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Interview With Illinois Senator Barack Obama; Debate Drama; President Bush Holds Emergency Talks on Bailout

Aired September 25, 2008 - 18:00   ET


WOLF BLITZER, CNN ANCHOR: And, to our viewers, you're in THE SITUATION ROOM.
Happening now: breaking news. Washington confronts the economic crisis. President Bush wraps up his emergency talks with John McCain and Barack Obama and the congressional leadership.

We are standing by to hear from Senator Obama, his remarks about the meeting. That is coming up.

Also, President Bush says he hopes a bailout agreement will be struck soon, but some of his fellow Republicans are saying no deal.

And debate drama, will John McCain share a stage with Barack Obama tomorrow night? The best political team on television considering all the possibilities.

We want to welcome our viewers in the United States and around the world. I am Wolf Blitzer. You are in THE SITUATION ROOM.

It was truly a historic meeting and we are told a contentious one, at least at one point. In the room with President Bush, congressional leaders and the two men competing for his job, nothing less than the future of the America's economy and a $700 billion bailout on the line.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: One thing the American people have to know is that all of us around the table take this issue very seriously, 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.


BLITZER: We are waiting for Senator Barack Obama to go before the cameras, talk about this White House meeting -- he is supposed to be doing that right now -- and the prospects for a bailout deal.

Our correspondents are standing by with the McCain and Obama campaigns on Capitol Hill over at the White House.

Let's go to Ed Henry first. He was the pool reporter inside the Cabinet Room in the West Wing when they allowed the reporters, the camera crews, to go in.

All right, update our viewers, Ed, on what we know right now, because, as Dana Bash has been reporting, at least at one point, it became contentious.


It was high drama in the Cabinet Room. And I can tell you, when I went in there at the very top, it was obviously all smiles for the cameras, a very brief statement from the president, as you heard there, that was sort of optimistic that a deal could be reached in short order.

But I can tell you, I am also being told, as Dana is, by two sources, one Republican, one Democrat telling me the meeting was very contentious, a Republican saying it was very pointed and that it ended badly, basically that it was friendly at the top.

The president went around the room and there seemed to sort of broad agreement on four principles, agreement between the president, the House and Senate Democratic leaders, and the Senate Republican leadership, along with Treasury Secretary Henry Paulson, but that, at one point, House Republican Leader John Boehner spoke up and basically raised some of those concerns we have been hearing about among his conservative members, and said they may have problems with some of this.

And he wanted their proposals to be aired. I'm told that Senator Barack Obama then the one point jumped in and said to Secretary Paulson, how do these conservative concerns fit in with our four principles that we are agreeing on?

I am also told that John Boehner and Secretary Paulson could not really explain where it fits in, saying basically it was still in flux. And it ended with John Boehner saying basically he needed to go back to his House Republican members on Capitol Hill, have a meeting tonight, and try to get a better readout on where they can go from here.

But the bottom line is, this deal is nowhere as near as close as many people thought -- Wolf.

BLITZER: Ed Henry watching the story for us -- I want you to stand by Ed.

Dana Bash is watching it from Capitol Hill. Dana, you are covering the McCain campaign and you're trying to figure out as all of us are where he stands on this sensitive issues, for him, the political stakes obviously quite enormous.

Give us the latest. What are you hearing?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, I just want to add to what Ed Henry was reporting. We have both been obviously talking to sources who were in the room or at least aides to those who were in the room, and just like he said, we are hearing it was quite contentious.

Basically, as you can imagine, we are hearing different reasons from different parties. The House Republican leader, he went into that room after meeting with John McCain here on Capitol Hill determined, we are told, to voice some of the concerns of those rank and file in his conference. And he did that.

And I am told by an aide to John Boehner that what he did was he gave another proposal, a proposal that would basically be to give $350 billion for this bailout, but then the rest of the money would be some kind of insurance proposal. That is the kind of thing that those fiscal conservatives in the House are pushing for. They feel like that they have been left out of this and that is why John Boehner did that.

That is basically what led to the contentiousness inside that meeting, we are told. Democrats said, wait a minute, we think -- we thought we had a deal. We worked it out for the most part on Capitol Hill. And here you are bringing something else into the mix. Democrats are saying, politically, they believe, Wolf, that the reason why House Republicans are doing this is because they want to give John McCain a little bit of a bite at the apple here politically.

As you can imagine, the McCain campaign is saying that is not true.

BLITZER: This has been an extraordinary day for John McCain. Yesterday, he announced he is suspending his political campaign. He's going to not go to the first presidential debate tomorrow night in Mississippi unless there is a deal here in Washington. But walk us through what he has been doing on this amazing day.

BASH: Well, basically, you know, here in the Russell rotunda, this is actually the building where John McCain has his office, and the bottom line is that we saw something we have not seen in a long time, and that was John McCain come and work here.


BASH (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.



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 the bailout package to save the economy from total 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.

UNIDENTIFIED MALE: 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 that is still roiling in the markets.

BASH: But McCain had a different mission. With top campaign aides in tow, he got on the underground subway and headed to the House to talk to Republicans there, still not sold on the bailout deal.

Behind closed doors, 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. He was going to drop by a quick lunch meeting with some of his fellow Senate Republicans. Much of his McCain's three-and-a-half hours at his day job were spent inside his office on the phone trying to get the lay of the land, until he headed to the White House.


BASH: Now, it was at that White House meeting that the House Republican leader as we have been reporting actually proposed some alternatives that would basically help appeal to some of the rank and file in the Republican -- and House Republican conference, but we are told, Wolf, by several sources, Republicans and Democrats, inside that meeting, John McCain actually didn't say very much.

BLITZER: All right, stand by, Dana, because I know you are working your sources and we will get more information from you.

We are also standing by, by the way, to hear from Senator Barack Obama, remarks about the White House meeting, the bailout talks. We will bring you those remarks as soon we get those.

Candy Crowley is working the story for us as well. She's down in Clearwater Beach, Florida. This is a day where he was supposed to be in Florida preparing for the first debate tomorrow night, but he had to interrupt that to come to Washington and go to this meeting with the president. Update us on what we know right now, Candy.


He wanted to stay here and then he got the call from the president, Indeed, he left this morning and went up to Washington for that meeting. He left pretty quickly and moved on to a Washington hotel, where he is doing a round of television interviews, after which he expects to have a statement and take some questions from reporters.

I am told, Wolf, by a campaign aide that Obama will now spend the night in Washington. Again, that is according to a campaign aide, who says he will stay there. Now, we were told before that he probably wouldn't unless there was some reason, maybe a vote that he thought was coming up on this package to stay.

So, we will have to hear from him exactly what it is that is prompting him to stay tonight. It may be it is easier to stay there then to come back down here and go to Mississippi for the debate. And, by the way, that debate is still on as far as the Obama campaign sees it.

They believe very much that it is John McCain who is behind the eight ball on this, that most people see absolutely no reason not to go ahead with this debate. As Obama put it yesterday, we need to show we can do more than one thing at a time.

So if this bailout package reaches some sort of crescendo, where the votes are needed, you can bet he will stay there in town, but right now, that debate is still on as far as the Obama campaign is concerned, but again, he is staying in Washington tonight, Wolf.

BLITZER: All right. Stand by, Candy. We are going to be getting back to you as well.

Even as President Bush was stressing bipartisanship today, members of his own party were throwing up major some roadblocks to striking this deal on this proposed $700 billion bailout. Let's go back to Capitol Hill.

Jessica Yellin is working this part of the story. The president, we heard him at the top of the meeting say he was hoping a deal could be reached shortly. What are you hearing, Jessica?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Well, it looks like they are a lot further away now than they were before this meeting began. And it is principally or exclusively because the House Republican conference is in disarray at this point on this measure.

And the way you can interpret that depends on who you talk to. On the House Democrat side, there is what I can only describe as fury, frustration. They contend that the House minority leader, John Boehner, was on board. He was in agreement. Spencer Bachus, the man who represented House Republicans in the meeting this morning, seemed to be going along with the plan all along.

And they contend, again, the Democrats, that only after this became politicized later today that the House Republicans disagreed and decided to break with the plan, and that they contend this is all because McCain has injected presidential politics on this.

On the other side, you hear House Republicans saying, look, we have had issues all along. That was no secret. This has been rushed and we are not ready to sign on.

And all sides are having meetings, huddling all over this terrain tonight, Wolf, trying to decide what the next steps are. No matter who I work to on the phone, they all say, well, we are working that out. We will get back to you when we know what we are doing next.

I can tell you that the Democrats continue to point out this was the president's proposal to begin with and so they don't want to move forward with this without some House Republicans signed on, at least a good number of them signed on. Their frustration right now, they say House Republicans are not even telling them what they really want in this package.

So, not a lot of communication. The last thing I can tell you is that both Pelosi and Reid apparently pulled Paulson aside afterwards and told Paulson, look, you need to help work this out with the House Republicans. And so they're looking for some more administration aid in all of this and resolving this quickly -- Wolf.

BLITZER: Jessica, stand by on the Hill as well.

I want to go to Jack. He has got "The Cafferty File."

Jack, when they said yesterday this meeting would take place at 4:00 p.m. Eastern, I immediately said to myself, that is when the markets in New York, the stock markets close, at 4:00 p.m. Eastern. You can only imagine what those markets would be doing right now if they saw this confusion, if they saw this uncertainty right now that was going on.

Some people say close to a deal, others saying not so close to a deal. It would not necessarily be all that positive.

JACK CAFFERTY, CNN ANCHOR: Well, that is not just the markets who are scratching their heads. I mean, there was a deal earlier. There was agreement earlier, according to just a whole bunch of reports that we saw throughout the day, that both sides had agreed in principle to the framework and structure of the deal.

And now all of the sudden, John Boehner and the House Republicans are say, no, no, we don't agree to the deal. And that only happened after John McCain got involved. I mean, you know, if the bailout package works, it won't come a moment too soon.

No guarantee it's going to work, for that matter.

President Bush told the nation last night without quick action, more banks could fail. The stock market could go down even more, which cuts the value of retirement accounts. Home values go into freefall in this environment, which could then lead to a dramatic rise in foreclosures. We have over a million of those now.

The president said more businesses could fail as a result of this crisis. Millions of Americans could lose their jobs. As it is, first-time unemployment claims came close to a seven-year high this morning.

There was some other discouraging economic news as well, a 5 percent drop in durable goods orders and some other troubling signs that we are slowing way down. Ultimately, the president said the country could experience a long and painful recession. Those are his words.

It's comforting, isn't it, that Washington finally decided to get in the game. This is a crisis that has been developing in plain sight ever since the housing bubble burst. People who should never have gotten mortgages are seeing their homes foreclosed on because they can't make their house payments. Ray Charles could have seen that they could not make the payments when they applied for the mortgages to begin with, but everybody chose to look the other way, because everybody at the time was making lots of money.

Let's just hope the government decided to act in time.

Here is the question: How is the nation's deepening financial crisis affecting you?, you can post a comment on my blog -- Wolf.

BLITZER: Jack, thanks very much.

And it is certainly the question virtually all of America wants to know. Will Barack Obama and John McCain actually face off in the first presidential debate? Will Senator McCain insist on not attending? We're watching this part of the story.

And Republicans applaud McCain's acts as true leadership. Democrats say it's all part of a political stunt. You are going to find out what people who know Senator McCain are saying about it.

And you maintain the economy is your number-one concern. Will that be the number-one factor influencing your vote in a few weeks?

We are also waiting to hear from Senator Barack Obama, his statement coming up on what happened inside the White House earlier today, lots of news happening, a very busy and historic day right here in Washington.

We will be right back.


BLITZER: All right.

This just coming in. We have just learned that we will be speaking live with Senator Barack Obama here in THE SITUATION ROOM momentarily. We will hear firsthand from him where this delicate negotiation stands on this proposed $700 billion bailout.

My conversation with Senator Barack Obama, that is coming up momentarily. Stand by for that.

And, with millions and millions of dollars, billions of dollars, that is, on the line right now, the university -- actually, millions of dollars in Mississippi, the University of Mississippi is still hoping that tomorrow night's presidential debate will go forward as planned.

They have already spent about $5 million getting ready for this historic moment.

Suzanne Malveaux is already in Oxford, Mississippi.

We see the arrangements being finalized behind you, Suzanne. Senator McCain yesterday said he is not coming unless there is a deal. Senator Obama says he is going to be there. What is the latest? What is going on?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, I just talked to the vice chancellor of university relations, Gloria Kellum. And she says she just got off the phone with the Debate Commission. They are still recommending to go forward as planned as if the debate will take place tomorrow.

We have also watched as well, Wolf, behind me on the stage here, the advance teams of both Barack Obama and John McCain doing their mike checks, video checks from their candidates' respective podiums. And the host of this debate, Jim Lehrer from PBS, he is also here with his team doing those type of technical tests.

Obviously, there's still a lot of optimism that this is going to take place tomorrow, but there's still a lot of angst from people who are uncertain about what is going to happen.


UNIDENTIFIED MALE: It was a shock. It was like getting kicked in the stomach, to -- to find out that McCain didn't want to have the debate.

MALVEAUX (voice-over): The consensus in the hometown of Ole Miss, sheer disbelief.

UNIDENTIFIED MALE: We were just all horrified.

UNIDENTIFIED MALE: Immediately, I says, he has already lost a lot of votes that were going to vote for him if he does not come.

MALVEAUX: At Oxford's camp for kids who are into politics, big pride in the debate for this third-grader.

UNIDENTIFIED FEMALE: Because it's in Oxford. It's, like, where we live.

MALVEAUX: Then disappointment.

UNIDENTIFIED FEMALE: He's going to possibly lose Mississippi's votes, half of them.



UNIDENTIFIED MALE: You're pretty smart about politics. How did you learn that?

UNIDENTIFIED FEMALE: It comes to me naturally.

MALVEAUX: Luckily, for McCain, little Ann Morgan's instincts are off. He's expected to win here easily. But, at the debate site, hundreds of students, volunteers, and faculty are in limbo.

GLORIA KELLUM, VICE CHANCELLOR FOR UNIVERSITY RELATIONS, UNIVERSITY OF MISSISSIPPI: Well, I was surprised and disappointed. But you immediately go into action.

MALVEAUX: Gloria Kellum, vice chancellor of university relations, operated as if it was a go.

KELLUM: The commission and the university are not talking about contingency plans. We have a strong belief that, tomorrow night, this debate will be right here.

MALVEAUX: But the question today to John McCain from the campus paper, will he show?

UNIDENTIFIED MALE: We expect to have the debate tomorrow night at 8:00.

MALVEAUX: That question dominated a news conference with the university chancellor and Mississippi governor, leaving them with very little to say.

UNIDENTIFIED MALE: I can't think of a bad day to be at Ole Miss.

MALVEAUX: A local editorial accused McCain of misplacing his Southern manners, where, in these parts, manners matter.

But some voters are cutting him some slack.

UNIDENTIFIED MALE: We're in a crisis, man. This man is a leader. He's taking personal responsibility.

UNIDENTIFIED FEMALE: He did hurt my feelings yesterday. My feelings were hurt, but I'm still a McCain girl.


MALVEAUX: So, Wolf, some hurt feelings and obviously a lot of money that is also on the line, money and pride, more than $5 million the university has invested, and a lot of pride from people here in the community and the state of Mississippi. They want this thing to go on without a hitch, but already, there's a lot of nervousness about tomorrow -- Wolf.

BLITZER: All right, we will see what happens. It is up in the air, I think it is fair to say, right now. Suzanne, we will check back with you.

By the way, if the debate happens -- and, one again, that is a very big if right now, given the fact the there is no deal yet on this bailout proposal -- you will, of course, see it live right here on CNN. Our coverage from the best political team on television, all of our coverage will begin at 8:00 p.m. Eastern tomorrow night.

Also, remember, we are standing by to interview Senator Barack Obama. We have just been informed we're going to be speaking with him live. That is coming up very soon. We will get his reaction to what happened over at the White House. My interview with Barack Obama, that is coming up soon.

Meanwhile, Governor Sarah Palin has faced criticized for what is being seen by some as her lack of access to the news media. But, today, for the first time since being named John McCain's running mate, Governor Palin took questions from some reporters traveling with her campaign.

And she actually answered some of those questions. It happened after she toured New York City's ground zero.


GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL CANDIDATE: I agree with the Bush administration that we take the fight to them. We never again let them come on to our soil, and try to destroy, not only our democracy, but communities, like the community of New York. Never again. So, yes, I do agree with taking the fight to the terrorists and stopping them over there.


BLITZER: Governor Palin is also getting more time to put together a report to the Federal Election Commission disclosing her personal finances. It was due originally on Monday. She now has until next Friday.

Meanwhile, the Democratic vice presidential nominee, Senator Joe Biden, he was out on the campaign trail in his home state of Pennsylvania. He was born in Scranton, even though he spent most of his life in Delaware. He sharply accused Senator McCain of flip- flopping on issues facing Americans. Take a listen to this.


SEN. JOSEPH BIDEN (D-DE), VICE PRESIDENTIAL CANDIDATE: You can't be president of the United States of America and lurch so rapidly from one fundamental position to another, seeing sunlight and then seeing nothing but darkness all in the matter of two hours.

Ladies and gentlemen, you can't gain the confidence of a nation, and you can't gain the confidence of the world when in fact you are not rooted and know exactly what you think.


BLITZER: Senator Biden speaking earlier.

Let's go over to Senator Barack Obama right now. He is joining us live. Senator, thanks very much for joining us.


BLITZER: All right. How did it go? How was the meeting over at the White House? We are all anxious to get the word. Is there going to be deal or no deal?

OBAMA: Well, I think, eventually, we're going to get a deal. I think that there's still some work that needs to be done. Look, we should not have been in this crisis in the first place. It is a consequence of reckless behavior on Wall Street, and regulators being asleep at the switch.

But, 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 have got to move rapidly. I have put forward consistently some core principles that would protect taxpayers, that we have oversight, that we make sure that taxpayers are treated as investors, so, if we are laying out potentially $700 billion, that people are going to recoup that money as assets appreciate over time, that we are not using this to bailout CEOs, that we are doing something for the actual homeowner, so that they are getting help, and we are avoiding these massive foreclosures that are at the root of much of the problem.

Now, we have made progress. And Secretary Paulson, who I have talked to every single day this week, as well as Democratic leaders, and I think the Senate Republicans, I think, have agreed to these principles as -- conceptually, and I think were ready to move forward before John McCain and I even landed here in Washington.

BLITZER: All right.

OBAMA: Something happened in the intervening hours. And, so, I think that there's going to have to be some discussions between the president, Secretary Paulson, House Republicans, perhaps Senate Republican, although they have been, I think, working well with the Senate Democrats, to figure out what exactly they want additionally to see to make this thing work.

BLITZER: Senator Obama, I spoke earlier, just a little while ago, with Senator Chris Dodd, the chairman of the Senate Banking Committee, and he was in that meeting as well.

He suggested that he really didn't understand Senator McCain's position, but he threw out the notion that maybe he is now part of the problem, rather than part of the solution. You tend to agree with that assessment, based on what you heard yourself from Senator McCain in that room?

OBAMA: Well, Senator McCain spoke briefly. I think he still wants to see something happen.

You know, the concern that I have and one of the concerns that I have had over the last several days is that, when you start injecting presidential politics into delicate negotiations, then you can actually create more problems, rather than less.

It is amazing how much you can get done when the cameras are not on and nobody is looking to get credit or allocate blame. And I think that both myself and Senator McCain need to be very careful in terms of how we inject ourselves into this process.

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.

Unemployment, we just saw the unemployment numbers come out today, and there obviously continues to be concern, highest jobless claims in seven years. We have got a continuing deterioration in the housing market. People are worried about rising health care costs.

We just had a report today that people's health care deductibles have gone up close to 30 percent just in the last year. So, people are already getting pinched. And that is one of the reasons why I think it is important for Senator McCain and I have to have a debate tomorrow, partly on foreign policy, but this issue of economic strength at home is absolutely critical, because, if we are not strong at home, we are not going to be strong abroad.

BLITZER: About that debate tomorrow night, the first presidential debate, what happens if Senator McCain doesn't show up?


OBAMA: Well, I hope he does. And I'm not going to speculate at this point.

I am going to be staying here in Washington tonight. I will be monitoring the situation. I have found that I have been able to stay entirely on top of the negotiations around the financial crisis by phone. I talk to Secretary Paulson at least once a day, sometimes twice.

I have been in conversations with the congressional leadership constantly. And, so, my sense is, is that we can do more than one thing at a time. I think that is part of what is required if you want to be president of the United States, is to be able to deal with difficult situations, but still make your vision clear to the country. And that is part of what this debate process is all about.

BLITZER: Good luck with these negotiations, Senator Obama. Appreciate it very much.

OBAMA: Thank you, Wolf.

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

Happening now: Acting on instinct, John McCain says the nation's economic crisis calls for all hands on deck and suspends his campaign. Barack Obama says the race and Friday's debate should stay on course. Who made the right move? Both candidates joined today's unprecedented White House meeting on a government bailout plan. Only a few weeks away from the Election Day, the economy now stands squarely an issue, the issue. It's issue number one. We will examine who stands to gain, who stands to lose politically from the downturn -- all of this coming up, plus the best political team on television.

Lots of news happening today. I'm Wolf Blitzer. You are in THE SITUATION ROOM.

Whether or not you agree with what Senator John McCain did and is doing, there is general agreement on this. It could help or hurt his presidential hopes. It won't be neutral.

Let's go to Brian Todd. He is speaking to people who know Senator McCain rather well.

A very controversial move he made yesterday, Brian, to suspend his political campaign, if you will, and to postpone that first presidential debate, unless a deal on the bailout is achieved.

What are you hearing?

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, John McCain's gamble here is astounding, suspending the campaign with five-and-a-half weeks left in the race. If the timing on a deal in the financial bailout doesn't go his way, he could seen as reckless, desperate, trying to recapture the poll position in this race. If it turns in his favor, it could be a huge political score.

So we tried to gain some insight into how John McCain arrived at this decision.


TODD (voice-over): John McCain says he's tapping into his training.

MCCAIN: I'm an old Navy pilot and I know when a crisis calls for all hands on deck.

TODD: McCain's aides say the move to suspend his campaign was made with deliberation after constant talks with experts and party leaders. Others believe this was also bare knuckle instinct.

We spoke to a man who's been in the room when McCain's made decisions like this. He's Roy Fletcher, deputy campaign manager for McCain in 2000. Fletcher wasn't there on Wednesday, but suspects it played out like this.

ROY FLETCHER, FORMER MCCAIN DEPUTY CAMPAIGN MANAGER: He walked into a room and said, gentlemen, we are going to suspend the campaign and we're also going to -- we're going to suspend the debate and we're going to go to Washington and we're going to get this business done and you guys figure out how to handle it. TODD: Fletcher and other former aides say if there was dissent in the room, McCain probably listened to it, then pressed ahead anyway. They describe him as a man willing to do his research and gather consensus. But then, they say, he goes purely on his gut, is willing to gamble, but not recklessly.

The selection of Sarah Palin part of that pattern.

TERRY NELSON, FORMER MCCAIN CAMPAIGN MANAGER: He is somebody who does have a tendency to kind of want to shake things up a little bit. And the Palin decision, you know, shook things up because she was an unconventional choice, in some respects and she was, you know, not a choice that, you know, a lot of people had talked about.

TODD: Former aides say in making the boldest decisions, McCain is genuinely motivated by moral conviction -- putting country before self. CNN analyst David Gergen agrees, but says this move on the financial crisis was not without political calculation.

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST, FORMER PRESIDENTIAL ADVISER: And he's doing this, in part, also to rescue his campaign, because this -- you know, a financial meltdown was driving him down in the polls and allowing Barack Obama to go up.


TODD: Now, if this move backfires, don't expect a lot of navel gazing from John McCain. His former aides back him up on a quote from his 2002 book that's called "Worth The Fighting For."

Here's the quote: "I don't torture myself over decisions. I make them as quickly as I can -- quicker than the other fellow, if I can. Often my haste is a mistake, but I live with the consequences without complaint."

Wolf, it looks like we're going to about those consequences, maybe within a matter of hours.

BLITZER: All right, Brian. Good work. Thank you.

In the long run, whose response to the current economic crisis was right? Would it be McCain's or Obama's? Let's discuss this and more.

Joining us from New York, our senior political analyst, Gloria Borger; also, our senior analyst, Jeff Toobin; and here in Washington, Steve Hayes, the senior writer for the "Weekly Standard".

What do you think about this amazing day -- Gloria? Whose instincts were right? Would it be McCain or Obama?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: At this point, I'm wondering if John McCain is second guessing his decision. But as Brian Todd said, he doesn't do a lot of that.

I think this has to play out, Wolf. And I think the House Republicans now hold John McCain's fate in their hands. And House Republicans, by the way, these conservative Republicans, they don't like John McCain very much. They never have. They opposed him on immigration reform. And they're trying to distance themselves from an unpopular president, as well.

So they don't like any of the Republicans who are sitting in that negotiating room right now.

BLITZER: Stephen Hayes, you know John McCain. You've spoken to him on many occasions.

What do you he's going to do, vote with the president, with the Democrats, by and large, or go with those House Republicans, those conservatives in the House, who are fiercely opposed to any bailout?

STEPHEN HAYES, SENIOR WRITER AT "THE WEEKLY STANDARD": Well, it's a good question. Obviously, if I knew the answer, I'd be -- I'd be very smart and probably very wealthy.

I think, you know, one of the things that he's doing is really trying to make himself sort of a proxy for House Republicans. Now, that doesn't mean that he agrees with everything that they're saying. But I think he's trying to take their complaints to this negotiating table, sit down with people and say, look, we don't want this bill larded up. We don't want Democrats to add infrastructure spending. We don't want a slush fund for housing advocacy groups.

I think we're likely to hear him give voice to these objections from House Republicans.

And as we were talking about 24 hours ago, at the very least what he's done is sort of press pause, which makes him a popular guy with the House Republicans, who are at the center of this dispute.

BLITZER: What do you think, Jeff?

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST, "NEW YORKER" MAGAZINE COLUMNIST: Well, can I just quarrel with the premise of this? Who says he suspended his campaign? He didn't suspend his campaign. He's been campaigning all day. He gave a speech in New York. He's giving interviews all night. He's raising money. His surrogates are attacking Barack Obama.

I think this is posturing of being apolitical. And, frankly, I think we're being kind of gullible in falling for it. He didn't stop his campaign. He's campaigning. Now whether it's...

BLITZER: I guess the argument is that...

TOOBIN: ...successful or not...

BLITZER: ...he didn't go out to a rally or a town hall meeting today. He addressed the Clinton Global Initiative in New York then he came to Washington for meetings on the Hill and went over to the White House and is now doing some television interviews.

TOOBIN: That's exactly

HAYES: He's pulled his ads down, too, Wolf.

TOOBIN: No, he didn't pull his ads down. His ads have been on. And he's done exactly what Obama has done all day. And Obama admits that he's campaigning. It's the middle of the campaign. I don't see why we should treat what he's doing as anything different from what Obama is doing.

BLITZER: Well, let me let Steve weigh in on that.

Go ahead, Steve.

HAYES: Well, we should treat it differently because it is differently. There were reports this morning that some of the ads were still running. You can't snap your fingers and get these ads to come down. But I think they've done pretty close to that. And I think these ads have been taken largely off of the air thus far.

TOOBIN: But, Steve, this is...

HAYES: What he...

TOOBIN: ...this is not campaigning, what he's doing?

HAYES: No. Of course, it is. But it's just the same thing as when Barack Obama said yesterday, look, we don't want to inject presidential politics into these discussions. The whole -- all -- the discussions have been about presidential politics this entire time.


HAYES: So of course both sides are playing politics.

BORGER: But the question is -- the question is what progress has been made by putting Obama at one end of the table and John McCain at the other end of the table in what, you know, our sources are telling us was a pretty tense meeting at the White House?

And, you know, the point is I don't think much progress was made today. And I think McCain heard the concerns of those House Republicans. They had been making those concerns known all week long, including to the vice president.

So I don't really see how this has moved the ball forward at all.

BLITZER: All right, Jeff...

BORGER: Now, many times in Washington, things fall apart before they come together, so we don't know.

BLITZER: We don't know. You're right.

Jeff, you just heard Senator Obama tell me in our interview that he's planning on going to that first debate tomorrow night in Mississippi and he hopes Senator McCain will show up, as well. What do you think?

TOOBIN: I think McCain will be there. I think it would be very embarrassing. I think it would -- he would look ridiculous if he didn't show up. And he'd look like a chicken. And that's something that John McCain can't stand to be seen as. And I think he'll be there and I think we'll have a debate at 9:00 tomorrow.

BLITZER: And we heard the governor, Steve, Haley Barbour, a former chairman of the Republican National Convention, earlier today. He says he wants that debate to go forward. He's a very solid conservative Republican, as you know.

So there is there's pressure on Senator McCain, even if there's no deal, to take a few hours tomorrow night, fly out to Oxford, Mississippi, do the debate and then come back to Washington and get ready for more negotiations.

HAYES: Well, Haley Barbour is protecting his parochial interest there as governor of Mississippi. One would expect him to say that. But I think it's preposterous to suggest that John McCain would be seen as a chicken if he doesn't go tomorrow night.

He was thundering for the entire summer about having a debate a week. His campaign today, in conversations I had with people, said they'd be happy to have more debates, to add debates to the three that are already scheduled between the campaigns.

I mean it's crazy to say that he would be chicken. Now I'm not sure it's -- it would be wise for him to skip the debate if an agreement isn't reached. It may make more sense for him to be there. But one thing it won't come off as, I think, is making it look like he's afraid to debate Barack Obama.

BLITZER: All right. All right, Jeff, everybody. Hold on. We're going to continue this conversation. Gloria, you, too.

Both candidates say they want to keep politics out of the financial bailout negotiations, but which one benefits when the economy is the top issue on voters' minds?

We have some brand new poll numbers to share with you. And I'll be joined by the best political team on television and we'll continue our assessment.

And a possible deal to create the largest airline in the world -- it's another step closer to reality. We'll tell you who's involved, give you an update on that and some other news.

Lots of news happening today right here on THE SITUATION ROOM.


BLITZER: The economy certainly now stands as the top issue of the presidential race.

And with only a few weeks to go before the November 4th election, who stands to gain politically from the current financial crisis?

Let's get back to the best political team on television.

And, Jeff, I'll start with you. Look at these numbers.

We asked in our latest CNN/Opinion Research Corporation poll, "Is the economy the most important issue for you?"

Fifty-six percent said it is right now. And if you look back, in July, it was 48 percent; in March, 42 percent; back last October, only 22 percent said the economy.

How does this play out in these remaining few weeks of this campaign?

TOOBIN: Well, certainly, the way it has played out in the last two weeks is it's helped Obama lot. This crisis has alienated people from Republicans, who are in charge of the economy. And Democrats have traditionally been viewed as the party of domestic policy.

McCain, with this dramatic gesture, is trying to throw all the cards up in the air and recapture the momentum here. But so far, it's been all Obama.

BLITZER: Steve, do you agree that this economic issue often is translated into good political news for Democrats?

HAYES: Yes, I think Jeff is right. I mean, clearly, Barack Obama has benefited from this. You know, there was a poll that you showed a couple of days ago that suggested, by a two to one margin, voters were blaming Republicans for this current mess rather than Democrats. And, obviously, I think that would work to Senator Obama's advantage.

BLITZER: And you -- I assume you agree, as well, Gloria?

BORGER: I do. And one of the reasons you see John McCain coming back to Washington not only to kind of regain momentum, but is to say that if Washington is broken, he's the one who can fix it. And, also, he's the one who can work across party lines. Those are two strands of his campaign that really work well for him with Independent voters. So if he could swoop back into Washington and get a deal and work across the aisle, that would be good for him. That's what he was hoping for.

TOOBIN: And how's that...

BLITZER: He wanted to...

TOOBIN: How is that going so far today?


BORGER: Not so well.


BLITZER: You know, Steve, I know, on the one hand, he's reaching out to those in the conservative base who doesn't like this bailout deal.

But what about those moderate Independents out there, including some Democrats -- presumably, that's a different -- a different approach he needs to win over them?

HAYES: Yes, well, I think a lot of it depends on how much people are -- how closely people are paying attention. And while I think voters are paying closer attention to this and sort of the contours of the story and every move of the story, they're still not doing it like we're doing it.

I think ultimately what people are likely to take away from this, if there is some deal and John McCain has some hand in brokering it, is that he suspended his campaign, he came to Washington, there was a meeting and then there was a deal. And I think that a lot of the other stuff will be details.

BLITZER: Guys, we've got to leave it right there. But you know what, we're not going away from this story for long. Stand by.

Let's check in with Lou to see what's coming up right at the top of the hour -- Lou, what are you working on?

LOU DOBBS, CNN ANCHOR: Well, what we're working on at 7:00 Eastern, we'll be bringing you the stories, including much more on the Bush administration's aggressively pushing that $700 billion bailout. We still don't know what it would do or what it would likely cost all told.

President Bush and Congressional leaders saying that bailout is vital. We're not entirely sure why.

But most voters oppose that bailout -- any bailout that benefits Wall Street moguls. We'll have complete coverage.

And Senators Obama and McCain -- they joined President Bush and Congressional leaders today for talks on this financial crisis.

Was it political theater or did -- or did they actually do something?

And Senator McCain still reluctant to participate in tomorrow's presidential debate. He wants a bailout deal before he agrees. Three top political analysts join me.

We'll be also joined by Congressman Brad Sherman, one of the most outspoken opponents of this bailout for Wall Street.

Join us at the top of the hour here on CNN for all of that and all the day's news from an Independent perspective -- Wolf, back to you.

BLITZER: Thanks very much for that. We'll be checking in with Lou at the top of the hour.

After introducing John McCain at his Global Initiative this morning, the former president, Bill Clinton, almost left the Republican presidential candidate at a loss for words. We'll explain. I think you're going to be interested in this.

And we're hearing lots of dire warnings about the potential long- term effects of the financial crisis on the U.S. economy. Jack Cafferty wants to know how the crisis is impacting your life.

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


BLITZER: Let's check back with Carol.

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

CAROL COSTELLO, CNN CORRESPONDENT: Well, Wolf, Delta and Northwest Airlines' shareholders are on board for a merger that could create the largest carrier in the world. The deal includes new stocks and the new Delta Airlines would be headquartered in Atlanta. The merger still requires approval of the Justice Department and was held off so far to consider possible antitrust implications.

Embattled Senator Ted Stevens of Alaska blames a friend for his legal woes. The Republican is on trial for lying about gifts, which included more than $200,000 in home renovations. During opening statements, Stevens' attorney said a long time friend and oil contractor was too generous with gifts and didn't send him the bills.

President Bush made it a family affair as he signed a bill today for disabled Americans. Those who use medication or other devices for impairments are now covered under the law. The landmark Americans With Disabilities Act was enacted in 1990 back when his father was in office.

And high winds, rough surf and flooding advisories -- it is the trifecta of an intense storm chugging toward the Southeast coast. Minor flooding already affecting residents from South Carolina to Virginia. The Weather Service is telling everyone to stay out of the water. There is a high risk of rip currents and seven foot waves along the Northern South Carolina shore -- back to you.

BLITZER: All right, Carol. Thanks very much. Let's go back to Jack.

He's got "The Cafferty File" -- Jack.

CAFFERTY: That is how is the nation's deepening financial crisis affecting you?

Vincent writes: "Inflation of many of the everyday items my wife and I purchase is beginning to impact our budget. It's not just gasoline anymore."

Cindy in Ohio: "We just retired. We thought we had a good income and that our life savings and our IRA would be there for us. Now, my husband took a part-time job to pay everyday expenses and we're afraid our nest egg will completely disappear."

Gary writes: "I was planning to retire early next year. Now, not so fast."

Laura says: "As a recent college graduate, I feel it already. Finding a job ahs been difficult. And thinking about how I'm going to pay off my student loans is very stressful."

Phillip writes: "The crisis is not affecting me because I wasn't so irresponsible as to buy a home I can't afford."

Elliott writes: "It seems like this is shock politics and it's being used to help Wall Street. I was a small business owner. I lost my business, home, car and I'm struggling to keep a roof over my head. I'm making 25 percent of what I used to earn. I'm struggling week to week to pay my bills. I can't afford to have $700 billion of our money used to prop up Wall Street."

And Rob writes: "It won't affect me at all because I have land, a shotgun, a garden, warm clothes and a stockpile of canned goods and moonshine."

If you didn't see your e-mail here, you can go to my blog at and look for yours there among hundreds of others -- Wolf.

BLITZER: I guess Rob is ready for whatever. All right.

CAFFERTY: For whatever, yes.

BLITZER: You get a lot of e-mails today?

CAFFERTY: About 12,000, 13,000. Something like that.

BLITZER: That's a lot. That's a lot.

CAFFERTY: Yes, it's a lot.

BLITZER: All right, Jack. See you tomorrow. Thanks.


BLITZER: On our "Political Ticker" right now, John McCain almost was at a loss for words during his appearance this morning over at the Clinton Global Initiative in New York City. After Bill Clinton introduced Senator McCain and praised him, he walked off with his speech. When McCain took the papers back, he gave the audience a laugh. Watch.




CLINTON: What can I tell you?


MCCAIN: What kind of host is that?



BLITZER: Former Hillary Clinton campaign chairman Terry McAuliffe apparently wants a new title. That would be governor of Virginia. Democratic sources in Virginia say McAuliffe is laying some groundwork to run for the state's top job next year. McAuliffe has hired the same political consultant who helped Democrats Tim Caine and Mark Warner win the Virginia governorship. McAuliffe, the former chairman of the Democratic Party, is expected to decide whether or not to run after November 4th.

Remember, for latest political news any time, just check out The Ticker, by the way, is the number one political news blog out there on the Web.

Collapse, financial peril, economic disaster -- those are the words you heard, just some of the ways people have been describing the rocky economy.

But our own Jeanne Moos finds there's one word that hasn't been on anyone's lips -- until now. We'll be right back.


BLITZER: Here's a look at some of "Hot Shots" coming in from our friends over at the Associated Press.

In Arizona, two sergeants from the National Guard, a husband and wife, say goodbye to their son before they deploy to Iraq.

In China, a manned spacecraft makes its way to orbit for that country's first space walk.

At the United Nations, the musician Bono speaks about the Irish Hunger Commission report.

And in Georgia, a 97-year-old former golfer hits the ceremonial ball to open this year's Tour Championship.

Some of this hour's "Hot Shots" -- pictures worth a thousand words.

We may be living through the rockiest financial time the U.S. has seen since the Great Depression. From the president to the pundits, people have been coming up with all kinds of ways to describe it. But there's one word everyone seemed to be avoiding -- at least until now.

CNN's Jeanne Moos has this "Moost Unusual" report.


JEANNE MOOS, CNN CORRESPONDENT (voice-over): We know we're in it even if we don't know what to call it.

UNIDENTIFIED MALE: A downward spiral.

UNIDENTIFIED MALE: Financial peril.

UNIDENTIFIED MALE: The current dire circumstances.


MOOS: To avoid causing a stampede off the cliff, most politicians are biting their tongues.

(on camera): The word most frequently used to describe the financial crisis has been...

MCCAIN: A crisis. A crisis of our own.

We know this is a crisis.

OBAMA: Our economy is in crisis.

UNIDENTIFIED MALE: And now we have a financial crisis.


PALIN: We are getting into crisis mode.


MOOS (voice-over): And what comes after a crisis?

MCCAIN: It could turn into far-reaching disaster.

MOOS: Just think, only a week earlier, Jon Stewart was mocking President Bush for downplaying the situation.


JON STEWART, HOST: How bad can it really be?


BUSH: Americans are concerned about the adjustments that are taking place in our financial markets.

MOOS: Who's scared of an adjustment?


STEWART: It's something you get at your chiropractor.



MOOS: It prompted Bill Maher to declare a new rule...


BILL MAHER, HOST: Stop calling what's happening to the financial markets an adjustment. An adjustment is something you do in your sweatpants when your (OBSCENE WORD OMITTED) falls out of your underwear.


MOOS: These guys aren't laughing. The higher-up the totem pole, the more circumspect. So the Treasury secretary and the head of the Fed say things like...

UNIDENTIFIED MALE: Such dire straits.

UNIDENTIFIED MALE: This difficult period.

MOOS: These guys know the market is hanging on their every word. Every escalation in word choice is noticed.

UNIDENTIFIED MALE: The grave threats to financial stability.

MOOS: It doesn't quite have the same ring as...

UNIDENTIFIED MALE: A financial Pearl Harbor.

MOOS (on camera): But there is one word that practically everybody goes out of their way not to say publicly -- the "P" word.

(voice-over): And who should finally say it but the president who started out referring to adjustments. What a difference a week makes.

BUSH: America could slip into a financial panic.

MOOS: He uttered the "P" word. But so far, no panic has ensued.

UNIDENTIFIED MALE: Hi. I'm Wolf Blitzer and this is The Situation Room.

MOOS: Maybe this mock Situation Room best sums up the financial situation.

UNIDENTIFIED MALE: How is the economy?


MOOS: Jeanne Moos, CNN, New York.


BLITZER: He should learn how to spell my first name, that kid. All right. Thanks very much for joining us. Check out our political pod cast.

Let's go to Lou. He's in New York -- Lou?