$700 Bailout Plan Fails; Bailout Failure Backfires on McCain
KIRAN CHETRY, CNN ANCHOR: Coming right up now to the top of the hour, 7:00 here in New York. Breaking this morning, President Bush will make a statement on the economic crisis right before the markets open at 8:45 Eastern this morning. Then the White House and congressional leaders will try to keep this $700 billion bailout plan alive, at least in some way, shape or form. Yesterday, the House shocked Wall Street by shooting it down triggering a record 777 point sell-off. This morning, Senator Barack Obama released a statement saying the continued inaction would be "catastrophic for the economy and families." Oil prices fell below $94 a barrel early this morning on economic fears. Yesterday, prices also fell more than $10 a barrel, one of the biggest one day drops ever. And the gas shortage drags on in the southeast. Some drivers are still sitting in two hour lines waiting to fill up. Industry experts say that this could last for yet another two weeks. Stations started drying up after Hurricanes Gustav and Ike shot down refineries along the Gulf Coast.</s>JOHN ROBERTS, CNN ANCHOR: Well, back to our top story this morning, Dow futures rebounding this morning after the biggest one-day drop in Dow Jones history closed at 800 points wiped out gone. That means an astounding $1.2 trillion vanished from portfolios and 401(k)s. Major world markets still taking a hit this morning after the bottom fell out on Wall Street. Japan's Nikkei closed down more than four percent. In Hong Kong, stocks rebounded from early losses. And in London, stocks are up slightly and it looks like reporting to an up day on Wall Street. A fix for the worst financial crisis of our time is going to have to wait at least another couple of days. Congress has adjourned for the Jewish holiday, but staffers and some lawmakers are working behind-the-scenes on a bailout plan. That's plan B. Our Kate Bolduan joins us live from Capitol Hill this morning. Kate, you probably heard Congresswoman Blackburn there a second ago saying she believes that something will get done by the end of this week. Is that a sentiment that's widely shared there on Capitol Hill?</s>KATE BOLDUAN, CNN CORRESPONDENT: I can tell you, they sure hope they can. Many did not expect it to turn out this way or be in the position that everyone seems to be right now, which is scratching their heads. I mean, some really thought this was a done deal but it turned out to be anything but that, John, and what turned out to be one of the most dramatic votes in recent years.</s>BOLDUAN (voice-over): Lawmakers knew it would be a tough vote and House Republican leaders were begging for support until the last minute.</s>REP. JOHN BOEHNER (R), MINORITY LEADER: What's in the best interest of our country? Not what's in the best interest of our party. Not what's in the best interest of our own reelection. What's in the best interest of our country? Vote yes.</s>BOLDUAN: Then came the stunning count. When the official clock expired, support wasn't there. Leaders held the vote open for more than 20 minutes twisting arms. In all, 95 Democrats and 133 Republicans voted no.</s>UNIDENTIFIED FEMALE: The motion is not adopted.</s>BOLDUAN: The stock market then plunged more than 700 points and the finger pointing began. House Republicans claiming Speaker Nancy Pelosi's blast against free market advocates poisoned key Republican support.</s>REP. NANCY PELOSI (D), HOUSE SPEAKER: But in this case, in its unbridled form, as encourage supported by the Republicans, some in the Republican Party not all, it has created not just -- not jobs, not capital, it has created chaos.</s>REP. ERIC CANTOR (R), VIRGINIA: Right here is the reason I believe why this vote failed. And this is Speaker Pelosi's speech that frankly struck the tone of partisanship that frankly was inappropriate in this discussion.</s>BOLDUAN: Democrats call that absurd.</s>REP. BARNEY FRANK (D), FINANCIAL SERVICES CHAIR: Here's the story. There's a terrible crisis affecting the American economy. We have come together on a bill to alleviate the crisis and because somebody hurt their feelings they decide to punish the country.</s>BOLDUAN: And Speaker Pelosi insists this crisis requires a bipartisan solution.</s>PELOSI: What happened today cannot stand. We must move forward and I hope that the markets will take that message.</s>BOLDUAN: Now, where everyone goes from here is definitely still unclear. One top House Republican, Roy Blunt, tells CNN that the bill could first go to the Senate, pass with some tweaks and then head back to the House hopefully gaining support along the way. But one top Senate aide says that seems very unlikely right now -- John.</s>ROBERTS: Kate Bolduan for us this morning on Capitol Hill watching this very closely. Kate, thanks. We'll talk to you a little bit later.</s>BOLDUAN: OK.</s>CHETRY: So the way this could all trickle down to you and hit you the hardest is through the credit market. Senior business correspondent Ali Velshi joins us now. You know, we all like to look at the Dow.</s>ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Right.</s>CHETRY: We like to look at Wall Street because you can actually see things dropping...</s>VELSHI: Yes.</s>CHETRY: ... and coming up. But really this credit situation --</s>VELSHI: You've got that little box that we could have in the corner. We've got the big screen with the Dow. But if you actually to put the Dow or U.S. stock markets in perspective in terms of all the money that flows around the world, it would be like looking at a map of America and having the Dow look like Long Island. The fact is the credit markets are much bigger. There is much more money that flows outside of stock markets than not. And that is the money that banks exchange with each other and then flow down -- that money flows down to you in different ways. One of the ways it flows down to you is in terms of you getting loans, mortgages and auto loans and student loans and other kinds of loans. But another way it flows down to you is if you're trying to sell a house. You're in trouble, you're trying to get out from under your payments. You're worried about foreclosure. You're trying to sell that house but somebody else can't buy it because they can't get the financing that is necessary. Another way it affects you is that companies and maybe your employer, maybe even small businesses need to borrow money. It's very common for them to borrow money for day-to-day operations which include payroll, and if they can't make those payments or if they can't pay a supplier, that affects that supplier which may be a small business. So the issue here is that as these credit markets are frozen up, people can't get loans. Now the big deal here is that the credit markets were frozen up already. But the anticipation of a deal really shut them down because now nobody is going to loan money on the expectation that they don't know whether the rules are going to change in a couple of days. So that's a really big deal and we are not hearing about all of it. We're hearing anecdotally from certain companies. But we know that some franchisees, for instance, who depended on the franchiser to get financing to buy machinery or things like that can't do that. You say, why do people care? Because people work at these places and those are jobs that are being lost. That's why we are worried about this. Again, I just make that point to underscore how this is related to Main Street because it's become a Wall Street bailout in the minds of so many Americans.</s>CHETRY: That's right. And that's what -- and they're still saying calling it that.</s>VELSHI: That's right.</s>CHETRY: And that also is a psychological trigger as well. All right, Ali. We're going to talk about this throughout the morning. Thanks.</s>VELSHI: And we're taking questions so go CNN.com/am.</s>CHETRY: Slash am. Thanks.</s>ROBERTS: A lot of people want information this morning. A deal rejected, a market collapsing, and all Republicans and Democrats could do was point fingers at each other. Each side accusing the other of playing politics with both the bailout and your money.</s>REP. JOHN CULBERSON (R), TEXAS: The Democrats because they had the majority they could have passed the bill today on their own.</s>REP. NANCY PELOSI (D), HOUSE SPEAKER: The Democratic side more than lived up to its side of the bargain.</s>REP. JOHN BOEHNER (R), HOUSE MINORITY LEADER: I do believe that we could have gotten there today had it not been for this partisan speech that the speaker gave on the floor of the House.</s>REP. MICHELE BACHMANN (R), MINNESOTA: We are not babies who suck our thumbs. We have very principled reasons for voting no.</s>ROBERTS: Well, ultimately, the bickering costs us more than $3 billion a minute but it may have cost John McCain something even more valuable right now. Political capital. Our Ed Henry joins us live from Washington this morning. Ed, Senator McCain put a lot on the line here, suspended his campaign, rushed back to Washington. The deal fell apart. Now he's back there on the campaign trail. What kind of shape is he in with this whole thing?</s>ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Well, John, you're absolutely right. John McCain put the financial crisis front and center last week, so the bailout's fall is a really dangerous development for him.</s>HENRY (voice-over): The market appears to be melting down, threatening to bring John McCain's campaign with it.</s>SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: I was hopeful that the improved rescue plan would have had the votes needed to pass.</s>HENRY: The bailout's failure on the House floor is a stinging defeat for McCain who dramatically raised the stakes himself last week declaring he'd suspend his campaign to get a deal. As the Dow plunged 778 points, McCain was on the defensive. So he tried to pin the defeat on Barack Obama, even as McCain insisted he did not want to play the blame game.</s>MCCAIN: Senator Obama and his allies in Congress infused unnecessary partisanship into the process. Now is not the time to fix the blame. It's time to fix the problem.</s>HENRY: But the real problem for McCain is that despite his best lobbying efforts, 133 fellow Republicans voted no. And some conservatives are charging McCain lost sight of his party's free market roots.</s>TERRY JEFFRIES, CNN CONTRIBUTOR: I think that John McCain failed fully. He should be right there pushing the principles that the conservatives in the House are doing right now.</s>HENRY: The bailout is one of the few major issues where Obama is pretty much in line with McCain. Both men have suggested they would vote for the rescue plan. But the tension within the Republican Party, many House conservatives rejecting both the president and their presidential nominee, has given Obama an opportunity to tie McCain to an unpopular White House.</s>SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: This crisis is a direct result of a philosophy that the people who've been running Washington for the last eight years have been following.</s>HENRY: McCain allies continue to insist he made the right move by inserting himself into the talks and note 95 Democrats voted against the bill too.</s>RON BONJEAN, REPUBLICAN STRATEGIST: He wanted to come back to Washington to help with the crisis. In fact that it didn't work out, it's not in his shoulders. Frankly, it's on the Democrats shoulders. They're the one who run -- they're the ones who run Congress.</s>HENRY: But the challenge is particularly stark for McCain, according to the latest CNN/Opinion Research poll. When asked who was more responsible for the financial crisis, 47 percent said Republicans. Twenty-four percent said Democrats.</s>HENRY: Now, both candidates will be talking about the economy again today. Senator Obama in Nevada, Senator McCain will be in Iowa. And new this morning, Senator McCain was supposed to be coming back to D.C. tonight into tomorrow for a possible Senate vote. With all that influx, he's now going to Missouri instead. Besides the fact that the Senate vote is up in the air, it doesn't seem to be a lot of political benefit for John McCain coming back here to Washington right now, John.</s>ROBERTS: All right. Ed Henry for us in Washington this morning. Ed, thanks so much for that. And a reminder that Senator John McCain is going to join us coming up live at our next hour here on the "Most News in the Morning." What are his plans for the campaign now that Congress is looking for a plan B on that bailout?</s>CHETRY: And in the wake of the bailout bill defeat, Republicans in the House are getting a lot of blame. But 95 Democrats also voted against the bill, too, and we're going to talk to one of them live to find out more about why. Also, the VP's plan of attack. Sarah Palin and Joe Biden getting ready to face off in front of the nation. Will Governor Palin be prepared? Can Senator Biden be too tough? Jason Carroll gives us the tale of the tape on the "Most Politics in the Morning."