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THE SITUATION ROOM

AIG Bailout has Investors Worried; Obama and McCain Camps React to News; New CNN/"Time" Poll Revealed

Aired September 17, 2008 - 16:00   ET

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


WOLF BLITZER, CNN ANCHOR: All right Rick, thanks very much. Happening now, investors express their anxiety about a new corporate bailout. Stock prices as you just saw nose diving once again at the closing bell. And this hour, breaking news on the economy and how all of us are paying to keep an insurance giant afloat.
John McCain softens his opposition to the AIG bailout while his running partner Sarah Palin takes a harsher tone. We're going to have reaction from the McCain and Obama camps. They're doing battle over your money.

And we're only minutes away from unveiling our brand new CNN/"Time" magazine polls from the crucial campaign battleground states. Stand by for a fresh look at CNN's electoral map. I think you might be surprised at what we're learning.

I'm Wolf Blitzer, you're in THE SITUATION ROOM.

But up first this hour, the breaking news from Wall Street. Another huge stock sell off. The Dow Jones industrials closing down more than 450 points just a few moments ago, just about a minute or so ago. The markets clearly unsettled by a new federal government rescue of the nation's largest insurance company AIG. The $85 billion loan from the Federal Reserve bank also is giving the presidential candidates more disturbing economic news to argue about.

Dana Bash and Suzanne Malveaux are standing by from the campaign trail. Let's go to our senior correspondent Allan Chernoff, he's outside American International Group's headquarters, AIG. I guess the workers there are happy they still have jobs as a result of the Federal Reserve stepping in. But what's going on? Because at the end of the trading day today Allan, we saw this blood bath once again on Wall Street.

ALLAN CHERNOFF, CNN CORRESPONDENT: That's right, Wolf. The employees here, they're happy. This may be the only happy place in the entire financial district down here in Manhattan. Certainly the policyholders around the world, well they got some reassurance, but the U.S. bailout of AIG at $85 billion, it's supposed to provide stability for the financial markets for the global economy.

That was the whole point because the financial markets are pretty much like a human pyramid, and this is one of the pillars that's how important AIG is. But from the read on Wall Street, at least today, you really wouldn't feel any of that stability -- Wolf? BLITZER: What about the CEO? What kind of severance package? He was effectively fired by Ben Bernanke, the chairman of the Federal Reserve yesterday. But what do know about what kind of severance package he'll walk away with?

CHERNOFF: That's right. Well, the Fed and the treasury secretary asked Robert Willemstad to step down. Bottom line, he's only been the CEO over here since June. The guy is not the one who caused the major problems. This was not of his making. Nonetheless, he's been here, as I said, for just a few months. He will walk away with millions, part of his contract. Probably at least $5 million. So, he's certainly not the biggest loser here, not at all -- Wolf?

BLITZER: In the scheme of things, $5 million sounds like a tiny little amount when you're talking about $85 billion. But we'll watch that part of the story, too. Allan, stand by, we're going to be getting back to you.

John McCain and Sarah Palin and what they're saying about the AIG bailout that's making news today, as well. McCain's been struggling with his economic message in recent days and the new development doesn't seem to be making that struggle any easier.

Dana Bash is out on the campaign trail in Michigan covering the McCain campaign. He seemed to tweak, I could use another word, he seemed to tweak his stance on this bailout today as opposed to yesterday, Dana.

DANA BASH, CNN CORRESPONDENT: He did seem to do that. You know what he's trying to do, Wolf, John McCain, is have staunch support for hard-hit Americans but balance that with zero tolerance for Wall Street and Washington for what he calls being asleep at the switch. But he has learned clearly over the past 24 hours when a huge insurance company collapses it's hard to do both.

(BEGIN VIDEOTAPE)

BASH (voice-over): John McCain visited the heart of Michigan's long-suffering economy, the auto industry, to try to erase any perception he's out of touch.

SEN. JOHN MCCAIN, (R-AZ) PRESIDENTIAL CANDIDATE: We're not going to leave the workers here in Michigan hung out to dry while we give billions in taxpayers' dollars to Wall Street. We're going to take care of the workers.

BASH: Yet, a day after rejecting using taxpayer money to bail out AIG, he softened his stance.

MCCAIN: I don't think anybody I know wanted to do that, but there were literally millions of people whose retirement, whose investments, whose insurance were at risk here.

BASH: At a diner in Cleveland, the $85 billion AIG bailout was important enough that Sarah Palin answered traveling reporters' questions for the first time in nearly three weeks. She struck a harsher tone than her running mate.

GOV. SARAH PALIN, (R-AK) VICE PRESIDENTIAL CANDIDATE: The shock that has been called by the Fed it's understandable but very, very disappointing that taxpayers are called upon for another one.

BASH: McCain aides are well aware that bad economic news is crushing political news for the candidate whose party is in the White House. Undecided voters in hard hit Michigan who usually vote Republican say this.

DEB BRYCE, MICHIGAN VOTER: When Clinton was in office, I had a little jingle in my pocket, everybody could live on their own and do their own thing. Once Bush took over, everything went downhill.

BASH: That's why McCain is hitting his reformer message harder than ever as he feels voters' pain.

MCCAIN: It's not your problem. I'll tell you whose fault it is, corruption in Washington and corruption on Wall Street and as president I'm going to clean it up and I'm going to fix it.

(END VIDEOTAPE)

BASH: And McCain still appears, Wolf, to be trying to clarify comments he repeated this week that the fundamentals of the economy are still strong. I can tell you from being here in Michigan for two days that did not go over very well here. He said when he was at that GM plant today, that he was trying to express the optimism that FDR did during the great depression and he said to the workers there, he said they should reject the doom and gloom that says our nation is in decline -- Wolf?

BLITZER: As you point out Dana, yesterday on "The Today Show," he was firm, he said there should be no bailout of AIG. Today, less than 24 hours later, he said the government had no choice given the ramifications. What are they saying about what would seem to be a dramatic shift in his stance?

BASH: You know, I mean, basically what they're saying is that the reality of the fact that workers and Americans would have been in big, big trouble if the federal government didn't step in, that's why he changed. It's actually not unlike what happened several months ago when Bear Stearns, remember Bear Stearns was helped out by the federal government. He said he didn't really want to but he supported that and yet, he didn't support and was happy that the federal government didn't bail out -- or was unhappy about the bailout for Freddie Mac and Fannie Mae.

It's very tough for him and it's pretty clear in the fact that we're getting mixed messages from the McCain campaign about what the role of the federal government is -- when it is and isn't appropriate to bail out these big conglomerations and even private companies because he understands that the most important thing, frankly, at the end of the day is to make it clear to the American people that he's not going to let them be high and dry with their live savings basically gone. BLITZER: All right Dana, thanks very much. We're going to be getting back to Dana out on the campaign trail.

The AIG bailout by the way is also giving Senator Barack Obama some reason to hammer away on the economy and at John McCain's overall stance when it comes to the Wall Street crisis.

Let's go to Suzanne Malveaux, she's covering the Obama campaign for us, she's in Las Vegas now. What did they say about this bailout, Suzanne?

SUZANNE MALVEAUX, CNN CORRESPONDENT: Well, Wolf, essentially Barack Obama says that he's the one who gets it, that John McCain does not. That he's been inconsistent with his message and he's been saying this in a very important place, his first stop, Elko County, Nevada, that is a Republican stronghold, Republicans outnumber Democrats two to one. Usually republican candidates win there by 80 percent. A lot of criticism for John Kerry for ignoring rural Nevada. They think they've got a shot at it. And what are those voters looking at, they're looking at issues like health care, mining and of course the economy. They're paying very close attention to what Barack Obama has to say.

(BEGIN VIDEOTAPE)

SEN. BARACK OBAMA, (D-IL) PRESIDENTIAL CANDIDATE: So everywhere you look, the economic news is trouble.

MALVEAUX (voice-over): It's a full-court press, rallies.

OBAMA: We can't steer ourselves out of this crisis by heading in the same direction.

MALVEAUX: E-mails and a new ad blitzing the airwaves across the country and in critical swing states.

OBAMA: Our troubled economy isn't news.

MALVEAUX: Barack Obama is on the offensive, seizing the crisis on Wall Street as a rallying cry. First as an all-out indictment on President Bush's economic approach.

OBAMA: It's a philosophy that says we should give more and more to those with the most. And hope that prosperity trickles down.

MALVEAUX: Obama says despite John McCain's 26 years in Washington, he doesn't blame McCain for the crisis just for promoting more of the same.

OBAMA: And now he tells us that he's the one who's going to take on the old boys' network. The old boys' network. In the McCain campaign, that's called a staff meeting.

MALVEAUX: Obama aides say McCain is inconsistent on how he would fix the broken economy. Obama is offering his own six-point blueprint to restore confidence in Wall Street, including more government oversight on banking, greater law enforcement regarding trade deals and more cooperation between regulatory agencies.

(END OF VIDEOTAPE)

MALVEAUX: And Wolf, Obama's next stop, we're hear obviously Las Vegas. He is betting on the fact that considering this financial upheaval this week that voters are paying very close attention to his economic message. When you take a look at the state of Nevada, you're talking about Hispanics, retirees. You're also talking about critical voting blocs. Union members, these are the kinds of voting blocs that are really they believe potentially going to change this Republican stronghold to a Democratic win. Wolf?

BLITZER: Suzanne, yesterday, Joe Biden, like John McCain was on one of the morning shows and he flatly said he opposed the bailout of AIG. Today the Obama campaign said the Federal Reserve had no choice given the ramifications. How are they explaining this switch from what Biden said yesterday to what they're saying today?

MALVEAUX: What they're saying is ideally what they want to take a look at is make sure that speculators and those who really took advantage of just regular folks are not the ones who are being rewarded here. That that essentially was what Senator Joe Biden was saying, that they want to make sure that the taxpayers are protected, that obviously there's no ideal situation in taking care of something like this, that there was a lot of manipulation. That there was a lot of corruption involved and also that this was a broken system that needs to be fixed so they're looking at all aspects of it -- Wolf?

BLITZER: Suzanne Malveaux is out in Las Vegas covering the campaign trail for us. Thanks very much.

Let's check in with Jack. He's got "The Cafferty File" -- Jack?

JACK CAFFERTY, CNN ANCHOR: Another day, another crisis. We got up this morning, found out the government's loaning the nation's largest insurance company, AIG, $85 billion to keep it afloat. And then we sat back and we watched the bottom continue to fall out of the stock market.

At 4:00 this afternoon the Dow lost another 450 points. The former chairman of the Federal Reserve, Alan Greenspan says we're experiencing a once in a century financial crisis. Which may be why Democratic strategist and CNN political commentator James Carville said on this program yesterday that this comment from John McCain was a game changer.

(BEGIN VIDEO CLIP)

MCCAIN: Our economy I think still the fundamentals are -- of our economy are strong, but these are very, very difficult times.

(END VIDEO CLIP)

CAFFERTY: Really? Say what? That was Monday. That was the day Lehman Brothers filed for bankruptcy and the Dow lost more ground than it has in seven years. Carville said unless something totally out of the ordinary happens, the stupidity of McCain's remark about the economy virtually assures an Obama win in November. Oh and one other thing, you're probably not going to be seeing a lot of Carly Fiorina speaking out on behalf of John McCain in the near future either.

Fiorina told a radio host yesterday that neither John McCain nor Sarah Palin quote, "could run a corporation." That's the kind of stuff you expect the Democrats to say, not one of your own advisers.

Here's the question: Was John McCain's statement that the economy is fundamentally sound a fatal error? Go to cnn.com/cafferty file and you can post a comment on my blog -- Wolf?

BLITZER: All right, Jack, thanks very much. Sarah Palin certainly had some nice things to say about Hillary Clinton in recent weeks. But the senator doesn't want to be seen with the Alaska governor. You're going to find out why Senator Clinton apparently feels blindsided. We'll explain.

Barbara Streisand and other celebrities helped raise huge amounts of money for the Obama campaign last night. I'll ask senior Obama adviser Robert Gibbs if a star-studded fundraiser sends the wrong message during these tough economic times.

We're all across the electoral college map. Our new presidential polls from five crucial battleground states. We're about to release those numbers. You're going to be surprised by some of them. Find out if the ground is shifting either way in this important race for the White House.

Stay with us, you're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Right now, there are important developments in the presidential race. CNN/"Time" magazine and Opinion Research Corporation are releasing new poll numbers on where things stand in a few states that could determine who will be the next president of the United States. Let's go straight to those numbers. Our senior political analyst Bill Schneider standing by. Bill, we're seeing some surprises in some of these battleground states. And tell our viewers what we've learned.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, bad news for the economy, good news for the Democrats.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Indiana a battleground state, the McCain campaign has spent no money on TV ads there. Indiana went for George W. Bush over John Kerry by a whopping 21-point margin in 2004. But our new CNN poll of Indiana conducted by the Opinion Research Corporation has McCain ahead by only six.

Another surprise battleground, North Carolina. Bush carried North Carolina by 12 points in 2004, even though a North Carolinian John Edwards was on the Democratic ticket. Obama sees an opportunity in North Carolina. He's outspent McCain 10 to one on TV ads. The latest CNN poll in North Carolina, McCain ahead by just one point.

If we do a poll of polls in North Carolina, McCain leads by 10. Still a little closer than four years ago. Florida was not a squeaker in 2004. Bush carried it by five. And now? Uh-oh. McCain 48, Obama 48 in Florida. Don't sweep up those chads.

Everybody agrees Ohio's a battleground state. Both campaigns have been spending heavily there. Last time, Ohio went for Bush by two points. Now, Obama's leading by two. What happened? Here is Obama's take.

OBAMA: What we've seen the last few days is nothing less than the final verdict on economic philosophy that has completely failed.

SCHNEIDER: Not my philosophy, McCain says.

MCCAIN: The American worker is strong. But it's been put at risk by the greed and mismanagement of Wall Street and Washington. The top of our economy is broken.

SCHNEIDER: Wisconsin was another close one in 2004. Kerry by one point. And now? Obama's up by three. In every battleground state, the democratic ticket is doing better than it did four years ago.

(END VIDEOTAPE)

SCHNEIDER: Other polls don't show quite as dramatic a shift to the Democrats. The poll of polls in Ohio, for instance, has McCain leading by three. Which is about the same as in 2004 -- Wolf?

BLITZER: But ours is the most recent polls that were conducted in those states. So they're the freshest, is that right?

SCHNEIDER: That is correct.

BLITZER: Ok, Bill Schneider with that information, thank you. We want to take a look at something Bill was referring to. Our new CNN/"Time" magazine poll shows Obama and McCain essentially tied in Florida, but what if third party presidential candidates are thrown into the mix? Something happens that might cause worry in the McCain campaign.

John McCain actually loses support, his number drops four points when third party candidates Ralph Nader, Bob Barr and Cynthia McKinney are actually included in the poll. Florida by the way is the only state in our brand new poll in these battleground states that shows McCain support taking this kind of hit when these third party candidates are added. Of course, you remember most people believe that Ralph Nader's popularity in Florida undermined Al Gore's electability in the 2000 contested election in Florida.

We want to note our new poll numbers do not change the states we consider to be solidly red, solidly blue or leaning one way or another on our CNN electoral map. That said by CNN's estimation, Obama is looking right now at about 233 electoral votes to 189 for McCain on our map, 116 electoral votes are still up for grabs.

In Florida, some Jewish voters are excited about Barack Obama, but others say something about him turns them off and turns them on to John McCain. Our John King is on the scene looking into the story.

And one Hurricane Ike survivor put it this way: I have to start my life all over. But it could be weeks, maybe even months before he and so many others can get their lives back on track. Wait until you see exactly what's going on in Texas right now.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Carol Costello is monitoring some other important stories incoming to THE SITUATION ROOM right now. Carol, what's going on?

CAROL COSTELLO, CNN CORRESPONDENT: Well Wolf, a deadly terrorist attack on the U.S. embassy in Yemen. U.S. officials say Islamic militants disguised as Yemeni forces opened fire outside of the embassy today. There were also several explosions, one of them from a car bomb and an embassy spokesman says one suspect was wearing a suicide vest. Ten people from Yemen and six of the attackers were killed. President Bush says the militants definitely had an agenda.

(BEGIN VIDEO CLIP)

BUSH: We are at war with extremists who will murder innocent people to achieve their ideological on objectives. One objective of these extremists is they kill to try to cause the United States to lose our nerve and to withdraw from regions of the world.

(END VIDEO CLIP)

COSTELLO: Israel's foreign minister is possibly one step closer to becoming the country's prime minister. TV exit polls shows Zipi Livni winning the party's primarily election to replace Prime Minister Ehud Olmert. Livni is Israel's chief negotiator in peace talks with the Palestinians. If she wins the post, she would be Israel's second female prime minister. Golda Maher(ph) was the first.

The son of a veteran congressman from Florida facing human trafficking charges. Democratic representative Alan Boyd says his son was arrested Sunday in Arizona. Authorities say 30-year-old John Boyd was smuggling undocumented immigrants in his truck. Congressman Boyd says his son must face the consequences for his actions but he has the support of his family. Back to you.

BLITZER: Pretty shocking story there. Gee. All right, Carol, stand by.

Hillary Clinton is now refusing to be half of a politically charged photo opportunity. Imagine seeing Senator Clinton at a rally with Governor Sarah Palin. It almost happened. We'll tell you why it didn't. Is the Obama camp worried that a prominent supporter of Senator Clinton is now crossing over and backing John McCain? I'll ask a senior Obama adviser Robert Gibbs, he's here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM. Happening now, major American companies wading in deep financial waters. Should the government be throwing them life lines? That's what some people wonder amid federal bailout after bailout. We're watching the story. Some say they were against it before they were grudgingly for it. Wait until you hear how John McCain and Joe Biden felt about an AIG bailout only on Monday and what they're saying right now.

And a woman endorses John McCain, not just any woman. She supported Hillary Clinton, holds an important job at the Democratic National Committee, raised lots of money for Hillary Clinton's campaign. Wait until you hear her explain why she's now turning her back on her party to support John McCain. She's here. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Governor Sarah Palin and Senator Hillary Clinton standing side by side. Well, you'll have to just re-watch the "Saturday Night Live" parody of that. They were together in that skit or at least the women playing Palin and Clinton were together. Now we're learning that the real women could have been standing together very, very soon, but will not. Brian Todd is working this story for us. All right Brian, what's going on?

BRIAN TODD, CNN CORRESPONDENT: Wolf, a lot of political observers wanted to see that "Saturday Night Live" skit come to life but it's not going to happen.

Hillary Clinton has pulled out of a rally scheduled for next week in New York where Sarah Palin is also scheduled to appear. The event is Called Stop Iran Now, calling attention to that country's nuclear ambitions. It's sponsored by a Jewish group.

The reason for Clinton's withdrawal? Well, her office e-mailed us saying that Palin's attendance at the rally was news to them and that this was never billed as what they call a partisan political event, and, therefore, Senator Clinton will not be attending.

Now, the McCain/Palin team has not yet said whether Sarah Palin will still go or not, but they released a statement criticizing Clinton's withdrawal, saying -- quote -- "Governor Palin believes that the danger of a nuclear Iran is greater than party or politics."

Now, separately, a McCain blogger has implied, at least, that Obama's campaign leaned on Senator Clinton to pull out of this. An Obama campaign official says they had nothing to do with it. Clinton's office won't comment on that, Wolf. An event that was at least billed as something being nonpartisan in this very charged atmosphere has at least become very political.

BLITZER: Very charged, indeed. Brian, thanks very much.

Governor Palin continues to criticize Barack Obama. Given the sensitivity over attacking Palin, how should the Obama campaign respond?

(BEGIN VIDEOTAPE)

BLITZER: And joining us now from Elko, Nevada, Robert Gibbs. He's a senior Obama campaign adviser.

Robert, thanks very much for coming in.

ROBERT GIBBS, OBAMA CAMPAIGN COMMUNICATIONS DIRECTOR: Thanks for having me, Wolf.

BLITZER: All right, listen to this criticism of Senator Obama leveled today by Sarah Palin, the Republican vice presidential nominee. She says that Senator Obama basically distorted what Senator McCain is saying about the economy.

(BEGIN VIDEO CLIP)

PALIN: It was an unfair attack on the verbiage that Senator McCain chose to use, because the fundamentals, as he was having to explain afterwards, he means our work force. He means the ingenuity of the American people.

And, of course, that is strong and...

(CROSSTALK)

(END VIDEO CLIP)

BLITZER: All right. So, go ahead. I see a little smirk, a little smile on your face. He says the fundamentals refer to the American workers, who are strong and solid.

GIBBS: Well, look, there's no doubt that the workers of this economy are solid, but those aren't the people that John McCain was talking about. It wasn't what John McCain was talking about at all.

Wolf, he's used this phrase about 16 times, according to independent estimates. And of all weeks to walk out in front of the American people, when the stock market was down 500 points, the biggest drop since -- since September 11, and tell people that the fundamentals of this economy are strong.

Our question for Senator McCain is, which economy are you looking at? What we believe is that, fundamentally, people want a house that's not at risk, a college education they can afford, health insurance they can afford, and a job they can count on.

Right now, they're not getting that from the Bush/McCain economy.

BLITZER: Yesterday, Joe Biden, the Democratic vice presidential nominee, said he opposes a bailout of AIG, the insurance giant. Later that night, there was, in effect, an $85 billion bailout.

What's your position today? Was it a -- a wise thing that the Federal Reserve did?

GIBBS: Well, look, I -- I think -- and Senator Obama believes -- that what the Federal Reserve did was what they had to do to stop an insurance company, a large company, from going under and spreading this pain and this crisis even further.

You know, what we got, Wolf, was the final report card on an eight-year economic philosophy that we now know is a complete and utter disaster. We have watched the crony capitalism and -- and -- and the lobbyists take hold on Wall Street and in Washington. We have watched the regulators be dismissed, while the speculators bathed in money. And -- and -- and now, unfortunately, the taxpayers...

BLITZER: So...

GIBBS: ... are going to have to pick up the bill.

BLITZER: So, do Biden and Obama disagree on this bailout?

GIBBS: No, I -- I don't believe they do.

I think they both agree that this was something that, regrettably, had to be done. But, you know, Wolf, what we have to do is change the culture both on Wall Street and in Washington. Over the last eight years, John McCain and George Bush have let the regulators go and let the speculators go wild. That can't happen anymore, and it won't happen under an Obama administration.

BLITZER: The -- Senator McCain also says that Senator Obama is simply out of touch with average working-class folks out there. And he -- he referred to the fund-raiser out in Los Angeles last night that Barbara Streisand was hosting.

Listen to -- listen to Senator McCain.

(BEGIN VIDEO CLIP)

MCCAIN: Talked about siding with the people, siding with the people, just before he flew off to Hollywood for a fund-raiser with Barbra Streisand and his celebrity friends.

(AUDIENCE BOOING)

MCCAIN: Let me tell you, my friends, there's no place I would rather be than here, with the working men and women of Ohio.

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

BLITZER: We saw a lot of glitz and glamour at that fund-raiser last night, a lot of Bentleys.

What do you say to Senator McCain?

GIBBS: Well, look, the night before, the night of the largest stock market collapse since 9/11, John McCain was in Miami raising $5 million, and Governor Palin was in Ohio being entertained by somebody who's made millions shipping jobs overseas and helping Ohioans lose their jobs.

That's what out of touch with this economy. Thinking that $5 million is middle class, that is out of touch with this economy. Quite frankly, walking out and saying that the fundamentals of our economy are strong couldn't be more out of touch this week.

Wolf, it's time to get back to creating jobs, tax breaks, not for companies that ship jobs overseas, but for middle-class Americans, an agenda that Barack Obama has talked about now for more than 20 months.

BLITZER: One of Hillary Clinton's chief fund-raisers came out today and endorsed Senator McCain, Lynn Forester de Rothschild, and she said this. I will play the clip for you.

(BEGIN VIDEO CLIP)

LYNN FORESTER DE ROTHSCHILD, HILLARY CLINTON SUPPORTER BACKING JOHN MCCAIN: I feel a little bit like when Ronald Reagan said: "I didn't leave the Democratic Party. The Democratic Party the party left me."

I don't think it is doing the right thing in -- in promoting Barack Obama as president.

(END VIDEO CLIP)

BLITZER: Now, the McCain campaign is doing, obviously, a lot with this.

What do you say about this Hillary Clinton supporter now endorsing Senator McCain?

GIBBS: Well, look, you know, Senator McCain has the endorsement of Lady Baroness de Rothschild.

We're out here in Elko right now, working hard, trying to get people a better way of life and a better economy. He can have fund- raising endorsements. We are going to work hard every day for middle- class Americans to put this economy back on a path to reform and renewal, and make sure that we're growing this economy.

That's what's important here, not endorsements from fund-raisers in Washington or New York, but being out here with the people in Nevada, New Mexico, and making sure that we get this country moving in a fundamental direction -- a fundamentally different direction of change, rather than what the -- more of the same that we have seen from John McCain.

BLITZER: It doesn't sound like you're too worried about the Baroness de Rothschild's endorsement. (LAUGHTER)

BLITZER: All right, Robert Gibbs, thanks very much for coming in.

GIBBS: Wolf, thanks for having me.

(END VIDEOTAPE)

BLITZER: We will be speaking with her in the next hour -- right here in THE SITUATION ROOM.

It's the mother of all tossup states, Florida. We are going to focus on -- focus in on the feverish campaign to get out the votes 48 days from now. One group could make a lot of difference in Florida.

In our "Strategy Session," our new battleground polls. Where should McCain and Obama be putting their resources right now?

And I will ask that prominent Hillary Clinton supporter during the primary why she decided to jump from the Democrats and back McCain and Palin.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Guess what? It's deja -- deja vu all over again in Florida. Our brand-new battleground poll in Florida showing the state right now evenly split between Barack Obama and John McCain, shades of the 2000 presidential standoff, when Florida obviously decided it all.

Let's go to our chief national correspondent, John King. He's joining us from Delray Beach in South Florida right now.

How close, based on your reporting, John, is this race in Florida?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Wolf, it is as close as you can get. And you well know, for Democrats to win a close races in Florida, they need huge margins among the Jewish voters here in Palm Beach County and in neighboring Broward County. As our new poll shows, it is as close as it can get, and the competition for that vote is fierce.

(BEGIN VIDEOTAPE)

KING (voice-over): Early morning at a retirement community synagogue, coffee, bagels and outreach critical to Democratic chances in battleground Florida.

HALIE SOIFER, OBAMA FLORIDA JEWISH OUTREACH: We are here today to talk about Senator Barack Obama and Joe Biden's record and to insure that Barack Obama is elected the next president of the United States.

(APPLAUSE)

KING: The turnout is proof of enthusiasm in the Democratic ranks.

UNIDENTIFIED MALE: ... Barack Obama.

KING: Still, many on hand were Hillary Clinton supporters and say some friends are still slow to warm to Obama. Others worry aloud Obama isn't tough enough to win.

UNIDENTIFIED MALE: He has to get specific and tell the American people, let's wake up; this is what's happening.

(APPLAUSE)

KING: South Florida Jews are a loyal Democratic base, but there's more competition this year, as Republicans aggressively remind pro-Israel voters Obama, in a primary debate last July, said he would be willing to sit down with Iran's president without preconditions his first year in office.

The campaign now says Obama favors aggressive diplomacy, but with strict conditions on high-level meetings.

DAN SHAPIRO, SENIOR OBAMA MIDDLE EAST POLICY ADVISER: You may hear and you may see ads or see rumors that, well, Barack Obama wants to go and have coffee with Ahmadinejad, the president of Iran. Not true. Not true. Not true.

KING: Broward and Palm Beach Counties are Democratic strongholds.

ADAM HASNER (R), FLORIDA STATE REPRESENTATIVE: Thank you, guys. It's good to see you.

KING: But State Representative Adam Hasner heads a McCain campaign Jewish outreach program he believes is making a significant dent in Obama's support.

HASNER: We do know that he wants to sit down with President Ahmadinejad. John McCain has a long proven track record on his safe -- on his support for the safety and security of Israel. And I think that's going to be very important to the Jewish community. And this is a year when more Jews are -- are going to be voting Republican than ever before.

KING: At the Boca Diner, there is evidence of McCain inroads. Jules Weiss voted Democratic in 2000 and again in 2004, but says Obama isn't ready.

JULES WEISS, RESIDENT OF FLORIDA: I think that, it's just -- to me, it's just ludicrous to have neophyte for president and the experienced one as his assistant. That just doesn't make sense.

KING: Ruth Goldberg is no Obama fan either, but likes McCain even less. RUTH GOLDBERG, RESIDENT OF FLORIDA: It's a very difficult thing. I really don't want Obama, but I think that's what we have to do if we don't want Bush again. It's as simple as that, right?

(END VIDEOTAPE)

KING: The race is so close here that both campaigns are worried Florida could have a repeat, especially here in Palm Beach County, of what happened back in 2000.

So, Wolf, both campaigns already running phone banks, telling their supporters, if you have already made up your mind, don't wait until Election Day. Get an absentee ballot, and vote early by mail -- Wolf.

BLITZER: Because, as you point out, Obama really has no chance in Florida, unless he overwhelmingly carries those counties, Broward County, Palm Beach County, and Miami-Dade County, for that matter, as well.

KING: That's right.

That's right, Wolf. The Jewish vote here is critical. Another thing the Obama campaign says could make the difference is, they say there are 600,000 African-Americans in this state who are registered, but did not vote in the last presidential election. So, in addition to courting the Jewish vote, they're also trying to find those voters and encourage them to turn out this year, telling them they could help Obama make history -- Wolf.

BLITZER: Thanks very much for that.

John King is going to be joining us later in THE SITUATION ROOM as well.

There are broken pieces of shattered lives, evacuees who have become refugees trying to find their way back home, power crews trying to restore light to those in the dark, and lines and lines of people waiting for water, food, and whatever else they need to survive. In Hurricane Ike's aftermath, conditions that would seem unfathomable are very real for lots of people right now.

Many of them are sending us their pictures of what it all looks like.

Let's bring in our Internet reporter, Abbi Tatton. She's -- she's got some information for us on what's going on.

Abbi, what are you seeing?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, the first stories we were getting from our I-Reporters from Texas, it was about the damage to their homes. And now the reports are the lines, the power outages which are still going on, scenes like this from a Houston point of distribution from Melanie Neff. From Jason Barnes, also in the city there, he says no power at the moment. He's hoping to get his power back next Tuesday, based on radio reports. He waited four hours in line for basic supplies on the first day, second and third day, five hours in line.

In Austin, Texas, as well, volunteers helping out at these food banks, trying to move people along, and get them basic supplies, like Nick Papatonis, who said they helped more than 500 people at this point of distribution.

Combine all that with these scenes at the gas stations as well. These pictures are all over Flickr, on YouTube, long lines for gas. You can imagine, this is a pretty miserable situation for some of the people down there.

BLITZER: Our heart goes out to those folks down there.

All right, Abbi, thank you.

Coming up in our "Strategy Session": the CNN/"TIME/Opinion Research Corporation battleground polls. You saw them exclusively here, North Carolina in play, Florida tied, McCain with a lead in Indiana. Obama leads in Ohio. And Wisconsin is within the sampling margin of error.

If you are -- if you were running one of these presidential campaigns, what would you be doing right now?

And don't forget Michigan, that state's 17 electoral votes up for grabs. Our own Dana Bash explains why the McCain camp right now is upbeat about Michigan.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's get right to our "Strategy Session."

Joining us, our political contributor Hilary Rosen. She's also with HuffingtonPost.com. She's a Democratic strategist. Republican strategist John Feehery is here as well.

Look at these poll numbers in our new CNN battleground polls, in -- in Florida right now, tied 48/48, in North Carolina, 48 McCain, 47 Obama, well within the sampling error, and in Ohio, Obama 49, McCain, 47. These are very good numbers at this stage in the game for Obama.

JOHN FEEHERY, REPUBLICAN STRATEGIST: Well, they're -- this is a very close race. I don't know about those North Carolina numbers. I still think McCain still wins North Carolina and Florida. I also think he wins Florida.

But, for the McCain, he's got to tighten up that economics message. He's gone to be talking about not commissions so much, but talking about what he's going to do, like maybe create a second Resolution Trust Corporation, like they did in the savings and loan, get some real policy on...

(CROSSTALK)

BLITZER: I don't think he wants to bring up the savings and loan crisis, given his past with that.

FEEHERY: Well, but...

(LAUGHTER)

FEEHERY: But the fact of the matter is that we actually -- the federal government actually made money with RTC. And we have got to get start talking about solutions and how we can get through this difficult period.

BLITZER: What do you think?

HILARY ROSEN, DEMOCRATIC STRATEGIST: You know, I have always felt that Florida was a better shot for Barack Obama than Ohio, actually, for -- for this reason in particular.

There's -- have been three million unregistered youth, blacks and Latinos, which are overwhelmingly breaking for Obama. The Obama campaign has put a lot of money on the ground there. Now, with Joe Biden there, it's very strong for the Jewish community, and Sarah Palin, you know, not so good for the Jewish community.

(CROSSTALK)

BLITZER: Although she -- she is going to that rally against Ahmadinejad and Iran in New York next week.

ROSEN: She is. She...

BLITZER: And Hillary -- Hillary Clinton is not.

ROSEN: But Jews tend -- have tended to shy away from evangelical candidates.

So, I think that the fundamentals in Florida actually look fairly good for Barack Obama. It's going to be a tight race, when you look at some of those other places. And, compared to the big picture, remember, all she has to do -- all -- all Obama has to do is win every state John Kerry won, plus 22 more electoral votes. Florida does that. Virginia does that. North Carolina helps.

BLITZER: Is -- is -- is Joe Lieberman a secret weapon in the Jewish community for John McCain?

FEEHERY: I happen to think so.

I think Lieberman can go down and campaign. He can say that John McCain is the real deal. He's the strongest supporter for Israel. And he's going to be very effective. He's been very effect also with independent voters and...

BLITZER: How worried are you about Joe Lieberman down in Florida in those three counties that John King was talking about?

ROSEN: Not worried at all.

In fact, there was a poll of a couple of months ago. And Barack Obama is more popular among the Jewish community in Florida than Joe Lieberman is. It was surprising, but -- but true. I think that the Obama ticket is good. I don't think Joe Lieberman changes that dynamic at all.

BLITZER: John Ensign, who is trying to get Republicans elected in the Senate, says Sarah Palin's addition to the Republican ticket has really bolstered chances of some of these close senatorial races, Republicans doing better. You think she's -- she's going to help those Republicans who are in close battles, some of them survive -- struggling to survive?

FEEHERY: No doubt about it. She energizes -- energizes the Republican base, which is critically important.

Actually, if you look what's happened with the generic ballot, it's much closer than it was only a month ago. In the latest polls, it's 40 -- the Republicans are only down four points in the generic. Last month, two months ago, they were down about 15 points. This is a big change in this election. And energizing the generic ballot, both those things will help Republicans in the Senate.

BLITZER: It does show -- that generic question on these polls shows it narrowing somewhat.

ROSEN: Although, again, the fundamentals favor Democrats. There are 11 pickups possible for Democrats. That's twice as many as last time. Democrats are comfortably ahead in four to five of those races.

It's possible she helps in North Carolina, where Liddy Dole, another female candidate, possible she helps in Maine, Susan Collins, another female candidate. So, in some places, it's possible where, you know, a surge from Obama might put senators over the edge. But I still think you're going to see five, six, seven Senate pickups.

BLITZER: We have got 48 days to go.

ROSEN: Yes.

BLITZER: We're going to be spending a lot of time not only watching the presidential race. We're going to be looking at these Senate races in the next several weeks, as well.

(CROSSTALK)

BLITZER: Guys, thanks for coming in.

Joe Biden and Hillary Clinton, they are getting ready to team up for Barack Obama. We're going to tell you what they have now decided to do.

Also, four days after Hurricane Ike struck Texas, some residents are still without basic necessities, like food and water. We're about to go live to Texas.

And after the Fed's $85 billion bailout of AIG, could more U.S. companies expect a government handout?

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: On our "Political Ticker": Joe Biden and Hillary Clinton are teaming up. The Obama camp is set to release a new Web video tonight featuring the senators together.

We're told that Clinton and Biden will make the case that John McCain is simply out of touch with women voters on the issues they care about.

Remember, for the latest political news any time, check out CNNPolitics.com.

Let's go back to Jack. He's got "The Cafferty File" -- Jack.

CAFFERTY: The question this hour is, was John McCain's statement that the economy is fundamentally sound a fatal error?

James Carville suggested that it was a game-changer on this program yesterday.

Bruce writes: "I don't know if it is a fatal error, but a lot of people that vote are not the brightest light bulbs in the room. But it backs up the fact that he is in another world, McCain, from the rest of the working people. Oh, yes, I only have one home. And I make under $5 million a year."

Rick writes: "It really should be, Jack. But McCain seems to be getting a free pass from all the media and supporters. I have not seen an election where a candidate, like McCain, can say so many mistakes like this and nothing happens. I am really beginning to subscribe to the theory floated recently that the election will be won on race."

Helen writes: "Quite possibly so. Sounds like Herbert Hoover saying the same thing as the Great Depression hit. Hoover was another greedy Republican."

Bob writes: "The comment is only an issue in the minds of the talking heads, justifying their television shows, and in the minds of Democrats who have already decided to vote for Mr. Obama. Yes, we are in a critical moment, but America is still a strong economic force in the world. I say it is the commentators who don't get it."

(LAUGHTER)

CAFFERTY: Probably get some agreement on that.

Luke writes: "Well, it's a matter of perspective. I mean, how many stupid things does a candidate have to say before America realizes he is stupid?"

And David in Colorado says this: "How can John McCain even begin to understand the nuances of the financial markets, when he can't even count the number of homes he owns?"

If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile, and look for yours there among hundreds of others -- Wolf.

BLITZER: All right, Jack, thank you.

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

Happening now: another massive government bailout sending chills through Wall Street, putting the presidential candidates in a tough position, and leaving -- leaving even the experts wondering what's next for our battered economy.

She was backing Hillary Clinton. Now a high-profile supporter and prominent member of the Democratic National Committee is endorsing John McCain. She's here to explain why.

And long lines for gas and food, a rising death toll, well over a million people still without power -- four days after Hurricane Ike, Texas struggling to recover.

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

The government comes to the rescue of a failing company once again, and investors react today with horror.