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Secretary Paulson on "Fox News Sunday"

Fox News Sunday

CHRIS WALLACE, HOST: I'm Chris Wallace, and this is "Fox News Sunday".

Race and presidential politics -- as Democrats fight for the nomination, is the debate over race hurting the party's chances in November? We'll ask two key advisers, Senator Chris Dodd, who supports Obama, and Senator Charles Schumer, who backs Clinton.

Then, the economy on the edge of recession. With prices up, foreclosures on the rise and the stock market down, what can the federal government do? We'll ask Treasury Secretary Henry Paulson.

Plus, will the words of Barack Obama's pastor...

(BEGIN VIDEO CLIP)

JEREMIAH WRIGHT: Not God bless America, God damn America!

(END VIDEO CLIP)

WALLACE: ... hurt his candidacy? We will ask our Sunday regulars -- Brit Hume, Mara Liasson, Bill Kristol and Juan Williams. And our Power Player of the Week, trying to keep the president in the spotlight, all right now on "Fox News Sunday."

And hello again from Fox News in Washington. Well, with the next presidential primary in Pennsylvania more than a month away, here's where the Democratic race stands as of today.

Senator Barack Obama holds a 119-delegate lead, having picked up more delegates Saturday at Iowa county conventions and in California. He has won more states than Senator Clinton, and he also leads in the popular vote by more than 700,000.

On the campaign trail, the week was dominated by controversial statements by supporters of both candidates, which raises the question: Is there a growing racial divide in the Democratic party?

For answers, we bring in two key supporters -- Senators Charles Schumer, who backs Clinton and comes to us from New York, and Chris Dodd, who has endorsed Obama.

And, Senators, welcome back to "Fox News Sunday".

DODD: Good to be with you, Chris.

SCHUMER: Good morning.

WALLACE: Senator Dodd, let's start with Barack Obama's long-time pastor, Jeremiah Wright, and some of the things he has said from the pulpit. Here's part of his sermon from the first Sunday after 9/11. Let's watch.

(BEGIN VIDEO CLIP)

WRIGHT: Now we are indignant because of stuff we have done overseas is now brought right back into our own front yard! America's chickens are coming home to roost.

(END VIDEO CLIP)

WALLACE: Senator, over the years, Reverend Wright has said that the U.S. government created the AIDS virus to kill African Americans. He has said instead of singing "God Bless America," we -- blacks should sing "God Damn America."

How would you characterize Reverend Wright's remarks?

DODD: Well, I'd use the words of Barack Obama. He's totally rejected this as quickly as anything. He was not there when these statements were made. They're outrageous statements.

I don't know how much more clear Barack Obama could have been on all of this. Obviously, these things come up. We've seen a lot of invective being used over the last number of weeks in the campaign. It doesn't help, obviously. But guilt by association is not typically American.

We've all been around in places where people have given speeches or said things that we've thoroughly objected to, totally objected to.

The fact that he was as quick as he was -- I thought his comments yesterday, Barack Obama's comments yesterday, in Indianapolis recalling the words of Robert Kennedy with the death of Dr. Martin Luther King -- talking about we're never going to accomplish anything in this nation of ours as a divided people.

I think one of the qualities that Barack Obama's bringing to this candidacy is that ability to bring us back together again. President Bush talked about it six, seven years ago. We never came close to it.

The country wants that very, very much. And I don't think we helped that cause necessarily by focusing exclusively on these kind of comments that he has totally rejected.

WALLACE: Well, you say he is quick to condemn them. Even if you believe that Obama was unaware of all these comments, this is one statement that Reverend Wright said. These are statements that go back. And the one that you just saw goes back to September of 2001, six years ago.

Even if he says that he's unaware of that, he admits that he became aware of these statements last year. And yet just last month, here is what Obama had to say about Reverend Wright's statements, "He is like an old uncle who sometimes will say things that I don't agree with, and I suspect there are some of the people in this room who have heard relatives say some things that they don't agree with."

An old uncle, he says. Senator, he only rejected these statements after these tapes became public.

DODD: Well, Chris, again, we can spend all morning talking about this. The American public are watching their foreclosure rates climb. Oil prices are going up.

WALLACE: Well, sir, you're changing the subject. I'm asking you...

DODD: Well, the question is -- well, this is subject matter...

WALLACE: You don't think it's relevant that this man was a member of this church for two decades and this fellow...

DODD: No, you made it relevant here for the last four or five days on this network. But the fact of the matter is...

WALLACE: It's not just this network, sir.

DODD: I know. But the fact of the matter is people would like to move on to other things. I've answered your question. Barack Obama has rejected this.

WALLACE: Well, no, I don't think you have answered it, because you said that he answered it -- that he rejected it very quickly.

DODD: Well, I don't think he's...

WALLACE: He didn't reject it quickly. The fact is last month, when he's known about it, he said he's a crazy old uncle.

DODD: Well, going back and reviewing at what point who said what to whom -- we can dwell on that. He's rejected it. He said he no -- he doesn't have any association with it. He finds these comments outrageous.

I don't know how much more clear he could be on the subject matter.

WALLACE: But he didn't find him outrageous and condemn them last month...

DODD: Well, I'm not sure he...

WALLACE: ... when we didn't have the videotapes.

DODD: Well, I'm not even sure he necessarily was aware of them until they became public. I can't say...

WALLACE: That's not true. He says that he was aware of them when he started running for president in 2007.

DODD: He has rejected them here. Whether he did it a month ago or a week ago, he's rejected them. I think that's the important point. And again, guilt by association here is something we've got to stay away from in this country. Anyone involved in public life, Chris, has been places, have been with people who have said and done things we totally reject. Running for president, obviously, revives a lot of this.

But I think it's implement about what he has said. What position has he taken? What sort of a campaign has he run? What is he calling upon Americans to be doing in this country?

These are not the words of Barack Obama.

WALLACE: But, Senator, it isn't...

DODD: So we can dwell on that, but I think we ought to move on. He's rejected it.

WALLACE: Senator, it isn't a question of guilt by association.

DODD: Sure it is.

WALLACE: Forgive me. If you read Barack Obama's book, "Dreams For My Father," he talks about what a huge role Reverend Wright played in his deciding his affirmation of his identity as an African American.

He's been a member of this church for two -- forgive me, for two decades. He was married by this reverend. His children were baptized in this church. It is not that he happened to walk into a room and Reverend Wright was there. He has been a member of this church, a member of Reverend Wright's flock, for 20 years.

DODD: Well, again, Chris, look. A member of a church and a parish where you may have a pastor, a minister or a rabbi who says and do things you totally disagree with -- you don't necessarily walk away from your church.

WALLACE: You would stay in a church that had a...

DODD: Well, I would -- no. I would certainly disagree with this individual. We've all been in situations like that.

But the idea somehow that this is deeply involved and ingrained, that this is -- this is really who Barack Obama is -- what you're suggesting, or those who are making these accusations, is this is really who Barack Obama is.

Anyone who knows this man, who has worked with him, who has spent time with him, would say this is totally unlike him. It's not him at all. And so the suggestion somehow that this is really who this candidate is I think it is an unfair accusation.

WALLACE: Senator Schumer, are you troubled that Obama would belong to a church, be married by a minister, have his children baptized by a minister, who says these kinds of things?

SCHUMER: No. I agree with Chris here. Look, each campaign is wide- ranging. Supporters are all over the place. And you will find in every campaign -- you have Senator McCain endorsed by a reverend who said very anti-Catholic things. You've had the problems our campaign had with certain statements that Geraldine Ferraro made.

If you are going to ascribe what every supporter says, every word they say, to the candidate themselves, you know, you're going to just be in an - - we have major issues facing us in America, whether it's the war, the economy, and I do believe -- you know, past elections have had too much emphasis on these things.

This election won't, Chris. And the reason is people are worried about the future of the country, and they want a real discussion on issues.

WALLACE: Well, let me just ask you, if I may, for just a moment. This isn't just a supporter. This is a man who was the head of his church for 20 years.

Are you telling me -- because I'm a little surprised at this, Senator. You're not troubled that Barack Obama belonged to a church which had a reverend, Reverend Wright, who said that the U.S. has sponsored state terrorism through Israel against the Palestinians? That doesn't bother you?

SCHUMER: Look, I know Barack's views on Israel, and I think they're very strong. I mean, as you know, I prefer Senator Clinton for a whole lot of reasons, but I don't cast aspersions on Senator Obama for what somebody else said.

We'll be in a game here where we'll never debate the issues. We've spent half our time already on this, and it has nothing to do with Barack Obama's views.

WALLACE: Well, let me ask you, Senator Schumer, about something that someone in the Clinton campaign said.

SCHUMER: OK. How come that doesn't surprise me?

WALLACE: Well, there's a pattern here, Senator. Geraldine Ferraro, former vice presidential Democratic candidate, also a big fund-raiser for Hillary Clinton, made her own controversial comments this week. Let's take a look at them.

"If Obama was a white man, he would not be in this position. And if he was a woman of any color, he would not be in this position. He happens to be very lucky to be who he is."

Senator, this isn't just one isolated comment. There's a long list of comments like this. Why do members of the Clinton campaign keep playing racial politics?

SCHUMER: Well, first, Geraldine Ferraro said she said those completely on her own. I know Geraldine. I've known her for 20 years. She says what she thinks. These comments were wrong. They were condemned by Hillary Clinton. Geraldine Ferraro is no longer part of the campaign. She had the grace to step aside on her own because she didn't want to make these an issue, and that's that.

DODD: And I agree with that as well. I've known Geraldine Ferraro as long as Chuck has. And I disagree with her comments here, but again, it's the same kind of thing. We can spend our time talking about Geraldine Ferraro and Jeremiah Wright, but the issues are -- is where does Barack Obama stand.

What are these major issues we face in the country? That's what people are really worried about. We've got a major, major problem in our nation. We need to get back on track again.

And that's what people, I hope, are going to cast their ballots on come this November, not about whether or not you agree with Jeremiah Wright or Geraldine Ferraro. That should not be the subject -- central point in the debate.

SCHUMER: And by the way, just one point, Chris. I think this election will be much more on the issues. The dramatic differences between Hillary Clinton and Barack Obama and John McCain are not only large, but they're right at the center of what's worrying people.

When people are basically content, these kinds of minor issues -- unimportant issues, in my opinion -- play a major role.

But when people are worried about the future of this country, as they are now, we're going to see a very interesting campaign where the differences on Iraq, the differences on the economy, the differences on health care and energy policy, are going to make the big difference here and be most of the discussion.

So I think, you know, to dwell -- obviously, you can ask the candidates the question. And obviously, if they don't denounce what is said, if it seems so bad as these statements are, you can hold them accountable. But once they denounce them, let's move on.

WALLACE: Well, I am going to move on to the economy. But I would disagree with you to this extent, Senator Schumer. We don't know a lot about Barack Obama, and he does not have as long a record in public life as Senator McCain or Senator Clinton.

And when, I think, a lot of us find out and are somewhat shocked to find out what his minister said over the last two decades, I actually think that's a very legitimate question in judging the character of a candidate.

But let's move on to the economy.

Secretary Paulson, Treasury Secretary Paulson, Senator Dodd, is going to be here in a moment. On Friday, the president rejected your plan for a multibillion-dollar government program to buy up foreclosed homes. And generally speaking, he says the Democratic plans for massive government intervention won't help people and, in fact, will make it harder for the economy to recover.

DODD: Well, it's hardly that at all. In fact, the American Enterprise Institute has endorsed this idea, and it's not about buying them. It's refinancing here.

What's going on -- the credit crisis is that...

WALLACE: You said refinancing. Aren't a lot of these homes already abandoned?

DODD: No, not yet. You're going to have a huge wave coming on resets. There's already been one wave. The second wave is coming, Chris, which is larger than the first one here, and the foreclosures -- it isn't just the foreclosures, but the declining value in properties, where mortgages are current but falling because the neighbor next door or down the block property has foreclosed.

The idea here is to get a floor. We need to find out where the bottom is in all of this. The people who are investing, making capital available, just don't know where that is.

One of the benefits of this idea is not only to keep people in their homes -- owner-occupied, not the speculator -- but also to determine where the bottom is, where the floor is, so you can restore that sense of confidence that's been critically missing in all of this. In the absence of that, there is no bottom to this, and thus you'll not see that...

WALLACE: But the argument some people -- and, frankly, conservatives -- would make is if the government keeps propping up the price, the market never establishes where the floor is, and therefore it only prolongs this housing crunch that we're in.

DODD: Well, that's a good point. But here's the point. If we were talking about just individuals, a Long-Term Capital situation, that company back a number of years ago that was in deep trouble, that's one thing.

You're talking here systemically. We're not just talking about a couple of firms. We're talking about a system-wide problem here. And so you need to address it as such here.

This ought to be -- there are no sweetheart deals here. Any assistance that's provided whatsoever, the first lien holder ought to be the American taxpayer to the extent you're going to back this up in any way at all.

But this is a problem that's growing. It's affecting student loans. It's affecting availability of car loans. Everything is being affected by it. And so you need to have bold ideas, some aggressiveness here, or this is going to spin out of control.

There's a self-fulfilling prophecy to this. It's spiraling down. And it's exacerbating the problem far beyond what it is.

And you add to that, Chris, the following. As Chuck has already pointed out, you've got high energy prices. You've got a huge deficit. You've got inflation on the rise, unemployment on the rise.

This will be the second recession in this administration -- twice in one administration to have a recession. The difference is in this recession, you don't have the solid underpinnings that we had six years ago when you had another recession.

WALLACE: I want to bring in Senator Schumer, because this week you compared President Bush to Herbert Hoover, as you said, whistling a happy tune as the economy goes south.

But back in 2001, when President Bush was talking about the recession then, the recession that Senator Dodd is referring to, and saying that he had inherited it from the Democrats, you said the following, "The president should stop talking down the economy."

Other than playing the political blame game, what possible good does it do for President Bush to say, "You're right, we're in a recession?"

SCHUMER: Let me say this, Chris. I'm not talking down the economy. The economy is talking down the economy. The statistics that we see on foreclosures, gasoline prices, the dollar, the deficit talked down the economy.

The president is, indeed, behaving like Herbert Hoover. We're in the most serious economic problem we've been in in a very long time, much worse than 2001. The president's hands-off attitude is reminiscent of Herbert Hoover in 1929, in 1930.

There are lots of things that can be done, particularly on housing. Housing has been the bull's eye of this crisis. We Democrats have a five- point plan. We're going to move that forward when we come back.

And the president says, "No government involvement. Take the government out of it altogether." And let me tell you, this has become the Bush recession.

Had the president done some of the things that people like myself, Chris, were asking back in May, the recession would be much less deep, because fundamentally, credit is confidence.

There is no confidence by Democrats, Republicans, leaders of Wall Street, leaders of Main Street in this administration. And it's a real problem that builds on itself.

WALLACE: Senator Schumer, Senator Dodd, we're going to have to leave it there. And it's going to be interesting, given our next guest. Thank you both for talking with us today.

DODD: Thank you.

SCHUMER: Thank you, Chris.

WALLACE: Up next, we'll continue discussing the state of the economy. Are we in a recession already, and what can be done to turn things around? We'll get some answers from the secretary of the treasury, Henry Paulson, right after this break.

(COMMERCIAL BREAK)










WALLACE: And we are back now to talk about the economy with Treasury Secretary Henry Paulson.

Mr. Secretary, welcome back to the program.

PAULSON: Chris, good to be here.

WALLACE: Well, you just heard Senator Schumer, Senator Dodd -- Senator Schumer particularly -- calling this now the Bush recession, comparing him to Herbert Hoover and failing to do what he could have done months ago to prevent this situation from getting so bad.

Your reaction, sir?

PAULSON: My reaction is we're all over this. And the president is very focused on what's going on in the economy. We got out ahead of it early, coming off a third quarter where the GDP grew at 4.9 percent.

We actually were criticized for some for moving too fast with a stimulus package. With the help of Congress -- great leadership there -- we have a program and we're working on getting those checks out to the American people beginning early in May. And it's going to make a meaningful difference.

WALLACE: Well, I want to pick up on that, because you have been criticized and the president has been criticized for striking such positive notes.

When you were last here on the program seven weeks ago, you said, quote, "The economy is going to continue to grow." But by every measure, things have gotten worse since then.

And I'd like you -- if I may, just take a look. The dollar closed at a record low this week against the euro. Oil is at a record high. We've lost 85,000 jobs in the last two months. And retail sales continue to drop.

Mr. Secretary, don't all signs point to the economy continuing to decline for months to come?

PAULSON: Chris, what I said is I believe the economy is going to continue to grow but the risks are to the downside. The risks are housing, capital markets turmoil, the price of oil.

We're focused on it. We're all over it. I think it's much less important what you call this. Economists will be debating that for months and months and months. It's much less important what you call it than what you're doing about it.

And we're working very hard, working to prevent those foreclosures which are preventable, avoidable, working to minimize the spillover from the capital markets, turmoil on the real economy.

And I think the stimulus package is going to make a difference.

WALLACE: But let me ask about that, because I think the concern, whether it's called a recession or not -- and we should point out that the Wall Street Journal had a survey of 51 top economists this week. Seventy percent of them said the economy is already in a recession. But let's not even play that semantics.

PAULSON: Right.

WALLACE: I think the growing concern is that you, the president, keep saying, "We're all over this." And then a few months down the road, things are worse. And so they wonder are you out ahead of these things, or are you always behind the curve?

PAULSON: Well, Chris, there's a question what -- when there are excesses, excesses we've seen in the housing market, a correction there is inevitable. You're going to see a correction.

Can we outlaw the forces of gravity? You know, how much can government do? But this administration has been focused on this, I think very early involved -- very early, beginning in August, working very hard to avoid foreclosures that are preventable, putting in place programs that are making a difference, are working.

Are they going to prevent the inevitable correction in housing prices? No. But we're working hard on that. And again, I think we were early with the stimulus package.

WALLACE: All right. Let me ask you about some specific issues that you're facing and the government is facing today. On Friday, the Federal Reserve helped bail out Bear Stearns, the first time that it has taken such action since the great depression.

Are more Wall Street firms in danger, at risk, of going under?

PAULSON: Chris, I've got great confidence in our financial market, our financial institutions. Our markets are resilient. They're flexible. Our institutions, our banks and investment banks, are strong.

And I am very confident with the help of the regulators and market participants we're going to work our way through this.

WALLACE: But forgive me. If I'd asked you this a week ago, you probably would have said that about Bear Stearns. And the fact is that on Friday, they reached a crisis. They would have gone under if it hadn't been for this huge injection of funds.

So my question is are there other Bear Stearnses out there? Are there other firms at risk of going under?

PAULSON: Chris, what I've said -- and I'll just repeat it. I've got confidence in our markets and in our financial institutions. You saw action which I -- you know, I've been very involved -- you know, been on the phone for a couple days right now helping to work through this.

And there is always a decision that needs to be made and to say what's best for the stability of the marketplace, the orderliness of the marketplace. I think we made the right decision. I think the Federal Reserve made the right decision here.

And again, I don't know what to say other than what I've just said -- is we've got strong financial institutions. Our markets are the envy of the world. They're resilient. They're innovative. They're flexible.

I think we move very quickly to address situations in this country. And as I said, our financial institutions are strong.

WALLACE: You talk about the decision that you made and that it was the right decision. If another investment bank faces a Bear Stearns situation, is the government prepared to bail them out?

PAULSON: I'm not going to speculate on things that might happen. But I just clearly am going to say our focus, our priority, number one priority, is the stability of our financial system, the stability of our financial markets, orderly markets.

What we are working to do -- and this gets back to your conversation with Senators Dodd and Schumer. What we're working to do is to minimize impact of what's going on in housing, what's going on in the capital markets, on the real economy.

That's our first priority. That's our responsibility right now.

WALLACE: So is the government prepared to do more, if necessary, to maintain that stability in the financial...

PAULSON: The government is prepared to do what it takes to maintain the stability of our financial system. That's our priority.

And I've got to tell you, it's a great financial system, and we have market participants. As you work your way through a period like we've been working our way through and, you know, risk is being repriced -- I've been saying all the way along that there will be -- there always are -- surprises along the way, bumps on the road. You hit rough spots. These things happen. And the question is how do you deal with them.

WALLACE: But isn't the result of this that U.S. taxpayers might end up holding billions of dollars in bad mortgage securities?

PAULSON: I'm not going to speculate about the outcome of this specific situation. You're going to have to wait and see.

Conversations are going on, you know, over the weekend. I'm very involved in those conversations. I'm confident that this was the right thing to do.

Sometimes there are difficult decisions. This, in my judgment, was not a difficult decision. It was a right decision. And again, our markets are very important.

WALLACE: But there's an overarching philosophical and policy question here that I want to try to get at with you about the government's role.

Why should the government, and thereby U.S. taxpayers, bail out lenders and borrowers who made bad decisions? And if they know they're going to be bailed out, what does that do to the moral hazard argument that they don't end up paying a price?

PAULSON: Well, first of all, I really understand the moral hazard argument. So on the one hand, you've got a moral hazard. On the other, you've got what's right for the markets, what's right for the stability of the financial system, the U.S. economy.

All of these situations are situation-specific, depending on what's going on in the markets at the time. You're jumping to a conclusion about what the cost is going to be to U.S. taxpayer. So I just want to point that out.

And this situation hasn't played out yet. And wait and see how that plays out.

But to get to your general question, this is something that -- you need to balance these two considerations. And I would say at this time, given where we are, and given how important it is to minimize disruptions in our capital markets, and how important it is to protect the economy which you were talking about earlier, this was the right decision.

WALLACE: Finally, I want to ask you about the dollar, which, as I mentioned, is at a record low this week. With fuel's inflation and our dependence on foreign money, you and the president say -- and this has become kind of a mantra over previous administrations as well, that the strong dollar is in, quote, "our national interest."

Why not take a more aggressive stance and support a stronger and stable dollar and even implement policies to make a -- to prop up the dollar?

PAULSON: Well, I'm going to step back and say a strong dollar is in our nation's interest. Our long-term fundamentals in this country, economic fundamentals, are strong.

Our economy has its ups and downs like any other economy, but I believe that that long-term strength is going to be reflected in the dollar.

And to get to your point, we are -- the president has policies we're advocating very strongly, policies that are going to increase confidence in the U.S. economy and make our economy stronger over time, keep it stronger over time.

And you know what those policies are. It's pro-growth tax. It's being open to foreign investment. It's embracing and welcoming trade. That's why we're working so hard to get Congress to accept the Colombia free trade agreement.

WALLACE: But very briefly, because we've only got about 30 seconds left, you're not going to change your stance and push more aggressively for a stronger, increased value dollar.

PAULSON: Well, I don't know how we can be any stronger in saying that a strong dollar is in our interest. And we're going to keep pressing.

Everything I'm doing when I'm here, Chris, is to make this U.S. economy more competitive, stronger, minimize -- you asked me about the Bear Stearns situation.

I think actions like that -- anything we can do to enhance confidence in our marketplace, in our capital markets, in our economy, are the policies that increase confidence in our economy over time.

WALLACE: Secretary Paulson, we want to thank you so much for coming in today. And please come back as this situation continues to develop to bring us up to date on it, sir.

PAULSON: Thank you.

WALLACE: Thank you.

Coming up, racial politics in the Democratic campaign for president. We'll hear from our Sunday regulars in a moment. Stay tuned.

(COMMERCIAL BREAK)










(BEGIN VIDEO CLIP)

WRIGHT: "God damn America for treating our citizens as less than human! God damn America as long as she tries to act like she is God and she is supreme!"

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: Had I heard them, had I been sitting in the church at the time that they were spoken, I would have been absolutely clear to Reverend Wright that I didn't find those acceptable.

(END VIDEO CLIP)

WALLACE: That was Barack Obama saying that until recently, he was unaware of the inflammatory comments made by his pastor of two decades, Reverend Jeremiah Wright.

And it's time now for our Sunday group -- Brit Hume, Washington managing editor of Fox News, and Fox News contributors Mara Liasson of National Public Radio, Bill Kristol of The Weekly Standard, and Juan Williams, also from National Public Radio.

Well, Brit, let's start with the big question, the key question. How big a deal is this? How damaging is it to the Obama campaign?

HUME: I think it's a very big deal. And even if you give Barack Obama the benefit of the doubt and accept the idea that not only at the time these remarks were made -- and there's quite a number of them, as you noted -- that he didn't actually physically hear them, it's hard to imagine he didn't hear about them. And they are pretty extreme.

And you also noted the reaction inside the congregation of the church. There were people jumping to their feet to cheer this. This is the atmosphere there where such comments are not only accepted but applauded.

And it's worth noting also, I think, certainly Obama knew what sort of church this is.

Now, I have no doubt that the Trinity United Church of Christ in Chicago has done many good things. It is clearly a thriving parish with active programs for youth and antidrugs and all sorts of other good things. There's no doubt about that.

On the other hand, for a candidate who would like us all to believe that he is post-racial, this is an interesting institution. For example, this is what it says about itself. "We are an African people and remain true to our native land, the mother continent, the cradle of civilization."

And it goes on to say this is a congregation with a, quote, "non- negotiable commitment to Africa," not to Chicago, not to Illinois, not to the United States of America, but to Africa.

Now, look. There's nothing wrong with that. And I wouldn't say it's racist. But it is certainly racial.

WALLACE: Mara? And I'd like you to focus on this question. The political reality of whether or not this is really a serious problem for Obama -- and you know, we heard Schumer and Dodd both saying, "Well, look, in the context of the war, the context of the economy, this doesn't matter." Does it matter?

LIASSON: I think it is a potentially big problem for him. It might be a bigger problem for him if he's the nominee than in the nominating fight itself.

I think the most telling evidence of that is how the Clinton campaign doesn't want to touch it with a 10-foot pole. If they thought it needed some pumping up, believe me, they'd be doing it. I think it's because it's such a big problem that they're not aiding it along.

Look, I think it is a big problem. He didn't have him do the invocation at his announcement of his candidacy for a reason. He's kind of known that there were controversial statements all along and that it might be a problem. Now he's denounced them and he's removed him from his advisory committee.

I just want to take exception to one thing that Brit said about the mission statement of this church. A congregation with a non- negotiable commitment to Africa reminds me a lot about Jewish synagogues who are committed to Israel. It doesn't mean that they're committed to Israel above their commitment to the United States.

When it talks about the diaspora of the African people, you know, Jewish people also are in a diaspora. That stuff does not seem to be in any way offensive or incendiary. The comments are a different matter.

WALLACE: Bill?

KRISTOL: I was just in services yesterday at my synagogue, and my rabbi doesn't really sound like Reverend Wright. He needs to take some of those pills to get really revved up, I guess.

I think it's -- the Clinton campaign needs to decide are they going to make an issue of this or not. The media cannot sustain this kind of thing.

If Charles Schumer, a major surrogate for Senator Clinton, sits here on this -- right here and says -- or sits in New York and says to you, "Well, we shouldn't get into all that," that just says it's not a legitimate issue, in a sense, for Democratic primary voters. It shouldn't matter.

I think it probably could matter in judging Senator Obama. And I'm really surprised that the Clinton campaign seems unwilling to play this very strong card, which is that this man either believes this -- has some affinity for what his pastor is saying, which I think most Americans or most Democrats wouldn't agree with, or he just joined the largest church in the community for political reasons, for opportunistic reasons.

You know, he says this in his book, that he was a community organizer. Someone told him, "Hey, if you're going to be a community organizer, the churches are awfully important, you should join a church." He looked around. He liked this church. It happened to be the biggest church in the area.

Plenty of politicians join the biggest church in their districts or in their state senate districts or in their prospective state senate districts where they're going to run. And fine, he doesn't really agree with Reverend Wright.

But it's a little odd, I think, for the Clinton campaign to just think they can let -- I mean, I'm surprised they're going to let this go. And I'm wondering whether they will stick with that.

WALLACE: Juan, let me get to what I think is the key question, because -- and this is why I think it's different than one of the ministers -- Hagee, who has supported McCain, but they don't have any real connection, and has said some horrible things about the Catholic Church.

Obama's been a member of this church for two decades. He was married there. His children were baptized there. Does it say anything about him that he's a member of this church and he is a member of Reverend Wright's flock?

WILLIAMS: Of course it says something about him. And I think this goes back to what Bill was just saying. He joined this church really to solidify his credentials as authentically black and authentically a part of that South Side Chicago community, because it's the largest church there and Reverend Wright is well known not only in Chicago but nationally.

And he's known for making these outlandish comments. And he falls into a tradition of black ministers who -- you know, they say it's social gospel, or whatever.

But really, what it comes down to is an expression of black nationalism and trying to affirm black folks and say, "You know what? Racism in this country's terrible and it's a burden to be black in America," and all that. But they go beyond the pale at some point, then, and start off with this whole victimization, blaming people, damning the United States. And it goes to the point, then, where I think it becomes sort of -- it picks up and leads to what Michelle Obama said about -- only for the first time has she, this Ivy League-educated prominent American lawyer, proud to be an American because you're having support for her husband.

I think that's wackiness. But yet that's the kind of thing that spirals out of this. And I think it's very key here that, unlike the notion that Barack Obama wants to advance that he didn't -- or wasn't aware of it, I find that unbelievable -- or that this is a crazy uncle speaking out, this is a man who he chose to be associated with.

It's not a family member. He chose to be associated with Reverend Wright and saw advantage in it. And that's why he exploited it up to a point when he realized, especially when he was announcing, that he couldn't have Wright by his side for the announcement in Springfield and now seeks to somehow distance himself.

But it speaks to his character, and it speaks to the judgment which is the basis on which Barack Obama has been running his campaign. So I think it could be a big problem.

WALLACE: Well, wait. I want to follow up on this, because, you know, look. Quite frankly, African Americans see a lot of issues differently than whites.

WILLIAMS: Sure.

WALLACE: And sometimes we don't understand. What do you think it says about Obama's character and his judgment?

WILLIAMS: Well, I think that what it says is that Barack Obama, who says he wants to be transracial, that he wants to be the crossover -- I mean, he is the fruit of a generation.

This is the closest black people have ever been to having a president of the United States of America. And suddenly, you see -- wait a second, he's playing games and corners here on the race question.

He's not being straight ahead and saying, "You know what? I stand astride racial polarization." He's saying, "I play racial polarization at one moment to my advantage," Reverent Wright, "the next moment, I will distance myself and disavow Reverend Wright when that's convenient, too."

That is why I say for me, it just strikes -- wait a second. I want to know you. I want to know what you think and who you are. And in this case, I realize I don't.

HUME: I think that's really what the critical question is. We don't really know Barack Obama very well. And what we know of him and what we've seen of him we like, because it's impossible not to. He's extremely engaging, charming, likable. There's nothing about him that reminds you of certain angry politicians of the past. But we don't know that much about him.

And you see in the comments, as Juan pointed out, of his wife -- you see these attitudes toward this country. Now you see them in his minister, who is more than -- Bill, I'm not sure he went to that church for political reasons.

I think that Reverend Wright was deeply and personally a part of Barack Obama's life. And I don't doubt Barack Obama's assertion that he led -- that he, Reverend Wright, led him to Christ. And I think that's wonderful.

But it certainly makes it difficult, it seems to me, for him credibly now to distance himself from this man.

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

But coming up, the other big story this week -- the fall of New York Governor Eliot Spitzer. Was it really so surprising? We'll take a look at the so-called sheriff of Wall Street when we come back. You won't want to miss this.

(COMMERCIAL BREAK)

WALLACE: On this day in 2004, John Kerry won the Illinois primary, putting him over the top to become his party's nominee. That same night, Barack Obama won the Democratic nomination for the U.S. Senate.

Stay tuned for more from our panel and our Power Player of the Week.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ELIOT SPITZER: I am deeply sorry that I did not live up to what was expected of me. To every New Yorker and to all those who believed in what I tried to stand for, I sincerely apologize.

(END VIDEO CLIP)

WALLACE: That was Eliot Spitzer on Wednesday announcing his resignation as governor of New York.

And we're back now with Brit, Mara, Bill and Juan.

Well, the conventional story line was -- about Spitzer and the call girl was the tragic fall of Mr. Clean.

But, Bill, in this latest new issue of The Weekly Standard, you are running an interesting story that takes a different take on this.

KRISTOL: Yes. The reporters who followed Spitzer most closely -- Fred Dicker the New York Post, Mike Goodwin of the New York Daily News, Fred Siegel, who teaches in New York -- all of them now say, and I think they're right, this is who he was.

Character is destiny. He was a con man. It's not a tragedy. There was nothing much noble about him. He broke the campaign laws and lied about it. He was in all kinds of trouble anyway ethically. And this in a way just proved the proposition that he -- all the talk was just talk.

His campaign slogan, incidentally, when he ran for governor in 2006, was, "Everything changes. On day one," comma, "everything changes." Somewhat Obama-like, if I could say. You know, he was the change -- Spitzer was the change we've all been waiting for.

WALLACE: But, Brit, there are plenty of other views about what the story line is here involving Eliot Spitzer.

Take a look at this column by Ruth Marcus that appeared this week in the Washington Post. "The tragedy of the Emperor's Club VIP Client 9, better known as Eliot Spitzer, is one of Greek dimensions."

Brit, do you see a Greek tragedy here? HUME: No. And I love Ruth Marcus. I've known her for years and admire her very much. I thought the column was amazing. She knows him well. She apparently was a law school classmate.

And what she wrote about him was of a piece with a lot of the reporting that was done on and about him over the long years, which was to gloss over with nary a mention the abuses of power, some of which Bill has cited, cases in which he would publicly accuse someone of breaking the law then never charge the person, leaving the smear or the accusation to stand untested in a court of law, the leaking of information prior to any charges being filed -- the kind of rough stuff that, when it was associated with Rudy Giuliani, the media hated but they didn't mind so much when it was Eliot Spitzer.

And this is the kind of stuff he did for years and years and years. One sense is that this is man who should never have been elected governor, let alone by the landslide with which he was reelected, and had he received the kind of press scrutiny that he certainly deserved over the years, he would not have been. And it would have been better.

WALLACE: Mara, let's talk about some of the specific cases -- and let's put them up on the screen -- that critics are raising now about Spitzer, and actually raised at the time.

In 2005, Spitzer went on national television to say that Hank Greenberg, the CEO of AIG, or American International Group, had engaged in criminal activity. But six months later, Spitzer buried the news that he didn't have the evidence to press criminal charges against Greenberg.

John Whitehead, a highly respected figure in Washington and on Wall Street, criticized Spitzer for activities like this. He said after his criticism, Spitzer called him to say, "You will pay dearly for what you have done."

LIASSON: I think there's a big difference between those two. I mean, Hank Greenberg, you could say, was an abuse of power. And prosecutors have a lot of power and have to be really careful about how they use it.

The other one sounds like a bullying, blustering phone call.

HUME: Well, wait a minute. The guy was in a position of real power. When you accuse somebody like that, that's no small thing.

LIASSON: I'm talking about Hank Greenberg. I agree with you. I'm saying that the phone call to Whitehead...

HUME: But that's still an abuse of power if you're in a position of authority.

LIASSON: Yes. It was a threatening, abusive phone call. But he didn't actually charge Whitehead with anything. He didn't use it...

WALLACE: No, but if the attorney general of New York gave you that call and said you're going to pay...

LIASSON: I think that was an example of what we now know was Eliot Spitzer's gross lack of judgment and recklessness. And those kinds of character flaws don't just pop up in one incident.

They are something that you can now go back and point to throughout his career. I agree with that. I was just saying there was a slight difference between those examples.

One of the reasons why he fell so hard and fast is because he had no allies in Albany even in his own party. And that also attests to, you know, his behavior and his judgment in the past.

WALLACE: I mean, we should point out that when he became governor, Juan, he allegedly used state troopers to try to dig up dirt against the top Republican in the Senate...

WILLIAMS: Joe Bruno.

WALLACE: ... Joe Bruno, in his first year in office.

I mean, this was a fellow who really played hard and rough and, some would say, played loose with the rules.

WILLIAMS: Yes. Charlie Rangel, the congressman from Harlem, said, you know, "He was always the smartest guy in the room." But I just feel like right now there's a lot of piling on going on with regard to Eliot Spitzer.

And the fact is that Wall Street was excessive, and Wall Street had a lot of money rolling in. And on some levels, you have to say thank God that Eliot Spitzer was there as an aggressive prosecutor trying to hold them accountable and make sure that shareholders were properly represented.

And clearly, that kind of attitude -- at some point, you become reckless and you become sort of enamored of your own power. And I think he was excessive at times.

But to go to the root of the issue, was it a good thing that you had an aggressive prosecutor watching over Wall Street? I think it was. I think there's no question about it.

LIASSON: But we're not saying that it wasn't. I mean, you can say both things, that he was an aggressive prosecutor and also that he was reckless and had poor judgment.

WILLIAMS: And then the second thing to say -- wait a second. The second thing to say is, you know, it's interesting that he resigned. I think it was right that he resigned, because he was Mr. Clean. I mean, his whole existence as a political entity was based on his probity.

But then you stop and think about what's going on in this town with people like Larry Craig, or you think about David Vitter, who was, you know, caught up in a -- they're still in office. You've got to say, "Well, wait a second. What's going on here? Why is that? And what's the double standard here?"

You know, I guess those are real questions for Republicans.

WALLACE: We have one minute left.

And, Mara, I'm going to play stereotype and ask you the question, because I hear so many people talking about Mrs. Spitzer, Silda Wall Spitzer, a very accomplished woman, a very accomplished lawyer before she quit her job.

And you see her there. And not once, but twice, she stood by her man at press conferences. And I've got to tell you, an awful lot of men and women, particularly women, are saying why.

LIASSON: Look, I am not going to second-judge her decision to do that. That was her personal decision. Do you wince when you see a wife standing there? Sure. She was completely -- if there was a victim in this whole thing, it was certainly her.

But I have no idea why she did it. And you know, in this case, I'm not going to judge her on that. But yes, it is kind of a horrible thing when you see the wife -- or Mrs. McGreevey, for that matter -- you know, standing there.

HUME: I don't know what was said at their wedding ceremony, but if she said that she would stand by him for better or for worse, this was the "for worse" part.

LIASSON: She did. Yes, she did.

WALLACE: She's lived up to her oath.

LIASSON: Yes.

WALLACE: Thank you all, panel. See you next week.

Now, the first in what will be a weekly update on Barack Obama. Many of you have sent us e-mails asking why the senator won't come on "Fox News Sunday" and face tough questioning like every other candidate, including, repeatedly. Hillary Clinton.

Back in March of 2006, I met with Obama, and he promised me, face-to- face, he would come on this program. But so far, he has not.

Well, as of today, we are starting our "Obama Watch." It has now been 730 days, 13 hours, 53 minutes and nine -- no, 10 seconds and counting since Obama agreed to be a guest on Fox News Sunday.

Senator, when are you coming on?

Tune in next week for the latest, and we'll be right back with our Power Player of the Week.

(COMMERCIAL BREAK)










WALLACE: She's a fixture on daytime television, who, with one sentence, can shake governments or move financial markets, which is why she's our Power Player of the Week.

(BEGIN VIDEOTAPE)

PERINO: We have tried to use some different techniques and hooks in order to keep the media interested and keep the American people interested.

WALLACE: Dana Perino has had a special challenge since becoming President Bush's press secretary -- how during a fierce campaign to keep the man who still has the job in the news?

PERINO: Exclusive interviews that we've done in order to get some attention on an issue, or we've shortened the president's speeches a little bit over the past seven months.

(BEGIN VIDEO CLIP)

BUSH: She can handle you all.

(END VIDEO CLIP)

WALLACE: Back when Perino replaced Tony Snow last summer, there were doubts she could fill his commanding presence at the podium...

(BEGIN VIDEO CLIP)

PERINO: You know, I had to pull that out so I could see over the top.

(END VIDEO CLIP)

WALLACE: ... doubts she had herself.

PERINO: There was one day in particular, I think it was maybe two weeks into the job, that I told myself, "You're never going to be Tony Snow, and you shouldn't try to be anymore."

WALLACE: Perino said back then her goal was to lower the temperature in the briefing room, make it less adversarial.

But she has no qualms about putting reporters in their place, as when veteran Helen Thomas suggested U.S. troops were killing innocent Iraqis.

(BEGIN VIDEO CLIP)

HELEN THOMAS: ... more people we kill?

PERINO: Helen, I find it really unfortunate that you use your front row position bestowed upon you by your colleagues to make such statements. To suggest that we, the United States, are killing innocent people is just absurd and very offensive.

(END VIDEO CLIP)

PERINO: Every day, when you go into the White House, you should take a moment and pause and think, "Wow. I work here."

WALLACE: The 35-year-old Perino was the second woman to serve as press secretary. One challenge, she says, is unlike a man, she can't wear a pinstriped suit every day.

PERINO: You can just look at all the unfair comments that people make about women who are in politics or in news. And you know, your appearance matters.

WALLACE: But another problem surprised us -- being the White House spokeswoman during a war.

PERINO: Some of the terms I just don't know. I haven't grown up knowing -- the different types of missiles that are out there, Patriots, and Scuds, and cruise missiles, and Tomahawk missiles.

And I think that men just, by osmosis, understand all of these things. And there are things that I really have to work at, and to know the difference between a carrier and a destroyer, and what it means when one of those is being launched into a certain area.

WALLACE: Perino got a crash course in current events as a child.

PERINO: When I was eight years old, my dad asked me to read both the Rocky Mountain News and the Denver Post before he got home and to have picked out two articles I wanted to discuss when he came home.

WALLACE: After college, Perino worked in local news...

(BEGIN VIDEO CLIP)

PERINO: Here at the Sangamon County Courthouse, everyone who enters must...

(END VIDEO CLIP)

WALLACE: ... until she was assigned to interview the mother of a small child who'd been murdered.

PERINO: I realized that I couldn't do it, and I didn't want to stick a microphone in her face, and I realized I probably wasn't cut out for that type of hard-hitting journalism.

WALLACE: Now Perino is an old Washington hand. She and her husband have a dog named Henry. Ask him what he thinks of John Kerry, and he fetches a flip-flop.

As for what happens when the president leaves office in 10 months...

PERINO: I know that I will try to make it to yoga class and maybe take up flute lessons again. I used to volunteer a lot when I worked on Capitol Hill and I had a little bit more time, and I haven't been able to do that the past few years, and I miss it.

(END VIDEOTAPE) WALLACE: Perino got her first taste of the White House as a six- year-old tourist. She says she told her mother she'd like to come back and work there when she grew up.

And that's it for today. Have a great week and we'll see you next "Fox News Sunday."

For more visit the FOX News Sunday web page.

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