Panel on the Gov't and the Financial Markets

Panel on the Gov't and the Financial Markets

FOX News Special Report With Brit Hume - September 19, 2008


GEORGE BUSH, PRESIDENT OF THE UNITED STATES OF AMERICA: We must address the root cause behind much of the instability in our markets, mortgage assets that have lost value during the housing decline and are now restricting the flow of credit.

America's economy is facing unprecedented challenges, and we are responding with unprecedented action.


BAIER: President Bush today saying we must act now in the Rose Garden. He also said this is a pivotal moment for America's economy.

Introducing a sweeping plan to try to shore up confidence in the financial markets, a plan that could involve-that will involve buying up distressed mortgages at deep discounts from banks.

How much it costs--no real price tag yet. It could be hundreds of billions of dollars.

Treasury Secretary Henry Paulson today saying the federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy.

The administration is working with Congress tonight and through the weekend on this. It's massive.

Some analytical observations from Fred Barnes, Executive Editor of "The Weekly Standard," Mort Kondracke, Executive Editor of "Roll Call," and Charles Krauthammer, FOX News contributors all.

Charles, it's hard to get your mind around how big a deal this is. The president is saying today that there are plans to pay all of this back. But there is a lot of taxpayer money on the line, a lot.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: And enormous new structures. It took FDR a decade to put in place all the institutions of the New Deal. Paulson and Bernanke did it in ten hours. In one night, they created a whole new world. Even god took six. It's absolutely astonishing.

What Paulson understood is that the approach he had taken, this ad hoc approach, was not working. The reason is that you had--he had three solutions, shotgun weddings--the Bear Stearns bit--the liquidation of Lehman, and nationalization of AIG, for example. And nobody knew what would happen to a firm in trouble, which of three would apply.

So as I said last night, he was introducing uncertainty in a situation which was already incredibly uncertain and panicked. If you were going to lend money overnight, you didn't know if the borrower was going to be a Lehman or a Bear Stearns.

And what he did was he decided you got to go to the root problem underlying all the instability of the institutions, and that is the mortgages. So he takes on the mortgages, he takes it off the balance sheet of all these institutions, and they get relatively healthy overnight.

And then you get strength in those institutions, confidence, and trust, and lending. And that's why I think it will likely work.

BAIER: And, Mort, there are a lot of different parts to this potential plan. We should say the Federal Reserve and Treasury Department working with congressional leaders starting tonight through the weekend.

MORT KONDRAKE, EXECUTIVE EDITOR, "ROLL CALL": Yes. And the danger, of course, always is that Congress will not just do this but want to add on all kinds of addenda--a stimulus package, aid for states and local governments, infrastructure programs, all that kind of stuff.

And what they've got to do--I gather Chris Dodd actually said this will not become a Christmas tree today, the Chairman of the Senate Banking Committee-

BAIER: Meaning they won't hang thing on it.

KONDRAKE: Yes, hang all kinds of things on it, which will complicate things.

So one would hope that they would do the minimum. You can be sure that there will be add-ons because Harry Reid said we've got to not only help out Wall Street, but have to help out Main Street. The question is how much are they going to help out Main Street?

But, fundamentally, I think, everybody is so scared and realizes that something has to be done, that--even money market accounts. People were pulling money out of money market accounts, which are the safest thing going next to Treasury Bills, and piling them next to Treasury Bills, and you were going to have a run on mutual funds, the safest mutual funds there were.

So this was real panic time, and they had to put a pan under it.

BAIER: And, Fred, the markets worldwide saw this as a good sign today. The DOW was up 369 across the board and around the world.

FRED BARNES, EXECUTIVE EDITOR, "THE WEEKLY STANDARD": Around the world, I love it. Even in Russia! The Russian market was up 20 percent.

Look, when I keep hearing this is going to cost a trillion dollars, and so on, it may not cost anything. Remember, when they are setting up a "bad bank," so called, that will but, as you said, at a deep discount all these mortgage-backed securities.

But they do involve some--the paper may be bad, but there are below them houses, an awful lot of houses, which will be more valuable at some point further down the line. And so actually the federal government may come out ahead. I mean, they are putting a lot of money out there now, no question about that.

What I am tired of hearing is people saying that this is an economic crisis. This is not an economic crisis. This is a crisis in financial markets, and what Henry Paulson and Ben Bernanke have done is to come in and do all this in one fell swoop so the crisis in financial markets will not cause a crisis on Main Street and the economy.

It hasn't yet, and I don't think it will because they have acted so boldly.

KONDRAKE: One bum wrap I think that is going around here is "where was Bush?" I think Bush handled this rather well by not being out in front and putting Hank Paulson out in front.

If Bush had been out in front negotiating with the Democrats--the Democrats in Congress hate Bush. They would have politicized this. Hank Paulson had a lot of trust and confidence. Furthermore, he was the head of Goldman Sachs and knows what he is doing.

And so I think Bush handled it rather well.

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