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Whiplash on Wall Street; John McCain Offers Second Economic Proposal This Week; Obama: Don't Be 'Hoodwinked'

Aired October 10, 2008 - 16:00   ET

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


WOLF BLITZER, CNN ANCHOR: Happening now, breaking news, the whiplash literally on Wall Street. The stock market ends an historically bad week with a stunning seesaw in crisis before the closing bell just seconds ago. Robert Rubin, the former Treasury secretary under Bill Clinton, he's standing by live to help us better understand what's going on.
And John McCain and Barack Obama in a tit-for-tat over the economy. They're offering new proposals and new swipes at one another.

Plus, a new report on Sarah Palin's firing of her public safety commissioner. Alaska lawmakers right now are reviewing it in secret. Will the findings be made public in the next few hours?

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

It was a cliffhanger right until the closing bell. Stock traders pressed the sell button or the buy button after a week of devastating losses. They did some of both, sending the Dow Jones industrials on a heart-stopping swing, up and down, up and down by the hundreds ever points.

Just seconds ago, the Dow ended the day. Right now they're still tabulating the final numbers, but it looks about 40 points down, at least right now. No real relief yet, but at least the historic and painful week of trading is over.

Let's bring in our senior business correspondent, Ali Velshi. He's been following all of this for us.

It's down about 79 points, Ali, right now. All right, update us on what exactly happened today.

ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: What a day. What a day, Wolf. You put it well.

In fact, we have seen this all week. It's going to take a few minutes to settle in. We are down about 95 points. But right into the closing bell, within six minutes of the closing bell this morning, this Dow was down almost 700 points.

It was forceful and it was fast. And it made some people think it was something called capitulation, heading toward the bottom. And today, all day, back up and down, around that 8,000 level, testing it, testing it. Every time it pushed below it, it came up. That said to some people, that's a resistance level, we are exploring the bottom of this market.

And then closing the day around the 8,500 mark. What a relief to an end of a week that has been seven days of losses. This is the eighth day of losses, but still pretty incredible.

It leads people to ask you, where are we in this whole thing? Even if the market starts to find a bottom, Wolf, we are not anywhere out of this recession.

And I talked to our friend Lakshman Achuthan of the Economic Cycle Research Institute. He has written the book literally on recession. And I wanted to see where we were.

This recession that we are in right now, Lakshman said it began at the beginning of this year. He came over and said it on our air, and a lot of people think that's the case, even though there are some people in Washington who won't say that we're in one. This is a global recession, and this is where the problem starts.

In 2001, we had a recession, and it lasted eight months. The recession before that, which was in 1991, also eight months. That seems to be the sort of average.

But before 1991, we had a recession from 1981 to 1982. It too was a global recession, not just a U.S. recession, and it lasted 16 months.

What happened before 1981? In 1980, we had a recession that was just a U.S. recession, also relatively short, six months. And before that, we had a global recession in 1973 and to 1975, and that lasted 16 months.

So localized recession lasts about eight months in this economic era, and globalized recessions last about 16 months. We still have to decide where we think we started this recession, but if we are in a global recession, we may only be halfway through it.

So, Wolf, even if this signals a bottom -- and that doesn't mean that stocks don't go down in the next days, weeks, even months -- but even if this signals a bottom in a market, we still may be less than halfway through this entire recession -- Wolf.

BLITZER: Because economists have always said, as you know, Ali, you're not in a recession until there's two consecutive quarters where the GNP guess down. That technical definition I don't believe has been met, at least here this the United States.

VELSHI: That's right. And increasingly over the last several years, most economists say the way things have changed, that's no longer the best way to measure a recession. They talk about over a series of months, indicators across many different economic gauges that we use. We still have unemployment coming. We have lost 750,000 jobs. We'll probably lose more. And no one expects that home prices are not going to stop dropping, at least for a little while -- Wolf.

BLITZER: All right, Ali. Stand by. We're going to get back to you.

Right now the Dow down just more than 100 points. They're still tabulating, they're still calculating the final sells, and we'll get the official number. That's coming up in a few moments.

Let's move on to the intersection between the economy, which is obviously very bad, and politics. John McCain responding to the fresh turmoil in the markets by offering a second major economic proposal this week alone. It's aimed at trying to protect senior citizens who rely on their investments for retirement.

Let's go to CNN's Dana Bash. She's in Minnesota for us, one of those battleground states. All right. He comes up with another proposal. What did he recommend, Dana?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, you know, he didn't do it with a lot of fanfare, Wolf, and basically an adviser just moments ago finished up a conference call trying to fill in the blanks. But I'll tell you, what we saw today is anything but John McCain trying to move away from economic news. They understand inside the McCain campaign that he has to try to get out from under the crush of bad economic news because they admit it has been devastating to his campaign.

(BEGIN VIDEOTAPE)

BASH (voice-over): As the stock market tumbled for the 10th straight trading day, a surprise from John McCain. A call to let investors nearing retirement keep their stock instead of being forced to start selling their 401(k) and IRAs in this chaotic market.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Current rules mandate that investors must begin to sell off their IRAs and 401(k)s when they reach age 70.5. To spare investors from being forced to sell their stocks at just the time when the market is hurting the most, those rules should be suspended.

BASH: Much like his debate night proposal for the government to buy homeowners' bad mortgages, McCain did not make clear to voters he was putting forward a new idea. He left it to aides to confirm that this is indeed a fresh attempt to show voters he is in touch with their deep economic anxiety.

The voting bloc he is targeting, older Americans, is crucial. And it's an area McCain seems to be winning. A recent national poll shows McCain has a 10-point edge over Barack Obama among voters 65 and older. McCain is still pounding away at his home stretch theme against Barack Obama, calling him untrustworthy.

MCCAIN: Senator Obama will try to distract you from noticing that he never answers the serious and legitimate questions he has been asked.

BASH: Here, McCain did not mention William Ayers, but he did in this new negative TV ad.

NARRATOR: When convenient, he worked with terrorist Bill Ayers. When discovered, he lied. Obama: blind ambition, bad judgment.

BASH: And to supporters raising concerns this week about Obama's rise, he offered this...

MCCAIN: How many times, my friends, have the pundits written off the McCain campaign? We're going to fool them again. We're going to fool them one more time.

(END VIDEOTAPE)

BASH: And on that new TV ad, Wolf, the ad certainly is probably the harshest that we have seen from the McCain campaign yet. CNN and other news organizations have reported that the two men simply were not close; however, the McCain campaign insists that they are going to still keep hitting Obama on this because they say that this is an example of how Obama has not told the truth, has had different explanations for the nature of their relationship back in the 1990s, when Obama lost the political career. As well you know, the Obama campaign says this is scurrilous and nothing is true in this ad -- Wolf.

BLITZER: All right, Dana. Dana's in Lakesville, Minnesota, outside Minneapolis. Dana's going to be back with us.

Barack Obama, meanwhile, is trying to keep his political edge with voters when it comes to the economy. Today he is offering a new proposal of his own to help bolster small businesses around the country, and he is warning Americans not to be "hoodwinked" by Republican policies.

CNN's Suzanne Malveaux has been traveling with Obama in Ohio -- Suzanne.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, this community of 22,000 was once a booming industrial town, but now a lot of people are suffering. And despite a lot of the support for McCain, Barack Obama believes that he can win the support of some social conservatives and Independents by addressing their economic concerns.

(BEGIN VIDEOTAPE)

MALVEAUX (voice-over): In the make-or-break state of Ohio, the town of Chillicothe usually signals the outcome. So Barack Obama is here in the heart of the community that twice elected President Bush.

Ross County has an 8.6 percent unemployment rate. This year, 12,000 Ohio voters lost their jobs. Obama linked his call for unity to economic reform. SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: We can come together to restore confidence in the American economy. We can renew that fundamental belief that in America, our destiny is not written for us, it's written by us.

MALVEAUX: Obama accused John McCain of using the economic crisis to divide.

OBAMA: Nothing is easier than riling up a crowd by stoking anger and division. But that's not what we need right now in the United States.

MALVEAUX: A McCain spokesman responded that Obama is using the crisis to deflect legitimate criticisms of himself and his record.

Both candidates are competing to come up with new ideas to address the financial crisis. On this day, Obama proposed a small business rescue plan which would provide short-term loans to help pay for immediate expenses. For some voters, Obama's message resonates.

UNIDENTIFIED FEMALE: I'm a single mother, and I took a 40 percent pay cut in my job. I'm a flight attendant and I work two jobs. I substitute teach on my days off.

UNIDENTIFIED MALE: He is the better of the two people and he can give us something that we need and we want, where the other one I'm afraid will still go with the upper echelon or the rich.

MALVEAUX: But other voters are not convinced.

UNIDENTIFIED MALE: It's almost like the old story about the South American dictators who promised chicken in every pot. And that's kind of where he's coming from, promising everybody, but I wonder whether he will actually be able to deliver any of it.

(END VIDEOTAPE)

MALVEAUX: Many voters are questioning whether or not President Bush can deliver any relief before handing over this financial mess to the next administration -- Wolf.

BLITZER: Suzanne, thank you very much.

Jack Cafferty is off today.

Is there any cure for America's financial emergency? I'll ask the former treasury secretary who helped turn the economy around during the Clinton administration. Robert Rubin, he's standing by live. There he is.

Plus, Alaska lawmakers are behind closed doors reviewing an investigation of Governor Sarah Palin and why she fired her public safety commissioner. Big questions right now about whether the public will get to see the findings.

We're standing by live in Anchorage. And House Democrats renew their call for yet another injection of cash into the troubled economy. Would it help your finances or their election prospects?

Stick around. Lots more coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: In the midst of this economic crisis, Treasury Secretary Henry Paulson certainly playing a prominent role. Back in the mid-90s, Robert Rubin was in Paulson's shoes, heading up the Treasury Department. He was the secretary of the Treasury under Bill Clinton.

Secretary Rubin is joining us now live from New York. Mr. Secretary, I wish we were meeting under different circumstances. Have you ever seen in all your years, whether going back to Goldman Sachs, when you were treasury secretary, have you ever seen personally anything like this?

ROBERT RUBIN, FORMER U.S. TREASURY SECRETARY: Not in an American perspective, Wolf. These are the most difficult and uncertain and complex condition that this country has faced in the financial markets since the 1930s, though it is not the 1930s. That was a very different set of conditions. But this really is a perfect storm.

I do think that the Asian financial crisis, as it affected Asia and Russia, and the Mexican crisis, as it effected Mexico, had many similarities to what we are facing now. But now it's happening in our country, and I think there is a lot you can learn from having thought about how we addressed those crises in the '90s as you think about what we need to do here and, in fact, some fair measure are doing.

BLITZER: Well, I remember those crises in Asia, and I remember what you were doing. Well, what lessons did we learn from then that should be applied right now? In other words, what needs to be done to turn this around?

RUBIN: I think that absolutely the number one key -- and I think Henry Paulson -- Hank Paulson -- and Ben Bernanke and Tim Geithner at the Federal Reserve Bank in New York have been doing this -- is to be highly, highly proactive. And then the Congress did it in the recent emergency legislation, highly, highly proactive with respect to policy. And a great deal has been done.

The recent emergency program, now it has to be implemented in a wise and sensible fashion. And I think very well of Hank Paulson. I think we're in very good hands with Hank there.

The Federal Reserve system has taken a number of unprecedented measures. I think the single most important thing we could do that we haven't done is something that Senator Obama has been proposing for quite some time now, which is a major fiscal stimulus. And very importantly, if we do that, it has to constructed in a way to have immediate effect and to get the most impact for the money you spend. And I think it also needs to be married with a commitment to on the long term, reestablishing fiscal discipline.

BLITZER: I know you support Senator Obama. You support him strongly. Let's talk about that stimulus, because Nancy Pelosi and others now are saying there should be another economic stimulus package. What would you see that package including?

RUBIN: Well, I do think there are a lot of choices you can make. What I would do, and it very much follows what Senator Obama has suggested -- and as you probably know, he has met with a number of us -- Paul Volcker, Larry Summers, myself, Laura Tyson, and others, quite a number of times now to think this through. I would put in place an infrastructure piece, because there are a lot of infrastructure projects that are in place.

(CROSSTALK)

BLITZER: What does that mean, an infrastructure...

RUBIN: Oh, bridges, water systems, roads, highways. But not new projects that are going to take a listening time to set up, Wolf. There are a lot of projects under way, particularly where states and cities now are having trouble finding financing. We could funnel that money right into existing activities so that you would be able to act very, very quickly.

BLITZER: Is that going to stimulate the economy and create jobs as well?

RUBIN: Oh, yes. What that would do is create economic demand. So that stimulates the economy, and it very directly creates jobs in the infrastructure. And furthermore, since our country really has very serious needs in the infrastructure area for the long term, at the same time it's doing something very useful for the long-term good of our country.

I also think there are a number of measures that we could take that would provide immediate additional demand in the economy that would help middle income people and poor people weather very difficult things.

BLITZER: Like what?

RUBIN: Well, one example would be the proposal that Senator Obama made, which is a rebate to make up for the high price of gasoline. That would help middle income and lower income people meet their gas and heating bills, and at the same time, it is providing an additional stimulus for the economy.

BLITZER: Where is the federal government going to get all of this? You are talking about tens of billions of dollars for another additional stimulus package. The federal government just put up $700 billion for the bailout, as it's called, the bailout package. Where is all this money coming from?

RUBIN: Well, the $700 billion is not going to be what it's going to cost the government. It will cost the government some fraction of that, because they'll be buying assets or injecting equity and getting...

(CROSSTALK)

BLITZER: We hope. We hope.

RUBIN: Well, Wolf, I think I sort of -- I know a touch about this thing. I think no matter what happens, it will cost the government something, but I think that something will be a relatively small portion of the total -- and in any event, it's certainly not going to be anywhere remotely like the whole $700 billion.

Secondly, the government can spend money now when we are in trouble. And then what it should do is what Senator Obama said in his stimulus package and his presentation, which is, commit to reestablish sound fiscal conditions over the long term, once we are past this immediate crisis, so that we can maintain the confidence in our markets.

And one of the concerns you have to have is, if the international markets lose confidence and you are a long-term fiscal position, then that could undermine our interest rates and our currency right now, which could hurt us right now, which is why I think that he was very wise in marrying fiscal stimulus now with a long-term commitment to reestablish fiscal discipline.

BLITZER: People are worried about their jobs, as you know. We have already lost 700,000 jobs since January 1st. In order to keep up with the population, if you will, you need to create about 100,000 jobs a month just to stay even.

How many more jobs are we talking about in the balance of this year and next year? Because this recession, a lot of people say it could be long, it could be deep.

RUBIN: Wolf, I don't know the answer to that, and nobody knows the answer to that. When you start getting into the question of trying to predict outlooks -- and as you said, I've been around this for a long, long time, including running Goldman Sachs at one time, and then being in the government, I don't think predictions are worth very much.

I think what is very important is to do what you think makes sense. And in this case, I think it is to be highly proactive in as many ways as we can think of, to provide relief for middle income and lower income people, because that also -- not only does it help the American people directly, but it creates demand in our economy. And we have to -- we have to focus on fixing our financial system, because that has an enormous effect on Main Street, jobs and standards of living.

And that, it seems to me, in the broader sense, is what we should be doing. And at the same time, we should be working with the rest of the globe, because we do have now very serious difficulties around the globe.

BLITZER: And leaders from the International Monetary Fund, the World Bank, they are gathering in Washington this weekend, leaders from the G-7. The Italian prime minister, Berlusconi, is recommending that all the markets worldwide be shut down, at least temporarily.

Is that a good idea? Is that a bad idea? Because this is a global economic crisis, as you point out.

RUBIN: I think that that is a genuinely bad idea, because what happens when you close -- the experience, at least, with closing markets in other countries is that when you do, you have pent up demand or pent up anxiety. It increases anxiety. And then when you reopen them you have all kinds of problems.

What I think the leaders of the global economies -- major global economies can do is as they did this week -- act cooperatively both with respect to rate cuts and with respect to their programs, to support financial systems and to create jobs, so that you get a cooperative global endeavor. There is a lot of advantage in that kind of cooperative endeavor.

We met, about -- I think it was -- I've forgotten exactly -- about three or four weeks ago with Senator Obama. He had Paul Volcker, Larry Summers, Laura Tyson, myself and others. And one of the things he talked about then was reaching out -- what this country should do is reach out to the leaders of the other major economies to work together, and that that would be far more effective than just working on our own. And I think that's right.

BLITZER: Robert Rubin, the former treasury secretary. Thanks very much for coming in, Mr. Secretary.

RUBIN: You're more than welcome, Wolf. It's very nice to be with you.

BLITZER: I hope the next time we speak things have turned around, although a lot of people are not necessarily holding their breath.

RUBIN: Well, we will find out. Sooner or later, Wolf, this will turn.

BLITZER: But the question is, when is that?

RUBIN: And nobody knows the answer to that, but if you look at all past crises, they have within them a self-generating dynamic, and ultimately they do turn. But the critical thing is to do everything we can in the meanwhile to hasten that process.

BLITZER: Mr. Secretary, thanks very much.

RUBIN: You're more than welcome.

BLITZER: Will November 4th be Independents Day? Independent voters who haven't decided whom they are voting for could decide this presidential race. You're going to find out where many of them live. Are you one of them? And a senator whose reputation is taking a beating calls for help form a man with a very positive reputation. Ted Stevens gets help from Colin Powell in the senator's corruption case.

Lots more coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Senator Obama has been swinging through Ohio. John McCain not very far behind. Both candidates are targeting Ohio. Its 20 electoral votes critical to their White House hopes.

So what might Ohio voters consider when they decide to vote?

CNN's chief national correspondent, John King, is in Columbus right now. John, I know you've been talking to a lot of people. No state, at least right now, is more important than Ohio. What are you hearing? What are you seeing?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Wolf, in the Obama campaign, they think by winning these 20 electoral votes here in Ohio, that that alone could put Barack Obama in the White House. We have been spending our time here trying to get a first-hand look at all this economic volatility you have just been talking about, and we saw this painfully up close in the tiny town of Ashland, where the Archway Cookies factory shut down, 200 people or more lost their jobs and their health insurance overnight.

It was painful to spend time with them. It's a small community, Wolf, Ashland County, that normally in presidential politics votes Republican.

(BEGIN VIDEOTAPE)

KING (voice-over): Walk the crowd, and there are rumors the banks cut off credit, a buzz the machines were trucked overnight to a bakery in Canada.

UNIDENTIFIED FEMALE: They own (INAUDIBLE).

KING: And a numbing sense among people like Diana Anderson (ph) that nobody outside this little town will care much.

(on camera): Do you think the government and the corporate culture and the political culture, forgive me, gives a damn about people like you?

UNIDENTIFIED FEMALE: No, they absolutely don't. Absolutely don't. That's obvious.

KING (voice-over): Anderson (ph) is absolute in her opposition to abortion, usually a reliably Republican vote for president. Not this year.

UNIDENTIFIED FEMALE: Definitely Obama.

KING (on camera): Definitely? No question?

UNIDENTIFIED FEMALE: Definitely. No question about it, I'm definitely going to vote for Obama.

(END VIDEOTAPE)

KING: Now comments like that from Anderson (ph), and there were several others like her there, Wolf, in tiny Ashland. Ashland, a community where Hillary Clinton trounced Barack Obama back in the Democratic primaries and normally votes for Republican come November in races for President. But comments like those have the Obama campaign encouraged.

They believe those blue collar voters are beginning to trend their way because of all the volatility in the financial markets and in the broader economy. Still, though, the Democrats here and their allies in organized labor do see some signs of trouble.

(BEGIN VIDEOTAPE)

KING (voice-over): In Ohio and several other major battlegrounds, the race issue is an urgent focus, as increasingly optimist Democrats and their allies confront what many believe is the last potential barrier to victory.

At this labor rally in Cleveland, union leader Jerry McIntee's (ph) frustration spilled into the open.

And this doesn't even come out close. It comes out like this: "I can't vote for him because he's a black man. He's not one of us."

Well, sisters and brothers, when you hear that, you know what you ought to say? This is what I...

(END VIDEOTAPE)

KING: And Wolf, you hear the urgency there in Jerry McIntee's (ph) voice because of their fears that many white union workers won't vote for Barack Obama simply because he is black. The AFL-CIO is spending $200 million nationwide. Now, not all of it focusing on the race issue, but quite a bit of it is.

You see flyers like this showing white working class families offering testimonials to Barack Obama, urging union members to vote for the African-American candidate. And you also see flyers like this -- again, white working class voters on the cover of this flyer, inside saying, yes, there are some legitimate questions about Barack Obama.

Inside here, "Is he a Christian? Was he sworn in on the bible? Was he born in America? Does he say the Pledge of Allegiance with his hand over his heart?"

So, as optimistic as the Democrats and the labor unions are, Wolf, that the economy is trending this election here in Ohio and across the major battleground states their way, the fact that they are still worried about the race issue, still worried about these rumors on the Internet, shows you that as confident as they are, they're still quite worried that they have a lot to do in the three-plus weeks now we have, Wolf, now between now and Election Day.

BLITZER: I assume there are still plenty of Obama supporters who are concerned. They are looking at the latest Poll of Polls, the battleground polls, if you will, in Ohio, and they see Obama slightly ahead, but they discount it because, what, they assume some people aren't not necessarily telling them the truth?

KING: It's that so-called Bradley effect, Wolf. The former Los Angeles mayor, Tom Bradley, ran for governor of California back in 1982, was well ahead in the polls, didn't win on Election Day. So there is a discounting, some pollsters say, as much as four percent of people, white voters who say they'll vote for an African-American candidate who in the end will not.

So a small lead of four or five percentage points will not inspire total confidence in the Obama campaign. But he was in Portsmouth, Ohio, just last night. That is one of the communities we have visited where we do see a race factor. Obama, his allies, the labor movement, is critical to this, Wolf, doing all they can. But you are dead right in saying that, let's say he goes into Election Day up three or four points here in Ohio, that they will be far from confident that that's how it will turn out when the votes are counted.

BLITZER: John's going to have a lot more on this story. He's done a lot of excellent reporting from Ohio for a special that will air here on CNN tomorrow night, 9:00 p.m. Eastern. John King's special, "The Next President: Battlegrounds." He will be in Ohio for that. You'll want to check in and see that.

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

Happening now, the campaigns are raking in millions in donations. How much attention is being paid to where that cash is coming from? We're investigating what they describe as bogus donors.

We're also checking the facts as the candidates roll out brand- new ads. Did Barack Obama lie about his relationship with Bill Ayers, as the McCain camp now claims?

And will John McCain's plan for bad loans to be bought up hurt taxpayers, as the Obama camp claims?

And the bad economic times, a boon for boot camp. We are looking closely at why the U.S. military is having one of the best recruiting years in quite a while.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

It could say -- it could say she did nothing wrong or contain some sort of smoking gun, an investigator's report into whether or not Governor Sarah Palin abused her power when she fired a state worker who refused to fire Palin's former brother-in-law.

Today, Alaska lawmakers, they're huddled right now in secret to review the final report.

Let's go to our justice correspondent, Kelli Arena. She's working this story for us.

What do we know at this point, Kelli?

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Well, Wolf, Alaska lawmakers are still meeting in Anchorage to discuss that report. They remain behind closed doors. But here is some background on the issue.

(BEGIN VIDEOTAPE)

WALTER MONEGAN, FORMER ALASKA PUBLIC SAFETY COMMISSIONER: I wished I could have done it longer.

ARENA (voice-over): Walt Monegan says he lost his job because he wouldn't fire Sarah Palin's ex-brother-in-law, Mike Wooten, a state trooper. Monegan was Alaska's public safety director, until this past summer.

(BEGIN AUDIO CLIP)

MONEGAN: I believe I was fired because I did not fire Mike Wooten.

(END AUDIO CLIP)

MONEGAN: Palin's sister and Wooten went through a nasty divorce in 2006. Todd Palin said in an affidavit that Wooten exhibited violent behavior, had drunk beer in a squad car, and was unfit for the job.

Still, both Palins insist that they never told Monegan to fire Wooten. Sarah Palin says that Monegan was let go because he did not embrace her platform of reform.

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL CANDIDATE: It's a governor's right and responsibility to make sure that they have the right people in the right place at the right time.

ARENA: But accusations that she acted inappropriately persisted. And Alaska's legislation launched an investigation this past summer.

(END VIDEOTAPE)

ARENA: Now, it is still unclear whether that report on the investigation will be made public, Wolf. Before they went into the closed session this afternoon, some lawmakers questioned whether there were legal issues that still had to be considered. Hopefully, we will find out more in the next few hours.

BLITZER: And, as soon as you do, you let us and our viewers know, right, Kelli?

ARENA: Sure will.

BLITZER: Thanks very much.

The group of voters that helped Ronald Reagan and Bill Clinton win the White House are swinging to Barack Obama right now, at least if the current poll numbers are correct. Bill Schneider is standing by to explain.

And Montana's governor, Brian Schweitzer, knows how to get a crowd on its feet. I will ask the Democrat if the McCain/Palin campaign has crossed the line in its efforts to rev -- rev up its supporters.

Stick around, lots of news happening today -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Americans are certainly struggling with high anxiety right now. They also have low confidence in the financial markets, as well as job losses and debt gains.

And some lawmakers want you to know, more help could soon be on the way. Some Democrats are pushing another plan to pump money into the economy and help Americans, millions of them.

Let's go to CNN's Kate Bolduan. She is working the story for us. All right, Kate, what's the latest? What are you picking up?

KATE BOLDUAN, CNN CORRESPONDENT: Well, we are talking about a pretty hefty price tag here, Wolf.

Looking at another tough week in the markets, and states from coast to coast facing some serious budget concerns, Democratic leaders say, Congress may now need to come back for another cash injection.

(BEGIN VIDEOTAPE)

BOLDUAN (voice-over): Tennessee is looking to cut the state work force by at least 2,000 employees. Nevada, coping with a drop in housing values and tourism, is asking state agencies to reduce spending by 14 percent. Virginia's governor, Tim Kaine, announced he's laying off almost 600 employees to deal with a $2.5 billion shortfall.

GOV. TIM KAINE (D), VIRGINIA: We are not like the federal government, where, when there is a big gap between revenue and expenses, we just crank up the debt machine.

BOLDUAN: Pointing to harsh realities like these, congressional leaders renewing the call for another economic stimulus package, likely hauling Congress back for a vote right after the election next month.

REP. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE: So, we have some very harsh decisions to make, and some of them cannot wait until January. BOLDUAN: A spokesman for House Speaker Nancy Pelosi says the package could cost as much as $150 billion. The first stimulus package approved in February cost $170 billion. It focused on kick- starting the economy through rebate checks to consumers.

But Democrats say, they need to do more -- the focus this time, help for struggling states and money for infrastructure, like roads and bridges, to spur job creation.

PELOSI: A package that creates good-paying jobs in our country by investing in our infrastructure, a package that recognizes that many people have lost their jobs in this period of time, and we need unemployment insurance.

BOLDUAN: While many Republicans have supported unemployment assistance, Republicans were largely opposed to a smaller economic aid measure Democrats pushed in September.

Republican Congressman Tom Davis is skeptical of Democratic motives.

REP. TOM DAVIS (R), VIRGINIA: It is just politics. And throwing money at the problem is the way they want to do it. If it is so important to stimulate, and they have got the plan, they ought to come forward with it now.

(END VIDEOTAPE)

BOLDUAN: But aware of how concerned people are about the economy, many Republicans who already supported the Wall Street bailout are not voicing outright opposition to this, instead saying they want more details.

Now, Speaker Pelosi and other Democratic leaders, they are coming back to Washington Monday to meet with economists to -- to discuss some of those details, including how big a stimulus should be -- Wolf.

BLITZER: Kate, thanks very much.

We heard Robert Rubin earlier, he thought a stimulus package right now would be a good idea as well.

Shortly after the markets opened today, President Bush tried once again to restore confidence in the overall U.S. economy. In remarks over at the White House, he detailed recent federal measures to try to ease the financial crisis. It was the 26th time in about a month that Mr. Bush has issued a broadcast or made a written statement about the economy.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The government's top economic experts warn that, without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

BUSH: The reality is that we are in an urgent situation, and the consequences will grow worse each day if we do not act.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

BUSH: We have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

BUSH: The United States government is acting. We will continue to act to resolve this crisis and restore stability to our markets.

(END VIDEO CLIP)

BLITZER: The market slide certainly has dire sequences for the U.S. auto industry, and now an effort to try to save carmakers in this country under way. We will have details.

And Obama supporters on a journey to Florida to visit with Jewish grandmas and grandpa.

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

(COMMERCIAL BREAK)

BLITZER: An economic American brand frets over its future, while its employees wonder if they will even have jobs. There is reason to fear about General Motors.

When trading began today, the massive automaker's stock fell to $4 per share, its lowest level in almost 60 years. It did rebound slightly. A few months ago, GM's stock was trading around $20. The company is trapped in a brutal vice of weak car sales and a weakening credit crunch.

But GM insists one thing is not an option, and it's denying a report it is likely to soon announce more production cuts and plant closures.

CNN's Brooke Baldwin is outside one of those plants in Warren, Michigan, watching what's going on. I assume the workers at that plant and elsewhere, Brooke, are really worried.

BROOKE BALDWIN, CNN CORRESPONDENT: Really worried, really nervous, Wolf.

And just think about it geographically speaking first. Wall Street is more than 600 miles away from us here, as you mentioned, Detroit suburb of Warren, Michigan, but its effect very visible out here on the street, in the local bars, and at this transmission plant belonging to, as you mentioned, an American icon.

(BEGIN VIDEOTAPE)

BALDWIN (voice-over): Lunch time is at the Victory Inn, a popular watering hole for the automotive crowd. Lately, with the economy in reverse, uncertainty has been brewing.

UNIDENTIFIED MALE: Everywhere you go, that's all you talk to people, that everybody is just in a depressed mode.

BALDWIN: Dave Lafew (ph) would know. He is a metal model maker at General Motors, 18 years under his belt, following his father's footsteps. This 42-year-old is also a husband and young father. His concern, providing for his family and retirement.

UNIDENTIFIED MALE: I have got so far to go now. Now that I lost all my money in the stocks here, it's like I'm adding years on now that I got to keep working.

BALDWIN: News of General Motors' stock sinking is already trickling down in this blue-collar town, schools, businesses, bars all affected. When plants close, people leave town. This mom-and-pop bar owner, seeing more and more empty seats, is fearful for the future, especially if GM was to go bankrupt.

UNIDENTIFIED MALE: I think it would hurt a lot of people, there's no question, certainly a lot of jobs. And it may result in me closing my door.

BALDWIN: GM says bankruptcy is not an option. Some don't buy that. Nevertheless, this longtime employee hopes to hang in there.

UNIDENTIFIED MALE: What we're going to do is tie a knot on the end of the rope and hang on, because it's going to come back. And this happens. You know, they go in different cycles for years. They will be doing really good. Then they will do bad. But I think we will be all right. I think we will come back.

BALDWIN: But, with the bottom of this economic plunge still nowhere in sight, it's tough for folks in this auto town to know when.

UNIDENTIFIED MALE: It's very depressing. It's really bad.

(END VIDEOTAPE)

BALDWIN: The futures of Ford and privately owned Chrysler also have people wondering here in Warren, Michigan, what is next -- Wolf.

BLITZER: All right, Brooke, thanks very much. We will watch this story with you.

And it's not just Michigan that has been hit hard by the economy. I-Reporters across the country are sharing their stories about how they have been affected by the struggling economy. Our Internet reporter, Abbi Tatton, has been going through, talking with some of these I-Reporters. What are we seeing and hearing, Abbi?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, people who are just hurting.

And we're going to show you some of the stories we are getting right now, flying into Jacksonville, Florida. Joe and Lori Barnes, an accountant and a paralegal, both lost their jobs earlier this year. They said they have extended family helping out with the mortgage right now, but Lori tells me it's the things they usually take for granted that are just now out of the question.

After-school programs for their three boys, soccer at $125 each, is just not an option right now.

Moving on to Savannah, Georgia, and to David Harney, he is a graphic designer, 31 years old. And we're going to show you his house that's been on the market now for 18 months. Now, the problem is that he's not getting offers. He is getting offers. He has had four so far, but that it's the potential buyers then can't get a loan from the bank. And each deal has fallen through. And it means he is sitting on his house that he desperately needs to sell.

Up now to Boston, where I talked to Zack, who is now two years out of college, and he says it is just basically the cost of living going up, telling me: "The biggest surprise to me has been how much basic utilities and necessities have increased in price over the last year. My salary hasn't increased proportionally. Things are going to be tough this winter."

Wolf, talking to Zack, he says he's not living an extravagant lifestyle, but he just can't sustain what he has been living.

BLITZER: And multiply these stories by the thousands and thousands.

TATTON: We have got so many of them.

BLITZER: Abbi, thank you.

Coming up in our "Strategy Session": Both candidates are pitching new ideas today.

(BEGIN VIDEO CLIP)

MCCAIN: Under my orders, as president, the secretary of the treasury will carry out a homeownership resurgence plan.

OBAMA: I'm going to propose an additional temporary business tax incentive through next year to encourage new investments.

(END VIDEO CLIP)

BLITZER: Are any of the -- these ideas moving the undecideds, though?

Also, we are taking a closer look at some of the fictitious names that have been found on Senator Barack Obama's donor's list. What's up with that? Susan Roesgen standing by with that story.

(COMMERCIAL BREAK)

BLITZER: Let's get to our "Strategy Session."

Joining us, our CNN political contributor the Democratic strategist Donna Brazile, and Tony Blankley, former spokesman to Newt Gingrich.

Donna, we see both of these candidates today unveiling new ideas to try to get the economy going again. Is this smart at this stage?

DONNA BRAZILE, CNN POLITICAL ANALYST: Well, absolutely.

Given the fiscal nightmare that the country is facing right now, both candidates have had to reset their campaign to focus on this economy. Senator Obama is continuing his call for a second stimulus package. Speaker Pelosi and Majority Reid -- Leader Reid. And I heard Bob Rubin just a few minutes ago endorse the same concept, that states are in desperate need of funds to teach their flow of cash to -- to workers, and its important infrastructure projects.

And, then, Senator Obama also introduced today a plan to help small businesses weather this storm. So, I think it is important that these plans go forward. And as the president sits down this weekend with leaders, financial ministers from across Europe, perhaps we can -- we might hear even more plans.

BLITZER: What about that, Tony, because, as you know, in our latest poll of polls, our average of the national polls, right now, we have it Obama at 49 percent, McCain at 42 percent, nine percent unsure.

Is there still time for McCain to turn this around with some new economic proposals?

TONY BLANKLEY, FORMER NEWT GINGRICH SPOKESMAN: Well, look, McCain started that in the debate when he talked about the home mortgage issue. Now both candidates are talking the economic issue.

I'm not entirely convinced that that's a useful message for either of them. I think everybody, from the president, to Bernanke, to Paulson, to the various ministers around the world of finance, nobody seems like they are instilling confidence in the public that they know what the solutions are.

I -- maybe I'm an old partisan fighter, but -- but I happen to think that -- that McCain spending a lot of his advertising money and some -- a good part of messages in the media trying to raise questions, is Obama too risky to lead us in these risky times, may be a more useful way. He -- after all, if you look at the -- at the polling, the undecideds are growing lightly larger in the last few days, which you never see in October.

BLITZER: Right.

BLANKLEY: So, there's a lot of doubt in the public. And I think McCain needs to knock Obama down two or three points.

(CROSSTALK)

BLITZER: Well, what about that nine percent, Donna, undecided right now?

BRAZILE: Oh, I think it's John McCain's riskiest strategy yet, to heat up the electorate, to divide the country once again along partisan lines, with baseless accusations.

Tony, you should know that the independents, undecided voters are not looking for negativity. They want -- they want to hear what the plan is for the future. They are worried. They are concerned.

BLANKLEY: Donna...

BRAZILE: And I think, to the extent that John McCain has no vision, no plan, and just negative partisan attacks, that will backfire.

BLANKLEY: Look, look, a persuasive negative message always works with people. I don't know that it's going to work...

(CROSSTALK)

BRAZILE: Tony, not when it is based on a lie, not when you -- when you are out there doing character assassination using recycled...

(CROSSTALK)

BLANKLEY: I don't want to get into -- I don't want to get into debating the merits of the charges.

I'm simply saying, tactically, if there is an effective negative message to make, then it may be useful to make it for either candidate, because the economic argument, they all look pretty small dealing with this massive worldwide meltdown.

(CROSSTALK)

BRAZILE: You are heating up the electorate. You are out there raising the level of animosity, you know, with partisans, where you hear people in the audience saying, "Kill him." That's not -- that's not leadership.

BLITZER: All right.

BLANKLEY: Well, look, look, you have got Obama supporters who are doing all kinds of chanting on the Internet. So, both sides have people who go nuts on -- I don't think there is anything the candidates can do about their various partisans going nuts.

BLITZER: All right.

BRAZILE: They can act like leaders and they can say, stop it.

BLITZER: All right.

BLANKLEY: No, Obama hasn't said stop it to any of his...

(CROSSTALK)

BRAZILE: He has. He has.

(CROSSTALK)

BLITZER: Stand by, guys, because we're going to continue this conversation. We have got to leave it here for now, though. We're simply out of time.

Barack Obama picks his choice for baseball's National League Championship. Will it help him votes in a crucial battleground state?

And Montana Governor Brian Schweitzer got the crowd riled up at this year's Democratic Convention. He's now standing by live here in THE SITUATION ROOM. I will ask him if he thinks people are going over the line at the McCain rallies in recent days. We will pick up that thought and more right here.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: On our "Political Ticker": You could say "Cheers" to John McCain. Two stars of the classic TV sitcom are hitting the campaign trail for the Republicans. That would be Kelsey Grammer, who played Frasier Crane, and John Ratzenberger, who played Cliff Clavin. They are joining an RNC bus tour through Nevada today.

Barack Obama says he is rooting for the Phillies against the Dodgers in the National League playoffs. It may not hurt that Pennsylvania is a critical battleground state. Plus, Obama's home team, the Chicago Cubs, is out of contention now.

Last night, the Cubs' historic failure to win a championship was the subject of a campaign spoof by the people who bring you "Saturday Night Live."

Listen to this.

(BEGIN VIDEO CLIP)

BILL MURRAY, ACTOR: What, as president, would you do to guarantee this never happens again?

(LAUGHTER)

(APPLAUSE)

MURRAY: Senators, in your answer, please be specific.

FRED ARMISEN, ACTOR: We, as a nation, have got to wean Cubs fans away from supporting that team and retrain them to root for other teams...

(LAUGHTER)

ARMISEN: ... teams that will actually have a chance of winning.

DARRELL HAMMOND, ACTOR: Let me give you some straight talk, my friends. The Cubs will never win the pennant, much less the World Series.

Junior over there...

(LAUGHTER)

HAMMOND: ... he won't tell you that. I just did.

(LAUGHTER)

(END VIDEO CLIP)

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