Following is a transcript of Jan. 13, 2002.

TONY SNOW, HOST, FOX NEWS SUNDAY: In one year Enron went from the toast of Houston to just plain toast. Executives walked off with millions of dollars, employees lost their life savings, and accountants shredded critical papers. 

(BEGIN VIDEO CLIP) 

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The administration is deeply concerned about its effects on the economy. We're also deeply concerned about its effects on the lives of our citizenry. 

(END VIDEO CLIP) 

SNOW: Did Enron executives break the law, bend the law or fall victim to bad luck? Will any politicians take a fall? We'll ask Treasury Secretary Paul O'Neill and two key congressional investigators, Representatives John Dingell and Tom Davis. 

(NEWSBREAK) 

SNOW: The top domestic story this morning: the collapse of Enron. Not long ago the company was the world's largest energy trader, worth $70 billion. But last fall the company acknowledged several hundred million dollars' worth of previously unreported liabilities, and its stock, already hit by a weakening economy, went into free-fall from a high of more than $80 a share to less than 50 cents today. 

A company that once boasted of never having had a bad quarter now has filed for the biggest bankruptcy in our nation's history. In the process, thousands of employees have seen their retirement savings vanish, while some company executives managed to sell stock then worth millions. 

Adding to the intrigue, Arthur Andersen, the firm auditing Enron's books, claimed it didn't get some important records from the company and destroyed thousands of other pages of documents. The administration and at least four congressional committees have launched investigations, but the complex case may take years to resolve. 

So is this a corporate scandal, a political scandal, both, neither? For answers we turn to the treasury secretary, Paul O'Neill. 

Good morning. 

PAUL O'NEILL, TREASURY SECRETARY: Good morning. 

SNOW: Now, in October you received the first of three phone calls from Ken Lay, the chairman of Enron. In his first phone call to you, what did he say? 

O'NEILL: He called to tell me that he thought it would be useful for our technical people to talk with his technical people to understand the complex derivative contracts they had, to assure ourselves that their problems were not going to get translated into larger problems for the U.S. and the world capital markets. 

SNOW: So he did not seek direct help? He didn't ask for, at least at that juncture, any intervention with rating services or anything? 

O'NEILL: Absolutely not. No, he just called me to alert me that he thought we ought to pay attention to the technical details. 

SNOW: All right. And when you got that request from him, did any alarm bells go off? Did you say, this is an unusual request? 

O'NEILL: No, I didn't think it was unusual at all. I get dozens of calls from people every day, and his call wasn't unusual. 

SNOW: So you mean corporate executives will often call and ask for your advice about technical details of their derivatives trades? 

O'NEILL: Well, they — well, you know, this is a very unusual case in the sense that Enron's the biggest energy — or was the biggest energy trader in the world. And so, in that sense, I didn't think it was unusual. 

You know, I think one thing that's been missing through a lot of the conversation about this is a lack of understanding of what goes on in the world. 

As the treasury secretary at the time that I had this call, I was working on the economic stimulus bill with the leadership of Congress. I was trying to get the Congress to pay attention to and pass a terrorist risk insurance proposal, which, unfortunately, they failed to do. I was working on pursuing terrorist financing all over the world. 

So, you know, this is three, four-minute conversation in the midst of a sea of things going on in the world, and I didn't think it was unusual at all. 

SNOW: So it wasn't a big deal. The following day he calls. What did he ask for then? 

O'NEILL: You know, I guess I don't remember two conversations back to back. You're telling me something new. 

I think what our records show is that I had two conversations with Ken, and I think the dates are the 28th of October and another one on the 8th or 9th of November. 

And, you know, the second call that I had from Ken was to tell me that they were being looked at by the rating agencies. It was just a heads-up, and that was it. 

SNOW: So, at this point, one of the questions a lot of people want to know is, why didn't you tell the president, why didn't anybody tell the president at this point? 

O'NEILL: Well, again, you know, if you put this in the context of what's going on, the president's prosecuting the war against the terrorists — you know, I have been involved in big-league events for, I don't know, most of the last 40 years. I didn't think this was worthy of me running across the street and telling the president. I don't go across the street and tell the president every time somebody calls me. 

SNOW: This is the seventh-largest corporation in America. When you got those phone calls, did it occur to you that Enron might very soon be bankrupt? 

O'NEILL: I had no idea. You know, I had — I frankly think what Ken told me over the phone was not new news. You all had been reporting for weeks that Enron had problems, that they were in trouble and the rest of that. And, you know, it's part of the reason I didn't think there was any reason for me to talk to anybody else, because I thought what Ken said to me was public property. It was not new news. 

SNOW: So were you surprised by the collapse of Enron's stock value? 

O'NEILL: Well, not really. I guess, you know, I've watched lots of corporations come and go. It's an interesting fact that there are very few companies that have been around for 40 or 50 years or 100 years. 

So, you know, in the broader scheme of things, not really. Companies come and go. It's — part of the genius of capitalism is, people get to make good decisions or bad decisions, and they get to pay the consequence or to enjoy the fruits of their decisions. That's the way the system works. 

SNOW: Now, a few years ago, a company called Long-Term Capital got a bailout from the federal government as it was facing bankruptcy. At least one — 

O'NEILL: I don't think that's... 

SNOW: I'm sorry. Go ahead. 

O'NEILL: I don't think that's a correct characterization. My recollection is that Long-Term Capital had a problem, and the New York Fed, I think it's true, played a role in convening the banks that were at risk, but I don't think the federal government provided anything at all, Tony. 

SNOW: OK. In that case... 

O'NEILL: There was no bailout. There was no bailout. 

SNOW: OK. Well — and there was no requested bailout here. There was a request for perhaps some aid in intervening with Moody's, which was doing corporate ratings. 

O'NEILL: Not to me. 

SNOW: OK. But to people under your jurisdiction, correct? 

O'NEILL: According to accounts that I've read in the newspapers, that's right. 

You know, this thing has become a subject of lots of conversation. We have taken what I think are prudent steps, so that I've not spent any time talking to the undersecretary about the conversations he had with other people, to make sure that we do this correctly. 

You know, I think we have done the right thing. We're going to continue to do the right thing. 

The president has asked me to lead a couple of different groups, to see if there are lessons that we should learn, and possibly change law, rules or regulations to better protect individuals who have a stake in a 401(k) plan or a pension plan, to make sure that the people that are involved out there in companies are not disadvantaged by decisions that their leaders make. 

SNOW: Now, is the philosophy of this administration that, when a company gets into a bind like this, it's on its own? 

O'NEILL: Absolutely. You know, unless there's an issue related to the company that reaches to public responsibility, you know, in the American capitalist system, companies are responsible for their actions. And there is a broad scheme of laws and rules and regulations that instruct and tell companies what they're supposed to do. And so, of course, you know, we don't have an interest in individual companies, and that's it. 

SNOW: So you're not talking to Peter Fisher, who's your undersecretary working on this. There seems to be almost a see-no- evil, speak-no-evil kind of atmosphere. You're not talking to a guy who's working for you. You and Don Evans don't talk to the president until a meeting just very recently. 

Surely there had to be some sense in your mind that these calls were inappropriate, or that there was something about them that you did not want to pass along to the president. Is that correct? 

O'NEILL: No, it's not. I didn't think there was anything inappropriate about someone calling me to give me a heads-up that there were some technical things that we ought to pay attention to. I don't find that inappropriate. It seems to me it's exactly the right discharge of my duties to make sure that the public's not going to be hurt by some individual company action. 

SNOW: Now, Henry Waxman is saying that this administration — well, let me read a quote from Congressman Waxman. He's going to be conducting an investigation; a lot of people are. He's making allegation about the way the White House has handled this. We're going to get it up on the screen here presently. 

He said, "It is now clear that the White House had knowledge that Enron was likely to collapse but did nothing to protect innocent employees and shareholders who ultimately lost their life savings. I'm deeply troubled that the White House stood by and let this happen to thousands of families." 

Your reaction? 

O'NEILL: My reaction is, you know, it's just amazing to me to have this kind of comment. What we knew, what I knew, I think what those of us in the administration knew was public property. Everyone knew from Enron's disclosures that they were struggling. We didn't know more than that. 

The company had a duty to inform its shareholders and its employees about things that were going on inside the company. That's not a federal government responsibility. 

And again, we didn't have any knowledge that wasn't general public property. You all in the television world and in print media were reporting on kind of a day-to-day basis what was going on in Enron. I didn't know anything more than you did. 

SNOW: So when Ken Lay e-mailed employees in August saying he thinks the best times are ahead, do you think he was being straight with his employees? 

O'NEILL: Well, I don't know. You know, that's something you need to ask Ken Lay. I don't know. I didn't have inside knowledge of what the company's prospects were. You know, having been a CEO, I often — I always communicated with my people what I thought was going on. And you need to ask Ken Lay what he had in his mind when he sent that e-mail. 

SNOW: Do you think the federal government or Congress ought to do anything to try to make whole some of the shareholders, especially people who worked for Enron who've lost their life savings, or is that just the breaks? 

O'NEILL: Well, again the second group the president asked me to lead is to look and see whether the laws and rules and regulations about disclosure are appropriate and whether something's been missing in the requirements for disclosure, especially in these areas that are so complicated. 

I don't know whether you've ever spent any time trying to understand the derivatives business. I did, because when I was at Alcoa we ran a billion-dollar, multi-billion-dollar derivatives process in the 36 countries we were involved in around the world. And it's an enormously complicated subject. 

The president's asked me to look at the rules and regulations and see whether we need to modify them in some way to assure that shareholders and employees are not disadvantaged because the disclosure rules are not strong enough. 

SNOW: Mr. Secretary, final question. I'm going to read a Fox News Opinion Dynamics Poll question. We asked people about their optimism about the economy, whether they think things are going to get better or worse in the next year. And 74 percent said better; only 14 percent said worse. 

Are they realistic or guilty of irrational exuberance? 

O'NEILL: No, I think they're on the right track. I think — you know, I think the information we have so far in the data on economic performance is a mix but I think it's mixed toward the positive side, and I'm optimistic we're going to return to a good rates of real growth. 

SNOW: With or without a stimulus package? 

O'NEILL: Well, the stimulus package, I still believe, would hasten the movement out of a slow economic period. It would help people who were directly affected by the events of September 11. 

The president said over and over again, every person who has a prospect of losing their job or who has lost their job, we should care about them and therefore, yes, we should do the stimulus package. 

I'm hoping the Congress will come back informed by their constituents that they, the constituents, want a stimulus package and that we'll finally get a vote in the Senate. We already passed two bills in the House. Hopefully the Senate's going to be responsive, and we're going to do something in the next few weeks. 

SNOW: All right. Secretary O'Neill, thanks for joining us. 

O'NEILL: My pleasure. 

SNOW: Up next, Congress takes a look at the Enron mess. (BEGIN VIDEO CLIP) 

BUSH: This administration will fully investigate issues such as the Enron bankruptcy to make sure that workers are protected. 

(BEGIN VIDEO CLIP) 

(COMMERCIAL BREAK) 

SNOW: Continuing our discussion of the Enron collapse, we welcome two key players from the House of Representatives: Democrat John Dingell, ranking member of the House Energy and Commerce Committee; and Republican Tom Davis, chairman of his party's National Congressional Committee. 

Also here with questions, Brit Hume, Washington managing editor of Fox News. 

Representative Dingell, based on what you've seen so far, is there any case for political hanky panky so far in Enron? 

U.S. REPRESENTATIVE JOHN DINGELL, D-MICH.: I think it's too early to say. I think what we have to do is have a thorough investigation, get all the facts, and then make the necessary judgment. 

Certainly Enron's behavior, Andersen's behavior, have raised questions. And certainly the fact that the administration would not reveal the matters that went on with regard to the vice president's panel on energy and Enron's part in it raises some questions. 

BRIT HUME, FOX NEWS: Well, let me just ask a follow up on that if I can, Congressman. What link do you see between the discussions the administration had on energy policy and the financial collapse of this company? Is there any connection? 

DINGELL: Well, there's no connection there, but there is a connection which is even more important, and that is what energy policy was put. 

Remember, Enron was pushing very, very hard to have total deregulation of energy, particularly electrical utility energy sales that had a particular effect upon California and which caused huge disasters to the people of California with regard to energy. Plus... 

HUME: Well, how many investigations are you talking about here, Congressman? Are you talking about one about the financial collapse of Enron, or are you talking about two, including a separate investigation of energy policy, California's predicament, Enron's discussion with the vice president on that matter? 

DINGELL: All this ties together. 

HUME: How? 

DINGELL: Enron was busy doing many things including stripping its employees of their 401(k) benefits, including possible insider trading, including filing false reports with the SEC, the 10-Ks, the 10-Qs and annual reports, and they were also tied up in a peculiar relationship with Andersen, their auditor. 

SNOW: OK, Representative Davis, what do you think? I want to get your response to what Representative Dingell said. 

U.S. REPRESENTATIVE TOM DAVIS, R-VA.: First of all, I think a lot of what Representative Dingell says goes to what the Post says this morning. 

SNOW: That's The Washington Post. 

DAVIS: The Washington Post, it's: "Poll finds bad news for Democrats looking for a traditional mid-term election edge." 

Of course we ought to investigate the collapse of Enron and what happened to the employees and how some of the largest owners of this and the CEO were able to cash out while forbidding their own employees to do that. We ought to take a look at the financial accounting standards on this. We ought to see if new rules and regulations ought to come forward. 

But taking a look at these overall policies, just this politics, there's absolutely no evidence to date that the administration did anything improperly. And we know that Enron gave a lot of money to a lot of players in Washington on both sides. 

SNOW: Carl Levin, who is going to be running an investigation on the Senate side, has said on another broadcast that he thinks that Ken Lay, in fact, was asking over the phone for inappropriate favors from the administration. Do you see any evidence of that? 

DAVIS: Well, we know he was on the phone. We know that they had Bob Rubin, who was President Clinton's Cabinet secretary, call up on their behalf. And we don't know all those answers yet. 

What we do know so far is we found no indication that the administration, in any way, did anything improper or answered any calls that might have come forward. 

HUME: But you are, as the head of the National Republican Congressional Committee, in the process of returning campaign contributions. 

DAVIS: Absolutely. 

HUME: Well, if there's nothing improper here, why return the money? 

DAVIS: Well, I'll tell you why, because they gave $100,000 in corporate dollars, it could go back and help those employees, help fund their pension plans. And, frankly, I think that is a better use of $100,000 at this point. 

SNOW: Representative Dingell, you also got some money over the years from Enron. Did anybody at Enron try to contact you? 

DINGELL: Well, Enron talks to everybody. And I've told them no at almost everything they've said... 

(LAUGHTER) 

... and that includes deregulation of electrical utility sales and things of that kind. 

SNOW: But during this period when Enron officials were contacting the treasury secretary, the commerce secretary and the undersecretary of treasury, did anybody call you and say, we want you to take a look into rating services or we want you to give us some help? 

DINGELL: No, they did not, and I would not have done so. 

And by the way, Tony, they gave me $10,500, and we're going to give that money — I've already instructed my campaign treasurer — to the funds that have been set up to help the employees, and I urge everybody to do the same thing. 

HUME: Well, just to follow that up for a second, Tony's questions, when did they contact you, how often and about what? 

DINGELL: Well, they were usually contacting me about deregulating electrical utility sales, and we always told them no. 

HUME: When was the last time? When did that happen last? 

DINGELL: Oh, over a period of some time, and we told them no. 

HUME: What? Last year, last six months, last month, when? 

DINGELL: Oh, over a long period of time. They contacted us about that. We told them no. I opposed the proposal. I think it was the right thing to do. 

HUME: Sounds like the $10,500 was a bad investment. 

DINGELL: Well, if they regard it as an investment, they lost their shirt. But what we're going to do with that money is give that to the employees' funds to try and help make whole from the fact that so many of their em 

ployees lost everything in the process of the collapse because Enron would not let them cash out their 401(k)s. 

HUME: Congressman Dingell, when the hearings get under way, will you be wanting to have Bob Rubin among those testify about attempts to gain influence or bailout for Enron? 

DINGELL: If you watched me when I ran investigations, and I ran a lot of them, and they were very, very effective, we had everybody in. And we saw to it that we got all the facts. 

HUME: That would be a yes? 

DINGELL: And that's what I want of these investigations in the Senate and the House. 

HUME: Would that be a yes then? 

DINGELL: That means absolutely yes. 

SNOW: Representative Davis, I've heard you talk about returning contributions, Representative Dingell talk about returning contributions. If you returned everybody's contributions, you probably would be able to save one or two of the people who worked. You've got thousands at Enron. This is token help. 

Now, is there going to be some move on Capitol Hill to make these people whole? And if so, shouldn't other people who have been the victim of bad business practices and had their portfolios hampered, shouldn't they also expect help from Capitol Hill? 

DAVIS: Well, I don't know that they can expect a government bailout at this point. 

But, look, I agree with Congressman Dingell. We need to get to the bottom of this matter. We have a criminal probe going on from the Justice Department. I think that's appropriate. 

But I think on Capitol Hill, we need to look at why the seventh- largest corporation in America fell so quickly, why their corporate executives were cashing out and their ordinary employees that had grown the company were not able to do that and lost their pension funds. 

SNOW: Is it your suspicion that corporate executives deliberately misled employees and told them everything was going to be fine, meanwhile, they cashed out while the employees were left holding the bag? 

DAVIS: That's the appearance is. I think we need to nail that down, but that is the appearance. 

And the question then is, were they acting illegally, improperly, and do we need to put in new rules and regulations to stop this in the future? 

SNOW: Representative Dingell, getting back to the investigations, Attorney General John Ashcroft, who received money just last year from Enron in a failed Senate bid in Missouri, said he's going to recuse himself from the case. 

Do you think anybody who's received money from Enron over the years should recuse themselves from the investigations? And that would include you. 

DINGELL: I think there's a judgment that should be made. 

Well, Tony, I'm just going to tell you, I've opposed Enron at every turn. And I intend to — with regard to deregulation and questions that they regard important and contacted me on, and I intend to continue that practice. 

No, I'll give Enron an honest investigation. We'll look and see what kind of rascality went on. 

Remember, there's plenty here to look into. There's the fact that Enron, apparently, made false representations in connection with their annual reports, their 10-Ks and their 10-Qs. They, either alone or together with their accountant, misrepresented facts. Their accountant also destroyed large volumes of papers. 

I don't think you can find anybody in the country who doesn't want to get to the bottom of this. That includes me and every other member of Congress. 

SNOW: Representative Davis, do you think either political party is going to be able to gain political advantage out of this Enron scandal? 

DAVIS: Well, right now there is absolutely no evidence that anyone in elected office or in the administration acted improperly. So at this point, I don't see any advantage. I see people — they're jockeying for it, when you look at the polls and how these have been used in the past. But I can assure you, we'll have a fair hearing on the House side. 

SNOW: All right, Representative Dingell, very quickly, either side getting an advantage? We'll get 10 seconds. 

DINGELL: Well, Tony, I want to see a fair, thorough and complete investigation. 

SNOW: All right. 

DINGELL: I don't think we ought to make a partisan issue out of this. I think we ought to get to the facts. 

SNOW: All right. Representative Dingell, Representative Davis, thank you both. 

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