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Panel on Revived Rescue Bill Negotiations

Panel on Revived Rescue Bill Negotiations

FOX News Special Report With Brit Hume - October 1, 2008

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: I call on everyone in Washington to come together in a bipartisan way to address this crisis.

SEN. BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: So the Democrats and Republicans who opposed this plan yesterday, I say step up to the plate. Do what's right for this country.

(END VIDEO CLIP)

HUME: Well the two candidates agree on that, and they agree on one more thing, and that is the increase in the Federal Deposit Insurance Company insurance ceiling on bank deposits from $100,000 to $250,000, which seems to be in the works.

Some further thoughts on all this now from Bill Sammon, FOX News Washington deputy managing editor, Mara Liasson, National Political Correspondent of National Public Radio, and the FOX News contributor and syndicated columnist Charles Krauthammer.

All right, you still have some resistance among members of the house, and some elsewhere in the financial community as well, that say, look, this thing, a great big package like this, $700 billion, whether it's done over time or not, is really not what is needed, and, in fact, it's dangerous. I wonder who's right about that.

Bill, your thoughts?

BILL SAMMON, WASHINGTON DEPUTY MANAGING EDITOR, FOX NEWS: Well, also the public doesn't obviously think this is a good idea. It has been overwhelmingly against it.

And I think fundamentally we are still are a center-right nation, and people don't trust the government for an intervention of this magnitude. They would rather see maybe the power of the market unleashed, in a way, to help this thing, whether it's through--

HUME: How?

SAMMON: Capital gains tax reduction, corporate tax reduction, the suspension of the--

HUME: Is there any chance in your judgment that any of that could pass?

SAMMON: Well, obviously the Congress is controlled by Democrats. The first iteration of the bill didn't pass, so it has to change. It can go either go leftward, where they can put this ACORN stuff and the union stuff--

HUME: Which would include what?

SAMMON: Well, the ACORN is a controversial left wing group that is involved in voter registration-

HUME: It would have been eligible under some provision in this bill to get money from the proceeds of the sale of these assets eventually, right?

SAMMON: And the union stuff-they wanted unions a seat in the board room, forced them into the boardrooms of some of these--

HUME: And that stuff got thrown out.

SAMMON: That stuff got thrown out. So it could either get back in there, which would attract more Democratic votes. But for every Democratic vote you pick up, you lose a conservative.

The other way we could go, we could make it more of a conservative bill by putting in a cut in corporate tax rates, by putting in a cut in the capital gains, by getting rid of this mark to market accounting rule which has been so troublesome. That's less likely.

One last thing--the other way is to do a fig leaf, which is this let's both agree to raise the FDIC insurance from $1,000 (sic) to $250,000 and call it a day and pass this thing. And that may be what happens.

MARA LIASSON, NATIONAL POLITICAL CORRESPONDENT, NATIONAL PUBLIC RADIO: I think of that wish list, the only likely one is mark to market and maybe an FDIC. I think the fig leaf--

HUME: In fact Jim Angle reported tonight--we didn't have a chance to get to it--that the Securities and Exchange Commission is working on a way to partially suspend the mark to market.

Those are the accounting rules in which these assets--the market for which it is basically frozen, although they have value, they are forced to value them way below what they are probably worth.

LIASSON: Which makes them look a lot worse.

HUME: It also makes the balance sheets of banks look a lot worse and restricts the amount of money they can lend.

LIASSON: I think that If Democrats continue to insist on having a certain number of Republican votes, which they are, they will have to do something, some kind of fig leaf to get those extra 12 votes that they need.

Some will have to come from the Democratic ranks from no voters and some will have to come from Republican ranks, and that's what I think is likely to happen. Although, of course, all of us thought that it would pass yesterday, too.

But this was a huge failure of leadership all around. And they thought they had the votes and they didn't. They will have to go back and get them.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Look, I'm in favor of a fig leaf, because if that's what it takes, that's OK. The raising of the limit on the FDIC-insured deposit is a fig leaf. It's not a big deal, but it will look good. It had the endorsement of the two presidential candidates.

HUME: It may prevent runs on banks.

KRAUTHAMMER: Well, almost every bank that has money in the bank splits it up and doesn't have it over $100,000.

HUME: A lot of businesses do, though, Charles.

KRAUTHAMMER: But, also, when the S&L's had failed, there was a lot of leeway given to people who had over $100,000. There is always the understanding that ultimately it will be supported. That's why I think it is a fig leaf. It will be official even though it's unofficial.

You look at the market today, which rebounded hugely, and you can say either it's because the doomsday scenario was wrong, and the markets in Europe nonetheless went up and the sun came up in the east in New York, and people thought it was OK if you don't have a package.

Or you can argue that the reason it went up is because everybody on Wall Street assumed after hearing the president and Democrats and Republicans and Mitch McConnell and others say we will have a package. It will be changed in some way, but we will have a package. Everyone on Wall Street believes we will have a package.

I believe the second theory is right and the first is completely wrong.

HUME: But the futures were up last night before anybody said any of this.

KRAUTHAMMER: The problem is that--the thing that Jim Angle had talked about, which is the spread on the lending, the seizing of the credit markets, even if the stock market holds up a day or two or three, if no one is lending and no one will lend at six and seven percent overnight, nobody will lend, no one is going to have any money and the economy is going to be in a crushing collapse.

Everybody understands that. The reason that Bernanke and Paulson are running around with their hair on fire is because they're looking at the overnight lending numbers, and those are real. That's what's going to happen.

That's why I think the markets reacted, assuming there is going to be a package. If there isn't a package, I think there will be a collapse that will make yesterday look like a picnic.

SAMMON: The other person who is hurting, of course, is John McCain.

HUME: We're going to talk about that in the next segment.

SAMMON: OK.

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