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ANDERSON COOPER 360 DEGREES

Financial Crisis Fallout

Aired September 24, 2008 - 22:00   ET

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


ANDERSON COOPER, CNN ANCHOR: Tonight, breaking news, and plenty of it.
The president speaks, inviting Barack Obama, John McCain and congressional leaders to come to the White House tomorrow. They accept. Obama and McCain just released a joint statement on the economic crisis. We will get to that in a moment.

But the big breaking story today, the one that still has political observers scratching their heads, is John McCain's announcement that he's suspending his campaign and returning to Washington to focus on the bailout battle.

He also called for delaying the first presidential debate on Friday. Now, Harry Reid said don't come to Washington. And Obama, surprised by the decision, said he plans to debate on Friday.

So, what's up with McCain? To some, what he did may be a sign of leadership, to others, a purely political move. We will have all the angles tonight.

But, first, let's listen to some of what President Bush just said before we went on air in his prime-time speech to the nation.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The market is not functioning properly. There has been a widespread loss of confidence, and major sectors of America's financial system are at risk of shutting down.

The government's top economic experts warn that, without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold.

More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically.

And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs.

Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And, ultimately, our country could experience a long and painful recession.

(END VIDEO CLIP)

BROWN: We will have more of what -- we will have more of what the president did and didn't say and the latest on the congressional hearings over the bailout.

But, first, John McCain's political bombshell and the real story, what happened behind the scenes back and forth between him and Obama.

Candy Crowley has the breaking news.

(BEGIN VIDEOTAPE)

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT (voice-over): After a phone call from the president, Barack Obama has agreed to return to Washington for a White House meeting which also includes congressional leaders and John McCain, who requested the session.

The news came at the end of a day of high drama on the campaign trail, which started when McCain told reporters the financial crisis is historic, too important to continue campaigning.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: It has become clear that no consensus has developed to support the administration's proposal. I do not believe that the plan on the table will pass as it currently stands, and we are running out of time. Tomorrow morning, I will suspend my campaign and return to Washington.

CROWLEY: McCain's actions come at a precarious time for both the economy and his campaign. The Wall Street bailout is teetering in Congress, on the edge between yes and no. And McCain's campaign is losing ground in the polls after days of fumbles, as both candidates try to show leadership on the country's dire financial straits.

In a take-charge, serious mode, McCain also called on Obama to join him in suspending political ads and to agree to a change in the political schedule.

MCCAIN: We must meet as Americans, not as Democrats or Republicans, and we must meet until this crisis is resolved. I am directing my campaign to work with the Obama campaign and the Commission on Presidential Debates to delay Friday night's debate until we have taken action to address this crisis.

CROWLEY: Prior to the president's call, Obama, startled by McCain's TV appearance, put together a quick news conference to say yes to bipartisan and no to the rest, including a delay of the debate.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: It's my belief that this is exactly the time when the American people need to hear from the person who, in approximately 40 days, will be responsible for dealing with this mess. And I think that it is -- it is going to be part of the president's job to deal with more than one thing at once.

CROWLEY: In a presidential campaign that, at its core, is about leadership, Obama aides quickly let it be known that it was their candidate who called McCain first early this morning. McCain called back mid-afternoon, and Obama suggested a joint statement about the financial crisis, and McCain agreed.

It materialized late this evening. It was a weak piece of paper, saying what both have said for days: The Bush plan is flawed. The meltdown is real. It lacked even the barest specifics that both have talked about on the campaign trail. Bipartisan only goes so far.

(END VIDEOTAPE)

COOPER: Well, here is part of what Obama and said in that joint statement, the statement Obama first tried to call McCain about early this morning.

It goes on to -- it says: "Now is a time to come together Democrats and Republicans in a spirit of cooperation for the sake of the American people. The plan that has been submitted to Congress by the Bush administration is flawed, but the effort to protect the American economy must not fail," as Candy pointed out, no specifics, plenty of "Raw Politics" behind that.

Let's go deeper with Candy, along with CNN's John King, and CNN senior political analyst and former presidential adviser David Gergen.

David, what is your take on all of this? I mean, for a race that couldn't get any more surreal, it suddenly reached a whole other level today.

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: It sure did, Anderson.

And I -- look, I think that John McCain is certainly a patriot. And there's nothing he likes better than leading the cavalry to the rescue, which is what he is doing by going to Washington. But he is also a politician, as we have seen in this campaign on several occasions. And this is very, very political.

He is trying to get -- seize the leadership back. I think he wants to -- I think he wants to make sure that it gets passed and he gets some of the leadership credit. I think he also sees it's in his interests, given the anger level in the country.

The Bloomberg/"L.A. Times" poll shows, 55 percent of Americans do not want this plan. He would love to suck Obama into the middle of this and have Obama's name on this plan when it's passed, so that he has to share the blame, as well as the credit.

So, I think that this is a combination of the two. And I think Obama has been smart to say, let's go forward with the debates. Let's not hold off now.

COOPER: Candy, what does the Obama camp think of all this? I mean, what went on behind the scenes today?

CROWLEY: Well, they think that McCain is doing this purely for political reasons.

You know, they were pushing that storyline most of the day, saying, well, our guy called first. McCain is just trying to seize the leadership. His Gallup poll is going down. Therefore, he is making this move for that reason.

They clearly felt that way. However, they really were startled by it. I will say that. I mean, they -- it took them -- I mean, Obama just talked about talking to McCain and then coming back to his hotel room seeing McCain on TV saying he was going back to Washington. So, they did scramble that news conference, because, again, this isn't just a bid for the leadership mantle from John McCain. It's from Barack Obama as well.

So, he has to be also really careful about when he is out there and the sorts of things that he says.

COOPER: John, what do these guys do if they go back to Washington? I mean, John, neither of them are even on the committee that is taking part in these negotiations.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Well, both -- both men have big responsibilities as leaders of their own parties right now, Anderson, especially House Republicans, who are nervous going into this election season already, who will be looking to John McCain for cues on what to do.

But I also think we need to broaden the conversation, in the sense that presidential politics is a huge part of this, but it is a subplot. Listen to what the president of the United States said tonight. He is trying to convince the American people, who do not trust him and do not trust anybody in Washington -- it's not just about the president -- to spend $700 billion.

I am traveling this week. And I can tell you, people think they are going to pay the bill, and they are going to get the short end of this stick; rich people will benefit.

So, John McCain and Barack Obama are now part of an exercise that is about saving the American economy, which is a pretty big deal. You heard the president say tonight, factories will shut down, banks in your community will shut down, if we don't do this, at a time when it is clear the American people do not trust the politicians who are saying, we will fix this.

COOPER: I'm told Barack Obama just released a statement about the president's comments, saying that he is heartened and encouraged by what he heard. We will try to have more of that statement as we get it.

David, do you think -- I mean, how do you see this playing out? What does -- how does that work? John McCain goes back tomorrow. I mean, do -- is there going to be a debate?

GERGEN: I think there will be a debate, unless there's a showdown vote at 9:00 Friday night. (CROSSTALK)

COOPER: But, if there is a debate, does that make it look like John McCain blinked, because he said there shouldn't be a debate?

GERGEN: I think that he has got that problem.

I would surprised if -- the Presidential Commission set these debate dates a long time ago. I don't think the country is -- I think the country sees this as sort of odd, frankly, as strange.

But let me go to John King's point, because it's so important, about how important this is to the country. What these men should do, Obama and McCain, is stay out of the negotiations. There are very intricate negotiations that have been under way now between Secretary Paulson and feel like Barney Frank on the hill that have gotten -- have gotten a long way.

Yes, it's teetering to a degree, but they have made a lot of progress. And I think there's a very good chance it's going to -- something is going to pass here in the next few days. Congress, when it has a gun to its head, usually will respond and produce a bill, as angry as they will be about it.

What Senator McCain can do and what Senator Obama can do is be very helpful in rounding up votes, especially Senator McCain. You know, in the House side, it said that there are 30 or 40 Republicans prepared to vote for this. You know, McCain can be helpful in making it much more bipartisan and making sure really Republicans take as much responsibility as Democrats do.

COOPER: Candy, Barack Obama is still continuing to run ads, though, is that correct? I mean, that's what I got from his press conference, whereas John McCain says he is pulling his ads tomorrow.

CROWLEY: Absolutely, yes. He is continuing on, the debate as usual. He has not suspended his campaign, although most of it, for the rest of this week, is debate preparation, besides the trip back to Washington. And he intends to go to the debate.

But just on what David just touched on, there really are larger stakes here for John McCain. It's been the Democrats saying to McCain, well, where are you on this bill, because it's the Republicans that are holding it up? We need to get more Republicans on board. And John McCain needs to do this.

So, in many ways, John McCain has much more at stake going to Washington than Barack Obama would have going there. So, he's perfectly right. This is about rounding up votes. And the person who most needs to round up those votes is John McCain.

COOPER: John King, I guess there is a risk, though, for John McCain in -- in seeing -- in appearing linked with President Bush on this thing. I mean, to David's point, that he wants to get Obama linked to it, too, so that blame, if there is to be any blame, is at least shared, but, certainly, there is a risk for John McCain in going back to Washington.

KING: There's a risk in John McCain and the president of the United States going on TV tonight, because, at a time of economic trouble, people tend to blame the party in power.

And we were reminded yet again tonight that that party is the Republican Party when it comes to the White House. So, there is certainly a risk for John McCain in being associated with anything that is going to, in the end, be signed by George W. Bush, which is why, as David just said, he wants to bring Barack Obama along for the ride.

But the bigger risk is to be seen as doing nothing. Both of these candidates are having difficulty connecting with voters on the economy. Barack Obama gets a bit of an edge right now because he's a Democrat, not because he's formed any personal bond with people on the issue of the economy.

And, Anderson, again, I'm going to say this. As you travel, there is a huge disconnect. People -- if you bought a house, whether it's a $1 million home in Washington or a $200,000 home in Montana, that is now worth two-thirds of what you paid for it just six or several months ago, they want action. They want something to help them.

And they don't trust any of them, not the president, not Barack Obama, not the Congress, not John McCain, to do something that will help them, the little guy, not the people on Wall Street, who I can tell you from traveling, they think this is a bailout, not a rescue plan.

COOPER: We are going to have more from John King and Candy Crowley and David Gergen throughout this hour.

For now, the first presidential debate still set for Friday. Everyone but John McCain seems to want it. Senator Obama says he will be in Mississippi. Senator McCain says a bailout deal has to be done first. We will be there if it happens Friday night 9:00 p.m. Eastern.

As always, we're going to be blogging throughout the hour. Join the conversation. Go to AC360.com. Erica is blogging as well. Also, you can watch Erica's live show during the break. She's already started it. So, log on to AC360.com and click on the link to watch that.

Just ahead: more breaking news, the latest on the bailout brawl. Where does it stand? Today, Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson facing off with House lawmakers, who were not cutting them any slack. The questions were tough. Hear how they defended themselves.

It is your money and your vote. That counts. And that is what is at stake.

Also ahead, Sarah Palin gave an interview, only her third one. Katie Couric asked the questions. Hear how she responded we asked about connections between McCain's campaign manager and Fannie Mae and Freddie Mac.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MCCAIN: I am directing my campaign to work with the Obama campaign and the Commission on Presidential Debates to delay Friday night's debate until we have taken action to address this crisis.

OBAMA: This is exactly the time when the American people need to hear from the person who, in approximately 40 days, will be responsible for dealing with this mess.

(END VIDEO CLIP)

COOPER: Coming up, we're going to hear from different political sides, Bay Buchanan and Paul Begala, Democrat and Republican.

But we want to get as many facts from impartial observers as possible. Right now, the debate over the debate, that's part of the question. The entire presidential campaign is basically in limbo tonight. The only thing the candidates seem to agree on right now is that $700 billion bailout plan needs more oversight and accountability.

Today, the architects of the plan were back on Capitol Hill, offering dire warnings, but few details. Again, it is your vote, your money at stake.

360's Tom Foreman takes a look.

(BEGIN VIDEOTAPE)

TOM FOREMAN, CNN CORRESPONDENT (voice-over): On Capitol Hill, the administration's bailout plan continues to get a cool reception and heated words, the latest point of contention, a demand by lawmakers that none of the money headed for troubled companies can be used for big CEO salaries.

REP. AL GREEN (D), TEXAS: The taxpayers have to know that those who have created the problem are not going to be rewarded as they go out the door. No golden parachutes.

FOREMAN: Treasury Secretary Henry Paulson, who himself made hundreds of millions as a CEO, had been saying such a measure could make companies back away and doom the whole deal, but, today, concession: The White House will consider the restriction.

HENRY PAULSON, U.S. TREASURY SECRETARY: The American people are angry about executive compensation -- compensation, and rightfully so.

FOREMAN: Still, many Democrats and some Republicans say they don't yet have a clear enough picture about how the money will be spent, who gets it, and what taxpayers get in return. It is a blank check. SEN. ROBERT MENENDEZ (D), NEW JERSEY: Give me all the authority, no oversight, no guidelines, no conditions, and no judicial review, and trust me that we will do the right thing. That simply is not acceptable.

FOREMAN: Amid all that debate, the head of the Federal Reserve keeps saying he believes, if something isn't done fast:

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: That jobs will be lost, the unemployment rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will not just be able to recover in a normal, healthy way, no matter what other policies are taken.

FOREMAN: That has some saying taxpayers are being railroaded into a deal that only might work.

REP. JEB HENSARLING (R), TEXAS: I can put a gun to my neighbor's head, take his college fund for his children, place a bet on a roulette table in Las Vegas, and maybe, maybe I will triple his money. But, Mr. Chairman, that is not a risk that my neighbor voluntary undertook.

FOREMAN (on camera): Many lawmakers, nevertheless, are predicting that some deal will be worked out. But they are clearly worried about the buyer's remorse they will face if they spend 700 billion taxpayer dollars, and the problem is not fixed -- Anderson.

(END VIDEOTAPE)

COOPER: Well, tonight, earlier, the president backed the bailout. But the question is, will you? Should you? It is confusing. There's no doubt about that.

So, let's try to break it down. We're talking politics, policy, and nearly $1 trillion.

Joining us is CNN's Jessica Yellin, CNN senior business correspondent Ali Velshi, and David Brancaccio, host of "NOW" on PBS.

Jessica, Nancy Pelosi, John Boehner said tonight that they have made progress on the bailout plan. We also heard that earlier from Dodd and Schumer. What do you hear about this progress? Are they any closer to an agreement?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Yes, Anderson, they are closer.

Right now, staffers are hammering out the terms of a proposal they will take tomorrow morning to Republicans on the Senate and the House sides in these committees to discuss where they go from here and to try to negotiate some sort of kind of preliminary package.

We understand that they have agreement in broad terms that there needs to be a limit on CEO severance, for example. There needs to be some sort of mortgage provisions to help people who are struggling with that. And there needs to be some sort of oversight board. There are a lot of details that need to be hashed out, still a lot of trouble that could come up. But I can tell you that Democrats are especially doing their utmost right now to make it clear that progress has begun, even before John McCain showed up.

Barney Frank, who is taking the lead for the Democrats, said to reporters of John McCain, he's saving us from a deal we're about to make. We're trying to rescue the economy, not the McCain campaign -- so, a lot of effort on both sides to politically posture right now, as well as negotiate.

COOPER: We're going to have more from Ali and Jessica and David in a moment.

We are talking about this deal or no deal on the bailout to fix the broken economy. Sadly, it is not a cheesy game show we're talking about. We're told progress, as Jessica just said, is being made. What does it mean for you? We will look at that next.

And D.C.'s disconnect -- Americans sounding off on the bailout. John King said that before. They are not buying it. We will have a report from him from Montana.

Stay tuned.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER: that. It appears to me that John McCain is trying to divert attention to his failing campaign. And coming back here is not going to add to the process.

(END VIDEO CLIP)

COOPER: That was Harry Reid earlier today, the senator majority leader taking some shots at McCain, someone he calls his friend.

Other lawmakers, however say they want McCain to return to D.C., mostly reporters saying that. John McCain says, this is above politics. But there's plenty of politics involved, as we have been talking about.

At the center of this, of course, is that nearly $1 trillion proposed bailout, your money, your vote.

Let's head back to our panel. With me again, CNN's Jessica Yellin, senior business correspondent Ali Velshi, and David Brancaccio, host of "NOW" on PBS.

Ali, how soon does something -- something -- have to done?

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Look, I'm going to tell you what is happening right now. And you can draw the conclusions from that. Caterpillar, a major U.S. company that happens to be steady and stable, borrowed money yesterday. It was sort of the largest borrowing of money since this announcement was made last Thursday. It was $1.3 billion and they paid about 7 percent interest on that. That is almost double what they would have paid a week ago.

General Motors, a company that we know is not financially all that stable, exhausted its credit limit a little bit last week. They have no credit line left. So, if there's inability for them to bring money in, they are going to have to not spend it somewhere.

Now, that is -- there's one connection that you make for this, Anderson, and that is your job. Americans do not, on a daily basis, take a mortgage out or rent -- take a loan for a car or a student loan. They do that once a year or once every few years. They do go to their job every day.

So, while there is all this talk about a Wall Street bailout, people have to understand that, while the financial system is frozen, while the credit markets are frozen, that could work into people's jobs. How long will that take -- take? I don't know. We just need to see the first one to see.

COOPER: And just the idea of a bailout, that will, what, loosen things up?

VELSHI: It will mean -- it will mean, right from the top, people have money. They will be able to loan money. So, if General Motors or Caterpillar needs to borrow money for operating costs, that money isn't anywhere to borrow right now.

COOPER: David, you say there's one thing that makes you a little more optimistic tonight.

DAVID BRANCACCIO, HOST, "NOW": Just slightly.

And I had to search far and wide to find it, all right?

(LAUGHTER)

BRANCACCIO: OK.

A lot of us don't understand this complicated bailout.

COOPER: Right.

BRANCACCIO: That's one of the problems, right? I don't understand it. The American people don't understand it.

The Congressional Budget Office, the CBO -- these are very smart folks who are paid to understand this sort of stuff -- the head of that today said, he doesn't understand it. He says, not enough details to fully get his head around this complexity. So, I don't feel quite as stupid if he doesn't understand.

COOPER: Yes. BRANCACCIO: It is generally very complex.

But I was working on a metaphor with a good friend of mine who is a stockbroker. It's basically like this, Anderson. Let's say you need to sell your house like right away, like tomorrow. What kind of price would you get for it? Not very much, right?

COOPER: Right.

BRANCACCIO: Because, tomorrow, you have got to sell.

If you could have more time, if you could have six months or a year, eventually, you would get a good price for it. What the government bailout proposes to do give these companies, with these distressed, toxic securities, a little bit more time, so they can get a slightly better price, taking some of the pressure off.

COOPER: Right.

Jessica, at this point, I mean, you said, tomorrow -- before the break, you were saying, tomorrow, they're going to propose some sort of plan. What are some of the main sticking points that lawmakers are trying to work through before they agree?

YELLIN: There are a number of them.

They include measures like a bankruptcy provision that would change the way people who are homeowners and bankrupt can deal with their losses. Republicans don't like the plan. Democrats do, a major sticking point not likely to end up in the package.

There are other measures. How would this equity package be structured? This is the thing we have heard them talking about, that taxpayers shouldn't invest in these companies without getting something back once the companies are profitable again. All the details of those things are still very nebulous and could make any deal fall apart, still.

The big -- other stick -- big sticking point is just how big should this bailout package be? Seven hundred billion is what they want from the administration. But it's not necessarily what Congress will give them.

The one thing I can emphasize, Anderson, though, is that everyone I talk to up here on both sides really does feel the pressure to get something done. They would rather do it sooner than later. They just have to figure out these -- the details.

COOPER: It's interesting, though. And we heard this from Obama earlier today, that he was he saying, look, not -- this should not be the whole kitchen sink in this thing. It is important to try to have this be as clean as possible, and not try to have the earmarks, not try to have all these add-ones.

VELSHI: It is very complicated, because the concerns that Jessica was just talking about, they are valid. They are valid concerns. In fact, the biggest selling point for this for Americans would be if it stops being called a Wall Street bailout and starts to have some provisions for either small businesses or homeowners.

That could help. How far down that road do you go to make this perfect? We need to free up the credit markets, so we need some deal, but the other stuff could be dealt with later.

COOPER: Yes.

VELSHI: And the other one -- I mean, well, here's one. Executive compensation, it is a bit of a red herring. It is a major, major problem in America. There's no question. It's been a major problem for a long time. Maybe that is something that they can all agree to tackle afterwards.

This is still like -- like discussing who started the fire while we have got to put the fire out.

COOPER: Well, there is so much anger out there, David.

And I understand why people would focus on executive compensation. The notion that -- I mean, you see these politicians asking questions to Paulson and Bernanke. Well, where were they, you know, for the last 20-some-odd years? Where were these questions being asked?

And now they're all -- everyone is suddenly shocked to find out that there is gambling going on in Rick's casino.

BRANCACCIO: No, and I was talking to somebody who originally went into this early in the week thinking it might be a red herring, this executive compensation issue, as you -- as you just mentioned.

But, as the week has evolved, they are concerned about a system that ultimately doesn't penalize the people at the top.

COOPER: Sure. Right.

BRANCACCIO: And, so, there is a continuing debate about this. You also heard there are some Democrats who are thinking about maybe we could phase this in. Maybe there could be a first tranche of this funding, then come back a little bit and vote on the rest.

Will Wall Street, will the investors put up with that kind of situation? Will they really get their money?

COOPER: Right.

BRANCACCIO: It remains to be seen.

COOPER: We will see what happens tomorrow.

Jessica Yellin, thanks.

Ali Velshi, David Brancaccio, thanks. Still to come, one-on-one with Sarah Palin, only her third interview. This time, Katie Couric did it. Hear how she responded to questions about McCain's ties to mortgage giants Freddie Mac and Fannie Mae -- his campaign manager's ties, I should say.

Plus, how the economic crisis is playing out for McCain and Obama in key battleground states. We have got new numbers, state by state, to share with you. Forget about those national polls. What matters is the battleground state numbers. And we have got new ones for you -- when 360 continues.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: With the situation becoming more precarious by the day, I faced the choice to step in with dramatic government action or to stand back and allow the irresponsibility actions of some to undermine the financial security of all.

(END VIDEO CLIP)

COOPER: President Bush tonight delivering his most important address to the nation in years, pushing for quick approval of that $700 billion bailout. He outlined a very bleak economic future if Congress did not back the plan. His message was to lawmakers but also, probably more importantly, to you.

It's a complete reversal of what he's been preaching for a very, very long time. We actually decided to take a look back at some of his past statements on how the economy was doing. Take a look.

(BEGIN VIDEO CLIP)

BUSH: Ours is a belief that, one, we shouldn't bail out lenders. And so in other words, we shouldn't be using taxpayers' money, saying, "OK, you made a lousy loan; therefore, we're going to subsidize you."

I mean, this economy rests in the hands of the American people, not in the halls of the government.

Our financial institutions are strong and that our capital markets are functioning efficiently and effectively.

We can have confidence in the long-term foundation of our economy.

(END VIDEO CLIP)

COOPER: Fundamentals are strong. You heard the president saying taxpayers shouldn't bailout lenders. Our financial institutions are strong overall. Very rosy outlook back then, not so long ago.

Tonight, we learn he invited senators Obama and McCain to the White House tomorrow to discuss the bailout bill, as well as other congressional leaders. It is all happening with the campaign turning upside-down today.

Obama spokesman Bill Burton just released this statement. "While Senator Obama believed that the administration's initial proposal was flawed and unacceptable to the American taxpayer, he was heartened tonight that the president seemed to be moving in the direction of the principles that Senator Obama outlined over the last week, including limits on CEO pay, independent oversight, and taxpayer protection."

Lots to talk about in our "Strategy Session." Here's Paul Begala, CNN contributor, former Clinton advisor and Democratic analyst. And Bay Buchanan, a Republican strategist and former senior advisor to Mitt Romney.

Paul, John McCain says, "Look, we're suspending the campaign. This is an altruistic move. This is above politics." Do you buy that?

PAUL BEGALA, CNN CONTRIBUTOR: No. Come on. We're 39 days before an election. Everything he does is political. And his campaign is remarkably tactical. You know, sometimes successful tactics, I thought it was goofy but that Paris Hilton ad, it worked briefly.

You know, I didn't think that the Palin thing would do very well. It did well tactically, short term. I think now it's already hurting him. This is another tactic. And the problem is, if he starts to look erratic, then he undermines his central message, which is "I'm experienced and steady. I'll be a strong, capable..."

COOPER: Are you saying he's basically making a move because he's dipping in the polls, and he needs to try to kind of regain the mantleship of being a leader?

BEGALA: Yes. Clearly he's dipping in the polls, and wants to change the dialogue somehow. But it's preposterous that we can't have a presidential debate in the middle of this economic crisis. We had a presidential campaign in 1864, when Sherman was marching on Atlanta. We had a presidential election in 1944, when D-Day was going on in Normandy.

We can have a debate on Friday. In fact, it's probably the most important thing McCain and them could be doing, would be to debate the issues.

COOPER: Bay, what about that?

BAY BUCHANAN, REPUBLICAN STRATEGIST: You know, it depends on what happens in the next couple days. Clearly, no matter what he's going to do, what Obama does in his next 40 days, everybody is going to say it's political. And to an extent it is.

But at the same time you've got to remember, John McCain and Obama are senators. They should be doing their job, especially at a time of crises when their vote, when their leadership could really make a difference in this bill. And McCain is accustomed to that. He's usually right in the middle of the fray back there. He understands the influence he can use to persuade things to go where he thinks would be better for America. Obama is very used to...

COOPER: Both of these guys -- both of these guys don't seem to mind missing a huge amount of votes. I mean, it's not -- in a moment, we're -- it's not as if these guys, you know, have never missed a vote. They rarely have voted.

BUCHANAN: No question.

COOPER: They rarely have voted in the last year, I think.

BUCHANAN: You've got that right. But this is just not any old bill, either. This bill is going to affect Americans -- all Americans, and also it's going to tie the hands of the next president. So if you want to be president...

COOPER: Do you think there should be a debate today, on Friday?

BUCHANAN: I think that if there's a resolution, absolutely. I don't think they should have to need four days to prepare for a debate. I think absolutely.

But if this thing is right down to the wire, and they're pushing for a resolution Friday afternoon, I think both of them should be in Washington to represent the millions of Americans that agree with their philosophy to make sure we're represented and get it pushed as best it can be for all of Americans.

COOPER: I want to read something Newt Gingrich said about McCain's move. He said, quote, "He put everything on the line to try to put together a bipartisan sizable economic package to replace the failed Paulson bailout package. This is the greatest single act of responsibility ever taken by a presidential candidate."

On the flip side, here's something that Democratic Senator Chuck Schumer said today. Let's play that.

(BEGIN VIDEO CLIP)

SEN. CHUCK SCHUMER (D), NEW YORK: We do not need an injection of presidential politics into this. These issues are complicated. The negotiations have gone on. It's as if, you know, you're in the middle of drawing an amazing painting, and someone else comes in and says, "Hey, let me throw my brush marks on there. It just -- it just doesn't make sense."

(END VIDEO CLIP)

COOPER: So Paul, is there a big Democratic concern that John McCain is going to swoop into town and suddenly claim credit for whatever has already been hammered out?

BEGALA: I think they'd be really happy to give McCain full credit for this turkey. No, I think that -- I think they just -- everybody I talk to think it's odd. It's just weird. It's erratic.

COOPER: Bay, did it surprise you?

BEGALA: Just a few days ago he said the fundamentals of the economy are strong. Now there's such a crisis he can't even run a TV commercial? I'm sorry.

BUCHANAN: This is so -- I mean, what Schumer said is so ridiculous. If this were two governors trying to fly back to Washington and negotiate, I would agree. These fellows are the senators. It is their responsibility. It's what we pay them to do.

And it's time they took some accountability for the bills they sign off on. That is why they definitely should be there.

And I think McCain shows real leadership. He understands that he can make a difference. Obama has spent his lifetime in the Senate, standing away...

COOPER: Did I just hear you denigrating governors? Did I just hear you...

BUCHANAN: Well, governors can say something, but they -- this is resolved by the Congress of the United States. Up or down on this bill.

COOPER: Bay Buchanan, thank you. Paul Begala, great to have you on.

Still to come, new polling out today in key battleground states may mean good news for Obama. John King breaks down all the latest numbers.

And up next, thousands of people return to Galveston, Texas, today after Hurricane Ike batters the city. We're going to show you what they went home to. Look at those long lines.

We'll be right back.

(COMMERCIAL BREAK)

COOPER: We referenced it just before the break. Bay Buchanan talked about the importance of not missing votes. McCain has missed the most votes in the Senate this year, 412.

Obama is third. He's missed 295 votes.

He's behind Senator Tim Johnson of South Dakota, who has missed 311 votes as he recovers from a stroke-like illness.

So basically, John McCain has missed more votes than a guy with a stroke, and Obama has missed almost as many votes as a guy with a stroke. Obama's last roll call vote was back in July 9. McCain goes back further, April 8.

Erica Hill joins us now with the "360 News and Business Bulletin" -- Erica.

ERICA HILL, CNN ANCHOR: I'm glad I made it, too. Galveston residents, Anderson, heading home now. This is, of course, nearly two weeks after Ike ravaged the Texas community. The mayor warning no one should return without tetanus shot and rat bait.

Traffic on the one highway you just saw there is at Galveston, blocked up for miles. Many people returned, as you can see here, to find their homes in ruins.

Storks mixed today after the bailout plan for the nation's financial system continues to cause ripples on Wall Street. The Dow closed down 28 points, not a huge loss, 10,825. The NASDAQ basically flat, gaining two. The S&P 500 posted a moderate loss.

And the investigation into the ages of China's gold-medal gymnasts at the summer Olympics is expanding. Officials now looking at two gymnasts who took bronze in the 2000 Sydney games. A blog entry by one indicated she was 15 at the time. The other told a TV interviewer she was 14 at the Sydney Olympics.

COOPER: Wow. All right.

Still to come, a high school principal goes to great lengths to nab a couple of pranksters. We'll show you what happened to these guys in our "Shot of the Day."

But first -- people running around in chicken costumes. First, John McCain says he will not debate on Friday unless Congress reaches a deal on the bailout plan. We'll get the latest developments from our political team when 360 continues.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: Tomorrow morning I'll suspend my campaign and return to Washington after speaking at the Clinton global initiative. I've spoken to Senator Obama and informed him of my decision, and I've asked him to join me.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: Presidents are going have to deal with more than one thing at a time. It is not necessary to think that we can only do one thing and suspend everything else.

(END VIDEO CLIP)

COOPER: Well, now to breaking news. McCain pledging to suspend his campaign, as you just saw, with Obama saying the move would not be productive. Obama -- that's what Obama said.

Tonight, the two candidates issued a joint statement, calling on both parties to unite to solve the economic crisis. Really didn't have any specifics in it. We've learned they will meet with President Bush tomorrow afternoon at the White House along with congressional leaders. How it all plays on the campaign trail is, at the moment, frankly anybody's guess.

The debate rages on Capitol Hill over competing bailout plans. There is growing anger, however, from voters all across America. Call it a bailout revolt. CNN's John King has the "Raw Politics."

(BEGIN VIDEOTAPE)

JOHN KING, CNN CORRESPONDENT (voice-over): Montana is a long way from Wall Street and Washington, geographically and culturally. The talk of a big bailout there is the source of outrage here.

GOV. BRIAN SCHWEITZER (D), MONTANA: I say, my God, this looks like a condition where the powerful are going give money to the rich. What's new?

KING: Democratic Governor Brian Schweitzer calls it a classic case of Washington disconnect from the real world.

SCHWEITZER: People say, "Now wait a minute. My stock portfolio has gone down. I lost 15, 20 percent. My value is down to zero, and they're going to bail out the big banks. What gives here?"

KING: Out here what gives is a sudden and dramatic shift of public opinion. The more people hear about the $700 billion plan, the more they're trying to block it.

UNIDENTIFIED FEMALE: You're calling to protest. Well, you know, I've heard a lot of those. So let me just get this written down.

KING: At the Helena office of Republican Congressman Denny Rehberg...

UNIDENTIFIED FEMALE: Against the bailout.

KING: ... Suzanne Scooter says she's never seen anything like it. A flood of calls and ample evidence of why consensus in Congress is so hard to come by.

UNIDENTIFIED FEMALE: What are you saying, basically hit the bottom and then start again?

KING: Dozens the past two days, and not one in favor of the bailout.

UNIDENTIFIED FEMALE: I've gotten one, "Think about it."

KING: Montana senators give similar accounts of overwhelming opposition and concerns Congress is in too much of a rush.

(on camera) You're governor. You understand sometimes you've got to make decisions that drive you crazy, but you've got to do it. Is this something you think they have to do, despite that feeling on the street? Or is this something where they need to say, "Whoa, time out. Let's think a little more"?

SCHWEITZER: Ask a few questions. If we're going to bail these coyotes out, when then how about if we have an equity position? Why wouldn't the taxpayer make a little money if they do turn around? Instead of just shoveling that money out the door and have them pay themselves now big gold impressions again?

KING (voice-over): All this in the closing weeks of a fiercely- contested presidential campaign, and it's a pointed reminder most members of Congress face the voters, too. And in a time of profound economic anxiety, it's apparent here that the politicians promising to fix things are held in considerably less than high esteem.

(END VIDEOTAPE)

COOPER: And you heard the president tonight trying to address the concerns we hear from voters out here in Montana and elsewhere that this is about Washington and billions of dollars and rich people on Wall Street.

Anderson, you heard the president talking about banks in your community, factories and jobs in your community. Well, we'll check in around here all day tomorrow to see if the president made any impact or whether that big pow-wow at the White House tomorrow featuring the presidential candidates sways the voters that maybe they should get behind this plan.

We'll have a little bit more on that, maybe tomorrow.

COOPER: All right. We'll definitely have that tomorrow. Coming up, though, John's going to map out how this is playing out in some key battleground states. New polling numbers state by state, which shows which candidate has the edge on the economy issue.

Also, Sarah Palin actually gave another interview today to Katie Couric. We'll play you some of it. How did she respond to questions Katie Couric asked about connections between John McCain's campaign manager and Fannie Mae and Freddie Mac. Well, judge for yourself.

We'll be right back.

(COMMERCIAL BREAK)

COOPER: 360 electoral map showing states projected for McCain colored in red, leaning toward McCain light red. Projected states for Obama are blue. Light blue leaning Obama's way. And yellow are the toss-up states. I find it a very confusing Electoral College map, but I seem to be the minority.

Thankfully, we have people who are much smarter who can explain it to us.

You see Obama now is forecast as leading with 223 electoral votes of 270 needed to take the White House. McCain there with 200. Still, the tossup category, 115 electoral votes.

Those smarter people I referenced are, of course, John King and Candy Crowley, who are joining me to dig deeper into these new numbers. John, what is the latest in the key battleground states? What are the number showing?

KING: Well, Anderson, we have new numbers in five battleground states. Let's go through them in order, starting with Colorado. This one is now Barack Obama 51 percent, McCain 45 percent. That's an improvement. Just last month we had this one, McCain 49, Obama 44. So encouraging for the Obama campaign in Colorado.

Let's move on to Michigan, a huge industrial battleground. Fifty-one percent now for Barack Obama among likely voters, 44 percent for John McCain. You see if you look at the numbers from just a couple of weeks ago, a little bit of improvement there for Barack Obama in the key state of Michigan. Obviously, one of the big economic battlegrounds.

Pennsylvania, another state Republicans have to try hard, and McCain is trying hard in but has gone Democrat for quite some time. Obama above the 50 percent mark in our new poll there, 52 percent Barack Obama, 43 percent John McCain. Again, these are likely voters. And you compare that to just a few weeks ago in August, about a month ago. We see Barack Obama has stretched his lead a bit there, as well.

Now, two other states where John McCain has the advantage, where I am tonight in the state of Montana: 54 percent for McCain, 43 percent for Obama. Obama is fighting hard here. His forces insist it's a little closer than that.

And in West Virginia, a state that used to be reliably Democratic but in 2000 helped make Georgia Bush president. John McCain at 50 percent, Barack Obama at 46 percent.

So a bit of an edge there for Obama, Anderson, especially in those big industrial battlegrounds. But all of these polls still very, very close, heading into the final 40 days.

COOPER: Candy, do -- behind the scenes do people in Obama's campaign believe that, you know, John McCain saw those numbers, saw momentum shift toward Obama on the economy, and decided to kind of throw a Hail Mary pass today by coming up with this idea of suspending the campaign going back to Washington and saying there should be a debate?

CANDY CROWLEY, CNN CORRESPONDENT: I haven't -- haven't heard the Hail Mary term. But they really -- you know, obviously are pushing the notion that John McCain did this to try and grab the edge and to try to change the headlines. Because the headlines are, as John just reported, that he's losing some ground, McCain, in those battleground states, that the Gallup poll is down a little.

The Obama campaign traces this back to the economy. They say that they see an increase in the leadership quality when you ask who is to lead the U.S. in an economic crisis. They see an increase for Obama.

So they think this is McCain's way of trying to turn the tables and show leadership. But in truth, they both need to show leadership.

COOPER: Sarah Palin was asked about McCain's campaign manager and whether he received payments from mortgage giant Freddie Mac and if that's a problem. Here's what she said to Katie Couric.

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN (R-AK), VICE-PRESIDENTIAL NOMINEE: My understanding is Rick Davis recused himself from the dealings in that firm, I don't know how long ago, a year or two ago, and that he's not benefiting from that. And, you know, I would hope that that's the case.

KATIE COURIC, ANCHOR, CBS NEWS: But he still has a stake in the company. So isn't that a conflict of interest?

PALIN: Again, my understanding is that he recused himself from the dealings with Freddie and Fannie, any lobbying efforts on his part there, and I would hope that that's the case.

Because, as John McCain has been saying and as I've been, on a much more local level, been also rallying against is the undue influence of lobbyists in public policy decisions being made.

(END VIDEO CLIP)

COOPER: Candy, are there more plans for more interviews? Do we know?

CROWLEY: I don't know. But obviously, they are putting her out there in very specialized formats and gradually they will. Look, we have a debate coming up, a vice-presidential debate.

COOPER: Well, who knows? Maybe not.

CROWLEY: That clearly will put her in the -- well, so far there's one on the schedule. I'm sure it will go forward. And so we certainly will see her there. But gradually, they are having to put her out there. There's a lot of pressure.

COOPER: John, I'm told we're out of time. But do you think the debate is going to happen on Friday?

KING: I think the debate will happen on Friday unless the negotiations in Washington break down in the next couple days.

Now, the point Sarah Palin was just talking about, both campaigns are trying to say, "Aha, you have lobbyists around you," Anderson. In all of my travels, especially in the last few days, nobody brings this up. They care about the economy, period.

COOPER: Yes. No doubt about that. John King, thank you.

Candy Crowley, thanks.

"The Shot" is next. High school stunts sending a gorilla and a banana to jail. We'll have the video on that. I'm not sure why.

And at the top of the hour, breaking news. McCain's time-out -- his time-out putting his campaign on hold, asking to postpone Friday's debate. The fallout from McCain, Obama and you. That's ahead.

(COMMERCIAL BREAK)

COOPER: Erica, let's check out tonight's "Shot." We got it from YouTube. It's one of those wacky high school pranks. Funny on so many levels. You see it's a couple of kids dressed in a gorilla suit and a banana. See, and they took to the field at the football game. See, the banana is chasing the gorilla. The comic genius, these kids.

HILL: It's insane, I tell you. But here's the funny part.

COOPER: Right.

HILL: Or the ridiculous part.

COOPER: Right.

HILL: School officials didn't find it funny.

COOPER: Not funny at all. They weren't amused. The assistant principal jumped over the fence, nabbed the two of them. They were arrested and sentenced to 20 years in prison.

HILL: Arrested?

COOPER: I'm kidding, I'm kidding. But they were arrested, and they spent 16 hours in jail.

HILL: They weren't flashing people. Come on. There was no streaking involved.

COOPER: The charges were eventually dropped, however. Coming up -- that will teach those whippersnappers.

Coming up at the top of the hour, John McCain's bombshell. Suspending his campaign. He wants to delay the first presidential debate. All the "Raw Politics" ahead. Breaking news on 360.

(COMMERCIAL BREAK)