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ANDERSON COOPER 360 DEGREES

Federal Bailout Deal Threatened; Nation's Largest S&L Fails

Aired September 25, 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, serious news on a number of fronts, from Washington, to Wall Street, to Main Street.
Right now, negotiations are under way on Capitol Hill -- the meeting may have just ended -- because the administration's bailout deal stalled this afternoon. It happened at an emergency economic meeting at the White House. The meeting broke down in a big way, as conservative Republicans threw an alternate rescue plan on the table and dug in their heels.

John McCain and Barack Obama were in the room, along with President Bush and leaders from both parties. We're told Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke were just in meetings with key Democrats and Republicans.

Chris Dodd is now talking. He says it is not over, but we're getting there.

Let's briefly listen in.

(JOINED IN PROGRESS)

SEN. CHRISTOPHER DODD (D), CONNECTICUT: ... we had this morning.

So, we're getting there. But I would just tell you ahead of time the president has got to go to work here. We are not going to come to a conclusion on a three-legged stool here, missing the fourth leg. And I know my colleagues are not going to go on up and vote on something with awareness that the House Republicans aren't participating.

So, we will continue working at this. But let this be a clear warning. The president and his party have got to decide whether or not they want to be a part of this. The president laid out what he thought was a very grave situation to us in that White House meeting.

COOPER: That is happening right now. Clearly, the whole idea of bipartisanship seems to be out the window. So much for injecting presidential politics into all this.

We will have also details on the latest casualty on Wall Street. Washington Mutual, the largest savings and loan in history, has collapsed, seized earlier today -- seized -- by federal regulators, who then sold some of its assets to J.P. Morgan Chase. We will get to that and what it means.

But, first, the drama and "Raw Politics" at the White House today. It is your money, your vote.

CNN's Ed Henry was there.

(BEGIN VIDEOTAPE)

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT (voice-over): It was one of those days in Washington where things are not as they appear. Everybody starts out all smiles about the possibility of a bailout deal.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: And we know we've got to get something done as quickly as possible. And this meeting is an attempt to over the process forward. My hope is that we can reach an agreement very shortly.

HENRY: But, when the cameras left...

BUSH: Thank you very much.

HENRY: ... the optimistic predictions of an agreement turn out to be just that, optimistic. As a crush of cameras waited outside for a deal, sources inside the room say the meeting got ugly.

A senior Republican said, it was pointed. A Democrat called it very contentious. The meeting blew up when House Republican Leader John Boehner, facing angry opposition to the bailout from fellow conservatives, floated a plan to force companies with bad debt to buy insurance, instead of sticking taxpayers with the whole tab.

Barack Obama pressed Boehner for details, and Democrats say he didn't get enough. Then, Obama asked Treasury Secretary Henry Paulson for his thoughts on the Republican plan. Paulson suggested, it was unworkable.

SEN. RICHARD SHELBY (R), ALABAMA: No agreement.

HENRY: Republican Richard Shelby stormed out early and delivered a preplanned attack.

SHELBY: We hadn't gotten an agreement. There's still a lot of different opinions. Mine is, it's flawed from the beginning.

HENRY: The meeting ended with passing motorcades, but no deal. Back on the Hill, Boehner tried to rally support among Republicans, and Democrats vowed to keep at it.

REP. STENY HOYER (D-MD), MAJORITY LEADER: Members of Congress are going to e prepared to stay here Saturday, Sunday, next week, the week after, if that's necessary.

HENRY: A lame duck president who said bringing the two presidential nominees weeks for a rare joint appearance just weeks before the election might solve the crisis now finds himself with few options.

And John McCain is showing no signs of bailing the president out. Republican and Democratic sources say McCain stayed fairly quiet during the White House meeting, leaving lawmakers of both parties guessing about where he really stands.

Still, Republicans are standing behind McCain's decision to suspend his campaign and return to Washington.

ALEX CASTELLANOS, CNN POLITICAL CONTRIBUTOR: It ended up that Barack Obama agreed he would return to Washington today, too. So, yes, this is -- clearly, McCain is the underdog in this campaign. And, clearly, he has to take risks to win.

HENRY: But Democrats say McCain's move only further injected presidential politics into the crisis.

DONNA BRAZILE, CNN POLITICAL ANALYST: John McCain did not come in to save the day. Instead, he may have come in and ruined the deal that was already on the table.

(END VIDEOTAPE)

COOPER: What was so stunning to many today is that, early this afternoon -- actually, Ed joins us now.

Ed, where does this thing stand now? Do we know?

HENRY: Well, the bottom line is that there is no deal. There's not much of a hope of a deal. And a president here is running out of options to try to push fellow Republicans along.

I remember a time earlier in this administration the president could practically snap his fingers and get what he wanted from Republicans on the Hill. Instead, the last few days, he sent Vice President Cheney up to the Hill to try to twist arms. That didn't work. The president had a nationally televised address last night in prime time. That apparently didn't work.

Then he has this meeting today. That's not working. They're running out of options, Anderson.

COOPER: All right, Ed Henry, thanks.

What was so stunning, as I said earlier, to so many this afternoon is that both members of both parties, key members of both parties announced that they actually had a deal. And, then, just hours later, that message was revised, no deal. Again, the meeting seems to be still going on. We just saw a statement from Chris Dodd earlier, who said that they're still moving forward.

They're talking about your money, your vote.

Tom Foreman takes a look.

(BEGIN VIDEOTAPE)

TOM FOREMAN, CNN CORRESPONDENT (voice-over): After days of wrangling and warnings of looming disaster, a breakthrough: key congressional Democrats and Republicans side by side saying the bailout looks like a go.

REP. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE: Everybody knows that we must intervene. And so we will act, and we will act deliberate -- deliberatively and in a bipartisan way, and soon.

SEN. ROBERT BENNETT (R), UTAH: I now expect we will indeed have a plan that can pass the House, pass the Senate, be signed by the president, and bring a sense of certainty to this crisis.

FOREMAN: Congress wants substantial changes to the original $700 billion plan from the White House. And President Bush and Treasury Secretary Henry Paulson seem willing to go along, among the modifications, splitting up the money. Initial authorization would be given for up to $350 billion to buy up bad debts from the marketplace, and $350 billion more could be added if necessary, with congressional approval.

Congress would get bipartisan oversight. The government would get actual shares in the companies that benefit from the money. And the deal would limit pay for the CEOs of those firms, no golden parachutes.

(on camera): But the tentative agreement had barely been announced when cracks began appearing in the seemingly united congressional front, specifically, from a splinter group of Republicans.

(voice-over): Faced with what they characterize as an avalanche of public complaints, they want to beef up existing federal programs, urge more private investors to buy up those bad debts, and leave taxpayers out of it.

Powerful Senator Richard Shelby of Alabama showed up waving notes from dozens of economists, saying:

SHELBY: The Paulson plan is a bad plan. It will not solve problems. It will create more problems.

FOREMAN: None of that means the deal is dead, but it is clearly not yet done either. And, after that contentious meeting at the White House, the headline from presidential adviser Ed Gillespie is just what it has been.

ED GILLESPIE, COUNSELOR TO PRESIDENT BUSH: We're getting closer.

FOREMAN: Tom Foreman, CNN, Washington.

(END VIDEOTAPE)

COOPER: Well, the deal is not dead, as Tom said, but it's not done, although the meeting about it tonight apparently is done. We have just learned that. That's breaking news.

Let's dig deeper with CNN's Jessica Yellin, who is on Capitol Hill.

Do we know what came out of the meeting?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Well, we know that division came out of this meeting, Anderson.

One of the biggest signs that the House Republicans are still far apart from everyone else on this is that the person they designated to go into this meeting tonight was somebody they have already called essentially a lame duck, somebody who does not speak for the House Republican conference.

And I spoke to some top aides for the House Republican side in the House. They say he was just there to observe and report back on what happened. So, there was nobody actually negotiating on behalf of the House Republicans in this meeting tonight.

And you heard Dodd come out there. The Democrats are accusing the House Republicans of failing to cooperate, not trying to make progress, really stalling this thing even further.

COOPER: So, what happened earlier today? John McCain met with House Republicans before this meeting at the White House. Do we know what -- what was said? I mean, how much does John McCain have to do with this seeming tack or change or refusal by House Republicans to go along with the plan.

YELLIN: There was always a strong and significant group of House Republicans that has been opposed to this plan. And they take issue with a number of things you heard John -- Ed -- Ed -- sorry, Tom Foreman just outline there.

Essentially, they don't like that the taxpayers are funding all of this. They say they were going to oppose this all along. They presented to John McCain one of the alternatives they would like to see enacted. And John McCain -- by all sides agrees, John McCain did not sign on to the House Republicans' ideas. He listened.

So, the House is saying, essentially, this was always a problem, and the Democrats were trying to rush forward toward a deal, so they could say they had a deal before McCain got here. Of course, Democrats see it entirely differently. They say John McCain came, he injected politics into it, and it derailed the thing.

It depends how you come at this.

COOPER: Chris Dodd has just said that there's going to be a meeting tomorrow. At 11:30, negotiations resume. Is there -- I mean, is there a timetable for this? Is just open-ended? Is there a sense that -- do we know how close they may be?

YELLIN: It's one of these situations where we see no likely end in sight, and, yet, all sides say they want something done by the time markets open Monday morning.

What one of the things the could be a deal solution -- a solution here is that the White House could sit down with the House Republicans and try to come to terms with some sort of negotiation that both of them are happy with, the administration and the House Republicans. And then they, together, could take that back to the Democrats tomorrow and say, how about this proposal?

That can move things forward tomorrow. Maybe you would see a bill written Saturday, something that they could say, here's the form of a deal by Monday morning, so the markets don't go bonkers, when the markets open Monday. They need to have something -- something agreed to by Monday.

COOPER: All right.

Jessica Yellin, thanks. We are going to be blogging throughout the hour, Erica and I. You can join the conversation at AC360.com. And, also, check out Erica Hill's live Webcast during the break. You can go to the Web site AC360.com and click to the link. That's already begun.

Just ahead, though, the McCain campaign has headed to Washington, but Sarah Palin was out in public today, at ground zero in New York. And she took questions from the press corps for the first time. Take a look.

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL NOMINEE: I do agree with taking the fight to the terrorists and stopping them over there.

(END VIDEO CLIP)

COOPER: What she said when asked if she supports President Bush's war on terrorism. It wasn't all she said. Her interview with Katie Couric is raising eyebrows. We will play you some of what she said.

Also, more bloodshed on Wall Street today. Washington Mutual, the nation's largest savings and loan, has collapsed, seized by federal regulators, some of its assets sold to J.P. Morgan Chase -- what this grim news means from Wall Street to Main Street.

And more behind the scenes -- what really went on in Washington today. We will be right back.

(COMMERCIAL BREAK)

COOPER: Breaking news tonight on many different fronts all throughout this hour. There's the bailout plan on the verge of possibly falling apart, although negotiations do continue. They're going to continue tomorrow at 11:30 a.m.

Now another huge financial story, it is grim. This happening just a short time ago. Washington Mutual, the nation's largest savings and loan bank, has failed. Its deposits have been bought out by J.P. Morgan Chase.

Let's get the latest on the -- the Washington Mutual collapse from senior business correspondent Ali Velshi. What does this mean, Ali?

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Anderson, this is the biggest bank failure in the history of the world.

Washington Mutual, which was the largest savings and loan in the country, was trying to find a buyer. But this credit crisis has made it impossible for this company to raise money. So, late this afternoon, its credit rating was downgraded again. It was not going to get a buyer. It was closed by the Office of Thrift Supervision, taken over by the Federal Deposit Insurance Corporation, and instantly sold -- or at least its assets were sold to J.P. Morgan Chase.

The good news, nobody loses money on this, unless you were a shareholder. Take a look at the shares of Washington Mutual over the last year. It doesn't look unlike some other financial companies. If you are a shareholder, you get virtually nothing back.

But, tonight, if you own -- if you have money in Washington Mutual, your money is safe. This is not even the $100,000 limit that the FDIC has. Your money is entirely safe. It will be seamless. Your account number will not change.

J.P. Morgan Chase is now your banker. And everything will go on, according to the FDIC, seamlessly. But it is the largest failure of a bank in history, Anderson.

COOPER: Wow. Scary stuff.

Ali, we're going to talk to you more later on in the hour, because there's so much breaking news to get to.

Washington Mutual's demise comes as the financial bailout plan was thrown into chaos today, as we showed you before the break, lawmakers on Capitol Hill fighting over which deal would work better to save the economy, or if there should be any deal right now. And all that talk of putting politics aside, forget about it. Democrats, Republicans are offering up proposals and counterproposals.

Let's have a "Strategy Session."

Joining us, CNN senior political contributor, Republican strategist Ed Rollins, CNN political contributor and Democratic strategist Paul Begala, and CNN senior analyst -- senior political analyst Gloria Borger.

Gloria, what do you make of this?

(LAUGHTER)

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: I think it's insane, honestly, Anderson. I have never seen anything like this.

COOPER: Did it help to have John McCain and Barack Obama go to Washington today?

BORGER: No, I don't think it -- I don't think it necessarily did.

I mean, in the end, once McCain went, and the White House meeting occurred, you have to have both of them there. But we have been reporting all day on CNN that this was a very contentious meeting, a lot of tension in the room.

And, really, what was so interesting to me is that the folks who have thrown a grenade into this are the House Republicans, conservative House Republicans. They don't have any use for George W. Bush. He's at 28 percent in the polls. Historically, they don't have much use for John McCain either. They have disagreed with him on every issue.

COOPER: I have got to break in.

Brianna Keilar is the phone with new details of what happened tonight at this meeting that just ended.

Brianna, what are you hearing?

BRIANNA KEILAR, CNN CORRESPONDENT: Well, we just heard from Representative Barney Frank and from Senator Christopher Dodd. They said they made some good progress on some points.

But Christopher Dodd said, we are not going to come to a conclusion on a three-legged stool without the fourth leg. He said, this is the first time that they were presented -- this is what Barney Frank said, actually -- the first time they were presented with a paper plan, a plan on paper, from House Republicans, who have obviously been the ones who are not seeing eye to eye with the other parties in this.

And he said, though, that it included a mortgage insurance plan that Secretary Paulson says will not work, and it includes cutting the capital gains tax. Obviously, they were rejecting that proposal.

And we also heard from Senator Judd Gregg, who's really taken over negotiations for Republicans in the Senate. He said that he did make a little progress, but it is not over yet. We're focusing on things that we talked about this morning, so we can move on from that.

We're hearing, Anderson, there's going to be another meeting at 11:30 a.m. tomorrow. And it's going to include Senate Republicans, House Democrats, and Senate Democrats, but we're not expecting House Republicans to be at that meeting, Anderson.

COOPER: Brianna, thank you much.

Ed Rollins, if House Republicans are not in that meeting, what's the point of that meeting?

ED ROLLINS, CNN SENIOR POLITICAL CONTRIBUTOR: If they're not in the meeting, it's not going to happen.

I mean, the bottom line is that this is a four-legged stool. The House Republicans are a different breed. And... COOPER: What is going on with them? What is happening?

ROLLINS: Well, my sense is, they feel that Bush had led them down -- astray, that he's gone in 116 days. They don't care about anybody in the Treasury Department. They have no relationship there.

COOPER: Do they care about anything else -- and I include Democratic congressmen in this as well -- anybody but getting reelected? They're all up for reelected.

ROLLINS: They're all going to get reelected. They're all in safe districts. The ones who are going to lose seats are going to be open seats. Maybe one or two of them lose.

At the end of the day, there's a lot of people thinking about, how do we rebuild the party? And do we want to rebuild this party with John McCain, who is always kind of questionable on the basic facts of fiscal control, all the rest of it, immigration? And I think, to a certain extent, this 110, 115 members of this study group are saying, here's the time to draw the line in the sand.

COOPER: It is pretty scary stuff, though. They're thinking about party right now, not country? Is that what you're thinking?

ROLLINS: I think they're thinking about -- yes, they're thinking about themselves.

I think they don't think the threat is quite as great as a lot of other people do.

COOPER: Paul, your take?

PAUL BEGALA, CNN POLITICAL ANALYST: Well, there's always this sort of do-the-right-thing gene in the Democratic Party. And it's frustrating a lot of analysts on my side, because Democrats very much view this as Bush's problem, right? This is -- this is a set of policies that he and his party put in place.

COOPER: Are you -- wait -- are you claiming that there's no politics involved for the Democrats on this?

BEGALA: No, no.

(CROSSTALK)

BEGALA: But I'm saying is, why -- why are they rushing to bail out Bush, to support Bush's very unpopular bailout plan?

I think it's because they have been persuaded, those who are for it, that this is the right thing to do for the country, quite honestly, right? The House Republicans, let's give them their due. This may not be just party. They may be ideology, but it's an ideology that say this. This is their solution. Cut regulations, fewer regulations on investors and less taxes on wealthy investors.

Now, a lot of people think that's what got us into the mess, is that we let these financial institutions run wild with no regulation, and that we had excessive tax cuts that -- that actually benefited investors, but not citizens, right, not consumers.

So, they're just like -- it is like the captain of the Titanic saying we need more icebergs, you know?

BORGER: But, you know, this bailout, the way it was initially proposed, became increasingly unpopular with the American public.

COOPER: Hugely unpopular.

BORGER: Because it had no oversight in it, something that they're -- that they're correcting. It didn't have the -- the CEO pay limits in it. It didn't have a lot of things that Americans -- that Americans sort of wonder about, well, if I'm giving these folks money, why don't I get any return on my investment?

Those are the kinds of things that they have been talking about. But, then, you have this other group. And I believe it's ideological, actually.

COOPER: Do you think it did any good to have John McCain go down there and to have Barack Obama...

(CROSSTALK)

BORGER: No.

ROLLINS: No, absolutely not. I think it...

(CROSSTALK)

COOPER: Do you think it helped John McCain's campaign?

ROLLINS: No, absolutely not.

And I would have said this ahead of the meeting. I think the bottom line is that, because this has happened in two weeks -- these people represent Middle America. At least they think they do. And three weeks ago, four weeks ago, they weren't about Wall Street. They weren't about -- they were about small-town America, worried about different things.

Now, all of a sudden, the world is coming to an end. The president gave -- I have been around this business 40 years -- the president gave the most doom-and-gloom speech I have ever heard in my life last night. If everybody didn't rush to their bank and pull their money out today, I would be shocked.

And so, all of a sudden, they're getting bombarded by little people out there, saying, what is this? Stick up for me.

(CROSSTALK)

COOPER: I have got to tell you, watching the president last night give that speech, it was like watching him in Jackson Square in New Orleans after Hurricane Katrina. I mean, he did not seem to be there.

ROLLINS: No, he wasn't there.

(CROSSTALK)

COOPER: I mean, he was physically there, but I...

ROLLINS: No. It was not -- it was not his words.

BEGALA: He's a -- he's a...

(CROSSTALK)

BEGALA: I'm going to get in trouble. He is a high-functioning moron, and that is what Congress treats him as, both parties. They didn't pay any attention to him today. They had a huge fight in the Cabinet Room.

ROLLINS: The Cabinet Room.

BEGALA: The president is not directing this. He sent Paulson out, who I don't know, but people say he's an able person.

ROLLINS: And the Congress doesn't know. That's the other part.

BEGALA: They have no respect for him.

BORGER: And Congress doesn't know Paulson very well.

COOPER: Well, I mean, why should the American people have any confidence in any of these people, who -- I mean, their pockets were being lined by Fannie Mae and Freddie Mac for years, when they were supposed to be the ones having oversight. It turned out they had no sight. I mean, it wasn't oversight. It was no sight.

BORGER: But I think that's one of the reasons that John McCain decided to make this tactical move and go back to Washington, because he saw himself as somebody who could tap into that mistrust of government, and also say, look, I can work with both sides, and I can work this out, and I will rescue Washington.

ROLLINS: He has always been -- he has always been able to work with the other side. The bottom line...

(LAUGHTER)

(CROSSTALK)

COOPER: ... working with the Republicans.

(CROSSTALK)

ROLLINS: The bottom line about John McCain is, John McCain has always gone to the other side, gone to Kennedy to put the health care, gone to Feingold to put together campaign -- he's never bought his team, and he's never bought the House Republicans. COOPER: I have got to move on.

But, very quickly, is there going to be a debate tomorrow night, do you think?

BEGALA: I think yes.

COOPER: But will John McCain be part of that debate?

BEGALA: Look, we were saying this through the break. I think, if McCain refuses to go Ole Miss, why doesn't Barack go to the floor of the Senate and say, you know, this is not a bad place to have a debate, John; stand up, you and me; we don't need a moderator; let's go; two hours, talk about the economy?

ROLLINS: I think Barack Obama is going to go to Mississippi tomorrow night, and I think he's going to have a one-on-one town hall meeting with -- with the -- and the cable stations will cover it, and he will 30, 40 million people watching him.

COOPER: Fascinating stuff.

It's a an incredible day. Just one day after another, it just keeps -- keeps going on.

Paul Begala, Ed Rollins, thanks, and Gloria Borger.

(CROSSTALK)

COOPER: Coming up: what really happened behind the scenes when Obama and McCain went to Washington today, the latest details ahead.

And the interview everyone is talking about, Sarah Palin talking to Katie Couric. You have got to kind of see it to believe it. We will be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER: We don't need presidential politics involved in this. John McCain has not voted in the Senate since some time last April. And I say very sincerely he has done nothing since he's been here the last few hours to help this process.

(END VIDEO CLIP)

COOPER: We should also point out, as we did last night, Barack Obama has also not voted in the Senate in quite some time. I think he's missed -- he's the third on the list of most votes missed. John McCain is first.

Democrat Harry Reid after the meeting at the White House ended -- the Democrats accusing McCain of injecting presidential politics into tense negotiations. Those talks have just ended on Capitol Hill. As we have been reporting throughout this hour, they're going to resume tomorrow morning, although without House Republican.

Senator John McCain and Obama will stay in Washington tonight, Obama still planning to be in Mississippi for the debate tomorrow. It remains to be seen what McCain will do.

We have a new CNN poll of polls to tell you about released tonight. It has Barack Obama leading McCain by four points, 47 percent to 43 percent, McCain clearly hoping his return to Washington is going to be seen as a sign of strong leadership.

But even Republicans are calling it a huge gamble. You heard Ed Rollins talking about it just a moment ago.

Let's take you behind the scenes, what John McCain actually did today in D.C.

On the trail, here's Dana Bash.

(BEGIN VIDEOTAPE)

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT (voice-over): It was just after noon when the campaign trail arrived on Capitol Hill, John McCain back in his Senate office greeted by his independent friend Joe Lieberman, but the McCain who used to talk to reporters in the hallways didn't show up.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: I am not (OFF- MIKE)

UNIDENTIFIED FEMALE: OK.

MCCAIN: Thank you very much. I appreciate it.

UNIDENTIFIED FEMALE: Not one question, sir?

BASH: McCain said he returned to help jump-start stalled talks over a bailout package before a total economic collapse.

But, as he arrived, congressional negotiations he was not involved in were wrapping up elsewhere in the Capitol, and his fellow Republicans were declaring a tentative agreement.

SEN. ROBERT BENNETT (R), UTAH: We will, indeed, have a plan that can pass the House, pass the Senate, be signed by the president, and bring a sense of certainty to this crisis.

BASH: But McCain had a different mission. He got on the underground subway and headed to the House to talk to Republicans there still not sold on the bailout deal.

GOP sources say McCain, House Republican Leader John Boehner and others discussed ways to make the measure more appealing to rank-and- file House Republicans, who do not think it is the government's role to bail out Wall Street.

Soon, he was racing back across the Capitol, stopping for nothing, not even cheering tourists surprised to see him. McCain said he suspended his official campaign to come back here. That meant trying to pull TV ads, though some did run, and no fund-raising. And the campaign stopped sending reporters the usual flurry of e-mails, not even after Joe Biden attacked McCain.

SEN. JOSEPH BIDEN (D-DE), VICE PRESIDENTIAL NOMINEE: Where was John a week ago? Where was John a month ago? Where was John five years ago?

BASH: But campaign aides were at work around the country. Some accompanied McCain to Capitol Hill. Reaction to McCain's return was passionate and sharply divided. House Republicans frustrated with the bailout called him a huge help to their cause.

REP. MIKE PENCE (R), INDIANA: If you look at the record of John McCain, it's a consistent record of free market economics, limited government, and fiscal discipline. His presence here gives us confidence that those ideals are at the table, are going to be demanded in this process.

BASH: Democrats, an unhelpful stunt.

SEN. CHARLES SCHUMER (D), NEW YORK: We believe he's impeding the negotiations. I think it's all theater. House Republicans say they're not for the plan now.

BASH: McCain insists he's just trying to show leadership in crisis. And, for all the accusations and motivations, one thing is clear. Inserting himself is another giant McCain gamble.

(END VIDEOTAPE)

COOPER: No doubt about that.

Dana, you're working your sources. What is John McCain's position now?

BASH: Well, his official position is that he doesn't have a position. And that is on purpose. He has people up here, even up until this late hour, his economic adviser, some of his colleagues who he's very close with here in the Senate, trying to sort of get a sense for him of how things are going.

But they also say that he understands, they understand how politically dicey this is and that, if he says, I'm for A, B and C publicly, then it will be seen as A, B and C, if other people sign onto those -- those provisions, for example, it will be seen as doing John McCain's bidding. So, he's being very careful, except to essentially say that he wants this to be done, and he wants it to be done with taxpayer -- in a way that really helps taxpayers.

There are some discussions. They're going on very quietly with some of his colleagues here, some people who are very close to him, about trying to find a way to get House Republicans and the White House and some people over in the Senate together. But it is very -- they're being very careful for him not to say his position publicly right now.

COOPER: All right, Dana Bash, appreciate your reporting.

Sarah Palin was at ground zero today.

And, by the way, in a moment, we're going to show you Barack Obama's day in Washington. We want to show you both sides here, let you make up your own mind about what's going and how you interpret it.

Sarah Palin was here in New York outside a firehouse down at ground zero. For the first time ever, she actually took questions from a group of reporters.

The big story, however, was her sit-down interview with Katie Couric, only her third one-on-one interview. In the past, Palin has said that Alaska's proximity to Russia adds to her foreign policy credentials.

Couric asked her if she had ever been involved in any negotiations with Russia. And here's part of Palin's response.

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN (R-AK), VICE-PRESIDENTIAL NOMINEE: And we have trade missions back and forth. We -- it's very important when you consider even national security issues with Russia, as Putin rears his head and comes into the airspace of the United States of America, where do they go? It's Alaska. It's just right over the border.

It is from Alaska that we send those out to make sure that an eye is being kept on this very powerful nation, Russia, because they are right there. They are right next to -- to our state.

(END VIDEO CLIP)

COOPER: That's just part of her answer. We're going to play the complete exchange later in the program. And it's definitely worth sticking around for.

Up next, we'll have more on Sarah Palin and her interview with Katie Couric. We'll play you the most important moments when the program returns.

Also, Barack Obama's day in D.C., behind the scenes. What really went on and the latest in the political cliff-hanger over the debates. Are they going to happen? Candy Crowley is on the trail.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: It's difficult to act both quickly and wisely, but that's what's required right now. Time is short, and doing nothing is not an option.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: What we should be doing is talking about what we expect to do in order to lead the country down the long-term path of economic growth. Because families were having trouble even before this Wall Street crisis hit.

(END VIDEO CLIP)

COOPER: Obama and McCain today on the economic bailout proposal.

More on our breaking news. Negotiations have just ended on Capitol Hill. As we told you, they will resume tomorrow morning at 11:30 Eastern, though right now congressional House Republicans are not supposed to be part of that meeting.

A moment ago, we looked at John McCain's huge political gamble, riding the line between acting presidential and acting out of purely political stunt. Now, Obama's very different, you might say softer approach, whether it's effective or not, you can be the judge.

On the trail, here's CNN's Candy Crowley.

(BEGIN VIDEOTAPE)

CANDY CROWLEY, CNN CORRESPONDENT (voice-over): It's about leadership. John McCain's urgent hard-charging effort to look like he's taking control, up against Barack Obama's effort to look cool and in control, above the fray.

OBAMA: Right now, there has to be a sense of urgency on the part of everybody, because this is putting jobs at risk, economic growth at risk, small businesses at risk, the financial markets and people's retirement accounts over time, potentially, at risk. So we've got to move rapidly.

CROWLEY: Fresh off that big White House meeting, Obama did not directly accuse McCain of mucking up a tentative bailout plan. He is more nuanced than that.

OBAMA: What I've found, and I think was confirmed today, is that when you inject presidential politics into delicate negotiations, it's not necessarily as helpful as it needs to be. Just because there's a lot of glare of the spotlight, there's the potential for posturing or suspicions.

CROWLEY: Obama can afford to stay cool while Washington heats up. He has plenty of help from his Capitol Hill surrogates, who have been tearing into McCain for him.

SEN. HARRY REID (D-NV), MAJORITY LEADER: I would suggest anyone at that meeting that tried to understand what John McCain said at the meeting couldn't. He was the last person to speak at the meeting, talked for a couple of minutes, and really didn't say anything substantive.

REP. BARNEY FRANK (D), MASSACHUSETTS: I think this was a campaign point for Senator McCain.

CROWLEY: And while Obama talks about the bipartisan nature of his phone calls to Capitol Hill leadership and Secretary of the Treasury Henry Paulson, Obama's campaign has spent a day and a half blasting McCain for trying to change the story line away from his falling poll numbers and rising criticism of Sarah Palin.

The latest is a memo from an Obama spokesman saying McCain's suspension of his campaign is a hoax, that McCain and his aides are campaigning during this so-called suspension. McCain, the memo says, "just turned a national crisis into an occasion to promote his campaign."

For now, it is full speed ahead. Obama intends to fly to Mississippi tomorrow for the scheduled presidential debate while, he says, continuing to monitor the bailout negotiations. As he coolly explains, presidents need to show they can do more than one thing at a time.

(END VIDEOTAPE)

CROWLEY: So what if they gave a debate and only one of the candidates showed up? Well, it is true that, inside the Obama campaign, they actually believe that McCain will show up after all. If not, there is talk of perhaps a town-hall meeting. There is a report, at least, that isn't confirmed by the campaign, but rest assured, that they will make note of the fact that John McCain is not there if he doesn't show up -- Anderson.

COOPER: And I guess there was some concern there might be a vote, but since Democrats are in control on Congress, I guess they can postpone any vote for a few hours while -- if Obama is down in Mississippi.

CROWLEY: They certainly could, but never underestimate the power of an impending recess on Capitol Hill. They wanted to leave Friday to go home and campaign. So there is a certain urgency, not just to the crisis itself, but also to the political agendas of everybody up there.

COOPER: I'm shocked to hear that their political agendas might be on their minds.

Candy thanks.

Still ahead on 360, the latest on our other breaking news: the collapse and sale of Washington Mutual, the largest Savings & Loan in America: what it means to you, especially if you have money in Washington Mutual or a mortgage from them. We'll explain, ahead.

But first, Sarah Palin unscripted, talking about how living so close to Russia adds to her foreign policy experience. Her conversation with Katie Couric. We've got the "Raw Politics," ahead.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

PALIN: Here -- good to see these New Yorkers who are rebuilding not just this area, but helping to rebuild America. They're very, very inspiring and encouraging. These are the good Americans who are committed to peace and security, and it's been an absolute honor getting to meet these folks today.

(END VIDEO CLIP)

COOPER: Governor Sarah Palin outside a firehouse near Ground Zero. The first time she's ever responded to impromptu questions by reporters.

The vice-presidential candidate had a lot to say to CBS News' Katie Couric. Here's some of what Sarah Palin said, unscripted.

(BEGIN VIDEO CLIP)

COURIC: You've cited Alaska's proximity to Russia as part of your foreign policy experience. What did you mean by that?

PALIN: That Alaska has a very narrow maritime border between a foreign country, Russia, and on our other side, the land boundary that we have with Canada. It's funny that a comment like that was kind of made to, I don't know, you know, reporters.

COURIC: Mocked.

PALIN: Yes, mocked, I guess that's the word. Yes.

COURIC: Well, explain to me why that enhances your foreign policy credentials.

PALIN: Well, it certainly does, because our next-door neighbors are foreign countries. They're in the state that I am the executive of. And...

COURIC: Have you ever been involved with any negotiations, for example, with the Russians?

PALIN: We have trade missions back and forth. It's very important when you consider even national security issues with Russia, as Putin rears his head and comes into the airspace of the United States of America, where do they go? It's Alaska. It's just right over the border.

It is from Alaska that we send those out to make sure that an eye is being kept on this very powerful nation, Russia, because they are right there. They are right next to -- to our state.

(END VIDEO CLIP)

COOPER: Let's go deep on this. CNN political analyst, Gloria Borger, is here. CNN senior political contributor and Republican strategist, Ed Rollins. And CNN political contributor and Democratic strategist, Paul Begala.

Ed, what do you make of it? ED ROLLINS, CNN POLITICAL CONTRIBUTOR: You know, I think they've done a great disservice by sort of locking her down for 30 days. You sort of have got to work your way into this game. And -- and when you tell someone you can't see a reporter for 30 days and then all of a sudden, you're going to start with the biggest, the anchor, you know, it creates a lack of confidence.

And what you need to do with every candidate, is you sit down and say, "Here's the 150 questions you're going to get asked. Give me your answers, and we'll work on your answers." And then you put them out there. And they haven't put her out there for 30 days, and I think she obviously...

COOPER: For those who like her, too, you know, a lot of the details don't matter. But if they allowed her to be herself, it would probably work out better.

ROLLINS: This is the same -- I'm sorry for -- this was a very confident woman, the first presentation she made. She walked in the biggest crowd she ever had when Bush [SIC] announced her. The second was the convention. She had great confidence. She's lost her confidence.

GLORIA BORGER, CNN POLITICAL ANALYST: Totally.

COOPER: I mean, how do you think they use Sarah Palin? Do you think -- I mean, do you think it was -- clearly, you think it was a mistake. Do you think at this point the public has turned?

PAULA BEGALA, CNN POLITICAL CONTRIBUTOR: It's turning. The public opinion is turning. But just as a longtime campaign manager, I think Ed is exactly right.

Candidate confidence is one of the most important things, set aside my own ideology concerns for her. They undermined that confidence. You know, to use a sports analogy, it's like if a pitcher throws a bad game, or -- you know, you put him right back in. Right? You have to show the candidate that you have faith in him or her, in this case.

But they threw her right in with Katie Couric. A question that she'd been asked before, too, this whole thing. I can see the moon from my backyard, so I'm an astrophysicist. You know, this notion that somehow proximity to Russia, I mean, it is a silly thing. And she should have had a good answer, though, and she didn't. And that suggests that they're not building her confidence or briefing her the way they are.

BORGER: You don't know, first of all, that they haven't given her those 150 questions you're talking about. Because I think they must have before she did her interview with ABC News with Charlie Gibson.

But after that, they locked her away and they took away Sarah Palin. And -- and even she, judging by this interview, she doesn't know who Sarah Palin is or what she thinks either, anymore. And I think it doesn't help her, and it won't help her as she heads into a debate.

COOPER: We're going to show some more of the interview right after this break. Our panel will also still be here. We're going to talk about -- actually, we'll show you what Sarah Palin said about never second-guessing the state of Israel. We'll be right back.

(COMMERCIAL BREAK)

COOPER: We're back with our panel, talking about Sarah Palin's unscripted comments today. We're going to broaden out the discussion. Gloria Borger is here, Ed Rollins, and Paul Begala joining me again.

Palin was also asked about comments -- whether she thinks the U.S. should ever second-guess the state of Israel. Let's listen to her response.

(BEGIN VIDEO CLIP)

PALIN: We shouldn't second-guess the state, is Israel's security efforts, because we cannot ever afford to send a message that we would allow a second Holocaust, for one. Israel has got to have the opportunity and the ability to protect itself. They are our closest ally in the Mideast. We need them; they need us. And we shouldn't second-guess their effort.

COURIC: You don't think the United States is within its rights to express its position to Israel, and if that means second-guessing or discussing an option?

PALIN: No. We need to express our rights and our concerns and...

COURIC: You said never second-guess them.

PALIN: We don't have to second-guess what their efforts would be if they believe that it is their country and their allies, including us, all of our best interests to fight against a regime, especially Iran, who would seek to wipe them off the face of the earth.

It is obvious to me, who the good guys are in this one and who the bad guys are. The bad guys are the ones who say Israel is a stinking corpse and should be wiped off the face of the earth. That's not good guy who is saying that.

Now, one who would seek to protect the good guys in this, the leaders of Israel and her friends, her allies, including the United States, in my world, those are the good guys.

(END VIDEO CLIP)

COOPER: There's a lot of Democrats, especially on the Internet, who would suspect they want to try to eliminate a vice-presidential debate by moving Friday's debate to the vice-presidential debate slot. Do you think that's just kind of conspiracy theory?

ROLLINS: No. I think it's a conspiracy theory. I think -- I think you may lose one debate if McCain doesn't show up tomorrow night. But I think the bottom line is this one is too big. More people are interested in this debate, Biden versus her, then just about anything else.

COOPER: It's interesting, we were talking during the break, about how one's eye changes and how, you know, she energized -- I guess Sarah Palin energized the base, did, you know, by most people's accounts, did a remarkable job at the convention of getting people excited.

This week, had there been a Mitt Romney or someone else, a financial expert, that might have helped John McCain in a different way. You're saying Paul, and you guys were both agreeing, that McCain campaign thinks tactically, not strategically. What's the difference?

BEGALA: They want to just get through the day. They were heading into a convention where the other party, Obama's party, was very excited and energized. They love Barack Obama. Republicans pretty tepid in the base toward John McCain.

So what do they do? Plus, they wanted to get Hillary Clinton voters, "So they thought, she's a woman. She excites our base." And it worked for a day or two or a week or two. But it's too consequential a choice. You know, this -- this woman, Governor Palin, may very well be a one 72-year-old heartbeat away from the presidency. They haven't even thought through how she plays out for the election, much less...

COOPER: How much of their decision making, do you think, is John McCain -- is John McCain and the way he makes decisions?

BORGER: You know what? I think, as we were saying, it's always the candidate. It's always the candidate who runs the campaign. You run a campaign. Is it the candidate or is it you?

ROLLINS: It's the candidate. But -- but go ahead.

BORGER: I think it's the candidate. And John McCain is somebody who comes in a room and can really upset the applecart when he comes in a room and say, "I want to do this; I want to do that."

ROLLINS: What's very important -- and Paul and I have both managed campaigns. You're the lion tamer. You've got to -- you're there with a little dinky chair and the whip, and you've got to keep him performing, or her, the way that they need to perform. They can do the best, do the things -- that doesn't mean you put words in their mouth.

BORGER: But does McCain listen?

COOPER: How do they use Sarah -- how do they use Sarah Palin from here on in?

ROLLINS: Well, study the debate, and the rest of it, I think I'd do fundraisers. I'd have her go to the base. I wouldn't put her in a lot more interviews like this. And I think -- the one thing I'll say for her. She bought them two weeks in a campaign that they were struggling. That's a major, major contribution with the campaign.

BEGALA: There's another contribution. As a lot of people think McCain is not handling the economic crisis, well, she's a distraction, at least. Maybe a negative one, but anybody who dislikes her is already going to be against McCain. So she's a useful distraction.

COOPER: At this point, I wonder how much the American public is really paying attention to anything she says. And at this point, I mean, this economy, everyone is worried about that.

BORGER: And to be fair, Joe Biden has had his own series of gaffes.

COOPER: As we have covered on this program many times, especially this week, a lot of gaffes, indeed, particularly in the last couple of days.

Paul Begala, Ed Rollins, thanks very much. Gloria Borger, as well.

ROLLINS: Thank you.

COOPER: Up next, more on the late breaking news that banking giant Washington Mutual has failed. What it means for consumers. What it means for you if you have money at -- in Washington Mutual or perhaps a mortgage. It's maybe not as bad for you as you think. Ali Velshi will explain.

At the top of the hour, the bailout negotiations on Capitol Hill. The latest developments when 360 continues.

(COMMERCIAL BREAK)

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

ERICA HILL, CNN ANCHOR: Anderson, more on our breaking news. One of the nation's largest Savings & Loan banks has collapsed. Washington Mutual has been bought by JPMorgan Chase. This is the largest bank failure in history.

We are told all of WaMu's deposits are safe and that there will be no interruption in service. However, up to 10 percent of the bank's nearly 2,300 branches are expected to eventually close.

In Washington, the corruption trial of Alaska Senator Ted Stevens getting under way today. In opening statements, Stevens' lawyer said his client was clueless about the cost of the makeover to one of his homes.

The Republican lawmaker is accused of lying on Senate forms about more than a quarter of a million dollars in home renovations and gifts he received from the oil contractor. He is pleading not guilty. And Delta Airlines shareholders giving the green light to the company's purchase of Northwest Airlines. That deal, though, does still need approval from the Justice Department, Anderson.

COOPER: All right. Up next, "The Shot." I'm actually not sure what it is, but I'm told it's going to make me squirm.

HILL: Oh, yes.

COOPER: And at the top of the hour, a serious matter: the latest on the bailout battle at the White House. Plus, how the crisis is exploding on the campaign trail, despite pleas for bipartisan teamwork. So much for all that talk. We'll be right back.

(COMMERCIAL BREAK)

COOPER: Time now for "The Shot."

Erica, I understand you're going to handle tonight "Shot."

HILL: Oh, yes.

COOPER: I have not seen it; has me a little concerned and scared, though.

HILL: No. NO need to worry, Anderson Cooper. It's all good. It's funny.

COOPER: Oh, yes?

HILL: It's rather revealing, in many ways. Sharon Osborne you may know -- may know -- stopped by "The Ellen DeGeneres Show" yesterday. They played a little game which Ellen often plays with her guests. And we found this one particularly interesting.

COOPER: Uh-oh.

HILL: We couldn't resist some of the magic from yesterday. So take a look.

(BEGIN VIDEO CLIP)

ELLEN DEGENERES, TALK SHOW HOST: We're bringing -- we're going to play a game right now. I just wanted -- it's not even a game. I just want your thoughts.

SHARON OSBORNE, JUDGE, NBC'S "AMERICA'S GOT TALENT": OK. OK.

DEGENERES: I'm going to hold people up, and you're going to just tell me what you think about these people. All right?

OSBORNE: Do I know them?

DEGENERES: Yes. We all know them.

OSBORNE: OK. DEGENERES: Yes.

OSBORNE: OK.

(DEGENERES HOLDS UP A PICTURE OF ANDERSON COOPER)

OSBORNE: You see, I'd like to have sex with him.

DEGENERES: Wow!

(END VIDEO CLIP)

COOPER: Wow!

HILL: Yes.

COOPER: Wow.

HILL: She loves her some A.C.

(BEGIN VIDEO CLIP)

OSBORNE: I think he's so hot! And he's bright and smart and gorgeous.

DEGENERES: Yes. Yes. OK.

(DEGENERES HOLDS UP PICTURE OF PARIS HILTON)

(END VIDEO CLIP)

COOPER: OK. Wow.

HILL: The best part was She Who Must Not Be Named, she says she thought of feathers, light and airy.

COOPER: Really?

HILL: Yes.

COOPER: I really don't know how to respond to any of that.

HILL: We can just go to break.

COOPER: I don't have time for that.

Just ahead at the top of the hour -- what did you say?

HILL: We could just go to break.

COOPER: Yes, I think that's probably best.

At the top of the hour, the latest on tonight's breaking news.

I appreciate it, Sharon Osborne, though. Thank you. Sudden breakout down in talks over the bailout plan for Wall Street. What went wrong? Where do things stand now? The latest ahead. Stay tuned.