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ANDERSON COOPER 360 DEGREES

Another Wall Street Bailout?; Interview With Suze Orman

Aired September 16, 2008 - 22:00   ET

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


ANDERSON COOPER, CNN ANCHOR: We begin with breaking news that could affect your job, your retirement, your wallet, another shock to the financial system, possibly another massive bill for you, taxpayers around the country, and a giant warning sign that the mortgage crisis is not over yet.
First, Lehman Brothers collapses. Then Wall Street melts down, a slight market recovery today, but, tonight, the nation's largest insurance campaign, already shaky from the iffy mortgages it insured, is getting a federal bailout, because the late, well, that would be a nightmare.

In a moment, personal finance expert Suze Orman on the steps you can take to weather this storm, but first, the storm itself, the latest developments from CNN's Ali Velshi and "BusinessWeek"'s Diane Brady.

What is AIG, Ali, and -- what does it mean to everyone?

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: AIG is one of the largest insurers in the entire world. They has more than 70 million customers. And those are individuals and companies.

This is not like Lehman Brothers, an investment bank. This is much more like Freddie and Fannie. It is tied to so much. If it were to fail, the ripple effect would be dramatic. AIG has been trying more than a week now to raise $75 million. Its credit rating has been dropped. It has found it difficult to do so.

To tonight, at risk of AIG failing, the government has extended to AIG an $85 billion bridge loan. It's a temporary loan. And it comes at a rate which is calculated at today's rates at about 11.31 percent. It's -- for 24 months, they can use this, but that is a very, very expensive loan, which means the government keeps them afloat, but there's no incentive for them to sit down and not look for better financing.

AIG lives to fight another day, basically. And that means your stocks could do better, because it is part of the Dow 30. It's one of the biggest companies in America.

COOPER: Diane, I want to read you what Senator Charles Schumer, Democrat who sits on the Senate Finance Committee, said about the AIG -- he said -- quote -- "The administration is approaching an unprecedented step, but, unfortunately, we are living in unprecedented times. Hearing of these plans, you have to stop and catch your breath. But, upon reflections, the alternatives are much worse." Why is the government bailing them out?

DIANE BRADY, SENIOR WRITER, "BUSINESSWEEK": Well, basically, as Ali said, it's a huge company. It touches all parts of the economy.

You look at Wall Street, it doesn't really matter if another investment company goes under. People are out of work, but it doesn't have the same ripple effect. I think the most important of AIG is that it is the linchpin of a lot of corporate America. It insures property casualty. It also has life insurance. You just can't let this company fail. It had $110 billion in sales and $1 trillion in assets.

COOPER: How many bailouts can our government do? I mean, how much money do you have to bail out, I mean, Freddie and Fannie, and now AIG?

VELSHI: Yes. It's a lot of money. And that is -- remember, that is taxpayer money, in the end. Now, the government wants to be sure they can get this back. And, boy, they are charging a lot for this loan to discourage anybody else who wants to come looking for money.

But the bottom line is, they have to decide, what is better to do, loan them the money now or deal with the cleanup if a company like this were to fail? And that this is what you're going to hear a lot of talk over the next few days. Why is the government doing that? There are some people who are going to say they rescued AIG and they saved a bad situation from getting worse. And there are others who are going to say we -- the government can't be in this business of bailing out private firms who get into trouble.

(CROSSTALK)

COOPER: Are there other companies on the brink like this?

BRADY: I think they are.

But I think an important thing is, let's remember that they said no a few days ago. They did not want to do this to AIG. There is no money in the system right now. They tried Wall Street. There's no money there. They tried to bend the insurance rules to get money from themselves. It's not there.

Yes, there are others. WaMu could come down the line, but AIG is unique.

COOPER: WaMu, Washington Mutual...

BRADY: Yes.

COOPER: ... a savings and loan.

Diane Brady, thanks very much.

BRADY: Thank you. COOPER: Ali, we will talk to you in a moment.

Personal finance expert Suze Orman joins us in a.m. to talk about what you should and shouldn't be doing with your stocks and 401(k)s and other things.

Tonight also, John McCain and Barack Obama each weighing in on Wall Street and the economy. Here were the bullet points of what Senator McCain promised today on the campaign trail.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: In short order, we're going to put an end to the reckless conduct, corruption and unbridled greed that health care caused a crisis on Wall Street.

(CHEERING AND APPLAUSE)

MCCAIN: We're going to put a stop to it.

(CHEERING AND APPLAUSE)

MCCAIN: I pledge that the FDIC and the SBIC will have all the support they need to fully back the savings of the American people. Government has a clear responsibility to act in defense of the public interest. And that's exactly what I intend to do.

And, above all, I promise reforms to prevent the kind of wild speculation that could put our markets at risk and has already inflicted such enormous damage across our economy.

(END VIDEO CLIP)

COOPER: That was John McCain in Tampa today, also promising a 9/11-style commission on Wall Street greed. We will have more details on that in a moment.

Barack Obama in Colorado this afternoon taking aim at McCain's commission idea. Then, he also laid out his own plan, here again in condensed form.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: To jump-start job creation, I have proposed a $50 billion emergency economic plan.

We need to replace Fannie Mae and Freddie Mac as we know them today.

I will ease the burden on struggling homeowners through a universal homeowners' tax credit. I will change our bankruptcy laws to make it easier for families to stay in their homes.

(END VIDEO CLIP)

COOPER: Barack Obama, John McCain on the trail on the economy campaigning on their own.

Later in the day, Sarah Palin joined up with John McCain.

That's where Ed Henry picks up on the trail.

(BEGIN VIDEOTAPE)

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT (voice-over): When John McCain campaigns by himself, there are empty seats in critical states like Florida. But, with Sarah Palin at his side, the crowds are electric.

UNIDENTIFIED MALE: Please welcome Governor Sarah Palin.

HENRY: When Palin was finished speaking here in Ohio, voters, especially women, started leaving while McCain was still at the podium.

It's dangerous for the second in command to outshine the top of the ticket. But McCain aides insist they're fine with all the excitement around Palin, because it boosts their megaphone on key issues like the economy.

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL NOMINEE: We also need serious reform on Wall Street. And John McCain is the guy who will get it done.

(CHEERING AND APPLAUSE)

MCCAIN: We're going to put an end to the reckless conduct, corruption and unbridled greed that have caused a crisis on Wall Street.

HENRY: Here on the road, they are running as outsiders.

PALIN: And, with your vote, we are going to Washington, D.C., to shake things up.

(CHEERING AND APPLAUSE)

HENRY: But McCain's latest solution to fix the economy comes straight from inside the beltway, appoint a blue-ribbon panel in Washington to probe Wall Street.

MCCAIN: We have to assure every American that their deposit in a bank is safe. We have to have a 9/11 Commission. And we have to fix this alphabet soup of regulatory agencies that is left over from the 1930s.

HENRY: In Colorado, Barack Obama jumped all over that idea.

OBAMA: Senator McCain offered up the oldest Washington stunt in the book. You pass the buck to a commission to study the problem.

HENRY: Democrats are hoping that, if they can paint McCain as out of touch on the economy and Palin as outside-the-mainstream conservative, the running mate's high favorability ratings will drop.

SEN. CLAIRE MCCASKILL (D), MISSOURI: That's going to settle down. And, you know, women in America and all -- frankly, all voters are going to kick the tires for the next month-and-a-half, and they're going to figure out that these policies that she embraces are very extreme.

HENRY: Senior McCain advisers insist, Democrats are doing some wishful thinking.

CARLY FIORINA, VICTORY CHAIR, REPUBLICAN NATIONAL COMMITTEE: I think it's pretty clear that the Democratic Party is in full-throated panic about the state of the race.

HENRY: But even some conservatives see a risk if Palin overshadows McCain.

KEVIN MADDEN, FORMER ROMNEY CAMPAIGN NATIONAL PRESS SECRETARY: Once it becomes a -- a position where you're relying too much on your vice president, then you don't have that ability to really accentuate the top of the ticket.

(END VIDEOTAPE)

COOPER: Ed, is the McCain campaign concerned about whether all these attacks on Sarah Palin's experience by the Obama campaign and their surrogates are having an impact?

HENRY: Well, Anderson, they say they have nothing official to announce yet, but there are signals that the campaign may be sending Governor Palin to New York next week for the U.N. General Assembly meetings.

That would give her a chance, obviously, to sit down with a lot of world leaders, sort of raise her profile on the international stage. And, so, that is a sign perhaps that they're concerned about that hole in her resume and the attacks on her experience, and that this would be one way to beef up that resume before that big presidential debate with Joe Biden that obviously will have a -- a large focus on foreign affairs -- Anderson.

COOPER: All right, Ed Henry, thanks.

On now to the Obama side, more on the economy and the politics of the economy.

On the trail, Candy Crowley.

(BEGIN VIDEOTAPE)

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT (voice-over): Barack Obama sees an opening in the crisis on Wall Street, a way to connect on Main Street, and disconnect John McCain.

OBAMA: We are in the most serious financial crisis in generations. Yet, Senator McCain stood up yesterday and said that the fundamentals of the economy are strong.

CROWLEY: McCain later said he was talking about American workers and American products. Too late. It is the Obama campaign's favorite line now.

(BEGIN VIDEO CLIP, OBAMA CAMPAIGN AD)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: Our economy, I think, still, the fundamentals of our economy are strong. The fundamentals of our economy are strong. The fundamentals of our economy are strong.

(END VIDEO CLIP)

CROWLEY: In Golden, Colorado, Obama offered what he called six principles to prevent a Wall Street crisis in the future, including smarter government oversight and regulation of financial institutions.

OBAMA: Over the last few years, commercial banks and thrift institutions were subject to guidelines on subprime mortgages that did not apply to mortgage brokers and companies. This regulatory framework failed to protect homeowners.

CROWLEY: McCain has also called for better oversight and regulation, but Obama questions the commitment.

OBAMA: ... quote "I'm always for less regulation -- unquote, and referred to himself as -- quote -- "fundamentally, a deregulator."

Now, this is what happens when you confuse the free market with a free license to let special interests take whatever they get.

CROWLEY: McCain is a tool of special interests is a recurrent theme in Obama's speeches, but this is a two-man race.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: Talks a tough game on the financial crisis, but the facts tell a different story. Senator Obama took more money from Fannie Mae and Freddie Mac than anyone but the chairman of the committee they answer to.

(AUDIENCE BOOING)

MCCAIN: And he put Fannie Mae's CEO, who helped create this problem, in charge of finding his vice president.

(AUDIENCE BOOING)

MCCAIN: That's not change. That's what's broken in Washington.

CROWLEY: It is word-to-word combat now, a bid for working-class voters. Obama's high-flying rhetoric is all but gone. It is nuts and bolts, less about hope, more about fears around the kitchen table, as he tries to connect with this reluctant voting bloc.

OBAMA: The cost of everything, from gas to groceries to health care, has gone up. These are the struggles that Americans are facing. This is the pain that has now trickled up.

CROWLEY: At camp Obama, they are delighted. If this race is decided on the economy, said a strategist, we will do very well.

(END VIDEOTAPE)

COOPER: Candy joins us now.

Candy, Obama obviously has had trouble connecting with some voting blocs, white working-class blue-collar voters. Is there any sign he is making progress in those areas?

CROWLEY: Not yet, but here is how they sort of strategize this inside the campaign.

They say, listen, first of all, people have not been paying that much attention. They believe that Obama wears well over time, that, the more people see him, the more they understand that he connects. They think that the debates, which they have already started preparing for, will let him show his connection to the problems of working-class voters.

And they believe, in the end that, you know, they are going to see Obama as the person that understands paycheck-to-paycheck workers. So, it hasn't developed yet, but they -- they certainly believe that, over time, since people are starting to focus, that's the way they will see him eventually.

COOPER: All right, Candy, stick around. We are going to talk to you and John King a little bit later on about more of what is happening on the trail.

As always, we're blogging throughout the hour, Erica Hill and I. Join the conversation. Go to AC360.com. You can also find Erica's new live Webcast during the commercial breaks. If you haven't seen it, you should.

Up next, Suze Orman, the nation's foremost personal financial expert is here. Surviving these economic times, she will talk about that. And we will be joined also by Ali Velshi and what the candidates' plans really are for you and your money.

Later, "Keeping Them Honest," how Barack Obama's campaign statements track with the truth. We're "Keeping Them Honest." Judge for yourself.

And new developments in the political battle over what Sarah Palin did or didn't do as governor of Alaska when she fired the state's top cop -- not that guy, that guy's boss. Was she doing her job or doing a job on someone for personal reasons?

All that and more -- tonight on 360.

(COMMERCIAL BREAK)

COOPER: A very nervous day ends with a sigh of relief on Wall Street, as the Dow closes up 141 points. That bit of optimism follows the Fed's decision not to cut key interest rates. The question is, what does -- what is going to happen tomorrow?

Tonight, the breaking news that the Federal Reserve is rescuing AIG with a massive loan to keep the insurance giant in business. So, will it help save the economy from collapsing?

From insurance policies, 401(k)s, to your job, home, savings, future, we want to look now at what all this means for you and what each candidate is promising to do about it.

Joining us to talk about your money and your vote, Suze Orman, the personal financial expert and host of CNBC's "Suze Orman Show," and, once again, CNN's Ali Velshi.

Suze, for the average folk out there who has got maybe a little money in the stock market, certainly money in their 401(k), a lot of money in their home, what do they do now?

SUZE ORMAN, AUTHOR, "WOMEN & MONEY: OWNING THE POWER TO CONTROL YOUR DESTINY": Well, they do what they have been doing. And, thank God, truthfully, in my opinion, that the Fed has rescued right now AIG, because we might not know what they would be doing tomorrow if that hadn't happened. But, today...

COOPER: Because it's such an important, huge company?

ORMAN: Oh, my God. Do you agree with me?

VELSHI: Yes.

COOPER: Yes.

(CROSSTALK)

ORMAN: This was serious. Why it took them so long. I mean, if they had just done on Friday, it would have cost us $20 billion. But, no, they wanted to wait, so it would cost us $85 billion. That's a whole 'nother story, however.

But it's -- but, today, people do what they have been doing. They stay out of credit card debt. You make sure that your money is insured by the FDIC. You don't take undue risk. If you have just made an inheritance -- had an inheritance, or you had new money, it's not money that belongs in the stock market.

VELSHI: And keep a little cash.

ORMAN: Yes, yes.

VELSHI: Suze says this all the time, but the -- what's happening on Wall Street is no different than what is happening to Americans. The companies that have a lot of cash can weather this storm, because we will come out of it at some point. People who have a lot of cash can weather out this storm. COOPER: It was interesting. I reading an article in "The Times" today, saying -- or in "The Wall Street Journal" today, saying, a lot of people right now just kind of freeze, because they're so nervous. And I'm in this position, too. I don't even want to look at what stocks I have.

VELSHI: Right.

COOPER: It's just -- it's intimidating. Do you take money out of the stock market now? If you have a bunch of stocks, do you take them out?

ORMAN: Depends. Do you need the money or do you not? If you need the money in one year to retire, to generate income for you, and it's all in growth stocks, yes, you betcha. You come out of the stock market right now.

COOPER: That's if you need the money in a year or two?

ORMAN: That's it. But, if you don't need the money for 10, 15, 20 years, and you're in good, quality stocks, stocks that aren't going to go away, then of course you stay here. So, there's -- you know, what you just have to...

COOPER: It's the long term vs. short term.

ORMAN: It's the long term vs. short term.

However, who has money in the stock market, Anderson, really, when you think about it? They have it in their 401(k).

COOPER: Right.

ORMAN: What do they have? They have credit card debt. At what interest rate?

COOPER: Right.

ORMAN: Eighteen percent. Want to make an 18 percent return on your money? Pay off your credit card debt.

COOPER: Right.

ORMAN: Forget the stock market. So, people have to be so careful here.

COOPER: Right. It's crazy to invest money in the stock market when you are paying 18 percent on credit card debt and you haven't paid that off.

ORMAN: But here is the real thing that is going to start happening to people. They're going to find that they have credit cards. They're going to find that they have credit cards that they haven't been using that have no balances on them. From this, they are going to find that these credit card companies are going to close down these credit cards. They're going to close down your home equity lines of credit.

That is going to affect your FICO score. Interest rates then are going to go up. So, you're going to find that credit is going to now decrease more and more and more. That's how it's going to affect the average person.

COOPER: Ali, Obama and McCain both said they have plans. I mean, what are the differences between their plans?

VELSHI: With the crisis that we're in, virtually nothing. They have both said they want better regulation. We all know we need better regulation. The regulatory framework for financial services is a mess. It's a lot like our security regulation before 9/11.

COOPER: You know, for goodness sakes, if everyone says, it's like security was before 9/11...

VELSHI: Right. It's different organizations that don't talk to each other.

COOPER: But if everyone says they know we all need more regulation, how come we have all been sitting around? Just because everyone -- people have been making money?

(CROSSTALK)

VELSHI: Particularly when these two senators talk about the fact that they should have done this, this should have been done, they have both been in the Senate. I don't recall either of them suggesting this sort of legislation.

So, the fact is -- but that still probably wouldn't have saved this situation. They don't have a plan about this. And I'm not entirely sure that any administration could. This was the normal greed and markets that have caused this. And...

COOPER: Their tax plans, though, differ greatly.

VELSHI: Their tax plans do differ greatly. And, frankly, for most people, that's probably a better thing -- a better thing to look at.

Barack Obama's tax idea, his -- his philosophy, is that lower taxes for about 95 percent of households, and raise taxes on those that make more than 250,000. He also would doesn't -- he would like to reduce taxes for people who -- seniors who earn less than $50,000.

McCain will lower taxes for everybody, including businesses. So, he wants to reduce taxes for all individual taxpayers. And he wants to cut the business taxes down, because his belief is, if you reduce taxes, it encourages growth, because it gives people their own money. And he also wants to get rid of the alternative minimum tax, which, by the way, is killing a lot of middle-income...

(CROSSTALK)

COOPER: Is anyone talking about the deficit?

(CROSSTALK)

COOPER: Both these plans are -- do they solve the deficit problem?

VELSHI: No. And both of their economic plans will grow the deficit, in fact, and the debt. But, no, there's -- that is just not -- it's not a sexy issue, Anderson. It's a hard issue to talk about.

(CROSSTALK)

COOPER: So, I mean, you talk about personal finance and people paying off their own personal debt, I mean, our government has got a huge amount of debt. We're borrowing money from -- from China and just about everyone else.

ORMAN: Huge. Huge. Huge.

And, so, you know these segments that you do, "Keeping Them Honest"?

COOPER: Right.

ORMAN: We need to be keeping the corporations. We need to be keeping the SEC honest.

There are so many things that have gone so seriously wrong, I can't even tell you, which is why the everyday person, can you forget about what, seriously, what the economy is doing?

VELSHI: Right.

ORMAN: Look at your own lives. Look at what you have got going on. There's only one thing, Anderson, you have control over in this life. And that is your own personal finance, as what you do with the money you have, what you do with the money that you don't have.

And that's where you have to focus right now, because all of this other stuff, I have to tell you, nobody gets it.

COOPER: There are some people who say, though, their instinct is, look, take money out of the stock market, take money out of the 401(k), and just keep it in cash right now, because you want to be liquid, and then maybe get back in the stock market when you think things are going to get better.

COOPER: The danger is, we just saw the inflation numbers come out for -- for the month of August, 5.6 percent annual, year-over- year, 5.6 percent. That means, unless you're earning 5.6 percent, you're nowhere ahead of where you were a year ago.

So, where do you get 5.6 percent? There's no bank account that will give you that kind of money right now.

ORMAN: Yes, but, Ali, what he's saying is, isn't it better to at least have something than to lose 20 percent?

VELSHI: Than to lose 20? Yes, it is.

ORMAN: Who cares about 5.6 percent inflation?

VELSHI: But life is about a little bit of risk. We just have to make smart decisions about risk. We...

ORMAN: No, there are people that it might make sense for them that they...

VELSHI: Just to sit with their money?

ORMAN: Hey, 99 percent of my money is where? I mean, I have been criticized for this. Is in municipal bonds. Why? Because I would rather make 5 percent, tax-free, and not have to worry about the stock market.

VELSHI: And they're safe.

ORMAN: And they're safe.

So, what do I care about the stock market? So, there are some people, truthfully, that, if you're safe, you're getting a good return, who cares?

VELSHI: But that's still an individual decision, to be a municipal bond. It's very different than keeping it in your house.

COOPER: The bottom line here, if the 401(k) is your primary savings, you stick with it?

ORMAN: Absolutely, as long as you are invested in things that make sense.

COOPER: All right.

Suze Orman, always good to have you on. Thank you very much.

ORMAN: Thank you.

COOPER: Ali Velshi as well.

Troubling times.

Suze Orman is sticking around. You can see her on Erica's live Webcast in a moment, during a break. Link to it from the live blog posts at AC360.com. You have got to do it quick, coming up.

Now, analysts fear this could be the start of the worst financial crisis since the 1930s. Let's put what happened back then in perspective, though. Here's the "Raw Data."

the Great Depression last from '29 to 1939. At its height, the unemployment was a staggering 25 percent. In 1932, the national income was half of what it was in 1929. And, by 1933, more than 11,000 of America's 25,000 banks had failed.

Straight ahead: checking the facts, looking at Barack Obama's record when it comes to telling the truth on the trail and in public statements in the media. Is the Obama campaign stretching the truth, distorting the record, or taking McCain's statements out of context? Well, we examined McCain last night. Only fair we do the same to Obama's. We're "Keeping Them Honest." You decide.,

Also, our panel on how the two candidates say they will fix the economy -- ahead on 360.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MCCAIN: The American worker is the most productive and most innovative. They're the fundamental of our economy and the strength of it and the reason why we will rebound. We will come back from this crisis.

OBAMA: And he tried to explain himself again this morning by saying that what he meant to say was that the American workers are strong.

But we know that Senator McCain meant what he said the first time, because he has said it over and over again throughout this campaign.

(END VIDEO CLIP)

COOPER: And so it went today, more back and forth between John McCain and Barack Obama, this time, Senator Obama accusing Senator McCain of trying to redefine after the fact remarks that McCain made on the trail.

Tonight, we're continuing our fact-check on the candidates' spin. Last night, we put John McCain under the microscope and took a close look at what he has been saying on the trail and how truthful he has been.

Tonight, we're doing the same with Barack Obama, checking the facts against the spin, and, as always, leaving the rest up to you.

"Keeping Them Honest," here's Joe Johns.

(BEGIN VIDEOTAPE)

JOE JOHNS, CNN SENIOR CORRESPONDENT (voice-over): Clean shot or cheap shot? Obama's ads speak for themselves. You be the judge.

Take the dustup over the economy. Just one day after John McCain talked about the current Wall Street crisis, the Obama campaign pounced with an ad, repeating over and over again a short McCain little sound bite.

(BEGIN VIDEO CLIP, OBAMA CAMPAIGN AD) MCCAIN: The fundamentals of our economy are strong. The fundamentals of our economy are strong.

(END VIDEO CLIP)

JOHNS: But the fact is, McCain said more than that. He also acknowledged in his speech that these are very difficult times, though, now, after the Obama attack, he suddenly had some explaining to do.

MCCAIN: Well, what I obviously was saying and I believe is, the American worker is the most productive, and most innovative. They're the fundamental of our economy and the strength of it and the reason why we will rebound. We will come back from this crisis. But, right now, we're the victim of greed, excess and corruption in Wall Street.

JOHNS: In another ad, Obama attacks McCain and spending for schools.

(BEGIN VIDEO CLIP, OBAMA CAMPAIGN AD)

NARRATOR: John McCain voted to cut education funding.

(END VIDEO CLIP)

JOHNS: Well, did he? Take a look at the fine print. It's tiny, up there at the top of the screen. The ad lists five dates which appear to be, well, several McCain votes. But the truth is, McCain only voted once to cut education funding. Another time, he voted to increase funding. The other three votes, he opposed an increase.

VIVECA NOVAK, FACTCHECK.ORG: I would call that simply false. He did not vote to cut education funding five times. There was only one instance where you could say he actually cut from the current baseline.

(BEGIN VIDEO CLIP, OBAMA CAMPAIGN AD)

MCCAIN: It's over. It's over for the special interests.

NARRATOR: Wait a second. John McCain's chief adviser lobbies for oil companies.

(END VIDEO CLIP)

JOHNS: Example number three. An Obama ad running now says a top McCain adviser lobbies for oil companies, Charlie Black. The truth is, Black used to lobby for oil companies, but not anymore.

NOVAK: Actually, nobody who is paid by the McCain campaign is permitted to currently be lobbying. So, they have all taken leave or they're not currently lobbying.

JOHNS: In one Obama ad, the issue may be more omission than distortion. In a commercial targeted at Michigan -- remember, Detroit is Motor City, and it's having tough times -- McCain claims that McCain opposed loan guarantees for automakers, which is true.

(BEGIN VIDEO CLIP, OBAMA CAMPAIGN AD)

NARRATOR: But John McCain refused to support loan guarantees for the auto industry. Now he's just paying lip service.

(END VIDEO CLIP)

JOHNS: But what the ad doesn't say is that McCain actually changed his tune in August.

NOVAK: Well before this ad was aired, he had changed his position and come around to supporting the loan guarantees.

JOHNS: And the most controversial assertion of all perhaps is the remark Obama made months ago that McCain would keep troops in Iraq for 100 years. McCain actually said troops should stay in a non- combat role as long as it takes, not that he wanted a century of war.

(on camera): Of course, not everything Obama says in his ads is untrue, but, regarding these issues, the campaign would not give us anyone to interview. But it's clear they stand by the ads.

Joe Johns, CNN, Washington.

(END VIDEOTAPE)

COOPER: Joe Johns "Keeping Them Honest."

Just ahead: this year's unlikely swing state, Indiana. Why is the traditionally red state suddenly in play and what it's going to take to turn it blue -- we have got the "Raw Politics."

Plus, the long road ahead in Texas, the massive cleanup challenge Hurricane Ike left behind. Look at that -- death toll now 47, the future uncertain for all those left homeless.

The latest -- when 360 continues.

(COMMERCIAL BREAK)

COOPER: It is, as Candy Crowley, noted earlier, word-for-word combat. Now let's dig deeper into what's happening in the race with CNN's John King and Candy Crowley.

Candy, each day, this race evolves, how has the economic meltdown changed it in really the last 48 hours?

CROWLEY: Well, it's changed the headline. And that's certainly what the Obama campaign was looking for.

As time went on, the home mortgage crisis, the foreclosures began to move further and further back in the headlines. The jobless numbers come out. The a burst of a couple of days.

But this, you know, came out suddenly. It has dominated the headlines. As we watched, you know, the Dow Jones at the close of every -- of every stock market. So the fact is, that this has given new life to what the Obama campaign has wanted to talk about, at least, you know, for some time, and certainly in the post-convention period, when they've been kind of rocked by the Palin selection.

COOPER: John, it does make it sort of hard to talk about, you know, choice of words or "he said lipstick" or -- when suddenly this is making huge headlines.

KING: Without a doubt. This is a huge and a very complicated and a very compelling issue. Because when people see the headlines, whether it's $85 billion from the federal government to bail out AIG tonight or the collapse of a major firm like Lehman Brothers and whether they logon and look at their 401(k)s, Anderson, this is an issue that hits everyone around the table. And both candidates have been forced to come up with their -- explain their ideas. Although both of them have been sniping.

Still, John McCain says, "Well, I called for more regulation two years ago," and Barack Obama says he would just be more like George W. Bush.

This is a time when these candidates do have an opportunity that one could take command of the race if they stepped forward and delivered something much more compelling than the other one. I don't think we have seen that quite yet, but that is certainly what the competition is right now.

COOPER: McCain is getting hammered by Obama for his comment that the fundamentals of the economy are strong. And McCain says he was talking about the American worker and also, in that same statement, had acknowledged that the markets are in turmoil and that these are difficult times.

But is Obama's attack working?

CROWLEY: Well, we'll see. And I don't think we know this yet. I mean, this has been a part of Obama's repertoire since the convention simply because John McCain, at that convention, claimed the change mantle: "Here's Sarah Palin. She's a reformer. I'm a reformer. I'm a maverick. I can effect change in Washington."

And so they have been beating this back ever since. And now they have a new subject matter to kind of wrap this around and say he's not about change. He thinks everything is great. He's kind of the old guard. He is totally out of touch with where people are now. So it's this sort of McCain doesn't understand your problems and, besides which, he's part of the group that created this problem.

COOPER: John McCain advisor Carly Fiorina made a statement about Sarah Palin. It's gotten a lot of attention. There's a version of it floating around on the Net that's not entirely accurate. I want to play the accurate version right here.

(BEGIN VIDEO CLIP) ANDREA MITCHELL, MSNBC NEWS: And you were asked whether Sarah Palin has the experience to run a major company like Hewlett Packard, which you did. And you said, "No, I don't. But you know what? That's not what she's running for."

CARLY FIORINA, JOHN MCCAIN ADVISOR: Well, I don't think John McCain could run a major corporation. I don't think Barack Obama could run a major corporation. I don't think Joe Biden could run a major corporation.

(END VIDEO CLIP)

COOPER: The version floating around on the Web just says, "I don't think John McCain could run a major corporation." It cuts it there and doesn't mention Obama and Biden, and we want to play the whole tape here to be fair.

But even though she included McCain and Obama, the campaign cannot be happy about her comments. Though in truth, both these candidates, Obama and McCain, don't have a huge amount of economic experience. They're not -- they're not business leaders.

KING: They have not run a major corporation but, Anderson, what is the United States government? It is the biggest business, if you will. It requires executive decisions like that. From Senator McCain on down, they were apoplectic at those comments, saying, yes, she said Obama and Biden aren't qualified either.

But at a time they are trying to make this compelling economic argument to seize control of the biggest issue before the American people, to have someone who is on your payroll as a senior economic advisor -- although she volunteers for the campaign -- say that you're not qualified has them furious. And she was told to cancel some other interviews she had scheduled today, and I'm told you won't see much of Carly Fiorina on TV, at least for a while, because of their disappointment on this.

But this was another miscommunication from the McCain campaign at a pivotal time. He could -- John McCain can make the case that, yes, the fundamentals of the economy is strong. The economy grew it more than 3 percent in the last quarter. That's not so bad. Unemployment is not at historically high levels, but you just can't make that case right now. It is politically not smart to try to out-debate the economics, the numbers, the statistics, if you will. And Carly Fiorina only added to a communication problem for the campaign.

COOPER: All right. Everyday this race is changing quickly. John King, Candy Crowley, thank you.

Still ahead, the battle heating up in Alaska over the investigation into the firing of the state's top cop. Sarah Palin, her husband and her staff at the center of the probe. The stakes were raised today, how an ugly divorce snowballed into a political showdown.

Plus, how Indiana went from a reliably red state to swing state and why the Obama campaign thinks it has a shot at turning it blue. John King reports on that. Stay tuned.

(COMMERCIAL BREAK)

COOPER: There's the electoral map. The yellow states are the states in play. In the Midwest Indiana -- Indiana, one of the key battlegrounds. It's actually a pretty remarkable fact. Indiana, of course, is a long leaning Republican when choosing presidents. The last Democrat to win its electoral vote was Lyndon Johnson in 1964.

Now, 44 years, 11 elections later, Indiana is very much in play. The Obama campaign believes it can turn it from red to blue. So what's different this year?

CNN's John King has the "Raw Politics."

(BEGIN VIDEOTAPE)

KING (voice-over): At $4.29 a gallon, the grumbling and disbelief is to be expected.

UNIDENTIFIED MALE: I put $80 in, and I'm eight gallons shy of being full.

KING: But listen closely to a very different sound Democrats are counting on to make history.

DOMINIQUE MURSON, OBAMA VOLUNTEER: Do you know who you're planning on supporting this year?

KING: Dominique Murson is cheerful.

MURSON: Are you registered to vote? OK, great. Thanks.

KING: Patient.

MURSON: It takes 30 seconds, like literally.

KING: Persistent.

MURSON: And what city is that?

KING: Murson is part of unprecedented effort by the Obama campaign to register new voters, with the ambitious goal of turning reliably Republican states like Indiana from red to blue.

UNIDENTIFIED FEMALE: I think we can. I really do. I think we definitely have enough people dedicated to the campaign and enough people that want to see some change. So I think we'll definitely see that happen.

KING: At Obama headquarters, constant reminders of the October 6 registration deadline and Republican Secretary of State Todd Rokita says the McCain camp had better take notice.

TODD ROKITA (R), INDIANA SECRETARY OF STATE: Yes. They have a fight here in Indiana. And I think it's real. KING: In 2004, 2.5 million Indiana voters cast ballots for president. This year, the state has already processed more than 560,000 new and updated registration forms, and Rokita predicts that reach a record 750,000 by the deadline.

ROKITA: This is the first time I've ever seen a Democratic presidential campaign this engaged in this state. Usually Indiana is No. 1 on the board for the red states on election night when it comes to our presidential elections.

KING: Not since 1964 has a Democrat carried Indiana for president, and Republicans promise to keep it red this year.

Without a doubt, the state's farm communities and small towns lean conservative. Washington is a town of 11,000. Seventy-five percent of its vote went Republican four years ago. Mark Williams was among the minority who voted Democrat. But not this time.

MARK WILLIAMS, INDIANA BUSINESS OWNER: When you look at the resumes from McCain to Senator Obama, Senator McCain has a lot more experience.

KING: Williams sees McCain as more in tune with his needs as a small businessman and rejects the Obama line that McCain is no different from President Bush.

WILLIAMS: He never stood by the rules of the Republicans. He's always voted the way he believes. He tells people what they need to hear, not always the most popular thing.

UNIDENTIFIED MALE: Every vote counts this year.

KING: Tough goings for Obama foot soldiers along the Kentucky border in Evansville, too. President Bush took nearly 60 percent of the vote here in 2004.

UNIDENTIFIED MALE: Just the man himself. Not really sure about him.

KING: In this garage, a McCain voter.

UNIDENTIFIED MALE: Thank you. Take care.

KING: So it's not easy. In the half hour knocking doors, only one promised to vote for Obama, and plenty of skepticism.

UNIDENTIFIED MALE: You aren't registered? Do you want to get registered?

KING: That the Democrats are here at all in the final weeks, never mind here aggressively looking for every last vote, is itself a dramatic change.

UNIDENTIFIED MALE: Haven't decided?

UNIDENTIFIED MALE: Too much tossups. (END VIDEOTAPE)

COOPER: John, you've already moved onto another state, Florida, battleground state. What's -- how does the race look there?

KING: Well, the Obama campaign, Anderson, is trying here in Florida -- this is a bigger state, of course, 27 electoral votes -- to do exactly the same thing. They say they're trying to register new voters. They also say there are tens of thousands of African- Americans here who are registered but have simply stopped voting. And they're trying to reach out to them, as well.

But I will tell you, the McCain campaign feels increasingly optimistic about Florida. We have a new poll coming out of CNN tomorrow, so we'll share those numbers with you tomorrow night. But the McCain campaign says that Obama spent $8 million in the summer unanswered on TV ads here over the summer.

Only in the last two weeks has McCain gone up with advertising of his own. So it's $8.6 million spent by the Obama campaign to about $600,000 spent by the McCain campaign. And the McCain campaign says it is running ahead right now in its internal polls. We'll see how if our numbers match up tomorrow night.

So the Obama campaign putting a lot of effort into this state. The Republicans say they are now increasingly optimistic. And we're here to take a peek.

COOPER: All right. We'll look at that tomorrow night. John, thanks very much.

Just ahead tonight, the lingering questions about Sarah Palin and her trooper ex-brother-in-law. Did he threaten her family's life? Did she try to get him fired? And now allegations -- Republican allegations -- that the Obama campaign is stirring things up.

First, the new bottom line on damage from Hurricane Ike. All that when 360 continues.

(COMMERCIAL BREAK)

BECK: Let's check in now with Erica Hill, who joins us with the "360 News and Business Bulletin" -- Erica.

ERICA HILL, CNN ANCHOR: Anderson, we want to update you, first of all, on the situation in Texas today. President Bush there to see for himself the colossal mess Hurricane Ike left behind.

In Houston, the food banks are simply overwhelmed, and the lines, as you can imagine, are incredibly long. Galveston in ruins. Thousands of people remain in shelters tonight. More than a million customers are without power. Forty-seven deaths are now tied to the storm, including 17 in Texas.

On Wall Street, as you can guess, another nail-biter. But we should mention, there was some actually very welcome good news today. Morgan Stanley, the investment bank posting a third quarter net profit of $1.4 billion on sales of $8 billion. That beat Wall Street's expectations by a mile.

And on its 100th birthday, General Motors today unveiling its four-wheeled bridge to the future. Say hello to the electric-powered Chevy Volt. GM's top executive also urged Congress to fund a $25 billion loan package, which was approved last year, despite the turmoil on Wall Street, Anderson.

COOPER: Looks pretty nice, that car.

HILL: No word on pricing. It's going to be two years before it's available.

COOPER: Really? You know, it's always disappointing, because you see those cool cars. And then it's just like -- or it's just like a design car.

HILL: And then you can't get your hands on them. Yes.

COOPER: Here's a nice "Beat 360" photo. O.J. Simpson stretching during his armed robbery kidnapping trial in Las Vegas.

Here's the caption from our staff winner, Alyssa: "Hey, ladies, check out the gun show!"

HILL: By the way, she was very happy. It's the first time she's ever won. And as she said, this is sort of the bright spot on the day. Forget about the worries on Wall Street.

COOPER: Right.

HILL: She won "Beat 360."

COOPER: She -- yes. I liked her caption very much. I thought it was clever.

Go to AC360.com. Click on the "Beat 360" link. Send us your entry. We'll announce the winner at the end of the program. The winner gets a "Beat 360" T-shirt.

New details just ahead. I was going to say something but best not to.

New details just ahead on Sarah Palin and the state trooper who married her sister. The investigation turning into a political punch- up of the allegations of a political witch-hunt. The allegations are getting wilder. We'll investigate.

Later, more on tonight's breaking new. The federal bail-out of the nation's biggest insurance company, how it affects you, the economy. Suze Orman is going to join us, weighing in on that. Stay tuned.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MIKE WOOTEN, ALASKA STATE TROOPER: I was a member of that family. I have some very cherished memories of those times. There was a lot of good times. I -- I don't wish any ill will on any of them. I absolutely don't.

(END VIDEO CLIP)

COOPER: That was a CNN exclusive, interview by CNN's Drew Griffin earlier this month with Alaska state trooper Mike Wooten, who was at the center of an investigation into whether his ex-sister-in- law, Governor Sarah Palin, tried to get him fired.

Now, tonight, there's breaking news in the case. Alaska's attorney general says state employees will not help with the investigation, will not be honoring subpoenas to give evidence. A bipartisan panel from the state legislator is leading the probe. Now, the McCain campaign is stepping in with new charges about the whole inquiry.

Up close tonight, 360's Randi Kaye.

(BEGIN VIDEOTAPE)

RANDI KAYE, CNN CORRESPONDENT (voice-over): Suddenly, the stakes are raised. What was once an ugly divorce involving Sarah Palin's sister is now at the center of a political showdown. The question is this: did Governor Palin, her husband, Todd, or any of her staff put pressure on the state's top cop to fire the governor's ex-brother-in- law, state trooper, Mike Wooten?

An investigator hired by Alaska lawmakers plans to subpoena Governor Palin's husband and several of her staff.

STEPHEN BRANCHFLOWER, INVESTIGATOR: He's made many comments about how it appeared the DPS was not doing its job because of Wooten. He wanted him fired. I'm hoping that the subpoena, if issued, will permit me to interview him.

KAYE (on camera): Now, Republican lawmakers say the investigation has become a political circus. They call it partisan payback. It's already a distraction, if not yet an embarrassment, for the governor. Five state lawmakers have sued to block the investigation.

The McCain campaign says it's being driven by two prominent supporters of Senator Barack Obama.

(voice-over) How did we get here? Claims by Palin and her family that three years ago in the middle of the divorce, Trooper Wooten repeatedly threatened them; even threatened to kill her father. Wooten denies that. Palin conceded her staff expressed concern about Wooten to Walt Monegan, the top cop.

GOV. SARAH PALIN (R-AK), VICE-PRESIDENTIAL NOMINEE: The state trooper has threatened to kill my dad. KAYE: But she insists as governor, she did not pressure anyone to fire Wooten. She told ABC last week that her husband had met Monegan but did not pressure him to fire Wooten.

PALIN: He did very appropriately, though, bring up those concerns about a trooper who was making threats against the first family. And that is appropriate.

KAYE: Now, the McCain campaign says Sarah Palin, quote, "did not learn of these contacts by Todd Palin until August of this year," even though Todd Palin met Monegan in her office soon after she became governor.

Monegan insists he was fired in July because he didn't sack the trooper. He says he wasn't told directly to fire him, but...

WALT MONEGAN, FORMER PUBLIC SAFETY COMMISSIONER: I believe I was fired because I did not fire Mike Wooten.

KAYE: The McCain campaign is now providing dozens of e-mails which it says show Monegan lost his job for, quote, "egregious insubordination."

MEGHAN STAPLETON, PALIN CAMPAIGN SPOKESWOMAN: The final straw came in June and early July of this year when Commissioner Monegan arranged for yet another unauthorized trip to Washington D.C. to request more financial assistance from Congress.

KAYE: Still, even some Republicans in Alaska say Monegan's firing was badly handled and hurt Governor Palin's credibility. They include a former U.S. attorney who was an informal ethics advisor to the governor.

In this letter dated July 24, Wesley Shay (ph) told Sarah Palin he had grave concern about the, quote, "naive unprofessional council" she received in the Monegan case. He declined to speak on camera but told me, "If they would have done what I said, I think it would have been over."

A spokeswoman for the governor told us, "While we can't always act on every idea, Governor Palin thanks Mr. Shay for his counsel."

(END VIDEOTAPE)

COOPER: Randi Kaye tonight, up close.

We continue to look at all the candidates, the vice-presidential candidates and the presidential candidates, with 49 days to go before this election.

"The Shot" is next. Pizza delivered from the ground up. The video kind of tells the story on this one. He picks it up. We'll show you that.

And at the top of the hour, breaking news and $85 billion bail- out for insurance giant AIG. Suze Orman with us, looking at what it means to you and what you should do with your money now when 360 continues.

(COMMERCIAL BREAK)

COOPER: Tonight's "Shot" might make you lose your appetite. You won't even want to touch a Zagnut. Take a look. We found -- that's an inside joke.

We found this video on the Web site Live Leak -- LiveLeak.com. A closed circuit security camera -- I'm not sure it's real -- capturing a pizza delivery man making a stop. He drops the pizza. Takes it out of the box. And slices fall on the street and then he just picks that back up.

HILL: I don't see understand how he could pick the pizza -- I mean, think about the pizza that you get delivered.

COOPER: Yes.

HILL: Maybe -- it's just -- it's like kind of -- And I love pizza. But it's kind of greasy and slimy. To have to pick it back up so quickly and put it in the box...

COOPER: You're saying slimy as though that's a negative.

HILL: No. I just like to sop it up with a paper towel.

COOPER: Yes. Time now for -- I go through an elaborate removal of cheese process, but I digress.

Time now for "Beat 360" winners, our daily challenge to viewers to try to trump our staff. Suze Orman said that she likes this segment very much.

HILL: She likes the music.

COOPER: She likes the cheesy music, yes. So you've got to come up with a better caption than the one that we can come up with. Tonight, it's going to be tough. Snap shot: O.J. stretching during the armed robbery and kidnapping trial in Las Vegas.

Our staff winner, Alyssa, first time, says, "Hey, ladies, check out the gun show!"

HILL: Yes.

COOPER: Viewer winners are Raul and Odalys in Miami. They came up with this caption together: "Ouch... I thought what happens in Vegas stays in Vegas."

(SOUND EFFECT: "Oooh!")

COOPER: "Beat 360" T-shirt. I think we're going to have to send them two T-shirts, since there's two people. It's on the way.

HILL: That's not fair.

COOPER: You'll have to share it or flip a coin, maybe. I'm not sure. Really? They have to share it? We're only sending them one?

HILL: Actually, can't we send them two T-shirts?

COOPER: Come on.

HILL: How about one of the old ones and one of the new ones?

COOPER: Is that true? We should send them two. Although now, everyone's going to say they did it as a joint thing so they get two. Anyway, you know, you can't game the system.

Check out all the entries at AC360.com.

HILL: And try a Zagnut.

COOPER: I had a Zagnut. I'd never had one before. And I just got handed one.

HILL: We just discovered it. It's really good.

COOPER: Yes. It's like -- anyway.

Coming up at the top of the hour, Suze Orman looking at your money options after the Wall Street meltdown and tonight's massive bailout of another corporate bailout.

I hope Zagnut's not, like, a brand name. it probably is a brand name. Oh, well.

Later, the candidates' word for word combat on fixing the economy, how their ideas stack up and how they're playing out on the trail. This show's just gone to pot. We'll be right back.

(COMMERCIAL BREAK)