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Battle Over and Reaction to the Government Bailout of Wall Street; Attack In Israel; Prejudice At the Polls

Aired September 22, 2008 - 17:00   ET

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


WOLF BLITZER, HOST: A new poll suggests prejudice could hurt Barack Obama when it comes time for voters to cast their ballots. We're looking at the impact of race on the presidential race.
And John McCain's running mate out on the campaign trail -- we're waiting to hear live from GOP vice presidential nominee, Sarah Palin. She's about to speak this hour.

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

Euphoria over a bailout gives way to skepticism on Wall Street, where stocks tanked today, down more than 370 points. The dollar suffered amid uncertainty about the government plan to buy up the mortgage-related securities that are at the heart of this financial crisis. And that caused the price of oil to spike, with its biggest one day gain in history, up more than $25 a barrel at one point. All of this the top topic of the presidential race today.

CNN's Brian Todd is working the story for us -- all right, Brian, what are Barack Obama and John McCain saying?

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, they both say that this bailout is necessary, but they both want at least a couple of safeguards in place before this thing goes much further.

(BEGIN VIDEOTAPE)

TODD (voice-over): A $700 billion bailout that's shaking up the campaign trail, as well as Wall Street. The two nominees, under pressure to come up with their own ideas about the rescue plan, agree on two fundamental points.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: We cannot give a blank check to Washington, with no oversight and no accountability, when no oversight and accountability is exactly what got us into this mess in the first place.

TODD: Barack Obama and John McCain both believe an independent oversight board should be set up to monitor how Treasury Secretary Henry Paulson runs the bailout. Both trust Paulson, but believe it's too much power to give one person.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: This board should be bipartisan and have qualified citizens, who have no agenda but the protection of taxpayers and the financial markets -- people like Warren Buffett, who supports by opponent; Governor Mitt Romney; or maybe Michael Bloomberg; an Independent.

TODD: Both nominees also want to do away with so-called golden parachutes for CEOs of companies rescued by the government. Those parachutes often amount to tens of millions of dollars. McCain also says no CEO of any firm that comes under government control should make more money than the highest paid employee of the federal government. Obama proposes including a provision to protect individual homeowners from foreclosure in the mortgages the government buys. And Obama has a longer-term plan that's heavy on regulation of major firms, which some say could be redundant.

DIANE SWONK, MESIROW FINANCIAL: And now we're under the full scrutiny of the Federal Reserve, in terms of the regulator, and more regulators than they've ever had to deal with. So regulation has already gone up dramatically.

TODD: The criticism of McCain -- that he's coming to the regulation side a little late.

EAMON JAVERS, POLITICO: He's been deregulatory in the past in his career. Now he's changing his tune as he sees the giant size of the problem that we're facing.

(END VIDEOTAPE)

TODD: But analysts are not too critical of either candidate for coming up with rather sudden ideas on all of this. One analyst said, let's face it, to some extent, the government is also making this up as it goes, because we haven't seen a crisis this size in a long time, if ever -- Wolf.

BLITZER: Brian, some experts generally praise their idea for that independent oversight board.

I assume that's right, right?

TODD: Yes. The analysts we spoke to said there needs to be some accountability there with that board, that Treasury Secretary Paulson, or whoever comes after him, needs to be accountable to the public. They say that kind of a board could work. We'll see if Congress likes that and if the federal government likes that.

BLITZER: All right, thanks very much.

Brian, stand by.

The bailout is certainly sparking anger out on Main Street over what many taxpayers see as Wall Street's recklessness.

Mary Snow is working this part of the story for us -- Mary, what are you seeing?

MARY SNOW, CNN CORRESPONDENT: A lot of the fury, Wolf.

One taxpayers' advocacy group puts it this way. On a scale of one to 10, if one is a lukewarm reaction and 10 is boiling hot, the scales are hitting 10 plus. But with that anger comes resignation.

(BEGIN VIDEOTAPE)

SNOW (voice-over): What do taxpayers have to say about the government's $700 billion plan to save banks?

UNIDENTIFIED MALE: This is exactly not what I want to happen. I'd like my tax dollars to go somewhere else.

UNIDENTIFIED FEMALE: You're expecting us taxpayers to bail out Wall Street?

UNIDENTIFIED MALE: It sounds to me like if they didn't bail it out that things would be much worse.

SNOW: On CNNMoney.com's page, one reader didn't mince words: "Not just no, but hell no," was one response to the bailout.

"Let these companies die," read another.

PETE SEPP, NATIONAL TAXPAYERS UNION: This is almost a populist revolt against what has been some very careless behavior, not only on the part of Wall Street, but the government, as well.

SNOW: Pete Sepp of the National Taxpayers Union is urging lawmakers on Capitol Hill to fight for a smaller package. But he acknowledges there needs to be some government action.

What might the consequences of not passing a bailout be?

Treasury Secretary Henry Paulson was quoted by the "Wall Street Journal" as saying: "If it doesn't pass, then heaven help us all," while he met privately with lawmakers last week.

Among those Congressional leaders, Senator Chuck Schumer.

SEN. CHARLES SCHUMER (D), NEW YORK: Well, basically they described a financial system, where the arteries are clogged. And if you don't unclog the arteries -- these are my words -- the patient could get a heart attack.

SNOW: If banks don't lend money, companies doesn't have money to spend. Businesses grind to halt. Workers are laid off. And a potentially disastrous downward spiral follows. While many think the bailout may have averted a brush with massive disaster, one economist says underneath it at all is an economy that is still struggling.

LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: When the dust settles -- and it's starting to settle now as we discuss this -- the fact remains we're in a recession.

(END VIDEOTAPE)

SNOW: And to prevent conditions from getting worse, the Treasury Department is stressing the need for speed to pass a bailout. But critics of the plan say they believe changes can be made in the next few days that may be more acceptable than the plan that's already proposed -- Wolf.

BLITZER: Mary, thanks for that. Mary's working the story.

Jack Cafferty back once again with "The Cafferty File." What a mess, this whole financial crisis.

CAFFERTY: Terrible.

Leaders from all over the world are going to gather in New York City this week for the fall session of the U.N. General Assembly. And with all of the possible conversations that will go on between heads of state and other political leaders -- that's what they do over there at the U.N. they talk and talk and talk. But there's going to be one -- one conversation, one meeting that's creating so much hype, the flies are fighting for spots on the wall to listen in.

Alaskan governor and vice presidential candidate Sarah Palin is going to meet with Afghan President Hamid Karzai.

This meeting comes as the McCain-Palin camp works overtime to try to assure voters that Ms. Palin has a good enough grasp of foreign policy to be but one heartbeat away from the presidency.

Until now, Palin's foreign policy experience involved a trip to Kuwait and Germany to visit Alaskan National Guard members and something about being able to see Russia from her house.

According to the "Washington Post," while in New York, perhaps is also going to meet -with the presidents of Georgia, Iraq, Pakistan and the Indian prime minister.

So here's the question: What will Sarah Palin and Hamid Karzai talk about?

Go to CNN.com/caffertyfile and let us know what you think -- Wolf.

BLITZER: He's a very charming guy, Hamid Karzai. I've interviewed him several times. And I'm sure it will be a lovely meeting, right?

CAFFERTY: I'm sure.

BLITZER: OK, Jack. Thanks very much.

CAFFERTY: Yes.

BLITZER: Some of the stories we're following here in THE SITUATION ROOM this hour.

John McCain and Sarah Palin, they're holding a rally near Philadelphia. We're there live. Stand by.

And Mitt Romney -- he's also standing by to join us live. Would he serve on the financial oversight board that Senator McCain wants to form? Guess what? I'll ask him. And new poll numbers on race could mean trouble for Barack Obama in November. We'll explain.

And recount deja vu -- new fears about Florida and a recount nightmare. Our John King is on the scene for us.

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

(COMMERCIAL BREAK)

BLITZER: With American financial meltdown -- at least some fear that's the case -- and a $700 million bailout at stake, the presidential candidates both want to know who will be watching the store. But they're also playing the blame game.

Joining us now, the former Republican presidential candidate, the former governor of Massachusetts, Mitt Romney. Governor, thanks very much for coming in.

MITT ROMNEY (R), FORMER PRESIDENTIAL CANDIDATE: Thanks, Wolf. Good to be with you.

BLITZER: I'm going to play a little clip of what Senator Obama said today and then we'll discuss. Listen to this.

(BEGIN VIDEO CLIP)

OBAMA: When it comes to regulatory reform, Senator McCain has fought time and time again against the common sense rules of the road that could have prevented this crisis. His economic plan was written by Phil Gramm, the architect in the United States' Senate of the deregulatory steps that helped cause this mess.

(END VIDEO CLIP)

BLITZER: All right, now what do you say about the argument -- and we keep hearing from a lot of Democrats -- that Senator McCain and the Republicans, they were just totally bent on deregulation and that's why we're in this financial meltdown right now?

ROMNEY: Well, Barack Obama knows better than that. And, frankly, with the kind of crisis that we're facing financially, it really doesn't do a lot of good to be pointing fingers and engaging in a blame game.

Republicans believe in meaningful and appropriate regulation. That's why, in fact, John McCain was one of those who now, for several years, has been fighting for a reform and regulation of Fannie Mae and Freddie Mac. And frankly, it was Barack Obama who sat on the sidelines watching that.

So, look, the right kind of regulation makes sense. Unnecessary burdensome regulation does not. In this case, you had people on both sides of the aisle calling for mortgages to be given to people who really couldn't afford to pay them back. It was bad policy by both parties. Now the question is what are we going to do to get things turned around?

John McCain has laid out a plan to do just that. He wants to make sure that this government support program doesn't result in managers making millions of dollars and doesn't have the secretary of the Treasury not being overseen.

BLITZER: All right.

Do you agree that the CEOs of these major Wall Street firms who are getting government assistance now should earn salaries in line with the highest government workers, maybe $200,000 a year, as opposed to the millions that they make right now?

ROMNEY: Well, I don't think it's appropriate for managers of any enterprise to look to the government to bail them out and then pay themselves millions of dollars. I think that's a huge mistake. I think John McCain is right to say, look, you don't have to come to government. The government is not going to limit compensation for people in the private sector.

But if you come to the government for help, the government has every right to say that you shouldn't be making millions of dollars off the taxpayers. And I think it's a point that John McCain has made loud and clear.

BLITZER: So should they be making $200,000 or $190,000?

ROMNEY: Whatever the number is. I think he said $400,000 but...

BLITZER: That's what the president of the United States makes.

ROMNEY: Yes. I think he'll assess what the right number is for the particular executive involved. But the point is that these multimillion dollar Freddie Mac and Fannie Mae salary compensation packages and bonuses are just -- are just something that the American people are saying enough to that.

BLITZER: Senator McCain also recommends that you and Warren Buffett and Michael Bloomberg perhaps form this oversight board to make sure that the Treasury secretary, Henry Paulson, is doing it right -- this bailout.

First of all, are you ready to serve?

ROMNEY: Well, it's probably a little speculative to talk about serving on a board when the board hasn't been formed yet, John McCain isn't president yet and the offer hasn't been made yet. But it's an honor to be mentioned.

I think more important than the personalities involved is the policy. And the policy principle that John McCain is talking about is saying there ought to be a board -- a bipartisan board which oversees the work of the Treasury secretary to make sure that the purchases of assets that are in trouble -- that that purchase is done appropriately, without politics involved and the right kind of safeguards are put in place for the taxpayers.

BLITZER: In the last hour, we spoke with Senator Obama's chief economic adviser, Austan Goolsbee, who reacted to your name being floated as a possible member of such a hypothetical board. And here's what he said.

(BEGIN VIDEO CLIP)

AUSTAN GOOLSBEE, OBAMA ECONOMIC ADVISER: I'm glad to see Senator McCain has come around to Obama's view that we can't give a blank check and we need to have oversight. I don't know that I would necessarily want Mitt Romney. His -- his record of job growth in the companies that he took over was not super stellar.

(END VIDEO CLIP)

BLITZER: He's referring to jobs lost at the time of some mergers when you we were very active in the business sector.

What do you say to Austan Goolsbee?

ROMNEY: Well, I'm not running for anything, Austan. And, frankly, I'm pretty proud of the fact that the place that I was employed, we invested in enterprises which added a lot of jobs. Some of those names are household names today and employ thousands -- tens of thousands of people. And I'm pretty proud of that.

BLITZER: Is there a whole -- I mean the whole notion of what's going on right now, do you have basic confidence that the Treasury secretary -- that the Bush administration knows what it's doing in these recommendations?

ROMNEY: Well, I have a lot of confidence in Hank Paulson. I have to tell you, I think we're fortunate right now, with the crisis on Wall Street, to have somebody who really understands Wall Street, who was there for most of his career.

The combination of Hank Paulson and Ben Bernanke, Chris Cox, the administration working as hard as they are, I really do believe, in my heart of hearts, they're doing everything they can to keep what is a crisis on Wall Street from becoming a crisis on Main Street.

And they proposed a plan to keep this from spreading further. I believe they're doing it in their -- with their best judgment. And I believe that there's some improvements and that Congress should put those in place. But let's move and make sure this thing doesn't spread further.

BLITZER: You mentioned the former Republican Congressman, Chris Cox, who's the chairman of the Security and Exchange Commission. Last week, Senator McCain said he had violated the public trust and should be fired. Do you disagree with Senator McCain on Chris Cox?

ROMNEY: You know, Senator McCain has the right, when he's president, to certainly remove anybody he'd like to remove and put in his own team. And I support him being able to do that. But I do think that the men that are working there today in this effort are doing their very best under current circumstances. But who all is to blame for what is something which time will tell.

BLITZER: Senator -- excuse me, Governor Romney, thanks very much for coming in.

ROMNEY: Thanks, Wolf. Good to be with you.

BLITZER: Thank you.

Russian warships -- they're sailing to Venezuela. They're ramping up tension between Washington and Moscow. We'll tell you what's going on.

And Bill Clinton on Barack Obama's vice presidential pick -- what Hillary Clinton really thinks about it. We'll ask. We'll find out what he said earlier today on "The View" and then we'll discuss with James Carville and Alex Castellanos. They're here to weigh in.

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

(COMMERCIAL BREAK)

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

CAROL COSTELLO, CNN CORRESPONDENT: Well, Wolf, North Korea takes another step toward its threat to restart its nuclear program. The International Atomic Energy Agency says North Korea has asked it to remove seals and surveillance equipment from the country's main nuclear reactor. North Korea began disabling that reactor last year under the now stalled disarmament for aid deal.

Russian warships are sailing to Venezuela. They are led by a nuclear missile cruiser. The squadron will take part in a joint naval exercise in the Caribbean Sea. It's a display of Russian military might not seen in the region since the cold war. The Kremlin has been getting closer to Venezuela amid strained ties with the United States over its support for former Soviet republic, Georgia.

As we all pinch our pennies these days, we'll soon have a newly designed one to pinch in our pockets. The penny is getting its first makeover in 50 years. The coin will continue to bear the likeness of President Lincoln, of course, on the front. But the back of the coin will feature one of four new designs. Each one shows a different phase in President Lincoln's life -- back to you, Wolf.

BLITZER: All right, Carol. Thank you.

We're standing by for remarks from Republican vice presidential candidate, Sarah Palin. She's about to introduce John McCain at a Pennsylvania rally. We're going to go there live.

Also, Florida 2000 may just have been the beginning. Will 2008 see another recount debacle?

Plus, whites who refuse to vote for a black candidate -- there's new data on just how badly that could cost Barack Obama. We're looking at new poll numbers with James Carville and Alex Castellanos.

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

(COMMERCIAL BREAK)

BLITZER: We're getting breaking news in from Jerusalem, where Israeli police say up to 15 people were injured when a driver plowed his car into a crowd of pedestrians. The driver was shot and killed at the scene.

Let's go straight to the scene. CNN's Ben Wedeman is on the phone for us from Jerusalem -- describe what's going on, Ben.

What do we know?

BEN WEDEMAN, CNN CORRESPONDENT: Yes, Wolf, about a half -- an hour-and-a-half ago, a black BMW, whose plates Israeli police have traced to predominantly Arab East Jerusalem, rammed into a crowd of soldiers at the northwestern corner of the Old City of Jerusalem, it's the Tzahal Square, a fairly busy area at this time of night, actually, because many people are out preparing for the Jewish holidays. And the Muslim residents of Jerusalem are currently observing Ramadan, so they don't really come out until night.

Now, according to the police, 15 people have been wounded, two of them seriously, three of them moderately, the rest lightly.

Now what happened also is that during this incident, when the car rammed into this crowd of soldiers, one of those soldiers managed to shoot and kill the driver.

Now we spoke to Mickey Rosenfeld, the spokesman for the Jerusalem police, who said that they are unaware of the precise identity of the driver. His fingerprints are being checked. But as I said, the car has been traced to an address in Jepal Makabar (ph), which is in Arab East Jerusalem.

So we don't have many details on the driver himself. But the police definitely seem to think that this was intentional act, that it was not an accident -- Wolf.

BLITZER: Ben, it seems to me there's a trend going on. Isn't this the third time -- at least in my memory -- in recent weeks and months that somebody has taken a vehicle and just slammed into a crowd of people in Jerusalem?

WEDEMAN: This is the third such incident since July. It's the fourth incident this year, Wolf, in which it appears that, spontaneously, a resident of East Jerusalem has undertaken an attack against other residents of Jerusalem. You will recall the first one was, of course, somebody attacking (INAUDIBLE) Yeshiva in Jerusalem, killing eight people in that incident. At the very beginning of July, there was another incident where a bulldozer plowed down Jaffa Road, which is right in front of our bureau. In fact, I saw this firsthand.

Just a few weeks later, another bulldozer apparently went on a rampage in front of the King David Hotel, just a day before Barack Obama was coming here.

So, yes, this is definitely a pattern that is emerging whereby these spontaneous attacks occur. And, in fact, until now, the Israeli police have been unable to link any of these four attacks that have occurred over the last -- since the beginning of this year -- to any specific groups. They do believe that these are spontaneous actions. But it definitely appears to be a pattern -- Wolf.

BLITZER: All right. Ben Wedeman on scene for us in Jerusalem following the breaking news. We'll get back to Ben if we get more information.

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

Happening now, new poll numbers suggesting that racial prejudice could make a critical difference for Barack Obama at the polls. The candidate himself is speaking out about this. Stand by.

Also, did Hillary Clinton really want to be Barack Obama's running mate? Her husband reveals what she really thinks about the V.P. pick. And James Carville and Alex Castellanos, they're here to weigh in.

And we're standing by for Republican vice presidential nominee, Sarah Palin. She'll be introducing John McCain at a Pennsylvania rally momentarily. We're going to go there live.

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

Our latest poll of polls shows Barack Obama gaining strength over the weekend and now leading John McCain by five points, compared to the three point lead shown on Friday. But another recent survey shows an age old American problem may cause some big problems for Barack Obama in November.

Let's go to Carol Costello. She's working the story -- pretty disturbing numbers, Carol. What do we know?

COSTELLO: Well, Wolf, if you thought we'd lessened the race factor during the primarily, well, according to that new survey, you are so wrong. It suggests if Barack Obama were white, he'd be enjoying a more comfortable lead over John McCain.

(BEGIN VIDEOTAPE)

COSTELLO (voice-over): It remains the ugliest truth in a presidential election gone negative -- race matters. It could cost Barack Obama the White House. A majority of whites harbor such negative feelings toward blacks it could cost him up to 6 percentage points in November. That's according to a new A.P./Yahoo! news poll. Obama addressed the race issue on "60 Minutes". SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: Are there going to be some people who don't vote for me because I'm black? Of course. There are probably some African-Americans voting for me because I'm black or maybe others inspired by the idea of breaking new ground. And so, I think all that's a wash.

COSTELLO: It may be a wash but Democrats are worried especially in swing states like Ohio. Governor Ted Strickland bluntly told voters, "There are good people who won't vote for Obama because he's a black man and he's not alone." Ohio State Representative Thomas Letson told constituents, "There are a thousand reasons to vote for Obama and one reason why you won't, race." It's a strategy meant to appeal to a Middle America that admires telling it like it is. Even Bill Clinton who appeared on "The View" says talking about it, would.

BILL CLINTON, FORMER PRESIDENT OF UNITED STATES: You know, if you sort of fess up to where you're coming from, you can talk about it.

COSTELLO: Obama himself sees positive signs despite what he calls Republican attacks and surveys that still say his race works against him.

OBAMA: I'm still tied or in the lead with John McCain. That tells me that the American people are good, that they are judging me on my ideas. And my vision and my values and not my skin color.

COSTELLO: And that's what at least Democratic political observers hope will happen in states like Ohio. Skin color in the end won't matter. Ideas on how to fix the economy will.

DENNIS ECKART, FORMER U.S. REPRESENTATIVE: I'm convinced at the end of the day that the color that matters in who I is not black or white. The color that matters is green.

(END VIDEOTAPE)

COSTELLO: Democrats suspect some Ohioans are reluctant to vote for Barack Obama because there has been no African-American holding a prominent office like say governor of Ohio. It's more fear of the unknown than it is about racism.

Wolf?

BLITZER: Carol, thank you.

Let's discuss this and more. Joining us Republican consultant Alex Castellanos and CNN political contributor, the Democratic strategist, James Carville.

What do you think, James? You've been around politics fur a long time. Is there a hidden racial factor out there that could hurt Barack Obama?

JAMES CARVILLE, DEMOCRATIC STRATEGIST: Well, the McCain people obviously think so. That's why they went to such lengths to try to put Franklin reins who Obama met for like three minutes on the air with Obama. I don't know. Surely people, I vote for someone because of race? Yes but there's not much that we can do about it and according to our poll, his lead is starting to increase. I think it's going to be a tremendous thing in America, I think Obama will probably win and they're going to overcome the kind of campaign being run against him. You know, we'll deal with our issues up front and we're going to do that and I think he's going to win and proud that my party nominated the first African-American for president of the United States. I think it's a remarkable thing.

BLITZER: Alex, what do you think?

ALEX CASTELLANOS, REPUBLICAN STRATEGIST: I think race is going to be much less of an issue than it was a week ago. The law of the firemen; when your house is on fire, you don't care so much about your fair man's faith or gender or last name or the color of his skin. You want him to put out the fire. Right now our economic house is on fire and we want somebody who can deal with that.

But you know John F. Kennedy had to deal with something very similar. Anytime you have someone who is not from the bland and product political middle, someone who's a little different whether it's last name or race are faith, people are going to wonder, is that person going to represent what's unique about them or what we all have in common as Americans and I think many political leaders have found they need to address that. Kennedy did. He looked the American people in the eye and said, the Democratic Party is taking a risk nominating me. But I'm going to resist any kind of religious pressure. And I think Obama is right in doing the same thing.

BLITZER: Do you agree, James? He's handling the sensitive issue well?

CARVILLE: Actually, I agree with Alex. Everybody that breaks new ground in this country anywhere, whether it be the first catholic or the first woman you know, it's always going to be some sort of resistance based on that. But if we just did it the way we did it before, then we'd be governed by nothing but property owning white males and we don't do that anymore. So somebody always breaks new ground. And Alex is right.

CASTELLANOS: Well, I'll disagree with James in that I don't think the McCain campaign is trying to make this a political issue on race. I think there's so much media scrutiny, it would be a dumb and wrong thing for them to do. I haven't seen any signs of that.

CARVILLE: I can't imagine why they would in time magazines imagine why they would run the Frank Raines spot. Maybe there's a better explanation. I haven't heard it.

BLITZER: I heard he was involved in a housing scandal, James.

CARVILLE: But Obama met him for three minutes. Rick Davis's campaign manager took hundreds of thousands of dollars for him. My understanding is there's more connection there. There's 19 lobbyists on McCain's campaign. BLITZER: All right guys. I want to play for you this exchange that the former president Bill Clinton had with Barbara Walters earlier today on "The View." Listen to this.

(BEGIN VIDEO CLIP)

BARBARA WALTERS, TALK SHOW HOST: Did Senator Clinton really want to be vice-president and did you want her to be vice president?

CLINTON: Not really, no. I mean, first of all, I had no.

WALTERS: She didn't?

CLINTON: Not really she didn't and I had no real opinion. I think it's very important once a party gets a nominee, it's a very personal decision who should be vice president. And I like Senator Biden a lot. I think it 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. But she said that if he asked, I'll do it because it's my duty but 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 things.

(END VIDEO CLIP)

BLITZER: Interesting, James, that he says if she would have been asked, she would have accepted that vice presidential slot. Have you heard him or others say that definitively like that before?

CARVILLE: I don't know. Clearly she didn't want to be vice president, she wanted to be president and ran pretty hard and aggressively to be president. But again, you know, that wasn't -- I don't -- I think very few people start out wanting to be vice- president. But I think his point is well taken. But I think if senator Obama would have asked her, presumably she would have said yes but he didn't and that's his choice. I agree. Every Democrat really loves Senator Biden and we're ready to go with the team we've got.

BLITZER: Alex, I can't remember a whole lot of people who turned down a request to be a vice presidential running mate.

CASTELLANOS: It's interesting to hear the Clintons renounce all political ambition all of a sudden. It's a little hard to take. But you know, Biden is actually also a better choice this week than he was last. Hillary Clinton had kept working class Reagan Democrats away from Barack Obama. McCain had exploit that had with his Palin pick. And his attack on the media. You know, he was McCain was very much positioning his campaign as the working class outsider kind of campaign. This week with the economic crisis, of course, Republicans are being defined as the party of Wall Street, not of Main Street. So the even without Hillary Clinton bringing those voters back to the table, the Democrats are getting some of those voters back. So a little pressure is off of Joe Biden now.

BLITZER: We've got to leave it there, guys. Alex and James, thanks for coming in.

Former president Clinton, by the way, will speak with Larry King about the campaign. That's on a special "LARRY KING LIVE" Wednesday night, 9:00 p.m. eastern. I think you're going to want to see that.

So who's got ties to the failed financial firms? It turns out advisers to both presidential candidates and that's becoming a hot issue on the campaign trail. We just heard from James Carville. We're taking a closer look.

And eight years later, the battle over hanging Chads still an issue in Florida. Paper ballots versus electronic touch screens. John King is standing by for a closer look. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Two firms at the heart of America's financial meltdown and who has ties to them? That's the subject of those latest slugging match in the presidential campaign.

Let's go to Brian Todd working the story for us.

There's a new were going on. What is it all about?

BRIAN TODD, CNN CORRESPONDENT: Wolf, that battle over the connections to Fannie and Freddie is intensifying on the campaign trail. The McCain campaign attacked Barack Obama for links to the two companies. Obama's former VP search committee leader Jim Johnson was once CEO of Fannie Mae. The McCain campaign says he got advice from Franklin Raines which the Obama campaign denies. But McCain's campaign manager Rick Davis also has ties to the two companies. Earlier this decade, he was president of the home ownership alliance set up by Fannie and Freddie to promote their work and help them advocate against government regulation. We spoke with two former officials. Fannie Mae, both Democrats, one of them contributes to Obama and one of them Robert McCarson told us he approved invoices for Davis's compensation. He says Davis made about $35,000 a month in that job. Now, in a conference call today, CNN asked Rick Davis about this. He said he never lobbied for the homeowner alliance. He said even when he headed the group, McCain was pursuing more regulation of Fannie and Freddie. The urban league cribbed to his salary. Officials from Fannie Mae and Freddie Mac would not comment when we contacted them. It seems both campaigns' ties to these two companies fodder for a lot of back and forth these days.

BLITZER: I think it's going to go back and forth for days to come. All right. Thanks very much.

Eight years after hand-counted ballots and hanging Chads raised so much controversy, you would think electronic voting would have taken hold especially in Florida. Get this touch screen voting is still a touchy subject in Florida as the latest recount shows. Our chief national correspondent John King has been looking into this.

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JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Some images of Palm Beach County are peaceful, relaxing. Others not so much. And with this year's presidential race so close, headlines like these stir both painful memories and present-day worries. The current recount drama involves a local judicial race, hardly a statewide or national concern. But the confusion and sometimes contradictory statements of elections officials are raising all too familiar questions.

SID DINERSTEIN, PALM BEACH CO. GOP CHMN.: Managerially is, software-wise, procedure-wise, training-wise, there is no confidence that those people will be ready in less than 50 days for the election that we're all going to have.

KING: Never again was the county's promise after the butterfly ballots and hanging Chads of the 2000 presidential recount. By 2004, the county had switch it had touch screen machines and there were no major controversies but for this cycle, Palm Beach County has switched to a system of scanned paper ballots. County Republican Chairman Sid Dinerstein says the touch screens were more reliable but local Democrats insisted on switching.

DINERSTEIN: We could have had computers giving us an honest count the drama here eight years ago, some would say debacle, led to major changes.

KING: More than 40 states made adjustments in their machines for audit trails.

TODD ROKITA, INDIANA SECRETARY OF STATE: We've had more change in our election process in 2000 than we've seen since the voting rights act of 1965.

KING: Todd Rokita is Indiana's top election official and a past president of the Association of Secretaries of State. Indiana spent $67 million on new equipment and he challenges those who don't trust the computerized systems.

ROKITA: We use technology in every one of our you financial transactions and social transactions. Why are we not putting -- why until 2000 did we not put that technology to use when it comes to our most sacred civic transaction, the voting process?

KING: Indiana has a record number of it newly registered voters and with the possibility of heavy turnout, Rokita advises those who don't like long lines or don't trust their local election system to take advantage of any opportunity to vote early either by in person or by mail.

John King, CNN, West Palm Beach, Florida.

(END VIDEOTAPE)

Republican vice presidential nominee Sarah Palin is speaking out on the campaign trail. She's in Media, Pennsylvania, right now with Senator McCain at a rally just outside Philadelphia. Let's listen in briefly.

GOV. SARAH PALIN (R), VICE PRESIDENTIAL NOMINEE: Who hired me. That was the people of Alaska. And in a McCain/Palin administration, we will never forget that we'll be there to work for, the people of America. John and I, we have a plan. And if we are so privileged to get to serve you, I'm going to have some new responsibilities as vice- president. Government reform, energy independence, and helping families and children, those with special needs that that's going to be on top of our list. First I will help lead our you reform efforts. John and I are the only candidates in this race with a track record of truly being able to make change happen. Not just talking about it, but making change happen. I want to ask you a few questions, media. Let me ask you a few questions. Our opponent, he likes to point the finger of blame, but tell me, has he ever lifted a finger to help? [ shouts of no ]

Has he ever reached out a reformer's hand to the other side of the aisle?

In order to get others to say yes to change, has he ever told his own party no?

When it comes to reform, he likes to say I will. But has he ever been able to say we did?

John McCain and I, we want reform. We want transparency in Washington. As the governor of Alaska, I did things like put the state's checkbook online so that everybody could see where the money was being spent. We want to do the same thing in D.C. John wants to do the same thing with the treasury bill. We believe that the American people have the right to know which firms the treasury is helping and what that selection is based on and how much that help will cost you. It's your money. And you do have a right to know where it's going.

BLITZER: All right, Sarah Palin, the Republican vice presidential nominee speaking at a rally. You see Arlen Specter and Joe Lieberman standing right behind her. We'll continue to monitor what she's saying. Sounds like so far at least, she's in her regular stump speech. We'll watch it for you and get back there if there's news.

Meanwhile a crash course for Sarah Palin meeting with the Afghan president Hamid Karzai and other key figures at the United Nations. Can she show she's up to speed on world fairs? Stay tuned.

And as things stand, he's supposed to control that $700 billion bailout. Is that too much power though for the treasury secretary?

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

(COMMERCIAL BREAK)

BLITZER: Let's check in with Jack. He's got the Cafferty file. Jack?

JACK CAFFERTY, CNN CORRESPONDENT: The question is what will Sarah Palin and Hamid Karzai talk about this week at the U.N.?

Leeann writes, "The thought of Palin talking to Karzai as a representative of the United States is mortifying. I don't know what they'll talk about, but I'm sure he'll have to tell her he's the leader of Afghanistan and proceed to locate his country on a map for her."

Kay writes in Ohio, "I'm sure she'll explain the Bush doctrine to him since Charles Gibson explained it to her."

Jerald writes, "Perhaps she'll ask President Karzai to explain the wonderful benefits that conservative religion has brought to his country."

Allen says, "What a sexist, elitist media question. I'd imagine they'd have an intelligence conversation, no different than a member of the press would have."

Noreen in Rochester, New York, "Ridiculous. The McPalin campaign won't let her talk with the news media. They're stifling the format of the upcoming vice presidential debate. According to the "New York Times" Saturday, the campaign of John McCain fighting for tight rules on how the VP debate will run, limiting the chances of anything other than short answers and ensuring the debaters won't speak directly to one another for anything more than short periods. Now they're parading her in front of world leaders."

Brad in Tampa writes, "Palin will say, so you're the first dude of Afghanistan? Good for you. What do y'all hunt over there?"

And Deborah in Los Angeles, "She'll tell Karzai she likes her dogs with the really, really long hair."

If you didn't see your e-mail here, go to CNN.com. Look for yours there among hundreds of others.

Wolf?

BLITZER: A lot of them are very clever indeed. Thanks, Jack.

He's asking taxpayers to fork over some $700 billion for that massive Wall Street bailout, but who is the treasury secretary, Henry Paulson? We'll put the secretary in the spotlight. That's coming up.

And Bill Clinton weighs in on the financial crisis, talking to the ladies of "The View." You'll hear what he had to say right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's check in with Lou now. Lou, I want to pick your brain. In that Henry Paulson proposal that was submitted to congress, it asked that the national debt, the ceiling be increased to 7.3 trillion dollars. Now, you know what it was when President Bush took office.

LOU DOBBS, CNN ANCHOR: Well, we were just discussing that. $5 trillion. You know, it's starting to sound like we're going in a certain direction that isn't to --

BLITZER: Our children, our grandchildren. This is all of their money.

DOBBS: Let's be really clear. These two political parties for the past 30 years have been absolutely irresponsible. And anyone watching you or me or listening to us who thinks that they're just a mad, absolutely fanatic Democrat or Republican and they're going to vote whichever way because that's the way they are, that's their label, they better understand that these two political parties got us here. Both Democrats and Republicans. And anyone who plays a game about this otherwise is just --

BLITZER: They're trying to work together to come up with this emergency legislation to deal with this crisis.

DOBBS: Yeah. Well, let's -- first of all, they haven't got the guts not to pass it. They don't have an understanding of what they're passing.

BLITZER: Do you think -- do you have confidence in Paulson?

DOBBS: No, not Paulson, Pelosi, Reid or Bush. No one should have confidence in them. They are doing their best in trying to appear competent and knowledgeable. They are in an area and I have talked with some of the best minds on Wall Street. I will guarantee you no one knows what the right answer is.

BLITZER: What about Ben Bernanke?

DOBBS: Despite all of the criticism, he moved earliest and moved as well as one could ask and respond. But this is not simply within his purview. This requires economic leadership. It requires political leadership. And we're beginning to get it. From -- at least from, in my opinion, John McCain. Obama is trying to point fingers. Hopefully he will be a positive contributor. No one is going to get political advantage out of this, but it would be nice to see real leadership here.

BLITZER: Lou will have much more in an hour. See you then, Lou.

DOBBS: Thank you.