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Senate to Vote on Bailout; Obama: Voting to 'Save' Economy; McCain's Vote on Bailout

Aired October 1, 2008 - 16:00   ET

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


JOHN ROBERTS, CNN ANCHOR: And happening now, the bailout's second chance in Congress. The Senate prepares for that, and by some accounts, could make or break the economy depending on which way the vote goes, while House members think the Senate has struck a sweeter deal.
I'll ask leaders of both parties.

Plus, John McCain and Barack Obama rush back to their day jobs. This hour, their roles in the bailout and what it means for their campaigns. We're standing by to hear Obama's remarks on the Senate floor.

And changes are coming in CNN's electoral map. Stand by for the big reveal of our new battleground state polls. One candidate is gaining new ground.

Wolf Blitzer is off today. I'm John Roberts. You're in THE SITUATION ROOM.

Right now, the United States Senate is poised to breathe new life into the bailout of America's financial system. Members are moving toward a vote tonight on a revised version of the $700 billion package rejected by the House on Monday.

The Senate version includes new provisions aimed at convincing opponents of the House bill to change their votes. There's an increase in the cap on federal insurance on bank deposits from $100,000 to $250,000. Plus, tax breaks and incentives, including relief from the alternative minimum tax for millions of middle class Americans.

We begin with Jessica Yellin. She's on Capitol Hill, where the vote is going to take place in just a couple of hours' time.

How do we expect this to play out, Jessica?

JESSICA YELLIN, CNN CORRESPONDENT: Well, John, the Senate is expected to vote sometime after 8:00 tonight, and leaders there expect not only will it pass the Senate, but it will pass, they say, with strong bipartisan support. The real uncertainty here is the House of Representatives.

And we're in an unusual situation. Usually when a bill has gone this far, you can tell at this point which way it's likely to go in the House, who is likely to for it and against it. And right now, there's a lot of uncertainty on that front.

When we talked to leadership in the Senate, both Senators Reid and McConnell, they really wouldn't touch the question of how the House of Representatives will go. Let's listen.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), SENATE MAJORITY LEADER: I would not have moved forward on this if I didn't think the chance in the House was good. Now, I don't run the House. I have nothing do with the House other than answer questions from the leadership. That's a decision that the Democratic and Republican leaders over there will have to make a decision.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL (R-KY), SENATE MINORITY LEADER: I'm not going to handicap what may happen in the House. I do hear reports and you all have reported that there's growing optimism that the House will be able to get the job done. But I don't think I should be predicting what the House will do.

(END VIDEO CLIP)

YELLIN: Now, John, you've heard enough of those press conferences there to know that what we usually hear from leaders are, you know, sounds that they're very optimistic or confident, we're feeling strong. Very different tone today.

I can tell you that Republicans on the House side are working the phones hard. Democrats are saying, look, they've got to deliver a lot more votes before we say who we're going to deliver. They know they could lose some with this new package, but they do hope they'll gain many more.

The final point I'd make, John, is that Majority Leader Hoyer in the House says the vote will happen on Friday in the House only if they know they have the votes -- John.

ROBERTS: Yes, well, that's a good thing. I mean, nobody would want a repeat of what happened on Monday. Very embarrassing to go to the floor without the votes.

We heard so much about the number of calls that were coming in there to Capitol Hill, the number of e-mails that were coming in, as well. So many, in fact, that they crashed an e-mail server at one point.

What are callers, what are e-mailers saying now? Has the message changed since the week began?

YELLIN: In many instances we're hearing that there's now a 50/50 split, whereas at the beginning of the week, all the callers were saying vote no. Now many offices are getting some yes, some no. But I can give you one example. Senator Casey of Pennsylvania, he plans to vote for the bailout tonight, but 95 percent of the calls in his office are still telling him don't, do not vote for this measure. So the message has not necessarily gone out to the -- of the voting public that the Senate feels this is absolutely necessary to do -- John.

ROBERTS: Jessica Yellin on Capitol Hill for us.

Jessica, thanks so much.

Senators McCain, Obama and Biden are all heading back to Washington for the big bailout vote, and they are all very aware of the sky-high stakes for the economy and for their campaigns, as well.

Dana Bash is covering the McCain camp. First though to Suzanne Malveaux, who's covering the Obama campaign.

What kind of role is Senator Obama playing in all of this besides casting his own "yes" vote for the bailout, Suzanne?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, John, Barack Obama really has a lot of work to do. Among others, the Congressional Black Caucus voted against the bailout bill, 21 said no, 18 said yes. I spoke with several members of the caucus today who are still not convinced that they have something that they can sign on to, but they are working on if. And Obama is using his political capital, making calls to them and other key Democrats, to try to push through this legislation.

(BEGIN VIDEOTAPE)

MALVEAUX (voice-over): While John McCain is trying to drum up Republican support for the bailout plan, Barack Obama is working hard not to the lose it from Democrats.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: I've been reaching out to leaders in both parties to do whatever I can to help pass this plan. That's why I'll be flying back to Washington today to cast my vote to safeguard the American economy.

MALVEAUX: Cast as a vote to save the economy, but not necessarily the solution for some of Obama's fellow Democrats. For some fiscally conservative lawmakers, there is concern how tax credits offered to small businesses will be paid for. And for half of the Congressional Black Caucus, the bailout bill got a big thumbs down.

Even Illinois Congressman Jesse Jackson Jr., who is campaigning for Obama, could not bring himself to vote for the legislation.

REP. JESSE JACKSON, JR., (D), ILLINOIS: Before we write a $700 billion check to Wall Street, we need to make sure that we are bailing out the country first and not country clubs first.

MALVEAUX: But Jackson and Obama have spoken since, and Jackson says he, along with other members of the Congressional Black Caucus, are working with the candidate to add some additional protections for homeowners which would allow them to vote yes.

JACKSON: I can bring 12 votes to the table, 12 votes who voted against this bill who are willing to vote for it, if there are stronger protections for basic homeowners in the final version of the bill.

MALVEAUX: Obama's strategy is to put a face on the crisis, to press the need for big government action.

OBAMA: If we don't act, it's going to be harder for you to get a mortgage for your home or the loans you need to buy a car or send your children to college.

(END VIDEOTAPE)

MALVEAUX: And John, in trying to make this $700 billion plan for palatable to voters, Obama, along with the Bush administration, is no longer calling this a bailout bill for Wall Street, but rather a rescue plan for taxpayers -- John.

ROBERTS: There are a lot of people who are spinning it that way, and there are other people who are saying this is the biggest bailout in the history of the United States. It all depends on your perspective, I guess.

Suzanne Malveaux for us. Suzanne, thanks very much.

Now to Dana Bash on John McCain's role in rescuing the bailout. Dana, McCain injected himself into the bailout talks last week, suspended his campaign. How is he playing it this time?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, you know, it really has veered from hitting Barack Obama on the issue of his economic record, to going to this idea of leadership and statesmanship, going back to this idea of hitting Obama on taxes and things like that. And today, his rhetoric did seem to settle again on the issue of bipartisanship.

(BEGIN VIDEOTAPE)

BASH (voice-over): Before returning to Washington to vote for an unprecedented rescue, John McCain tried to avoid political backlash from voters opposed to bailing out Wall Street by better connecting the dots to Main Street.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Businesses will have difficulty securing credit for operations and may be unable to pay employees. If we fail to act, the gears of our economy will grind to a halt.

BASH: McCain has lost political ground amid the financial earthquake, and this was about regaining his footing. Back to basics, making the challenging case that he may be a creature of Washington, but still able to give voters the change they want, distancing himself again from President Bush.

MCCAIN: Our government is on the wrong track. Our economy is struggling. It is now a time for leadership.

BASH: And railing against the very Congress in which he serves.

MCCAIN: Congress can't even find agreement on the yearly bill to pay for the Congress itself.

BASH: For some worried Republicans, a welcome tactic.

SCOTT REED, REPUBLICAN STRATEGIST: He needs to be talking about his skills, his skill set, which is leadership and how he would lead the country.

BASH: To that end, McCain renewed his promise to reach across the aisle, not even mentioning Barack Obama here, saying now is the time to fix the problem, not affix blame.

MCCAIN: Especially in the case of Fannie Mae and Freddie Mac, and the abuses and political deal-making that corrupted those institutions.

BASH: Yet McCain's campaign is not practicing what he's preaching. His TV ad does assign blame to Obama.

NARRATOR: The Post says McCain pushed for stronger regulation, while Mr. Obama was notably silent.

(END VIDEOTAPE)

BASH: And McCain has a new ad out this afternoon on the theme of day. That is bipartisanship.

He talks right to the camera about working together to get things done. And politically, McCain really does have an urgent need to return once again to this theme of leadership. It had been one of his few clear strong suits, but his actions during this economic turmoil seems to have really chipped away at that.

Listen to this, John. A new Pew Research Center poll out shows that Obama now has a 13-point lead as the candidate best to handle the financial crisis, and it says that more Americans than ever, an unprecedented number, actually paying attention right now to economic news.

ROBERTS: This certainly is issue #1 for pretty much every American.

Dana Bash for us. Thanks, Dana.

Jack Cafferty is off today. We are standing by to bring you a batch of new battleground state polls. The ground appears to be shifting and our electoral map is changing.

Stick around to find out how and why. John King is at the magic board today.

Plus, the bailout's chances of passing the House after it was stunningly rejected on Monday. I'll ask Majority Leader Steny Hoyer if he has the votes to get it through. And I'll ask an opponent of the bill, John Shadegg, if he is having a change of heart.

And John McCain and Barack Obama in their own words on the bailout, what they're promising and who they're blaming now.

(COMMERCIAL BREAK)

ROBERTS: Well, right now we have a new slew of battleground state polls to unveil, along with some critical changes in CNN's electoral map. All of them suggest that the momentum is shifting Barack Obama's way.

First, Florida, Obama leads John McCain now by four points among likely voters in the CNN/"TIME"/Opinion Research Corporation poll. Florida and its 27 electoral votes remain tossup yellow.

Obama is also up by four points in Nevada. The state and its five electoral votes remains a tossup.

In Virginia -- listen to this -- Obama has a nine-point edge over John McCain now. The state and its 13 electoral votes still a tossup.

In Minnesota, and here's a change here, Obama leads by 11 points in our new poll. That is helping to push Minnesota and its 10 electoral votes from tossup yellow to light blue, leaning Obama. That is a switch back. It actually was leaning Obama before it tightened up the battleground status.

Missouri is changing, as well. Obama now to has a one-point edge there. Missouri and its 11 electoral votes go from light red, leading McCain now, to tossup yellow.

With those changes, CNN estimates that Barack Obama would have 250 electoral votes if the election were to be held today. John McCain would have 189. Of course, 270 are needed to win the White House.

Let's bring in the man who knows the electoral map backwards and forwards, our chief national correspondent, John King.

John, if you're John McCain and you're looking at these numbers and you're looking at the way the electoral map is changing now, what do you have to do?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: You have to move very quickly to fortify yourself in the reliably red states and then move on. First, you have to fortify what you need.

We just turned this back to yellow. Eleven electoral votes in Missouri. John McCain needs to keep those. And we'll give them to him here. He has to keep them there, he has to go back to Missouri, solidify that state. It is the Show Me State. It tends to pick the winner. John McCain needs to keep it.

Florida, another huge state, John. Look at this map now. I just gave John McCain back Missouri. Barack Obama is still at 250. If he could just win the state of Florida -- again, this will change in the next five weeks, but right now Barack Obama wins Florida, he's the next president of the United States.

Forget about Ohio. Forget Virginia. Forget Michigan and out West.

So John McCain needs to keep that in the Republican fold. That still only gets him back in the game. It doesn't get him back even.

This is the state no Republican's ever won the White House without it. It's both cliche and true. He has to solidify Ohio.

Even if he does that, he's in a tie with Barack Obama. And look at these battleground states.

This has been -- Colorado has been a red state, very close right now. John McCain is going to have to win that because look at these states.

This is Michigan. Wisconsin here, Michigan here. These are states that are likely to go blue based on everything we know today unless John McCain can change the dynamic hugely.

Now, we could come down in a scenario -- and you've gone through this yourself -- we could come down to a big fight for Virginia. We could come down to the four electoral votes up in New Hampshire. But right now what John McCain needs to worry about is the Republican red states -- Missouri, Florida, Ohio -- to start with, and only then if he can get those big three solidly in his column can he start looking elsewhere.

ROBERTS: When we look at what the battleground state polls are finding now, we remember how tight it was during the conventions. And you and I were talking to a group of people in which you said, could this be like 1980, where it was tight, tight, tight, and then suddenly broke one way? Are we at a tipping point here?

KING: A better question in 10 days, after we have the VP debate and another presidential debate. But based on what happened after the first debate -- and I'm going to go to a different map here -- we are potentially at a tipping point, because this is what happened last time, two years ago.

John McCain's most reliable voters have been those over the age of 50. Well, who are the voters in America looking at Wall Street? If you are over 50, especially the closer are you to 60, looking at retirement, you are very worried about what's happening on Wall Street.

Guess what? In that Pew poll Dana Bash was talking about a few minutes ago, two weeks ago John McCain was plus-15 points among voters over the age of 50. He is now minus two points.

And we looked at our own polling that you just talked about in the states of Missouri. A few weeks ago -- and I'm going to go to the county level here -- a few weeks ago, John McCain in this state, a significant older population, 50 and up in this state, John McCain was ahead a couple of weeks ago, his numbers in Missouri plus 11 among voters over 50. He's tied now.

Another key state where no one needs to be told the older voters are important, the state of Florida. John McCain was dead even in our poll two weeks ago, now he is trailing Barack Obama among voters over 50.

If I would watch one constituency group over the next week to 10 days, it would be voters over 50.

ROBERTS: Bread and butter issues, retirement issues?

KING: Retirement issues, looking at the 401(k)s. Those who have the most immediate stake in the financial crisis have gone from John McCain to Barack Obama in the last two weeks. It could just be moving at a time of crisis, but if that holds, very hard to see John McCain winning an election if Barack Obama keeps the edge he has gained in the last 10 days among voters over 50.

ROBERTS: Again, there was still frame in a moving picture. Five weeks left. That's an eternity in politics.

KING: Long time. Absolutely.

ROBERTS: John King, great analysis for us this afternoon. John, thanks so much.

For and against regarding the Wall Street bailout bill. One lawmaker might be inclined to vote for it now, while another is trying to get more people on board.

I'll talk with Republican Congressman John Shadegg and House Majority Leader Steny Hoyer about it all.

And some say the media just want to ask Sarah Palin questions like they do the other candidates. But conservative talk show host Hugh Hewitt says the media are conspiring to embarrass her. I'll ask him to explain.

(COMMERCIAL BREAK)

ROBERTS: The bailout bill that is up for a Senate vote tonight is a lot like the one that was defeated by the House but with some significant changes. Here's what both bills have in common.

Two hundred and fifty billion dollars would be available immediately to buy the troubled assets of financial institutions. The rest would be doled out in stages.

Both aim to protect taxpayers, in part by giving them an ownership stake in the bailout. And both address concerns of executive pay, putting limits on compensation to CEOs of bailed-out firms. Both provide oversight, including boards to protect America's economic interests, and insurance to guarantee companies' troubled assets.

The Senate bill adds these crucial provisions: an increase in the federal insurance on bank deposits from a cap of $100,000 to $250,000, and a package of tax breaks including relief from the alternative minimum tax for more than 20 million Americans.

Joining us now is the House majority leader, Steny Hoyer. He's on Capitol Hill.

Congressman Hoyer, what's the status of this Senate bill in terms of how it will be looked at by the House? It's expected to pass a vote tonight, which will occur shortly after 8:00. What do you believe the House will do with it?

REP. STENY HOYER (D-MD), HOUSE MAJORITY LEADER: Well, John, we're obviously considering the bill, the changes that have been made to the bill. Some people support part of it. The FDIC I think is broadly supported on both sides of the aisle.

I think the tax extender package, the AMT that you referred to, is more controversial. But clearly, we believe that this is a critically important piece of legislation for Main Street, for average Americans, for working families, to stabilize this economy and stop us going deeper into recession. So I think there's going to be a strong effort to see that we can pass this bill, hopefully on Friday.

ROBERTS: So, you plan, if you have bipartisan support, to bring the Senate bill to the floor on Friday.

We all remember what happened on Monday, where the bill was brought to the floor, there weren't the votes to pass it. It went downtown defeat, 206 to 226. And I'm wondering, would you risk that again, or would you only bring this to the floor if you know you had the votes?

HOYER: John, as you know, we had two-thirds of the Democrats voting for the bill which was proposed by the president and Secretary Paulson. Unfortunately, we were hoping to get and expecting to get 100 Republicans. We only got 65. And the bill went down.

So I'm going to be talking to the Republican leadership, Mr. Boehner and Mr. Blunt, to see where they are on votes before we bring it to the floor.

ROBERTS: Yes. Sorry, I believe I made a mistake in the actual tally. I think it was 206 to 228 against.

There's a chance though, as you mentioned, because some of these tax provisions are a little bit controversial with some members of Congress, the blue dog Democrats, as they call it, conservative Democrats, because the tax extensions on renewables, not fully paid for, some of the business tax extensions not fully paid for. Blue dog Democrats are saying, hey, we want to make sure there are offsets in legislation to pay for all of these.

Are you concerned that you might lose some Democrats on this bill?

HOYER: Certainly that's a possibility. John, the concerns are not so much about continuing the tax extenders -- that is the benefits, research and development tax, the taxes to help solar, wind, other energy sources. Clearly we're for that.

What the blue dogs are concerned about is paying for these and not making the deficit worse. That's the controversy.

The AMT, of course, was supported strongly by the House and the Senate in an unpaid for fashion. I didn't vote for it, but the House and Senate were strongly for it.

But I think that, frankly, an awful lot of people are going to look at this bill, not be pleased with what the Senate has done in adding those provisions that make the debt worse, but believe very strongly that passing this bill to stabilize the economy, reinstate confidence in the markets, is critically important for their constituents and their hometowns.

ROBERTS: What about Senator Obama? Should he be involved here? Is he involved here? Is he calling Democrats, perhaps some of the 95 that voted against this bill, is he calling the blue dogs to say, hey, we've got to sign on to this and we've got to get this passed?

HOYER: I think Senator Obama has made it very clear that he is for this for the same reason, he wants to make sure that average working Americans aren't hurt by a deeper recession, which may well result if confidence is not reinstated in the marketplace. So Senator Obama's playing his role, but very frankly, it wasn't Democrats that didn't perform as expected.

As a matter of fact, I indicated to the Republicans that we'd get between 125 and 130 votes, and we in fact got 140 votes. The real failure came in not getting the 100 Republican votes, notwithstanding the fact that the president called the Texans. We got very few Texans. Mr. Boehner only got his own vote from the state of Ohio among the Republicans.

So the fact is, we're going to have to wait and see what the Republicans do, whether they think this is important. And if so, whether they're going to vote for it.

ROBERTS: And what are you hearing from them here at this point?

HOYER: Well, they're working at it. We've worked in a bipartisan fashion for the last two weeks, as you know, worked around the clock, worked last weekend to try to put this bill in a shape that we could support it.

We made it much stronger. As you pointed out at the outset, we put in oversight. We put limitations on compensation. We put assistance for those whose mortgages were at risk.

So we've made some real improvements in the bill. But we need to have Republicans step up to the plate and support this bill. ROBERTS: And Congressman Hoyer, on this issue of bipartisanship, when the bill comes to the floor, should the bill come to the floor on Friday, will Speaker Pelosi get up there and, in her speech in support of the bill, rail against the Bush administration again? Because there are many Republicans who say that's what turned the tables on Monday.

HOYER: And there are I think more Republicans who say that's hooey. That had nothing to do with their votes. But if it did have, if a Republican voted against this bill, which we think was in the best interests of the country, because of a speech, then they frankly don't care much about the welfare of the country.

And in fact, Republican after Republican, particularly conservative Republicans, have said to their leadership, that was not accurate. They didn't vote against the bill because of anything that Speaker Pelosi said. It was because of their conviction. And Speaker Pelosi has worked very, very hard in a bipartisan fashion to try to make sure that this bill could pass.

ROBERTS: Congressman Steny Hoyer, thanks very much. Appreciate your time this afternoon, sir.

HOYER: Thank you.

ROBERTS: Questioning the questioner. The moderator for tomorrow's vice presidential tomorrow, Gwen Ifill, sees her long established journalist integrity questioned. We'll tell you why, and you decide if it's fair or not.

And he was against it, but could he be for it if it's changed? Congressman John Shadegg and the Wall Street bailout bill, I'll ask just what it will take to get him to change his mind.

(COMMERCIAL BREAK)

ROBERTS: You're in THE SITUATION ROOM.

And happening now: the financial crisis bringing business to a screeching halt for parts of the auto industry. Free flow of credit, that sector's life blood, how will it survive the crunch? CNN's Mary Snow takes a look for us.

Bill Clinton on the stump drawing huge crowds for Barack Obama, but the former president isn't just promoting Obama's campaign. We will tell you what else he wants voters to back.

And shifting shades. New polls out of several battleground states are changing some of the colors on the CNN electoral map. We will have the latest on the reds, the blues and the in-between hues.

Wolf Blitzer is off today. I'm John Roberts. You're in THE SITUATION ROOM.

Well, moments ago, President Bush came out and aimed a message to 100 senators: Be very careful what you do. The president says the Senate should very seriously consider the Wall Street bailout bill that it is set to vote on tonight.

CNN White House correspondent Elaine Quijano joins me. The White House wants quick passage, Elaine, and the president keeps coming out, imploring Congress to get it done.

It will be -- will tonight be the night that they do at least get part of this bill through?

ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Yes, well, you know, President Bush says that this bill is improved, in his words, and he says he is confident that it will pass. The president made those remarks just a short time ago in the Oval Office during a meeting with a top U.S. military commander in Afghanistan, General David McKiernan.

Let's take a listen.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: It's very important for members to take this bill very seriously. It is important to get credit flowing again so that small businesses in our communities will be able to finance their operations.

(END VIDEO CLIP)

QUIJANO: Now, the president has been working the phones today, lobbying lawmakers on this issue. The president also had a lunchtime meeting with his treasury secretary, Henry Paulson, as well as the Federal Reserve chairman, Ben Bernanke, talking about how the markets are taking all of this, especially the overnight credit markets, which, as you know, John, are so critical.

But aides here expressing the same confidence the president is. Aides are saying, look, we feel there's a sense of momentum now behind us. But whether or not that momentum, John, translates into passage, of course, is very much an open question -- John.

ROBERTS: Elaine Quijano for us at the White House -- Elaine, thanks so much.

My next guest voted against the bailout bill that was presented in the House earlier this week. We want to talk to him about what comes next.

Republican Congressman John Shadegg joins me from Phoenix, Arizona. Congressman Shadegg, good to have you with us. Thanks for your time.

The majority leader, Steny Hoyer, said just a few minutes ago that he would be inclined, if there is bipartisan support, to bring the Senate version of this bill to the House floor on Friday.

The Senate version, as it stands now, is that something that you could support?

REP. JOHN SHADEGG (R), ARIZONA: Well, I don't know that I know all of the details of the Senate version.

But I think there are two major improvements in that, that I have been asking for from the get-go. This accounting rule called mark to market, which has caused these assets to be marked down a value of zero, unrealistically, has been fixed.

I spent about an hour and 10 minutes on the phone with Commissioner Chris Cox yesterday, and I think they're making progress on fixing that. They issued guidance, as you know, to fix that.

The second issue that I talked about in op-ed I wrote yesterday and I have been pushing on is the issuance of FDIC insurance at a much higher rate, $250,000. Both of those are significant improvements. Now, conservatives don't like the basic structure that Secretary Paulson has selected, but that is an issue that I think was pushed off the table from the very beginning.

Secretary Paulson said, it was this structure or no structure. And I think the Senate has already taken him on that point.

ROBERTS: You mentioned mark to market, which now means that I have to try to explain this in very simple terms for folks at home.

The modifications would -- would simply be a way for financial institutions to place some sort of intrinsic value on a piece of paper that might at present have a value of zero. Now, I think there was...

(CROSSTALK)

SHADEGG: That's exactly right.

ROBERTS: Yes.

SHADEGG: I think I can explain it very quickly, if you want.

ROBERTS: OK. Go ahead.

SHADEGG: Ask -- if you ask somebody what price they could get for their home if they had the next year to sell it, they will give you one number. Now, imagine if you told them you have got to sell to your home, but you have got to sell it in the next hour. How much maybe could you get for it?

ROBERTS: Right.

SHADEGG: The answer is, you might get nothing. Mark to market says to the market, you have to price that asset as though you had to sell it in the next hour, which means it you might get nothing for a home that was worth $500,000.

ROBERTS: And the principle is that, over time, these assets might be worth more than they actually are now. But there was analysis...

SHADEGG: Not even might be worth more. They absolutely, clearly are worth more. That's how unrealistic the rule is. ROBERTS: But there was an analysis in "The Wall Street Journal" today on this -- on this whole issue that suggested that -- that modifying those rules, to some extent, would be sort of like letting the bankers run the asylum, that there might be some voodoo accounting that goes on, and we wouldn't really know what the value of all of this was. And, therefore, we wouldn't know what the actual value of these companies was.

I mean, isn't that why mark to market was initially instituted?

SHADEGG: Yes. It was instituted to correct a problem.

But it's been -- I think it's typical of Congress. They enacted it following the Enron scandal. And I think it went overboard. I think Chairman Cox will tell you that it has been overapplied. It's been applied in circumstances where it shouldn't.

But, understand, nobody is proposing that it be suspended and no rule be put in place. And Chairman Cox is working very carefully to work to something probably called mark to value, or at least that's what I call...

ROBERTS: Right.

SHADEGG: ... call it, where they will be close supervision. This isn't just going to be accounting playing around. This will be close supervision, but it will be a value that is much more realistic.

ROBERTS: Of course, just getting into the politics of all of this, Senator McCain made a big deal last week of suspending his campaign. He said he was going to work to bring unity in the Republican Party. Why couldn't he convince you to vote for the original version of the bill that came to the floor on Monday?

SHADEGG: Well, the bill had gotten dramatically better, quite frankly, exponentially better between when Senator McCain injected himself and said, in the Cabinet Room, that it was not a good bill, and that he thought House Republicans had a good idea.

But, unfortunately, from that point forward to the vote, all we were able to do is negotiate bad things out of the bill, negotiate this ACORN provision out of the bill, for one example.

ROBERTS: And have you been...

(CROSSTALK)

SHADEGG: We weren't able to get -- we weren't able to get good things into the bill.

ROBERTS: And have -- have...

SHADEGG: And now the president apparently says we're getting good things into the bill.

ROBERTS: All right. And have you talked to Senator McCain this time around?

SHADEGG: I have.

ROBERTS: And what did he say?

SHADEGG: He agrees that we were able to improve the bill. I thanked him very much. If he had turned in that room and said, OK, I'm with the Senate Democrats and Republicans and the House Democrats and with Henry Paulson, this deal would have been done several days ago. House Republicans would have been rolled. And it would have been a much worse bill, a much, much worse bill.

ROBERTS: All right. So, do you think you will be able to vote for it on Friday?

SHADEGG: I'm strongly leaning that way. In this business, it's trust, but verify. I want to read the bill.

(LAUGHTER)

SHADEGG: And, hopefully, I will be able to do that tonight.

ROBERTS: Congressman John Shadegg of Arizona, good to have you with us this afternoon. Thanks.

SHADEGG: Thank you.

ROBERTS: There is something missing from Barack Obama and John McCain's latest remarks about America's financial mess, the word bailout. Stand by to hear what the candidates are saying.

In our "Strategy Session": A new McCain attack ad calls Obama a -- quote -- "hypocrite." Will those tough words come back to haunt him?

And, later on, he said/she said -- on the eve of the Biden/Palin showdown, how political debates can be influenced when it's a man against a woman.

(COMMERCIAL BREAK)

ROBERTS: Fredricka Whitfield is monitoring stories incoming to THE SITUATION ROOM for us now. She's in Washington. What are you picking up, Fred?

FREDRICKA WHITFIELD, CNN CORRESPONDENT: Hello to you, John.

Well, dramatic testimony today at the corruption trial of Senator Ted Stevens. The Alaska Republican is accused of lying on Senate forms about receiving a quarter-of-a-million dollars in home renovations and other gifts. A wealthy oil pipeline contractor testified that he bankrolled renovations to Stevens' family chalet.

Well, Bill Allen says the senator asked to be billed, but he ignored the request after a mutual friend told him Stevens simply asked for the invoice for appearances' sake. Well, an urgent appeal from a top U.S. military commander in Afghanistan. General David McKiernan says he needs more troops on the ground as quickly as possible. He says an increasing number of foreign fighters are crossing into Afghanistan from Pakistan, posing a significant threat to NATO forces. The general is requesting thousands of additional troops, plus more helicopters and surveillance equipment.

And Russia will soon be flexing its military muscle in the Mediterranean. The Russian navy says four of its ships will sail into the Mediterranean Sunday and make several stops, before heading on to Venezuela. The maneuver is part of Moscow's first deployment to the Western Hemisphere since the Cold War. Russia vowed to plan maneuvers worldwide after defeating the former Soviet Republic of Georgia in a war over a breakaway republic last August -- John.

ROBERTS: Fred, thanks very much. We will see you again soon.

In the "Strategy Session": McCain likes to say he's the underdog. He's trailing in the national polls in key battleground states. How does he get back on track?

And, as the credit crunch churns, its effects are being felt in Michigan. Ford and General Motors posted double-digit sales declines. Mary Snow reports on the double whammy whacking the American carmakers.

(COMMERCIAL BREAK)

ROBERTS: New polls out of several major battleground states show Barack Obama gaining ground over rival John McCain. Will those changing numbers lead to a change in strategy for either Obama or McCain?

Joining us in today's "Strategy Session," CNN political contributor Hilary Rosen, editor at large of HuffingtonPost.com, and Republican strategist Kevin Madden, a former Mitt Romney spokesman.

Let's look at a couple of the battleground states. Let's put up the boards for Virginia here. There's a nine-point lead now for Senator Obama, ahead of John McCain 53 percent to 44 percent, in a solidly, reliably red state, Virginia. And take a look at Florida here now, as well.

John McCain had been leading. It was thought at one point, in fact, that -- that the Democrats had no chance in Florida. Look at this, Barack Obama ahead now by four points, 51 percent to 47 percent.

Kevin, what does John McCain need to do to try to turn those numbers around? Does he still have time to do it?

KEVIN MADDEN, FORMER ROMNEY CAMPAIGN NATIONAL PRESS SECRETARY: Oh, absolutely, he does. I mean, 30 days is a -- you know, 30-plus days is a very long time in a presidential campaign, John.

And what John McCain's going to do now is, he's really going to hammer away at the vulnerabilities that Barack Obama has with swing voters. You know, Barack Obama has gotten through this last year-and- a-half by convincing a lot of these swing voters that he's a pragmatic centrist, when he's anything but. He's a conventional politician who is very -- holds a -- views and has a record that is very much out of the mainstream.

So, John McCain has to, over the next 30 days, with a relentless precision, just hammer away at Barack Obama on his record and his very left-of-center world view.

ROBERTS: Hilary Rosen, the fact that we're all about the economy right now, even though there is more than 30 days left in this campaign, does the economy take such precedence as an issue here that any attacks on character and ideology may get lost in the noise of the concern about the economy?

HILARY ROSEN, DEMOCRATIC STRATEGIST: Well, Florida in particular has been super-hard-hit by the economy, particularly the real estate market, for all segments of voters.

You know, I have been saying for months, I think Florida is our sleeper state that Democrats are going to win and surprise people. But the -- you know, there's still several weeks to go here, and I don't think Democrats can take any of these numbers for granted. They're way too close for comfort.

But we should remember that people are going to start voting in just a couple weeks by -- by mail. And getting out the vote in the last three to four weeks of these campaigns in these battleground states is going to win the election for either side, you know, that -- how they do that.

(CROSSTALK)

ROBERTS: Right.

Kevin, as our John King was pointing out just a little while ago, John McCain has lost significant support among older voters, those 50- plus. How troubling is that?

MADDEN: Well, it's only troubling if today was Election Day.

I think that, over the next 30 days -- you have seen it happen the last 30 days, that women voters have been swinging back and forth, older voters have been swinging back and forth. But now's the time to make the argument to those voters on the economic issues, on the national security issues, and, again, draw those very distinct, sharp contrasts between John McCain's record as somebody who has been forging bipartisan accomplishment for 25 years, and Barack Obama, who hasn't had any accomplishments, and has a -- again, has a record that is every bit consistent with somebody who's been in Chicago machine politics for their entire career.

That's the charge John McCain has over the next 30 days.

(CROSSTALK) ROBERTS: You know, Hilary -- there are a lot of Republicans, Hilary, who are encouraging John McCain to go on the attack against Barack Obama, do many of the things that Kevin was just talking about.

With five weeks left, if -- if this bill gets passed in the Senate and House, two -- two weeks from now, it may be ancient history. And John McCain does very well, as we saw coming out of the Republican Convention, when he attacks Barack Obama on character, on integrity, and ideology.

So, could Senator Obama be in for a rough ride in the closing weeks of the campaign?

ROSEN: There's no doubt that John McCain is going to go negative in the next several weeks, because that will be the only shot he has, but a couple of things to keep in mind. Going negative didn't work very well for him over the last several days.

And, in fact, we saw the bipartisan John McCain today, the nicer guy, because he knew that going negative was ineffective. American people really want solutions. They want this to be a different kind of election. And I don't think he's going to be able to change Barack Obama's image over the next couple of weeks.

At the end of every election, something, some issue, you know, ends up being the most prominent in voters' minds.

ROBERTS: Right.

ROSEN: In the last election, 2004, it ended up being national security. And that favored George Bush.

ROBERTS: You know...

(CROSSTALK)

ROSEN: This time, it's going to stay on the economy. That's going to favor Barack Obama.

ROBERTS: You know, Kevin, going negative, voters don't like it. And it might not cut through the noise now, when issue number one is -- is so prominent in people's minds. But, historically, negative campaigning works, and it works because it suppresses voter turnout. And would that play in John McCain's favor?

ROSEN: Well, John, I think negative is when you try and portray another candidate as good or bad. And what -- it's in the eye of the beholder, essentially.

What John McCain has to do, again, is contrast. He has to create an environment, so that voters are looking at him and Barack Obama, and deciding which policies are right and which policies are wrong with regards to the direction of the country on economic issues and national security issues.

When John McCain draws those contrasts and makes -- makes sure that voters know that he has the right solutions, that he has the record of accomplishment, he will win.

ROBERTS: You know, as we keep on saying, Hilary Rosen, that these polls are simply a still frame of a moving picture, do you think that these could tighten back up again, or, as we have seen in some elections in the past, we could be, if not at, close to a tipping point?

ROSEN: I don't think we're at the tipping point yet.

I think that we -- we're relatively certain that these polls will stay close for several more weeks, as people begin to, you know, look back and forth at what's going on here.

ROBERTS: Mm-hmm.

ROSEN: The -- the issue, I think, though, for John McCain is, he's going to try and make Barack Obama be the risky choice.

And I think people are worried enough about their own lives. We have another bad jobs report coming out this week, 100,000 more jobs lost, the worst in five years. Barack Obama is not going to seem risky. He's going to seem like the opportunity for change. And that's why I think John McCain is not going to succeed in -- in scaring people away from him.

ROBERTS: We will have to make that the final word.

Hilary Rosen, Kevin Madden, good to see you. Thanks for coming in for our "Strategy Session" today.

MADDEN: Good to be with you, John.

ROBERTS: All right.

Silent no more.

(BEGIN VIDEO CLIP)

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: So, he's got a better philosophy. He's got better answers.

(END VIDEO CLIP)

ROBERTS: President Bill Clinton is off the sidelines and in Florida campaigning for the Obama/Biden ticket.

And she is known as a straight shooter, but her soon-to-be- released book has some conservatives wondering if Gwen Ifill should be moderating tomorrow's Palin/Biden debate.

(COMMERCIAL BREAK)

ROBERTS: On our "Political Ticker": Barack Obama makes a promise to Americans regarding what's happening with the financial crisis. Listen to what he said today in La Crosse, Wisconsin.

(BEGIN VIDEO CLIP)

OBAMA: This will only work if there's real enforcement and real accountability. And that starts with presidential leadership.

So, let me be very clear. When I am president, financial institutions will do their part and pay their share, and American taxpayers will never again have to put their money on the line to pay for the greed and irresponsibility of Wall Street.

(CHEERING AND APPLAUSE)

OBAMA: That's a pledge I make today, and it's one I will keep as president of the United States.

(CHEERING AND APPLAUSE)

OBAMA: Now, accountability must start with this rescue plan, but it can't end there. Across Wisconsin, across the country, families are sitting down at the kitchen table and making hard choices.

You're planning for your future in tough times. You're squeezing just a little bit more out of next month's paycheck, so you can pay next month's bills. It's time for Washington to do the same. We can't mortgage our children's future on a mountain of debt. I look at all these young people here today, and I say to myself, the notion that we are loading up more and more debt on a war in Iraq that I believe should have never been authorized, it should have never been waged...

(CHEERING AND APPLAUSE)

OBAMA: ... on tax cuts for multibillion-dollar corporations and some of the wealthiest Americans, that is not a good investment in the future.

We can't run up a credit card, have a party, and leave our children to pay the bill.

(CHEERING AND APPLAUSE)

OBAMA: It is time -- it is time to put an end to the runaway spending and the record deficits. It's not how you would run your family budget. And it must not be how Washington handles your tax dollars.

(END VIDEO CLIP)

ROBERTS: Well, John McCain is also making a promise of sorts. Listen to what he said today from Independence, Missouri.

(BEGIN VIDEO CLIP)

MCCAIN: As president, I will also act immediately with reforms to restore fairness, integrity, and financial sanity to the institutions that have failed us on Wall Street.

(APPLAUSE)

MCCAIN: We will apply -- apply new rules to Wall Street to end the frenzies of speculation by people gaming the system, and to make sure that this present crisis is never repeated.

We will bring regulatory agencies built for the 1930s into the 21st century. On my watch, the rules will be enforced, and violations will be prosecuted, and people will be held responsible and accountable.

(APPLAUSE)

MCCAIN: And there will be new rules to shrink, sell and clean house at Fannie Mae and Freddie Mac.

(CHEERING AND APPLAUSE)

MCCAIN: Now, we must also realize that this rescue plan has serious implications for future spending. We can't dedicate more than -- possibly more than a trillion dollars to rescue failing institutions, and then go right back to business as usual in Washington, as if there were no end to the resources of government or the patience of the taxpayers.

(APPLAUSE)

MCCAIN: Therefore...

(APPLAUSE)

(END VIDEO CLIP)

ROBERTS: And we're going to want to take a look now -- this is live on Capitol Hill in the Senate. And Senator Barack Obama is speaking on behalf support for this bailout bill.

Let's -- let's listen in.

(JOINED IN PROGRESS)

OBAMA: ... neighbor sleep in his bed or leave the stove on. Right now, we want to put out that fire. And now is the time for to us come together and do that.