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The Situation Room
Fed Takes Emergency Measures; Financial Crisis Goes Global
Aired October 07, 2008 - 17:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, HOST: And to our viewers, you're in THE SITUATION ROOM.
Happening now, the breaking news we are following -- stock markets continue in freefall. The Federal Reserve takes emergency action, but offers a gloomy forecast at the same time. President Bush offers a promise that things will get better. Personal finance guru Suze Orman is here. She'll tell us information you need to know, what to do in the meantime.
Prospects are cloudy for business students who were planning careers on Wall Street. But there's a silver lining out there for Americans who can afford to go shopping.
And just hours from now, the presidential debate -- why the economy may be John McCain's biggest challenge.
I'm Wolf Blitzer at the CNN Election Center.
You're in THE SITUATION ROOM.
Massive and unprecedented government action not enough to stop the hemorrhaging today on Wall Street. The breaking news we're following -- a dismal day turned disastrous, with the Dow taking another huge dive in the final hour of trading, closing down more than 500 points. That's despite an announcement by the Federal Reserve that it will now step in to provide short-term loans to help American businesses pay for day to day operations -- loans they're having a hard time getting elsewhere, no matter how good their credit.
Our White House correspondent, Elaine Quijano, is standing by.
What's the president saying about this latest nose-dive in the economy?
ELAINE QUIJANO, CNN CORRESPONDENT: Well, Wolf, even in the face of more bad economic news, President Bush tried yet again today to calm jittery investors.
(AUDIO GAP)
BLITZER: As we get ready for what the president is saying -- and we're going to be hearing what he's saying in a moment -- the president tried to reassure Americans, yes, these are tough times right now. It doesn't look very good. But he's very confident -- very confident in the exuberance of the economy, the resiliency.
In fact, I'm going to play that sound bite from what the president said earlier today.
Listen to this, Elaine.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Thawing the freeze in the financial system is not going to happen overnight. But it will be a process that unfolds over several stages. And, obviously, the first stage began last Friday when I signed the rescue package into law. So the Treasury Department is moving aggressively to implement the new authorities.
(END VIDEO CLIP)
BLITZER: All right. So he made the statement, Elaine. He's trying to reassure everyone. Take us behind-the-scenes a little bit.
What are you hearing there?
QUIJANO: Well, it's interesting. President Bush is so concerned about, really, the global financial picture that he began his day, actually, on the phone -- a flurry of phone calls, really, to world leaders, including British Prime Minister Gordon Brown, as well as the leaders in Italy and France, the president trying to help coordinate the efforts and stem what really has been the global market plummeting.
As you know, later in the day, we saw him in suburban Washington, specifically at an office supply company in Northern Virginia, talking about his reasons for moving ahead with the massive government rescue plan. The president trying once more to draw that connection between Wall Street and Main Street.
He said at one point that he wished he could snap his fingers and make what happened stop, but it doesn't work that way. The president says that it's going to take a while, basically, to get the credit markets that are now frozen unfrozen.
But, of course, there are still some ominous signs ahead. Today, Federal Reserve Chairman Ben Bernanke suggested that the gloomy economic picture is going to continue into next year.
Let's take a listen.
(BEGIN VIDEO CLIP)
BEN BERNANKE, CHAIRMAN,, FEDERAL RESERVE: Overall, the combination of the incoming data and recent financial, developments suggest that the outlook for economic growth has worsened and that the downside risks to growth have increased. At the same time, the outlook for inflation has improved somewhat, though it remains uncertain.
In light of these developments, the Federal Reserve will need to consider whether the current stance and policy remains appropriate.
(END VIDEO CLIP) QUIJANO: And what he's talking about there, an economic picture so bleak, Wolf, that you heard the Federal Reserve chairman very clearly leave the door open to the idea of cutting interest rates. This is something that the Fed had not done since June, I believe. So, several months that it has held steady because of concerns about inflation.
Now, though, what you heard, a signal from Ben Bernanke it may have to take some drastic action here -- Wolf.
BLITZER: Elaine Quijano is over at the White House.
Thank you.
Let's go to our senior business correspondent, Ali Velshi.
He's here -- some, Ali, are talking about a global tipping point.
What exactly does that mean?
ALI VELSHI, CNN CORRESPONDENT: Well, listen, this is -- our economy is so intertwined with the rest of the world that it's starting to affect other countries in a couple of ways.
One way, Wolf, we've described how people took mortgages from their banks. The banks resold that to Wall Street, companies like Fannie and Freddie. And they resold that to international investors and sometimes banks in other countries. And that's why you're seeing -- and this is just three examples, because I would take up an hour to tell you about all the banks and all the countries that are affected.
But in Germany, they've just given $51 billion to their banks. In the United Kingdom, the government has nationalized one of the country's major lenders.
And in Iceland, they've nationalized their second largest bank.
That's one way in which the rest of the world is being affected by this crisis. Their banks are having trouble making their payments because they've been exposed to these mortgage-backed securities.
But there's another way, too. And that is that the U.S. is world's best customer. We buy more from the world than anywhere else. And other countries that have not been involved in this subprime mortgage crisis are really feeling the heat. Our number one trading partner in the world is Canada, where, by the way, you couldn't get as many of these subprime loans if you didn't have credit. They don't have a credit crisis going on. But Canada suffers when the United States doesn't buy as much, when we are feeling a little poorer.
Our second biggest trading partner is China. We, as we all know, buy a great deal from China. They're suffering because of that.
Mexico, our third biggest trading partner. Again, we're just not buying as much, because we are feeling like we're not going to have the money there. That starts with us, with individual Americans, Wolf. And it's working its way around the world.
Why do we care about this?
We care because we thought at the beginning of this recession that the rest of the world is doing really well and they'll keep us out of this mess. It doesn't look like the rest of the world is strong enough to save us from this. That's why you heard what you heard from Fed Chief Ben Bernanke.
And, by the way, Wolf, what Ben Bernanke was talking about -- a possible rate cut -- what he was hinting at, there's talk that there might be a worldwide coordinated rate cut at central banks around the world to make money cheaper for everybody in the world.
And there are experts who say wasn't it cheap money that got us into this in the first place -- Wolf?
BLITZER: Yes. Well, experts do say that.
All right, we're going to watch the global reaction, as well. The world relatively small right now. Ali, thank you.
Round two and John McCain may feel like he's on the ropes somewhat. The presidential candidates hold their second debate only a few hours from now. It's a town hall style affair in Nashville.
McCain trails Barack Obama by five points in our latest poll of polls. And his fortunes have ebbed as the economy has weakened.
Let's go to Dana Bash.
She's been covering the McCain campaign for us -- this is a huge challenge for Senator McCain right now.
DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: No question, a huge challenge. You have gotten e-mails, I've gotten e-mails from Democrats trying to raise expectations, because this is a town hall format.
The reality is they're actually right. You know, this -- I've traveled around with John McCain for months and months. He is most comfortable, Wolf, in a town hall setting, interacting with voters. And that's something advisers admit that he is going to need to take advantage of, especially on the issue voters care most about and he's having the most trouble with -- the economy.
(BEGIN VIDEOTAPE)
BASH (voice-over): At the first debate, John McCain started on the economy with an "I feel your pain moment."
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: I've been not feeling too great about a lot of things lately. So have a lot of Americans.
BASH: But that was it. He then veered into talk of earmarks and spending levels and many Republicans winced -- not the way to connect with voters' woes.
McCain advisers tell CNN prep for tonight's debate has focused heavily on trying to step up McCain's empathy and link it to his policy ideas.
More of this.
MCCAIN: I'll get the rising cost of food and gas under control. I'll help families keep their home and help students that are struggling to pay for college.
BASH: But McCain aides admit his big problem now is the direct correlation between Wall Street's meltdown and his slip in key states.
Take Florida, for example. In early September, 49 percent of voters listed the economy as the most important to them and McCain had a 7 point lead over Obama. A month later, the percentage of those who called the economy the top issue spiked to 60 and suddenly, a reversal. Now Obama has an 8 point lead.
One top McCain adviser admits to CNN coming back to Washington to push for the economic bailout "wrapped him back around George Bush, politically devastating."
Many supporters say detangling himself from the president tonight is paramount.
UNIDENTIFIED MALE: That's the elephant in the living room in this race. You've got to reassure economic voters that a John McCain is going to be OK, that he's got his own vision, that it's not necessarily George W. Bush's vision.
(END VIDEO TAPE)
BASH: Now, we've heard several worried Republican strategists recently suggest that McCain should try to come up with a bold new idea. But one of McCain's senior advisers I talked to today rejected that as "panicky" and insisted that they have plenty of policy ideas, from health care to energy, that should sell. But this adviser -- and, Wolf, this adviser I talked to, his job is to talk about economics and to work with John McCain on this issue. He said that the issue is true, that they have a message problem, that it's muddy and unfocused.
But the problem, this person admitted, is not necessarily the message, but the messenger -- their candidate, John McCain.
BLITZER: They're going to have -- he's got a big challenge ahead of him tonight.
BASH: Definitely.
BLITZER: We'll see if he's got a new message in the course of this 90 minute debate.
Dana, thank you. Charges and countercharges are flying back and forth between the McCain and Obama campaigns. We're fact checking the facts to make sure that someone is not necessarily stretching the truth.
Also, how worried should you be about the financial meltdown?
Suze Orman is here with advice all of us need to hear.
Plus, as we count down to tonight's presidential debate, what's on voters' minds?
We have some surprises in our brand new CNN poll.
Stick around.
You're in THE SITUATION ROOM.
(COMMERCIAL BREAK)
BLITZER: This financial crisis is very personal to a lot of Americans. They're watching their retirement savings evaporate and wondering what's happening next.
Financial expert Suze Orman is here with us.
She's got information all of us need to know.
You can catch her show, by the way, on CNBC Saturday nights at 9:00 and midnight Eastern.
Suze, thanks very much for coming in.
SUZE ORMAN, HOST, "THE SUZE ORMAN SHOW": Any time, Wolf.
BLITZER: All right, let's talk a little bit about how worried folks should be.
Have we reached rock bottom yet?
ORMAN: No. I don't think we're close to rock bottom. I was saying to you when I was sitting here -- I can't remember if I said it on your show or Larry King's show or Anderson Cooper's show -- but I really think you're going to see these markets go to about 8500, 8200, 8000. It could go a little lower.
BLITZER: Because it's at 9400 and this is the first time in four or five years it's been below 10000.
ORMAN: Yes, I think we have a lot lower to go. For some people, that should make them very happy, if they have time on their side. For others...
BLITZER: Wait, wait a minute. Explain.
Why should anyone be happy when these markets are collapsing as they are? ORMAN: So, I was escorted in here today by one of your producers that was 27 years of age. I said to her, you should be jumping up and down for joy. And she goes, why?
I said because you have at least 40 years to leave money in this market. You are going to be able to buy things here shortly that are just unbelievably value for yourself.
BLITZER: But when do you -- when does it -- people have a lot of money. A lot of people have moved money to the sidelines -- T-Bills or whatever, money market funds.
When do you know that it's now time to jump back in and start buying "bargains" -- stocks at bargain prices?
ORMAN: Well, you never know for sure, because things can always go lower and lower and lower. And that's why you never take a lump sum of money and you buy. That's why you always hedge your bets. Maybe you have $12,000 to invest. So maybe you want to take $1,000 this month, $1,000 next month, $1,000 the month after that or every three months, so that you can stretch it over time.
And when you do that, then no matter what happens, you'll be OK. But if you are lump sum investing right now, you will be making one of the biggest mistakes out there at this point in time, if you ask me.
BLITZER: Why is this happening right now?
People are wondering who's to blame for this crisis.
ORMAN: Well, I will always believe that this started with the housing crisis. It started with the housing crisis because people were offered loans that they couldn't afford. And people said OK, I'll take it. Now, some people will say to you but, Suze, they'll say to me -- but, Suze, weren't they scamming the system?
Ordinary everyday people, when a bank says to them you can qualify for a loan...
BLITZER: You can afford it.
ORMAN: ...you can afford it, the people believe that they can afford it. They did not understand no money down, negative amortization loans.
BLITZER: They could afford it for a year or maybe two. But after that, with the rates going up...
ORMAN: That's right.
BLITZER: They weren't going to be able to afford it.
ORMAN: But nobody showed them how much their rates were going to go up to. What people said to them is you know what, rather than buying one house, where your monthly payment was $1,200 a month, let's do a negative amortization loan, where you could by two homes no money down and your payments will be $600 a month each. And you can make that much more money.
And people went I can do that?
And they said yes.
BLITZER: I asked some of my producers today if they have any questions they'd like to ask you.
ORMAN: Yes.
BLITZER: And they all had a lot of questions, because this hits home for everyone.
ORMAN: For everyone.
BLITZER: Some of the young people wanted to know, their parents might be getting ready to go into retirement right now and they're really worried they might not be able to. And they're, you know, in their late 60s or whatever.
What do you say to these young kids who are worried about their parents and retirement?
ORMAN: I say learn from what could happen when you get to be that age. Money that's in the markets is money that you must not need for at least 10 years or longer. I have always said that from day one.
If you're nearing retirement and you need that money, what was that money doing in the stock market?
That is not money that should have been in...
BLITZER: It should have been in much more...
ORMAN: It should have been in bonds. It should have been in CDs. It should have been in a place to generate the income that you need to replace your salaries so that you could retire.
When you are literally investing it, hoping and wishing and praying that it's going to go up, and things like this happen, now the reality is you're not going to be able to retire.
So what the kids should be learning is when you get older, when you need money, that is not money that goes into the stock market.
BLITZER: It may be too late for the parents right now but it...
ORMAN: It may be too late for the parents.
BLITZER: ...but it's lessons learned for younger people.
ORMAN: Yes.
BLITZER: All right, let's talk a little bit about workers out there who were expecting raises this year and bonuses this year at the end of the year. Do you think that's still going to happen?
ORMAN: No, I don't think that's going to happen. And people should never live on expectations. People need to live -- and they've always needed to live on reality. Don't cash the check until it's in the bank, everybody. Don't spend it, just thinking oh, this is going to come in.
Too many people buy things they can't afford, thinking they're going to get the raise, they're going to make more money next year, next year they'll be able to afford it. And that's why -- let's never, ever get -- you know, they're blitzed out. They never get out of credit card debt. They always owe money. They always find themselves in a situation of living paycheck to paycheck because, why?
They always want more, more, more.
So in this situation, this is where you spend less. This is where you save more. This is where you do not spend money. This is where you do not take a vacation. You do not buy a new car. You do not expand your home. You do not buy things for the holiday season.
This is where...
BLITZER: But that's going to exacerbate the global economy, the U.S. economy, if people aren't going to go out there in the holiday season and spend money. That's going to further make matters potentially worse.
ORMAN: What are we in?
We are in this situation because we are in a credit crisis -- a credit crisis where we owe money and we don't have the money because of -- we don't have it. We don't have what we owe.
If individuals didn't owe money, they didn't have credit card debt, they didn't have a mortgage -- oh, like me.
Now, I'm not saying -- I'm not putting me up as an example. But when you don't owe anybody anything, you feel free. You don't have to worry as much.
BLITZER: If there are people who are watching now -- and there are -- they have some money lying around and they want to invest it, they want to try to get some interest.
What should they do?
ORMAN: What they should do is first ask themselves the question -- do you have credit card debt?
Because if you have credit card debt and your interest rate is at 18 percent, want to make an 18 percent return on your money?
Get rid of your credit card debt. Then you need an eight month emergency fund, because God forbid if you lose your job or you don't get the bonus, you need to be able to continue to pay your mortgage.
BLITZER: So pay off your mortgage if you can, too.
ORMAN: Then, if you are going to invest, if you have some money that you want to put in the market, you might want to wait still a little bit here. But if you are putting it in the market, dollar cost average into things like exchange traded funds that pay you a high dividend, possibly DVY, which is an exchange traded fund that invests in the Dow Jones Select. It's got a 5 percent dividend yield right now. Keep doing that every month. If the Dow Jones keeps going down, fine, you'll buy more shares. Eventually, you'll be OK. In the meantime, you're paid to wait.
Personally, if you have money in the market, I think it should be in stocks or exchange traded funds that give you a high dividend.
BLITZER: Look for the dividend.
ORMAN: Look for the dividend so that you are paid to wait as it goes down.
BLITZER: Suze is going to be back with us in the next hour. We have a lot more questions, Suze.
ORMAN: You've got it.
BLITZER: Thanks very much.
Well, we're counting down tonight's presidential debate.
What do Barack Obama and John McCain need to do to win?
Paul Begala and Alex Castellanos -- they're standing by live with their advice.
Plus, learning judo with Vladimir Putin -- we're going to show you what it's all about. There he is, the prime minister of Russia.
We'll be right back.
(COMMERCIAL BREAK)
BLITZER: Susan Roesgen is monitoring some other important stories making news around the world -- Susie, what's going on?
SUSAN ROESGEN, GULF COAST CORRESPONDENT: Some important stories and some strange stories, like the judo and Vladimir Putin story.
The author of a controversial anti-Barack Obama book was kicked out of Kenya today. Jerome Corsi -- he wrote the book called "The Obamination: Leftist Politics and the Cult of Personality." Officials whisked him away just before he was about to begin a news conference in Kenya. Corsi went there to launch the book. Senator Obama is wildly popular there and he drew thousands of people during a visit two years ago.
Political unrest in Thailand -- two people died when anti- government protesters clashed with police outside the parliament building in Bangkok. One person died in the clash, the other was killed in a car bombing. Today's protest is the latest in an ongoing conflict which flared up this summer when demonstrators tried to overthrow the current cabinet. Last weekend, a key opposition leader was arrested as part of the crackdown on the protests.
And here's the story -- Vladimir Putin -- Russian prime minister and judo master. A new instructional DVD called "Let's Learn Judo with Vladimir Putin" is out. He is a black belt, but says the name has more to do with advertising. In the past, Russian television has showed Putin skiing, racing trucks and even tracking a tiger through the Siberian forest.
And here's another strange one. Japanese police say they have apprehended a man who went skinny dipping in the moat around the Imperial Palace in Tokyo today. There he is -- a naked man described just as a middle-aged Westerner. He was chased by the police there in a row boat. And then they got him when, as you see, he jumped out of the water and climbed a wall and tried to escape. He has been detained for questioning. A palace official says the emperor was in the palace, but he probably didn't see the naked swimmer -- Wolf.
And maybe it's just as well.
BLITZER: Better off.
ROESGEN: Yes.
(LAUGHTER)
BLITZER: Susie, thanks very much.
Dreams of a Wall Street career are turning into a living nightmare for some recent MBA grads. The jobs are gone.
What do they do now?
Plus, John McCain has been written off before.
How can he make another comeback to snatch the lead from Barack Obama?
I'll ask Paul Begala and Alex Castellanos. They're standing by live.
(COMMERCIAL BREAK)
BLITZER: To our viewers, you're in THE SITUATION ROOM.
Happening now, only 28 days until the presidential election and a financial crisis is raging. So what are voters looking for?
Some surprises in our brand new poll.
Also, where the truth ends and mudslinging begins. We're checking the facts behind some of the candidates' most outlandish claims.
Plus, dark clouds hovering over the U.S. economy -- but there is a silver lining for some Americans.
Who stands to gain from the meltdown?
I'm Wolf Blitzer.
You're in THE SITUATION ROOM.
The latest polls show Barack Obama opening up a lead over John McCain nationally and in a number of key battleground states. Tonight's debate is a major opportunity for Senator McCain to try to turn that trend around.
So how does he do it?
Our senior political analyst, Bill Schneider, has some new poll numbers that might help explain Senator Obama's momentum -- Bill, after months and months of campaigning, the conventions and everything that's going on, are the images of these two candidates changing right now?
BILL SCHNEIDER, CNN CORRESPONDENT: Well, yes. And no.
(BEGIN VIDEOTAPE)
SCHNEIDER: It's been a month since the conventions. How are the candidates' images holding up? In Barack Obama's case, pretty well. Opinion of Obama was very favorable back in august before the conventions. It's about the same now. John McCain's popularity has slipped. In august, McCain was about as favorably regarded as Obama. Since then, however, his unfavorable ratings have climbed ten points.
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: Because on November 4th, you and I are going to turn the page not on talking about the economy. We're going to turn the page on the disastrous economic policies of George W. Bush and John McCain.
SCHNEIDER: Obama's lead on domestic issues has widened. The democrat is considered the better candidate on health care, the economy, and the nation's financial crisis. The big surprise? Iraq. Voters now say Obama would do a better job handling the war in Iraq. Until now it's been McCain's issue like most foreign policy issues, including terrorism where McCain still leads. But by a smaller margin than lost month. Doesn't the public believe things are getting better for the U.S. in Iraq?
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: We are succeeding in Iraq and we are winning and our troops will come home with victory and honor.
SCHNEIDER: They do, actually. For the first time in more than three years a majority of Americans think things are going well in Iraq. But has that changed public opposition to the war? No. Nearly two-thirds of the public continues to oppose the war. Same as it's been for the past two years.
(END VIDEOTAPE)
SCHNEIDER: Iraq may be doing better. But we're not. And guess which matters to voters more? Wolf?
BLITZER: Bill Schneider is in Nashville getting ready to watch the debate. Thank you.
Joining us now our CNN political contributor and democratic strategist Paul Begala and republican consultant, Alex Castellanos. Guys, thanks very much for coming in.
Let's talk about Senator Obama first. What does he need to do tonight?
PAUL BEGALA, DEMOCRATIC STRATEGIST: He needs to show empathy. You know, there's always been two sides of Barack Obama. There's been the law professor, very lofty, a little too theoretical for my taste. Then the community organizer much criticized by the republicans. Bill Clinton's empathy was criticized too when he said I feel your pain. I want to see tonight the same guy who used to go into church basements and work one on one with factory workers in Chicago who lost their job through no fault of their own. That's who he's going to be talking to tonight in Tennessee and through them to people across the country.
BLITZER: What do you think Obama needs to do tonight?
ALEX CASTELLANOS, REPUBLICAN STRATEGIST: Not much. Keep doing what he's doing. It seems to be working. He's got a little bit of a lead. Certainly this economic meltdown has helped him. Obama would be very happy if this debate did not occur tonight.
BLITZER: You're saying don't make a big mistake?
CASTELLANOS: Just play it safe tonight. They've n a very conservative campaign. Keep doing it.
BLITZER: If you were giving advice to McCain does he need to do.
BEGALA: I think he needs to listen to the better angels of his nature. He's been off on this attack politics. It doesn't suit him well. It's not working well. The straight talk express has been making stops at every garbage dump along the trail and it's not working. He needs to do the same thing. In other words, he's very good at showing leadership and strength. This is not a test of either leadership for McCain or intelligence for Barack. It's a test of empathy. It's a does he feel our pain? Does a guy who's got nine homes, 13 cars and a private jet understand what it's like to be under economic stress? BLITZER: We're going to show you live pictures of where the meeting is going to take place. What do you think Senator McCain needs to do because he's behind in the polls?
CASTELLANOS: He's behind. That means he has a complicated job. I agree with Paul. I don't think an attack strategy is what McCain needs right now. What he needs is a comeback strategy, a little different and more complicated. One, start at the starting line. Tell voters where you are. We had a bad economic hit last week. It's hurt republicans. It's hurt our party. That happens. I know where we are. We can come back. Two, America rises to the challenge in these occasions. I have in my life. America has, too. It'll make us stronger. Three, here's how we get out of this. There's a new global economic frontier. We can compete there. If we reform taxes, energy policy, get out there tonight and offer a vision of the future.
BEGALA: Good stuff.
BLITZER: He's a smart guy, Alex. Are you surprised?
BEGALA: No, I'm not.
CASTELLANOS: We surprise each other.
BEGALA: I'm glad he's sitting on the sidelines.
BLITZER: Let's talk about the format tonight because they negotiated the ground rules, Lindsay Graham, among the team representing McCain, Ramon Emanuel, your old buddy from the Clinton White House representing Barack Obama. They're very strict. Tom Brokaw will be the moderator. Folks will stand up and ask questions. There'll be viewer questions via e-mail. Then the time limits are pretty restricted. Go ahead and tell us about this format.
BEGALA: The whole thing is ridiculous. These are two really able political leaders in Obama and McCain. And they're being constricted by these stupid rules. The citizens who ask questions are not allowed to give a follow up. The director is not supposed to focus the camera back on that citizen again even for a visual follow up. It's ridiculous. The candidates are allowed to get off of their little stools but only move a few feet away. What if a woman breaks down crying because her son was wounded in Iraq? Here's John McCain who was tortured for our country in Vietnam. Can't he go and give her a hug? That would be the moment McCain needs.
BLITZER: They negotiated these.
BEGALA: All of them should violate the rules.
BLITZER: Tom Brokaw really can't follow up either given the nature of these rules.
CASTELLANOS: I agree with Paul. This is like not showing Elvis Presley from the waist down. Let's Elvis dance. The more folks see more unscripted it is, the more authentic we'll see the candidates.
BLITZER: A while ago Sarah Palin said this on the campaign trail. She's been spending time in Florida. Listen to this.
(BEGIN VIDEO CLIP)
GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: He didn't know he had launched his career in the living room of a domestic terrorist? He didn't know that until he did know? And then he continued to be in any way associated with that person? The story keeps changing and the claims keep getting more and more curious.
So what next? Claiming that he didn't know that two of his biggest supporters were running Fannie Mae, the sub prime mortgage joint? I don't know. That's, of course, the sub prime mortgage giant that has done so much harm to this economy. Maybe he just thought that they were guys in his Washington neighborhood.
(END VIDEO CLIP)
BLITZER: Guys in his Washington neighborhood. This is the fourth day in a row she's been going after the William Ayers from the radical weathermen underground organization back in the '60s. She's not backing off at all from this or from the Fannie Mae or Freddie Mac issue.
BEGALA: Nor is she helping her cause. Governor Palin was introduced to great fanfare, gave a terrific speech at the convention. She energized the republican ticket. Now she's in that negative. I think this is why.
She should know better. She has no idea what John McCain's record is. Two can play this game. John McCain sat on the board of a very controversial group that had ties to some very, very radical extremist groups on the far right. Does that mean McCain is an extremist on the right? Of course not. It means that they should be careful about playing the game of guilt by association.
The Obama campaign is responding with Charles Keating for whom McCain intervened with banking regulators to try to subvert the regulations. Keating was a criminal who ripped off taxpayers and had to be bailed out for billions of dollars. This is not where the McCain campaign needs to go.
Palin needs to actually watch her own reputation. She's hurting herself. He was admonished by the Senate Ethics Committee which is a low form of punishment. McCain himself says it's the biggest mistake of his career.
BLITZER: He always says that. Go ahead.
CASTELLANOS: I think, you know, obviously -- I think it's fair game. You want to know who these -- both of these men would surround themselves with. You've seen -- if Obama becomes president, certainly we've seen McCain in public life. We know who's around him. We want to know the same about Obama. The real question, though, is will these kind of attacks work in absence of a positive message and a vision for -- BLITZER: At a time when the economy is in such trouble, the Dow is going down 500 points today, does that kind of discussion about these issues sort of irritate a lot of voters out there?
CASTELLANOS: If the campaign had a central message, I'm in a car, call the ambulance, pull me out, help me here. But don't tell me that tomorrow I might get the measles. Don't -- do something immediate about my problem I'm engaged with today. Right now we all know that's the economy.
BLITZER: It sort of belittles both of them. When they're going after each other, whether Charles Keating or Ayers or Reverend Wright, this is a time of enormous economic crisis. People want answers on these issues.
BEGALA: Absolutely. I think that's what the citizens will say tonight in Nashville. If the directors allow them -- the commission allows them to speak. This is what voters want. They do not want to hear about all that stuff. But if attacked, democrats have been really worried, at least I have been, whether Barack Obama will be tough enough to counterpunch. And I like the fact that he's counterpunching, particularly the Keating thing is a lot more dis- positive because it is about regulating the economy. And McCain's, one of his few examples of dealing with regulating the financial system was subverting those regulations on behalf of a criminal. I think that's pretty close to the point about where the economy is today. If you want to see how McCain deals with regulations of the financial system, look what he did to help a criminal.
BLITZER: He was two years ago with a lot of other republicans in favor of taking stronger steps to deal with Fannie Mae and Freddie Mac, to his credit.
BEGALA: My old PR business was Freddie Mac, too. There's a whole lot more to that story, too. His aide, Rick Davis was also a consultant to Freddie.
CASTELLANOS: When Barack Obama attacks John McCain's character it's toughness on Barack Obama's part. When McCain attacks Barack Obama's character it's out of bounds. It's fair for both of these candidates. But right now also address the car wreck. Tell us what you're going to do about the economy.
BLITZER: Let's hope we hear a lot of the answers tonight.
BEGALA: Do you see why I picked up in Nashville this morning, Wolf?
BLITZER: Very nice.
BEGALA: I was in Nashville this morning at the bookstore there. They have these bookmarks from all of the best political team. They said I think this is the most popular one.
BLITZER: Very handsome guy.
BEGALA: Isn't that great?
BLITZER: Thanks guys.
They planned careers on Wall Street. Now these business students have a real life financial disaster to study. But do they think they need to rethink their own futures?
Every cloud has a silver lining. If you still have money out there to spend, there may be some bargains out there. We'll explain right here in THE SITUATION ROOM.
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BLITZER: The economy is weighing on many people's minds. Especially a lot of young people out there. That goes for those trying to plan a career in the financial sector. Many students have been banking on making big bucks on Wall Street. They're starting to get nervous right now.
Let's go to CNN's Dan Lothian. He's joining us.
Some of those MBA hopefuls might be losing hope right now. What are you seeing, what are you hearing?
DAN LOTHIAN, CNN CORRESPONDENT: Obviously, Wolf, there is a lot of concern. One MBA student told me he wishes he could stay in college for at least another year or perhaps even longer and spend more time studying and doing research until the storm passes over. Many really were hoping to head to Wall Street, get into investment banking perhaps. Some of these MBA students are no longer bullish on prospects and are now looking to plan b.
(BEGIN VIDEOTAPE)
LOTHIAN: Plan a for him was to turn last summer's internship on Wall Street into a full-time job earning six figures. But the second year MBA a student at MIT's Sloan School of Management ran into reality. The hurricane that slammed Wall Street sucked the air out of big dreams.
ANDRE LO, MIT SLOAN SCHOOL OF MANAGEMENT: It's certainly a challenging time. I think our students are concerned about what the future might be for their career opportunities.
LOTHIAN: Inside the grad school simulated training room we met with second year student Benjamin Frenkel. His high-tech start-up went belly up during the last bubble and the finance field he's headed into imploded.
BEJAMIN FRENKEL, MBA STUDENT: I still think finance is a great place to be. But I personally am sort of broadening my horizons and looking at jobs in management consulting.
LOTHIAN: At Harvard Business School where 44% of the last graduating class went into financial services, career coaches are helping current and former students navigate through the violent and seemingly endless storm.
JANA KERSTEAD, HARVARD BUSINESS SCHOOL: I think many of them are saying, what's my risk tolerance? Am I comfortable with this? Or am I not?
LOTHIAN: A team from here recently flew to New York City to meet with members of last year graduating class who got great jobs on Wall Street but wonder for how long.
UNIDENTIFIED MALE: It works for people, too.
LOTHIAN: Some still in grad school are also worried consults or high-tech jobs might be harder to get. Now they're competing for those jobs with more MBA students and more experienced workers.
UNIDENTIFIED MALE: I think it's a little bit scarier than you'd like it to be.
LOTHIAN: But his passion to eventually do something in finance hasn't diminished. Neither has his.
UNIDENTIFIED MALE: It's hard to tell which direction I'm going to head in. The goal's still there. I don't know how I'm going to get there yet.
(END VIDEOTAPE)
LOTHIAN: Wolf, there is something good that may come out of all this. One professor says they have a real-time disaster to dissect in the classroom. An MBA student told me there are so many lessons to be learned that can help them avoid some of the traps and pitfalls that landed Wall Street in this mess in the first place.
BLITZER: But so many are worried about jobs right now first and foremost. All right. Thanks, Dan, very much.
There is an upside to the financial downturn, believe it or not. Susan Roesgen is back again looking at this.
Some of the silver ling in this crisis? What are you picking up?
SUSAN ROESGEN, CNN CORRESPONDENT: There's always a silver lining for somebody. The downside here in this economy is that many people just don't have any money at all to spend. The upside is that if you can afford it, sellers are practically begging you to buy.
(BEGIN VIDEOTAPE)
ROESGEN: You know the money you've been saving for a rainy day? If you have it, get it out. It's a good time to buy.
TERRY SAVAGE, FINANCIAL CONSULTANT: If you've saved up money for a down payment and you have good credit, this could be your opportunity to buy a house at truly a bargain price.
ROESGEN: With a record number of foreclosures and low interest rates, this is the time to buy a house if you can afford it. Get the house and you might be able to put a car in the garage, too. Some car makers are offering the zero percent financing we haven't seen in years. And AAA reports the national average price for a gallon of regular unleaded is just under $3.50. The lowest price since April.
ROBERT SHEMIN, FINANCIAL AUTHOR: A lot of people like myself know when everybody else is selling is a great time to be buying.
ROESGEN: Like buying a new TV before the digital conversion in February. Stores are pushing deals in all kinds of electronics. And with the dollar stronger than it's been all year, foreign electronics are cheaper than they've been in a while. And financial planners say don't be shy about haggling. Ask for a lower price for what you want or ask for extras to sweeten the deal. You just have to remember that you help the economy when you buy. But you hurt yourself when you buy too much on credit.
SAVAGE: The sooner we face up to the fact that debt will not buy you a better life, it will only bury you, as soon as we realize that, we'll all be better off.
ROESGEN: And, of course, the holiday shopping season is creeping up on us. Many retailers are barely putting away the pumpkins this year, Wolf, before they bring out Christmas trees. They're desperate for your spending. But it's buying too much on credit that started this whole mess in the first place.
BLITZER: Let's hope people learned some lessons from this. Hopefully they will. Thanks very much, Susan.
The mud is flying.
PALIN: Our opponent is someone who sees America as imperfect enough to pal around with terrorists who targeted their own country.
BLITZER: As Election Day gets closer, four weeks from today, the campaign seems to get nastier. We're fact checking the claims made by both sides.
And with the debate only three hours plus away, how will all that negativity play when the candidates face voters in an intimate town hall setting.
Stay with us. You're in THE SITUATION ROOM.
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BLITZER: As Election Day draws nearer the presidential campaigns are each drawing increasingly nasty portraits of the other side's candidates. We bring in Suzanne Malveaux. She's been looking into all these negative campaign ads and we say that it is getting a little nastier.
I know you have a fact check from the truth squad. What are you seeing? SUZANNE MALVEAUX, CNN CORRESPONDENT: Well Wolf it's interesting because both of the candidates promised a different campaign, but with these charges and these countercharges flying, the campaign has taken on a negative tone, and now both of the candidates are preparing for the face-off tonight as voters wait to see if they will sling mud.
(BEGIN VIDEOTAPE)
MALVEAUX: Liar, liar, pants on fire, what is a voter to believe? The candidates now unleashing a barrage of charges over the airwaves.
UNIDENTIFIED MALE: Barack Obama, he promised better. He lied.
UNIDENTIFIED MALE: John McCain wants to tear Barack Obama down with smears that have been proven false.
MALVEAUX: And statements by their running mates that have recently come under scrutiny.
PALIN: Our opponent is someone who sees America as imperfect enough to pal around with terrorists who targeted their own country.
SEN. JOE BIDEN (D), VICE PRESIDENTIAL CANDIDATE: Under John McCain's tax proposals 100 million family, middle-class families have not a single break in taxes.
JOSH LEVS, CNN CORRESPONDENT: We are seeing more and more distortions as things get down to the wire.
MALVEAUX: CNN's Josh Levs has been doing reality checks for the last two years.
LEVS: Some of the things that I are saying is mind boggling and I have had moments when I hear something and I think, if we had a bogus-o-meter it would explode right now.
MALVEAUX: The duty has been so large, that CNN created a truth squad for the final week to separate fact from fiction.
UNIDENTIFIED FEMALE: Here in the mudslinging continuing.
MALVEAUX: Here in the partisan fact check.org and the Washington Post have been checking the truthfulness of the ads. They use a Pinocchio nose to indicate the truth. Both candidates are turning up the heat and carrying risks and rewards.
LEVS: Attack ads can work even when they are false. The real change that can happen is that more and more Americans can become more and more educated and excited about fact check and start to force these guys on the stump to stay on it.
(END VIDEOTAPE)
MALVEAUX: And CNN is going to be following the debate and fact checking throughout. Go to CNN.com/politics, so obviously, we will be looking at all of the claims that the candidates make tonight and see if they stand up to scrutiny.
BLITZER: And go to CNNpolitics.com as well. Thank you, Suzanne.
We are count down debate just a little over three hours from now. Joining us is Lou Dobbs and what he wants to hear from the candidates tonight.
Also, new polls prompting changes on the electoral map and changes that could determine the outcome of the election four weeks from today. Plus, corporate excess in the crosshairs again. Leaders of a troubled insurance giant, AIG, get grilled by congress about the multimillion dollar bailouts.
Stay with us here in THE SITUATION ROOM.
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BLITZER: Checking in with Lou to see what is coming up in an hour from now.
You will be listening and watching the debate. What do you want to hear tonight?
LOU DOBBS, CNN ANCHOR: Well, I hope the same thing as most Americans. I want to hear why these two presidential candidates can't say what would be cut back in the programs as a result of a drastically altered economic future.
BLITZER: No way they can do --
DOBBS: Absolutely not. I would like to think that one of the two men would have the intellectual integrity to address the American people honestly.
BLITZER: And say, you know, I hoped to give you universal health care, but the $700 billion is not going happen.
DOBBS: And there will be no more entitlements because we have $750 trillion in unfunded entitlements already.
BLITZER: And McCain, should he say I wanted to lower the capital gains taxes and all of the other taxes and keep in place the Bush tax cuts and make them permanent and we can't afford it.
DOBBS: They should both be acknowledging it. There are not going to be tax cuts or entitlements or universal health care and everybody fields to understand that. Because we have watched the democratically-led congress and the president of the United States destroy any hope of that in the future.
BLITZER: Thank you, Lou. We will be back.
