Elizabeth Holmes reports from Fort Myers, Fla.,on the presidential race.

Just when you thought things couldn’t get uglier on the campaign trail, they did.

On a day when Republican candidate John McCain and his campaign, including running mate Sarah Palin, have come out swinging, their supporters have taken the cue and thrown even harder punches.

At a Palin rally here, Lee County (Fla.) Sheriff Mike Scott took the stage to introduce the candidate and yelled: “On Nov. 4th, let’s leave Barack Hussein Obama wondering what happened!”

Using the Democratic candidate’s middle name—Hussein—is something McCain has frowned upon before. In February, McCain was introduced at a rally by conservative talk show host Bill Cunningham, who harshly attacked Obama and repeatedly used his middle name, “Hussein.” McCain immediately apologized and condemned Cunningham’s remarks.

But that’s not all. Mandy Connell, a local conservative radio host and emcee of the event, entertained the crowd of thousands for an hour while Palin attended a fund-raiser. During her riff, she threw her own take to the crowd, referring to Obama as “a guy who hangs around with terrorists.”

Both campaigns are aggressively mudslinging. The McCain campaign has invoked Obama’s relationship with 1960s radical William Ayers and commented on his former pastor Rev. Jeremiah Wright.

The Obama campaign, for its part, has resurrected the Keating Five scandal, a 20-year-old skeleton in McCain’s closet. During the Savings and Loan crisis, McCain and four other senators were accused of improper activity for interacting on behalf of Charles Keating, the chairman of the Lincoln Savings and Loan Association and a big McCain campaign contributor.

The Obama campaign released a documentary tying McCain’s involvement then to his economic policies now.

John D. McKinnon reports on the White House.

President George W. Bush again urged patience with the government’s new $700 billion program to restore financial confidence, in a hastily arranged event aimed at reassuring worried investors and the public.

President George W. Bush speaks about the economy Monday in San Antonio, Texas. (AP)

The president held the event as as stocks were falling sharply both in Europe and in the U.S., despite the rescue plan and action by the Federal Reserve to help banks.

Bush met with small-business owners in an unscheduled stop at Olmos Pharmacy, an old-fashioned soda fountain in San Antonio, Texas, on his way back to Washington from a weekend at his Crawford ranch. He was also scheduled to attend a political fund-raiser in San Antonio.

In brief comments to reporters, he said the government needs a little time to get last week’s rescue plan working. “It’s going to take a while,” he said. “We don’t want to rush into this situation and not have the program be effective.”

Even when the program is up and running – likely within days – “it’s going to take a while to restore confidence in the financial system,” he added.

Bush acknowledged continuing criticism of the legislation, which cleared Congress Friday and many voters regard as an unjustified bailout for Wall Street. But “had we not done anything, folks like the ones behind me would be a lot worse off,” Bush said, referring to the small-business owners.

The president suggested that he’s looking forward to coming home to Texas when he leaves office in late January. But in the meantime, he said, “it looks like I’m going to have a lot of work to do” on the economy. Bush has always said he planned to “sprint to the finish” as president, but might not have realized he would be running to stay ahead of dangerous and increasingly global financial problems.

In the latest signal that Bush’s work continues, the White House announced that he would have another event on the economy and the rescue legislation on Tuesday, at an office products company in the Washington suburban of Chantilly, Va.

Jay Solomon reports on international affairs.

U.S. diplomats visiting Pyongyang last week learned little about the health and mental capacity of North Korean leader Kim Jong Il.

South Koreans watch TV reporting on North Korean leader Kim Jong Il at a railway station in Seoul on Sundayl. (AP)

U.S. Assistant Secretary of State Christopher Hill made a two-day journey to the communist country last week in a bid to salvage a foundering U.S.-North Korea disarmament deal. But U.S. officials familiar with the trip said Hill’s entourage was unable to gain any new insights into Kim Jong Il’s condition from their interlocutors.

American and South Korean officials believe the 66-year-old had a stroke in mid-August, and North Korea-watchers outside the country haven’t seen any videos or photos of him in nearly two months.

Last week, North Korea’s state-owned news agency ran stories saying Kim Jong Il attended a football match in Pyongyang. But no video of the event was provided to international news agencies.

“It’s something they simply didn’t want to talk about,” said an official familiar with the U.S. mission. Hill met with senior negotiators from North Korea’s foreign ministry, as well as a general form the Korean People’s Army.

The American diplomat is trying to establish a verification process that will allow arms inspectors to dismantle North Korea’s atomic weapons while enabling the White House to remove Pyongyang from the State Department’s list of state sponsors of terrorism.

North Korea has begun reactivating its Yongbyon nuclear reactor in recent weeks because it says the U.S. didn’t make good on its pledge to take Pyongyang off its terrorism list.

American officials haven’t announced whether Hill made any progress in developing a new formula to verify North Korean’s denuclearization process. The U.S. diplomat briefed Secretary of State Condoleezza Rice on his mission over the weekend, and a press briefing may happen by the end of this week.

Elizabeth Holmes reports from Clearwater, Fla., on the presidential race.

Sarah Palin’s gaffes or missteps in recent national interviews were part of a larger strategy, the GOP vice-presidential candidate said Monday.

It’s all about giving the cast of Saturday Night Live something to parody.

In a light-hearted display of self-deprecation, Palin talked about the recent attention she received over her answers in recent interviews. In particular, Palin’s comments from a long series with CBS-TV’s Katie Couric have garnered scads of press, on questions about everything from what she reads to her stance on Supreme Court cases.

The interview was part of a parody on the late-night comedy show Saturday Night Live. Actress and comedian Tina Fey, who bears a striking resemblance to Palin, has portrayed the Alaska governor three different times. The first appearance was a mock skit but the other two were based on real moments of Palin’s from the campaign trail. Last Saturday, Fey returned to re-enact the vice-presidential debate.

“I’m happy to be speaking directly to the American people to let them know if you want an outsider who doesn’t like politics as usual or pronouncin’ the ‘g’ and the end of words she’s sayin’ I think you know who to vote for,” said Fey, imitating Palin. “Oh, and for those Joe Six-packs out there playing a drinking game at home – Maverick.”

On Monday, to a crowd of hundreds gathered in a park here, Palin called the CBS interview “less than successful” and apologized for getting “really impatient” because the questions weren’t about issues “Americans wanted to hear about.” (Critics of Palin’s vice-presidential debate performance panned her for avoiding the issues-based questions.)

“I was just trying to keep Tina Fey in business,” she said to big applause. “Job security for SNL characters.”

After the rally, Palin shook hands with audience members as Shania Twain’s “She’s Not Just a Pretty Face” blared from the speakers. “She’s on the council, she’s on the board / She’s a politician, she praises the Lord,” Twain sings. “She’s not just a pretty face / She’s got everything it takes.”

Elizabeth Holmes reports from Clearwater Beach, Fla. on the presidential race.

With just four weeks left until decision day, John McCain and his campaign kicked the week off by attacking Barack Obama on Afghanistan.

Titled “Dangerous,” the 30-second spot aims centers on an out-of-context quote of Obama’s from August 2007. During a campaign stop in New Hampshire, Obama talked of the U.S. troops in Afghanistan. The McCain campaign pulled only this snippet: “Just air-raiding villages and killing civilians.”

“How dishonorable,” a female narrator says.

In the spot, which the campaign says will air “nationally,” the narrator then blames “congressional liberals” for “increasing the risk on their lives.”

“How dangerous,” she says.

The full Obama quote, however, gives a much different tone. “We’ve got to get the job done there and that requires us to have enough troops so that we’re not just air-raiding villages and killing civilians, which is causing enormous pressure over there,” Obama said.

McCain’s running mate Sarah Palin repeated the attack at her Monday morning rally here. Using again only the portion of the quote, Palin, whose eldest son was deployed in September, said, “That’s not what our brave men and women in uniform are doing in Afghanistan” as the red-white-and-blue clad crowd booed.

She continued: “The U.S. military is fighting terrorism and protecting us and our values…they deserve our gratitude and they deserve our support.”

UPDATE: The Obama campaign enlisted John Natham, a retired four-star admiral, to respond to the ad. “As a recently retired admiral, I know who has the strongest record of supporting the men and women currently serving in our military. Senator Obama has consistently voted to fund our troops in Afghanistan and Iraq and, just as importantly, a proven record of support when they return home,” Natham said.
“Despite consistent distortions of his record, thousands of veterans like myself support Senator Obama because he has the judgment, character and integrity to be a great president.”

It’s been a bad stretch for Sen. John McCain, but few have been willing to go this far: Former Hillary Clinton spokesman Howard Wolfson, now writing for The New Republic, declares flatly “The race is over.” Sen. Barack Obama will win, he says.

“John McCain’s candidacy is as much a casualty of Wall Street as Lehman or Merrill. Like those once vibrant institutions, McCain’s collapse was stunning and quick. One minute you are a well-respected brand. The next you are yelling at the messengers of your demise as all around you the numbers start blinking red and stop adding up.” Before the Wall Street collapse, Wolfson writes, “Senator McCain was ahead.” But today, “an election dominated at its inception by the war in Iraq is now overwhelmingly focused on the economy. More than half of voters in polls say that the economy is their top concern and Senator Obama enjoys double digit leads among voters asked who can better fix our economic mess. Put simply, there is no way Senator McCain can win if he continues to trail Senator Obama by double digits on the top concern of more than half of voters.”

CLICK HERE to read the rest of today’s Political Wisdom. And take a look at Peter Brown’s new column, “Wall Street Ends McCain’s Lucky Streak.”

Amy Chozick reports on the presidential race from Asheville, NC.

Barack Obama’s campaign plans to release an Internet ad Monday morning that will highlight Republican John McCain’s involvement in the “Keating Five” scandal of the late 1980s and early 1990s.

The campaign says it will email its supporters a link to a new Website called KeatingEconomics.com that features a 13-minute documentary on the savings-and-loan scandal. The Website also includes a timeline and newspaper articles explaining in detail the nearly twenty-year old scandal.

The Web ad shows footage of the senate trials of the five senators, including McCain, all of whom were accused of improperly aiding Charles Keating, chairman of the failed Lincoln Savings and Loan Association and a political donor who went to prison for fraud that led to the bank’s collapse.

The failure of California-based Lincoln Savings led to more than 20,000 mostly elderly investors losing their life savings and at the time was one of the largest financial failures in history. In 1991 the Senate Ethics Committee cleared McCain of acting improperly but said he exercised “poor judgment.”

The campaign says that McCain’s involvement in the Savings and Loan crisis directly impacts the current economic problems and is indicative of a mindset of deregulation and lack of oversight that led to the financial industry meltdown.

“His involvement with Keating is a window into McCain’s economic past, present, and future,” says Obama spokesman Dan Pfeiffer.

“The Keating Five involved all the things that have brought the modern crisis. Senator McCain has not learned the lesson, and has continued to follow policies that are going to produce a disaster,” former bank regulator William Black says in the Obama campaign’s new documentary-style Web attack.

The Keating attack comes after the McCain campaign has stepped up its efforts to tie Obama to 1960s radical William Ayers. During an event in Colorado on Saturday, Alaska Gov. Sarah Palin said Obama is “palling around with terrorists.”

At a rally on Sunday, Obama hit McCain for being out of touch with the current economic problems. “I want y’all to listen to this, his campaign has announced and I quote, that they plan to ‘turn the page’ on the discussion on the economy and spend the final weeks of this campaign launching Swiftboat-style attacks on me,” he said to 28,000 people gathered at a high school here.

McCain and his wife Cindy have spoken about the severe emotional trauma caused by the Keating investigation. Of the five senators put on trial only McCain and John Glenn ran for re-election.

UPDATE: “The difference here is clear: John McCain has been open and honest about the Keating matter, and even the Democratic special counsel in charge recommended that Senator McCain be completely exonerated. By contrast, Barack Obama has been fundamentally dishonest about his friendship and work with the unrepentant terrorist William Ayers,” McCain spokesman Brian Rogers said in response to the Keating Five attack. “It’s obvious that Barack Obama is frantically attacking because he knows that most voters find these kinds of friendships, and the failed judgment they expose, to be unacceptable for our next president.”

Kara Scannell reports from Washington:

Now that Congress has the $700 billion financial-industry rescue plan out of the way, lawmakers are turning their attention to what went wrong – and whom to blame. Two groups expected to appear before Congress to testify on these questions in coming weeks are regulators and corporate executives.

Regulators
Being Securities and Exchange Commission Chairman Christopher Cox hasn’t been easy lately. Republican presidential nominee John McCain called for firing him over his role in the financial crisis.

Five independent investment banks disappeared under his watch, and the SEC’s Inspector General issued a report criticizing the agency’s oversight of Bear Stearns & Cos., the first Wall Street casualty of the financial crisis, during Mr. Cox’s tenure.

Now, Democrat Rep. Henry Waxman, chairman of the House Oversight Committee, has asked Mr. Cox to testify about his actions at a hearing on Oct. 23. Former Federal Reserve Chairman Alan Greenspan and former Treasury Secretary John Snow have also been invited to testify at the hearing, entitled “The Role of Federal Regulators.”

The committee has asked them to talk about their roles with respect to the regulation of “markets, ‘subprime’ mortgages, mortgage-backed securities, and derivatives.” Derivatives, or financial products that often act as insurance, have been singled out as one of the culprits contributing to the credit crunch.

Rep. Waxman is racing the clock as many congressional leaders will have left town to campaign for reelection. “This financial crisis has shaken the global economy,” he said last week when announcing five hearings. “Congress cannot wait until a new administration arrives in January to examine what went wrong and who should be held accountable.”

Executives
Richard Fuld, chairman of Lehman Brothers Holdings, will testify on Monday before the Oversight Committee. Three former executives of American International Group, including Maurice “Hank” Greenberg, have been invited to testify on Tuesday. Later this month, the committee will focus on the regulation of hedge funds and the role of credit rating agencies in the crisis.

Amy Chozick reports on the presidential race from Asheville, N.C.

The gloves are off … if there were any gloves on to begin with.

With just 30 days left until voters go to the polls, Barack Obama announced Sunday that he refuses to be “bamboozled” by negative attacks and called rival John McCain out of touch with average Americans.

The McCain campaign has attacked Obama recently for his association with 1960s extremist Bill Ayers. Speaking to GOP donors in Colorado on Saturday, Alaska Gov. Sarah Palin said Obama is “palling around with terrorists.”

“Senator McCain and his operatives are gambling that they can distract you with smears rather than talk to you about substance,” Obama said to a crowd of 28,000 gathered outside a high school here. “That’s what you do when you’re out of touch, out of ideas and running out of time.”

“We’re not going to let John McCain distract us. We’re not going to let him hookwink you or bamboozle you. We’re not going to let him run the okie dokie on you,” Obama said, a subtle dig at Palin’s folksy language that sparked a huge applause from the Southern crowd. “The American people are too smart for that.”

In response to Obama’s rally, the McCain campaign hammered Obama’s association with Ayers. The two men briefly served on a charity together and live in the same Chicago neighborhood.

Obama has frequently denounced Ayers’s bombings of federal buildings four decades ago and has noted that he was eight years old when the acts occurred.

“The last four weeks of this election will be about whether the American people are willing to turn our economy and national security over to Barack Obama, a man with little record, questionable judgment, and ties to radical figures like unrepentant domestic terrorist William Ayers. Americans need to ask themselves if they’ve ever befriended an unrepentant terrorist, or had a convicted felon help them buy their house — because those aren’t smears, those are true facts about Barack Obama,” said McCain spokesman Tucker Bounds.

Kara Scannell reports on presidential campaign:

Talk on CBS’s “Face the Nation” focused on questions about Republican presidential nominee John McCain’s role in the Bush administration’s effort to sell the $700 billion financial-industry rescue package to Congress.

Sen. Dianne Feinstein (D., Calif.) called Sen. McCain’s moves “erratic” and said it was indicative of the kind of “gamble” he took at a sensitive time. In contrast, she described the approach of the Democratic nominee, Sen. Barack Obama, as “steady.”

McCain had surprised many when he said he would suspend campaigning to tackle the bailout plan and urged Sen. Obama to postpone the first presidential debate. He and Obama both returned to Washington to attend a White House meeting on the rescue package. But the meeting ended without agreement and the House voted down the bill, after some House Republicans rebelled against aspects of it.

Even though a deal hadn’t been reached, McCain agreed to participate in the presidential debate on Sept. 26 in Oxford, Miss, Congress approved the rescue package on Friday after several concessions were made, and President Bush signed it into law the same day.

Rep. Roy Blunt (R., Mo.), a leader in the House, defended the Arizona senator, saying Sen. McCain was “selfless” and spent hours on the phone urging Republicans to vote on the rescue plan.

The Obama campaign is unveiling a new ad this week focusing on McCain’s response to the financial crisis. The ad says while the financial system was in turmoil, McCain was “erratic,” and “out of touch on the economy.”