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THE SITUATION ROOM

Historic Stock Rebound; McCain's Final Fight

Aired October 13, 2008 - 18:00   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: We're following the breaking news, that historic rebound in stock prices, only 22 days before America votes. Barack Obama isn't letting up on issue number one. He's offering new proposals today aimed at creating jobs.
John McCain is vowing to fight to change the direction of the nation and he's changing the broader message of his campaign as well. The best political team on television is standing by to weigh in and weigh the strategy and whether it will work.

And he's been dubbed the $700 billion man. Did the Bush administration's new bailout overseer help jump-start the markets?

We want to welcome our viewers in the United States and around the world.

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

Well, we begin with the breaking news: stocks bouncing back from more than a week of unprecedented losses, the Dow Jones industrial average surging 936 points today, its biggest one-day point gain ever.

Let's go to our senior business correspondent, Ali Velshi. He's been looking at this they for us. Simply put, Ali, tell our viewers what happened.

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Yes.

In all the years I have been covering this, in fact, Wolf, this is one of those days I can actually tell you with some precision what happened. Two very specific things happened. One is mutual fund investors, mutual fund managers, who invest in many cases on behalf of you and the 401(k)s you hold, can't really continue to go in and lament bad markets. They were looking for a reason to buy.

And the coordinated efforts, the coordinated announcements that came out today gave them that reason to buy. First -- and you're going to be talking about this -- Neel Kashkari, the $700 billion man, the treasury undersecretary who will be leading the $700 billion bailout, came out and gave a few more details, not many, but a few more details.

Secondly, we got news from the European Union that they will be guaranteeing loans that banks make to other banks. And that means people will feel more secure about lending to each other. Third, we had news that U.S. government may be committing to more of a buyout of bank assets, more like what Britain has done. And, fourth, we had Barack Obama coming out with an economic outline that was then sort of backed up by Nancy Pelosi, who says Congress can be called back right after the election in order to put through an economic stimulus that will directly affect people.

All of that made investors think that Americans might be doing better than they otherwise were doing as this economic situation got worse. So, we definitely know why they were buying. We spoke to them. That's why that was going on.

The other thing, Wolf, is that there had been people who had been betting against the market. They had been making financial bets that stocks would continue to go down. That's called short-selling. Well, when the market starts to go the other way with some momentum, short- sellers have to go out and buy the stocks they were betting against in order in order to close that deal.

And, late in the day, we saw a great deal of short-selling. So, there are some technical reasons why this market went up as well. The bottom line here is that what we don't know is what happens next. Is this a bounce because we were in such bad shape, or is this the beginning of an upward trend?

Know this. There are people who will go in and sell stocks tomorrow because they finally made some money back and they do want to exit. So, even when you see a charge-up like this, after the two weeks that we have had, it doesn't mean that it's a trend. We will have to continue to watch to see if that's the case.

BLITZER: So, I guess the question a lot of our viewers want answered, is it time tomorrow to start buying?

VELSHI: I think your discipline has to determine whether you're buying, in other words, your risk tolerance. Should you have been in this market in the first place? If so, continue with the disciplined buying that you do through your 401(k). If you're very close to retirement and need this money, well, you still have to consider whether there's a better and safer place for your money than the stock market.

A stock market after a bear market is a dangerous place to be. On the flip side of that, Wolf, when the bear market ends, and we don't know that this one is ending, when a bear market ends, some of the biggest gains are made within the first two months. So, this is -- again, it becomes a personal decision.

But there is a reason why professional investors were in on this market today.

BLITZER: Ali, thanks very much. Ali is working the story.

While stock prices may be making a comeback, at least on this one day, Senator Barack Obama says he has new ideas for bringing something else back. And that would be jobs. Obama is keeping his sights set on the economy in the battleground state of Ohio.

Let's go to Ohio. CNN's Jessica Yellin is in Toledo, watching what's going on. He was on message, message number one, the economy, once again today, Jessica.

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: That's right, Wolf.

Folks here in hard-hit Ohio say they don't feel the upswings on Wall Street. What they feel are only the downs, because this is one of the states that's suffering the hardest in these economic tough times. So, Barack Obama came here to Toledo to deliver a message for immediate relief that targets middle-class families and small businesses.

(BEGIN VIDEOTAPE)

YELLIN (voice-over): In Toledo, Ohio, Barack Obama took a swipe at John McCain.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: Senator McCain may be worried about losing an election, but I'm worried about you losing your jobs. I'm worried about you losing your homes. I'm worried about you losing your life savings.

YELLIN: Then he told an audience in this economically strapped city, the government needs to act now.

OBAMA: Right now, we face an immediate economic emergency, and that requires urgent action. We can't wait to help workers and families in communities who are struggling right now, who don't know if their job or their retirement will be there tomorrow.

YELLIN: And he said he has a plan that will help Main Street.

OBAMA: It's a plan that begins with one word that's on everybody's mind. And it's easy to spell: J-O-B-S, jobs.

YELLIN: Among the proposals the senator outlined, a tax credit for businesses that create new jobs in the U. S. , $3,000 per job; allowing cash-strapped American to withdraw up to $10,000 from their 401(k) and IRA plans with no penalty; creating a 90-day moratorium on foreclosures for good faith homeowners who need more time to restructure their mortgages; and temporarily eliminating taxes on unemployment insurance.

Obama is calling on Congress and the Bush administration to adopt his plans in a matter of weeks.

OBAMA: If Washington can move quickly to pass a rescue plan for our financial system, there's no reason we can't move just as quickly to pass a rescue plan for our middle class.

(END VIDEOTAPE)

YELLIN: Now, this speech by Obama triggered an instant war of words between the Obama and McCain campaigns.

The McCain campaign, Wolf, is charging Obama with still planning to raise taxes, pointing out that he still intends to raise taxes on the wealthiest 5 percent of Americans -- the Obama campaign saying, look, he's just not raising taxes. He is actually proposing enormous tax cuts, $105 billion worth in all. I guess it all depends on how you look at it and which class of people you're -- you're looking at when you're considering tax raises, tax increases -- Wolf.

BLITZER: Jessica is in Toledo. Thank you.

A senior aide to John McCain is suggesting this is the first day of the rest of the Republican's campaign. McCain is putting more fight, new energy into his message, after losing ground in the polls. And he's warning Obama not to measure the drapes at the White House, not just yet.

CNN's Ed Henry is traveling with the McCain/Palin camp to Virginia -- Ed.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Wolf, with time running out, John McCain is under great pressure, so, today, a new strategy.

(BEGIN VIDEOTAPE)

HENRY (voice-over): Call it John McCain 4.0, another shift in message. The maverick morphing back into the fighter he talked about at the convention.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Fight for what's right for America.

HENRY: His closing argument to Independent voters so the tone is less harsh on Barack Obama being risky and inexperienced. More about McCain as happy warrior.

MCCAIN: America is worth fighting for. Nothing is inevitable here. We never give up. We never quit. We never hide from history. We make history.

Now, let's go win this election and get this country moving again.

HENRY: The new message getting unveiled in Virginia, a state Democrats have not carried in 44 years, shows how difficult the race is. Influential conservative William Kristol declared McCain has been totally overmatched by Obama, writing in The New York Times, The McCain campaign, once merely problematic, is now close to being out- and-out dysfunctional.

Kristol's fix? Let McCain be McCain, try to recapture some of the magic of his 2000 campaign, a tact the candidate seems to be taking.

MCCAIN: I have been fighting for this country since I was 17 years old, and I have the scars to prove it. But if you elect me president, I will fight to take America in a new direction from my first day in office until my last. I'm not afraid of the fight, I'm ready for it. HENRY: But McCain offered nothing new substantively to fix the financial crisis. Instead, criticizing the bailout he voted for.

MCCAIN: I'm not going to spend $700 billion of your money just bailing out the Wall Street bankers and brokers who got us into this mess. I'm going to make sure we take care of the people who are devastated by the excesses of Wall Street and Washington.

(END VIDEOTAPE)

HENRY: After leaving Virginia, John McCain headed to North Carolina. And, on Friday, Sarah Palin is going to Indiana, two battleground states the Republicans should have locked down a long time ago, but haven't -- Wolf.

BLITZER: That's a big problem for them.

All right, Ed Henry is in Richmond.

He's 35 years old, and he's managing, get this, $700 billion. For the first time, meet the man in charge of the new financial rescue plan.

High oil prices have fueled higher food and travel prices. But with oil prices falling right now, will you be paying less for those other things?

And how does John McCain really feel about the angry, disturbing, anti-Obama sentiment from some supporters at his rallies? You may be surprised when Senator McCain tells our Dana Bash what he really thinks.

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

(COMMERCIAL BREAK)

BLITZER: Perhaps, this time, the Bush administration's reassurances did help calm the markets, after days of trying.

Let's get back to the breaking news we're following this hour, the Dow Jones industrials closing a whopping 936 points higher today. That's the biggest one-day point gain ever.

Let's go to our White House correspondent Elaine Quijano. She's working the story for us. There was dramatic action all weekend, the president involved, the secretary of the treasury working with G7 leaders, G20 leaders, and maybe they got something accomplished, Elaine.

ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Well, you know, it's interesting. Even on a day like this, Wolf, officials here are continuing to insist that they will not comment on individual day-to- day market fluctuations, but clearly what happened today is the kind of result President Bush had hoped to see.

(BEGIN VIDEOTAPE) QUIJANO (voice-over): Standing next to his staunch ally, Italian Prime Minister Silvio Berlusconi, President Bush repeated the message he wants jittery investors to hear.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES OF AMERICA: America will continue to work closely with the other nations to coordinate our response to this global financial crisis.

QUIJANO: The president's comments come on the heels of his emergency weekend meetings with finance ministers from around the world, meetings meant to convey solidarity in tackling the crisis. And in another move meant to allay investors' fears, Neel Kashkari, the 35-year-old engineering and MBA whiz tapped by Treasury Secretary Henry Paulson, broadly outlined the rescue plan for the first time since being put in charge of it a week ago.

NEEL KASHKARI, INTERIM ASSISTANT TREASURY SECRETARY: We are designing a standardized program to purchase equity in a broad array of financial institutions. As with the other programs, the equity program will be voluntary.

QUIJANO: And as European leaders move to bolster their financial systems, the Federal Reserve announced it would provide unlimited dollars to three other central banks in Europe, a move meant to thaw those frozen credit markets as well.

PAUL LA MONICA, EDITOR AT LARGE, CNNMONEY.COM: Right now the scope of this crisis is so unprecedented, that the Federal Reserve and other central banks are going to do just about anything necessary.

(END VIDEOTAPE)

QUIJANO: Meantime, Treasury Secretary Henry Paulson met this afternoon with top executives from financial institutions to finalize the government's plan to stabilize -- finalize details, I should say, on the government's plan to stabilize the credit markets -- Wolf.

BLITZER: Elaine, they must be relieved, at least on this one day, some good economic news coming their way over at the White House, good economic news for a lot of investors as well. Thank you.

We all know there's a cause and effect between rising oil prices and the everyday things we pay for. But what happens now that oil prices are falling?

Let's go to Carrie Lee. She's looking into this part of story for us. What is going on, Carrie?

CARRIE LEE, CNN CORRESPONDENT: Well, Wolf, for months, we have seen the cost for so many things, from gasoline, food, deliveries, travel, skyrocket because of rising oil prices. Well, oil has come back, way back, to about $81 a barrel from $147 in July.

But, if you think these other prices will now follow, think again.

(BEGIN VIDEOTAPE)

LEE (voice-over): Demand for oil is drying up. Oil prices are half the level they were in July, at the peak. That saves businesses money, but don't expect those savings will be passed on to you.

DIANE BRADY, SENIOR WRITER, "BUSINESSWEEK": One of the things we saw in the run-up of oil is that, because of the recession, a lot of companies were resistant to passing through those prices to consumers. So, prices didn't increase as much as they could have, and I'm sure they will not decrease as much either.

LEE: Food and clothing were actually more expensive in August, but gasoline tanked. Pump prices are down 22 percent from their peak, to just over $3.20 a gallon today. And AAA expects we will see $3 in a week or two.

But it's a very different story for air travel. Fuel prices make up almost 40 percent of airline costs. But, even as oil prices plummet, carriers are still losing money.

RAY NEIDL, CALYON SECURITIES: Demand appears to be slowing, which normally would mean ticket prices would come down. However, airlines are sharply coming back on their capacity, particularly in the domestic markets. And because there are fewer seats, the airlines are able to hold up their ticket pricing levels, despite a weakening economy.

LEE: And home heating oil costs will be much higher than last winter. Oil still costs more than it did a year ago and some heating oil companies stocked up before prices started dropping.

(END VIDEOTAPE)

LEE: Now, Goldman Sachs changed its year-end estimate for oil prices today to $70 from $115. And the bank says oil could even slide to $50 if the credit crisis deepens. But the Energy Department says oil could rebound to $112 a barrel if the global economy doesn't get worse.

So, Wolf, opinions differ, but the bottom line is higher or lower oil prices do not necessarily dictate the prices we all pay.

BLITZER: So, the irony, Carrie, is, the worse the global economic situation is, the lower the price per barrel will become. So, that's good news in one sense, but the bad news is that we could all be in a very deep recession.

LEE: Exactly. You know, we were all worried about rising oil prices a few months ago. Now the concern is, well, oil may be even too low. Maybe we want it to be a little bit higher, because demand is so low, and that's not good for global economic output.

BLITZER: Carrie Lee working the story for us, she's going to be back in a moment. Thank you, Carrie.

Can he take it to the people? Senator John McCain talks about turning his campaign around. More of his one-on-one interview with our Dana Bash, that's coming up.

And Senator Barack Obama keeps his focus on the economy, outlining the steps he would take to help middle-class Americans.

And how much of a factor will race be in choosing the next president? Our own John King, he is in the swing state of Missouri looking into this sensitive issue.

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

(COMMERCIAL BREAK)

(NEWS BREAK)

BLITZER: Barack Obama says it's time to get real about the economy, but could today's rebound on Wall Street work against him? The best political team on television is standing by.

In the McCain camp, the word maverick is now out. The word fighter is now in. Will that help the Republicans turn the campaign around?

And when the candidate comes a'knockin'? Senator Obama goes door-to-door, and it proves to be a "Moost Unusual" experience.

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

(COMMERCIAL BREAK)

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

Happening now: Barack Obama offering new specifics on his economic plan. Can it help him seal the deal with voters still on the fence only 22 days from now?

Also, John McCain gets fired up in a one-on-one interview with our own Dana Bash when asked about some of his supporters' hostility toward Barack Obama. You are going to want to see what Senator McCain said.

Plus, a leading conservative now calling on McCain to take very dramatic action -- why he says the candidate should simply fire his campaign staff, all of this plus the best political team on television.

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

John McCain is promising to fight the good fight for the country and to try to turn his campaign around. The Republican presidential nominee sat down with our own Dana Bash today. She's joining us from North Carolina.

Dana, he's very emotional, he gets agitated on some sensitive questions that you asked. Tell our viewers what happened.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: That's right, Wolf, well, specifically, about the fact that last week, especially, as Senator McCain and Governor Palin became more and more harsh with regard to their rhetoric against Senator Obama, specifically about the idea that he has connections to the 1960s radical William Ayers, we heard supporters in the Republican candidates' crowds say things like terrorist and traitor and even worse with regard to Barack Obama.

(BEGIN VIDEOTAPE)

MCCAIN: I have heard the same thing. I have heard the same thing at -- I have heard the same thing, unfortunately, at Senator Obama's rallies being said about me.

There's always a fringe element that's in politics in America. The overwhelming majority of the people that come to my rallies are good and decent and patriotic Americans, and if they are worried about this country's future, that's correct.

But to somehow, to somehow intimate that of the thousands people -- 17,000 people were just with us in Virginia -- and to somehow intimate that the overwhelming majority of those people, with rare exception, are somehow not good Americans or are motivated by anything but the most patriotic motives is insulting. And I won't accept that insult.

John Lewis, who I admire and have written about how much I admire him, somehow linked me and Governor Palin to racism, to segregationism, to some of the worst aspects to ever appear in American politics. And Senator Obama refuses, or has not yet, repudiated those comments.

That's not from some -- quote -- "party official." That's from one of the most respected people in America. It's unfair. It's unfair and it is outrageous.

BASH: And because I just want to ask this one last question...

MCCAIN: Sure.

BASH: -- because you brought up John Lewis.

MCCAIN: Sure.

BASH: I was told by one of your aides that when you saw that statement from John Lewis, your campaign kind of stopped and you stopped and you talked to your aides and you said this is a big deal and we need to figure out how to respond to that.

And, of course, you ended up coming out with your own statement, in your name. And in that statement you said that you were concerned that Lewis and people like him were trying to -- quote -- "shut down debate."

What did you mean by that? What do you think that they are trying to do with regard to...

MCCAIN: The accusation that Congressman Lewis made is so far out of bounds and so disturbing to me, of course it stopped me in my tracks. I never believed that John Lewis, who is an American hero, who I admire, would ever make a comment of that nature. He even referred to the bombing of a church in Birmingham. That's unacceptable.

(END VIDEOTAPE)

BASH: And with regard, Wolf, to the top issue in this campaign -- that, of course, is the economy -- the senator will give a speech on economic issues tomorrow in Pennsylvania. He was very cagey about whether or not he's going to offer some new proposals there. But also, with regard to his state in the race right now, he was -- really tried to be upbeat about the fact that he is behind across the country in polls and battleground states, from the West Coast to the East Coast. But he also said that he has had more lives than a cat.

And, as you know, Wolf, that is true in politics for John McCain and also in life.

BLITZER: It certainly is. He's come back from supposedly the dead politically speaking in the past. We'll see how he does over the next 22 days. Dana, thank you.

At least one prominent conservative says it's time for Senator McCain to simply fire his campaign staff. Let's discuss this and more with our senior political analyst, Gloria Borger; Steve Hayes, the senior writer for "The Weekly Standard"; and CNN political contributor, Dana Milbank of "The Washington Post".

Here's what Bill Kristol, the conservative columnist, wrote in the "New York Times," among other things, today, Gloria: "It's time for John McCain to fire his campaign. He has nothing to lose. His campaign is totally overmatched by Obama's. The McCain campaign, once merely problematic, is now close to being out and out dysfunctional."

Those are strong words from a conservative.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: You know, campaigns, like businesses, flow from the top down. And if the campaign is disorganized, if it doesn't have a theme, if it doesn't have a clear message, instead of blaming the staff, you need to look at the candidate. Because, in the end, Wolf, it's the candidate that's responsible for what he says out there and how he goes about his campaign.

Yes, you depend upon a whole lot of smart people. I would argue that John McCain has a lot of smart people working for him. But at this point in a campaign, when you're losing, what do you do? You throw the staff overboard.

(CROSSTALK)

BLITZER: Is it good advice, though, that Kristol is giving McCain?

STEPHEN HAYES, SENIOR WRITER AT "THE WEEKLY STANDARD": Well, I mean... BORGER: He's conflicted, he should tell you.

HAYES: ...Bill Kristol is my boss.

(LAUGHTER)

HAYES: So it's very good but...

BLITZER: That's right. And let me just explain.

HAYES: And I want to say...

BLITZER: Let me explain. He's the editor of "The Weekly Standard" and you're a senior writer for "The Weekly Standard." So you can't be completely objective.

HAYES: Of course, I can. But it was gracefully written. He's a wonderful human being.

DANA MILBANK, "WASHINGTON POST" STAFF WRITER AND AUTHOR: He's very handsome, too.

(LAUGHTER)

HAYES: Very handsome. Look -- I mean, I think Bill's point -- basic point was this. We have seen the McCain campaign, over the past week, and, really, three weeks, unable to come up with a clear, consistent, concise message. Essentially, the McCain campaign should be able to have voters, when they walk into a polling booth, recall a two sentence statement about Barack Obama and this campaign that influences them when they vote. And they can't do that right now. And I think that's his point. And that's a problem.

BLITZER: Because he keeps throwing -- you know, and Obama keeps hitting him hard and a lot of Democrats -- he keeps going after McCain, he's not consistent, he's erratic, he's lurching from one subject to another. And that seems to be resonating.

MILBANK: It is resonating. Now, if I could defend the candidate against these merciless attacks from Stephen Hayes and Bill Kristol, arguably -- and I think Bill gets at this in his column -- there may be nothing that McCain could be doing. So much of this is out of his powers to control anyway.

But that said, he has very little to lose at this point, with the trajectory things are going in.

And he did -- Kristol did have a suggestion that he dump the staff off and bring reporters on the bus 24/7. Now...

BORGER: We're for that.

HAYES: Always.

MILBANK: ...who could disagree that?

HAYES: Always.

BLITZER: Let McCain be McCain.

All right, here's what he said today.

I'm going to play the clip and then we'll discuss.

Listen to this.

(BEGIN VIDEO CLIP)

MCCAIN: Senator Obama is measuring the drapes and planning with Speaker Pelosi and Senator Reid to raise taxes, increase spending...

(APPLAUSE)

MCCAIN: ...take away your right to vote by secret ballot in labor elections...

(BOOS)

MCCAIN: ...and concede defeat in Iraq. But, you know, you know what they forgot?

They forgot to let you decide.

(APPLAUSE)

(END VIDEO CLIP)

BLITZER: All right. You know, those are pretty -- and he went on to say we've got them just where we want them.

BORGER: Oh, sure he does. Oh, absolutely.

HAYES: This is what they were planning starting 21 months ago.

BORGER: Want to buy a bridge in Alaska?

Right. No, look, I think the point that he made early on in that about Barack Obama and a Democratic Congress is a very salient point for Independent voters. You could say, as he says, that Barack Obama is liberal. This is his label on Barack Obama. Then you've got Nancy Pelosi and Harry Reid and an overwhelming majority of Democrats, as it looks like it could be, and you need me as a check and balance.

Now that's a perfectly legitimate point to make to Independent voters.

BLITZER: It's an argument that would resonate, you need checks and balances.

HAYES: Yes, I think it's something that resonates.

But what struck me from that passage was looking at John McCain, he seemed once again to have energy. He seemed, you know, excited and filled with vigor, which he didn't seem like last week when I was with him on the campaign trail. And that's a chara -- you know, that's sort of a key characteristic of McCain.

MILBANK: He loves being the underdog.

HAYES: Yes.

MILBANK: This is when he's at his best.

BORGER: Yes.

MILBANK: But as Mark Salter, as his key adviser pointed out to me, it's not great to be the underdog the day after the election.

(LAUGHTER)

MILBANK: So at some point, you want to stop being the underdog. But this is how he likes (INAUDIBLE).

BORGER: I mean there really isn't any other...

BLITZER: There isn't a whole lot of time left. All right, we've got lot more to talk about guys. Stand by.

Barack Obama -- he's offering new specifics of his own on the economy. He's got some new ideas.

But do voters trust him when it comes to these economic matters?

We've got some new poll numbers, as well.

And closing the deal with undecided voters -- with election day three weeks from tomorrow, we'll tell you what's going on right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: Part of the reason this crisis occurred, if we're honest with ourselves, everyone was living beyond their means -- from Wall Street to Washington, to even some on Main Street. CEOs got greedy. Politicians spent money they didn't have. Lenders tricked people into buying homes they couldn't afford. And some folks knew they couldn't afford them and they bought them anyway.

(END VIDEO CLIP)

BLITZER: Senator Obama speaking at length today on his economic recovery plans.

Let's get the best political team.

Gloria, we're just learning now that President Bush will meet with his economic advisers early tomorrow morning. Then at 8:05 a.m. Eastern, he'll go into the Rose Garden and make yet another address about what's going on.

Look, he's been doing this a lot. Today, at least, it seemed to have a benefit -- 900 points plus the markets jumped up.

BORGER: Well, let's see what he says to Americans tomorrow. It's clear that they're going to have other plans to rescue the economy. And we'll see what he says tomorrow.

The problem for John McCain is that every day that George W. Bush is front and center in this reminds people that he's a Republican, John McCain is a Republican, and allows Barack Obama to join them together.

BLITZER: Let me ask, both of you -- all of you -- a question I asked earlier on Pennsylvania. Polls right now -- about a 12-point lead in our poll of polls -- 52 percent for Obama, 40 percent for McCain.

Is it time, 22 days out, for McCain to do in Pennsylvania what he did recently in Michigan, concede that state and take those limited resources to other states like Ohio or North Carolina, Virginia, Colorado -- states that he clearly needs?

HAYES: Well, I'm not somebody who thought that he should have conceded in Michigan as early as he did. So I'd be up for him taking them from Pennsylvania and move them to Michigan.

Look, I think at a certain point, 22 days out, three weeks out, he's got to figure out what really works and what doesn't.

I was in Iowa with him over the weekend and, you know, he's down 10 points there. And he gave a quick speech there. So I think we're going to see him start to pare down these states even further and target more.

BLITZER: Because Pennsylvania, remember, went for Kerry four years ago. Michigan went for Kerry four years ago. If he carried the states that Bush carried -- and that includes Ohio and North Carolina and these other states, he could get elected.

MILBANK: Yes. Now, I'm just off the train from Philly, where I was watching Hillary Clinton today. And all signs are that her backers are rallying behind Obama. Looking very bad for McCain there.

That said, another public pull out like he did in Michigan, it's very demoralizing for the campaign. So if he is going to pull back a little, which would be the sensible thing to do, you want to kind of do it...

BLITZER: You don't announce it.

MILBANK: Do it quiet, yes.

BLITZER: I was surprised he announced that pullout of Michigan.

BORGER: Right. But you have to look at where he is as much as you look at where he's pulling out of, because he -- his running mate, Sarah Palin, is in West Virginia, which should be a lock for the Republicans. He's in -- going to be in North Carolina. You know, if he's visiting states that should be safe for them at this late date, that doesn't say very good things about what they...

(CROSSTALK)

MILBANK: I agree.

(CROSSTALK)

BORGER: ...of their campaign.

HAYES: I think Dana makes a very good point. I mean, I think it's really important. If you're going to -- I would think he could pull back in Pennsylvania, but not pull out.

BORGER: No.

HAYES: I mean you'd have another story about John McCain giving up a huge state.

MILBANK: And then...

HAYES: People are going to start thinking, ah, is it even worth it for me to go to the polls?

MILBANK: Yes.

BORGER: But I mean they won't do that. They can't...

MILBANK: Yes.

BORGER: I don't think they'll publicly...

MILBANK: And then Obama feels...

BORGER: ...hold a conference call to announce that they're pulling out of any state.

HAYES: Right.

MILBANK: And then Obama will feel he doesn't have to compete there, either. So it -- to keep things -- at least to keep some heat on Obama, he needs to at least make the appearance of an effort.

BLITZER: And it's a cliche, but 22 days in politics is still a long time. And in many other presidential contests -- and we've all covered them -- you see closure in those final days very often. And, you know, if Gerald Ford would have had a few more days, we don't know what would have happened. You know, you hear those kinds of stories.

BORGER: You know, lots of Republicans I talk to say, oh, this is like Ronald Reagan and Jimmy Carter back in '80, because Reagan made up for a very big lead that Carter had late in the game. There was a late debate. However, Jimmy Carter was part of the folks in power that people didn't like.

HAYES: But there's also, I mean, the Ford comparison going back to '76. Ford closed 33 points to two.

BLITZER: Right.

BORGER: Right.

HAYES: He did it over a much longer period of time. And his convention was in the middle of it. But I mean, you know, you're talking about closing six points, potentially, nationally.

MILBANK: Right.

HAYES: That's not inconceivable, especially with the markets doing what they did today. If there's some stability here and it's a broader argument, it's possible.

BLITZER: As people become a little bit more upbeat about their economic futures.

MILBANK: Right. And there's the danger of peaking too early. Obama essentially in a stall offense right now. I mean he would like nothing better than to sit there at his rallies reading the phone book and, you know, just run this thing out.

BORGER: But that's why he came out with an economic plan today.

MILBANK: Right. He's got to do something like...

(CROSSTALK)

BLITZER: And to use a football analogy, sometimes you go into prevent defense and you know what happens?

BORGER: No, I have no idea.

BLITZER: It prevents you from winning.

(CROSSTALK)

BLITZER: Yes, that's what happens.

BORGER: Don't ask me.

BLITZER: All right, guys. We've got to leave it there. But we've got a lot of work to do over these next 22 days.

We're getting some new information from Kelli Arena. She's standing by -- what are you learning, Kelli, because this is potentially significant, on the economic front?

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Oh, absolutely, Wolf.

Well, according to a person who was briefed on the proposal, the Treasury Department has settled on a plan to rescue credit markets. That includes taking equity stakes -- direct equity stakes in financial institutions.

Not unexpected, Wolf. Treasury says it may spend as many as $250 billion on that effort. Sources tell us government officials really did not want to go there, but they simply had no choice, especially after several European countries announced yesterday that they would do the same.

And we have no official comment at this point, Wolf. This is all according to a source who was briefed on the plan.

You know, very important for the U.S. to maintain a level playing field here during this crisis, so they have to, you know, mirror actions that are taken in other countries.

Another part of this plan, Wolf, the FDIC will also insure new senior bank debt for three years. As you just said, the president expected to make a statement tomorrow morning. Government officials, as you know, met with banking leaders today in Washington to try to hammer out specifics.

So we should be getting a clearer picture of exactly what the government is going to do with the money that they got from Congress to deal with this crisis.

BLITZER: All right. We'll see what happens. Well, we will be there, 8:05 a.m. Eastern tomorrow morning. Kelli, thank you very much.

ARENA: You're welcome.

BLITZER: Lou Dobbs has got a lot more coming up on this at the top of the hour. I know you're working on this story and a lot of other stories -- Lou, what are you working on specifically?

LOU DOBBS, CNN ANCHOR: Thanks, Wolf.

Much more on the nearly 1,000 point rally on the Dow today -- the biggest one day point gain ever. The rally coming as the federal government preparing to recapitalize ailing commercial banks. But who's helping our ailing middle class? We'll have that story.

And Senator McCain's efforts to revitalize his lagging presidential campaign -- can Senator McCain boost his poll numbers? Will his new message resonate with Independent voters? Three top political analysts assess all of that and more.

And new details tonight of efforts by the left-wing radical activist group ACORN to manipulate the outcome of this election -- ACORN an outfit with longstanding ties with Senator Obama.

And among my guests tonight, "New York Times" best-selling author and "Wall Street Journal" columnist, Peggy Noonan. She'll tell us about her provocative new book, "Patriotic Grace" -- a book every voter should read.

Please join us for all of that and more at the top of the hour here on CNN. We'll have all the day's news and a lot more, as well, from an Independent perspective -- Wolf, back to you.

BLITZER: Did you say, Lou, she was a "New York Times" columnist?

You meant "Wall Street Journal" columnist.

DOBBS: I meant "Wall Street Journal," absolutely.

BLITZER: I want to just make sure that we don't confuse those two newspapers.

DOBBS: Absolutely.

BLITZER: All right, Lou. See you in a few moments.

DOBBS: You've got it.

BLITZER: Thank you very much.

DOBBS: Thank you.

BLITZER: Just over three weeks until election day, so what role will race play?

(BEGIN VIDEO CLIP)

ROCHELLE SHIPMAN, MISSOURI VOTER: Black people always -- have always known there's a divide. I don't think we ever live in a false sense of we're always accepted.

(END VIDEO CLIP)

BLITZER: We're looking at the issue of race and what role it might play in one critical battleground state. John King is there.

Also, they've touched the lives of millions, but what happens when the candidates get touched back?

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

(COMMERCIAL BREAK)

BLITZER: As election day gets closer and closer, there are questions and concerns about how much of a factor race will be in choosing the next president.

Our chief national correspondent, John King, is exploring that in the battleground state of Missouri -- John.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Wolf, in Ohio and other key battleground states, we've explored the reluctance of some rural and blue collar whites to support a black candidate for president.

But there's a flip side to the race issue in this campaign and you see it in places like here in St. Louis -- the benefit to the Democrats of a highly energized African-American community. (BEGIN VIDEOTAPE)

KING (voice-over): The Leonard Missionary Baptist Church in downtown St. Louis. The choir is always energetic and Pastor Steven Thompson always upbeat -- even in these trying economic times.

REV. STEVEN THOMPSON, LEONARD MISSIONARY BAPTIST CHURCH: My house got foreclosed on me, but after all...

KING: No politics from this pulpit. Thompson draws a firm line -- imploring his congregants to vote, but no preaching for or against any specific candidate.

THOMPSON: When it gets bad, that's when you have to shout the loudest.

KING: But this is an overwhelmingly pro-Obama crowd. And three weeks to election day, Pastor Thompson says the excitement is unprecedented.

THOMPSON: And the energy comes from -- from the fact that it is historical and we've got a lot of first time voters and many like myself, who have been through a few. And it still has that pumped up energy in it.

KING: Increased African-American turnout is an Obama campaign imperative -- a potential game changer in a half dozen or more key battleground states, Missouri among them. All the more important because of the flip side of the race issue. This roadside billboard is in the Missouri Ozarks -- in a predominantly white, rural part of the state. Show Pastor Thompson the billboard and he keeps his trademark calm.

THOMPSON: If I spend my time getting angry about what -- the things that people do, then I can't do what I effectively do here. Those people who do stuff like that, you know, the only thing I can say is we pray for them.

KING: Rochelle Shipman says no one here is surprised that some of the scrutiny has taken a nasty turn.

SHIPMAN: Black people always -- have always known there's a divide. I don't think we ever live in a false sense of we're always accepted. I think that we are always judged first by our color, then by the way we speak and then by what we look like.

KING: Fredrick Lemons II says after months of doubt, he believes America is ready to elect a black president. But he also made a point of complimenting John McCain for trying to calm the mood at an event last week, where a woman wrongly called Obama Arab.

FREDRICK LEMONS II, MISSOURI VOTER: It's gotten a little nasty. But I think that John McCain really showed some integrity and some character when he was at the last town hall meeting and some people said some discouraging remarks and he corrected them. And that shows that he does have integrity. (END VIDEOTAPE)

KING: African-Americans cast 10 percent of the nationwide vote for president back in 2000 and that grew to about 12 percent four years ago. The Obama game plan counts on boosting that number again this cycle, through a combination of newly registered African- Americans and aggressive targeting of blacks who are already signed up to vote, but have stayed home in years past -- Wolf.

BLITZER: John King in St. Louis working the story. Thank you.

Just ahead in our "Hot Shots," the best pictures of the day -- how some angry customers responded to the financial crisis.

And what happens when the candidates come in contact with some overenthusiastic fans? Guess what? It's "Moost Unusual."

(COMMERCIAL BREAK)

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

In Afghanistan, a mullah recites from the Koran.

In Madrid, protestors march in front of Spain's central bank.

In Washington, an official lifts a flag off the head of an honor guard.

And in Bulgaria, check it out -- a vet treats an eagle shot down by poachers.

A "Moost Unusual" look right now at the hands-on approach some fans are taking with the presidential candidates -- enthusiastic fans getting close to the candidates -- maybe a little bit too close.

CNN's Jeanne Moos takes a look at all the activity.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): Imagine someone knocked on your door and you opened it to find Barack Obama?

Well, the shock wasn't quite like winning a million bucks.

(VIDEO CLIP)

MOOS: With Obama, it was a little more.

OBAMA: How are you?

UNIDENTIFIED FEMALE: How are you?

MOOS: As Obama went from house to house like a trick or treater, there were a few squeals.

OBAMA: How are you?

(VIDEO CLIP)

OBAMA: Hi, guys. How are you?

MOOS: But no scream out of the senator when a woman pointed out he had a spider on him.

UNIDENTIFIED FEMALE: You've got a spider on you.

OBAMA: You're right.

Is it a big one?

MOOS: He gently brushed it away, unlike the way he handled folks handling him. To touch or not to touch the candidate -- that is the question -- from a hand on his stomach to kissing his hand. It plays right into that McCain Web commercial...

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: They will call him the one.

(END VIDEO CLIP)

MOOS: The candidates are used to touching outstretched hands and kissing babies. Disembodied hands are always reaching out to pat them. And all that posing for photos makes the small of the back a big point of contact. There are over enthusiastic handshakes...

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL CANDIDATE: John McCain.

MOOS: ...which sometimes turn into over enthusiastic hugs. Which is better than the opposite.

(VIDEO CLIP)

MOOS: A photo-op that flees.

PALIN: Come here.

(CROSSTALK)

PALIN: We're not going to -- we won't publish it anywhere.

MOOS: They eventually relented.

PALIN: All right, you guys.

UNIDENTIFIED MALE: Thank you.

MOOS: But when you work a crowd, the crowd works you.

UNIDENTIFIED FEMALE: We love you!

MOOS (on camera): Of course, there is a down side to all that love, all that touchy feely stuff.

(voice-over): Germs. It's not just their speeches candidates sanitize.

MCCAIN: Hey, shall we get on?

MOOS: This lady told Senator Obama she's not voting for him, but she still gave him a hands-on blessing.

UNIDENTIFIED FEMALE: But I just want to bless you (INAUDIBLE).

OBAMA: I appreciate your prayers.

MOOS: And then there are supporters so overcome, they need comforting.

UNIDENTIFIED FEMALE: I've been following you for a while.

OBAMA: Well, it's so nice to meet you (INAUDIBLE).

MOOS: Though all that touching is subject to being freeze-framed -- "Barack Obama strangles Ohio gal," joked the Web site Wonkette.

Choked -- no.

Choked up -- yes -- leading to hug number two.

OBAMA: Oh, you're going to do great.

MOOS: Jeanne Moos...

OBAMA: (INAUDIBLE).

UNIDENTIFIED FEMALE: I'll be following you.

MOOS: CNN, New York.

(END VIDEOTAPE)

BLITZER: And that's it for us.

I'm Wolf Blitzer in THE SITUATION ROOM. Up next, "LOU DOBBS TONIGHT" -- Lou.