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Interview With Karl Rove

Fox News Sunday

CHRIS WALLACE, HOST: I'm Chris Wallace. Does the government now have even more power to spy on Americans? Next on "Fox News Sunday."

The president's chief architect says goodbye.


KARL ROVE, WHITE HOUSE DEPUTY CHIEF OF STAFF: I'm grateful to have been a witness to history, but now is the time.


WALLACE: After promising bold initiatives, what was accomplished? What are the failures he regrets and what happens in 2008? The president's top adviser on politics and domestic policy, Karl Rove is live on "Fox News Sunday."

Then the wild week on Wall Street with markets roiled by a credit crunch. How far should the government go to ease the process? We'll ask our Sunday panel -- Fred Barnes, Nina Easton, Bill Kristol and Juan Williams, all right now on "Fox News Sunday."

And good morning again from Fox News in Washington. Here's a quick check of the latest headlines. New surveillance powers approved by Congress this month may allow the government to conduct physical searches and collect business records of Americans without court approval.

According to the New York Times, security experts say Congress' hurried rewrite of the Foreign Intelligence Surveillance Act may have unwittingly given the government new powers no one was asking for.

Senator Barack Obama has announced he will no longer attend most Democratic campaign forums. Obama says the dozens of debates on the schedule made it impossible to run his own campaign.

And Michael Deaver, the longtime image maker for Ronald Reagan, has passed away. Deaver died yesterday of pancreatic cancer. He was 69.

Well, joining us now, President Bush's most influential and controversial strategist, Karl Rove, who announced his resignation this week.

And, Mr. Rove, welcome back to "Fox News Sunday."

ROVE: Thank you, Chris.

WALLACE: Washington is still buzzing over your decision to leave. September, as you know, is a big month for this president with the Petraeus report and fighting to keep troops in Iraq, also a spending battle, possible vetoes with Congress.

Why not stay at least for that?

ROVE: Well, I've been talking to the president about this for over a year. And it always seemed that we -- whenever we'd talk about when was the right time to leave, there would always be something else. You know, there'd be another battle.

And he really needs -- you know, there's -- this is the right time to go. There are people that have been brought into place who can take up some of my responsibilities and other people who could be recruited to take on them. And now's the time to go.

WALLACE: What about the argument that your resignation shows that this president is a lame duck who is going to be playing defense from now on, and not launching big initiatives and so forth, therefore he doesn't need Karl Rove?

ROVE: Yeah, look. Well, first of all, nobody is irreplaceable. We can all be replaced, with the exception of the president. Look. That's a complete misunderstanding of who he is.

He is a bold leader who's going to be milking every single moment that he's got in this office. He knows the powers of the office. He knows the leverage that he's got. He didn't come here simply to occupy it.

He came here to do things, and he's going to keep doing things right up to the moment that he leaves on January 20th, 2009.

WALLACE: When you were last here, which I will remind you was the weekend after the 2004 election victory, you spoke of your ambition to build a lasting Republican majority, very much the way that one of your heroes, Mark Hanna...

ROVE: No, no. Mark Hanna is not my hero. My hero is William McKinley.

WALLACE: All right. But he was William McKinley's Karl Rove, if you will.

ROVE: No, he wasn't.

WALLACE: Well, let me finish. Then you can tell me why I'm wrong -- in helping to build a lasting Republican majority after the election of 1896.

We talked about that when you were last here. Let's watch.


WALLACE: Does this election have the same potential to grow the size and give a governing majority to the Republican Party for decades?

ROVE: It does. We'll only tell with time.

(END VIDEO CLIP) WALLACE: Without getting us into a lecture about Mark Hanna and William McKinley, what's gone wrong in the last three years?

ROVE: Look. The 2006 election was a normal off-year election. If you look at the sweep of American history, the White House party in its second term, off-year election, has lost an average of 28 seats in the House and five seats in the Senate.

We lost 30 in the House and six in the Senate, and it was a very close election. The House of Representatives was decided by 85,000 votes out of 82 million cast. The 15 closest races...

WALLACE: You sound like John Kerry complaining about Ohio.

ROVE: Well, no, no, we lost. I mean, there's no doubt about it.


ROVE: But it was a close loss. I mean, think about that. We lost 15 contests by a combined total of 85,000 votes. We lost control of the Senate by 3,562 votes in Montana. Close election -- the normal and ordinary thing you'd expect in a second midterm.

I do think the Republican Party is the party that is more in keeping with the attitudes and values and views of the American people. And with a strong candidates we've got -- McCain, Thompson, Romney, Giuliani, and others -- we'll have an excellent chance to keep the White House.

WALLACE: But according to the Wall Street Journal poll in June -- and let's put it up on the screen -- only 28 percent of voters had a very or somewhat positive view of the Republican Party.

That's the lowest popularity rating for the GOP in the two-decade history of the poll. That sure doesn't sound like you've been building over the last three years a lasting Republican majority.

ROVE: Well, first of all, campaigns are about articulating a vision for the future and offering somebody to implement that vision.

And I look at our candidates and I look at their vision, and I have confidence that they're going to be able to carry this message to the American people.

There's plenty of time. There are several geological ages that are going to come and go before the 2008 election.

And at the same time you quote that poll, take a look at the very sharp decline in the popularity of the Democrat Congress, which was at very high levels seven months ago and has plummeted way below where the president has.

In fact, in June and July, I think there were like eight public polls. The Democrat Congress lost ground in -- I think it is seven out of the eight.

There were also in those eight polls questions about the president's popularity and he gained in six out of eight.

So what we've seen is the Democrat Congress declining, a frontrunner for the Democratic nomination who has higher negatives than any major candidate for history since the polling began.

And I look at our candidates and their views and their values and what they're articulating, and I feel -- you know, it's going to be tough, but I feel good about it.

WALLACE: All right. There are a few big raps against Karl Rove, and I want to give you the...

ROVE: Only a few?

WALLACE: Well, yeah. In any event, we had to winnow them down.

ROVE: Thank you.

WALLACE: And I want to give you an opportunity to give your side on a few of them.

The first is that with unprecedented national unity after 9/11 that you decided to turn the war on terror into a campaign issue.

And Exhibit A in that is an ad that was run in the 2002 Senate campaign against Max Cleland, a Vietnam veteran who lost both legs and an arm in Vietnam. Let's take a look.


ANNOUNCER: America faces terrorists and extremist dictators. Max Cleland runs television ads claiming he has the courage to lead. He says he supports President Bush at every opportunity, but that's not the truth.


WALLACE: Now, I understand that as the chief strategist to the president, you weren't sitting there writing ads in Georgia for Max Cleland or against Max Cleland, but were that and other attacks on Democrats, turning the war on terror into a campaign issue, just in 2002 -- was that a mistake?

ROVE: First of all, you're right. They did that ad. The White House didn't. It would be -- surprise you, but we've got better things to do than write television ads in Senate campaigns in Georgia.

I do think it's important to look at the context of this. Senator Cleland was running a television ad saying that he supported the president on homeland security, when he was one of the senators who was blocking the passage of the homeland security bill because of a special interest provision that would have allowed the labor unions to organize the Department of Homeland Security.

You know, we have -- John Kennedy set in place a policy in the early '60s that said that government departments connected with national security had the right to declare certain parts of those agencies off-limits to union organizing. This was signed into law by James Earl Carter.

And what the homeland security bill had was a provision that would undo that for the Department of Homeland Security.

WALLACE: Forgive me. I don't want to re-fight the Cleland race in Georgia in 2002. I want to ask a bigger question, though, because this was far from the only time that you called -- you -- called Democrats soft on terror.

Let's take a quick look at some of Karl Rove's greatest hits.


ROVE: Liberals saw the savagery of the 9/11 attacks and wanted to prepare indictments and offer therapy and understanding to our attackers.



ROVE: When it gets tough and when it gets difficult, they fall back on that party's old pattern of cutting and running.


WALLACE: Now, Democrats are clearly far from blameless in all of this, but should you and the president -- we're talking now just a year after 9/11 and ever since. Should you have made the war on terror something that unified the country, not divided it?

ROVE: Well, look. First of all, I was very specific in my comments on that first speech. I have a copy of the speech with me and I'd be happy to leave it with you. I'm sure you've never read it.

But what I talked about was four specific things. I talked about a ad that talked about how we literally should not invade Afghanistan to remove the Taliban but instead should sit down and see if we could negotiate something with them.

I talked about the comments of Michael Moore, Howard Dean and an outrageous speech by Senator Durbin on the floor of the Senate in which he said that the things that were being done at Gitmo to terrorists who had attacked America were as bad as what Hitler, Stalin and Pol Pot had done.

I was very specific in my comments. I'd be happy to leave you a copy of the speech and I'll defend it every step of the way.

When a Democrat goes out and says something as reprehensible as Senator Durbin said about our U.S. military, or when has such a incredibly out-of-touch ad like that one -- let's literally provide therapy, let's -- you know, let's sit down and counsel with the Taliban about what they -- what bad things they've done and see if we can't find a way to get them to agree -- I'm going to -- you know, we have an obligation to speak out about it.

Now, look. The Democrats could routinely question the president's integrity. They can routinely stand up and call him a liar and say he deliberately misled the country to get into war.

When we call the Democrats for their statements and for their votes, somehow that's wrong. I don't get it. It's completely acceptable.

If a Democrat says, "It should not matter to us what happens in Iraq, we ought to leave the country and leave it to its own devices," that's wrong. That's not good for the security of the United States and it's not good for the security of the region.

WALLACE: The other complaint about you -- and actually, even some Republicans have been saying that this week -- is that the very things that made you so successful as a campaign strategist -- the polarizing strategy -- hurts you in trying to help govern and that, in fact, you alienated Democrats and even -- I'm not telling anything you haven't heard this week -- ran roughshod over congressional Republicans.

ROVE: Yeah.

WALLACE: Briefly, and not getting into the details of each, how do you explain the failure to build coalitions in the second term on Social Security reform, immigration reform, tax reform?

ROVE: Yeah. First of all, I don't accept that we didn't build coalitions. We built a coalition to pass an energy bill. We built a bipartisan coalition to pass a tax cut. We built -- three tax cuts.

We built a bipartisan coalition to pass education reform, bipartisanship to pass the Patriot Act, bipartisanship for the war resolution -- bipartisanship, incidentally, on Social Security. The chairman of the president's Social Security Reform Commission was respected Democrat Senator Daniel Patrick Moynihan of New York.

On immigration, we worked closely with Democrats in the house and the Senate. In fact, it was a Democrat who...

WALLACE: But why didn't you get any of them through in the Senate?

ROVE: Well, because at the end of the day, Senator Harry Reid, for reasons that are completely inexplicable -- we were this close to getting that bill through.

There were a whole series of amendments lined up by proponents and opponents. Everybody would have had a chance to be part of the process.

And on a Friday night, for reasons that I, to this moment, do not understand and cannot explain to you, Senator Reid precipitously pulled down that bill, claiming that he was tired of it, didn't think that there was going to be enough time the next week. We were within a couple of days. Members of the Senate who said, "Look, I've got a shot to get my amendment. If I get my amendment passed, I'll be for the bill. If I don't get my amendment passed, I will at least have had a shot to try to improve the bill and I could probably be for it..."

WALLACE: But, Mr. Rove, there was tremendous opposition from your own party on immigration reform and, frankly, not much support on Social Security reform.

ROVE: Well, look. On Social Security it's a tough issue. This president campaigned, talked about it in 2000, talked about it in 2004. But it's a difficult issue. I understand that.

But again, inexplicable opposition from Democrats -- Senator Moynihan, for example, came up with a wonderful idea, called, after the author of it, the Posen plan, which basically that said we're going to have a progressive benefit and we're going to take the promise that Social Security has made that it can't fulfill, but we'll keep it to the bottom third by giving them the full benefit.

We'll have a scaled-up benefit so that everybody gets a check as big as the check that they're supposed to get today and that the government can -- that we've got the tax money to pay for.

This was a great idea, and Democrats opposed it. And why? Because they didn't want to give this president a victory.

I had Democrats tell me, face to face, "We'd love to work with you on Social Security, but our leadership won't let me," or, "I'd love to work with you on Social Security, but my leaders are afraid of giving the president a political victory." That's bad for America.

WALLACE: You've been subpoenaed to testify by the Senate Judiciary Committee on the firing of the eight U.S. attorneys. Why not appear under oath or at least allow a transcript?

ROVE: Because of the Constitution of the United States. We have a constitutional separation of powers.

Imagine the outcry if the executive branch said, "We have the ability to call aides to members of Congress up before us to testify publicly as to what they've told their boss, their senator or congressman or congresswoman for whom they work."

Imagine the outcry if either the executive or the legislative said, "We have the ability to call Supreme Court clerks out for public testimony about what they're advising the Supreme Court justice when they're writing an opinion."

You know, the counsel's office made a generous offer to the Senate. They said, "If you want to find out what Harriet Miers and Karl Rove said and did, we'd be happy to provide them for a conversation with you which would protect the president's prerogative and yet give you the information you..."

WALLACE: All right. The Constitution does not prevent you from speaking to me so, in fact, I'll ask you some questions.

Why did you push to fire some U.S. attorneys in the president's second term?

ROVE: Nice try. You -- the president has prerogatives that stand up not only to Congress, but also to you.

WALLACE: Well, I'm simply asking you what you did.

ROVE: And what I advised the president is protected by that prerogative. Nice try, Chris.

WALLACE: Can you -- and what you did unilaterally was protected by that prerogative?

ROVE: What I did as...

WALLACE: I mean, executive privilege involves the separation of powers with Congress. It doesn't involve what you talk to me about.

ROVE: It involves the right of a president to receive candid advice from his aides without being subjected to -- called by the Congress to come up and testify.

I know you don't understand you're being an agent of Congress when you ask me that question, but you are.

ROVE: I'm going to stand and protect the Constitution and the right of a president, which is absolutely vital, to receive unvarnished, direct and candid advice from his aides.

WALLACE: So you say that the Constitution protects -- in fact, prevents you from talking to the press, talking to the public?

ROVE: If the president...

WALLACE: I like to think I'm an agent of the public, not the Congress.

ROVE: Well, in this instance, you're an agent of Senator Leahy and Congressman Waxman.

The Constitution gives the president the right to get this kind of advice. What I told the president, what actions took place in the White House, are protected constitutionally by that separation of power.

WALLACE: All right. We have to take a break here.

But coming up, the 2008 campaign, the Valerie Plame leak case, and why on earth Karl Rove ever agreed to do this -- become a rap artist. All that in a moment.


WALLACE: And we're back now with White House strategist Karl Rove.

Looking ahead to the 2008 campaign, you said this week that the Democrats are likely to name a, quote, "tough, tenacious, fatally flawed candidate, Hillary Clinton," as you said in the first segment, that -- no frontrunner has ever gone into the primary season with such high negatives.

Here was Clinton's response this week.


SEN. HILLARY RODHAM CLINTON, D-N.Y.: Today Karl Rove attacked me again. I feel so lucky that I now am giving them such heartburn.


WALLACE: Her campaign says the more you attack her, the more the Democrats love her. So why are you helping Hillary Clinton?

ROVE: Didn't know that I was. Don't think that I am.

WALLACE: What does that mean?

ROVE: Exactly that.

WALLACE: In fact, I mean, is there a certain amount of -- don't throw me into the briar patch here -- that you'd like to see her as the Democratic candidate?

ROVE: Look. It is going to be what it's going to be. I mean, you know, the Democrats are going to choose a nominee. I believe it's going to be her. That's their business.

Maybe I made the mistake of trying to be -- audition for a member of the Fox panel by opining about what might happen. But I think she's going to be the nominee.

WALLACE: Well, but what makes her fatally flawed? I understand she has high negatives. George W. Bush had high negatives going into the 2004 campaign -- didn't beat him.

ROVE: Yeah, but look. First of all, they were nowhere near as high as hers. In fact, I think the next highest is Al Gore going into the 2000 campaign.

But look. The fact is she's known. People know her. She's been around for 16 years. It's really hard, once you jump up onto the stage and have been on the stage that long, to do much to change people's attitudes about you, and she's going in with more people having an unfavorable opinion than having a favorable opinion.

WALLACE: And from your experience in politics, can you turn that around?

ROVE: It's difficult. It can be done, but it's difficult.

WALLACE: Turning to the GOP race, do you have a favorite?

ROVE: I'm not going to tell you. I've got a right to vote in the Texas Republican primary which I intend to exercise.

WALLACE: Well, without telling...

ROVE: Kerr County, Texas.

WALLACE: Without telling us who it is, do you have a favorite?

ROVE: I don't. I'm going to be interested to watch it.

WALLACE: Do you think that the Republican Party would ever nominate someone who is pro-choice? Is abortion still too much of a touchstone for the Republican Party for that ever to happen?

ROVE: Look. Our party is a pro-life party. I do think people are accepting of candidates who, you know, are -- may have a slightly different label or may have a slightly different attitude, as long as people respect and understand the essential core of that, which is what do we need to do in order to make abortion less prevalent in America.

And appointing conservative judges, encouraging adoptions, standing for the restrictions that we have in current law so there's no federal funding -- I find a lot of people who are pro-life are willing to take a candidate who will carry that standard.

WALLACE: Someone who could carry that standard but also defends a woman's fundamental right to choose.

ROVE: Look. That's one of the issues that will be decided in the primary. And the question is, you know, do -- people who enter politics, when they first enter politics, tend to sort of want everything very quickly.

And as time goes on, they mature and they get a more mature understanding of politics and say, "You know what? I want somebody who is with me, you know, 80 percent or 90 percent of the time and may take longer to get where I want to go." And they just -- that's a natural thing in politics.

WALLACE: Everyone I talked to about this interview asked me the same question, which is, "Will Karl Rove get involved in the 2008 campaign," especially given the fact that you're concerned and obviously interested in preserving the president's legacy?

And as you well know, there's nothing that would be more instrumental to doing that than electing a Republican president.

ROVE: I don't anticipate taking any kind of formal role. Look, I've done this -- I've been at this a long time. I've been with this president for 14 years.

I've been involved in -- you know, we started planning and thinking about running for president shortly after the 1996 election. I mean, I'm in my eleventh year of this. So, no. My wife would kill me.

WALLACE: But if somebody called you up privately and said, "Hey, what do you think about..."

ROVE: Well, look. I mean, I've got friends in all four of the major camps. I'm an opinionated kind of guy. And I hope to think I'm sort of discreet. And so if people call me, I'm happy to give them what I think.

WALLACE: Why did you discuss with two reporters that Valerie Plame, the wife of Ambassador Joe Wilson, worked for the CIA?

ROVE: Yeah. Well, first of all, let me say there is a civil lawsuit filed by Wilson and Plame against a wide variety of people.

WALLACE: But that's been dismissed. ROVE: Well, it's been dismissed, but they've announced they intend to appeal. And so I'm not going to add anything to the public record.

What I did say to one reporter was, "I've heard that, too." And what I said to another reporter, off the record, was, in essence, "I don't think you ought to be writing about this."

And you know, we'll -- I intend to hold my fire and not add anything else to the public record until after this is over.

WALLACE: Matt Cooper, the second reporter you're talking about, who then worked for Time, says you told him that Joe Wilson's wife, who worked for the CIA, authorized the trip.

ROVE: Which I had been told by a reporter.

WALLACE: But did you tell that to Matt Cooper?

ROVE: I'm going to let -- I don't recall Mr. Cooper's conversation. I'll let his notes stand as a record of it. It's clear off the -- that I'm talking to him off the record, trying to discourage him.

After all, this is the day that the CIA is going to issue a statement. I'll remind you what that statement said, by the CIA Director George Tenet on July 11th. He said, "Contrary to Mr. Wilson's claim in the New York Times, neither the White House, the vice president or the director of the CIA sent him to Niger."

The information he came back with was not treated as dispositive or conclusive on the question of whether or not Iraq had tried to acquire uranium in Niger.

In fact, we now know from the Senate Select Intelligence Committee that Mr. Wilson came back but did not mention in his article information that corroborated the British intelligence report about Iraq trying to acquire uranium in Niger.

He, Mr. Wilson, had found a previously undisclosed contact between Iraq and a third party to pressure the Niger government to accept a trade delegation, which it did, and since the only thing they had to trade was uranium cake, the Niger government was very nervous and basically shut down the meeting.

WALLACE: But whether it was off the record, whether you were saying, "I just heard that, too," whatever it was you were saying, you're a government official. Why traffic at all in the fact that his wife worked for the CIA?

ROVE: Look. I didn't confirm it. If somebody had said -- if you as a reporter had said, "I'd like you to confirm this," my answer would have been to say, "I can't." And again...

WALLACE: But you say that's not what you said to Bob Novak.

ROVE: I said that I heard that, too, and I'm -- you know, that was not confirmation. If you talk to the CIA, if you talk to...

WALLACE: But do you think that you should even have been discussing a CIA operative?

ROVE: Look. There are 30-some-odd thousand people who work at the CIA. I did not know that -- and I'm not even certain to this day whether she fit the definition of a CIA operative.

WALLACE: I want to take you back...

ROVE: I would remind you also if she were, I suspect that the special prosecutor would have done something different about both Mr. Richard Armitage, who was the person who had an extensive conversation with Mr. Novak about this, and would have done something different about me.

WALLACE: I want to take you back to the fall of 2003, when both the president and the president's press secretary said -- denied you had spoken to anyone about Valerie Plame. Take a look.


PRESIDENT GEORGE W. BUSH: I don't know of anybody in my administration who leaked classified information. If somebody did leak classified information, I'd like to know it, and we'll take the appropriate action.



QUESTION: You said this morning that, quote, "The president knows that Karl Rove wasn't involved." How does he know that?

SCOTT MCCLELLAN, WHITE HOUSE PRESS SECRETARY: Well, public knowledge. I've said that it's not true, and I have spoken with Karl Rove.


WALLACE: Question: Did you mislead the present and Scott McClellan?

ROVE: No, I didn't. In fact, the president said classified information. I was very clear right from the beginning on this with both the counsel's office and with the FBI.

And look. If I had leaked classified information, Peter (sic) Fitzgerald would have done something different. And what I told Scott McClellan was I didn't know her name, didn't know her status at the CIA.

WALLACE: When was the first time you told the president?

ROVE: I'm not going to -- again, nice try. I've said I'm not going to -- there is a civil lawsuit. I'm not going to expand the public record.

What I've just said to you is available on the public record before today.

WALLACE: Well, thank you for making it seem even more important, Mr. Rove.

Question: What do you think of Joe Wilson?

ROVE: I'm not going to comment. Nice try.

WALLACE: Finally...

ROVE: What do you think about Mr. Wilson?

WALLACE: Nice try.

ROVE: Thank you.

WALLACE: Finally, let's do a lightning round of Rove insights -- quick questions, quick answers.

You're famous in campaigns for turning your opponent's strengths into weaknesses. How do you do that?

ROVE: You look at what they claim to be strong on and see if they really are strong on it. And many times, what people tend to offer up as their strength turns out to be actually a weakness when you examine it further.

For example, the claim by Senator Kerry in 2004 that simply because he'd served in military service, which is laudable and patriotic and worthy of personal recommendation, somehow made him capable of being a strong war leader, when his views and values and approach would have been wrong in a time of...

WALLACE: But some would say go after their weaknesses. Why is it so effective to go after strengths?

ROVE: Because again, sometimes people's strengths turn out to be really big weaknesses. We tend to -- you know, people tend to sometimes in campaigns accentuate things that they think are big and important, and they exaggerate them.

And more than anything else, people want authenticity and reality. People are pretty smart. They look at somebody running for office and they don't see them as all good and all bad. They see them as, you know, human beings trying to do their best.

So if you exaggerate your strong points, it generally gives an opening for people to say, "Well, you know what? Maybe that person really isn't somebody that deserves..."

WALLACE: When you disclosed on Monday to the Wall Street Journal your plans to leave, you said the following, "I'm not going to stay or leave based on whether it pleases the mob." Question: Who's the mob?

ROVE: Well, we were -- this particular context, we were talking about -- Paul Gigot asked me, "Well, you know, don't you think the people on Capitol Hill who are after you are -- you know, are you leaving because of them?" And so I was referring to this gaggle of politicians on the Hill who seem to be after me.

It's interesting. A week or two ago, there was an article in one of these Hill publications where they quoted the Democrat staffers as saying, "Rove is the big fish." You know, I feel like I'm Moby Dick and we've got a couple people on Capitol Hill auditioning for the role of Captain Ahab.

But look. I'm going to make a decision and made a decision a year ago on what's best for my family, not on the basis of any consideration about what they will do.

They'll keep after me. Let's face it. I mean, I'm a myth, and they're -- you know, I'm Beowulf. You know, I'm Grendel. I don't know who I am. But they're after me.

WALLACE: I'm going to get to that in a second. After you resigned, Bill Moyers -- some would say he's part of the mob -- went after you as an agnostic who flim-flammed the Christian right. Take a look.


BILL MOYERS, JOURNALIST: You have to wonder how all those folks on the Christian right must feel discovering they were used for partisan reasons by a skeptic, a secular manipulator.


WALLACE: Your response.

ROVE: I'm a Christian. I go to church. I'm an Episcopalian. I think he may have taken a comment that I made where I was talking about how -- I have had colleagues at the White House -- Mike Gerson, Pete Wayner (ph), Leslie Drune (ph), Josh Bolten and others -- who I'm really impressed about how their faith has informed their lives and made them really better people.

And it took a comment where I acknowledged my shortcomings in living up to the beliefs of my faith and contrasted it with how these extraordinary people have made their faith a part of their fiber.

And somehow or another he goes from taking it from me being an Episcopalian wishing I was a better Christian to somehow making me into a agnostic. You know, Mr. Moyers ought to do a little bit better research before he does another drive-by slander.

WALLACE: Finally -- and let's put up the tape.

(VIDEO CLIP IS PLAYED) WALLACE: See, I saved the drive-by slander for last. Good idea or bad idea to play rap master at a big Washington dinner?

ROVE: I had no choice. I was plucked out of the crowd. If you thought I wanted to do -- I'm Norwegian. I don't dance. That's twitching.

I'll tell you, I knew I was in trouble. I met the two fellows beforehand, and I was with staff and the president that night at the White House Correspondent's Dinner.

And one of them, Brad Sherman, said to me after visiting for a few moments -- he says, "You know, you're not a bad guy, not like the devil I've been taught, you know."

And so when he came off of that head stage and said, "We need some more audience participation," he walked from the left-hand side of the stage all the way over to the right-hand stage -- we were -- we'd been seated two tables apart -- and came straight down the row at me.

I went, "Oh, no," you know. And then they dragged me up there. I was uncomfortable. And I said, "I've got a choice. I can be irritated and everybody will see it, or I can play along and try and show them I'm a good sport."

So I tried to play along. But it's the most humiliating moment in Washington, bar none.

WALLACE: And finally, what choice words did the president have for you when you came off the stage?

ROVE: He said, "You're fired."

WALLACE: Well, I guess it took a little while, but finally it's true.

ROVE: Hey, hey, hey, I left under my own power.

WALLACE: All right. That's your story.

Mr. Rove, thank you.

ROVE: Thank you, Chris.

WALLACE: Thanks so much for coming in, and please come back. We always want to hear what you have to say, sir.

ROVE: Thank you, sir.

WALLACE: Up next, our Sunday panel on the week that was on Wall Street and what the government should be doing about it. Stay tuned.



SAM STOVALL: The reason why they did do something quickly was to show the market that yes, they are not asleep at the wheel, they are paying attention, and they are willing to do whatever is needed to make sure that an orderly business flow is maintained.


WALLACE: That was a senior market analyst explaining why the Federal Reserve tried to ease the turmoil in financial markets Friday by cutting a key interest rate.

And it's time now for our Sunday panel -- Fred Barnes of The Weekly Standard, Nina Easton with Fortune Magazine, Bill Kristol, also of The Weekly Standard, and Juan Williams from National Public Radio.

So, Bill Kristol, what is the fallout from this instability in the stock market both economically and politically?

BILL KRISTOL, WEEKY STANDARD: I guess Warren Buffett once said that after a binge, there's a hangover, and there was a subprime mortgage binge, no question about it, and there's going to be a hangover.

I think it will affect the real economy. It will slow growth. It looks like Bernanke acted promptly and prudently in cutting the discount rate and opening the discount window, lengthening the loans from one day to 30 days, which is very important to make sure there's enough liquidity in the system.

If he can keep it as a liquidity problem instead of a solvency crisis, we can make it through this, I think. And most people I've talked to on Wall Street are reasonably optimistic that we'll have slower economic growth, maybe even a slight, you know, one quarter negative growth later this year, but basically come out of this okay.


JUAN WILLIAMS, NPR: The economy, I think, you know, is -- suddenly, the economy is tied into a lot of high-risk mortgages that were offered in the subprime market. And who gets bailed out here? People who were involved in the hedge funds. The very richest Americans get bailed out. And of course, we all have a stake in it because it's our economy.

But if you stop and look exactly at what they're doing, they're helping out people right now, by opening the discount window, who are making the most high-end mortgages.

They're bailing out people who -- because the market's so shaky, there was some uncertainty about even giving money to people who would clearly qualify for these high-end mortgages.

But that's who gets bailed out, just as the hedge funds get bailed out, rather than putting in protections for the poor or even the middle class who are still going to have trouble with mortgages and who are going to still feel the impact of these really high-risk subprime mortgage loans.

WALLACE: Fred, is that what the Federal Reserve did Friday, bail out the rich and the fat cats?

FRED BARNES, WEEKLY STANDARD: No. What they did is they kept the financial markets from collapsing even further.

Look. They lost nearly 10 -- actually, up to 10 percent, which is the definition of a correction -- and stopped the bleeding -- that's what they had to do -- and allowed some liquidity, which helps everyone, back in the market.

Look. The Federal Reserve is the place to do this. They have the instruments to handle this. We'll see how much it -- how much this financial problem helps the -- hurts the real economy, and the fed may have to act again by lowering interest rates. In fact, I think that will have to happen.

But Ben Bernanke, the chairman, is right to be cautious and not to rush right into that now.

WALLACE: Nina, as our resident market watcher from Fortune Magazine, perhaps the only person on this panel who really understands any of this stuff -- I certainly would not say that I do -- what do you think the fed did? How effective was it? And underlying it, how much instability is there in the financial markets? How much trouble are they in?

NINA EASTON, FORTUNE MAGAZINE: Well, I think we saw a real clear -- a clear shift in fed policy on Friday. The fed and the administration have been especially concerned about inflation in the wake of high energy prices, high housing prices.

What you saw was the fed on Friday putting that aside and saying, "Look. We're really worried about a slowdown in the economy," the "R" word, recession, hangs out there on the horizon.

Market folks say, "Look. It's going to get worse, conceivably, because it gets better." You'll see a lot of bumps, you know, a lot of roller coaster rides on the way.

And you know, I think it's going to be several months and, you know, even a year before this all works itself out. I like to think of it as like a big huge snake, a python that swallowed a rat, and it's got to work itself out as these bad loans come through.

But just to address Juan for a second, subprime mortgages -- by definition, it's people who got homes who otherwise wouldn't have gotten homes. They didn't qualify for prime lending.

And so they have -- you know, we have a stake in keeping those people homeowners.

WILLIAMS: Well, no, I think -- but I think you can be -- it can be predatory, though, Nina. And that's what was going on. They were predatory loans being made to take advantage of poor people and sometimes people who really shouldn't have been able to take out that loan because they knew they were going to then later default.

And when you put people in that position, you not only endanger them, I think you've endangered the entire economy. And who is making money off this? Those big boys on the hedge funds.

KRISTOL: No, but that -- look, that is true, but Bernanke, to his credit, is not bailing them out. He precisely is not bailing them out.

The way to have them get bailed out, the hedge funds, is to let the crisis go further and then you will have to actually make some of those hedge funds whole.

All he did is inject liquidity into the system. Those hedge fund losses are still on the books. None of those bad loans is going to become a good loan because of what Bernanke did.

So I think he's acting responsibly and not actually bailing out -- it's very important that he inject liquidity without...

WALLACE: All right. Let's...


WALLACE: Too much of this week here.

KRISTOL: Okay. Too much.

WALLACE: Fred, let's drill down, though, into the politics of this, because -- and at this point, there isn't any need, apparently, for a bailout, but the Democrats are talking about eventually maybe we're going to need to bail out -- particularly Hillary Clinton, for instance, who is talking about bailing out the borrowers, not the lenders.

The White House at this point says no and we've got to let the market play out and, quite frankly, perhaps there needs to be some pain for the borrowers and the lenders who made some very risky and bad decisions here.

Who gets the better side, the political side, of that argument?

BARNES: Well, obviously, this is harmful to Republicans. There will be sympathy for the borrowers who wanted to become homeowners in America and have become homeowners.

And to the extent that their homes are foreclosed on -- and I think 1 percent of the loans are being -- at the moment have been foreclosed on -- that's a problem.

The other problem is, of course -- you know, politics is very simple. When the economy is in turmoil or in decline, that's a problem for the incumbent, and that's the Republican president and the Republican Party.

WALLACE: Let me ask you about that, Nina. I mean, if we end up with real dislocation, let alone a recession -- and at this point, there's certainly no indication of a recession, but it's something on the horizon - - would that just kill Republicans next year?

EASTON: Well, it would make the campaign and the presidential election about the economy stupid, which -- not you, stupid. You know, going back to the...

WALLACE: You can call me stupid.

EASTON: ... that great terminology, you know, it's about the economy. 2004 was largely decided on national security issues. I think it will make the economy front and center.

I will add, however, that the global economy is much stronger than it has been in years, and the thinking by even those people like Hank Paulson, the treasury secretary, who says, "There's going to be investor losses. There's going to be businesses that fail," they believe that the global economy will provide a structure and that things won't get that bad.

WALLACE: Bill, you get the last word here.

KRISTOL: In September '87, the stock market crashed. The Reagan administration, Jim Baker and Greenspan acted well.

The economy was going strong by late '88. That is the model here, that it's good to get this out of the way now.

And I think actually the economy will be in good shape a good year from now, and Bush should get credit for the appointment of Bernanke as fed chairman. Republicans -- competent management of the economy will end up helping Republicans here.

WALLACE: All right. We're going to have to leave it there, step aside for a moment.

But coming up, the unexpected departure of the president's top strategist. Our panel gets to reflect on the Rove years after this break.


WALLACE: On this day in 1960, captured American pilot Francis Gary Powers was sentenced to 10 years in prison by a Soviet court.

Powers pleaded guilty to spying for the CIA after his U-2 plane was shot down.

Stay tuned for more from our panel.



BUSH: We worked together so we could be in a position to serve this country. And so I thank my friend. I'll be on the road behind you here in a little bit.


WALLACE: That was President Bush saying hail and farewell to Karl Rove this week.

And we're back now with Fred, Nina, Bill and Juan.

Well, given how important September is for the president -- we talked about this with Mr. Rove -- both in terms of the Petraeus report and continuing -- trying to continue the mission in Iraq, fighting with Congress over spending, Juan, why do you think Karl Rove is leaving now?

WILLIAMS: Well, I think he's in charge of protecting the president's legacy, moving forward. And I think it's a good time to go out and establish himself while he's still got maximum access to players at the White House.

Everybody's going to treat him as if he's still the king of Washington Republican politics, for sure, going into this campaign.

So he's in a position to make money and also to -- I think will have a freer hand away from a lot of the pressures, the daily pressures, as he goes about telling people the story of not only his role in electing a president twice, but shaping what will -- how history will treat President Bush.

WALLACE: Fred, do you think that he can do a better job of burnishing the Bush legacy out of office than in office?

BARNES: I'm not sure that's what he's going to do. Look. I think he was -- look. He'd been there six years. He's tired. He wanted to do something else, although he seemed pretty lively this morning during your interview with him. And there's -- look. There's not that much more for him to do.

We know what the president -- the president does not have any big initiatives coming up. It's going to be mainly on defense. He doesn't need to tell the president to veto a spending bill.

He doesn't need the president to fight off Democrats if they're forcing -- trying to force withdrawals from Iraq. I mean, the strategy is pretty set.

I don't think Karl needs to be there. He wants to write a book and relax a little. I can't think of any other explanation for his leaving. He certainly wasn't fired.

WALLACE: No, I know that. We were just -- I hope everybody understands we were just teasing about that.

Nina, what do you think Rove's departure says about the last 17 months? Because a lot of people are going to say, "Oh, he's a lame duck. He is playing defense." And of course, Mr. Rove bristled at that this morning.

EASTON: I think it says nothing more than that the president is not up for reelection. I think Karl Rove -- Karl Rove's success has been in electoral politics. That's been his great success -- 2000, 2002, 2004.

The other hat he wore, however, was on policy, and as you pointed out, that hasn't been all that successful -- Social Security reform, immigration reform, which was a very interesting case of you link electoral politics with policy and it becomes a problem.

Karl Rove wanted to expand the Latino base, but that ran right up against conservative Republican sentiments, and it was very hard to keep those two pieces together.

So I think, you know -- there's no major initiatives out there for him to -- and I don't think he was that good at major initiatives in Washington. He was great on a campaign trail.

WALLACE: So, Bill, summing -- looking at all of that, what is the Rove legacy?

KRISTOL: Well, it depends if we win the war in Iraq and if a Republican gets elected in 2008. I think both are pretty likely, actually.

And in that case, Rove's legacy will be pretty impressive -- to have gotten Bush elected in 2000 in the face of a good economy, general contentment with the Clinton administration, to have helped Bush get reelected in 2004, in a difficult circumstance, no weapons of mass destruction, a war that wasn't going that well in Iraq.

If he can -- his leaving now doesn't matter that much if Bush wins -- if a Republican wins in 2008 and if Iraq turns out okay. The two people who matter most now in the Bush administration, after the president and the vice president, are David Petraeus and Ben Bernanke.

If the economy is okay in '08, and if the war in Iraq turns out fine, things will be fine.

And in that respect, I wonder if Karl left before September -- which surprised me, because you would think -- as you said in your first question to him, September is a huge month. Wouldn't you want to just stay in the White House for that and leave at thanksgiving?

But I wonder if they thought, "You know what? Let Petraeus testify without having Rove in the White House, without having questions -- did Karl -- is Karl Rove's hand behind the scenes here. Just let's have a straightforward presentation of the progress that's being made in Iraq. Get Rove out of the way as a distraction."

And I think in that respect, maybe this was the right time for him to leave.

WILLIAMS: I think his legacy is all about getting out the vote, reaching out even beyond the suburbs, especially in the '04 election. I think that's -- his work with Ken Mehlman, others of the Republican Party, really is going to stand as a lesson.

It's a lesson right now in terms of the way politics are being conducted for '08 in the way that you go after the base, you get out the base, you stir your base support. We're seeing it, I think, play out across time.

And it comes back to one of the questions you asked, which was after 9/11, why did this president not reach across all sorts of lines and take advantage of the fact he had 90 percent approval rates and instead say You know what, that's not going to be in our long-term political benefit.

Let's go back to the base. Let's antagonize the Democrats. Everybody who is not with us is against us and with the terrorists. That language comes out of Karl Rove.

WALLACE: Fred, whenever a campaign guru wins -- think Lee Atwater, think James Carville -- and you could go back over the generations -- he automatically becomes a genius.

Was Karl Rove different? Was there something about him that stood out from the successful campaign strategists?

BARNES: Look. We take people like Karl Rove and we think they can do anything. Republicans were waiting around -- even people at the White House were waiting around in 2006, when there were horrible problems, political problems, for Republicans -- the war in Iraq was unpopular, corruption among Republicans on Capitol Hill, horrible image by Republicans on Capitol Hill. And people somehow thought that Karl is going to have some strategy that's going to make all that go away. And of course, he couldn't do that.

I mean, look. Karl was a great political strategist in '94 when Bush was first elected. Everybody thought Bush's brother was going to be the Bush to win in Florida, and it was George.

In 2000, with Democratic prosperity working against him, and he won there. And 2004 was even more important than 2000, because he got out this incredible vote of volunteers that really trumped this great paid get-out- the-vote effort by Democrats. It was really brilliant.

But to think that he could guarantee a Republican realignment, or that he could be someone who had some secret strategy that could get immigration reform passed and Social Security reform passed, just ignores how much or how little a political strategist can really affect things.

WALLACE: And you know, and Karl, Mr. Rove, talked about that, Nina, in the interview where he said he's become this kind of myth, Grendel or Beowulf or Moby Dick. Why do you think there was such fascination with this guy?

EASTON: Well, he took a lot of knives, I think, for the president. And in fact, it's funny. The president calls him both boy genius and turd blossom, because, you know, he tries to keep him -- acknowledging his genius...

WALLACE: Which, we should point out, is a flower that can come out of a cow patty, but anyway.

EASTON: Yes, acknowledging his genius, but also with some -- you know, keeping him in his place. And you know, George Bush was the president, is the president. And I think Karl Rove became -- he's became - - he's become a lightning rod for the left.

I mean, Joe Wilson said that when he talked about he can't wait to see him drug out of the White House in...

WALLACE: I think frog-marched was the...

EASTON: Frog-marched, was the term, out of the White House. And you know, look. Right now with Karl Rove attacking Hillary Clinton, what a gift to Hillary Clinton. That will help her, you know, with Democratic primary voters.

WALLACE: Bill, your take on why his friends and his enemies elevated him to this status.

KRISTOL: Well, he enjoyed it. He didn't mind being considered the great genius behind the scenes. But it is George Bush's presidency.

I've dealt with him a fair amount and tried to dig a little bit and see who makes the key decisions, and the answer is not Dick Cheney and not Karl Rove. It's George W. Bush.

WILLIAMS: You know, it's interesting to me, though. What is going on at this moment? Why now? Because you know, you look and you see Matt Dowd's gone. You know, you think, "What's going on with some of the people who have been so closely advising the president for a long time?"

The kind of attack that Gerson got this week from Matt Scully -- Gerson, obviously, the president's the former chief speech writer -- and you wonder if people aren't, you know, just running from a flaming house at this point and thinking that it's over.

WALLACE: Well, that's certainly saying that the glass is half empty. We're going to have to leave it there. Thank you, panel. See you next week.

Time for some mail, and much of it was about a question I asked Republican candidate Mitt Romney last week.

Patty Matthews from Oklahoma didn't like it. "It's laughable to bring up the fact Mitt Romney's big dog rode in his carrier on top of the car 24 years ago. I see dogs hanging out the windows on the driver's lap and in the back of pickup trucks all over the place today. Back then, kids rode in the back of pickup trucks and no one complained."

But Carol Evans from Colorado thought the question was legitimate. "To justify transporting his dog in that manner is ludicrous, claiming the dog liked it. Dogs and kids like to ride in open pickup trucks, so that is okay if they like to? While Romney is honest, he shows poor judgment that will likely cost him the votes of many responsible dog owners."

Be sure to let us know your thoughts by e-mailing us at

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