as well. Fannie and Freddie's political action committees, employees and their family members gave more than $16 million to members of Congress over the past decade.

MASSIE RITCH, CENTER FOR RESPONSIVE POLITICS: They want access to politicians, they want to influence their thinking. And particularly in their cases, they wanted to fend off regulation.

CHERNOFF: Barack Obama and John McCain benefited. Senator Obama is the number three recipient of Fannie and Freddie campaign dollars having collected $123,000 since running for the Senate. The original head of his vice presidential search team James Johnston is the former chief executive of Fannie Mae. Johnson resigned from Obama's campaign amid controversy over discounted home loans he had received. John McCain has received $19,000 from the two companies in the past ten years. His campaign manager Rick Davis formerly led the Home Ownership Alliance, an advocate for Fannie Mae and Freddie Mac's mortgage businesses.

ROSNER: They've had very strong ties to I would say the vast majority of congressmen and senators.

CHERNOFF: Two years ago, Freddie Mac paid a record $3.8 million fine to the Federal Election Commission to settle charges it improperly organized political fund-raising dinners. Now as part of the bailout, the government is suspending Fannie and Freddie's lobbying.

JAMES LOCKHART, FEDERAL HOUSING FINANCE AGENCY: All political activities including all lobbying will be halted immediately.


CHERNOFF (on camera): Critics say partly due to the influence that Fannie and Freddie had with Congress, we as taxpayers are now on the hook for this bailout. The millions that the companies spent can now cost us billions of dollars. One other interesting note, ultimately, it's going to be Congress that decides what happens to these two companies, their future business -- Wolf?

BLITZER: And ramifications for all of us enormous right now. Allan, thanks very much. The presidential candidates are reacting to this important news. Let's go to CNN's Christine Romans, she's been looking into this part of the story for us. So what are the two campaigns saying, Christine?

CHRISTINE ROMANS, CNN CORRESPONDENT: Well, Treasury Secretary Henry Paulson briefed both candidates before this historic bailout of Fannie Mae and Freddie Mac. The next president with Congress, after all, will have to decide what to do with these failed public companies and just how long the American taxpayer will also be the country's mortgage lender. Both candidates supported the bailout.


MCCAIN: Today, we're looking at costly government-led restructuring of our home loan agencies. We need to keep people in their homes, but we can't allow this to turn into a bailout of Wall Street speculators and irresponsible executives.


ROMANS: In a statement Senator Barack Obama said quote, "Given the substantial role that Fannie Mae and Freddie Mac play in our housing system, I believe that some form of intervention is necessary to prevent a larger and deeper crisis throughout our entire economy."

Fannie and Freddie have long been the source of ideological battles in Washington. Free market Republicans have always said taxpayers should never be on the hook. Some of the biggest champions of Fannie and Freddie have been Democrats eager to promote home ownership in this country.

At the same time, Fannie and Freddie's influence over both parties is legendary as Allan just reported. One critic telling me today it's where congressmen retire in Washington. Insiders get internships for kids and grandkids. Plenty of blame to go around for the collapse. The White House blamed Congress today.


DANA PERINO, WHITE HOUSE PRESS SECRETARY: President Bush initiated a call years ago to try to reform the system because he did not want the status quo to continue. Unfortunately, Congress didn't act on that.


ROMANS: Earlier today, Senator Chris Dodd, a Democrat and the chairman of the powerful Senate Banking Committee said he would have tough questions for Treasury Secretary Paulson about whether this bailout would actually strengthen our economy. Wolf, you can expect hearings upon hearings I'm sure on the Hill about this.

BLITZER: I'm sure they'll be talking a lot about it. Christine, thank you very much.

The Obama camp is eager to take some of the wind out of Sarah Palin's sails and Hillary Clinton may be the one person who could do it. We're watching Senator Clinton right now. She's out on the campaign trail in Florida. She's campaigning for Senator Obama. And an advice for what Obama and McCain need to do. That's coming up in our strategy session.

And Hurricane Ike hammering Cuba and Haiti. And plowing closer to the United States coast. We'll have a live update on this powerful storm and who may be in harm's way. A new update coming out from the National Hurricane Center momentarily. We're about to share that with you. Stay tuned. You're in THE SITUATION ROOM.


BLITZER: Senator Hillary Clinton was certainly passed over as Barack Obama's running mate, but she still may find herself up against Sarah Palin on behalf of Senator Obama. Senator Clinton is campaigning for the Obama/Biden ticket in Florida today.

Let's go to CNN's Jim Acosta, he is watching this story for us. Was she specifically deployed to try to counter this enormous buzz that the governor of Alaska is receiving, Jim?

JIM ACOSTA, CNN CORRESPONDENT: Wolf, the Obama campaign is saying no and stressing this was a previously scheduled event for Hillary Clinton. But today it's safe to say mump of the political world was watching just how she handled her.


ACOSTA (voice-over): Hillary Clinton may be out of the horse race but some Democrats see her riding to the rescue of Barack Obama. And it didn't take long to put her own brand on the campaign.

SEN. HILLARY CLINTON, (D) NEW YORK: No way, no how, no McCain, no Palin.

ACOSTA: Her backdrop of voters decidedly female she never singled out rising GOP star Sarah Palin in her attacks. Instead, she linked the Republican ticket to an unpopular president.

CLINTON: What do Senator McCain and Governor Palin offer for you and your families? More of the same. Barack Obama is my candidate and I hope he is your candidate, as well.

ACOSTA: Returning to her role as middle class warrior, she argued the GOP can't be trusted to fix the economy.

CLINTON: Choosing a Republican to clean up this mess is like asking the iceberg to save the Titanic. It is not going to work.

ACOSTA: Some Democratic strategists say there's only so much Clinton can do when she's not on the ticket.

TED DEVINE, FORMER JOHN KERRY ADVISER: Hillary can campaign so actively, can be such a forceful presence on the national stage, that those 18 million voter who supported her can listen to her voice and heed her call. I think in terms of people out there who are not on the ticket she may be the most important person at all.

ACOSTA: So far Obama's running mate Joe Biden has avoided hammering Palin leaving that job to the top of the ticket. The Illinois senator accused the governor of double talk on congressional pork. OBAMA: When you've been taking all these earmarks when it's convenient and then suddenly you're the champion anti-earmark person, that's not change. Come on.

ACOSTA: For Hillary Clinton, there's good reason to be a team Obama player. Think 2012.

MARK PRESTON, CNN POLITICAL EDITOR: Hillary Clinton and even her husband Bill Clinton are going to do anything and everything asked of them to help get Barack Obama elected. Anything short of it would be political suicide.


ACOSTA (on camera): Here's why. If Hillary Clinton pulls out all the stops and Obama somehow still loses the thinking among some Democrats is that nobody could possibly blame her and that puts her in the driver's seat for the next election. Wolf?

BLITZER: All right, Jim, thanks very much, Jim Acosta reporting. He's going to have more on the story later.

Here's a pop quiz for you. Name two things Barack Obama and John McCain might do to guarantee victory? Donna Brazile and John Fury, they are standing by with some answers here in our "Strategy Session."

And the truth behind an internet rumor about Sarah Palin. Stay with us. You're in THE SITUATION ROOM.


BLITZER: In today's "Strategy Session," what do Barack Obama and John McCain each need to do to win? Let's see what advice our experts have for the other side. Joining us now our CNN political contributor Donna Brazile, she's a Democratic strategist and Republican strategist John Feehery. All right. We're going to switch sides. What two things that John McCain needs to do if he wants to be president of the United States.

DONNA BRAZILE, DEMOCRATIC STRATEGIST: He has an exciting running mate. It is time for him to become the insurgent in this race. He cannot explain the Bush record over the last eight years. So run an insurgent campaign. Second thing I would advise him is to get a ground game. Barack Obama is putting new people on the voter registration rolls. John McCain needs a ground game. This is going to be close ...

BLITZER: To bring out the base of the Republican Party, what Karl Rove did in 2004.

BRAZILE: Karl Rove expanded the base of the party. John McCain must not only bring out his base but he must reach into the center and find independents who will vote for him.

BLITZER: When you say he should be an insurgent, do you mean he should hammer away at President Bush and Vice President Cheney. BRAZILE: To be credible he has to. He has to basically tell the American people what he would do differently and cannot run away from their record but he must explain it, simplify it and run an insurgent campaign.

BLITZER: Let's take a look what our Republican strategist says Barack Obama needs to do to be president.

JOHN FEEHERY, REPUBLICAN STRATEGIST: Focus on the states you can win. Don't waste money in Montana, North Carolina or Georgia. He is not going to win those states. The key states are Michigan, Pennsylvania, Ohio, Iowa. Spend your money there and in Colorado. Spend your money on those states. That's one thing. He's got to focus on older white women, the Reagan Democrats, especially they're worried about him and his experience. He's got to flesh out his proposals. Have town hall meetings with older white women and talk about things they care about. I think he is good when he's talking about the economy. But really focus in on ...

BLITZER: Would you advise him to go to those groups, older white women, for example, with Hillary Clinton at his side?

FEEHERY: Absolutely. Hillary Clinton and anyone who can help flesh out those proposals and Hillary Clinton says he's got the experience. That's the real problem with those older white women.

BLITZER: Because it's clear that Sarah Palin has energized John McCain. He gets almost Obama-like rallies thanks to her. He was clearly not doing that by himself.

BRAZILE: Well, we have a new celebrity. Let's see if someone will attack. I think Senator Obama needs to go on offense each day. The McCain campaign is releasing new ads and the Obama campaign is trying to debunk the ads. They need to go on offense.

BLITZER: Give us a piece of advice what McCain needs to do right now.

FEEHERY: I think Donna is right about the insurgent campaign. He's got to continue that reform message running against Washington, Washington's popularity is very low. Keep talking about how you're going to change Washington and flesh out what reform means to the economy. If he can flesh out reform and what it means to the economy, he'll win.

BRAZILE: I want to get paid for this advice.

BLITZER: How much?

BRAZILE: Hey, I go by the hour.

BLITZER: Thanks very much.

John's not cheap either as we know. If you buy into the rumors on the Internet, you might think Sarah Palin has something against Harry Potter. The real story coming up in our "Political Ticker" and that's coming up next.


BLITZER: On our "Political Ticker" today, the election certainly has been dogged by Internet rumors. The latest hoax circulating online alleges Governor Sarah Palin tried to ban a number of books including Harry Potter. This rumor is false. Our Internet reporter Abbi Tatton is here to set the story straight. All right, Abbi. Tell us what's going on.

ABBI TATTON, CNN CORRESPONDENT: Wolf, this e-mail has been traveling at lightning speed around the Web in the last couple days. It says that this is a whole list of some 90 books that then Wasilla Mayor Sarah Palin wanted banned from the local library, there is all sorts on here, classics like "The Catcher in the Rye," books by "Judy Bloom and an assorted "Harry Potter" books.

This e-mail is a hoax. It looks like someone just straight cut and pasted the list from another Web site online. It's been debunked to the Web site and the Web site of the City of Wasilla, we have no records of any books being banned ever. What is out there is an "Anchorage Daily News" report that in 1996, Mayor Palin asked the city librarian if she would ever be all right with censoring books and was told no.

But CNN's investigative team says there's nothing to indicate any more. A McCain campaign spokesman calls the e-mail transparently false and points out that some of these books weren't even written in 1996. Wolf?

BLITZER: Thanks very much for setting the record straight, Abbi.

And to our viewers, you're in THE SITUATION ROOM.