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ANDERSON COOPER 360 DEGREES

Meltdown on Wall Street; Keeping the Candidates Honest

Aired September 15, 2008 - 22:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


ANDERSON COOPER, CNN ANCHOR: Tonight, breaking news: your future, my future, our future at stake, a meltdown on Wall Street, the worst since 9/11. One giant collapses. Another is bought, yet another now begging for a bailout, tens of billions of dollars lost, tens of thousands of jobs gone. Two presidential candidates weighing in. So, what are they going to do about it? It's your money, your vote. We will examine tonight.
Also tonight, they're both attacking, but is John McCain just plain lying about Barack Obama's record, his statements, Sarah Palin's accomplishments, even the size of his own crowds? Karl Rove says McCain's ads are a problem. He says both sides' ads are a problem.

The Associated Press says -- and I quote -- "The Straight Talk Express has detoured into doublespeak."

Tonight, we're checking the facts, "Keeping Them Honest."

And, later, Hurricane Ike's path of total devastation. We have got the latest from Galveston and coastal towns, parts of which simply no longer exist.

We begin, however, where Wall Street, Main Street and the campaign meet, with breaking news on the single most important issue to voters, the shaky economy. Right now, Asian markets have dropped, experiencing their own versions of the bloodshed today on Wall Street. Blue chips here lost more than 500 points, investors reacting to news over the weekend Lehman Brothers collapsing, Bank of America on about 48 hours notice buying Merrill Lynch.

Also just tonight, insurance giant AIG and Washington Mutual, the nation's biggest S&L, seeing their credit downgraded, putting both on the brink. The bigger picture, of course, unemployment up, inflation up, gas prices triple what they were seven years ago. Set all that against a presidential race now all tied up, the latest CNN poll of polls dead even.

Today, the candidates each weighing in on what has gone wrong and how to fix it, your money, your vote.

Here's Tom Foreman.

(BEGIN VIDEOTAPE)

TOM FOREMAN, CNN CORRESPONDENT (voice-over): As the latest financial earthquake rumbled through Wall Street, tremors were rattling the campaign trail. In Colorado, Barack Obama called it more bad fallout from years of Republican rule.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: For eight years, we have had policies that have shredded consumer protections, that have loosened oversight and regulation, and encouraged outsized bonuses to CEOs, while ignoring middle-class Americans. The result is the most serious financial crisis since the Great Depression.

FOREMAN: In Florida, John McCain blamed big business and bad government.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: People are frightened by these events. Our economy, I think, still, the fundamentals of our economy are strong, but these are very, very difficult times. And I promise you, we will never put America in this position again.

(CHEERING AND APPLAUSE)

MCCAIN: We will clean up Wall Street. We will reform government.

(CHEERING AND APPLAUSE)

FOREMAN: Amid recent problems in housing, banking and jobs, McCain's assertion that the economy is fundamentally sound was mocked by Obama.

OBAMA: Senator McCain, what economy are you talking about?

FOREMAN: McCain says he was talking about the fundamental American work ethic.

MCCAIN: Our workers have been the strength of our economy.

FOREMAN: For all that, with each new bit of bad news, both men are pushing their plans for economic reform. McCain is hitting hard on balancing the federal budget, cutting wasteful spending, and reducing food prices, among other things.

Obama wants to invest more in manufacturing, fund more research and education, and crack down on credit card companies, to list some of his goals.

(on camera): Both men want a simpler tax code and lower taxes for working Americans. Both want lower fuel costs, more foreign trade. And both insist, it all must start now.

MCCAIN: Our economy is at risk today. Have no doubt how serious this -- this problem is.

OBAMA: We are going to have a lot of rebuilding to do.

FOREMAN: The devil, of course, is in the unanswered questions about all these grand economic plans. Who will pay? Who will benefit? And will any of it really work?

Tom Foreman, CNN, Washington.

(END VIDEOTAPE)

COOPER: A lot of people may lose their jobs when this is all over. It's not just Wall Street. Computer maker Hewlett-Packard today announcing nearly 25,000 job cuts, the nation's jobless rate the higher in years.

Let's deeper now with "Fortune" magazine's managing editor, Andy Serwer.

Now bad news about AIG, about Washington Mutual. I mean, is this going to get worse tomorrow? What happens tomorrow?

ANDY SERWER, MANAGING EDITOR, "FORTUNE": Yes, I don't see this getting better, Anderson. I'm -- I'm sorry to say that. You know, over the past couple of hours, those two giant financial companies, AIG, the largest insurance company in the United States, Washington Mutual, the largest S&L thrift in the United States, both were downgraded by credit agencies, meaning their bonds are rated the condition of the business has deteriorated, meaning they will have to raise more money.

But that puts their actual future in jeopardy at this point. In other words, possibly, they could go bankrupt very soon.

COOPER: So, if I'm sitting at home tonight, and I have a 401(k), I have got money in that, and I have got, you know, money in my house, what does all this mean?

SERWER: Well, you know, there a couple things that are happening right now. First of all, with the market, the stock market going down, you're poorer, your 401(k). So, you have lost money there. That hurts.

Also, of course, the housing market has no improved. And let's remember, at its core, this problem is all about the U.S. housing market and that deteriorating. That's happening. And, then, also, there's a crisis of confidence. I mean, this stuff is starting to spill out into the overall economy.

Then you see banks and credit card companies starting to tighten up, not loan as much money to individuals and businesses, and raise rates on credit cards. So...

(CROSSTALK)

COOPER: So, even if you don't have money in the stock market, it's going to impact short-term, and maybe long-term, because of job cuts, tightening credit market?

SERWER: I think that's right.

And, of course, you know, business conditions are also going to be a problem going forward. And you have to wonder if companies are going to start to lay people off. The Hewlett-Packard layoff you just talked about not directly connected to this type of thing. They had a giant merger.

But other companies, of course financial services in New York City and other cities, like Lehman Brothers, a lot of jobs are going to lost there. That's obviously really bad for the economy.

COOPER: In terms of the plans being offered by both Obama and McCain, what do you make of them?

SERWER: I think they're pretty short on substance. And, you know, I mean, I think these guys need to get up to speed fast, because it's going to become a huge issue. It is already is a huge issue, but it's going to sort of overwhelm, I think, all the other issues of the campaign.

These are very, very serious and complicated issues. But they kind of come back to some fundamental questions we have in our society, regulation and free markets. Where do you stand? And we always have this tension, Anderson. But I think that it's safe to say we failed.

COOPER: Has there -- has there been enough regulation? I mean, Freddie and Fannie Mae had a government agency that was supposedly watching over them. Have -- has -- you know, the people who were supposed to be watching over all this stuff, were they?

SERWER: They weren't. They were not. There is a regulatory body that oversees Fannie and Freddie, but they failed. There's no question about that.

Then you look at the regulatory evidence, in terms of Washington and Wall Street, and you have to say that there's failure there. They didn't understand what was going on in terms of derivatives, complex financial instruments that got these companies into trouble.

COOPER: What is interesting, too, I mean, I'm 41. Most of my adult life, the stock market has always just been going up. And it's one of those things that I think there's a lot of people who don't have the experience of it having major problems like this.

SERWER: Well, yes.

COOPER: And that shakes confidence.

SERWER: Right.

And, you know, of course, we both remember 1987, the crash then. And that was devastating. It really hit Wall Street. It did cause a recession. But, in a way, this feels worse, I'm sorry to say, because it seems more difficult to contain.

It seems like Washington, you know -- you know, Hank Paulson and Ben Bernanke are working very hard, but it doesn't feel like they're in control. And that is very, very unsettling.

COOPER: They're responding to -- yes.

SERWER: Yes.

COOPER: All right. Dark days ahead, probably.

(CROSSTALK)

COOPER: Andy Serwer, appreciate you being with us. Thanks.

A lot more to talk about. Our political panel weighs in tonight.

As always, I'm blogging throughout the hour. Join the conversation. I'm about to log on. Go to AC360.com. You can also find Erica Hill's live Webcast during the commercial breaks.

Also ahead tonight, is the McCain lying, is the Obama campaign in their commercials and their statements? Some recent statements by John McCain and Sarah Palin have been raising eyebrows? We will examine lies, half-truths, and misstatements ahead.

Later tonight, what Hurricane Ike did to Texas Gulf Coast and the people who live there. We're live in Galveston, where hope and heartbreak are doing battle tonight.

Stay tuned.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL NOMINEE: And that infamous bridge to nowhere, I did tell Congress thanks, but no thanks. If we wanted a bridge up there, we were going to build it ourselves.

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

COOPER: Governor Sarah Palin today still claiming she was against the so-called bridge to nowhere. Her statement is one of those sort of kind of partially true, but not really true lies that we have been hearing a whole lot of recently.

The campaign has become increasingly bitter. And accusations of lies and misrepresentations have reached an extraordinary level. Tomorrow, we will look at some of Senator Obama's statements that have been called into question, but tonight we focus primarily on the McCain's campaign's claims, some of which are simply factually incorrect.

"Keeping Them Honest," here's Randi Kaye.

(BEGIN VIDEOTAPE)

RANDI KAYE, CNN CORRESPONDENT (voice-over): Call it what you will, mistruths, half-truths, stretching the truth, telling the truth. Whatever it is, it has both Democrats and Republicans questioning what's going on inside the McCain campaign. Their opponents have gone so far as to say that John McCain and Sarah Palin are lying their way into the White House, claims the campaign brushes off.

TUCKER BOUNDS, MCCAIN CAMPAIGN SPOKESMAN: I think that those who say John McCain and Governor Palin are lying about anything in this campaign need to pay closer attention to our advertisements and the record of the candidate we're running against.

KAYE (on camera): Make no mistake. The Obama campaign has also been accused of mistruths along the way, like telling voters McCain wanted to spend 100 years in Iraq. McCain actually said, troops should stay in non-combat roles for as long as it take, not that he wanted 100 years of war.

(voice-over): But, today, Obama turned up the heat on McCain.

(BEGIN VIDEO CLIP, OBAMA CAMPAIGN AD)

NARRATOR: He's running the sleaziest ads ever, truly vile, dishonest smears.

(END VIDEO CLIP)

KAYE: McCain stands by his ads, he told the ladies from "The View."

(BEGIN VIDEO CLIP, "THE VIEW")

JOY BEHAR, "THE VIEW": We know that those twos ads are untrue, they're lies. And, yet, you, at the end of it, say, I approve these messages.

Do you really approve them?

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: Actually, they're not lies. And...

(END VIDEO CLIP)

KAYE: Well, are they or aren't they?

"Keeping Them Honest..."

(BEGIN VIDEO CLIP, MCCAIN CAMPAIGN AD)

NARRATOR: Learning about sex before learning to read?

(END VIDEO CLIP)

KAYE: Did Obama want to teach sex education to kindergartners? Not really. The programming question was intended to teach kids how to avoid sexual predators, says the nonpartisan group FactCheck.org.

VIVECA NOVAK, FACTCHECK.ORG: What he wanted to do was increase the range of some -- some sort of sex education, K-12. But the kind of thing he was interested in having kids at a young age learn about was inappropriate sexual advances that might be made against them. KAYE: The campaign's response?

BOUNDS: Our ads are based on honesty and truth and a true reflection of Barack Obama's records.

KAYE: But what about Sarah Palin's records? On the campaign trail, she keeps hammering home one point: "I told Congress, thanks, but no thanks, to that infamous bridge to nowhere."

But that's not true. Congress has already killed that project.

NOVAK: She never said, "No thanks, Congress."

KAYE (on camera): Opposing the bridge plays into a bigger theme of the McCain campaign, that Sarah Palin is the perfect crusader to help McCain rid Washington of its addiction to earmarks and wasteful pork barrel spending.

(voice-over): This is what McCain said on "The View."

(BEGIN VIDEO CLIP, "THE VIEW")

MCCAIN: First of all, earmark spending, which she vetoed a half- a-billion dollars worth in the state of Alaska.

(CROSSTALK)

BARBARA WALTERS, CO-HOST: She also took some earmark spending.

(CROSSTALK)

MCCAIN: No, not as governor, she didn't. She vetoed...

(END VIDEO CLIP)

KAYE: The truth? Governor Palin cut Alaska's earmark requests in half. But, this year alone, the state asked for $197 million.

NOVAK: She says that she vetoed a lot of legislation that would have called for earmarks, but that doesn't get rid of the fact that she actually did ask for earmarks for the state of Alaska.

KAYE: On energy policy, Palin said, Alaska provides 20 percent of the energy produced in the U.S. Is that true? Nope. The U.S. Energy Information Administration says, it's 3.5 percent.

NOVAK: It's big deal because Sarah Palin and John McCain have been claiming that Palin is an expert on energy in the United States, because Alaska has a good bit of oil. But the figures she's citing are simply wrong.

KAYE: And what about Palin's international credentials, the extent of her travels abroad?

BOUNDS: The Alaska National Guard has confirmed, just like we had confirmed at the campaign, that she has traveled abroad. She went to Kuwait. She entered Iraq. She underwent and presided over a -- over a ceremony. So, here we are, trying to bat down something that was completely true, 100 percent accurate.

KAYE: Apparently not. We checked with the Army National Guard. And they told us they are 100 percent sure Palin never made it past the Iraq-Kuwait checkpoint, that she never entered Iraq.

And her trip to Ireland, originally billed by the campaign as a visit to a foreign country, campaign spokeswoman Maria Comella says, it was a refueling stop.

Some Republicans are uneasy. Bush White House strategist Karl Rove, on "FOX News Sunday" criticized both the McCain and Obama campaigns.

(BEGIN VIDEO CLIP, "FOX NEWS SUNDAY")

KARL ROVE, FORMER SENIOR ADVISER TO PRESIDENT BUSH: McCain has gone, in -- in some of his ads, similarly gone one step too far in sort of attributing to Obama things that are, you know, beyond -- beyond -- beyond the 100 percent truth test. Both campaigns ought to be careful about -- they ought...

(END VIDEO CLIP)

KAYE: Still, political expert Larry Sabato says, mistruths can work well with the party base, which is conditioned to believe the campaign.

LARRY SABATO, DIRECTOR, UNIVERSITY OF VIRGINIA CENTER FOR POLITICS: A smear campaign can succeed. If it's completely outrageous, and it's completely contrary to the facts, then, probably the truth will catch up with it before the end of the campaign. But, if the unfairnesses or the mischaracterizations are subtle enough, then the campaign will probably succeed.

(END VIDEOTAPE)

KAYE: Now, our expert, Larry Sabato, telling us tonight that, if the McCain campaign can't win pretty, it will try and win ugly.

And, Anderson, you know it's getting pretty ugly on both sides.

COOPER: We are going to look at the Obama claims tomorrow night.

You have also been covering the case of the fire trooper and public safety commissioner. The Alaska legislature is investigating if Sarah Palin abused her power as governor to get the fire safety commissioner fired. There was some action on that today. What happened?

KAYE: Right, Anderson.

In July, the governor fired this public safety commissioner. She says it was because of budget reasons. He says it was because he didn't fire trooper Mike Wooten, who was actually the ex brother-in- law of the governor, who had threatened her family, she said.

So, they're looking into whether or not there was any abuse of power in trying to get him fired. Well, the state legislature is investigating, as you said. And, today, the campaign held a presser, saying that Barack Obama, the Obama campaign, is orchestrating this investigation, that they are behind this, announcing -- and I'm quoting here -- that the governor won't be interviewed by investigators and will not cooperated with a tainted investigation.

Now, in response to that, Anderson, the Obama campaign coming out tonight, calling this complete paranoia.

COOPER: All right, Randi Kaye, thanks.

Again, tomorrow, looking closer at the Obama campaign and how it does with the simple truth.

Our political campaign weighs in on lies and spin in a moment. Also, Sarah Palin on the trail campaigning alone, but that doesn't mean she's any more accessible. As you will see, getting Palin to answer a question is, well, pretty much impossible.

Later, investigating the deadly California train wreck. Did a cell phone distraction play a role in the crash?

That and more -- when 360 continues.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP, "THE VIEW")

WALTERS: What is she going to reform specifically, Senator?

MCCAIN: Well, first of all, earmark spending, which she vetoed a half-a-billion dollars worth in the state of Alaska.

(CROSSTALK)

WALTERS: She also took some earmark spending.

(CROSSTALK)

MCCAIN: No, not as governor, she didn't.

(END VIDEO CLIP)

COOPER: John McCain claiming Sarah Palin didn't ask for earmarks as governor, which is simply not true.

Let's talk strategy now, as well as truth and consequences with CNN's Candy Crowley, CNN senior political analyst David Gergen, and "TIME" magazine's Mark Halperin.

David, does -- I mean, have -- has the McCain -- we're going to talk a lot about the Obama campaign and their claims tomorrow night, but, I mean, has the McCain campaign gone too far stretching the truth?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Yes.

And what they have been doing, Anderson -- all campaigns stretch the truth to some degree, but I think Karl Rove was right. This has gone well beyond the normal bounds.

And it's like waving a red flag in front of the press. And you now see are journalists getting angry. And, so, Senator McCain claims that she didn't ask for any earmarks as governor of Alaska. Well, "The Wall Street Journal" has a big piece today -- "The Wall Street Journal" has a big piece today saying over $400 million in requests for earmarks from Senator -- from Governor Palin.

And, so, I think what you -- and you see various news agency, the Associated Press, not questioning the veracity of the McCain campaign, but actually saying they're lying about something. That's very unusual in a campaign.

And I think this was all coming to a head, the questions about Sarah Palin, herself and her adequacy, and the sort of -- the growing sort of resentment, anger by the press that they're sort of being -- you know, they're being had has been coming together. And I think there's a real pushback starting against the McCain campaign, at least in the press.

And one sensed that it was also -- has also been starting to occur among the public. I think it's a lot clearer among the press than it is among the public.

COOPER: It's interesting, Mark Halperin.

I think, today, John McCain said to the Associated Press that Barack Obama did not call Sarah Palin a pig when saying the lipstick on a pig, and, yet, he approved this commercial -- and it said, "I approve this commercial" -- in which they said, "Barack Obama on Sarah Palin," and they had that quote.

MARK HALPERIN, CNN SENIOR POLITICAL ANALYST: Look, I think ,on this day, the biggest question is which one of these guys can take over the American economy in just a few months.

There is -- there are these subsidiary questions about tactics and strategy and fascinating personal dramas here. John McCain is clearly uncomfortable with the campaign that he has authorized his staff to run. He's clearly uncomfortable going on "The View" and having -- and doing interviews with the Associated Press, and having to sort of come partially back towards the truth. It's not the way he wants to be.

COOPER: But he's uncomfortable, he's still saying, "I approve these messages."

HALPERIN: Oh, I'm not -- I'm not -- I'm not saying he's uncomfortable, and, therefore, we should forgive him. I think what he's -- what he's doing is, he's revealing, through this uncomfortableness, through these partial acknowledgements of the truth, that he is not comfortable, he never has been comfortable, running this kind of campaign.

And those liberal commentators who say he's sold his soul in order to try to win for the presidency, I think there's a fair amount of truth to that. And -- and, if David's right, and if voters are starting to see the extreme nature of the degree to which they're willing to just say up is down, black is white, I think he's going to be in for some trouble.

COOPER: Candy, lest we be accused of only focusing on McCain, as I said, we're going to focus in-depth tomorrow on Barack Obama, Karl -- Karl Rove, to the point he made on Sunday, he said both sides are stretching the truth. Is it equal?

CROWLEY: You know, I mean, I -- I'm not going to be the one to tell you whether it's equal or not.

I honestly think that voters need to be out there and say, OK, here's what McCain says. Everybody says it's a lie. Here are the facts of the matter.

I can tell you that there are stretched truth and things that are not fact that show up in Barack Obama's speeches. He routinely says, well, John McCain thinks that middle class is $5 million.

This is taken from the Saddleback forum, when John McCain was asked, what's middle class? And he said, oh, I don't know, let's see, $5 million, $6 million. There was a laugh. He said, no, but, seriously, let me tell you. Now, I know people are going to use that against me, but I think it's this or that.

So -- but this is a routine part of the Obama campaign. There has been a commercial out there with -- FactCheck.org took a look at, in which John McCain's quotes were taken out of context about the economy. He said in January he didn't think that we were in a recession. That quote is now being used -- or was used recently, when, in fact, the totality of what he was saying in the next couple of paragraphs was, but that doesn't take anything away from the fact that people are upset.

This is pretty routine stuff, I hate to tell you, that goes on, on a campaign. Obama has also said that he is going to pay for his tax cuts and for his spending programs solely on the basis of closing those corporate loopholes and corporate tax havens.

The fact of the matter is, he also is going to use the tax increases that he's going to give people who make over $250,000. So, there are things left out. There are things not in context.

COOPER: Right.

CROWLEY: And they -- they do that on both sides.

COOPER: Mark, do you think it is equal?

HALPERIN: No, I don't think it is. I appreciate why Candy wants to be cautious about it, because she can cite examples, we can all cite examples on both sides.

The lies of the McCain campaigns, the untruth, the distortions, the attempts to paint Senator Obama are more central to the arguments of the McCain campaign right now than they are to the Obama campaign on the other side.

COOPER: How so?

HALPERIN: Well, all their advertising, most of their rhetoric, the messages they drove at the convention, I think, are more fundamentally false and more central to their campaign message right now.

But I think Candy pointed out one thing that I think is hurting the Obama campaign. They're taking themselves off the high road and they're trivializing the prospect of being president in just a few months.

When they seize on what John McCain said about $5 million is rich, which he meant jokingly, when they do, as they did today, and they seize on John McCain saying there are fundamental strengths to the American economy, which Barack Obama agrees with -- he's not going to say there are no fundamental strengths to the American economy -- when they seize on one mis -- badly phrased thing, as they have several times with John McCain, I think they do themselves and the country a disservice.

That's not what this campaign should be about. It shouldn't be about distortions either. But it shouldn't be about what they every so often try to make the campaign about.

COOPER: David, isn't that about trying to keep the McCain campaign responding to the Obama campaign, as opposed to what's been occurring the last couple weeks, which is the Obama campaign kind of responding to these one-offs from McCain?

GERGEN: I think that's right, Anderson. There's going to be a lot backing-and-forthing.

But, if I might, I think the central story of today, politically -- let's go back to what Mark was saying -- is, we have reached another major turning point in the campaign. John McCain had all the momentum coming out of his convention with Sarah Palin, and dominated the news, was on offense right the end of this last week. There was a resistance building up.

But what happened over the weekend with the economy and the bottom falling out of the financial markets -- and we have been saying for some time on this program this is the worst financial crisis since the Depression -- Alan Greenspan said on Sunday the worst economic situation he's seen -- it seems to me that there's a real turning point now, that that momentum on McCain's side is likely to fade. And there is the opportunity for Obama to seize the momentum back on his side. I don't know if he's going to do it or not. He is trying. McCain has an opportunity here as well. But there's no question right now that this -- this really dark economic situation is now going to be -- is going to really -- is going to, I think, blot out a lot of this question about who -- the backing-and-forthing and the advertising, and focus on the issues.

COOPER: Right.

GERGEN: And that's what -- that's what Obama has wanted to do. He's now got the opportunity.

I think, personally, he's got the critique down, but he still hasn't provided a message about what he would do, nor has he really surrounded himself, in the way he needs to, with the Bob Rubins and the Paul Volckers and the Larry Summers and Laura Tysons, and have them as a tight unit. I think he still has to do that.

COOPER: Candy, no doubt -- very quickly -- on the campaign trail, it obviously played a big role today. You anticipate, in the days ahead, issue number one, it's going to be front and center?

CROWLEY: Oh, absolutely.

I mean, listen, just as foreclosures were showing up on B-17, or in the real estate section, along comes this horrific headline out of Wall Street.

COOPER: Right.

CROWLEY: I mean, this is what they wanted. They believe, of course, that the economy is one of their strengths and that they can paint John McCain as George Bush.

COOPER: All right, Candy Crowley, David Gergen, Mark Halperin, thanks.

Still ahead on 360, the investigation into that deadly train crash in Los Angeles taking a sudden turn. Was the engineer on one of the trains text-messaging he blew through a stop signal? Was he even looking at the track? We will try to find out ahead?

And our reporters on the trail "Keeping Them Honest," getting up close with the candidates -- Sarah Palin taking her first solo flight on the stump today. How did that go? And Joe Biden throwing punches today, doing his best to avoid those gaffes that critics say seem to come so naturally.

Stay tuned. You're watching 360.

(COMMERCIAL BREAK)

COOPER: On the trail today, Governor Sarah Palin took her first steps without John McCain at her side. Coming up, all the details on her first solo flight on the stump, including how she handled the media. We'll give you a hint: it was from a distance.

Plus, Joe Biden's knack for making gaffes over the years and just a few days ago.

But first, Erica Hill joins us with a "360 Bulletin" -- Erica.

ERICA HILL, CNN ANCHOR: Anderson, the death toll in that horrific train crash in Los Angeles stands at 25 tonight. Dozens are seriously injured. Investigators are now looking into whether text messages may have played a role in the crash. The commuter train ran a stop signal, hitting that freight train head on.

Two teen train buffs now say they were exchanging texts with the engineer at the time.

Day one in the O.J. Simpson trial. Who could have predicted this? The first prosecution witness who's an alleged victim of the case actually became ill on the stand. The man had a history of heart attacks.

Simpson is charged with robbing sports memorabilia dealers in a Las Vegas hotel room. He has pleaded not guilty.

And interest rates cuts that appeared largely off the table a few days ago could soon happen. In fact, economist say today's meltdown on Wall Street may, in fact, prompt the Federal Reserve to cut that key rate at its meeting tomorrow.

And Richard Wright, a founding member of the rock group Pink Floyd, died today after a battle with cancer. In the early days of Pink Floyd, the keyboardist was seen as the band's driving musical force, along with the late Syd Barrett. Wright was 65, Anderson.

COOPER: All right, Erica.

Here's tonight's "Beat 360" photo. John McCain in the kitchen during the taping of "The Rachael Ray Show" in New York on Friday.

Here's the caption from -- oh, from Erica, our staff winner.

HILL: Hello.

COOPER: "No, really. She told me all I needed to win is a little E.V.O.O. and yum-o! The White House is mine."

(SOUND EFFECT: "Ooh!")

HILL: Get that?

COOPER: No. What's E.V.O.O.?

HILL: Rachael Ray has this thing. I don't really watch her show, but I know this. She always refers to extra virgin olive oil as...

COOPER: Oh, as E.V.O.O.. HILL: Yes.

COOPER: E.V.O.O..

HILL: And then she says, "Yum-o."

COOPER: Well, "yum-o" I'm familiar with.

HILL: Very excited about things.

COOPER: You think you can do better, go to AC360.com. Click on the "Beat 360" link. Send us your entry. We'll announce the winner at the end of the program. The winner, of course, gets a "Beat 360" T-shirt.

Sarah Palin's rock-star-like tour continues. Only now, she's gone solo, still drawing big crowds but still staying on message and still not taking any questions from reporters. We're on the trail.

And later, incredible pictures of the devastation left behind by Hurricane Ike, and search and rescue teams go community to community, looking for those who stayed behind. We'll have a live report.

(COMMERCIAL BREAK)

COOPER: There's the electoral map, Minnesota now moving from leaning Obama to a tossup, shrinking his estimated lead by 10 electoral votes. Bear in mind, state polling tends to lag behind the national numbers, and John McCain's convention bump appears to be fading.

His VP pick, Governor Sarah Palin, had her first solo day on the trail today. She spoke at two rallies: one in Colorado and another Nevada. She was watched closely, to say the least, by supporters, as well as her opponents, not to mention reporters.

With Palin's ABC News interview behind her, other news organizations are eager to ask her their own questions. But that didn't happen today, though, but not for trying.

CNN's Dana Bash is on the trail.

(BEGIN VIDEOTAPE)

DANA BASH, CNN CORRESPONDENT (voice-over): Sarah Palin took to the stage and took a thinly-veiled swipe at the Republican president.

GOV. SARAH PALIN (R-AK), VICE-PRESIDENTIAL CANDIDATE: Our regulatory system is outdated. Washington has ignored this. Washington has been asleep at the switch and ineffective.

BASH: A taste of the reform message McCain advisors call the key to winning, and the biggest bonus to adding an outside other to the ticket, especially in the anti-establishment Rocky Mountain west, her first foray at campaigning alone.

PALIN: We've got a lot in common, these western states. You know, we hold together, and we pull together.

BASH: Here, Palin added fresh fodder to her now familiar stump speech, like what she'd do in the White House...

PALIN: My mission is going to be energy, security, and government reform.

BASH: ... and got a big response for a new jab at Barack Obama.

PALIN: Our opponent wants to raise income taxes and raise payroll taxes. And raise investment income taxes.

BASH: Nonpartisan groups say that's a stretch. Most Americans would get a tax cut under Obama's plan. But lines like that are drawing crowds like this: newly enthused GOP voters and even some conservative Democrats like Gayle Loughridge.

GAYLE LOUGHRIDGE, PALIN SUPPORTER: I have been political my whole life. And Palin just has got me energized up at 3:30 this morning to come see what she's got to say.

BASH (on camera): With these enthusiastic crowds, Palin's solo debut is a case study in her appeal and in the McCain campaign strategy to keep her to a careful script.

(voice-over) Palin's two western rallies were tightly-controlled events. In Carson City, Nevada, she seriously signed autographs longer than she spoke. In Golden, Colorado, signs voters brought were not allowed in. The handmade-looking yellow signs in the crowd were distributed by the campaign.

Palin spent Sunday in Denver out of sight, meeting with aides and staying way from those of us in the traveling press.

En route Saturday night, we watched Tina Fey's imitation of Sarah live in the back of her plane.

TINA FEY, NBC'S "SATURDAY NIGHT LIVE": And I can see Russia from my house.

BASH: But we weren't sure Palin had seen it until the next day, when an aide said she found it quite funny.

Palin will take questions from voters in an open forum with John McCain later this week. As for reporters following her around...

UNIDENTIFIED MALE: Governor Palin.

UNIDENTIFIED FEMALE: Is there time for a question?

BASH: ... still trying.

Dana Bash, CNN, Golden, Colorado.

(END VIDEOTAPE) COOPER: I want to point out that it's typical for reporters to question vice-presidential candidates after they're named, and usually they welcome the attention.

Joe Biden held two press conferences on his first solo day on the trail. He's also given many local and national news interviews since being named Obama's running mate, including an interview with "60 Minutes." And he takes voters' questions at events.

All of this contact with the public and the media means a lot of opportunities to put his foot in his mouth, something he has been known for. Just ahead, some of the gaffes that have earned Joe Biden that reputation over the years and reinforced just days ago.

Plus, in a Texas town reduced to ruin, the house that is still standing. It's one of the powerful images post-Ike. We'll have the latest on the damage and the cleanup efforts next.

(COMMERCIAL BREAK)

COOPER: That's Senator Joe Biden greeting supporters in St. Clair Shores, Michigan, where he campaigned today. Michigan, of course, a crucial battleground state, a key swing state with the highest unemployment rate in the nation.

Now Biden came out swinging today. He, of course, hasn't received the kind of attention from the press that Sarah Palin has in the last two weeks or so, at least in part because he's been in the public eye a lot longer, something that hasn't always worked in Biden's favor.

Joe Johns has our "Up Close" report.

(BEGIN VIDEOTAPE)

JOE JOHNS, CNN CORRESPONDENT (voice-over): The Joe Biden story, as told by Joe Biden, is all about being a fighter. He was out throwing punches today at the Republican nominee.

SEN. JOE BIDEN (D-DE), VICE-PRESIDENTIAL NOMINEE: There is simply no daylight between John McCain and George Bush, at least none that I've been able to discern. On every major challenge we face, from the economy to health care, to education and the war in Iraq, you can barely tell the difference.

JOHNS: Biden's sister says he learned how to fight early.

VALERIE BIDEN OWENS, SEN. BIDEN'S SISTER & CAMPAIGN CHAIR: When he was a young kid until he was in high school, my brother couldn't string three or four words together without stuttering. So he knows what it's like to be made fun of and to be laughed at.

JOHNS (on camera): Today, though, after 35 years in Congress, he's got a different problem. His critics say he talks too much.

When he got the V.P. nomination, Republicans even started running a so-called Biden Gaffe Clock. His record of misspeak is impressive.

(voice-over) Before Biden announced his run for president last year, he fumbled his description of Barack Obama.

BIDEN: He's the first sort of mainstream African-American who is articulate and bright and clean and a nice looking guy. I mean, that's a storybook, man.

JOHNS: When introducing his new running mate last month, he mispronounced his name.

BIDEN: Barack Omara (ph).

JOHNS: Still, he is the master of the quick recovery, even after making you cringe. Like recently, when he told man in a wheelchair to stand up.

BIDEN: Chuck, stand up, Chuck. Let them see you. Oh, God love you, what am I talking about?

JOHNS: When he was chair of the Senate Judiciary Committee, Biden was criticized for his handling of the Clarence Thomas Supreme Court confirmation hearing, because some said they degenerated into a circus.

But what Biden calls the highlight of his career came a few years later, with passage of the Violence Against Women Act, to protect victims of domestic violence.

And as head of the Senate Foreign Relations Committee, Biden has also stood up to tough guys like Serbia's Slobodan Milosevic, calling him a war criminal to his face, and Libya's Moammar Gadhafi.

NORM KURZ, FORMER BIDEN COMMUNICATIONS DIRECTOR: Gadhafi was telling Biden about why Libyan democracy was superior to the American version of democracy. And Biden had had enough, and he put his hands up and said, "Hold on, just -- I want to ask you one question about your democracy. Can the people get rid of you?"

JOHNS: But if Biden is also seen by some as a champion of a little guy, he opened himself up to attack by supporting bankruptcy reform in the Senate, which is seen by many as more of an assault on the little guy, a law making it harder for people in financial distress to wipe out their debts and get a clean start.

TRAVIS PLUNKETT, CONSUMER FEDERATION OF AMERICA: By making it more difficult for people to file bankruptcy, it's made -- the law has made it more difficult for people to keep their homes.

JOHNS: One of the companies that lobbied for bankruptcy reform was credit-card giant MBNA, then headquartered in Delaware. Biden was derisively nicknamed the senator from MBNA because of his and his family's associations with the company.

The campaign says Biden's relationship with MBNA had nothing to do with his support of bankruptcy reform and that he's not in the pocket of anybody.

Joe Johns, CNN, Washington.

(END VIDEOTAPE)

COOPER: Well, next on 360, after the storm, the death toll, the destruction, the search for survivors. Gary Tuchman is live from Texas with the latest on Hurricane Ike.

And later, market meltdown, stocks plunging to a seven-year low after Lehman Brothers filed for bankruptcy. The fall-out from Wall Street to Main Street coming up.

(COMMERCIAL BREAK)

COOPER: Heartbreaking pictures from Galveston two days after Hurricane Ike slammed into Texas. Look at those pictures: flooding towns stranding thousands. The scope of what happened really is just now starting to unfold.

In some areas, the devastation is complete, hurricane obliterating just about everything in its path. Take a look at this. It's Gilchrist, which is a beachfront community in Galveston County. This is what it looked like before Ike hit. After the storm surge, that's what it looks like now. Punching winds, it's basically reduced to ruin, swallowed by the sea. Just block after block. Before and after. The destruction simply extraordinary.

One house, just about one house there remaining. Gilchrist is one of many areas that were hit hard by Hurricane Ike. Tonight, authorities are conducting search and rescue missions, trying to find people trapped by the hurricane.

Gary Tuchman has the latest from Texas.

(BEGIN VIDEOTAPE)

GARY TUCHMAN, CNN CORRESPONDENT: This is Highway 87 in Crystal Beach, the main street in this town that may have been the hardest hit town from Hurricane Ike. It's completely isolated. You can't drive here anymore. Searchers are just coming here today to start looking for the possibility of anyone who was killed in this hurricane.

But we had to take a boat here from Galveston, a 40-minute boat ride just to get here. And here's some of the stuff that we're seeing in this town.

This is a house in the middle of the street. This is the major intersection in Crystal Beach. And like everywhere in this town, mud and much and sewage. This was underwater for 36 hours. The water is now gone, but this is what it's left behind.

If anyone was in this house, and we've gone through it, no one was in this house, there's no way they could have survived. But there are scores of homes like this, that are sitting in the middle of streets. And many homes are just completely gone. There are lots where the houses were. And you don't see anything anymore.

This gives you an idea of some of the businesses in town. This is the grill. It's a restaurant that people and tourists -- this is a very big tourist town -- come to, destroyed. And this is what we see throughout the entire town.

This storm was a Category 2. But people we've talked to -- and there were some people who were here who rode it out. Some houses still stand. And they say they can't believe it was a Category 2.

What did you see going down the street?

UNIDENTIFIED MALE: This whole house. The whole house with the roof sticking up floating down.

TUCHMAN: Floating down the street?

UNIDENTIFIED MALE: Floating down the street right down the canal waterway.

TUCHMAN: What were you thinking when you were riding this out?

UNIDENTIFIED MALE: Just hope one of them doesn't hit us. That's what we were thinking.

TUCHMAN: This is the biggest grocery store in town. It's appropriately called the Big Store. The reason we're here -- we don't usually report rumors. But this rumor was so active we've got to try to set the record straight.

Police departments got many calls that scores of people, perhaps as many as 200, rode the storm out inside this grocery store in Crystal Beach. And there are reports that a lot of those people are missing. Well, we're not sure if searchers have been in the store yet. We've gone all through it, and there's no way for us to check every nook and cranny.

But in our tour of the store so far, we've looked very carefully. We can see no signs whatsoever of anybody who rode out the storm and did not survive.

There are roughly 100,000 year-round residents who live here in Crystal Beach. But there are between 20 and 30,000 tourists here during weekends in the tourist season between the spring and Labor Day. But this is a much different place now. This will take a long time to rebuild.

The fact is that there is not one structure that we have seen in this entire town that hasn't been damaged or destroyed.

(END VIDEOTAPE)

COOPER: It's amazing, those pictures. It looks like Waveland, Mississippi did, you know, right along the shoreline right after Katrina. I know some three million customers lost power when Ike hit all across southern Texas. And how many are still without power now? TUCHMAN: Anderson, still 1.5 million customers without power. And here in Galveston, every customer is without power. There's no power. There's no water. There's no telephone communication. There's no medical care.

And basically, anyone who's evacuated is being told you can't come back. They've actually closed the bridge, and they say you can't come back at all. And it will be at least a month before you'll be able to, because we won't have power until then.

And as far as total damage, Anderson, incalculable, in the billions. And it's very symbolic today. We took that boat ride to the Bolivar Peninsula where Crystal Beach is located. It's a 40- minute boat ride. We had to keep zigging and zagging because there's so much rubble in the Galveston Bay. There's wood, and there's metal and there's parts of houses, and there's children's toys and there's swimming pools and there's lamps and there's desks. And we even saw livestock. We saw three cattle in the water. It's very surreal; it's very sad.

COOPER: Unbelievable. Gary, thanks.

"The Shot" is next, playing politics for laughs, "Saturday Night Live" taking on Sarah Palin and Hillary Clinton.

And the top of the hour, the meltdown on Wall Street, the Dow closing down more than 500 points. What it means for you, for all of us, and for the elections when 360 continues.

(COMMERCIAL BREAK)

COOPER: Erica, time now for "The Shot." If you watched "Saturday Night Live" over the weekend, you were waiting for it. From the moment Sarah Palin was chosen as John McCain's vice-presidential candidate, you knew Tina Fey would play the part on the show. At least Jack Gray knew it. She did, finally, this weekend...

HILL: Jack Gray knows all.

COOPER: He blogged about it, like, weeks ago, I think. Anyway, alongside Amy Poehler as Hillary Clinton. It was pretty funny stuff. Take a look.

(BEGIN VIDEOTAPE)

TINA FEY, NBC'S "SATURDAY NIGHT LIVE": Tonight, we are crossing party lines to address the now very ugly role that sexism is playing in the campaign.

AMY POEHLER, NBC'S "SATURDAY NIGHT LIVE": An issue, which I am frankly surprised to hear people suddenly care about.

FEY: You know, Hillary and I don't agree on everything.

POEHLER: Anything.

I believe that diplomacy should be the cornerstone of any foreign policy.

FEY: And I can see Russia from my house.

(END VIDEO CLIP)

COOPER: That was the opening sketch, Amy Poehler delivering a hilarious bit, as they always do.

HILL: I thought it was pretty good. I have to say, I liked it.

COOPER: Yes. They do. They both do really well. It was great to see Tina Fey back on the program.

HILL: They do. I think she's going to be there another time, too. I'm going to go out on a limb here. I'm no Jack Gray, but I feel comfortable...

COOPER: She's going to keep doing it?

HILL: She'll be back as Palin.

COOPER: My favorite one, though, is the guy who does the political comedian. I don't know if you watched that.

HILL: He was hysterical this week on "Weekend Update."

COOPER: "Weekend Update." (UNINTELLIGIBLE)

All right. You can see all the most recent "Shots" on our Web site at AC360.com. You can also see other segments from the program, read the blog, check out the "Beat 360" picture. The address again: AC360.com.

Time now for our "Beat 360" inners. Our daily challenge to come up with a caption that's better than the one anyone on our staff can come up with.

All right. So here it is. Tonight's picture, John McCain, taping "The Rachael Ray Show" on Friday.

Our staff winner, Erica. Her caption...

HILL: Woo, woo!

COOPER: Oh, if you could only see what Erica just did. Her caption: "No, really. She told me all I need to win is a little E.V.O.O. and yum-o! The White House is mine."

(SOUND EFFECT: "Oooh.")

COOPER: The viewer winner is Terri from Atlanta with this caption: "John, make me the White House chef, and all of your meals will be yum-o!"

(SOUND EFFECT: drum beat) COOPER: There you go. All right. Terri, your "Beat 360" T- shirt is on the way. You can check out all the entries we received on our blog and play along tomorrow by going to AC360.com. That's our Web site.

Coming up at the top of the hour, more on our breaking news, the Wall Street meltdown, what it means to you and the candidates.

And the questions about John McCain, Sarah Palin and the truth. We're "Keeping Them Honest" when 360 continues.

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