Return to Transcripts main page

ANDERSON COOPER 360 DEGREES

The Economic Meltdown and Politics; Turning Red State Indiana Blue; Palin Probe

Aired September 16, 2008 - 23:00   ET

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


ANDERSON COOPER, CNN ANCHOR: We begin with breaking news that could affect your job, your retirement, your wallet. Another shock to the financial system, possibly another massive bill for you, taxpayers around the country and a giant warning sign the mortgage crisis is not over yet.
First Lehman Brothers collapses and Wall Street melts down, a slight market recovery today. But tonight the nation's largest insurance company already shaky from the iffy mortgages it insured, is getting a bailout because the alternative, well, that would be a nightmare.

In a moment, personal finance expert, Suze Orman, on the steps you can take to weather this storm. But first the storm itself, the latest developments from CNN's Ali Velshi and Businessweek's Diane Brady.

What is AIG, Ali, and what does it mean?

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: AIG is one of the largest insurers in the entire world. They have more than 70 million customers and those are individuals and companies.

This is not Lehman Brothers, an investment bank. This is much more like Freddie and Fannie. It is tied to so much. If it were to fail, the ripple effect would be dramatic.

AIG has been trying for more than a week now to raise $75 million, its credit rating has been dropped; it has found it difficult to do so.

Tonight, at risk of AIG failing, the government has extended to AIG an $85 million bridge loan, a $10 billion bridge loan. It's a temporary loan and it comes at a rate which calculated at today's rate which is about 11.31 percent. For 24 months they can use this. But that is a very, very expensive loan which means the government keeps them afloat but there's no incentive for them to sit down and not look for better financing.

AIG lives to fight another day, basically, and that means your stocks could do better because it is part of the Dow 30. It's one of the biggest finance companies in America.

COOPER: Diane, I want to read you what Senator Charles Schumer, the Democrat who sits on the Senate Finance Committee said about the AIG. He said quote, "the administration is approaching an unprecedented step. Unfortunately we're living in unprecedented times. Hearing of these plans, you have to stop and catch your breath but upon reflection, the alternatives are much worse."

Why is the government bailing them out?

DIANE BRADY, SENIOR WRITER, BUSINESSWEEK: Well, basically as Ali said, it's a huge company. It touches all parts of the economy.

If you look at Wall Street it doesn't really matter if another investment bank goes under. People are out of work but it doesn't have the same ripple effect.

I think the most important part of AIG is that it is the linchpin of a lot of corporate America. It insures property casualty, it also has life insurance. You just can't let this company fail.

It had $110 billion in sales and $1 trillion in assets.

COOPER: How many bail outs can our government do? How much money do we have to bail out? Freddie and Fannie and now AIG?

VELSHI: It's a lot of money and that is taxpayer money in the end. The government wants to be sure they can get this back and why they are charging a lot for this loan to discourage anybody else who wants to come looking for money.

But the bottom line is, they have to decide, what is better to do? Loan them the money now or deal with the cleanup if a company like this were to fail. And that is what you're going to hear a lot of talk over the next few days. Why is the government doing that?

There are some people who say they rescued AIG and they saved bad situation from getting worse. There are others who are going to say the government can't be in this business of bailing out private firms and getting into trouble.

COOPER: Are there other companies on the brink like this?

BRADY: I think there are. But I think an important thing is, let's remember that they said "no" a few days ago. They did not want to do this to AIG. There is no money in the system right now. They tried Wall Street, there's no money there. They tried to bend insurance rules to get money for themselves, it's not there.

Yes, there are others, WaMu could come down the line, but AIG is unique.

COOPER: WaMu is Washington Mutual; another savings and loan.

Diane Brady, thank you so much. Ali, we'll talk to you in a moment.

Personal finance expert, Suze Orman joins us in a moment to talk about what you should and shouldn't be doing with your stocks and 401k's and other things. Tonight also, John McCain and Barack Obama, each weighing in on Wall Street and the economy. Here are the bullet points of what Senator McCain promised today on the campaign trail.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R) PRESIDENTIAL NOMINEE: In short order we're going to put an end to the reckless conduct, corruption and unbridled greed that have caused the crisis on Wall Street. We're going to put a stop to it.

I pledge that the FDIC and the SPIC will have all the support they need to fully back the savings for the American people. Government has a clear responsibility to act in defense of the public interest and that's exactly what I intend to do.

Above all, I promise reforms to prevent the kind of wild speculation that could put our markets at risk and it's already inflicted such enormous damage across our economy.

(END VIDEO CLIP)

COOPER: That was John McCain in Tampa today, also promising a 9/11 style commission on Wall Street greed. We'll have more details on that in a moment.

Barack Obama in Colorado this afternoon taking aim at McCain's commission idea and he also laid out his own plan, here again in condensed form.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA, (D) PRESIDENTIAL NOMINEE: To jump-start job creation, I propose a $50 billion emergency economic plan. We need to replace Fannie Mae and Freddie Mac as we know them today.

I will ease the burden on struggling homeowners through a universal homeowner's tax credit. I will change our bankruptcy laws to make it's easier for families to stay in their homes.

(END VIDEO CLIP)

COOPER: Barack Obama and John McCain on the trail on the economy, campaigning on their own. Later in the day Sarah Palin joined up with John McCain. That's where Ed Henry picks up on the trail.

(BEGIN VIDEOTAPE)

ED HENRY, CNN CORRESPONDENT: When John McCain campaigns by himself, there are empty seats in critical states like Florida. With Sarah Palin at his side, the crowds are electric.

When Palin was finished speaking here in Ohio, voters, especially women, started leaving while McCain was still at the podium. It's dangerous for the second in command to outshine the top of the ticket. McCain aides insist they're fine with all the excitement around Palin because it boosts their megaphone on key issues like the economy.

GOV. SARAH PALIN, (R) VICE PRESIDENTIAL NOMINEE: We also need serious reform on Wall Street and John McCain is the guy who will get it done.

MCCAIN: We're going to put an end to the reckless conduct, corruption and unbridled greed that have caused a crisis on Wall Street.

HENRY: Here on the road, they're running as outsiders.

PALIN: With your vote, we're going to Washington D.C. to shake things up.

HENRY: But McCain's latest solution to fix the economy comes straight inside the Beltway; appoint a blue ribbon panel in Washington to probe Wall Street.

MCCAIN: We have to assure every American that their deposit in a bank is safe. We have to have a 9/11 commission and we have to fix this alphabet soup of regulatory agencies that's left over from the 1930s.

HENRY: In Colorado, Barack Obama jumped all over that idea.

OBAMA: Senator McCain offered up the oldest Washington stunt in the book. You pass the buck to a commission to study the problem.

HENRY: Democrats are hoping if they can paint McCain as out of touch on the economy and Palin as an outside the mainstream conservative, the running mate's high favorability ratings will drop.

SEN. CLAIR MCCASKILL, (D) MISSOURI: It's going to settle down. Women in America and frankly all voters are going to kick the tires for the next month and a half and they're going to figure out that these policies she embraces are very extreme.

HENRY: Senior McCain advisers insist Democrats are doing some wishful thinking.

CARLY FIORINA, MCCAIN ECONOMIC ADVISER: I think it's pretty clear that the Democratic Party is in full throated panic about the state of the race.

HENRY: But even conservatives see a risk if Palin overshadows McCain.

KEVIN MADDEN, REPUBLICAN STRATEGIST: Once it becomes a position where you're relying too much on your vice president, then you don't have that ability to really accentuate the top of the ticket.

(END VIDEOTAPE) COOPER: Ed, is the McCain campaign concerned about whether all these attacks on Sarah Palin's experience by the Obama campaign, their surrogates are having an impact?

HENRY: Anderson, they say they have nothing official to announce yet, there are signals they may be sending Governor Palin to New York next week for the U.N. General Assembly meetings. That would give her a chance obviously to sit down with a lot of world leaders; sort of raise her profile on the international stage.

And so that is a sign perhaps that they're concerned about that hole in her resume and the attacks on her experience. And that this would be one way to beef up that resume before that big presidential debate with Joe Biden that obviously will have a large focus on foreign affairs -- Anderson.

COOPER: All right, Ed Henry, thanks.

On now to the Obama side, more on the economy and the politics of the economy, "On The Trail," Candy Crowley.

(BEGIN VIDEOTAPE)

CANDY CROWELY, CNN SENIOR POLITICAL CORRESPONDENT: Barack Obama sees an opening in the crisis on Wall Street, a way to connect with Main Street and disconnect John McCain.

OBAMA: We are in the most serious financial crisis in generations. Yet, Senator McCain stood up yesterday, and said that the fundamentals of the economy are strong.

CROWLEY: McCain later said he was talking about American workers and American products. Too late, it is the Obama campaign's favorite line now.

MCCAIN: Our economy, I think, still, the fundamentals of our economy are strong. The fundamentals of our economy are strong. The fundamentals of our economy are strong.

CROWLEY: In Golden, Colorado, Obama offered what he called six principles to prevent a Wall Street crisis in the future, including smarter government oversight and regulation of financial institutions.

OBAMA: Over the last few years, commercial banks and thrift institutions were subject to guidelines on sub-prime mortgages that did not apply to mortgage brokers and companies. This regulatory framework failed to protect homeowners.

CROWLEY: McCain has called for better oversight and regulation but Obama questions the commitment.

OBAMA: Quote, "I'm always for less regulation," unquote. And referred to himself as, quote, "fundamentally, a deregulator." This is what happens when you confuse the free market with a free license to let special interests take whatever they get.

CROWLEY: McCain as a tool of special interests is a recurrent theme in Obama's speeches, but this is a two-man race.

MCCAIN: Talk's a tough game on the financial crisis but the facts tell a different story. Senator Obama took more money from Fannie Mae and Freddie Mac than anyone but the chairman of the committee they answer to. He put Fannie Mae's CEO, who helped create this problem, in charge of finding his vice president. That's not change, that's what's broken in Washington.

CROWLEY: It is word to word combat now, a bid for working class voters. Obama's high flying rhetoric is all but gone. It is nuts and bolts, less about hope, more about fears around the kitchen table as he tries to connect with this reluctant voting block.

OBAMA: The cost of everything, from gas to groceries, to health care has gone up. These are the struggles that Americans are facing. This is the pain that has now trickled up.

CROWLEY: At Camp Obama, they are delighted if this race is decided on the economy, said a strategist, "we'll do very well."

(END VIDEOTAPE)

COOPER: Candy joins us now. Candy, Obama has obviously had trouble connecting with some voting blocks, white working class, blue- collar voters. Is there any signs he is making progress in those areas?

CROWLEY: Not yet. But here is how they sort of strategize this inside the campaign. They say, listen, first of all, people have not been paying that much attention. They believe that Obama wears well over time. That the more people see him, the more they understand that he connects.

They think that the debates, which they've started preparing for, will let him show his connection to the problems of working class voters. They believe, in the end, you know, they are going to see Obama as the person that understands paycheck to paycheck workers.

So, it hasn't developed yet but they certainly believe over time, since people are starting to focus, that's the way they will see him eventually.

COOPER: All right. Candy, stick around. We're going to talk to you and John King a little bit later on about more of what's happening around the trail.

As always, we're blogging throughout the hour, Erica Hill and I. Join the conversation, go to ac360.com. You can also find Erica's new live web cast during the commercial breaks. If you haven't seen it, you should.

Up next, Suze Orman, the nation's foremost personal finance expert on surviving these financial and economic times; we'll talk about that. And we will be joined also by Ali Velshi and what the candidates' plans really are for you and your money.

Later, "Keeping them Honest;" how Obama's campaign statements track with the truth. We're keeping them honest, judge for yourself.

And new developments in the political battle over what Sarah Palin did or didn't do as governor of Alaska, when she fired the state's top cop. Not that guy, that guy's boss. Was she doing her job or doing the job on someone for personal reasons?

All that and more tonight on "360."

(COMMERCIAL BREAK)

COOPER: A very nervous day ends with a sigh of relief on Wall Street as the Dow closes up 141 points. That bit of optimism followed the Fed's decision not to cut key interest rates. The question is what is going to happen tomorrow?

Tonight, the breaking news that the Federal Reserve is rescuing AIG with a massive loan to keep the giant insurance company in business. So will it help save the economy form collapsing? From insurance policies, 401(k) to your job, home, savings and future; we want to look now at what all this means to you and what each candidate has promised to do about it.

Joining us to talk about "Your Money and Your Vote," Suze Orman, the personal financial expert and host of CNBC's Suze Orman show and once again CNN's Ali Velshi.

Suze, for the average folk who has got maybe a little money in the stock market and certainly money in their 401(k) and a lot of money in their home, what do they do now?

SUZE ORMAN, HOST, "SUZE ORMAN SHOW": They do what they've been doing, and thank God, truthfully, in my opinion, that the feds rescued AIG because we might not know what they would be doing tomorrow if that hadn't happened.

COOPER: Because it's such an important and huge company.

ORMAN: Oh, my God, do you agree with me?

COOPER: Yes.

ORMAN: This was serious. Why it took them so long. If they had just done it Friday, it would have cost us $20 billion. No, they wanted to wait so it would cost us $85 billion. That's a whole another story, however.

But today people do what they've been doing, stay out of credit card debt. You make sure that your money is insured by the FDIC. You don't take undue risks. If you just had an inheritance you have new money, it's not money that belongs in the stock market.

VELSHI: Keep a little cash. Suze says this all the time. What's happening on Wall Street is no different than what's happening to Americans. The companies that have a lot of cash can weather this storm because they'll come out of it at some point. People with a lot of cash can weather out this storm. COOPER: It was interesting. I was reading an article in "Times" saying or "The Wall Street" saying a lot of people right now just kind of freeze because they're so nervous. I'm in this position, too. I don't even want to look at what stocks I have, it's intimidating.

Do you take money out of the stock market now? If you have a bunch of stocks, do you take them out?

ORMAN: Depends. Do you need the money or do you not? If you need the money in one year to retire, to generate income for you and it's all in growth stocks, yes, you bet you. You come out of the stock market right now.

COOPER: That's if you need the money in a year.

ORMAN: That's it. But if you don't need the money for 10, 15, 20 years and you're in good quality stocks, stocks that aren't going to go away, then of course you stay here.

You know what --

COOPER: Long term versus short term.

ORMAN: It's a long term versus short term however, who has money in the stock market, Anderson, really. When you think about it? They have it in a 401(k), what do they have? They have credit card debt. At what interest rate? 18 percent.

Want to make an 18 percent return on your money, pay off the credit card debt. Forget the stock market. People have to be so careful here.

COOPER: It's crazy to invest only in the stock market when you have 18 percent credit card debt and haven't paid that off.

ORMAN: But here's the real thing that is going to start happening to people. They're going to find that they have credit cards. They're going to find they have credit cards that they haven't been using that have no balances on them.

From this, they're going to find that these credit card companies are going to close down these credit cards; they're going to close down your home equity lines of credit. That will affect your FICO score and interest rates then are going to go up. So you're going to find that credit is going to now decrease more and more and more. That's how it's going to say effect the average person.

COOPER: Ali, Obama and McCain both said they have plans. What are the differences between their plans?

VELSHI: With the crisis that we're in, virtually nothing. They both said they want better regulation. We all know we need better regulation. The regulatory framework for financial services is a mess. A lot like our security was before 9/11.

COOPER: For goodness sakes, it's like security was before 9/11. VELSHI: Different organizations that don't talk to each other.

COOPER: But everyone says they know we all need more regulation. How come we've been sitting around, just because people are making money?

VELSHI: Particularly when these two senators talk about the fact they should have been done this when this should have been done. They've both been in the senate. I don't recall either of them suggesting this sort legislation.

That still probably wouldn't have saved this situation. They don't have a plan about this and I'm not entirely sure that any administration could. This was the normal greed and markets that have caused this.

COOPER: Their tax plans though differ greatly.

VELSHI: Their tax plans do differ greatly and for most people a better thing to look at.

Barack Obama's tax idea, his philosophy, lower taxes for about 95 percent of households and raise taxes on those who make more than 250,000. He'd like to reduce taxes for seniors who earn less than $50,000.

McCain will lower taxes for everybody, including businesses. He wants to reduce taxes for all individual taxpayers and he wants to cut the business taxes down because his belief is if you reduce taxes, it encourages growth because it gives people their own money. He also wants to get rid of the alternative minimum tax which, by the way, is killing a lot of middle income --

COOPER: Both these plans do they solve the deficit problem?

VELSHI: No. Both of their economic plans will grow the deficit, in fact, and debt. It's not a sexy issue, Anderson, it's a hard issue to talk about.

COOPER: You're talking about personal finance and people paying off their own personal debt. Our government has a huge amount of debt, we're borrowing from China and just about everyone else.

ORMAN: Huge. Huge. You know these segments you do, keeping them honest? We need to be keeping the corporations honest. We need to be keeping the SEC honest.

There are so many things that have gone so seriously wrong, I can't even tell you, which is why the everyday person, forget about seriously what the economy is doing, look at your own life, look at what you have got going on.

There's only one thing, Anderson, you have control over in this life, and that is your own personal finance. What you do with the money you have, what you do with the money that you don't have. That's where you have to focus, right now, because all this other stuff, I have to tell you, nobody --

COOPER: Some people still thought, their instincts is take money out of the stock market and take the money out of the 401(k) and just keep it in cash right now because you want to be liquid and maybe get back in the stock market when you think things get better.

VELSHI: We saw the inflation numbers come out for the month of August, 5.6 percent, annual, year-over-year. 5.6 percent; that means unless you're earning 5.6 percent, you're nowhere ahead of where you were a year ago. Where do you get 5.6 percent? There's no bank account that will give you that kind of money right now.

ORMAN: Yes, but Ali, what he's saying is, isn't it better to have something than to lose 20 percent. Who cares about 5.6 percent?

VELSHI: But life's about a little bit of risk. We just have to make smart decisions about risk.

ORMAN: No, there are people that it might make sense for them --

VELSHI: Just to sit on their money.

ORMAN: Hey, 99 percent of my money is where? I've been criticized for this; it is in municipal bonds. Why? I'd rather make 5 percent tax-free and not have worry about the stock market. They're safe.

What do I care about the stock market? There are some people truthfully, if you're safe, you're getting a good return, who cares?

VELSHI: But that's still an investment decision, to be in municipal bond. It's very different than keeping it in your house.

COOPER: The bottom line is, if 401(k) is your primary savings, you stick with it.

ORMAN: Absolutely, as long as you are invested in things that make sense.

COOPER: All right. Suze Orman, it's always good to have you on. Thank you very much.

ORMAN: Thank you.

COOPER: Ali Velshi as well. Troubling times, Suze Orman is sticking around; you can see her on Erica's live web cast in a moment during the break. Link to it from the live post on ac360.com. You have to do it quick; coming up.

Now analysts fear this could be the start of the worst financial crisis since the 1930s. Let's put what happened back then in perspective, though.

Here's the raw data. Great Depression lasted from 1929 to 1939. At its height, unemployment was a staggering 25 percent. By 1932, the national income was half of what it was in 1959. By 1933, more than 11,000 of America's 25,000 banks had failed.

Straight ahead, checking the facts, looking at Barack Obama's record when it comes to telling the truth on the trail and public statements in the media. Is the Obama campaign stretching the truth, distorting the record or taking McCain's statements out of context?

We examined McCain last night, only fair we do the same to Obama's; "Keeping Them Honest." You decide.

Also a panel on how the two candidates say they'll fix the economy. Ahead on "360."

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MCCAIN: The American worker is the most productive and the most innovative; they're the fundamental of our economy and the strength of it and the reason why we will rebound. We will come back from this crisis.

OBAMA: He tried to explain himself again this morning by saying what he meant to say was that the American workers are strong. But we know Senator McCain meant what he said the first time because he has said it over and over again throughout this campaign.

(END VIDEO CLIP)

COOPER: And so it went today, more back and forth between John McCain and Barack Obama. This time, Senator Obama accusing Senator McCain of trying to redefine after the fact remarks that McCain made on the trail.

Tonight, we're continuing our fact check on the candidates' spin. Last night, we put John McCain under the microscope and took a look at what he has been saying on the trail and how truthful he's been.

Tonight we're doing the same with Barack Obama. Checking the facts against the spin, as always leaving the rest up to you. "Keeping Them Honest," here's Joe Johns.

(BEGIN VIDEOTAPE)

JOE JOHNS, CNN CORRESPONDENT: Clean shot or cheap shot. Obama's ads speak for themselves. You be the judge. Take the dustup over the economy. Just One day after John McCain talked about the current Wall Street crisis, the Obama campaign pounced with an ad repeating over and over again, a short little McCain sound bite.

(BEGIN VIDEO CLIP)

MCCAIN: The fundamentals of our economy are strong. The fundamentals of our economy are strong.

(END VIDEO CLIP) JOHNS: The fact is McCain said more than that. He also acknowledged in his speech that these are very difficult time, though now after the Obama attack he suddenly had some explaining to do.

(BEGIN VIDEO CLIP)

MCCAIN: What I obviously was saying and I believe is the American worker is the most productive, most innovative, they're the fundamental of our economy and the strength of it, and the reason why we will rebound. We will come back from this crisis, but right now we're the victim of greed, excess and corruption in Wall Street.

(END VIDEO CLIP)

JOHNS: In another ad, Obama attacks McCain and spending for schools.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: John McCain voted to cut education funding.

(END VIDEO CLIP)

JOHNS: Well, did he? Take a look at the fine print. It's tiny, up there at the top of the screen. The ad lists five dates which appear to be several McCain votes. But the truth is McCain only voted once to cut education funding. Another time he voted to increase funding. The other three votes, he opposed an increase.

VIVECA NOVAK, FACTCHECK.ORG: I would call that simply false. He did not vote to cut education funding five times. There was only one instance where you could say he actually cut from the current baseline.

(BEGIN VIDEO CLIP)

MCCAIN: It's over. It's over for the special interests.

UNIDENTIFIED MALE: Wait a second, John McCain's chief adviser lobbies for oil companies.

(END VIDEO CLIP)

JOHNS: Example number three. An Obama ad running now sayings a top McCain adviser lobbies for oil companies, Charlie Black. The truth is he used to lobby for oil companies but not anymore.

NOVAK: Actually, nobody who is paid by the McCain campaign is permitted to currently be lobbying. They've all taken leave or they're not currently lobbying.

JOHNS: In one Obama ad the issue may be more omission than distortion. In a commercial targeted at Michigan; remember, Detroit is Motor City and it's having tough times. Obama claims that McCain opposed loan guarantees for auto makers which is true.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: But John McCain refused to support loan guarantees for the auto industry. Now, he's just paying lip service.

(END VIDEO CLIP)

JOHNS: But what the ad doesn't say is that McCain actually changed his tune in August.

NOVAK: Well before this ad was aired he had changed his position and come around to supporting the loan guarantees.

JOHNS: And the most controversial assertion of all perhaps is the remark Obama made months ago that McCain would keep troops in Iraq for 100 years.

McCain actually said troops should stay in a non-combat role as long as it takes, not that he wanted a century of war.

(END VIDEOTAPE)

JOHNS: Of course, not everything Obama says in his ads is untrue, but regarding these issues, the campaign would not give us anyone to interview. But it's clear they stand by the ads.

Joe Johns, CNN, Washington.

COOPER: Joe Johns, "Keeping Them Honest."

Just ahead, this year's unlikely swing state, Indiana. Why is this traditionally red state suddenly in play and what is it going to take to turn it blue? We've got the "Raw Politics."

Plus the long road ahead in Texas; the massive cleanup challenge hurricane Ike left behind. Look at that.

Death toll now 47 and future uncertain for all those left homeless. The latest when "360" continues.

(COMMERCIAL BREAK)

COOPER: It is as Candy Crowley noted earlier, word-for-word combat. Now, let's "Dig Deeper" with what's happening in the race with CNN's John King and Candy Crowley.

Candy, each day this race evolves, how has the economic meltdown changed it in really the last 48 hours?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Well, it's changed the headline. And that's certainly what the Obama campaign was looking for.

As time went on, the home mortgage crisis, the foreclosures began to move further and further back in the headlines, the jobless numbers come out, that's a burst of a couple of days. But this came out suddenly. It has dominated the headlines as we watch the DOW Jones at the close of every stock market. So the fact is that this has given new life to what the Obama campaign has wanted to talk about, at least for some time, and certainly in the post- convention period, when they've been kind of rocked by the Palin selection.

COOPER: John, it does make it sort of hard to talk about choice of words or what he said lipstick or when suddenly this is making huge headlines.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Without a doubt, this is a huge and a very complicated and a very compelling issue. Because when people see the headlines, whether it's $85 billion from the Federal Government to bail out AIG tonight or the collapse of a major firm like Lehman Brothers and whether they logon and look at their 401(k)s, Anderson, this is an issue that hits everyone around the table. And both candidates are being forced to come up with their -- to explain their ideas although, both of them have been sniping.

Still John McCain says, well, "I called for more regulations two years ago." Barack Obama says he would just be more like George W. Bush.

This is a time when these candidates do have an opportunity, and one could take command of the race if they stepped forward and delivered something much more compelling than the other one. I don't think we have seen that quite yet but that is certainly what the competition is right now.

COOPER: Well Candy, McCain is getting hammered by Obama for his comment that the fundamentals of the economy are strong. And now McCain says he was talking about the American worker. and also in that same statement had acknowledged that the market is in turmoil and that these are difficult times. But is Obama's attack working?

CROWLEY: Well, we'll see. I don't think we know this yet. I mean this has been a part of Obama's repertoire since the convention simply because, John McCain at that convention claimed the change mantle. Here's Sarah Palin, she's a reformer, I'm a reformer, I'm a maverick, I can effect change in Washington.

And so they have been beating this back ever since and now they have a new subject matter that kind of wrap this around and say he's not about change, he thinks everything is great. He's kind of the old guard. He is totally out of touch with where people are now.

So it's this sort of McCain doesn't understood your problems and besides which he's part of the group that created this problem.

COOPER: John McCain adviser Carly Fiorina made a statement about Sarah Palin. It has gotten a lot of attention and there's a version of it floating around on the Net that's not entirely accurate.

I want to play the accurate version right here.

(BEGIN VIDEO CLIP)

MCGRAW-HILL SHOW: And you were asked whether Sarah Palin has the experience to run a major company like Hewlett Packard which you did and you said, "No, I don't, but you know what? That's not what she's running for?"

CARLY FIORINA, MCCAIN'S ADVISER: Well, I don't think John McCain could run a major corporation and I don't think Barack Obama could run a major corporation and I don't think Joe Biden could run a major corporation.

(END VIDEO CLIP)

COOPER: The version playing around on the Web just says that I don't think John McCain could run a MAJOR CORPORATION and cuts of there, doesn't mention Obama and Biden and now we want to play the whole tape here to be fair.

But even though she included Obama and Biden, the McCain campaign cannot be happy about her comments. Though, in truth, both these candidates, Obama and McCain, I mean, don't have a huge amount of economic experience, they're not business leaders.

KING: They have not run a major corporation but Anderson, what is the United States government? It is the biggest business, if you will, and it requires executive decisions like that.

From Senator McCain on down they were apocalyptic at those comments today, yes, she said Obama and Biden aren't qualified either. But at a time when they're trying to make this compelling economic argument to seize control of the biggest issue before the American people to have someone who is on your payroll as a senior economic adviser, or I think she volunteers for the campaign, say that you're not qualified has them furious.

And she was told to cancel some other interviews she had scheduled today. And I'm told you won't see much of Carly Fiorina on TV at least for a while because of their disappointment. And this is another miscommunication from the McCain campaign at a pivotal time.

He could -- John McCain can make the case that yes, the fundamentals of the economy are strong, the economy grew at more than three percent in the last quarter. That's not so bad. Unemployment is not at historically high levels but you just can't make that case right now.

It is politically not smart to try to out-debate the economics, the numbers, the statistics if you will and Carly Fiorina only added to a communication problem for the campaign.

COOPER: All right, everyday this race is changing quickly. John King, Candy Crowley thank you.

Still ahead, the battle heating up in Alaska over the investigations of the firing of the state's top cop; Sarah Palin and her husband and her staff at the center of the probe. The stakes were raised today, how an ugly divorce snowballed into a political showdown.

Plus, how Indiana went from a reliably red state to a swing state and why the Obama campaign thinks it has a shot of turning it blue. John King reports on that. Stay tuned.

(COMMERCIAL BREAK)

COOPER: There's the electoral map, the yellow states or the states in play in the Midwest. Indiana, one of the key battle- grounds, it's actually a pretty remarkable fact. Indiana of course, has long leaned Republican when choosing presidents.

The last Democrat to win its electoral vote was Lyndon Johnson in 1964. Now, 44 years and 11 elections later, Indiana is very much in play. The Obama campaign believes it can turn it from red to blue.

So what's different this year? Well, CNN's John King has the "Raw Politics."

(BEGIN VIDEOTAPE)

KING: At $4.29 a gallon, the grumbling and disbelief is to be expected.

UNIDENTIFIED MALE: Put 80 in and I'm eight gallons shy of being full.

KING: But listen closely to a very different sound Democrats are counting on to make history.

DOMINIQUE MORSON, OBAMA VOLUNTEER: Do you know who you're planning on supporting this year?

KING: Dominique Morson is cheerful.

MORSON: Are you ready to vote? OK great thanks.

KING: Patient.

MORSON: It takes 30 seconds, like literally.

KING: And persistent.

MORSON: In what city is that?

KING: Morson is part of an unprecedented effort by the Obama campaign to register new voters with the ambitious goal of turning reliably Republican states like Indiana from red to blue.

MORSON: I think we can. I really do. I think we definitely have enough people dedicated to the campaign and enough people that want to see some change. So I think we will definitely see that happen.

KING: At Obama headquarters, constant reminders of the October 6th registration deadline. And Republican Secretary of State Todd Rokita says the McCain camp had better take notice.

TODD ROKITA, INDIANA SECRETARY OF STATE: Yes, they have a fight here in Indiana. And I think it's real.

KING: In 2004, 2.5 million Indiana voters cast ballots for president. This year, the state has already processed more than 560,000 new and updated registration forms. And Rokita predicts that number will reach a record 750,000 by the deadline.

ROKITA: This is the first time I've ever seen a Democratic presidential campaign this engaged in this state. Usually Indiana is number one on the board for the red states on election night when it comes to presidential elections.

KING: Not since 1964 has a Democrat carried Indiana for president and Republicans promise to keep it red this year.

Without a doubt, the state's farm communities and small towns lean conservative. Washington is a town of 11,000; 75 percent of its vote went Republican four years ago. Mark Williams was among the minority who voted Democrat but not this time.

MARK WILLIAMS, INDIANA BUSINESS OWNER: When you look at the resumes from McCain to Senator Obama. Senator McCain has a lot more experience.

KING: Williams sees McCain is more in tune with his needs as a small businessman and rejects the Obama line that McCain is no different from President Bush.

WILLIAMS: He's never stood by the rules of the Republicans. He's always voted the way he believes. He tells people what they need to hear, not always the most popular thing.

UNIDENTIFIED MALE: Every vote counts this year.

KING: Tough going for Obama foot soldiers along the Kentucky border in Evansville, too. President Bush took nearly 60 percent of the vote here in 2004.

UNIDENTIFIED MALE: Just the man himself. Not really sure about him.

KING: In this garage, a McCain voter.

UNIDENTIFIED MALE: Thank you.

UNIDENTIFIED MALE: All right man.

UNIDENTIFIED MALE: Take care.

KING: So it's not easy. In the half hour knocking doors, only one promised to vote for Obama and plenty of skepticism.

UNIDENTIFIED MALE: You aren't registered?

UNIDENTIFIED MALE: No.

UNIDENTIFIED MALE: Do you want to get registered?

KING: But that Democrats are here at all in the final weeks, never mind here aggressively looking for every last vote, is itself a dramatic change.

UNIDENTIFIED MALE: Haven't decided?

UNIDENTIFIED MALE: Too much tossups.

(END VIDEOTAPE)

COOPER: John, you've already moved onto another state, Florida battleground state. How does the race look there?

KING: Well, the Obama campaign Anderson, is trying here in Florida, and this is the bigger state of course, 27 electoral votes to do exactly the same thing. They say they're trying to register new voters, they also say there are ten of thousands of African-Americans here who are registered but have simply stopped voting and they're trying to reach out to them as well.

But I will tell you, the McCain campaign feels increasingly optimistic about Florida. We have a new poll coming out at CNN tomorrow so we'll share those numbers with you tomorrow night.

But the McCain campaign says that Obama spent $8 million unanswered on TV ads here over the summer. Only in the last two weeks as McCain gone up with advertising of his own so it's $8.6 million spent by the Obama campaign to about $600,000 spent by the McCain campaign and the McCain says it is running ahead right now in its internal polls.

We'll see our poll numbers match up tomorrow night. So the Obama campaign putting a lot of effort into this state, the Republicans say they are now increasingly optimistic and we're here to take a peek.

COOPER: All right, we'll at that tomorrow night, John thanks very much.

Just ahead tonight, the lingering questions about Sarah Palin and her trooper ex-brother-in-law. Did he threaten her family's life? Did she try to get him fire; and now allegations, Republican allegations that the Obama campaign is stirring things up.

First the new bottom-line of damage from hurricane Ike, all that when "360" continues.

(COMMERCIAL BREAK)

COOPER: Let's check in now with Erica Hill who joins us with the "360 News and Business Bulletin" -- Erica.

ERICA HILL, CNN CORRESPONDENT: Yes, Anderson, we want to update you first of all on the situation in Texas today. President Bush there to see for himself the colossal mess hurricane Ike left behind.

In Houston, the food banks are simply overwhelmed and the lines as you can imagine are incredibly long. Galveston in ruins, thousands of people remain in shelters tonight. More than a million customers are without power. 47 deaths are now tied to the storm including 17 in Texas.

On Wall Street, as you can guess, another nail-biter but we should mention, there was some actually very welcome good news today. Morgan Stanley, the investment bank posting a third quarter net profit of $1.4 billion and sales of $8 billion that beat Wall Street's expectations by a mile.

And on its 100th birthday, General Motors today, unveiling its four-wheeled bridge to the future; say hello to the electric powered Chevy Volt. GM's top executive also urged Congress to fund a $25 billion loan package which was approved last year despite the turmoil on Wall Street -- Anderson.

COOPER: Well, that pretty nice that car.

HILL: No word on pricing; it's going to be about 2 years before it's available yet.

COOPER: You know it's only this point because you see those cool cars and then if I go or yes, it's just like a design car.

HILL: I know and you can't get your hands on them.

COOPER: Here's tonight "Beat 360" photo, O.J. Simpson stretching during his armed robbery and kidnapping trial in Las Vegas. Here's the caption from our staff winner Alyssa, "Hey ladies, check out the gun show."

HILL: She e-mailed my by the way. She was very happy because it's the first time she ever won. And then she said, this is sort of a bright spot in the day, forget about the worries on Wall Street, she won "Beat 360."

COOPER: I liked her caption very much. I thought it was very clever. Go to ac360.com. Click on the "Beat 360" link. Send us your entry and we'll announce the winner at the end of the program. The winner gets a "Beat 360" T-shirt.

New details just ahead, I was going to say something but best not to.

New details just ahead, on Sarah Palin and the state trooper who married her sister and the investigation turning into a political punch-up; the allegations a political witch-hunt? Well, the allegations are getting wilder. We'll investigate.

Later, more on tonight's "Breaking News," the Federal bailout of the nation's biggest insurance company, how it affects you, the economy, Suze Orman is going to join us, weighing in on that.

Stay tuned.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MIKE WOOTEN, ALASKA STATE TROOPER: I was a member of that family and I have some very cherished memories of those times. There was a lot of good times. I don't wish any ill will on any of them. I absolutely don't.

(END VIDEO CLIP)

COOPER: That's was a CNN exclusive interview by CNN's Drew Griffin earlier this month with Alaska State Trooper Mike Wooten who is at the center of an investigation to whether his ex-sister-in-law, Governor Sarah Palin tried to get him fired.

Now tonight, there's "Breaking News" in the case, Alaska's Attorney General says, state employees will not help with the investigations, will not be honoring subpoenas to give evidence.

A bipartisan panel from the state legislature is leading the probe. Now the McCain campaign is stepping in with new charges about the whole inquiry.

"Up Close" tonight, "360's" Randi Kaye.

(BEGIN VIDEOTAPE)

RANDI KAYE, CNN CORRESPONDENT: Suddenly the stakes are raised. What was once an ugly divorce involving Sarah Palin's sister is now at the center of a political show down.

The question is this -- did Governor Palin, her husband Todd or any of her staff put pressure on the state's top cop to fire the governor's ex-brother-in-law, State Trooper Mike Wooten?

An investigator hired by Alaska lawmakers, plans to subpoena Governor Palin's husband and several of her staff.

STEPHEN BRANCHFLOWER, INVESTIGATOR: He's made many comments about how it appeared that DPS is not doing its job because of Wooten. He wanted him fired and I'm hoping that the subpoena if issued will permit me to interview him.

KAYE: Now Republican lawmakers say the investigation has become a political circus. They call it partisan payback. It's already a distraction if not yet an embarrassment for the governor. Five state lawmakers have sued to block the investigation.

The McCain campaign said it's being driven by two prominent supporters of Senator Barack Obama.

How did we get here? Claims by Palin and her family that three years ago in the middle of the divorce Trooper Wooten repeatedly threatened them. Even threatened to kill her father, Wooten denies that. Palin conceded her staff expressed concern about Wooten to Walt Monigan, the top cop.

GOV. SARAH PALIN, (R) ALASKA VICE PRESIDENTIAL NOMINEE: The state trooper has threatened, you know, to kill my dad.

KAYE: But she insists as governor she did not pressure anyone to fire Wooten. She told ABC last week that her husband had met Monigan but did not pressure him to fire Wooten.

PALIN: He did very appropriately though, bring up those concerns about a trooper who is making threats against the first family and that is appropriate.

KAYE: Now, the McCain campaign says, Sarah Palin quote, "Did not learn of these contacts by Todd Palin, until August of this year" even though Todd Palin met Monigan in her office soon after she became governor. Monigan insists he was fired in July because he didn't sack the trooper, he says he wasn't told directly to fire him but --

WALT MONIGAN, ALASKA TOP COP: I believe I was fired because I did not fire Mike Wooten.

KAYE: The McCain campaign is now providing dozens of e-mails which it says show Monigan lost his job for quote, "egregious insubordination."

MEGHAN STAPLETON, PALIN CAMPAIGN SPOKESWOMAN: This final straw came in late June and early July of this year when Commissioner Monigan arranged for yet another unauthorized trip to Washington, D.C. to request more financial assistance from Congress.

KAYE: Still, even some Republicans in Alaska say Monigan's firing was badly handled and hurt Governor Palin's credibility. They include a former U.S. attorney who was an informal ethics adviser to the governor.

In this letter, dated July 24th Webly Shay told Sarah Palin he had grave concern about the quote, "Naive, unprofessional counsel she'd receive in the Monigan case." He declined to speak on camera but told me, "If they would have done what I said, I think it would have been over."

A spokeswoman for the governor told us, "While we can't always act on every idea, Governor Palin thanks Mr. Shay for his counsel."

(END VIDEOTAPE)

COOPER: Randi Kaye, tonight, "Up Close." We continue though, to look at all the candidates, the vice presidential candidates and the presidential candidates with 49 days to go before this election.

The "Shot" is next. The pizza delivered from the ground up. The video kind of telling the story on this one. He picks it up. We'll show you that.

(COMMERCIAL BREAK) COOPER: Tonight's "Shot" might make you lose your appetite. You won't even want to touch it because I do not, take a look. We found this video on the Web. This is an inside joke.

We found this video on the web site at liveleak.com. A close circuit security camera, I'm not sure it's real; capturing a pizza deliveryman making a stop. He drops the pizza. Takes it out of the box and slices fall on the street and he just picks it back up.

HILL: I don't understand how he could pick -- I mean picking up the pizza that you've get delivered.

COOPER: Yes.

HILL: Maybe it is just like kind of -- and I love pizza but it's kind of greasy and slimy and how could you pick it back up so quickly and put it in the box.

COOPER: You say greasy and slimy as though that's a negative.

HILL: No, I just like to stuff it up with a paper towel.

COOPER: Yes, OK. Time now for the -- I go through an elaborate removal of cheese process but I digress.

Time now for "Beat 360" winners, our daily challenge to viewers to try to trump our staffs; Suze Orman says that she likes this segment very much.

HILL: She likes the music.

COOPER: She likes the cheesy music. So you've got to come up with a better caption than we can come up with. Tonight it's going to be tough, snap-shot; O.J. Simpson stretching during the armed robbery and kidnapping trial in Las Vegas. Our staff winner Alyssa, her first time says "Hey ladies, check out the gun show."

HILL: Yes.

COOPER: Our viewer winners are Raul and Odalys in Miami. They came up with this caption together. "Ouch... I thought what happens in Vegas stays in Vegas." Good one.

"Your Beat 360" T-shirt, I think we're going to have to send them two T-shirts since there's two people is on the way?

HILL: It's only fair.

COOPER: You have to share it or flip a coin or maybe I'm not sure. Really, you have to share it? You're only sending them one?

HILL: That's lame. Can we send them two T-shirts?

COOPER: Come on.

HILL: How about one of the old ones and one of the new ones. COOPER: Ted, is that true?

Although, now everyone is going to say they did it as a joint thing so they get two. But any way but you know what? You can't game the system. Check out all the entries at ac360.com.

That does it for this edition of "360."

Thanks a lot for watching.

LARRY KING starts right now. And I'll see you tomorrow night.