Return to Transcripts main page


President Bush's Massive Bail Out Plan; Planet in Peril - Melting Ice Sheets; Henry Paulson - The Man Behind the Bail-Out

Aired September 22, 2008 - 23:00   ET


ANDERSON COOPER, CNN ANCHOR: All right, coming up at the top of the hour, serious stuff, candidates, each raising questions about the financial bailout plan. Does either have a better idea? What do voters think about it?
Also later and the candidates and their connections on some of the companies that triggered the mess to begin with? Does either of them come out with their hands clean on this one? We're "Keeping them Honest." Ahead on "360."


COOPER: Tonight, growing questions about bailing out Wall Street and deepening fears about not bailing out Wall Street. Are fat cats being protected? Are homeowners getting shafted? Will foreign banks get your money?

What's in the fine print? And pretty terrifying when we're talking about $700 billion or more. Is the crisis so urgent there isn't even time to read the fine print? All the angles tonight.

Also tonight, the candidates, each raising doubts about the plan. Will John McCain lead a charge against the bailout? Does Barack Obama have a better idea? Serious questions there, we'll examine tonight.

And later, she's never met a world leader but this week she'll meet plenty. We'll tell you about the unprecedented cram session with global leaders, Henry Kissinger and even Bono all to get Sarah Palin in front of the cameras with world leaders.

We begin tonight with the president's massive financial rescue plan under fire from the left and right. With the markets on edge and some market watchers warning that unless something is done right now the country is looking at the next Great Depression. It's that seriously they say, one market guru comparing the crisis to a chemical fire, any delay, he says, any delay and the fire becomes unstoppable.

Investors today, jittery, driving blue chips down nearly 375 points. Oil sky-rocketing, the highest one-day spike ever. At the same time Democrats and Republicans each for very different reasons are growing leery of signing a $700 billion check without first reading the fine print and changing some of it.

Democratic Senator Chris Dodd offering a legislation of his own. Conservative Republicans meeting tonight discussing alternatives.

Barack Obama and John McCain each raising doubts.

The crisis apparently helping Senator Obama gain ground in the latest CNN poll of polls opening a five-point lead over earlier polling, also enjoying a five-point edge on the question of who would better handle a crisis such as this one. "Your Money, Your Vote," our future.

Here's what we know right now from Tom Foreman.


TOM FOREMAN, CNN CORRESPONDENT: With the markets watching Washington and Washington watching the markets, a high stakes poker game is being waged over the $700 billion bailout. On one side, Democrats who want more regulation, more protection for consumers and to clamp down on the corporate executives who contributed to the troubles.

SEN. BARBARA MIKULSKI, (D) MARYLAND: No golden parachutes. Let them feel the hard landing that my constituents faced when they were laid off at Bethlehem Steel. Let them feel the hard landing of knowing what it's like to have your mortgage foreclosed upon.

FOREMAN: On the other side, Republicans who fear if the drumbeat for market controls gets carried away, it will limit future economic growth, take jobs, and make the free market a lot less free.

REP. MIKE PENCE (R) INDIANA: Many of us conservatives are concerned that the cure of a massive transfer of money from the Treasury to Wall Street could ultimately be worse than the disease that we're facing in our financial markets.

FOREMAN: Many Democrats and some Republicans agree on the need for control over CEO's salaries of companies that get money. But with polls showing the public more inclined to blame Republicans than Democrats for the current problems, the Dems are pushing hard for concessions.

Among them, an agreement for emergency committee to oversee the handling of the bailout deal. Help for homeowners caught up in the mortgage mess. A one year timeline instead of two year deal the White House wants. And provisions for the government to hold actual shares in the companies it is bailing out.

That matters, because, in theory, those shares would be sold off in the future to pay back to the government at least some of all that taxpayer money that is being laid out for this deal.

But how much? No one even knows for sure what these companies are worth right now. According to the Center on Budget and Policy Priorities, a non-partisan group that promotes fiscal responsibility.

JAMES HORNEY, CENTER ON BUDGET & POLICY PRIORITIES: The long term cost won't be $700 billions; it's going to be somewhat less than that. The real problem is estimating what that cost is; this is extremely difficult in this case. FOREMAN: Still, despite the difficulties hammering out the details, both parties are predicting a deal before the week's end.

Tom Foreman, CNN, Washington.


COOPER: "Digging Deeper" now in the nuts and bolts and votes with Marcus Mabry, international business editor of the "New York Times" and author of "Twice as Good: Condoleezza Rice and her Path to Power" and John Fund, of "The Wall Street Journal" and author of "Stealing Elections, How Voter Fraud Threatens Our Democracy." And Peter Schiff, financial adviser of former presidential candidate Ron Paul, he's written "Crash Proof, How to Profit from the Coming Economic Collapse."

Marcus I want to start with you, what do you see the difference between the Republicans' criticism and the Democrats' criticism of this plan?

MARCUS MABRY, INTERNATIONAL BUSINESS EDITOR, NEW YORK TIMES: It's kind of funny Anderson, because whenever you have this kind of agreement on left and right, that something is a bad idea although for opposite reasons, you always wonder well, maybe they actually have something right.

What we're seeing is the Republicans say this is too much government interference, it's not good, the markets should be allowed to function. And what Democrats are saying, is this is a fat cat bailout, whereas American families are losing their homes and seeing foreclosure rates at historic highs. These guys were responsible for some of this, by getting Americans to take out loans they should not have, are now going to get rewarded after their multi-million pay days and bonuses. They're now going to get them off the hook and bailed out by us, we the taxpayers.

COOPER: John, you say this is an evil but is the lesser of two evils?

JOHN FUND, THE WALL STREET JOURNAL: Well I think it's becoming more evil with each passing day. People are attaching to it what is a relatively clean bill, their own ideas, for example bailing out homeowners; that's a sinkhole that has no bottom for it.

COOPER: A lot of Democrats are calling for that.

FUND: Yes, and also Republicans have their own ideas. I think the danger here is any time you have must pass legislation, you I think ignore policy and you focus on politics. The real danger is the timing of this crisis. We are six weeks away from an election in which almost every member of Congress is on the ballot.

They are panicking like wildebeests confronted by lions across the plains. And I think the American people are going to be the worst off for this because the taxpayer's caught holding the bag, if this all well help. If this were after the election, I think, we could have a more rational and more reasonable, more prudent approach. Now, we're panicking and I think we're going to make some very ill-advised moves if we add all of these Christmas tree amendments to the bill.

COOPER: Peter, you hated it on Friday. Does it stink any less to you now?

PETER SCHIFF, FORMER FINANCIAL ADVISER TO RON PAUL: What we're doing is the equivalent of selling our financial souls to the devil. It's Henry Paulson and Ben Bernanke; they're the pied pipers that led us down this path. Now, they're going to lead us over a cliff.

Now, sure it's going to be bad if we do nothing, but it's going to be a lot worse if we do this. We need to get back to the free market.

Because it's not the free market that got us in this mess, it was all the government interference with the free market. It was the Federal Reserve and putting the interest rate down as low as they did. It was Freddie and Fannie for creating the moral hazard that made possible all these crazy loans that led people to borrow money that they couldn't afford. We need less government, not more government.

COOPER: John you certainly believe in the free market but you disagree with Peter?

FUND: Well, I think it's -- no, I think Peter is right on the policy essentials. I'm simply making a political point. We are going to have a bill because members of Congress are not going to be stuck seen doing nothing on this. The bill should do the least possible damage. It is a big mistake to have the government taken an equity share.

COOPER: That's one of the big things being discussed right now, the idea that the government should take some sort of an equity share. Explain what that means.

MABRY: Well really, those who feel like we we're actually giving Wall Street a free ride here after Wall Street made irresponsible decisions, they say that the American taxpayer is now going to bail Wall Street out. The American taxpayer deserves some reward on the upside, meaning if these things actually improve, the American taxpayers should benefit.

COOPER: Is that like a bank which is loaning a company money, would taken an equity position, the government -- that argument is that the government should taken an equity position in these companies?

MABRY: In exchange for $700 billion or even -- that could be a trillion dollars.

FUND: It's going to be less than in the end though.

COOPER: Why is that a bad idea Peter? SCHIFF: Well it first of all, it's a bad idea because remember we're addressing the symptoms of our disease, and not the disease itself. We're borrowing too much money. And what does this plan do? Borrows even more and it gets us into a deeper hole.

And unfortunately, the taxpayers are not going to suffer with higher taxes, they're going to suffer with massive inflation. They're going to see the value of their wages eroded; the value of their savings eroded, as we have to print the money to fund all this stuff.

COOPER: But John on the equity thing, I mean to a lot of people, that would seem to -- to Democrats certainly, that seems to make sense, why not give taxpayers an equity stake in these companies.

FUND: Because I think it's the opening wedge to government ownership stakes and corporations which is the European approach. The Europeans have a different system.

COOPER: You're saying it smacks of socialism?

FUND: Well, the whole thing smacks of socialism because we are baling people out of their bad mistakes. Remember, the government created the conditions which led people to make bad loans. Everybody is to blame here.

I don't think the solution though is to insert the government, which created the very conditions that messed this up into helping to run these assets and corporations. There is no evidence they would do a better job.

COOPER: Are foreign banks going to getting money from this?

FUND: This bill will not pass if foreigners get bailed out because that will create a political firestorm.

MABRY: But they are going to get bail out. There's no way to stop it.

COOPER: Right, I mean these days, banks are so internationalized, how can this not?

MABRY: The problem is the banks -- already you're going to see the Japanese owning a stake in Morgan Stanley, when it was a premier in American independent investment banking. That model is now in jeopardy forever.

SCHIFF: But the minute you allow U.S. firms to sell these mortgages to the government, they could buy in from banks all around the world and then flip them to the government. There's no way to keep the foreigners out of it.

COOPER: There's also in the current proposal I mean some folks on Wall Street are going to make money off this. I mean aren't they?

MABRY: They're the ones who were guilty of excesses already and lack of greed. COOPER: How will they make money off it?

MABRY: Well, they're the ones who are going to be bailed out. They're the ones who are actually going to now have the stakes that would have kept plummeting in value will now be shored up. We've already seen it.

COOPER: So will they still get their bonuses under this?

FUND: The worst part of this is when we started out with the Bear Stearns bailout and then we moved onto the AIG bailout and Fannie Mae and Freddie Mac bail out, every time you violate the basic principle of no bail outs, you create a long line, right?

What is the next company that is going to come after this bailout? Detroit, the auto companies.

MABRY: Where do you draw the line?

FUND: I think you should have drawn the line at Bear Stearns.

MABRY: But they already didn't.

FUND: A long time ago. And they didn't so now we're paying the consequences of trying to decide when to say no. They should have said no at the beginning.

COOPER: But you think no matter what, there will be some sort of a deal, this week?

FUND: Six weeks before an election, what do you think? Of course, there has to be. Members of Congress go home without passing anything?

COOPER: Well, they want to go -- they want to go back home. They don't want to stay ...

FUND: If they go home passing -- if they go back passing nothing, I think they look as if that they're ignoring the plight of the American people. So, they're willing to pass a bad bill, rather than no bill.

SCHIFF: Remember, they're already extending this to credit card debt, to auto debt. So, they're already going way beyond...

FUND: And that's a bottomless pit...

SCHIFF: ... way beyond mortgages.

And you know what? Now, you have got Goldman Sachs and Morgan Stanley becoming banks. So, after they have blown through their own capital, they are going to acquire a bunch of FDIC-insured deposits, and they're going to lose that, too.

COOPER: We have got to leave it there. Peter Schiff, John Fund, Marcus Mabry, thanks very much. I wish we had something more uplifting and happy to talk about, but I appreciate your expertise.

More on the political dimension in a moment.

As always we'll be blogging throughout the hour, Erica Hill and I, join the conversation on Also you can find Erica Hill's live web cast during the breaks.

Up next, the candidates weighing in and taking shots. We got striking new poll numbers on the economy. And a closer look at campaign connections to the banking and mortgage industry. We're "Keeping them Honest."

And later, speed dating on kind of a global scale; Sarah Palin coming to New York. You're looking at a new video of her arrival. She'll be meeting foreign leaders. Will this help convince some people she's ready for the White House? We'll talk about that.

And Bill Clinton on Hillary Clinton on "The View" speaking about the kind of running mate she would have made and whether she wanted the job at all. That and more on "360."



SEN. BARACK OBAMA, (D) PRESIDENTIAL NOMINEE: We were talking about change when we were up and we talked about change when we were down. And this whole change thing must be catching on; because I notice that John McCain lately has been trying to steal my signs.

SEN. JOHN MCCAIN, (R) PRESIDENTIAL NOMINEE: Senator Obama has never taken on his party on any issue at any time. We pushed for reforms that ruffled feathers and angered the entrenched interests. I was not elected Miss Congeniality again this year in the United States Senate.


COOPER: That's how it went today on the campaign trail, Barack Obama and John McCain trading fire and hitting each other hard as they scramble to respond to the latest developments to the Wall Street crisis.

The challenge for both is to convince the voters that they're the best man to clean it up.

CNN's Candy Crowley has all the day's "Raw Politics."


CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: As the Wall Street mess dominates the headlines, Capitol Hill and the campaign, new polling finds that by a 2-1 margin, registered voters blame Republicans, political gold.

OBAMA: I guess they think that you don't have much sense. Because they can stand up with a straight face and say, we're going to clean it all up.

They made the mess. They have been running the government.

CROWLEY: It is the underpinning of the Obama campaign, a persistent attempt to tie John McCain to George Bush. Working just as persistently to break loose, McCain needs to convince voters, like those here in working class Pennsylvania that he has the reformer credentials to fix what's wrong.

MCCAIN: Well, let me offer a little advance warning to the big spending greedy do-nothing me-first, country-second crowd in Washington, and on Wall Street, change is coming, change is coming to a neighborhood near you.

CROWLEY: The latest CNN Opinion Research Corporation Poll also shows while McCain holds a 12-point lead when the question is about judgment during an international crisis, Obama is up six points when voters are asked about judgment during an economic crisis.

So the issue likely to dominate the conversation between now and Election Day plays to Obama's perceived strength. And he pushes it.

OBAMA: We need a plan that helps families stay in their homes and workers keep their jobs, a plan that gives hard working Americans relief instead of using taxpayer dollars to reward CEOs on Wall Street.

CROWLEY: The bailout brings a peculiar conundrum to the campaign. The candidates don't want to stand in the way of avoiding economic calamity; they don't want to fully embrace a plan that seems to save the elite.

So the trail rings with populism, as both candidates generally accept the need for $700 billion in help for the nation's top financial institutions even as they speak to the resentment it stirs among struggling taxpayers footing the bill.

MCCAIN: We can't have taxpayers footing the bill for bloated golden parachutes. We need to put our country first and focus on what's best for Main Street. It's the excess and greed of Washington and Wall Street that got us in this situation to start with.

CROWLEY: In the end, when it comes to the bailout, Obama and McCain agree more than disagree; both want more oversight in how the money is spent and limits on CEO payouts. Both want to see the final package before embracing it and both are likely to be campaigning when the vote is taken.

Candy Crowley, CNN, Washington.

(END VIDEOTAPE) COOPER: So right now, it seems like the Wall Street crisis may be the October surprise come early that could decide the election. Joining me for a "Strategy Session:" first, "Time" columnist and author Joe Klein; CNN's senior political contributor and Republican strategist, Ed Rollins; and Jennifer Donahue a political director at the New Hampshire Institute of Politics.

Joe it seems like both candidates are being very cautious in their statements about these bailout. I guess you could argue well, they don't want to do anything to upset the markets and then get blamed on themselves. But neither seems to be giving a lot of specifics.

JOE KLEIN, TIME COLUMNIST: Well you know it's a rare moment of prudence in this campaign. And that's because the stakes are so high. I mean this is a hugely complicated thing that we're looking at here, this $700 billion bailout. And by the way, I think it's really important that Congress does not rush.

I mean they all want to go home so they can campaign on Friday. I think it's probably going to take a little bit more than the next four days to work this one out. Meanwhile, both McCain and Obama are trying to chip away outside the central question of the bailout.

And, you know, Obama is trying to use the natural advantage the Democrats have.

COOPER: Ed, you say both sides have really botched their response. Let's talk about both. For McCain, what did he do or not do?

ED ROLLINS, CNN SENIOR POLITICAL CONTRIBUTOR AND REPUBLICAN STRATEGIST: Well, he initially sort of took the Phil Gramm line, which everything is great and we just have to sort of move through it and obviously, he had to come back and reverse himself and he's sort of bounced around all week.

COOPER: You won't hear that line now from him.

ROLLINS: You will not hear that line.

KLEIN: That was before the bailout.

ROLLINS: First of all, they don't control this environment and I think they don't have the knowledge, either one of them, to understand it totally. They'd better by the domestic debate, I mean I think some of them may come up in the foreign policy debate this week because it's an international crisis.

But I think by the foreign policy -- by the domestic debate, they better have their game plan. And part of the game plan maybe we can't fund or we can't make decisions to do all the things we promised to do over the last year.

COOPER: That's the thing that is remarkable is that they're still talking about all the plans that they have to do. I mean if they're being completely honest, that stuff is out the window.

KLEIN: But wait a second I mean you know, we're talking about $700 billion here. All of a sudden, it changes the playing field for a lot of different things. Barack Obama's infrastructure program of $7 billion which we may need to put a lot of people to work next year suddenly seems like a drop in the bucket.

I do think that they're going to have to recalibrate and they're going to have to prioritize, for sure. But I think that Obama is in a much stronger position here because he has people like Bob Rubin, Larry Summers, the whole Clinton team; and John McCain has essentially been a deregulator throughout his career.

COOPER: I want to get to Ed on what you think Obama has not done. Because we asked him about it when it came but I also want to bring in Jennifer.

Jennifer, Obama now has a 10-point lead when it comes to the economy. Is that -- in these polls do you think that's mainly because voters just link the problems with Republicans, fairly or not?


For one thing, I think you have to say, honestly, McCain has made some very serious mistakes in relation to this crisis. Saying before it happened it was fundamentally a good economy, and in the year leading up to that, even in New Hampshire, saying we were in good economic circumstances, flew in the face of what voters, regular voters, were seeing in their checkbooks and in their foreclosure situations.

McCain was calling the homeowners greedy. Now, he also was a deregulator who is now having to favor this legislation because the voters are demanding it.

Now, I have a tremendous amount of respect for John McCain. I think his campaign operatives are pushing him into positions he's not comfortable with right now. And that's why you're seeing him in a lot of discomfort.

But what it's allowing Obama to do is take over McCain's original talking points, transparency, sunshine, no revolving door, no government contracts, favor Main Street over Wall Street, over Washington.

COOPER: Ed -- Ed...

DONAHUE: That was McCain's playbook, and Obama is articulating it.

COOPER: Ed, though, in McCain's defense, he has given probably at least -- or, at least today, he gave more specifics who exactly he would want overseeing whatever the bailout is. I mean, he talked about a Mike Bloomberg, he talked about Warren Buffett, he talked about Mitt Romney, trying to get a bipartisan commission going, probably more specifics than we have actually -- or at least names of people. We haven't heard that from -- from Obama. What do you think Obama has misjudged here?

ROLLINS: What Obama misjudged was the consequences.

First of all, Obama should have used his role as the Senate -- and Senate leader in the Democratic Party. He should have sat down with the leadership of his party and basically been a part of that process, because, obviously, he's the guy who is going to have to govern. If he wins this thing, he has got to make it work.

You have not seen any presence on the Hill. You have not seen him sit down with Barney Frank or Dodd or any of the rest of them. He should have called a meeting, basically taken charge of this, from their perspective, and he would have looked like a leader.

The other side is, the first guy that steps up here and says, "Listen, I don't know what I can do; we're in a crisis; what I'm -- what I'm talking about is leadership, and part of leadership is being honest with the American public," I think that will give whoever does that a real advantage.

COOPER: It does seem that, I mean, the world has changed from three weeks ago. And for them to still be talking about all the programs that they plan to do, yes, the money may seem less...

KLEIN: Pick two.

COOPER: Pick two?

KLEIN: Pick two, pick three.

COOPER: They're in the heat of a political campaign. Is anyone going to step up, as Ed suggests?

ROLLINS: You're down to swing votes at this point in time. And Republicans aren't going to abandon McCain, no matter what he does. Democrats aren't going to abandon...

DONAHUE: I don't agree with that, Ed. I have got to jump in there.

I think that McCain is having a real problem solidifying his base. And that's part of what we're seeing. Now that the Janet Palin bounce is down, I mean, today and yesterday...

COOPER: Sarah Palin.

DONAHUE: Excuse me. Sarah Palin.

Now that the bounce is gone, McCain says, I think we need to cut taxes, make government bigger, and fix the economy. Now, that -- if that's not a Christmas tree -- that's not John McCain. You know John McCain. I know John McCain. And that's not John McCain.

KLEIN: I think he's flailing around.

ROLLINS: Well, I think he is.

But the basic premise is, Republicans don't want to vote for Barack Obama. And, so, he can't be talking about firing someone like Chris Cox, who is part of the Republican leadership, a very popular guy, worked in the White House with me, a great guy, and put -- put Cuomo in there. I mean, that's just the wrong signal to send to Republicans. You still need that base.

But independents, I think, today don't know where to go. And I think...

DONAHUE: Independents do, because part of what is happening is that young voters are registering in bigger numbers than any other generation. And I saw it at voter drives at Harvard and up in New Hampshire today.

COOPER: We have got to go.

I want Ed to be able to finish the thought, though.

DONAHUE: Only outnumbered by the boomers.

ROLLINS: But they're split. And the reality is, the independents are split. McCain has an advantage. And whoever gets the independents is going to win this election.

COOPER: All right, we're going to leave it there.

Ed Rollins, Joe Klein, Jennifer Donahue, thanks very much.

Up next, troubling new research on the melting Arctic ice sheet. Polar bears in danger and what it means for us and our "Planet in Peril" when "360" continues.


COOPER: As we say good-bye to summer on this autumn equinox, there's alarming new information on the annual melting of the ice sheet melting around the North Pole. And this year, it shrunk to its second smallest level on record. And scientists warn it is still in a quote, "death-spiral well, that what they call it, putting polar bears along with all of us potentially at risk.

With tonight's "Planet in Peril" report here's CNN's Miles O'Brien.


MILES O'BRIEN, CNN CORRESPONDENT: It's the incredible shrinking polar icecap, a chilling sight for researchers who study Arctic ice.

WALT MEYER, SCIENTIST: It's kind of like standing on a corner and kind of watching a car crash happening here. Something you can't do anything about it but you don't like to see it happen.

O'BRIEN: Walt Meyer is a scientist who tracks the troubling trend. This past summer, the Arctic sea ice dwindled to its second lowest level since satellite started watching; a slight improvement over the summer of 2007 but by no means, good news.

MEYER: If anything, it's reinforcing the long term trend. I wouldn't call it a recovery. Our long term trend is still accelerating.

O'BRIEN: 30 years ago, the polar icecap was about the size of the continental U.S. at the end of the summer. But this year, there is between 30 and 40 percent less ice. What's vanished would cover every state east of the Mississippi and beyond.

MEYER: We're heading towards the point where the ice is going to be gone during the summertime. And that would be a very big change in the Arctic and would have impacts as well beyond the Arctic.

O'BRIEN: So why is it happening? It's pretty simple. The earth is getting warmer and the effects are felt most at the poles.

The polar caps do a great job helping set our planet's thermostat, the big white sheets of ice reflects the sun's radiation, keeping the planet cooler.

But when they melt away, the open ocean that is exposed absorbs heat instead of reflecting it, causing the climate to warm up even more and melting more ice. It's a vicious cycle that accelerates.

Of course, none of this is good news for polar bears who hunt on the ice. They may now be listed as threatened under the Endangered Species Act but they're plight is not improving. They are drowning and starving and resorting to cannibalism.

KASSIE SIEGEL, CENTER FOR BIOLOGICAL DIVERSITY: Just continuing to do what we're doing, continuing business as usual will spell extinction for the polar bear, as surely as clubbing polar bear cubs to death.

O'BRIEN: Some scientists believe the Arctic may be ice-free in the summer in only five years.

Miles O'Brien, CNN, New York.


COOPER: That would be extraordinary.

We're going to be taking you back to the North Pole for a look at the melting ice sheet this December in our new "Planet in Peril - Battle Lines" documentary, the second installment of our award-winning series. Don't miss it again; airing this December.

Next on the program, John McCain and Barack Obama's financial ties. Both campaigns trying to distance themselves from Fannie Mae and Freddie Mac, and taking a few shots and making accusations about the other.

"360's" Randi Kaye tonight, "Keeping Them Honest."



REP. PETER DEFAZIO (D) OREGON: Secretary Paulson has submitted a simple proposal to Congress. This is it, three pages. It's about a billion dollars a word.

And it is quite simple. Secretary Paulson gets the key to the treasury then start off with $700 billion in the name of the American people.


COOPER: Oregon Congressman Peter Defazio. The Democrats saying what a lot of Americans, Republicans and Democrats are probably thinking tonight wondering where is the oversight, the accountability in this massive $700 billion plan.

Presidential candidates continue to sound off on the crisis; both attacking each other for having ties to some of the companies that fueled the meltdown. So who's telling the truth?

"Keeping Them Honest," here is Randi Kaye.


RANDI KAYE, CNN CORRESPONDENT: As one political expert put it. It's like that scene from Casablanca, with both sides acting like they're shocked, there's lobbying going on in the back rooms.


UNIDENTIFIED MALE: I'm shocked, shocked, shocked to find that gambling is going on here.

UNIDENTIFIED MALE: Your winnings, sir.

UNIDENTIFIED MALE: Oh, thank you very much.


KAYE: Here's the story line. Two mortgage giants fail, Fannie Mae and Freddie Mac. And Barack Obama and John McCain can't get away from them fast enough.

In this scene, John McCain struck first.


UNIDENTIFIED FEMALE": Obama has no background in economics. Who advises him? The "Post" says it's Franklin Raines for advice on mortgage and housing policy. Raines made millions, Fannie Mae collapsed.

KAYE: Hold on a second, that's just not true, says Obama.

OBAMA: My opponent attacked me for being associated with a Fannie Mae guy who I met once and talked to for maybe five minutes. The guy actually had to send out a letter saying, that's not true. I actually don't really talk to the guy.

KAYE: In a statement, Franklin Raines, who was former chief executive of Fannie Mae said, "I am not an adviser to Barack Obama nor have I provided his campaign with advice on housing or economic matters."

Obama spokesmen took it a step further. "This is another flat out lie from a dishonorable campaign that is increasingly incapable of telling the truth. Someone whose campaign manager and top adviser worked and lobbied for Fannie Mae and Freddie Mac shouldn't be throwing stones from his seven glass houses."

In this scene, Obama's talking about McCain campaign manager, Rick Davis. Keeping them honest, it's true. Davis was the head of an advocacy group that helped Fannie and Freddie successfully fend off tougher regulation. Fannie Mae's former spokesperson, Robert McCarson, who is a Democrat, tells CNN from 2000 to 2002, Davis' firm was paid $35,000 a month.

But now, many economists blame the absence of regulation for triggering the wider credit crisis and $700 billion bailout.

Since July, McCain has called for a ban on lobbying by Fannie and Freddie. And his running mate, Sarah Palin said in a recent interview even more significant to political donations to these firms is the role that the lobbyists play.

Democrat and former Fannie spokesman Robert McCarson told us, the reason Rick Davis was hired was because he was John McCain's campaign manager and the possibility that John McCain would be the Republican nominee. I know he's telling people he didn't lobby. He did lobby.

On the McCain's campaign's daily conference call with reporters, Davis shot back.

RICK DAVIS: I was the public face of an organization that promoted home ownership for a number of years. I never lobbied a single day.

KAYE: Obama's chief strategist that says same thing. The New York State Lobbying Commission shows the consulting firm where he worked as a senior partner received more than $1 million in lobbying fees from Cablevision.

Now see if this sounds familiar. David Axelrod told "Newsweek," I've never lobbied anybody in my life.

LARRY SABATO, UNIVERSITY OF VIRGINIA: Both these candidates and campaigns are shot through with lobbying influence. KAYE: Political expert Larry Sabato says the one thing that trips candidates up is hypocrisy.

SABATO: When you attack the other side for a perceived sin, you must be very careful to make sure that you are not guilty of the same sin.

KAYE: Especially not in a race this tight.

Randi Kaye, CNN, New York.


COOPER: Just ahead, Sarah Palin's remarkable cram session, who she's talking to and what she expects to learn about global leaders and the world by visiting New York.

Plus, what Bill Clinton has to say about the call that never came, asking Hillary Clinton to be Barack Obama's running mate.

That and more when "360" continues.



SEN. BARBARA MIKULSKI (D), MARYLAND: No golden parachutes! Let them feel the hard landing that my constituents faced when they were laid off at Bethlehem Steel. Let them feel the hard landing of knowing what it's like to have your mortgage foreclosed upon. Let them feel the hard landing that my constituents are facing right now.

We do not need to subsidize bad behavior.


COOPER: Tough talk from Senator Barbara Mikulski, the Maryland Democrat demanding Wall Street -- Wall Street's risk-takers pay the price and share the pain in the wake of a historic bailout.

Behind the bailout is, of course, Treasury Secretary Paulson. He's not the president, but he could be the most powerful person in the country right now, certainly, if this bail-out goes through as it is.

Not too long ago, he was just another face in the cabinet crowd. Now all the eyes are upon him. What do we really know about him? "Up Close," Henry Paulson.


COOPER: Last September, Secretary Paulson painted an optimistic picture of the nation's finances.

HENRY PAULSON, TREASURY SECRETARY: U.S. economic fundamentals are healthy. Unemployment is low. The wages are rising, and core inflation is contained. Although the recent reappraisal of risk, coupled with the weakness in the housing sector, may well result in a penalty, the fundamentals point to continued U.S. economic growth.

COOPER: His confidence remained intact in February.

PAULSON: The U.S. economy is fundamentally strong and diverse and resilient.

COOPER: Now, a complete reversal, with dire warnings of an economic tsunami. Paulson's message is one of fear and faith.

PAULSON: We're an entrepreneurial people, a hard-working people, and we will work through this. We always do. I wouldn't bet against the American people.

COOPER: But are you willing to bet on him? That's the $700 billion question. And before you answer, you should know more about the man at the middle of this financial firestorm.

Born in 1946, Paulson was a standout student and football star at Dartmouth. After receiving his MBA from Harvard in 1970, Paulson served as staff assistant to President Nixon.

In 1974, the Republican took a job at Goldman Sachs, climbing the ranks of the investment banking giant until he was chairman and CEO.

ALI VELSHI, CNN CORRESPONDENT: When a company wants to go public on the stock market, they'll go to a Goldman Sachs. When a company wants new financing for a project, they'll go to Goldman Sachs. The brightest and the best on Wall Street go into and come out of Goldman Sachs. And Henry Paulson was the brightest and the best at Goldman Sachs.

COOPER: In 2006, he left his estimated $40-million-a-year income on Wall Street to serve as the 74th Secretary of Treasury.

VELSHI: The Treasury Secretary deals with policy about the government, whereas the Fed deals with monetary policy. They deal with interest rates and money supply. The treasury secretary deals with the larger matters of the economy, the regulation of the financial economy, the types of policies that keep America going on its financial track.

COOPER: That's all changed now. And not since Alexander Hamilton has the position been so vital, so influential. Now, Paulson is asking all of us to take a tremendous leap of faith, basically trusting him and his successors with nearly a trillion dollars in taxpayer money.

VELSHI: That's not typically the role of the Treasury Secretary. But he was brought into this administration to solve a problem, and he's getting right down in there and trying to solve it. History will judge whether or not he's done this well, but he's fully, fully engaged in this financial crisis.

POPPY HARLOW, CNNMONEY.COM: He's essentially asking for a blank check, but the goal, again, is to get those illiquid assets or those assets that are really hard to value right now off the books of those banks and brokerages so that they can have sort of a clean slate, if you will.

COOPER: It's a sweeping proposition and one he is ready to gamble on. The question is, will you?


COOPER: We'll be watching him.

Up next, Governor Sarah Palin heading to New York for a crash course in foreign policy, meeting with world leaders to try to beef up her resume. But will it be enough to silence her critics? "On the Trail."


SEN. JOE BIDEN (D-DE), VICE-PRESIDENTIAL NOMINEE: I'm here as a United States Senator who has traveled to conflict zones all around the world. When I got elected as a 29-year-old kid, I committed that wherever we had soldiers at war, I would be there. I've been into Bosnia and Kosovo, Afghanistan and Iraq and every place we've had conflict.


COOPER: Senator Joe Biden in Washington today, the vice- presidential candidate showcasing his foreign affairs experience; not exactly a subtle dig at Governor Sarah Palin's resume.

Biden and Palin face off for their first and only debate next week on October 2. Now a short time ago, she arrived here in New York to meet with foreign leaders and global players at the U.N. You can be sure her supporters and critics will be watching very closely.

"On the Trail" tonight, here's CNN's Ed Henry.


ED HENRY, CNN CORRESPONDENT: It's like speed dating with world leaders. In a span of just 30 hours in New York, Sarah Palin will meet with nine major international players during the U.N.'s General Assembly meetings, from the presidents of Iraq and Afghanistan to Henry Kissinger and the rock star, Bono, all aimed at beefing up Palin's thin foreign policy chops.

JAMES HOGE, COUNCIL ON FOREIGN RELATIONS: I think they want to show, just as Obama did when he went to Germany and made a speech in Berlin, that she is comfortable on the international scene, that she can hold her own in conversations with foreign leaders.

HENRY: But Democrats warn that carefully-scripted photo ops, some of which will include John McCain, may backfire by bringing more attention to the holes in Palin's resume. HILARY ROSEN, DEMOCRATIC STRATEGIST/CNN CONTRIBUTOR: It's a big risk they run with this strategy of having her meet with these leaders individually, is that they end up with three days of stories about how she doesn't have foreign policy experience.

HENRY: But Republicans say Palin is just following in the footsteps of national candidates like Ronald Reagan and Bill Clinton, one-time governors who needed to bone up on international policy.

ALEX CASTELLANOS, REPUBLICAN STRATEGIST/CNN CONTRIBUTOR: The first thing you do is burnish their foreign policy credentials. You buy them a Rand McNally. They meet with generals. You get a lot of flags on the stage, and you give a big speech on foreign policy to display you have some command of the world.

HENRY: But Sarah Palin is not going so far as to deliver a major foreign policy address. Instead, these meetings will be pretty low- risk; quick photo ops with no questions from the media. In other words, very little substance, very little chance she'll stumble.

Ed Henry, CNN, New York.


COOPER: No questions from the media. That, of course, should not be a surprise.

In case you missed it, former president, Bill Clinton, appeared on ABC's "The View" today, an attempt to set the record straight once and for all if his wife would have been the best choice for vice president. Take a look.


BARBARA WALTERS, CO-HOST, ABC'S "THE VIEW": Did Senator Clinton really want to be vice president? And did you want her to be vice president?

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: Not really, no. I mean, first of all, I had no...

WALTERS: Not really she didn't or not really...

CLINTON: Not really, she didn't. And I had no real opinion. I think that it's very important, once a party gets nominated -- it's a very personal decision who should be vice president.

And I like Senator Biden a lot. I think he was a good choice. She would have been the best politically, at least in the short run, because of her enormous support in the country.

WALTERS: She didn't want it?

CLINTON: Not particularly. She -- but she didn't -- she wanted -- she said that "If he asked, I'll do it because it's my duty." I think -- look, she loves being a senator from New York. And she has more freedom to develop her positions on the issues and do her thing.


COOPER: Bill Clinton today. Among those things she's doing are stumping for Barack Obama in Florida, urging big donors in Ohio to support a Democratic surge there this fall, and appearing on CNN's "AMERICAN MORNING" with John Roberts and Kiran Chetry tomorrow.

You can see the interview tomorrow morning in the 7 a.m. hour, 7 a.m. Eastern Time. "AMERICAN MORNING," right here on CNN.

"The Shot" ahead: the great escape. A dog's trick brings freedom. That's coming up.


COOPER: Leona Helmsley loved Trouble. That's her dog's name. The Maltese may very well now be the richest pooch in the world.

Leona Helmsley was -- I guess you could say a toxic New York real estate tycoon and tyrant to many, a convicted felon who was famously overheard saying, "We don't pay taxes. Only the little people pay taxes."

She died in 2007, leaving behind a trust worth nearly $8 billion, and she only wanted her dog to inherit. Well, she wanted her dog to inherit $12 million of those $8 billion.

Her story and her wishes are pretty remarkable and what it says about her and the law and her hatred for humans.

CNN's senior legal analyst, Jeffrey Toobin, wrote a fascinating and entertaining article about it in the new issue of the "New Yorker" magazine. It's a great article.

He joins us now.

I've been obsessed with this for a long time, and I'm glad to see you have finally taken it on. Of the many legal cases you have looked at, this is the one I'm most interested in.

So in 2003 --


COOPER: -- Leona Helmsley created a mission statement for her trust and indicated the money should go to the care of dogs and also to indigent people, especially kids. She changed that in 2004, basically taking away all the money for indigent people. Why did she do that?

TOOBIN: Well, this is the great thing about Leona, is that her will reflects this tremendous hatred of the human race. She just despised people. , And the great thing about her will is that at one point, as you point out in that document, she said, "OK, let's give some of my $8 billion to indigent people, especially children." But then she said, "No, forget the indigent children. Let's give it all to dogs."

I mean, it's unbelievable. It's right there in the document.

COOPER: So originally, Trouble was left $12 million. That amount was reduced to $2 million. How does a dog spend $2 million?

TOOBIN: Well, the key thing is that, when this will was made public, there was so much publicity for Trouble that Trouble got death threats. So it costs about $100,000 a year to provide security for Trouble.

The person who takes care of Trouble gets $5,000 a month, $60,000 a year, just to be the caretaker. But most of the expense is for Trouble's security guards.

COOPER: So there is an actual security guard for Trouble? And A, how do I apply for that job? That seems like the easiest job.

TOOBIN: Twenty-four hours a day.


TOOBIN: Twenty-four hours a day security.

COOPER: So that's got to be like a team. It's got to be at least three people. So where does the other $8 billion go for -- go to?

TOOBIN: Well, this is the mystery, is that the Helmsley estate is now trying to figure out how do you spend $8 billion for the benefit of dogs?

And there are a lot of Animal Rights people coming forward saying, "You know, we want to have spaying and neutering vans. We want to turn -- we don't want to have euthanasia for dogs anymore."

But the interesting thing I learned in working on this "New Yorker" story, Anderson, is that I thought she was some sort of lunatic, which obviously, I still do. But lots of people want to leave their money to dogs, and states are making it easier and easier to leave money in trust for animals.

So the amount here is enormous. But lots of people are putting their dogs in their wills, and the law is making it easier to do that.

COOPER: And I just want to preempt all the e-mails you're about to get. You are a dog owner. I'm a dog owner. We love dogs, but $8 billion is a lot of money for dogs.

TOOBIN: We do love dogs. This is insane. Go ahead, e-mail me all you want.

COOPER: By the way, if there's any dogs who own stocks, maybe Leona Helmsley's trust could somehow be part of this whole big bailout of the stock market.

TOOBIN: You know what? Good point. Kind of a unified theory there.

COOPER: Exactly. Jeff Toobin. Thanks.

Again the article is in "The New Yorker." You should read it.

TOOBIN: See you, Anderson.

COOPER: "The Shot" is next. A daredevil dog determined to --


COOPER: Tonight's "Shot," it's another "Dramatic Animal Video, so let's see the crazy-eyed cat again. There we go. "Dramatic Animal Video."

HILL: Love her.

COOPER: We found this on the Web site, It's a jailbreak, canine style; a wily beagle scaling the screened door. See there, the dog actually reaches the top, gets its head kind of out from underneath the roof. Then he notices all the other dogs watching, kind of saying to themselves, "Don't do it. It's not worth it, man. We tried it before. It doesn't end well."

In the end, the dog takes a leap of faith...

HILL: Wow.

COOPER: ... and makes it out of the cell; freedom at long last.

You know who that dog look like? My sister's dog, who happens to be named Cooper.

COOPER: Your sister named the dog Cooper?

HILL: She didn't name him after you. They're all like, "Ohhh!"

COOPER: Oh, no. I'm sure it was just a coincidence. Yes. How could it possibly be...

HILL: It does look like Cooper.

COOPER: I'm not sure what that says, that your sister named her dog after someone you work with. Anyway, I'll take it as a compliment.

HILL: Why do you think it's for you?

COOPER: All right. Now time for "Beat 360." Because I'm an egotistical anchor. How else did I get this job?

It's our daily challenge to viewers, a chance to come up with a better caption than the one our staff can come up with. All right. So there it is. The great Kelly Ripa, who I'm a huge fan of, interviewing magician David Blaine, -- and I say magician in quotes -- upside down above New York's Central Park, for "Live with Regis & Kelly" as Blaine begins his latest public relations stunt.

Our staff winner tonight, Chuck, his caption: "You're going to hang upside down for 60 hours? Big deal. Try carrying Anderson Cooper for a one-hour show."

Erica Hill can sympathize.

Our viewer winner is Dani from Kansas. Her caption: "On the set of their talk show, 'Live!.. For Now ... With David and Kelly."

HILL: I like it.

COOPER: Sure. Dani, your "Beat 360" T-shirt is on the way.

And you know, I have nothing personal against David Blaine.


COOPER: But for my money, a magician is a...

HILL: I like the magic tricks. Pull a rabbit out of a hat. Cut somebody in half.

COOPER: Do you have Doug Henning's picture around? Because I do carry it with me. Do we have that picture?

There is Doug Henning. Now, there is a magician, you know. He had ridiculous suspenders, the cheesy '70s -- what, is that a leotard, even? I don't know what that is.

HILL: That is a unicorn on the front of his overalls.

COOPER: Look at that. How did he do that with the cards? See, that is magic. That's magic.

HILL: You know what else? That's not just magic; that's style.

COOPER: That's the world of illusion. Remember, Doug Henning? The world of illusion.

HILL: Coming up on the 360 magic hour...

COOPER: That does it for this edition of "360." Thanks for watching.

"LARRY KING" starts right now. See you tomorrow night.