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THE SITUATION ROOM

No Agreement in Congress on Bailout

Aired September 25, 2008 - 17:00   ET

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


WOLF BLITZER, CNN ANCHOR: All right. There heard it. Senator Richard Shelby of Alabama making it clear he doesn't believe there's a deal. And he emerged from that meeting.
It's unclear if that meeting is still going on, whether he just left to go out and tell reporters what he wanted to tell them or whether they're -- that meeting is wrapping up. A pretty extraordinary development.

Let me go back to Donna Brazile and Bill Bennett.

Bill, you know Senator Shelby. He's a very serious guy.

What do you make of what we just heard from him?

BILL BENNETT, CNN POLITICAL CONTRIBUTOR: What I had said just before you broke, I said, you know, there are these papers going on around on the Hill. This is one of the papers -- 44 economists from the most prestigious universities saying no, in fact, it is not inevitable, that if you don't pass this that there will be a depression or a serious recession, that it may be the best thing to do not to pass it. So this is what's roiling the waters.

Now, Shelby is kind of a standout in the Senate. Most of the senators, I think, are ready to go along. But what he said, Wolf, is very much representative of what a lot of the conservatives in the House are saying. And if enough of them, if a critical mass of them, you know, dig in their heels, you're not going to get 110, 120, 130, which is what Nancy Pelosi wants.

BLITZER: It's almost...

BENNETT: So I'm not predicting it unravels. But I'm just predicting they are no -- a long way from there yet.

BLITZER: And what are you hearing, Donna?

I mean, first of all, I want Donna to react to what we just heard from Senator Shelby.

Donna, what do you think about this really unusual moment?

He leaves the meeting that's going on in the Cabinet Room in the West Wing. He comes out and talks to reporters. Then he goes back into the West Wing.

Donna, what do you think about what we heard and this whole procedure?

I don't remember seeing anything like this. But go ahead, maybe you do.

DONNA BRAZILE, CNN POLITICAL CONTRIBUTOR: No, I don't, Wolf. Normally after meeting with the president, the parties gather around and decide who will go out first and who will lead the discussion with the reporters. So it's clear that Senator Shelby is not supporting the general principles and agreement that was worked out overnight by both parties.

It's not a Pelosi plan. It's not a Paulson plan. It's going to be a bipartisan plan. And, yes, there are alternatives. I've heard liberal economists also offer some recommendations...

BENNETT: Yes.

BRAZILE: ...how to make this plan a lot more appetizing to taxpayers. So if there are alternatives, fine, go find the votes. But if this plan comes -- if we get the votes for this plan, as modified by that -- by a bipartisan group of legislators, then I'm sure the president will ask Senator Obama and Senator McCain to help rally the troops to back this alternative.

BLITZER: Is this one of these cases, Bill -- and you appreciate this, you're a radio talk show host, you have your finger to the pulse out there -- sort of like what we saw happen in the Dubai Ports World story. There was by partisan agreement. The president was on board. The comprehensive immigration reform, we had McCain and Kennedy and the president on board. But then there were grassroots out there that were outraged by both of these developments. And, in the end, they both collapsed.

Is this -- does this have those fingerprints, that potential out there?

BENNETT: It has that potential. It was on your show, Wolf, that I said the day it was announced this won't stand. People won't stand for it. And they didn't.

I wouldn't say it's as stark here or as clear that it won't stand. But I would say you're not going to have an agreement today.

I'm not sure you're going to have an agreement tomorrow.

But, again, that sense of things that John King caught in the interviews in Montana is very much the same.

Let me tell you something very interesting that happened very quickly. On the radio show this morning, all sorts of conservatives and middle of the road people were all full of praise for John McCain for doing this, suspending the campaign and so on, but said they didn't want the deal -- said they didn't want the deal.

Now that's a funny kind of separation in the mind, isn't it? You know, we admire him for going back to Washington to get this done, but we don't want done what's being proposed. It's very interesting.

BLITZER: And, Donna, what about the decision that Senator McCain made yesterday to, A, suspend his campaign, and, B, not participate in tomorrow night's first presidential debate at Ole Miss in Mississippi -- in Oxford, Mississippi if there's no deal?

And you just heard Senator Shelby, the ranking member of the Senate Banking Committee, you just heard him say there is no deal.

Is there going to be a debate tomorrow night?

What do you think?

BRAZILE: Well, I personally believe the debate should go on. I clearly believe that Senator Obama made the right judgment in saying he that will attend the debate.

Look, you can walk and chew gum without calling time out in a crisis like this. They were both in that meeting. They should go before the American people tomorrow and explain what are the parameters of this deal. If the deal somehow or another will not make it to the president's desk, then maybe they should come up with their own alternatives.

BLITZER: All right...

BRAZILE: But this is an opportunity to debate and not to walk away from the table.

BLITZER: Bill, hold on a second, because Gloria Borger is joining us.

Jessica Yellin is on Capitol Hill.

Brian Todd is working the story.

Ed Henry is our man on North Lawn of the White House.

Gloria, this is a pretty extraordinary moment and we're watching it unfold live right here. Richard Shelby, the ranking Republican on the Senate Banking Committee, comes out and says no deal. He goes back into this meeting, which we believe is still going on.

What do you think?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, I think Senator Shelby has been cool to this idea all along, right from the start. And I think we really got a hint of how House Republicans were going to react to this when they kind of read Vice President Dick Cheney the riot act on Tuesday and told him that they had a lot of concerns about it.

And what happens in Congress -- and, Wolf, you've watched legislation being made. So have I. You can try and get something done quickly. But then there's something called the American public. And they pick up the telephone and they tell you exactly what they think about it.

And members of Congress are very reactive. And they're responding to their constituents, who are raising all the concerns that Bill was just talking about.

And I think they're saying not so fast. I think it's mostly a House problem. And the problem there is that Nancy Pelosi is not going to hand over all of her Democrats unless a majority of House Republicans go along with a Republican presidential bailout proposal. She won't do it on her own, because they know it's not that popular.

BLITZER: And this coming in the middle of an election campaign. Only around 40 days until not only the election of the next president of the United States, but every member of the House of Representatives, every seat there and a third of the U.S. Senate.

Let's go to Capitol Hill. Jessica Yellin is working the story for us. What are you hearing right now? A deal maybe close in the Senate, but not necessarily in the House. You need both Houses to go along, obviously.

JESSICA YELLIN, CNN CORRESPONDENT: Wolf, one Republican member says that this deal is no closer now than it was 24 to 48 hours ago, suggesting that the terms that have been negotiated that we heard so much enthusiasm about earlier today, have not satisfied certain key members of the House Republican Conference.

The reason they've expressed for their opposition has to do with the taxpayer financing of this proposal. And if I could summarize this in the clearest terms, instead of putting taxpayer money into this, whatever, $700 billion bailout, they would prefer to see private money go in -- investors put their own money into this bailout. And that would require -- they've outlined, I should say, what they're calling economic rescue principles, which would allow certain regulations to be relaxed on private capital, certain laws to be relaxed on companies, even some temporary tax relief for companies, so that those entities could invest the money into this bailout project instead of putting taxpayer money on the line.

And then they include a number of other principles that would essentially create, you know, a new blue ribbon panel to decide how to avoid this in the future, new oversight, etc.

Now, obviously, that's an entirely different vision for this plan. And it would take everything in a different direction.

I don't have a sense at this point how much they're just putting this forward as a way to slow down negotiations, as a way to at least get more points in that they want or whether they're really going to stick to this. But what I can emphasize is that the House Democrats are still saying they do not want to pass this bill on their own. They will not put this forward unless there's Republican sign-on, because basically they say this is the president's proposal. It's what Republicans want and Republicans have to be in agreement.

So the House of Representatives is still decide divided on this one -- Wolf.

BLITZER: Ed Henry is over at the White House, waiting, as all of us are, for this meeting to wrap up, this historic meeting that the president convened with the Republican and Democratic Congressional leadership, as well as with Senators McCain and Obama -- Ed, you know, it's pretty amazing, when you think about it. You have the Republican president, the Republican vice president, you have the secretary of the Treasury, you have the chairman of the Federal Reserve and, potentially, you have John McCain, as well.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Yes.

BLITZER: And they can't convince a lot of these House Republicans that this is a good idea?

HENRY: Wolf, I think that Bill Bennett put his finger right on the problem. I'm hearing from Democratic sources on Capitol Hill as well as people here at the White House that they believe -- and, in fact, I can tell you, I can see what appears to be John McCain's motorcade. It appears to be moving on West Executive Drive in front of me. And moment ago behind me, I saw the press pool around John McCain waiting, as if they were about to leave. And then an advance staffer -- a staffer for John McCain was literally running behind me right before I came on.

So my expectation is that John McCain may be leaving this meeting right now, just so you know. So that might give us an indication that this is about to wrap up. We may be getting more people at that stakeout camera.

But I think that Bill Bennett put his finger on it. I'm hearing from Democrats on Capitol Hill, as well as people here in the administration, that they're sort of close to a broad agreement here between the Democrats in the House and Senate and the Senate Republicans, along with the White House on the $700 billion package. But the sticking point would be those House Republicans, the conservatives that Jessica Yellin and Bill Bennett were talking about, who are very concerned about some of these provisions.

And all eyes now really are on John McCain. John McCain met with some of these Republicans earlier today on Capitol Hill. He came over and brought some of their principles, some of their message over here to this White House meeting to try to sort of explain to the wider group where the opposition on the Hill is.

The question now is whether John McCain is going to work hard to kind of bring this group together. Is John McCain going to, in the end, feel like this just can't be bridged and come out in opposition to the deal? All eyes are really on McCain a little bit more than Obama in terms of whether or not he's going to bring along some of these House conservatives.

BLITZER: Well, let me ask Bill Bennett, what do you think John McCain is going to do?

(LAUGHTER)

BENNETT: Well, you know, what I was thinking, Wolf, when you were talking about Dubai, I was thinking about other McCain initiatives, if you will.

Is this the surge in Iraq or is this the immigration bill?

BORGER: Well...

BENNETT: You know, he would hope it's the surge and he'd be on the positive side.

Look, he is back there, as he said, to help get an agreement. So he needs to try to get an agreement. That's why he was visiting with the Republicans. And he will be working it. This is a high stakes gamble by John McCain, but he certainly will try to get that.

What he can't get is a situation where he's siding with the president, 120 conservatives are opposed to him -- and he's come a long way in this campaign. To lose that support, I think, would be fatal to the campaign.

BLITZER: And we are told -

BORGER: Well...

BLITZER: Hold on a second, Gloria.

We are told that Senator McCain's motorcade has now left the White House. You heard that siren and you heard Ed Henry say that they were getting ready, the McCain people. So at least -- we don't know if the meeting has wrapped up, but it looks like Senator McCain has left that meeting. There's another exit from the West Wing, as opposed to this -- the door that you're seeing right now, where that Marine guard is standing by. There you see the side road outside the West Wing of the White House, where other vehicles are waiting, including the motorcade for Senator Barack Obama, who will be going back up to the Hill, as well.

Gloria, you wanted to weigh in.

BORGER: Yes. I hesitate to disagree with Bill Bennett ever, but let me just say that what if McCain were to disagree with those conservative House Republicans?

Wouldn't that bolster his Independent brand, to a certain degree?

Wouldn't that help him with Independent voters, if he says look, we've got to have a deal, I think it's important, I know you're going to disagree with me, as he did on immigration reform?

I think that's a...

BLITZER: All right... BORGER: That's a possibility, too.

BLITZER: Hold that thought for a second, Bill, because Ed Henry is getting some more information now.

BENNETT: Sure. Sure.

BLITZER: We were hearing, Ed, that Senator McCain left.

What about Senator Obama?

HENRY: Well, you can probably -- you may have just seen that a group of reporters left right behind me. And among that group was Linda Douglass, a former reporter who is now a media adviser, a spokeswoman for Senator Obama. I spoke to her briefly and she told me that Senator Obama is leaving the meeting as we speak.

The reporters who follow him, the Obama press pool, is also getting ready to leave. And, most importantly, she told me he is not -- not going to be making a statement here at the White House cameras.

We were given guidance before by the Obama camp, before the meeting, that Senator Obama would be making some sort of a statement, talking to reporters.

I'm now told by Linda Douglass on the record that Senator Obama will not be speaking. I don't want to read into it. We obviously don't have...

BLITZER: Well, not speaking at the White House, but he might be speaking some place else.

HENRY: He could speak somewhere else.

BLITZER: Right?

HENRY: He could speak somewhere else. He might be waiting to see where this deal or no deal goes, if you will. But he is not speaking here at the White House. And she did not give me any indication about him speaking anytime soon somewhere else. But, obviously, he can go give media interviews or do something. But he is longer going to speak here. And he is about to leave. The motorcade has not left, but she said he'll be leaving in the next couple of moments -- Wolf.

BLITZER: And we're waiting for other members -- other people who participated in that meeting at the White House to emerge and come to the stakeout -- the microphones that are now underneath the overhang at the West Wing of the White House.

All right, Bill, go ahead and -- because we interrupted your train of thought when we wanted to get some news from Ed.

BENNETT: Well, I was going to say to Gloria, I thought we all agreed -- all members of the CNN symposium -- that first you consolidate your base. You know, when -- John McCain might have been wooing Independents with the immigration issue, but he sure, you know, lost the base on it. Luckily, the base has forgotten or John McCain has muffled that by talking about securing the borders.

But again, think of what John McCain...

BLITZER: All right, hold on a second.

BENNETT: OK. Sorry.

BLITZER: Hold on a second. We're getting some people coming out.

UNIDENTIFIED MALE: I have a series of ongoing discussions. Members have gone back to the Capitol to try and continue to work on this issue. Senator Obama will be taking questions at the Mayflower Hotel in about 10 minutes.

Thank you very much.

UNIDENTIFIED MALE: And the House Democrats will have a caucus at 5:45 and they may come out after that and (INAUDIBLE) back at the Capitol.

Thank you.

UNIDENTIFIED MALE: Sorry about that, everyone.

QUESTION: Are you close to an agreement?

UNIDENTIFIED MALE: Still working on it.

UNIDENTIFIED MALE: We're working on it.

QUESTION: I guess that means things are (INAUDIBLE)...

UNIDENTIFIED MALE: We still have a lot of issues to be worked on. We're making progress.

(CROSSTALK)

UNIDENTIFIED MALE: ...a lot more to discuss.

UNIDENTIFIED MALE: A lot more to do, Jim.

UNIDENTIFIED MALE: Thanks very much.

BLITZER: All right. You heard them. Those are the two spokesmen for Harry Reid and Nancy Pelosi, saying they're making progress, they're still working and they're going to be speaking, both of them. But not there. Not at the White House. They want to go someplace else and make their statements.

And we'll, of course, have cameras wherever they go and we'll hear what the speaker of the House and we'll hear what -- and we'll also hear what the Senate majority leader has to say. I believe we also heard him say that Senator Obama will be making his statement over at the Mayflower Hotel on Connecticut Avenue, only a few away from the White House. So it should take his motorcade about 60 seconds to drive from the White House on Pennsylvania Avenue over to the Mayflower Hotel.

So we'll hear from Senator Obama at the Mayflower Hotel.

We'll hear from the speaker. We'll also hear from the Senate majority leader.

Let me go back to Donna Brazile. You know these players, Donna. You've known them for a long time. And I can only say the stakes for the country, the stakes for millions of Americans are enormous. But the political stakes for these two presidential candidates right now are enormous, as well.

BRAZILE: Well, it looks like there was a deal last night or early this morning. John McCain rode into town after the deal was made. And now the Republicans are in, you know, turmoil.

And so I think what needs to happen, at this point, is someone needs to go and have a caucus with the Republicans and see if they want to deal. This is, after all, a bill that Secretary Paulson put forward. The Democrats are working with Secretary Paulson and the Bush administration.

And if John McCain doesn't like this deal and the Republicans, and they are prepared to come up with an alternative, I think someone needs to explain that to Secretary Paulson, because Nancy Pelosi and Harry Reid got the Democrats on board to try to come up with a deal.

BLITZER: All right. I want everybody to stand by.

We know that the vice president, Dick Cheney, he went up and met with a lot of these conservative members of the House. He certainly has a lot of credibility. He's well liked by a lot of them. But apparently, that meeting did not necessarily go all that well.

We're following the breaking news. We're not going to be leaving this story. But I want to check in with Jack.

He's got The Cafferty File -- Jack, this is -- this is a pretty dramatic day.

CAFFERTY: There's a chorus of voices suggesting we should all be very afraid. President Bush -- "our entire economy is in danger." Treasury Secretary Paulson -- "the average American should be scared." Warren Buffett called the turmoil in the markets the economic equivalent of Pearl Harbor. And former General Electric Chairman Jack Welch said "America is in for one hell of a deep downturn."

Not exactly the easiest climate for the next president to start his new job in. And yet these two men, Senator John McCain and Senator Barack Obama, still want the job badly. John McCain announced late yesterday he's suspending his campaign, rushed back to Washington. He called for tomorrow's debate with Obama to be postponed.

Obama and McCain put out a joint statement calling for a bipartisan effort to deal with the crisis. Bailout talks continue, as you've heard if you've been watching CNN here the last hour or so.

Soon, though, it will be back to the campaign trail for both Obama and McCain -- both of them trying to convince us he knows more about fixing this mess than the other guy.

The question is, has the deepening financial crisis changed your mind on who to vote for for president?

CNN.com/caffertyfile is where you'll find my blog -- Wolf.

BLITZER: All right, Jack, stand by.

We're going to be getting back to you.

We're about to speak with one of the leaders -- the Democratic leaders -- who was inside that meeting in the West Wing of the White House, Steny Hoyer. He's the Democratic -- he's the majority leader in the House of Representatives. He's walking over to our microphones over on the North Lawn of the White House.

We'll go there and get his eyewitness account, his first person account of what has been going on inside the West Wing of the White House momentarily.

Gloria, we await Steny Hoyer. You know, you've got to think about the history, that this is a moment in American history -- Bill Bennett knows a lot about American history -- where the country could be moving in two very different directions based on what the elected leadership comes up with.

BORGER: Yes. And it's an amazing dynamic to think of inside that room, because you have a Republican president who's been laissez faire on the markets arguing for a big government bailout or rescue, or whatever you want to call it. You have the Democrats siding with him reluctantly. Republicans, like Senator Shelby of Alabama, angry about it. And then you have the two presidential candidates there, who may or may not meet tomorrow night in a debate to take sides in this, one of whom has promised to get this -- to get this done.

It's incredible tension in that meeting, I would think -- Wolf.

BLITZER: All right. I want everybody to stand by, because the House Majority leader Steny Hoyer has been miked and he's joining us now live.

You were inside, Mr. Leader, inside that room.

Take us inside and tell us, first of all, deal or no deal? REP. STENY HOYER (D), MARYLAND: Well, I think there was -- it was not a negotiating session. I think it was a reiteration of the -- how serious this problem is. I think it was bringing everybody up to date on where people were. I think Chairman Dodd and Chairman Frank clearly indicated that they felt we were very close on principles. And, clearly, everybody in the room was not necessarily in agreement. But the president made it very clear and the speaker and Harry Reid both made it very clear that we're working very hard to come to an agreement and work very closely with Secretary Paulson and Ben Bernanke.

We've realized there's a crisis. We realize that doing this correctly is critical, but also, doing it soon is critical.

BLITZER: About 15 minutes or so ago, we heard from Senator Richard Shelby of Alabama, the ranking minority member on the Senate Banking Committee, say there was no agreement. And he's deeply concerned, as you know, about the possibility of an agreement. But go ahead and tell us what the stumbling blocks are right now and when you think they might be resolved.

HOYER: Well, I'm not going to go into specific stumbling blocks. But I think there are obviously -- there's not full agreement. Senator Shelby did not fully agree, as you pointed out and heard, I suppose. But there were other segments in the House -- obviously there is some -- there is concern on both sides of the aisle. So that's being worked on.

But I was -- we're very concerned about some plans that have been put forward very recently. Secretary Paulson has not reviewed those plans. They're not part of his plan. We have modified his plan very substantially. The president last night said he accepted our modifications, which were designed to protect stockholders, provide for equity involvement and provide for protection of mortgage holders and provide for protection for taxpayers ultimately, as well.

So that we think, certainly from our side, that there is a consensus on how to go forward. And we'll have to see whether that consensus can grow. The president...

BLITZER: Well, as you know, the Congress...

HOYER: The president, hopefully, is going to be working on that.

BLITZER: As you know, the Congress is supposed to go into recess tomorrow night.

Is that happening?

Do you think there'll be a deal that will allow members of the Senate and the House to vote before tomorrow night?

HOYER: Wolf, let me reiterate what I have said to my caucus. As you know, I make up the schedule. And what I have told them is that this is a very serious matter. Members of Congress are going to be prepared to stay here Saturday, Sunday, next week, the week after, if that's necessary. Hopefully, that will not be necessary. We believe that acting with dispatch is necessary to stabilize markets, stabilize our economy and we hope to do that. But we have no arbitrary deadline as to when we're going home.

BLITZER: Tell us -- take us in, if you can, take us inside that Cabinet Room. We know that Senator McCain was there. We know Senator Obama was inside.

Did they participate in the discussion or was mostly the president talking and others sort of just asking questions?

Give us a little flavor, if you can, Mr. Leader, on what was going on.

HOYER: Wolf, I think it was like most meetings. Everybody participated, including Senator Obama and Senator McCain. I think Senator Obama, very frankly, was more specific and broader in his discussion with the president, with Secretary Paulson and had some very good contributions to make. Senator McCain was much briefer, much less specific and indicated, obviously, that there was a crisis, with which we all agreed.

BLITZER: And what about Senator McCain?

Did he indicate one way or another which way he was leaning?

HOYER: He did not.

BLITZER: Did you get a sense that there might be an agreement by tomorrow that would allow him to participate in the first presidential debate in Mississippi tomorrow night?

HOYER: Well, I would hope that Senator McCain would participate in the debate and go forward. The president made a wry observation and others made wry observations about Senator McCain and Senator Obama obviously have been otherwise focused, as we would expect them to be.

Having said that, both Republicans and Democrats, since last Thursday night, have been working around the clock to try to come to an agreement, to try to act on a consensus document that can get the votes for passage and stabilize the economic markets.

So I think that they will continue to do that. And hopefully, we will accomplish that objective.

BLITZER: Are you close to working out the language on executive compensation for Wall Street CEOs and top executives on Wall Street, that their salaries are not going to be in the millions and millions of dollars, but closer to what you as a leader in the House of Representatives earns?

HOYER: Wolf, we had made the proposal, as you know, very shortly after the recommendation came down -- or the bill came down from Secretary Paulson -- that there had to be the addressing of benefits and compensation for those who were leading these institutions which the taxpayer was going to invest in and try to help stabilize those. And we didn't feel it was fair to the taxpayer to have compensation of the kinds that we have seen, in the multimillions of dollars, and payouts to people with the golden parachutes, that there needed to be restraints.

The administration -- Secretary Paulson originally thought that might not be a good idea, but agreed to that. And as you heard President Bush last night say, he agreed to that.

They have also agreed to our suggestion that there needed to be a strong oversight board to ensure that there was oversight of the secretary's action, not because we don't trust the secretary, but because we think the American people, putting up this kind of investment, need to have some other eyes watching the store.

So that we've made a number of suggestions. The president has adopted those and accepted them. And we're pleased at that and we're still moving forward. And we're hopeful that we can reach agreement.

BLITZER: Good luck, Mr. Leader.

HOYER: OK. Good.

Thanks a lot, Wolf.

BLITZER: Steny Hoyer is the House Majority leader. You've seen pictures of the historic meeting. Now revealing details of what happened from another guest. Ed Gillespie is counselor to President Bush. He's standing by to join us live.

Also, Governor Sarah Palin again breaks her silence answering questions. But there's one question she couldn't answer.

And the debate over the debate -- will we see Barack Obama and John McCain face-off tomorrow night in Mississippi?

Or will Senator McCain insist on not attending?

We're updating you on all of the breaking news right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: It's an event that will certainly go down in American history. President Bush and the two presidential candidates holding an emergency meeting over at the White House on the financial crisis.

Also along, the Congressional leaders, Democrats and Republicans. And, indeed, only moments ago they wrapped up that meeting on the $700 billion proposed Wall Street bailout plan, or, as some are calling it, a national rescue plan.

We're waiting to hear from both of the candidates, McCain and Obama. They're expected to both speak shortly. We'll go there live once we hear from them. We're covering all angles of this story. But let's go back to the White House right now. Ed Gillespie is a counselor to President Bush. He was inside the meeting, one of the senior are advisers. Ed, thanks very much for coming in. How did it go?

ED GILLESPIE, COUNSELOR TO PRESIDENT BUSH: Thank you, Wolf. It was a good meeting. Look, these members of Congress, the leaders, the two parties' nominees, the president of the United States and his treasury secretary all understand that we have a crisis in this country right now in our financial markets that can spread to the economy and we need to come together and act to solve that.

There are not surprisingly different points of view and in terms of how some things that ought to be taken into account to do that and how to go about that. But you know, Wolf, having worked on Capitol hill for a long time, having worked here, the biggest thing that you have to come to terms is we've got to act and we have a problem here that needs to be solved. And there was no doubt about it in that room today, and that should be encouraging to people.

BLITZER: So is there an emerging consensus among the Democrats and Republicans? In other words, are you close to a deal?

GILLESPIE: We're getting closer. And I think, you know, as the president mentioned last night, Wolf, there were things that were not in the package that were put forward by the Treasury Department and by the president, this administration in terms of the rescue plan that leaders in Congress on both sides of the aisle frankly said, you've got to have for example bipartisan oversight. Fair point. They were right about that. And we've accepted that premise. And they said this is not a pure, free market. The fact is if people are going to be failed executives are going to be helped in their company saved by virtue of the federal government coming in and taking over that company, then these failed executives shouldn't get the benefit of a windfall from the tax payers. That's a legitimate point. And we have come to share that point of view.

So there's been a lot of give and take in this process and there is some more that has to be done. I believe this is one of those bills where it's going to take probably half of the House Republicans and half of the House Democrats to come together. Got to get 60 votes in the Senate for just about anything. So it's going to be a consensus plan at the end of the day but I think it will be one that meets these principles of removing these illiquid assets off the books of private companies in a way that they don't contaminate the credit markets that harm college loans or auto loans or 401(k) funds or lose jobs.

BLITZER: It seems to me, Ed, have you bigger problems right now with some of the conservative Republicans, especially in the House than you have with the Democrats in the Senate or the House. Is that right?

GILLESPIE: Look, there are both sides are going to have to work hard to get to an agreement that will fix the problem as the president was clear. You know, the goal here is not to pass a bill. The goal here is to fix a problem. And to address a looming crisis. And if Secretary Paulson, Federal Reserve Chairman Bernanke see something that they say will do it, our administration will support it and we believe we'll get Republican and Democratic votes for it. We think we put forward a plan that does those things but we are open to hearing other ideas or changes to it.

So I think that both sides have some work to do in order to get it there. But look, as the president said, Wolf, if you're a free market Republican, your first instinct is not for government intervention. But the fact is in this instance, that that is what's warranted in order to make sure those who were not irresponsible who acted responsibly are not harmed by the irresponsible actions of others.

BLITZER: Senator Obama has laid out four conditions he would like to see attached to this proposed legislation. And I think you're close on almost all of them. We'll put them up on the screen. A payback plan for taxpayers, bipartisan board to oversee the bailout, limits on money for Wall Street executives and aid to struggling homeowners. Two and three I think you've basically worked out.

What about to make sure the taxpayers have an equity position if you will in these firms being bailed out by U.S. taxpayers.

GILLESPIE: It's been raised. We think there are instances where that will work from the economists and that is one of those ideas we're open to. Senator Obama has that point of view as do many others, by the way. And look, it's important to understand something about this. And maybe I've done a bad job in my job, my position here at the White House or others, we haven't made clear. We're talking up to $700 billion. But this is not just money going out. There's going to be money that comes back in. These are in assets largely in mortgage securities and most Americans about, about 94 percent pay their mortgages. We're going to get that money that's going to come back in. In fact, some say that the treasury could get more money than the $700 billion, that this could be something where money could help fund programs or deficit reduction or tax relief if it goes above 700. So this is not going to be a $700 billion cost to the taxpayers. It's going to be much, much less than that. Maybe even zero and maybe even a return to taxpayers before the end of the day.

BLITZER: Well, that would be pretty amazing. But we can only hope for that.

GILLESPIE: By the way, I'm not promising that but economists speculate that could happen.

BLITZER: That would be pretty amazing. What about the fourth point that Obama makes, there's got to be something for millions of home owners who are struggling right now. Have you been willing to accept that?

GILLESPIE: Like to know the details of it. There are different ideas that have been proposed, some that could have an adverse economic consequence by raising mortgage rates for first-time homebuyers and pricing people out of the market. In other words, if you're going to do something that causes lenders to say I'm going to build-in higher mortgage rates in order to cover the cost of what the government is imposing, that would have a counterproductive effect at the time we're encouraging people to buy some of this housing stock. There may be some other ideas in terms of if we go forward and the Treasury Department or the government assumes some of these risks and some of these illiquid assets which are largely mortgage based, that you could say they should do some things that help the folks who are in those homes stay in those homes. That's in everyone's interest, though, Wolf. That's in the interest of the government in that interests because it's not in the governments interests to have a vacant home there, it's in the government's interest to have someone paying the mortgage in the home.

So it depends on the details. But look, we need to solve this problem. The president has made clear. We're willing to work with Congress. And I want to be clear, too. Democratic and Republican leaders in Congress have been clear. They want to work with this administration.

I do believe as the president said last night, this is one of those instances where elected officials will rise to the occasion.

BLITZER: All right. One final question before I let you go. I know you have a lot of work to do.

Senator McCain put forward five points he wants included in any deal and several of them are very similar to what Senator Obama is speaking.

I'll put them up on the screen. Greater accountability. Similar. Paths for taxpayers to recover money. That's similar. Complete transparency. That's also what is Obama like. He adds no earmarks should be attached to this legislation and no Wall Street executive should profit undue little from this. All right. On the earmarks, I assume you're on board with Senator McCain on that.

GILLESPIE: Yeah, I'm not familiar with earmarks in this legislation. It's not being written. But clearly, this is not at a time when we are trying to shore up our markets. This is not a time to be trying to slip in some money for your project back home or to get a dam or road paved.

BLITZER: Is Senator McCain with the president on this one?

GILLESPIE: Is Senator McCain, I'm sorry, Wolf, I didn't hear.

BLITZER: Is Senator McCain with the president on this issue?

GILLESPIE: Look, everyone is in the same place in terms of we have to solve the problem. These principles you just mentioned that Senator McCain mentioned, as you noted, Senator Obama has very similar and overlapping principles, principles that we have accepted in the course of the discussions. This is the legislative process. Members put forward good ideas. We want to get it done in a way that fixes the problem and we think we can do that. So we're all on the same page in terms of fixing this problem. Agreeing to many of these principles. Now we're down to the fact of, can we get details that will pass the House, pass the Senate and get to the president's desk and get signed in a way that helps solve this crisis. BLITZER: Good luck, Ed Gillespie, thanks very much for joining us. Ed Gillespie is the counselor to President Bush. He was inside that meeting. Let's go back up to Capitol Hill right now. Dana Bash is up there. What are you hearing, Dana, from your sources what went on during that approximately one-hour meeting in the West Wing?

DANA BASH, CNN CORRESPONDENT: What we're hearing from Republicans and Democrats was that it was a very, very he contentious meeting, actually, Wolf. As you can imagine, the different parties are giving us different reasons why they thought it was contentious. I spoke with a Republican source put the blame on Harry Reid and put the blame Congressman Barney Frank, who is the chairman of the House Banking Committee saying they were dug in on their position.

However, we are also talking to Democrats, Ed Henry is talking to sources, I am as well saying one Democratic source said it was basically one or two hour distraction what happened in there. What Democrats are saying is that House Minority Leader John Boehner came in there and he was voicing the opposition that we've been reporting on for the past couple of hours that House Republicans have to the this piece of legislation. And that according to one Democratic source that our Ed Henry spoke with that actually ended up quote unquote "blowing up" the meeting because of this conservative opposition. Democrats who were in this meeting felt that these are issues that they had been going over and over and over inside these negotiations that they thought that they had worked out with the House Republicans but the House Republican leader made very clear inside this meeting that he did not think it was worked out and therefore, it ended up all sides are telling us behind the scenes that this is a pretty contentious meeting that went on inside that White House.

BLITZER: All right. Dana, and there's no word yet from the McCain camp on whether or not Senator McCain will or will not go to that first presidential debate tomorrow night in Mississippi?

BASH: There still isn't. We talked about earlier, Wolf, they were hoping there was going to be some resolution that came out of this, at least by the end of the day that would allow them to go to the debate because politically they have concluded that is important for McCain to go to the debate as a game changer and they feel like they need that. But it's really still unclear whether or not he is going to go because he put that line in the sand saying that he needs a deal before he gets on the plane and goes. So far, it doesn't sound like it's will.

BLITZER: No deal, at least not yet. Dana, stand by. We'll be checking back with you. We're hearing that Senator Obama is either getting ready or has just spoken to reporters over at the Mayflower Hotel. We're going to be getting that videotape and get his reaction to what occurred over at the White House at that historic meeting.

We're standing by for news right here in THE SITUATION ROOM. We'll be right back.

(COMMERCIAL BREAK) BLITZER: We're waiting to hear from Senator Barack Obama. He's either speaking right now or has just spoken to reporters over at Mayflower Hotel here in Washington. We're waiting for the videotape as soon as it comes in. We'll share it with you. This will be his first official reaction, his first official reaction to what exactly happened during that approximately one-hour meeting with President Bush and Senator McCain and the bipartisan congressional leadership over at the White House.

As soon as we get his statement, Senator Obama's statement, we'll share it with you. We're also waiting for reaction from Senator John McCain. What did he think of this meeting? What is he going to do? All that coming up. Stand by. We'll get that information to you as quickly as we can.

In the meantime, let's assess what's going on. Donna Brazile is standing by. She is on the phone getting information herself. Paul Begala is with us. Alex Castellanos is with us and Gloria Borger, all part of the best political team on television.

Paul, let me let you weigh in first. We haven't heard from you yet. This is an amazing day that's going on. And it's certainly by no means over yet and it could go on for days to come, even though Congress is supposed to go into recess tomorrow.

PAUL BEGALA, CNN ANALYST: Yeah, because you have this overlay of this economic meltdown or so they tell us overlaid with the presidential campaign. The political campaign. And as a lot of people worried, Senate Democratic leaders, Senator Majority Leader Harry Reid, it appears that the presence of the presidential candidates is maybe something of a distraction. It looked like they were moving toward a deal earlier today from all of our reporting and from the sources on the hill and then in this meeting, it looked like things kind of blew up. What people who were in the room are telling me is the Republican leader in the House, John Boehner started raising issues settled in the past and it did become quite contentious. I think Dana's sources are right.

And you get the sense that maybe the Republicans were acting in a way to set this up so maybe McCain could swoop in at the end and be the white knight hero. The problem is, you know, serious people on the Hill and I used to work in the House majority leader's office during the day, they like workhorses, not show horses. And this is not John McCain's area of expertise.

If this were troop levels in Iraq, he is one of the foremost experts in the Senate, everyone would listen to him. But frankly, the people know about the economy are not terrible interested in what John McCain thinks and I think it has gummed up the deal making process.

BLITZER: Has it gummed up? Because there was criticism the last thing these legislatures need right now, the so-called workhorses are the two presidential candidates thrown into the mix. That could further complicate the whole negotiation in the midst of this presidential campaign. Alex, what do you think? ALEX CASTELLANOS, REPUBLICAN STRATEGIST: Well, I think I'll credit Paul with trying to find some political angle here that will advantage the candidate he's supporting. I guess that's fine. But I think what's going on here is something a little different. Even Republicans, Paul, are capable of actually being serious and looking at an economic meltdown and putting that first and trying to solve it. It just so happens it's still a little harder to get Republicans to spend $700 billion of the taxpayers' money than it is to get Democrats to do it.

And you're seeing a lot of concern from Republicans out there that are we doing something wisely here. Of course, this is tough for Republicans. What I think they're wrestling with is they're hearing from a lot of folks back home saying how do we know we need to do this. And of course we don't know and won't know unless we reject this deal, watch the economy meltdown and then we'll have proof. And of course we can't afford that. There's a little bit of Russian Roulette going on with the economy.

At the end, I think you're going to see everybody come together behind this. It's actually healthy to examine this deal but the house -- if the house is burning down, you don't want the firemen to debate the flavor of the water, you want them to put the fire out now.

BLITZER: Let's bring Donna into the conversation as well. Donna, you heard what Alex says. At $700 billion is enormous amount of money at risk even though Ed Gillespie, the White House counselor says maybe some of it, maybe even all of it could be regrouped if you will down the road. What's wrong with letting this process go on, not only a few more days, maybe even a few weeks? It's an enormous sum of money.

DONNA BRAZILE, CNN ANALYST: Well, first of all, the Democrats have been negotiating in good faith and Nancy Pelosi has really reminded Democrats that this is an opportunity to not just stabilize the markets but also protect the taxpayers and so the principles that were agreed upon last night that John Boehner even signed on to in a joint statement with Nancy Pelosi are no longer closer, I guess for some of the House Republicans. They're in full rebellion mode at this point. What needs to happen is that the Senate Republicans and Democrats have really come up with a plan that at least in principle he people have agreed to many of them, not all of them. We saw Richard Shelby.

Perhaps it's best now to figure out if you can get a majority what the plan that's been crafted that was signed on early today before of course, some last-minute tinkering took place.

Stand by because Chris Dodd, the chairman of the Senate Banking Committee is joining us live. You were in that meeting, Senator Dodd. Dana Bash, our reporter says she's hearing it was quote, "contentious." Was it contentious?

SEN. CHRIS DODD, (D) CT: Well, yeah, contentious is certainly - for a moment or so.

BLITZER: When you say for a moment or so, what happened.

DODD: It was a good meeting. The president certainly called upon all of us to respond to this moment and the secretary of the Treasury made the point and Barack Obama laid out the importance of all of this. What threw us off is all of a sudden there was some new core agreement floating around which no one had heard of before until we got to the White House and that was distracting.

BLITZER: Who introduced that?

DODD: Well, we're told it came out of the Republican House. We were told at this one point that this was maybe John McCain was floating the idea that Hank Paulson was considering it. Barney Frank and I along with republicans from the along with Republicans and Democrats from the House spent three hours this morning working on a different core and what we were told for the last seven days is the core issue that would give the secretary authority to move, to deal with the crisis, but simultaneously protect the taxpayers accountability and deal with the foreclosure issues and everything that the president mentioned last evening are important.

What happened here, basically, Wolf, if you want an honest appraisal from me of the thing, we have spent a lot of time and I am tired. I have been seven straight days at this in trying to come out with a workout plan for the economy, a rescue plan. What this looked like to me was a rescue plan for John McCain for two hours and took us away from the work we are trying to do today. Serious people trying to do serious work to come up with an answer.

Not everyone is going to support this, Wolf. There are people who are not going to be happy with this and I understand it. There will be no parades, no bunting. This is a sad day for the country to deal with the crisis with the amount of money that is involved, but I am convinced as many people are that the situation is grave and responsible people need to fashion something that can work and to be distracted for two or three hours by political theater doesn't help.

BLITZER: Well, this new so-called core agreement that was introduced that blindsided you and Barney Frank and some of others who have been working over the past seven days, was there a deal-breaker in there, was there any substantive new issue that you could not go along with?

DODD: Well, I don't know what it is, and nobody could explain it and Hank Paulson could not describe it either. What I want to do is to go back to where I was at 1:00 this afternoon and that is with people like Judd Gregg and Bob Bennett and Bob Corker an Barney Frank and Chuck Schumer along with Jack Reed and Kent Conrad and Barney Frank and others are putting together principles. They are not agreed to until the caucuses have seen them, but there were principles that we thought we could bring to the caucuses and the Treasury, a way to move forward. I want to get back on that track again, because I think that is what people want of us. If we are going to do this, we want it done in a responsible way to make sure that the people on Main Street are going to be as well protected as the crowd on Wall Street. We're going to make sure, for instance, there is no executive compensation here from greedy people who helped to create the problem. So there are ideas there that we continue to work on and my hope is we can get a deal.

BLITZER: When do you think this is going to be resolved? How much more time do you think you need? Because you are supposed to go to recess tomorrow, but it may not happen.

DODD: No, I don't think it will and shouldn't and whatever time it take, again, we all want to move quickly but I can tell you right now, my colleagues want to get it right as well. They know it takes time to think it through.

This is an issue, Wolf, that is just not any old bill we are talking about. The implications of this will be around for years and years to come. And so while speed is important for some, for most getting of us it right is far more important.

BLITZER: And just to be precise, who introduced the new element of the course of the meeting that resulted in that quote, "contentious" moment, was that John Boehner?

DODD: That was a press release that came out from House Republicans that indicated that they would not accept I guess the Hank Paulson core idea which we've all be working off for six days and came up with some new core idea and John McCain was somehow supportive of it. My view is, look, they need to get the act together and decide what they are for and then the secretary needs to decide whether he is for it or against it and if he is for that idea, we have to start all over again, and I hope that is not the case. That is the intention of some of them in the room. If they do that, of course, we have got a lot longer to go and if the president is right and the situation is grave and requires speedy action, careful action, but speedy action, I don't won't get his wish, because I certainly am not sign on to something that just gets raised this afternoon.

BLITZER: One final question before I let you go, Senator Dodd, the two presidential candidates, did you get a sense based what they said in the meeting in the Cabinet room in the White House that Barack Obama and John McCain that both of them are basically, basically with you and Barney Frank and the president when it comes to the enormity of what is going on and the need for a deal right now?

DODD: Well, I got the sense that Barack Obama did. And again, he was not buying into a final plan here, but he said, look, these principles are important and he accepts the gravity of the situation and believes that we need to act in a bipartisan responsible fashion and he wants, is more than willing to be a part of the effort to achieve that result. I say this, and John McCain is a friend, we have served here together for 22 years. I am not quite sure what John said at the meeting. He said something but I'm not sure - it had no indication he was for any particular plan. So I don't know where he is in all of this quite candidly.

BLITZER: Senator Dodd, thanks very much for joining us. DODD: Thank you.

BLITZER: All right. Now, let's go back to our analysts right now and I want to bring in Alex Castellanos. First, Alex, you just heard some strong words from Senator Chris Dodd and I want to know if you want to react to what he said, because he said he is not sure where John McCain stands.

CASTELLANOS: Well, I think that where Republicans are is a little bit in doubt at this moment as a party, and certainly the administration is clear and the House leadership has been clear. Again, so much easier for the Democrats to spend $700 billion in a blink of an eye without looking and it is kind of something perhaps they have grown used to in Washington. Republicans are supposed to be the party that says, hey, let's cut the cards first and let's take a look at this and see fit works. And obviously, there is a little bit of time to do that. It is all right for Barack Obama to come to town to have his five principles that he is insisting on but somehow wrong for Republicans to have their principles that they are insisting on, so that is a little bit of unfortunate political gamesmanship there on the part of Senator Dodd.

Everyone understands how serious it s but it is important to be done quickly but done the right way.

BLITZER: What do you think, Paul?

BEGALA: I think what you have is that the Democrats are coming into alignment here. They are calling for and looks like from the interview with Ed Gillespie that the White House is coming into alignment with the Democrats, that we need to protect the taxpayers more and we need to protect the homeowners more and we need greater accountability and transparency and it maybe we need to stretch the money out. I don't think that the White House is there, but I think a lot of the Democrats are not sure we need to write a check for $700 billion, Alex's partisan point notwithstanding, I don't think most Democrats want to write a big fat check to Hank Paulson and George Bush for $700 billion for the mess that they made. I think the Democrats would rather have it in three different tranches is the word I keep hearing.

So the Democrats are kind of unusual for my party, kind of in array. It is the Republicans who are in disarray right now. Chris Dodd named them, some very serious Senate Republicans who really seem to be workhorses on this and not show horses and they seem to be working hard on it. The House Republicans though seem to be in great disarray and is John Boehner, the minority leader of the House, is running this? Is Spencer Bachus, the ranking member of the Republican Party on the banking committee, is he driving this?

And where is John McCain on this? You got the sense from Senator Dodd and I hear it from a lot of the Democrats that somehow Senator McCain and the House Republicans are kind of gumming up the works here for political grandstanding and making a lot of people on both parties annoyed. BLITZER: All right. Go ahead, Alex, because I think Paul makes a point that I have heard from a lot of Republicans including Bill Bennett that the problem of the president and the secretary of the Treasury have is not so much with the Democratic leadership of the House and the Senate, but with the Republicans of the House and specifically and not necessarily in the Senate.

CASTELLANOS: Wolf, absolutely. I think that is a fair estimation. Look, getting a Democrat to spend money in Washington is like getting an alcoholic to drink a beer. It is not that hard. Getting Republicans to spend and frankly, I have been wondering where these republicans are. We have been spending like Democrats I think for quite a few years in Washington. This happens to be a big amount of money, this happens to be a burden that is going to be imposed on working American taxpayers, and a lot of the Republican are hearing from back home, let's be sure we do it right. Let's be sure we do it the right way. And I think that is in the interest of the public.

Again, it is all right as Paul said that the Democrats are thinking, there is a better way to do it and stretch it out. That is a good topic worthy of debate just as the Republican issues that they are raising, is this going to work? Are we going to need more money later, Republicans are raising good points that need to be debated as well.

BLITZER: Guys, hold on for a moment. I want to check in with Jack Cafferty. He has got "The Cafferty File" and he is watching all of this unfold as well. Jack, what a day.

JACK CAFFERTY, CNN ANCHOR: The question of the hour, is has the deepening financial crisis changed your mind on who to vote for president?

Felix in Texas writes, "Obama is a class act. The economic hurricane has swept John McCain away. He is running away from a debate he agreed to months ago. This man does not get it, by refusing to debate, he is hurting the American people more. Troy in Ohio writes, "I have always known who to vote for and this crisis does not change my mind and Obama is my man, and this country cannot go with a candidate that promises another term of George Bush and I hope that the voters don't get it wrong again."

Alan says, "I am voting for Nader, and the Republicans and the Democrats are unsafe at any speed."

Satish says, "A dumb question, you go with the more experienced person in a time of crisis, I am voting for John McCain."

Ken says, "The economic troubles have not changed my vote, my wife and I just bought our first house. Although we're struggling, we think we can recover as a nation if we elect the right leader and that's Barack Obama. John McCain's antics throughout the campaign have only show how dangerously out of touch with the American people and reality he really is."

Rinna writes, "We need a president who is calm and collected and doesn't panic. I used to like McCain but the present economic crisis freaked him out and he is not ready to be president after all, I think he is ready to retire."

And Ray in Indiana writes, "Ever since 1964 I have voted for the lesser of two evils and I continue with that approach, this time by voting a straight Democratic ticket."

If you don't see your e-mail here, go to my blog at cnn.com/caffertyfile. Might be there. Wolf?

BLITZER: All right, Jack. Thanks very much.

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