Return to Transcripts main page


Government Has New Bailout Planned; Todd Palin Will Not Testify in Alaska Trooper Probe

Aired September 18, 2008 - 23:00   ET


ANDERSON COOPER, CNN ANCHOR: We begin tonight, with "Breaking News," stunning news, frankly, the leaders of government, Congress, the nations' financial system coming together tonight on Capitol Hill hammering out a fix for the economy so important, so sweeping, it may take trillions of dollars to succeed that is trillions with a T.
The price of failure a deeper recession or even worse, the meeting broke up a short time ago with late word that a plan roughed out by the Treasury Department and Federal Reserve could be taking shape and taking shape quickly.

Treasury Secretary Henry Paulson had this to say.


HENRY PAULSON, U.S. TREASURY SECRETARY: This country is able to come together and do things quickly when it needs to be done for the good of the American people. And what we are working on now is an approach to deal with the systemic risk and the stresses in our capital markets.

And we've talked about a comprehensive approach that will require legislation to deal with illiquid assets on financial institutions of the United States on their balance sheet. As we said for some time, the root cause of the stress in the capital markets is the real estate correction and what's going on, in terms of the price declines in real estate.

So, again, we're coming together to work for an expeditious solution, which is aimed right at the heart of this problem, which is illiquid assets on financial institutions' balance sheets. Thank you.


COOPER: Well, tonight, we're going to be looking at what all of that means to you.

Suze Orman joins us once again for that and we're also be showing you a link on where you can learn more about which of your assets are federally insured. Along with Suze, CNN's Ali Velshi is monitoring all the latest developments, a lot to cover.

Ali, first of all what do you make of this?

ALI VELSHI, SENIOR BUSINESS CORRESPONDENT: This is remarkable. When you look at that assembly there, it was Hank Paulson, it was Ben Bernanke, it was Chris Cox the head of the SEC and Congressional leaders from both sides of the aisle. The house is supposed to get up for a session in just over a week and they're saying they will stay until it is done.

We've heard that this -- that group is ready to negotiate through the course of the weekend, if necessary. They're talking about a fast deal. And you said trillions.

And here's the model that they might use, it might be fashioned after what happened, after the savings and loan crisis, where the government formed an agency that bought up all the bad properties, hung onto them and fixed them up and sold them again basically. It's as if somebody came and picked up your stuff from your garage sale and was able to do something better with it than you could because they didn't have to sell it that day but to you, it was just junk.

But we are talking about possibly trillions of dollars of the government buying up bad debt and somehow releasing that from the market and letting market get up.

COOPER: The fact that Suze all of them were seen together is a just a sign of how bad this thing really is.

SUZE ORMAN, PERSONAL FINANCE EXPERT: Yes, especially when they're getting together during the week at 7:00 at night. And even, you saw Mr. Paulson, you even heard him say, this was dire, that this was really, really important. What I don't understand though, very different than in 1989, when the thrift savings, you kind of knew what you were putting in there.

VELSHI: It was properties.

ORMAN: It was properties, I don't understand though how here, when everything is so leveraged, --

VELSHI: Right. What is it that they're going put in to this?

ORMAN: What is it they're going to put in there?

COOPER: Don't you think the government really have a grip on the full extent of this?

VELSHI: No. I mean, that's why we have seen these billions and billions and billions of dollars of write-downs from banks and investment companies. Because nobody knows how big this is, and what is it that they're buying and putting into this.

The plan has worked in the past, and by the way, this type of bailout has actually been profitable in the end for the taxpayer. But we don't know what it is they're buying and what kind of deal they're hammering out.

COOPER: We should point out "The Wall Street Journal" is reporting that the SEC wants to temporarily ban shorting stocks. What does that mean? ORMAN: That means here and London has banned shorting stocks. It means, people are not going to be able to sell stocks in the hopes that they go down.

VELSHI: Shorting is betting on the horse you think is going to lose. The only thing here and they're treating it as concern about market manipulation, that some people have been deliberately betting against companies and forcing them to fail financially.

The one danger here, is one of the things that happened over the last several years is, regular investors have been able to capitalize on mutual fund that do some shorting so that when you're in a tough market and some of these mutual funds are able to sort of help you out in terms of limiting your down side loss.

This is a market mechanism; it is a very unusual move for a commission that regulates trading to stop a basic market mechanism.

ORMAN: Yes. Go on.

COOPER: All day today no doubt, everybody has been either talking to brokers, if they have them or looking at their 401(k) statement. What is the advice that for folks sitting at home right now? Suze --

ORMAN: And the advice, as I've always been giving the advice, if you have time, 10, 20, 30, 40 years, and you are investing in a 401(k), you have to keep investing. This is not the time to stop investing. Little amounts of money every single month.

However, if you need money, need money for what? You need money for a down payment on a home and it happens to be in the stock market. Need money to send your kids to pay college.

COOPER: What would you say is the time frame? If you need money what, in six months, a year, two years?

ORMAN: I've always had a rule that money that you need within five years or less doesn't belong in the stock market. Why? Because if something goes down 50 percent and you need it to go back up, it could take a nine percent annual average rate of return, 12 years to get back to where you were.

VELSHI: Suze made an interesting point though, just before we got on air. And that is no matter, even if you have 15 or 20 years to invest, if you are feeling like you can't sleep at night because of what's going on in this market? Suze what do you tell them then?

ORMAN: Bye-bye. And what's going to happen is because the market went up 400 some points today, everybody is going to say, it's over.

COOPER: Right.

ORMAN: OK, not true. This is going to go up, this is going to go down probably tomorrow morning. COOPER: It's amazing psychologically how each day has a different effect. I mean literally, I saw 400 points up today, and I thought, oh OK a relief, now, I'm glad I'm in the stock market. But it doesn't make any sense.

ORMAN: No, so you're in the stock -- when you're happy you're in the stock market, is when the economy is good, everybody is making money, unemployment is going down, real estate is going up, everything is good.

We still have unemployment going up. We have real estate still going down, although it's getting a little better, it's still going down. We have major problems in the economy. Even if they do this with the trust that they're trying to set up, it doesn't help in terms of who's going to lend you the money to buy a new house and once they've lent you that money what are they then going to do with that loan?

COOPER: So if you're looking for safe investments right now, obviously banks -- if you have it in a savings and loan up to $100,000, it's federally insured.

ORMAN: If you have it in a bank, as long as you have FDIC insurance, and again just quickly going to say this everybody should go to I've partnered with the FDIC, you'll see my little face there. Put in answer the questions and you will find out if your money is insured in the bank or not.

COOPER: We have that link also on our web site

VELSHI: Yes, Anderson what Suze says, there are three ways in which you can feel prosperous. And one is you're getting a raise, your increasing your wealth. Two, is that if your investments for retirement are increasing and, three, is that the value of your home is increasing.

As Suze said, none of those three things are happening. If one of those started to happen, if we started to gain jobs or house prices started go up, people would feel a little wealthier and they'd spend money. But this economy more than any other economy in the entire world, Anderson, is dependent upon people feeling wealthy and spending.

COOPER: You know we all want to believe they're experts and when you talk to the person who is managing you account or your 401(k), you want to believe that they know something that you don't. But no experts alive have really seen this kind of thing. I mean yes, there was '87, and, yes, there was the Internet bust. But you talk to people --

ORMAN: Let me ask you this. You have a financial adviser. Did your expert say to you, Anderson, I want you out of this market now, a year ago?

COOPER: No. ORMAN: No. What kind of expert was that? It's because nobody knows. Nobody has ever seen this happen before; nobody has an understanding of what's happening.

So what does a normal human being do? You do what it takes to make yourself feel secure, take the risk that you're able to take but don't do anything where you think, I'm going to catch a good buy now, maybe yes, maybe no.

COOPER: Suze has got more great advice on her blog at and also the link to that web site she talked about. In about 30 seconds, Suze is going to be on Erica Hill's live web cast and the commercial break. Erica is getting started now, to watch go to Follow the link to Erica's show.

Now up next, financial guru Andy Serwer on the housing meltdown that got us here. We'll talk about that where the market stands and how a massive bailout might help.

Later, how the candidates are responding to all of this, and how the issues are playing on the trail and in the polls. That and any late updates out of Washington, we'll tell you about when 360 continues.


COOPER: Looking there at a time lapse video of the entire market day, the DOW industrials gaining back more than 400 points. In a week it seems blue chips covering more territory up and down in less time than the coyote and the road runner.

Let's focus on our "Breaking News" economic, political leaders trying to come up with a plan tonight. We're talking about potentially trillions of dollars to fix the system. How did we get here? Where are we going?

And "Digging Deeper" now Andy Serwer who co-wrote the cover story of this week's "Time" magazine, "How Wall Street Sold Out America." And he joins us now.

First I got to what do you think about this meeting tonight?

ANDY SERWER, MANAGING EDITOR, FORTUNE: Well, it's momentous and I think it's very significant. I mean finally someone in Washington, and actually the whole gang is standing up taking notice and taking some action, very important. Not a coincidence that the stock market rallied broadly today, Anderson.

COOPER: Just on the rumor of this.

SERWER: On the rumor and you know but you could tell that really something was happening because the meetings with the president were going to be taking place and the meetings with Congressional leaders.

I hope we don't get dragged down tomorrow, Anderson, by you know partisan bickering, there's talk of well, will Congress be able to move forward on this quickly enough. And you know there's a recess on September 26th. I'm thinking to myself, you guys better stay on to make sure you get this thing finished.

COOPER: Right, they were so critical of the Iraqi parliament going to recess earlier last year, I don't think these guys -- I don't think people will stand for these guys going to recess while all this was happening.

It did make me feel better when I read the bio on Ben Bernanke to realize that his expertise is the Great Depression.

SERWER: Yes. I mean, and you've these two guys, Ben Bernanke at the Federal Reserve and Hank Paulson, the Treasury Secretary. And you have to feel kind of pretty relieved really that those two people are there.

I mean as you said, Ben Bernanke knows about the Depression and Hank Paulson, he's competent, he knows the material and he's not particularly partisan I would say too.

COOPER: Is this analogous to the Great Depression?

SERWER: I would say, that yes, in the sense that it's the biggest systemic failure we've had since then. There's no question about that. It's bigger than the S & L crisis. And it's hard for people to get their brain around because so far it hasn't spilled into the broader economy.


SERWER: But you go back to 1929, there is this big stock market crash, and people sort of looked up and they said, oh, and then they went back to doing the Charleston and drinking gin.

So it took a while for the effects to sort of spill over into the economy. I mean I think by the government sort of taking action, we'll run the chance, we hope, of things not getting so bad.

COOPER: Where -- I mean, it's complicated. And you should read the "Time" magazine article if you haven't. Because it really spells it out. But in terms of how we got here but more importantly, where we're going, what are the next steps? I mean if this is unchartered territory, what do you see happening?

SERWER: Well, that is almost impossible to answer. I don't want to cop out on you.

But what could happen of course, is we have this meltdown in money market funds, you see that stuff happening right now that some of these money market funds are actually in trouble.

And if that spread, that would be really, really a national calamity. And people would -- there will be runs on the bank.

And this is actually something to talk about Anderson, in terms of you and me and reporting and what we say on air. Because you want to describe a panic, but you also want to say, don't panic.

It's a very nuanced point. And so I think that's kind of complicated. So is there a risk of things getting worse? Yes, there's definitely a risk. I think that just by virtue of the fact that we have this big effort by Washington will restore confidence.

And I think that the chances are greatly lessened now that the Treasury Secretary, the Fed chairman and the President, and Congress, are all united working to solve this.

COOPER: In terms of how it got here, obviously the housing, the mortgage meltdown is what it began at but it's gone far beyond that.

SERWER: Right. The thing is I think that the housing situation is kind of easy to solve. You look at lending requirements, you look at sub-prime, look at teaser rates, look at lending standards. Those things can be addressed --

COOPER: Everyone uses this term sub-prime, but you're talking about junk mortgages.

SERWER: Yes, right exactly. And there are too many of them, and people didn't get the right ones and the people were ripped off. That stuff is not that difficult. To me the really difficult thing is derivatives, which are these exotic financial products that are packaged --

COOPER: No one understands.

SERWER: No one understands.

COOPER: I mean even incredibly brilliant people of which I am not one, have no idea what they are; people who are in the financial markets.

SERWER: You could be a derivatives trader, Anderson.

COOPER: Yes, well, apparently so, because the guys who are doing it now.

SERWER: Well, that's right.

I mean, it's clear, for instance, that I would say that CEO of Lehman Brothers, Dick Fuld, didn't fully understand the implications of derivatives, because that's partly what was responsible for bringing Lehman Brothers down.

COOPER: Warren Buffett called them, what, weapons of mass destruction?

SERWER: Financial weapons of mass destruction, that's right.

And, so, that, to me, is, how are we going to regulate those or get our arms around those or understand them? I mean, it's almost impossible. It's like this genie, this evil genie that is out of a bottle. And I'm not sure I understand, and I'm sure that the regulators don't fully understand how to address that and how to make sure that they don't strike again. It's -- it's very difficult. That is going to be the really toughest one, I think.

COOPER: We will be watching. This thing could break in a matter of hours in terms of getting more information on exactly what is going to happen.

SERWER: Right.

COOPER: We will, of course, bring it to you as it happens.

Andy Serwer, thanks.

SERWER: Thanks.

COOPER: No shortage of breaking news tonight. We should point out; we're going to bringing you any late updates on this story.

We're also looking at how John McCain and Barack Obama are squaring off on the economy and what impact it is having on poll numbers for both men.

Also "Breaking News" involving Governor Sarah Palin's husband Todd Palin and the state trooper abuse of power investigation. Also a profile and his influence in state government and his role as Alaska's first dude when "360" continues.



GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES OF AMERICA: The American people can be sure we will continue to act to strengthen and stabilize our financial markets and improve investor confidence.


COOPER: President Bush this morning, about 45 minutes after the markets opened, trying to reassure Main Street about the meltdown on Wall Street. The worst financial crisis in decades has unleashed panic around the globe frankly it's also grabbed center stage in the presidential race.

CNN's Candy Crowley is "On the Trail."


CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: As the economic crisis dominated the fourth straight day of headlines and his poll numbers fell, John McCain said he would fire the chief federal watchdog of the investment industry.

SEN. JOHN MCCAIN, (R) PRESIDENTIAL NOMINEE: The chairman of the SEC serves at the appointment of the president, and in my view, has betrayed the public trust. If I were president today, I would fire him.

CROWLEY: It is the sound of McCain trying to pull away from George Bush and this is the sound of Barack Obama lashing them together.

SEN. BARACK OBAMA, (D) PRESIDENTIAL NOMINEE: Don't just get rid of one guy, get rid of this administration, get rid of this philosophy, get rid of the do-nothing approach to our economic problem and put somebody in there who's going to fight for you.

CROWLEY: New polls indicate Obama has halted the McCain momentum. The CNN Poll of Polls shows Obama up by three points now. In truth, neither candidate is in a position to do anything about the current crisis.

But in politics, the key is to sound and seem like a guy who would take control and fix a problem like this, while suggesting the other guy is totally incapable.

Obama - scoring McCain for changing his mind about the need for government regulation and the taxpayer bailout for AIG.

OBAMA: He's not clear about what he thinks or what he believes. Well, I have a message for Senator McCain. You cannot just run away from your long-held views or your life-long record. You can't erase 26 years of support for the very policies and people who helped to bring in some of the problems that we're seeing. You can't -- you can't just erase all that with one week worth of rants.

CROWLEY: McCain, scoring Obama for taking so long to say how he felt about the AIG bailout.

MCCAIN: On the biggest issue of the day, he didn't know what to think. He may not realize it but you don't get to vote present as President of the United States.

CROWLEY: It is a reference to Obama's many present votes in the Illinois senate.

In the trickle-down theory of politics, the number twos on the Republican and Democratic ticket did some sparring of their own. It began with Joe Biden's explanation why people making more than $250,000 a year should pay more taxes.


CROWLEY: Sarah Palin took up the cause.

GOV. SARAH PALIN, (R) ALASKA VICE PRESIDENTIAL NOMINEE: To them, raising taxes -- and Joe Biden said it again today -- raising taxes is about patriotism.

To the rest of America, that's not patriotism. Raising taxes is about killing jobs and hurting small businesses and making things worse. CROWLEY: Round five Friday, Barack Obama has promised new ideas after he meets with his economic advisers and John McCain has added on a stop in Green Bay, Wisconsin to outline his own economic plan.


COOPER: The financial tsunami we've been watching unfold is far from over. It's as fluid as they come. Candidates are going to have to keep up.

Let's "Dig Deeper" with Candy Crowley, also with John King.

Candy, have either of the candidates responded to tonight's "Breaking News" about a potential plan to be worked out?

CROWLEY: No. Barack Obama is en route actually to Florida at this point. I'm not totally sure where John McCain is but I know he hasn't responded.

COOPER: All right. John this has fundamentally changed the race. I meant the fact is Obama is now rising at polls. Do we know how much of that is due to the economy?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: We don't know exactly. We do know that the McCain/Palin post-convention honeymoon in the national polls did come to a stop and over the past 72 hours, maybe 100 hours now, we have seen a slight trickle toward Obama.

People are connecting the dot saying well, you're back on domestic issues and not about the personality and the character contrast. The Republicans were trying to draw and happy to draw coming out of their convention. So it is safe to assume that it has something to do with what's going on.

But I would be very careful. Obama's move in the national polls is very, very marginal. They should be happy they're moving a bit. But it's way too early, Anderson, to draw conclusions. But to the bigger point, this has change the campaign and it has hit the pause button on everybody's strategy, this is now the big issue and the campaigns realizes that.

COOPER: And Candy, is the new strategy -- I mean is it just changing every day? Developing? Is this thing just in flux in real- time? I mean they didn't have a strategy planned out for this, did they?

CROWLEY: No. But it's in some ways, a sort of classic politics. I mean, here came the issue of the economy, both sides had dealt with economic issues prior to this when they came up with the foreclosure decisions those sorts of things and mortgages that were completely out of whack with what people actually were earning and that kind of thing.

So they talked about that. But this is pretty formulaic right now. On the Democratic side, you have Barack Obama saying, first of all, John McCain doesn't understand your problems, and second of all, he's part of the problem. He's been in Washington all this time.

And what is John McCain's response? John McCain's response is, listen, he won't even step out on a limb and take charge of an issue and say how he feels about it one way or the other. What you need here is an experienced hand on the helm. And I'm that as well as I have maverick credentials.

It fits into both those themes.

COOPER: It's interesting, John to Candy's point. If Obama is saying that McCain is basically running away from his own party, that he doesn't talk about being Republican and doesn't talk about George Bush, is that accurate?

KING: That McCain does not talk about George Bush? You bet it's accurate. And that McCain is trying to move away from the identity of his party, absolutely.

John McCain's economic approach is for the most part, and there are some notable exception, but the for the most part, it is a traditional Republican approach, cut taxes, lower regulation most of the time.

But McCain is right when he said it was two years ago that he called for and Barack Obama said nothing, more regulation of Fannie Mae and Freddie Mac. McCain did do that two years ago.

So McCain is right there even though most of his career has been deregulation. And calling for the firing of the SEC commissioner today is certainly saying I don't like Bush's guys and what they're doing right now.

But there's a bigger issue for both of this candidates right now Anderson and it's the biggest thing in this country since 9/11. This is a domestic crisis, the biggest crisis in this country since 9/11 is unfolding seven weeks from the presidential election. And guess what? The two candidates are actually almost powerless to do anything about it.

The president is very relevant right now. He happens to be named George W. Bush. He may be unpopular in the country, but he is very relevant right now. And you saw the picture on Capitol Hill tonight, Democrats and Republicans realizing, let's all calm down, quiet down and figure out what we need to do.

COOPER: All right, we're going to have more with John and Candy.

In a moment there's also more "Breaking News," to tell you about. Governor Sarah Palin's spouse, Todd Palin and his answer tonight to investigators looking into the allegations of abuse of power against his wife, the governor.

And the wake of hurricane Ike, a lot of anger about a slow response and a move that may put some of the choicest Texas beach front property off-limits for years.

A lot more news ahead tonight on "360."



GOV. PALIN: I want to introduce to you my husband, Todd Palin, Alaska's first dude.


COOPER: "Breaking News" tonight, Alaska's so-called First Dude, Todd Palin is refusing to testify in the state trooper abuse power probe. In a letter to investigators his attorney cited along with the rejections to the subpoena, including a state law which bars ethics investigations of people running for elected office.

Investigators said they want to know if the Palins pressured the state public commissioner to fire their ex-brother-in-law state trooper. The fact that Todd Palin was even subpoenaed speaks to his influence in state government in Alaska.

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


RANDI KAYE, CNN CORRESPONDENT: He was introduced to the nation as a blue collar oil worker, a world record holding snowmobile racer.

PALIN: Two decades and five children later, he's still my guy.

KAYE: He made an impression on John McCain.

MCCAIN: I bet he's not afraid of Washington D.C. We can take them on.

KAYE: Here in Alaska, many say Todd Palin has plenty of influence. This man certainly thinks so.

Steven Branchflower is investigating the firing of the state's top cop and wants to find out if the Palins pressured him to fire the governor's ex-brother-in-law, a state trooper. He plans to subpoena Todd Palin.

STEVEN BRANCHFLOWER, ALASKA STATE INVESTIGATOR: He has spoken to numerous government employees. I think because he's such a central figure to the events.

KAYE: The governor says she hasn't pressured anyone. Todd Palin hasn't spoken publicly about the case. But a picture has emerged of Mr. Palin as his wife's greatest protector.

He grew up here and is part Eskimo. The two met at a high school basketball game and eloped in 1988. And when she is busy with state business, it is Todd Palin who cooks, car-pools and juggles the five kids.

KRISTAN COLE, PALIN FAMILY FRIEND: Todd is incredibly supportive and willing to do whatever it takes to help Sarah.

KAYE: These e-mails released earlier this year show he has been copied on lots of state business ranging from public criticism of the governor to meetings with corporate leaders.

ANDREW HALCRO, PALIN CRITIC: Todd plays the role as kind of the fixer.

KAYE: Andrew Halcro, a critic of the governor, who blogs about politics calls Todd Palin a shadow governor.

KAYE: Do you really see Todd Palin as a shadow governor?

HALCRO: I think he has a tremendous amount of influence with Governor Palin.

KAYE: Halcro found himself the subject of e-mails Todd Palin was copied on and wants to know why the governor's husband, a private citizen was included on state correspondence.

Why is Todd Palin copied on e-mails about state business?

MEG STAPLETON: There's a spousal privilege in that the governor is asking him to take care of some -- print them off or take care of business.

KAYE: By all account, Todd Palin is a fixture at the legislature. Some have even joked about getting buttons that say, "What would Todd do?"

Senate president, Lyda Green is a Republican but no friend of the Palins.

LYDA GREEN, (R) STATE SENATE PRESIDENT: I had gone to the office at a meeting I requested with the governor. I was particularly surprised that Todd was there. I had never seen a spouse stay in the room through the meeting.

STAPLETON: Todd's role has not been inappropriate.

KAYE: Todd Palin wants to help Alaskans find jobs, which is why the campaign says, he has taken two trips with state commissioners to survey Alaskan mines and a flyover of the proposed route for a pipeline, his wife's key goal. The state paid for those trips because they were considered state business.


COOPER: Randi, getting back to the subpoena which Todd Palin is now rejecting, refusing to testify, can he legally do that and under what argument?

KAYE: The campaign says he certainly can. They point to a law here in Alaska saying no ethics violation proceeding can take place against a candidate running for office. So even though it's Sarah Palin running for office, they say Todd Palin is being asked to participate in an inquiry regarding a candidate running for office.

We looked at the law specifically. And it says, it really points to "the candidate," it doesn't point to anybody else who might be involved in this inquiry. But the campaign seems to want to cover Todd Palin under this law as well.

If it stands and he doesn't testify under this subpoena, Anderson, this would have to go to the Senate for a vote, which wouldn't take place until January, when they're back in session, which would be well after Election Day.

COOPER: All right, Randi Kaye on the story from Anchorage. Thanks, Randi.

Those e-mails that Randi mentioned were from Governor Palin's government e-mail account and also her personal Yahoo account, the same one that was hacked into two days ago. Someone impersonating Palin tricked Yahoo into assigning a new password to the governor's account and then posted some of the contents online.

The FBI and Secret Service are investigating. Tonight, they're details. Investigators have contacted David Kernell, the 20-year-old son of the Tennessee State Representative Mike Kernell. It's not clear exactly why they're interested in the younger Kernell who's a student at the University of Tennessee in Knoxville.

The story is a stunning reminder of just how vulnerable online information can be. It's also raised questions about the extent Palin used her personal account for government business, and whether she did so properly.

Just ahead tonight, new polling; the presidential race, the momentum shifting somewhat, yet again, very close though.

An Obama ad is drawing fire from McCain forces, allegations of a smear. As always, we have got the facts. You can judge for yourself.

And next a new development; the U.S. Embassy bombing in Yemen, compounding the tragedy, an American citizen found among the dead.

Details on that and some other headlines when "360" returns.


COOPER: Coming up, a look at the presidential ad wars and find out how which candidate -- or find out which candidate is spending more money going negative. The answer may surprise you.

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

ERICA HILL, CNN CO-ANCHOR: Anderson, we're learning a little bit more tonight about that bombing in Yemen. In fact, an American woman was among those killed in yesterday's terrorist attack at the U.S. embassy in Yemen. Eighteen-year-old Susan Albana of Lackawanna, New York, and her husband of just three weeks died holding hands. She went to Yemen last month for the arranged marriage. Hundreds of beach front homeowners in Texas may not be allowed to rebuild after Hurricane Ike because of a state law which says that particular strip of beach between the average tides is public property. Ike's destruction eroded so much beach that many homes are now technically on public property. Officials say they will monitor those beaches for a year before making any decisions.

And a previously unknown piece of music written by Wolfgang Amadeus Mozart is discovered in a French library. The 18th century melody sketch isn't complete, but experts say it is definitely Mozart's handwriting.

COOPER: That's cool.

HILL: Yes.

COOPER: All right. Here's tonight's "Beat 360" photo. Film director Woody Allen at a film festival in San Sebastian, Spain, today.

Here's the caption from our staff winner, Tom: "Yes, I'm still alive, it's just my sense of humor that died."

HILL: Ouch!

COOPER: That's not nice. I disagree with that.

HILL: I do, too. I like Woody Allen.

COOPER: I think he -- he's fantastic. I heard his new movie is better than ever. Best thing...

HILL: I hear nothing but rave reviews, but I don't get out very much.

COOPER: I'm a big -- I'm a big fan of his work. So anyway, that was Tom's caption. Think you can do better? Go to ac360. I don't want to see Tom out to dry.

HILL: He's taking you down, Tom.

COOPER: No don't tell that to Tom. I appreciate the caption., that's the address. If you can come up with a better one, try it. The winner gets a T-shirt, "Beat 360" T-shirt.

Just ahead, with just seven weeks to go, guess who's spending more money on negative ads? The answer may surprise you.

Also tonight, a remarkable survival story: the house left standing after Hurricane Ike. If only its walls could talk. Every single house around it, look at that, in ruins. We told you about this story earlier this week. Just ahead, you're going to hear from the owner. I'll speak to her.

This is "360."



MICHELLE OBAMA, WIFE OF BARACK OBAMA: People shouldn't make a decision this time based on, "I like that guy," or, you know, "She's cute." You know? This isn't -- and I'm talking about me.


COOPER: Michelle Obama in Charlotte, North Carolina, today talking at a women's round table on the economy. Mrs. Obama didn't talk about Sarah Palin directly in her remarks, which focused on issues like equal pay and health care.

But tonight, we focus on what Barack Obama has been saying, not on the stump but in ads. If you thought John McCain's ads were tough on Obama, well, a new report finds that Obama is outspending John McCain on negative ads.

"360's" Joe Johns has the "Raw Politics."


JOE JOHNS, CNN CORRESPONDENT: Trading fire in the air wars. Maybe you thought John McCain has been blistering Barack Obama with negative TV advertising. Of course he has, especially over the summer.

UNIDENTIFIED FEMALE: Not ready to lead, that's the real Obama.

He's the biggest celebrity in the world.

JOHNS: But in the week after the big GOP convention, surprise, Obama put down more money on negative ads than his Republican opponent.

UNIDENTIFIED FEMALE: McCain explains away the wage gap saying women just need more education and training.

JOHNS: The nonpartisan University of Wisconsin Advertising Project discovered that sudden blip in negative ads. How do they define negative?

KEN GOLDSTEIN, UNIVERSITY OF WISCONSIN ADVERTISING PROJECT: Very simple definition, if you're talking about the other candidate, it's a negative ad.

JOHNS: Both candidates spent about $8 million on ads, but with one big difference: 56 percent of the McCain ads mentioned Obama during that week. Just over three-fourths of Obama's ads mentioned McCain.

UNIDENTIFIED MALE: Things have changed in the last 26 years, but McCain hasn't.

JOHNS: It's only a snapshot of one week in the campaign, but it tells you what these guys were thinking.

GOLDSTEIN: Over the summer, Obama was more likely to be positive, McCain more likely to be negative.

JOHNS: And after the conventions?

GOLDSTEIN: At least in that first week, Obama more negative than McCain.

JOHNS: The study didn't count ads on the Internet or all the free media both campaigns got when they rolled out big attack ads that got a bunch of runs on TV news shows.

So why are these candidates going after each other with negative ads? Because they work.

GOLDSTEIN: We know from lots of studies, frankly, that voters are more likely to retain, more likely to learn negative information than positive information.

JOHNS: The Obama campaign argues it had to step up its negative advertising because their guy was getting slimed before the convention.

UNIDENTIFIED MALE: What's happened to John McCain? He's running the sleaziest ads ever, truly vile.

JOHNS: Just because one side does it, does that make it OK for the other side to respond in kind? Maybe not.

Republican Congressman Chris Shays is one of the architects of one the last big and bipartisan law to clean up campaign financing. But even he says one man's response is another man's negative ad.

REP. CHRISTOPHER SHAYS (R), CONNECTICUT: When a candidate attacks the other candidate for being sleazy and ugly, they are as negative as the candidate that they are criticizing.

JOHNS: Oh, and by the way, if you're looking at both candidates and thinking, this is rough stuff, just wait a few weeks.

Joe Johns, CNN, Washington.


COOPER: Let's dig deeper now with CNN's Candy Crowley and John King.

Candy, so we just heard Obama spent more money on negative ads last week than McCain. Does that explain the change in polls, or is that just one thing in the mix?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: You know, polls change for a wide variety of reasons. It's never just one thing. I think you have to look at this whole period of time.

Yes, Barack Obama has gone more negative, not just on the air, but on the stump, he is hitting him very hard.

The economy has come back onto the headlines and we're moving further and further away from the convention which gave John McCain a boost. And there have been more and more stories about Sarah Palin. So I think you take all of those, and that's what you're looking at in the polls.

COOPER: You know, John, last week we heard from a lot of Democrats pleading with Obama to show more fire, be more critical directly of McCain, not talk about Sarah Palin. Are those Democrats more satisfied with this week's Obama?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Well, the criticism was more Obama on the stump. They want to see him not only draw sharper contrasts with John McCain but do it in a way that makes a personal connection with voters on the economy, especially.

And Democrats do like the Obama ad they see now where he looks directly at the camera and says, "Go to my Web site and read my plan." That is very reminiscent of an ad Bill Clinton ran when he was on the ropes back in New Hampshire in the 1992 Democratic primaries. Simply say, "You're going to hear a lot of stuff. A lot of it's negative. A lot of it's about me. But I have plan. I can actually help you." Democrats like that.

But Anderson, on the bigger theme, if my memory is right, it was Barack Obama who ran the first negative ad in the Democratic primaries, too. They have created this image of new and different, but they play bare-knuckle politics just as much as anybody.

COOPER: In fact, Candy, some of the ads they're running, I think, the Spanish language ads they're running, linking John McCain with Rush Limbaugh, have been directly pointed out as being unfair.

CROWLEY: Absolutely and directly wrong. I mean, there have been several people that have looked at this ad and compared to the actual record, people -- people said Rush Limbaugh was taken out of context. The tie between Rush Limbaugh and John McCain is non-existent. And yet, that's what this ad does.

COOPER: As I recall, Rush Limbaugh was not a big fan -- Rush Limbaugh was not a big fan of John McCain for an awfully long time, as I recall.

CROWLEY: Yes, absolutely.

COOPER: So John, I mean, how does -- it's fascinating to me how much this race changes every week, I mean, sometimes hour to hour or day to day, and I guess all campaigns do. But the economy now has just completely shifted the dynamics of this race.

Do we know, I mean, is it still evolving how it's playing out? Has one side been able -- I guess the conventional wisdom is that Obama's done a better job capturing that, but has he? Do we know how it's evolving? KING: We don't know just yet. The little anecdotal evidence we have from our travels, talking to voters and what we see in the little trickle in the national polls, little trickle is that Obama might be benefiting a little bit. It's a much better question to ask, I think, a week or ten days from now.

But Anderson, we're also entering into the most fascinating part of any campaign, especially a close one where both campaigns have enough resources. Obama has more, which is huge. Not in my lifetime have the Democrats had more money than the Republicans in the end.

But we will see big national cable buys on ads. We will see the speeches from the candidates. But this is when you also see local ads in different parts of the state giving very different messages or in different parts of the country; very different messages, plus radio and direct mail.

As much as we focus on TV ads, watch what happens in mailboxes and on radio ads over the final six weeks of the campaign. That is some of the toughest stuff; some would say the most nasty stuff.

COOPER: And Candy, in terms of the machine behind each man and each campaign, are they both about equal? I mean, obviously, Obama is raising, you know, more money than John McCain. How is the organization at that level?

CROWLEY: Well, organizationally -- and again, this is something that -- that you begin to have a much better sense of two weeks out: who's knocking on the doors, how many people are knocking on the doors.

But the Democrats are getting some high-level help next week. And they have been out there registering people. Barack Obama has proven on the stump to be a draw to people that are first-time voters or who are people that have been discouraged voters.

So if you look at it right now from what we know, you are looking at an on-the-ground operation from Barack Obama that they are describing as unprecedented. And that's certainly what it looks like, whereas I have not seen that much from the Republican side. And honestly, that's where the difference is between winning and losing, is how many guys you can get out on the ground.

COOPER: All right. We're going to have to leave it there. John King, Candy Crowley, thanks very much.

Still to come, Hurricane Ike huffed and puffed; couldn't blow one lonely house down. That house. You've no doubt seen the picture. We're going to talk to the owner of that house and find out why it appears that home was spared and what it is like when all your neighbors are simply gone.

Later, breaking news; the nation's congressional financial leaders hammering out a plan to solve the economic mess. More on what they might have in store, what it means for you when 360 continues.



COOPER: That has got to be just a bizarre feeling.

PAM ADAMS, HOMEOWNER: Yes, it is a bizarre feeling. It's a beautiful home. We worked real hard to get that home looking the way it does. And it's amazing that it's sitting out there by itself. And I don't understand why it's still there.

I think I would have been better off if I hadn't gone back and saw it today and saw it in the shape that it is in. I think I would have felt better if it would have just went away with everything else and I was just looking on the ground for things.

COOPER: It's not salvageable at this point, right?

ADAMS: I don't really think so. Maybe they can do something with it. I'm not sure. But it sure is beautiful, isn't it?

COOPER: When -- I mean, have you been able to talk to any of your neighbors? Just -- I mean, the heartache of what has happened there. And I know a lot of the country has moved on, but folks there are just devastated. And a lot of them are angry and frustrated about, you know, not being able to go back to try to rebuild, not to be able to go back to look for their property. Have you talked to any of them?

ADAMS: In fact, I took two of the neighbors, Sid and Carol, with me today down there whenever I was able to go in there, so they could look at their property next door to me.

We were a real tight-knit group down there. If someone was working on their house, others came out and helped. You know, we had holidays together, barbecues together. And you know, family, everyone knew each other. We were really close-knit. And it -- it's just devastating. You know, we can't even talk on the phone without crying.

COOPER: I can imagine. Pam...

ADAMS: It's just really, really hard. And I just want the nightmare to be over with. I just want to go home.

COOPER: I know that there's thousands of people who share those same sentiments right now all throughout the Gulf area in Texas.

Pam, I appreciate you being on with us and talking about your home. And good luck to you and good luck to your neighbors. Thank you.

ADAMS: Thank you.

Coming up, a Wall Street crisis and meetings in Washington involving nothing less than your economic future and potentially trillions of dollars to fix the housing meltdown. It's "On the Radar" when "360" continues.


COOPER: "On the Radar" the crisis on Wall Street, a lot of you weighing in on the financial meltdown this week on the "360" blog.

Steve saying, "I fail to see where saddling the American people with even more debt will have a desirable outcome. Do the rules of accountability only apply to the everyday citizen?"

Interesting point.

Jackob, however, writes -- "This crisis was not just because of a failure in economic policy but also because of our lifestyle. Urban sprawl, SUVs, thousands of dollars in credit card debt -- need I go further?"

JC in Los Angeles says, "Enough is enough. The American people deserve better and deserve justice."

Certainly we do deserve better, JC.

Share your thoughts. Read the other comments by going to

That does it for us tonight. Thanks for watching.

"Larry King" starts right now and I'll see you tomorrow night.